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PROSPECTUS Filed pursuant to Rule 424(b) 3
Registration No.: 333-73039
DUSA PHARMACEUTICALS, INC.
2,217,608 SHARES OF COMMON STOCK
This prospectus relates to an offering of 2,217,608 shares of common
stock by the selling shareholders listed on pages 8 and 9.
INVESTING IN THESE SHARES INVOLVES SIGNIFICANT RISKS.
SEE RISK FACTORS BEGINNING ON PAGE 1.
Our common stock is traded on The NASDAQ National Market under the
symbol "DUSA."
The last reported sale price of our common stock on NASDAQ on July 30,
1999 was $10.9375 per share.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
ARE NOT ALLOWED TO SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is August 3, 1999
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TABLE OF CONTENTS
Page
DUSA..........................................................................1
Risk Factors..................................................................1
Where You Can Find More Information...........................................6
Incorporation of Certain Documents by Reference...............................7
Forward-Looking Statements....................................................7
Use of Proceeds...............................................................8
Selling Shareholders..........................................................8
Plan of Distribution.........................................................10
Securities to be Offered.....................................................10
Legal Matters................................................................11
Experts......................................................................11
Disclosure of Commission Position on Indemnification
for Securities Act Liabilities............................................11
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DUSA
We are a development stage pharmaceutical company engaged primarily in
the research and development of a light sensitive drug, whose chemical name is
5-aminolevulinic acid, or more commonly known as ALA, in combination with light
devices. The trademark for our brand of ALA is Levulan(R). We have published
trademark applications for our drug applicator, Kerastick(TM) and one of our
light devices, the BLU-U(TM). We believe that this drug and light combination
system may be used to treat numerous diseases and to help detect the presence of
other diseases.
- When we use Levulan(R)and follow it with exposure to light to
produce a therapeutic effect the technology is called
photodynamic therapy or PDT.
- When we use Levulan(R)and follow it with exposure to light to
detect medical conditions the technology is called
photodetection or PD.
In July, 1998, we filed an application with the FDA for marketing
approval using Levulan(R) photodynamic therapy to treat pre-cancerous skin
lesions of the face and scalp called actinic keratoses. This application is
called a new drug of application or NDA.
We own or exclusively license certain patents and technology pertaining
to our drug from PARTEQ Research and Development Innovations under a license
agreement between DUSA and PARTEQ. We also own or license certain patents
relating to methods for using pharmaceutical formulations which contain our drug
and related processes and improvements.
We are filing this prospectus, at our expense, as required by
agreements with the selling shareholders. We will not receive any proceeds from
the resale of the common stock by the selling shareholders.
Our principal executive offices are located at 181 University Avenue,
Suite 1208, Toronto, Ontario M5H 3M7 CANADA and our telephone number is (416)
363-5059.
RISK FACTORS
Investing in our common stock is very speculative and involves a high
degree of risk. The risk factors described below may cause actual results,
events or performance to differ materially from those predicted in any
forward-looking statements we make in this prospectus. You should carefully
consider these risk factors, in addition to the other information included or
incorporated by reference in this prospectus before you make an investment
decision.
DEVELOPMENT OF OUR POTENTIAL PRODUCTS INVOLVES A LENGTHY PROCESS WHICH
MAY NEVER RESULT IN ANY MEDICALLY EFFECTIVE PRODUCTS.
Most of our products are at an early stage of development. Currently,
we are developing a single drug compound for a number of different medical uses.
We cannot predict how long this process will take. We do not know if any of the
potential products will be effective medical treatments or diagnostic methods.
We face much trial and error and we may fail at numerous stages along
the way. Our products are at the following stages of development:
- Actinic Keratoses - DUSA received a notice of approvability
for the drug from the FDA dated June 27, 1999. FDA action on
the light device is pending.
- Bladder Cancer Photodetection - Our first Phase I/II trial is
completed and additional Phase II trials are planned.
- Hair Removal - Our first Phase I/II study was recently
completed and the results are being analyzed.
- Acne - A Phase I/II study is scheduled to begin this year.
- Endometrial Ablation which is a method of treating excessive
uterine bleeding - We are sponsoring an investigator study
which has recently started.
- Cancer or Pre-cancer of the Cervix -We are sponsoring
investigator trials.
Our most advanced development effort involves Levulan(R) PDT for
actinic keratoses. The FDA must still approve labeling for the drug product, our
manufacturers facilities and our light device. All of the other uses will
require significant further research, development and testing.
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WE HAVE SIGNIFICANT LOSSES AND MAY NEVER BE PROFITABLE.
We have a history of operating losses. We anticipate future losses and
we may never become profitable. As of June 30, 1999, our accumulated deficit was
approximately $32,867,521. We cannot predict whether any of our potential
products will achieve market acceptance to generate sufficient revenues to
become profitable.
IF WE DO NOT OBTAIN GOVERNMENT REGULATORY APPROVAL THEN WE CANNOT
MARKET OUR PRODUCTS.
All of our potential products will require the approval of the FDA
before they can be marketed in the United States. We cannot predict whether any
of our products will obtain required FDA approvals or that regulatory problems
will not arise that could delay or prevent the marketing of Levulan(R) PDT to
treat actinic keratoses. Discovery of problems with a product, manufacturer or
facility can result in delay of approval, product labeling restrictions or
withdrawal of the product from the market. These consequences could adversely
affect our financial condition and operations.
Before an NDA can be filed with the FDA, a product must undergo, among
other things, extensive animal testing and human clinical trials. Other than the
NDA for Levulan(R) PDT to treat actinic keratoses, we have not filed NDAs for
any of our other potential uses of Levulan(R) photodynamic therapy or
photodetection. Following the acceptance of an NDA, the time required for
regulatory approval can vary and is usually one to three years or more. To the
best of our knowledge, only two similar PDT applications have received marketing
approval from the FDA. DUSA was asked to appear at an FDA advisory committee
meeting to discuss its NDA. The meeting was originally scheduled for June 3,
1999 but was postponed by the agency. The FDA issued a notice of approvability
for our drug on June 27, 1999 and may not reschedule the advisory committee
meeting. We cannot predict what the committee will recommend to the FDA, if a
meeting is held, since our products are part of a relatively new type of therapy
which uses a drug and a light device in combination.
WE MAY NEED ADDITIONAL FUNDS AND IF WE CANNOT OBTAIN THEM ON ACCEPTABLE
TERMS, WE WILL HAVE TO DELAY DEVELOPMENT EFFORTS.
If we do not receive timely regulatory approval for our first product,
Levulan(R) PDT for actinic keratoses, or if our product is approved and our
sales goals are not met, then we will need substantial additional funds in order
to fully develop, manufacture, market and sell our other potential products. We
cannot predict exactly when additional funds will be needed. We may obtain funds
through a public or private financing, including equity financing, and/or
through collaborative arrangements. We cannot predict whether any financing will
be available on acceptable terms when we need it because investors may be
unwilling to invest in DUSA if we have setbacks in the development program or if
the public fails to use our products.
If funding is insufficient, we will have to delay, reduce in scope or
eliminate some or all of our research and development programs. We cannot
predict which programs will be effected since it will depend upon the status of
clinical trials at that time. We may also license rights to third-parties to
commercialize products or technologies that we would otherwise have attempted to
develop and commercialize ourself.
SINCE WE RELY ON SOLE SUPPLIERS FOR MANUFACTURE OF OUR PRODUCTS, ANY
REGULATORY OR PRODUCTION PROBLEMS COULD ADVERSELY AFFECT US.
We do not currently have the capacity to manufacture our Levulan(R) PDT
products on our own. We have only one source for our drug supply, one source for
our Kerastick(TM) brand of drug applicators, and one for our BLU-U(TM) brand of
light device. If any of these suppliers fail to meet our needs our business,
financial condition and results of operations could suffer. Our drug supplier
has been notified that its facilities are not GMP compliant at this time but it
is actively working to resolve the deficiencies. We are relying on this supplier
to manufacture future commercial supplies of our product. If this supplier, or
our other sole sources fail to meet and maintain regulatory requirements,
approval of our first product could be delayed. It would be time-consuming and
costly for DUSA to obtain these products from other FDA-approved manufacturers
because our NDA would have to be amended and reviewed by the FDA.
Our manufacturers have not yet produced our products in commercial
quantities. Manufacturers often encounter difficulties in scaling-up
manufacturing of new products, including problems involving product yields,
quality control, component and service availability, adequacy of control
procedures and policies, compliance with FDA regulations and the need for
further FDA approval of new manufacturing processes and facilities. We cannot
predict whether production yields, costs or quality will be adversely affected
as our appointed manufacturers seek to increase production. Any such adverse
effect could delay or prevent commercialization of our products which would have
a material adverse effect on our business, financial condition and results of
operations.
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SINCE WE LACK MARKETING EXPERTISE, OUR ABILITY TO ACHIEVE REVENUE GOALS
MAY BE DELAYED.
Although we are developing various plans for marketing our first
product upon receipt of regulatory marketing approval, we do not at this time
have a marketing partner or our own personnel to market our products. If we
receive FDA approval before we establish marketing capabilities, our ability to
generate revenues will be limited until we do so. We are negotiating potential
collaborative licensing arrangements with pharmaceutical companies with
manufacturing and/or sales and distribution capability to market our products.
We are also developing plans to market the products through distribution or
co-promotion arrangements. We cannot predict whether any of these arrangements
will be concluded or if any of our products will be successfully marketed.
WE HAVE LIMITED PATENT PROTECTION AND MAY NOT BE ABLE TO PROTECT OUR
PATENTS AND PROPRIETARY RIGHTS.
Our ability to compete successfully depends, in part, on our ability to
defend patents that have issued, obtain new patents, protect trade secrets and
operate without infringing the proprietary rights of others. We have no product
patent protection for the compound ALA itself, as our basic patents are for
methods of detecting and treating various diseased tissues using ALA or related
compounds called precursors, in combination with light. Even where we have
patent protection, there is no guarantee that we will be able to enforce our
patents. Patent litigation is expensive, and we may not be able to afford the
costs. We own or exclusively license patents and patent applications related to
the following:
- unique physical forms of ALA;
- methods of using ALA and its unique physical forms in
combination with light; and
- compositions and apparatus for those methods.
In addition, a number of third parties are seeking patents for
additional uses of ALA. These additional uses, whether patented or not, could
limit the scope of our future operations because other ALA products might become
available which would not infringe our patents. These products would compete
with ours even though they are marketed for a different use.
We have limited patent protection outside the United States which may
make it easier for third-parties to compete there. Our basic method of treatment
patents and applications have counter-parts in only four foreign countries.
Absent patent protection, third-parties may freely market ALA, subject to
appropriate regulatory approval. There are reports of several third-parties
conducting clinical studies using ALA in countries where DUSA lacks patent
protection. These studies could provide the clinical data necessary to gain
regulatory approval, resulting in competition.
Our patent protection in Japan may be diminished or lost entirely. The
Japanese Patent Office Board of Appeals, acting upon its review of an opposition
to Japanese Patent No. 273032 which we have licensed from PARTEQ Research and
Development Innovation, issued a document titled "Notice of Reasons for
Cancellation" which DUSA received on February 12, 1999. With PARTEQ's
assistance, we have prepared and filed our response to this action. If our
response does not allay the concerns of the Board, they may limit our patent
protections or finalize the cancellation. Japan is a major pharmaceutical market
and loss of this patent could adversely affect DUSA in at least two ways. First,
should DUSA seek to enter the Japanese market, the lack of a patent would
probably diminish our market share. Second, even if we did not seek to market in
Japan, third parties might not be interested in licensing the product in Japan
without patent protections, and this might affect DUSA's revenues.
Thermolase Corporation has patents that may affect our ability to
commercialize the use of ALA for hair removal. DUSA is aware that Thermolase has
seven issued United States patents which claim methods for removing or
inhibiting the growth of hair. DUSA does not know whether any of these patents
cover our plans to market hair removal using ALA because we have not developed a
final formulation or method of removing hair with ALA and light. If, after
finalizing our formulation and method, we find that these patents do cover our
planned use of ALA, Thermolase may either prevent us from using our system or
they may require us to take a license for a fee.
While we attempt to protect our proprietary information as trade
secrets through agreements with each employee, licensing partner, consultant,
university, pharmaceutical company and agent, we cannot give you any assurance
that these agreements will provide effective protection for our proprietary
information in the event of unauthorized use or disclosure of such information.
COMPETING PRODUCTS AND TECHNOLOGIES MAY MAKE SOME OR ALL OF OUR
PROGRAMS OR POTENTIAL PRODUCTS NONCOMPETITIVE OR OBSOLETE.
Many pharmaceutical companies have substantially greater financial,
technical, manufacturing, marketing and distribution resources than we have
which gives them an advantage over us in the marketplace. This industry is
subject to rapid, unpredictable and significant technological change.
Competition is intense. Well-known pharmaceutical, biotechnology and chemical
companies,
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are marketing well-established therapies, and/or seeking to develop new products
and technologies, for the treatment of various dermatological conditions
including actinic keratoses. For example, the current preferred methods of
treating actinic keratoses are with the drug 5-fluorouracil for multiple
lesions, and cryotherapy using liquid nitrogen for limited numbers of lesions.
Although both methods are effective, 5-FU can be irritating and often requires
administration for a number of consecutive weeks, while cryotherapy is
non-selective, is usually painful at the site of freezing and may cause
blistering.
In addition, several companies are developing photodynamic therapies
and photodetection products, including products for markets that we intend to
pursue. Commercial development of PDT agents are currently being pursued by a
number of companies, including: QLT Photo Therapeutics Inc. (Canada); Miravant,
Inc. (U.S.); Pharmacyclics, Inc. (U.S.); Nippon Petrochemicals (Japan); Scotia
Pharmaceuticals (United Kingdom); medac GmBh (Germany) ("Medac"); and Photocure
(Norway). Photocure may be working at Phase I/II equivalent trials using ALA PDT
for dermatological uses, including for certain indications being pursued by
DUSA. We are aware that Medac is developing ALA PDT for bladder cancer detection
in Germany and may receive regulatory approval in Germany prior to DUSA
receiving approval from the FDA. We expect that our principal methods of
competition with other PDT companies will be based upon such factors as:
- the ease of administration of our photodynamic therapy,
- the degree of generalized skin sensitivity to light,
- the number of required doses,
- the selectivity of our drug for the target lesion or tissue of
interest, and
- the type and cost of our light systems.
We cannot give you any assurance that new drugs or future developments
in PDT or in other drug technologies will not have a material adverse effect on
our business. Increased competition could result in:
- price reductions,
- lower levels of third-party reimbursements,
- failure to achieve market acceptance, and
- loss of market share
any of which could have an adverse effect on our business. Further, we cannot
give you any assurance that developments by our competitors or future
competitors will not render our technology obsolete.
THE LOSS OF KEY MEMBERS OF OUR MANAGEMENT COULD DELAY THE ACHIEVEMENT
OF OUR BUSINESS AND RESEARCH OBJECTIVES.
We are a small company with only sixteen employees. We are highly
dependent on several key employees with specialized scientific and technical
skills including: D. Geoffrey Shulman, MD, FRCPC, Chairman of the Board,
President, Chief Executive Officer and Chief Financial Officer of the Company;
Ronald L. Carroll, Executive Vice President and Chief Operating Officer; and
Stuart L. Marcus, MD, PhD, Senior Vice President, Scientific Affairs. At least
one of them receives regular solicitations for employment from industry
competitors. While we have entered employment agreements with these three
executive officers, they may not remain with us. Our growth and future success
will depend, in large part, on the continued contributions of these key
individuals as well as our ability to, motivate and retain these qualified
personnel in our specialty drug and light device areas. We currently do not
employ anyone who could replace them. The loss of Dr. Shulman, Mr. Carroll or
Dr. Marcus could cause significant delays in achievement of our business and
research goals since very few people with their expertise could be hired. Our
business, financial condition and results of operations could suffer.
IF REIMBURSEMENT FOR OUR PRODUCTS BY THIRD-PARTY PAYORS IS NOT ADEQUATE
OUR REVENUES AND PROFITS COULD SUFFER.
We expect that our ability to successfully penetrate the market will
depend significantly on the availability of reimbursement for our products from
third-party payors such as governmental programs, private insurance and private
health plans. We cannot predict whether levels of reimbursement for our drug and
light combination therapy, if any, will be high enough to allow us to charge a
reasonable profit margin. Even with FDA approval, third-party payors may deny
reimbursement if the payor determines that our particular new therapy is
unnecessary, inappropriate or not cost effective. If patients are not entitled
to receive reimbursements similar to reimbursements for competing therapies,
they will have to pay for the unreimbursed amounts. These reimbursement factors
could limit our revenues, and our profits, if physicians or patients choose
therapies with higher reimbursements. The reimbursement status of newly-approved
health care products is highly uncertain. If levels of reimbursement
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are decreased in the future, the demand for our products could diminish or our
ability to sell our products on a profitable basis could be hurt.
WE ARE DEPENDENT UPON AN INDEPENDENT CONSULTING FIRM FOR OUR REGULATORY
AFFAIRS EXPERTISE AND IF THE FIRM STOPPED PROVIDING SERVICES IT COULD BE COSTLY
AND TIME-CONSUMING FOR US TO REPLACE THEM.
Our clinical development program is being implemented by our senior
management, with the assistance of consultants, primarily Guidelines, Inc., a
Florida-based company, specializing in drug development and regulatory affairs.
Guidelines' services involve acting as our liaison with the FDA, preparing and
filing with the FDA our clinical trial information, representing us at FDA
meetings and responding to FDA questions. If we lost their services, at the end
of our contract on December 31, 1999, we would be forced to seek alternative
arrangements or we might have to develop our own regulatory affairs capacity.
These alternatives may prove to be costly and time-consuming which could delay
any FDA approval and cause a material adverse effect on our business, financial
condition and results of operations.
IF WE BECOME SUBJECT TO A PRODUCT LIABILITY CLAIM, WE MAY NOT HAVE
ADEQUATE INSURANCE COVERAGE AND THE CLAIM COULD ADVERSELY AFFECT OUR BUSINESS.
The development, manufacture and sale of medical products exposes us to
the risk of significant damages from product liability claims. We maintain
product liability insurance for coverage of our clinical trial activities. We
intend to obtain coverage for our products when they enter the marketplace but
we do not know if it will be available at acceptable costs. If the cost is too
high, we will have to self-insure. While we have not experienced any product
liability claims, a successful claim in excess of our clinical trial insurance
coverage or any coverage for commercial use of our products could have a
materially adverse effect on our business, financial condition and results of
operations.
IF OUTSTANDING OPTIONS AND WARRANTS ARE CONVERTED, THE VALUE OF THOSE
SHARES OF COMMON STOCK OUTSTANDING JUST PRIOR TO THE CONVERSION WILL BE DILUTED.
As of July 1, 1999 there were outstanding options and warrants to
purchase 2,180,300 shares of common stock, with exercise prices ranging from
U.S. $3.25 to $13.375 per share, respectively, and ranging from CDN. $4.69 to
CDN. $12.875 per share, respectively. In addition, there are 480,000 outstanding
underwriter's purchase options and 164,673.43 outstanding placement agent
warrants. If the holders exercise a significant number of these securities at
any one time, the market price of the common stock could fall. The value of the
common stock held by other shareholders will be diluted. The holders of the
options and warrants have the opportunity to profit if the market price for the
common stock exceeds the exercise price of their respective securities, without
assuming the risk of ownership. If the market price of the common stock does not
rise above the exercise price of these securities, then they will expire without
exercise. The holders are likely to exercise their securities when we would
probably be able to raise capital from the public on terms more favorable than
those provided in these securities.
RESULTS OF OUR OPERATIONS AND GENERAL MARKET CONDITIONS FOR
BIOTECHNOLOGY STOCK COULD RESULT IN THE SUDDEN CHANGE IN THE MARKET VALUE OF OUR
STOCK.
From time to time and in particular during the last several months, the
price of our common stock has been highly volatile. These fluctuations create a
greater risk of capital losses for our shareholders as compared to less volatile
stocks. Over the past twelve months our stock price has ranged from a high of
$14.4375 to a low of $2.250. From January 1, 1999 to June 30, 1999, our stock
price has ranged from a high of $11.563 to a low of $5.531. Factors that
contributed to the volatility of our stock during the last fifteen (15) months
included:
- announcement of clinical trial results;
- filing of the NDA;
- announcement of a proposed marketing alliance;
- failure to complete that proposed marketing alliance.
Since we are a development stage company the significant general market
decline in similar stage pharmaceutical and biotechnology companies made the
market price of our common stock even more volatile.
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OUR OPERATIONS AND BUSINESS COULD BE DISRUPTED IF OUR COMPUTER SYSTEM
OR IF OUR KEY SUPPLIERS' SYSTEMS FAIL WHEN THE YEAR CHANGES TO 2000.
Any of our computers, computer programs, and administrative equipment
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. We cannot give you any assurance that our
systems or the systems of third-parties with whom we do business do not contain
undetected errors or defects associated with the year 2000 date functions that
may have a material adverse effect on our business, results of operation or
financial condition. If any of our systems that have date-sensitive software use
only two digits, system failures or miscalculations may result causing
disruptions to our operations, including among other things:
- a temporary inability to process transactions,
- sending and receiving electronic data with our third-party
suppliers, and
- engaging in similar normal business activities.
Our management information systems have been tested and found to be
year 2000 compliant. However, because most computer systems are, by their very
nature, interdependent, it is possible that non-compliant third-party computers
could have an adverse effect on our computer systems.
We have not completed the process of obtaining certifications from
unrelated third-parties but expect to be complete before the end of 1999. In
the event such certifications are not available, we are developing plans to
evaluate the potential impact on our operations if such third-parties are unable
to perform their obligations. To the extent that such third-parties are
materially adversely affected by the year 2000 issue, we could experience
disruptions and delays in our operations and in receipt of supplies of our drug
or light devices. These events could negatively impact our research and
development activities and our revenues of any products which may have been
commercialized by that date.
EFFECTING A CHANGE OF CONTROL OF DUSA WOULD BE DIFFICULT, WHICH MAY
DISCOURAGE OFFERS FOR SHARES OF OUR COMMON STOCK.
Our certificate of incorporation authorizes the board of directors to
issue up to 100,000,000 shares of stock, 40 million of which are common stock.
The board of directors has the authority to determine the price, rights,
preferences and privileges, including voting rights, of the remaining 60 million
shares without any further vote or action by the shareholders. The rights of the
holders of our common stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in the
future.
We also have a shareholder rights plan. The plan may have the effect of
delaying, deterring, or preventing changes in control or management of DUSA,
which may discourage potential acquirers who otherwise might wish to acquire
DUSA without the consent of the board of directors. Under the plan, if a person
or group acquires 15% or more of our common stock, all holders of rights (other
than the acquiring shareholder) may, upon payment of the purchase price then in
effect, purchase common stock having a value of twice the purchase price. In the
event that DUSA is involved in a merger or other similar transaction where it is
not the surviving corporation, all holders of rights (other than the acquiring
shareholder) shall be entitled, upon payment of the then in effect purchase
price, to purchase common stock of the surviving corporation having a value of
twice the purchase price. The rights will expire on September 26, 2007, unless
previously redeemed.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission in Washington,
D.C. You may read and copy any document we file at the SEC's public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, NW, Washington,
D.C., 20549. The SEC has prescribed rates for copying. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public at the SEC's website at
http://www.sec.gov.
Our reports and other information can also be inspected at the offices
of the National Association of Securities Dealers at 1735 K Street, NW,
Washington, DC 20006-1506.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus
information we file with the SEC in other documents. This means that we can
disclose important information to you by referring you to those documents. The
information incorporated may include documents filed after the date of this
prospectus which will update and supercede the information you read in this
prospectus. We incorporate by reference the documents listed below, except to
the extent information contained in those documents is different from the
information contained in this prospectus.
- Annual report on Form 10-K for the year ended December 31,
1998.
- Quarterly report on Form 10-Q for the quarter ended March 31,
1999.
- Four current reports on Form 8-K, including the exhibits: one
dated January 7, 1999 which was filed on January 11, 1999; one
dated and filed on January 14, 1999 ; one dated and filed on
June 11, 1999 ; and one dated and filed on June 29, 1999.
- The description of DUSA's common stock contained in its
registration statement on Form 8-A which was filed on January
3, 1992, amended on October 24, 1997 (and in DUSA's report on
Form 10-Q which was filed on November 12, 1997).
We also incorporate by reference all other documents which we file in
the future with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended, prior to the termination of this
offering.
You may request a copy of these filings, at no cost, by writing or
telephoning us at:
181 UNIVERSITY AVENUE, SUITE 1208
TORONTO, ONTARIO M5H 3M7 CANADA
ATTENTION: MS. SHARI LOVELL
(416) 363-5059
E-MAIL TO: [email protected]
This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC. You should rely only on the information and representations
provided in this prospectus or on the information incorporated by reference in
this prospectus. Neither we nor the selling shareholders have authorized anyone
to provide you with different information. Neither we nor the selling
shareholders are making an offer of these securities in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of this
document.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
forward-looking statements relating to future events or our future financial
performance. Forward-looking statements are statements that include information
based upon beliefs of our management, as well as assumptions made by and
information available to our management. The words "believes," "expects,"
"anticipates," "intends" or similar terms are intended to identify
forward-looking statements. These forward-looking statements have been compiled
by our management based upon factors they consider reasonable. Such statements
reflect our current views of future events. These statements are subject to
risks and uncertainties that could cause actual results to differ materially
from those anticipated in the forward-looking statements. Many of these risks
are discussed above under the "Risk Factors" section of this prospectus and in
the documents incorporated by reference, including documents which may be filed
in the future.
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USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock by the selling shareholders. We will receive the exercise price for
the shares of common stock that underlie the following warrants and/or
underwriter's options if those securities are converted with cash payments into
shares by their holders. Potential proceeds to DUSA if all holders of warrants
or options convert their securities into shares of common stock total
$3,810,365.00, as follows:
- $823,365.00 upon the conversion of 164,673 placement agent
warrants with an exercise price of $5.00 per share;
- $300,000.00 upon the conversion of a warrant for 50,000 shares
of common stock with an exercise price of $6.00 per share;
- $2,310,000.00 upon the conversion of 300,000 underwriter's
options with an exercise price of $7.70 per share;
- $297,000.00 upon the conversion of 37,500 underwriter's
options with an exercise price of $7.92 per share; and
- $80,000.00 upon the conversion of a warrant for 20,000 shares
of common stock with an exercise price of $4.00 per share.
Any proceeds that we may receive upon any exercise of warrants and/or
options will be used for working capital, primarily to advance research and
product development activities of its drug, Levulan(R), including conducting
pre-clinical studies and clinical trials. If sufficient funds are available,
DUSA may also use its resources to acquire by license, purchase or other
arrangements, businesses, technologies, or products that enhance or expand
DUSA's business such as other light-sensitive drugs or light devices.
SELLING SHAREHOLDERS
The following table sets forth the names of the selling shareholders,
the number of shares of common stock beneficially owned by each selling
shareholder as of June 1, 1999, the number of shares of common stock that each
may offer from time to time and the number of shares of common stock
beneficially owned by each selling shareholder upon completion of the offering,
assuming all of the shares offered are sold. The number of shares sold by each
selling shareholder may depend on a number of factors, including, among other
things, the market price of the common stock.
The table is based upon information obtained from the selling
shareholders and upon information in our possession regarding the issuance and
sale of securities offered by this prospectus and the registration rights
granted to the selling shareholders. The selling shareholders listed in the
table as numbers 1 through 30 acquired the shares they are offering in a private
placement on January 15, 1999.
<TABLE>
<CAPTION>
Number of
DUSA Shares Shares that Maybe DUSA Shares
Beneficially Owned Number of Offered Upon Beneficially Owned
Prior to Offering Shares Conversion of After Offering
Name Shares Percent Offered Warrants/Options Shares Percent
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Amy Newmark....................... 30,300 * 30,300 0 0 0
2. Robert L. Swisher, Jr............. 101,000 * 101,000 0 0 0
3. Rainbow Trading
Venture Partners, L.P............ 20,200 * 20,200 0 0 0
4. David Kalatsky.................... 3,030 * 3,030 0 0 0
5. Jeff Kone and Cezanne Kone........ 10,100 * 10,100 0 0 0
6. Larry Miller...................... 20,200 * 20,200 0 0 0
7. Balmore Funds S.A. ............... 25,250 * 25,250 0 0 0
8. Austost Anstalt Schaan............ 25,250 * 25,250 0 0 0
9. Ohr Somayach International........ 8,080 * 8,080 0 0 0
10. Lighthouse Genesis
Partners USA, LP................. 15,150 * 15,150 0 0 0
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
Number of
DUSA Shares Shares that Maybe DUSA Shares
Beneficially Owned Number of Offered Upon Beneficially Owned
Prior to Offering Shares Conversion of After Offering
Name Shares Percent Offered Warrants/Options Shares Percent
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11. Pharos Genesis Fund Limited........ 136,350 1.24 136,350 0 0 0
12. Bulldog Capital Partners LP........ 882,200 8.0 101,000 0 781,200 7.1
13. Jack Lief.......................... 5,050 * 5,050 0 0 0
14. Lisa Low........................... 595,775(1) 5.24 142,410 0 453,365 3.99
15. Cradock Asset Management........... 20,200 * 20,200 0 0 0
16. EDJ Limited........................ 41,722 * 40,400 0 1,322 *
17. Matador Microcap Fund, LP.......... 475,250 4.32 25,250 0 450,000 4.09
18. Porter Partners, LP................ 158,448 1.44 40,400 0 118,048 1.07
19. Special Situations Private Equity
Fund............................. 181,800 1.65 181,800 0 0 0
20. Riviera-Enid Limited Partnership... 41,780 * 18,180 0 23,600 *
21. Talkot Crossover Fund.............. 72,100 * 60,600 0 11,500 *
22. Valor Capital Management LP........ 262,700 2.39 161,600 0 101,100 *
23. Prism Partners I................... 115,280 1.05 10,908 0 104,300 *
24. Prism Partners II Offshore Fund.... 33,128 * 33,128 0 0 0
25. Prism Partners Offshore Fund....... 16,564 * 16,564 0 0 0
26. JIBS Equities...................... 101,000 * 101,000 0 0 0
27. Michael G. Jesselson............... 101,000 * 101,000 0 0 0
28. State Capital Partners............. 20,200 * 20,200 0 0 0
29. Mid Ocean Investments Ltd.......... 47,700 * 20,200 20,000 7,500 *
30. Yad Avraham Inc.................... 20,200 * 20,200 0 0 0
31. Derek L. Caldwell**................ 60,970(2) * 21,174 14,796 25,000 *
32. John Gallagher** .................. 7,500 * 0 5,500 2,000 *
33. Alan Swerdloff**................... 3,146 * 0 3,146 0 0
34. Nathan Low** ...................... 595,775(3) 5.24 66,282 337,083 192,410 1.69
35. Dwight Miller**.................... 10,953 * 4,696 6,257 0 0
36. Paul Scharfer**.................... 116,569 1.05 28,174 88,395 0 0
37. Marc Seelenfreund** ............... 5,788 * 0 5,788 0 0
38. Richard B. Stone**................. 44,644 * 8,627 36,017 0 0
39. Sunrise Financial Group............ 50,000 * 0 50,000 0 0
40. Preston Tsao**..................... 6,687 * 0 6,687 0 0
</TABLE>
* Less than 1%
** Designee of Sunrise Securities Corp, a registered broker-dealer. Sunrise
Securities Corp. acted as underwriter in December, 1995, March 1996 and May 1996
and acted as placement agent in connection with a recent private placement under
Rule 506 of Regulation D. Sunrise Securities Corp. is affiliated with Sunrise
Financial Group, selling shareholder number 39.
(1) Under Rule 13d-3 of the Securities and Exchange Act of 1934, as amended,
Lisa Low may be deemed to be the beneficial owner of 142,410 shares held in
three (3) custodial accounts and an additional 453,365 securities which may be
deemed to be beneficially owned by her spouse, Nathan Low. (See footnote 3,
below).
(2) Under Rule 13d-3 of the Securities and Exchange Act of 1934, as amended,
Derek Caldwell may be deemed to be the beneficial owner of 25,000 shares that
may be issued upon the exercise of a warrant held by Sunrise Financial Group.
(See footnote 3, below).
(3) Under Rule 13d-3 of the Securities and Exchange Act of 1934, as amended,
Nathan Low may be deemed to be the beneficial owner of 142,410 shares that are
held by Lisa Low as custodian for three (3) children and 50,000 shares that may
be issued upon the exercise of a warrant held by Sunrise Financial Group. Mr.
Low disclaims the beneficial ownership of:
- 142,410 shares held by Lisa Low as custodian;
- 25,000 of the shares underlying the Sunrise Financial Group
warrant which have been committed to Mr. Derek Caldwell; and
- 1,000 shares that may be issued upon the exercise of
underwriter's options which options are currently in Mr. Low's
name and are committed to other employees of Sunrise Financial
Group and Sunrise Securities Corp.
9
<PAGE> 12
PLAN OF DISTRIBUTION
The selling shareholders are offering shares of common stock which they
acquired from us in a private placement or which are issuable to them upon
conversion of options or warrants that we issued to them. The shares may be sold
from time to time in public transactions, on or off The NASDAQ National Market,
or in private transactions, at prevailing market prices or at privately
negotiated prices or through a combination of such methods of sale, at fixed
prices which may be changed, at prices related to prevailing market prices or at
negotiated prices. In addition, any shares of the common stock may be sold
according to Rule 144 rather than as part of this prospectus.
The shares may be sold directly by the selling shareholders or through
underwriters, broker-dealers or agents. Such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling shareholders and/or the purchaser of the shares for whom such
broker-dealer may act as agent, or to whom they sell as principals, or both
(which compensation might be in excess of commission that brokers usually
receive). In addition, the selling shareholders may enter into hedging
transactions with broker-dealers who may engage in short sales of common stock
in the course of hedging the positions they assume with a selling shareholder.
There can be no assurance that all or any of the common stock offered by this
prospectus will be issued to, or sold by, the selling shareholders. The selling
shareholders and any brokers, dealers or agents, who sell any of the common
stock offered by this prospectus, may be deemed "underwriters" as that term is
defined under the Securities Act or the Exchange Act, or the rules and
regulations which pertain to these laws. Any commissions which these persons or
firms receive and any profits on the resale of the shares purchased by them may
be deemed to be underwriting commissions or discounts under such acts. As of the
date of this prospectus, the selling shareholders have advised us that there are
no special selling arrangements between any broker-dealer or other person and
any of the selling shareholders.
Under the Securities Exchange Act of 1934, any person taking part in
the distribution of the shares may not simultaneously engage in market-making
activities with respect to the common stock for five business days prior to the
start of the distribution. In addition, each selling shareholder and any other
person taking part in the distribution will be subject to the Exchange Act which
may limit the timing of purchases and sales of common stock by them. These rules
may affect the marketability of the common stock and the ability of brokers or
dealers to engage in market-making activities.
At the time a particular offer of shares is made, a supplemental
prospectus will be distributed, if required, which will set forth the number of
shares being offered and the terms of the offering, including the name or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the shares purchased from the selling shareholders, any
discounts, commissions or other items constituting compensation from the selling
shareholders in any discount, commission or concession allowed or reallowed or
paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and complied with.
The selling shareholders may be entitled under agreements entered into
with us to indemnification from us against liabilities under the Securities Act.
SECURITIES TO BE OFFERED
A total of 1,645,435 of the 2,217,608 securities being offered in this
prospectus are shares of common stock, no par value. 1,515,000 of these shares
are being offered by the participants of a private placement under Rule 506 of
Regulation D and 130,435 of these shares are being offered by the placement
agent, and/or its designees, which shares were issued as commissions and
non-accountable expense allowance in connection with the private placement.
The remaining 572,173 securities being offered in this prospectus are
offered pursuant to warrants and/or options to purchase shares of common stock
as follows:
- 164,673 of the securities are offered pursuant to placement
agent warrants which were issued and remain outstanding in
connection with a private placement transaction that closed on
January 15, 1999. The placement agent warrants can be
exercised for a period of five (5) years, until 5:00 p.m. New
York time on January 14, 2004 at an exercise price of $5.00
per share. The placement agent warrants contain no provisions
regarding changes or adjustments in the exercise price, but do
contain provisions for the issuance of an additional number of
shares in the event of a stock split, stock dividend or
similar transaction involving the underlying common stock.
10
<PAGE> 13
- 50,000 of the securities are offered pursuant to a warrant
which was issued and remains outstanding in connection with an
investor relations agreement. The warrant had an original
expiration date of October 14, 1998 which was extended for
three (3) years until 5:00 p.m. New York time on October 14,
2001. The exercise price of the warrant is $6.00 per share.
The warrant contains no provisions regarding changes or
adjustments in the exercise price but does contain provisions
for the issuance of an additional number of shares in the
event of a stock split, stock dividend or similar transaction
involving the underlying common stock.
- 300,000 of the securities are offered pursuant to
underwriter's options which were issued and remain outstanding
in connection with an underwriting agreement dated December
11, 1995. The underwriter's options have a five (5) year term
and can be exercised until 5:00 p.m. New York time on December
7, 2000 at an exercise price of $7.70 per share. These
underwriter's options contain no provisions regarding changes
or adjustments in the exercise price, but do contain
provisions for the issuance of an additional number of shares
in the event of a stock split, stock dividend or similar
transaction involving the underlying common stock.
- 37,500 of the securities are offered pursuant to underwriter's
options which were issued and remain outstanding in connection
with an underwriting agreement dated April 15, 1996. These
underwriter's options have a five (5) year term and can be
exercised until 5:00 p.m. New York time on April 14, 2001 at
an exercise price of $7.92 per share. These underwriter's
options contain no provisions regarding changes or adjustments
in the exercise price, but do contain provisions for the
issuance of an additional number of shares in the event of a
stock split, stock dividend or similar transaction involving
the underlying common stock.
- 20,000 of the securities are offered pursuant to a warrant
which was issued and remains outstanding in connection with an
investor relations services agreement. The warrant expires at
5:00 p.m. New York time on March 21, 2000. The exercise price
of the warrant is $4.00 per share. The warrant contains no
provisions regarding changes or adjustments in the exercise
price but does contain provisions for the issuance of an
additional number of shares in the event of a stock split,
stock dividend or similar transaction involving the underlying
common stock.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon by
Lane and Mantell, a professional corporation, Somerville, New Jersey. As of July
31, 1999, shareholders and associates of Lane and Mantell beneficially own,
directly or indirectly, less than 1% of the common stock of DUSA.
EXPERTS
The financial statements and related financial statement schedules
incorporated in this prospectus by reference from DUSA's annual report on Form
10-K for the year ended December 31, 1998 have been audited by Deloitte &
Touche, LLP independent auditors, as stated in their report (which contains an
emphasis paragraph indicating that DUSA is in the development stage), which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling DUSA pursuant to the foregoing provisions, DUSA has been informed
that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable.
11
<PAGE> 14
UNTIL JULY 29, 1999 ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
DUSA
PHARMACEUTICALS, INC.
2,217,608 Shares of Common Stock
August 3, 1999
