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Rule 424(b)(1)
Registration No. 333-14555
PROSPECTUS
550,000 SHARES
MAGAININ PHARMACEUTICALS INC.
COMMON STOCK
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The shares offered hereby (the "Shares") consist of 550,000 shares of
common stock, $.002 par value per share ("Common Stock"), of Magainin
Pharmaceuticals Inc., a Delaware corporation ("Magainin" or the "Company"),
which are being offered by the selling stockholders listed herein under
"Selling Stockholders" (collectively, the "Selling Stockholders"). The shares
may be offered from time to time by the Selling Stockholders. All expenses of
registration incurred in connection herewith are being borne by the Company,
but all selling and other expenses incurred by a Selling Stockholder will be
borne by the Selling Stockholder. The Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholders.
The Selling Stockholders have not advised the Company of any specific
plans for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on the Nasdaq National
Market of the Nasdaq Stock Market at the market price then prevailing, although
sales may also be made in negotiated transactions or otherwise. The Selling
Stockholders and the brokers and dealers through whom sale of the Shares may be
made may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and their commissions or
discounts and other compensation may be regarded as underwriters' compensation.
See "Plan of Distribution."
The Company's Common Stock is quoted on the Nasdaq National Market of
The Nasdaq Stock Market under the symbol "MAGN." On October 29, 1996, the last
reported closing price of the Common Stock was $11.25 per share.
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AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" ON PAGES 4 TO 9 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 31, 1996
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AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement
on Form S-3 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act,
omits certain of the information set forth in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the securities
offered hereby. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment
of the prescribed fee or may be examined without charge at the public reference
facilities of the Commission described below.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by references to the copy of the applicable document filed with the
Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can
be inspected and copied at the public reference facility maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices located at Seven World Trade Center, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
in person from the Public Reference Section of the Commission at its principal
office located at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Reports and proxy statements concerning the Company also may be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company
(File No. 0-19651) with the Commission are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(b) The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31 and June 30, 1996.
(c) The description of the Company's Common Stock which is
contained in the Company's Registration Statement on Form 8-A filed under the
Exchange Act on November 7, 1991 and as amended on January 15, 1993, including
any amendment or reports filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities remaining
unsold, shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of the filing of such reports and documents. Any
statement contained in a document, all or a portion of which is incorporated by
reference herein, shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained or incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Upon request, the Company will provide without charge to each person
to whom this Prospectus is delivered a copy of any or all of such documents
which are incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents that this Prospectus incorporates). Written or oral requests for
copies should be directed to Michael R. Dougherty, Executive Vice President and
Chief Financial Officer, Magainin Pharmaceuticals Inc., 5110 Campus Drive,
Plymouth Meeting, PA 19462, (610) 941-5228.
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THE COMPANY
Magainin Pharmaceuticals Inc. ("Magainin" or the "Company") is a
biopharmaceutical company engaged in the development of breakthrough medicines
for serious diseases. The Company isolates and develops compounds from the
host-defense systems of animals and uses molecular techniques such as gene
identification to understand the pathogenesis of disease. The Company's
development efforts are focused on anti-infectives, oncology and, pulmonary and
allergic disorders.
The Company's most advanced class of products under development are
"magainins," which are peptides that kill certain pathogens by selectively
perturbing the membrane of the cell. The most advanced magainin under
development by the Company is MSI-78, a topical anti-infective. In August
1994, the Company initiated the initial, pivotal Phase III clinical trial of
MSI-78 for the treatment of infection in diabetic foot ulcers and in August
1995, following interim analysis of this initial trial, a second pivotal Phase
III clinical trial in the same indication was commenced. These studies were
designed as equivalence trials with the goal of demonstrating that topically
applied MSI-78 is as effective as orally administered ofloxacin, a quinolone
antibiotic frequently used in the treatment of infection in diabetic foot
ulcers. In September, 1996, the Company announced successful results of the
initial, pivotal trial. Company analysis of the study showed statistical
equivalence between MSI-78 and orally administered ofloxacin, with respect to
the study's primary end point of clinical response of infection at day 10 of
treatment, and at subsequent time points through day 28, and at follow-up. The
Company expects to announce the results of the second pivotal trial in the
first quarter of 1997.
The Company is engaged in pre-clinical development of an inhalation
product for the treatment of pseudomonas infections in patients with cystic
fibrosis. A magainin peptide has demonstrated in vitro activity against
clinical isolates of pseudomonas from cystic fibrosis patients which were
resistant to currently available antibiotics, and has also demonstrated binding
to lipopolysaccharide, which is thought to be adverse to lung function. The
Company has begun to explore the feasibility of a more convenient, dry powder
inhalation formulation for this product.
The Company is also conducting research on an aminosterol class of
compounds, discovered in the dogfish shark. Certain of these compounds have
demonstrated anti-angiogenic activity in vitro and in vivo. The Company is
evaluating one such compound, squalamine, in cancer and another such compound,
MSI-1436, in viral infections.
The Company's newest research efforts are in the understanding of the
pathogenesis of disease using molecular techniques. The Company's initial
disease focus in this area is asthma.
The Company currently has no marketable products, and it may be
several years, if ever, until marketable products are developed and approved.
In November 1993, the Company changed its fiscal year end to December
31.
Magainin was incorporated in Delaware in June 1987. The Company's
executive offices and research facility are located at 5110 Campus Drive,
Plymouth Meeting, PA 19462, and its telephone number is (610) 941-4020.
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This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ significantly
from the results discussed in forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors."
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RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider the following factors in evaluating the Company and
its business before purchasing any Shares offered hereby.
Status of MSI-78. Although the Company believes its initial pivotal
trial of MSI-78 yielded successful results, there can be no assurance that the
FDA will concur with the Company's analysis in this regard. The Company is
currently conducting a second required pivotal trial of MSI-78 for the
treatment of infection in diabetic foot ulcers. There can be no assurance that
this trial will be successful. Success in both pivotal trials will be required
for the submission of MSI-78 for review and approval by the FDA. Failure of
MSI-78 to show efficacy in human clinical trials will have a material adverse
effect on the Company.
MSI-78 was previously tested in a pivotal trial for the treatment of
impetigo, a skin infection which usually occurs in children. In this trial,
completed in early 1994, MSI-78 did not demonstrate a statistically significant
advantage over the placebo control vehicle. Clinical responses in the range of
80% were achieved by MSI-78, however, similar responses were observed in the
placebo control vehicle.
Development Stage Company; Accumulated Deficit; Continuing Losses.
The Company is in the development stage, has been engaged to date primarily in
research and development activities and, through June 30, 1996, had generated
no revenue from product sales. At June 30, 1996, the Company had an
accumulated deficit of approximately $77 million, and losses are continuing and
are expected to increase. The Company's operations are subject to numerous
risks associated with establishing a new business, including a competitive and
regulatory environment in an industry characterized by numerous
well-established and well-capitalized companies and by exhaustive and expensive
regulatory scrutiny. The Company will be required to conduct significant
research, development and testing activities which, together with projected
general and administrative expenses, are expected to result in continued and
increasing losses for the foreseeable future, particularly due to the extended
time period before the Company expects to commercialize any products.
Technological Uncertainty and Early Stage of Product Development.
There can be no assurance that the Company's research and development
activities will be successful, that any products under development will be
approved or commercially viable and successfully marketed or that the Company
will ever achieve significant levels of revenue or profits. In addition, the
Company may encounter unanticipated problems, including development,
regulatory, manufacturing and marketing difficulties, some of which may be
beyond the Company's ability to resolve.
There has been only limited research in the area of the use of
naturally occurring host-defense compounds for the treatment of infectious and
other diseases, and results obtained in research conducted to date are not
conclusive as to whether pharmaceutical compounds being investigated by the
Company will be safe or effective. While the Company has demonstrated certain
utility of its technology in model systems in the laboratory and in animals and
has identified a number of compounds for additional testing, the Company has
submitted an Investigational New Drug ("IND") application to the FDA, to obtain
authorization for human testing, for only one compound, MSI-78. The Company's
research activities in asthma have only recently been initiated, and there can
be no assurance that any product candidates will result from these efforts.
There can be no assurance that results obtained in preclinical studies will be
indicative of results that will be obtained in human clinical testing.
The Company's proposed products are in the developmental stage,
require significant further research, development, testing and regulatory
approvals and are subject to the risks of failure inherent in the development
of all pharmaceutical products. These risks include the possibilities that any
or all of the proposed products are found to be ineffective or toxic, or
otherwise fail to receive necessary regulatory approvals, that the proposed
products, although effective, are uneconomical to market, that third parties
hold proprietary rights that preclude the Company from marketing them, or that
third parties market superior or equivalent products. Due to the extended
testing and regulatory review process required before marketing clearance can
be obtained, the Company does not expect to be able to commercialize any drugs
for several years, if at all.
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Need for Substantial Additional Funds. The Company will require
substantial additional funds to continue its research and development programs
and to commercialize any potential products. The Company may not have
sufficient funds to complete clinical studies or manufacturing scale-up on any
of its proposed products, including MSI-78. In addition, the Company may not
have sufficient funds to prepare a New Drug Application ("NDA") with the FDA
for any proposed products or to pay the user fees associated with filing NDAs.
The Company intends to seek additional funding through a combination of future
offerings of securities and collaborative arrangements with third parties and
regularly explores alternatives in this regard. The Company does not have any
commitments or arrangements to obtain any additional funds and has no
established banking arrangements through which it can obtain debt financing,
and there can be no assurance that required funds will be available to the
Company. Furthermore, to develop and commercialize its products, it will be
necessary to seek arrangements under which the Company conveys marketing,
distribution, manufacturing, development or other rights to its proposed
products to pharmaceutical companies in order to receive financial or other
assistance. This will result in lower consideration to the Company upon
commercialization than if no arrangements were entered into or if such
arrangements were entered into at later stages in the product development
process. There can be no assurance that the Company will be able to enter into
such additional ventures on favorable terms, if at all.
If the Company does not enter into appropriate collaborations, or is
not able to raise sufficient funds from the periodic sale of securities, the
Company will be required to delay or eliminate expenditures for certain of its
potential products, including MSI-78, or to license third parties to
commercialize potential products or technologies that the Company would
otherwise seek to develop itself, or to seek other arrangements.
Dependence on Third Parties; Manufacturing Uncertainties. The Company
does not have the resources, facilities or capabilities to manufacture any of
its proposed products. The Company has no current plans to establish a
manufacturing facility. The Company expects that it will be dependent to a
significant extent on contract manufacturers for commercial scale manufacturing
of its proposed products in accordance with regulatory standards. The
Company's dependence on third parties for manufacturing may adversely affect
operating results as well as the Company's ability to develop and deliver
products on a timely and competitive basis. There can be no assurance that the
Company will be able to enter into any arrangements for the manufacturing of
any of its proposed products, or that the costs of any such arrangements would
be acceptable to the Company.
The Company is currently dependent upon a single contract
manufacturer, Abbott Laboratories ("Abbott"), for the development of a chemical
process to manufacture bulk MSI-78 on a commercial scale, and for the actual
production of bulk MSI-78. The Company has entered into an agreement with
Abbott which provides for cash payments by the Company aggregating
approximately $11,000,000, as well as the issuance by the Company to Abbott of
up to 500,000 shares of its Common Stock and the obligation to pay a royalty on
future sales of MSI-78. Under this Agreement, Abbott will continue scale-up
activities for MSI-78, and perform other activities necessary to submit a Drug
Master File to the FDA in support of any filing for marketing approval of
MSI-78. Substantial additional funds will also be required to continue
manufacturing development efforts beyond the term of this current arrangement.
The Company and Abbott have agreed that, upon completion of such activities,
they will negotiate in good faith a supply agreement for the Company's
worldwide supply needs of MSI-78. In the event that this agreement is not
entered into or Abbott does not otherwise continue to manufacture MSI-78, the
Company's timeline to commercialize MSI-78 would be adversely affected.
Additionally, the Company would need to spend substantial funds on building a
manufacturing infrastructure or securing alternative contract manufacturing
arrangements, and for the licensing of applicable manufacturing related
technology from its current contract manufacturer. Any such facility would
require substantial funds, and the Company would be required to hire and retain
significant additional personnel and comply with extensive regulations
applicable to such a facility and such manufacturing operations.
Production of peptides (such as magainins) is expensive relative to
production of traditional antibiotics. Peptides, such as magainins, can be
synthesized chemically or produced by recombinant expression systems. The
Company's contract manufacturer is focused on a solution phase chemical
process. While progress has been made in reducing the cost of chemically
synthesizing peptides, further significant progress will be required to enable
the Company to manufacture and sell MSI-78 on a profitable basis. No assurance
can be given that a cost-effective manufacturing process can be developed, or
that any such process would be approved by the FDA, or that the
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Company, Abbott or others will be able to manufacture MSI-78 or any of the
Company's other proposed products on a commercially viable basis, or that raw
materials for synthesis in commercial quantities will be available.
The Company is currently evaluating outside contractors for the
production of its aminosterol compounds. The Company is currently producing
limited quantities of these compounds internally through a natural extraction
process. The Company expects to expend significant resources in the chemical
synthesis of these compounds, and there can be no assurance that these efforts
will be successful.
Marketing Uncertainties. In order to successfully develop and market
its products, it will be necessary for the Company to enter into marketing,
distribution, development or other arrangements with third parties, granting
marketing rights, which may be exclusive, to potential products, including
MSI-78. Such arrangements may also involve delegating to the Company's partner
the responsibility for all or a significant portion of the development and
regulatory approval process. In the event that partners do not develop an
approvable or marketable product or do not market a product successfully, the
Company's business will be adversely affected. There can be no assurance that
the Company will be able to successfully enter into any such arrangements.
For certain products under development, the Company may conduct its
own marketing activities through its own sales force. The Company has no
marketing and sales staff and, although certain members of management have
experience in the marketing of pharmaceutical products, the Company has no
experience with respect to marketing its proposed products. Significant
additional expenditures, management resources and time will be required to
develop a sales force, and there can be no assurance that the Company will be
successful either in developing a sales force or penetrating the markets for
any proposed products it may develop.
Government Regulation. Products such as those proposed to be
developed or commercialized by the Company are subject to an extensive
regulatory approval process by the FDA and comparable agencies in other
countries. In order to obtain FDA approval of a new product, the Company must
submit proof of safety, purity, potency and efficacy. Such proof entails
extensive and time consuming pre-clinical and clinical testing. Detailed
manufacturing documentation is also required, and with respect to MSI-78, even
if clinical testing is successful, the submission of any application for
product approval and the review by FDA of such application, will require
additional time to complete manufacturing activities and stability studies,
which additional time may be significant.
Although certain members of management have had experience in
conducting and supervising preclinical testing and human clinical trials for
pharmaceutical products, the Company has very limited experience designing
clinical protocols on its own behalf and has not prepared an NDA submission.
The process of obtaining required regulatory approvals from the FDA and other
regulatory authorities often takes many years and can vary substantially based
on the type, complexity and novelty of the product. As with any new drug,
additional governmental regulations may be promulgated which could impose
additional costly testing procedures necessary to obtain regulatory approval
and delay regulatory approval of the Company's products. There can be no
assurance that, even after investment of time and expenditures, regulatory
approval will be obtained for any of the Company's proposed products. Even if
regulatory approval is obtained, a marketed product is subject to continual
post-market review, and later discovery of previously unknown problems or
failure to comply with the applicable regulatory requirements may result in
restrictions on a product's marketing or withdrawal of the product from the
market as well as possible civil or criminal sanctions. Adverse governmental
regulation which might arise from future legislative or administrative action
cannot be predicted.
Clinical Testing. Before obtaining required regulatory approvals for
the commercial sale of products, the Company must demonstrate through
preclinical and clinical testing that such products are safe and efficacious
for use in each target indication. The results of preclinical and initial
clinical testing of products under development by the Company are not
necessarily predictive of results that will be obtained from large-scale
clinical testing. Even after any approval by the FDA and foreign regulatory
authorities, products may later exhibit adverse effects that prevent their
widespread use or necessitate their withdrawal from the market. There can be
no assurance that any products developed by the Company will be safe and
efficacious when administered to patients.
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Competition. The pharmaceutical industry is characterized by intense
competition. Many companies, research institutions and universities are
working in a number of pharmaceutical or biotechnology disciplines similar to
the Company's field of interest. In addition, many companies are engaged in
the development and sale of products, such as traditional antibiotics, which
may be or are competitive with the Company's proposed products. Most of these
entities have substantially greater financial, technical, manufacturing,
marketing, distribution and other resources than the Company. The Company is
aware that research is being conducted by others in connection with
anti-infective and anti-cancer compounds from the host-defense systems of
various animals, and many companies are working in the genomics field, and in
the area of asthma. In addition, the Company's proposed products will be
subject to competition from products using techniques other than those used by
the Company or based on advances that may render the Company's products
obsolete. The field of biotechnology is subject to rapid and significant
technological changes, and the Company's future success will depend in large
part on its ability to maintain a competitive position with respect to this
technology. Compounds, products or processes developed by the Company may
become obsolete before the Company is able to recover a significant portion of
its research and development expenses. The Company will be competing with
respect to its proposed products with companies that have significantly more
experience in undertaking preclinical testing and human clinical trials of new
or improved therapeutic products and obtaining FDA and other regulatory
approvals of such products. Some of these companies may be in advanced phases
of clinical testing of various drugs that may be competitive with the Company's
proposed products.
As to the Company's lead product candidate, even if MSI-78 is shown in
clinical testing to be statistically equivalent to ofloxacin, there can be no
assurance that it will be successfully marketed against oral antibiotics.
There also can be no assurance that MSI-78 can be manufactured at a cost which
will allow it to be sold at a competitive price relative to oral antibiotics.
Patents and Proprietary Rights. The Company's success will depend in
part upon its ability to obtain patent protection of compounds, combinations or
processes, as well as the drug or therapeutic use of the compound. The patent
position of biotechnology firms generally is highly uncertain and involves
complex legal and factual questions. Anti-infective and anti-cancer compounds
can be isolated from a wide variety of sources, and it is not possible for the
Company or any other entity to have proprietary rights to all such compounds.
In the genomics area, a number of companies are attempting to rapidly identify
and patent genes whose functions have not been characterized. Additional
companies are seeking to patent fully characterized genes. The current
criteria for obtaining patent protection for genes is unclear and the impact of
this uncertainty on the Company's business cannot be determined.
There can be no assurance that any patent applications now pending or
filed in the future will result in patents being issued or that any patents now
held by or licensed to the Company, or issued or licensed to the Company in the
future, will afford any competitive advantages for the Company, will not be
challenged by third parties or cannot be designed around by others. The cost
of litigation to uphold the validity and prevent infringement of patents and to
enforce licensing rights can be substantial. Furthermore, there can be no
assurance that others will not independently develop similar technologies or
duplicate the technology owned by or licensed to the Company or design around
the patented aspects of such technology. There can be no assurance that the
products and technologies the Company will seek to market will not infringe
patents or other rights owned by others, licenses to which may not be available
to the Company.
Pursuant to the terms of the Uruguay Round Agreements Act, patents
filed after June 8, 1995 will have a term of twenty years from the date of such
filing, irrespective of the period of time it may take for such patents to
ultimately issue. As compared to the prior law which established a patent term
of seventeen years from the date of issuance, this may shorten the period of
patent protection afforded to the Company's products as patent applications in
the biopharmaceutical sector often take considerable time to issue.
The Company also relies upon unpatented proprietary technology, and
may determine in appropriate circumstances that its interest would be better
served by reliance on trade secrets or confidentiality agreements rather than
patents. No assurance can be made that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to such proprietary technology or that the Company can meaningfully
protect its rights in such unpatented proprietary technology. If the Company
is unable to obtain strong
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proprietary rights protection of its products after obtaining regulatory
clearance, competitors may be able to market competing products by obtaining
regulatory clearance, through showing equivalency to the Company's product,
without being required to conduct the lengthy, clinical tests required to be
conducted by the Company.
To the extent that consultants, key employees or other third parties
apply technological information independently developed by them or by others to
the Company's proposed products, disputes may arise as to the proprietary
rights to such information, which may not be resolved in favor of the Company.
Members of the Company's Scientific Advisory Board and other consultants are
employed by or have consulting agreements with third parties, and any
inventions discovered by such individuals are not likely to become the property
of the Company.
The Company owns, or has rights under licenses to, several patents and
patent applications filed worldwide. The Company may owe royalties on sales of
certain of its proposed products under these licenses. Additionally, certain
of these agreements provide that if the Company elects not to pursue the
commercial development of any licensed technology, or does not adhere to an
acceptable schedule of commercialization, then the Company's exclusive rights
to such technology would terminate.
Dependence on Key Personnel. The Company depends to a considerable
degree on a limited number of key personnel. Due to the Company's limited
number of employees, many key responsibilities within the Company have been
assigned to a relatively small number of individuals. The Company does not
maintain "key man" insurance on any of its employees. The loss of certain
senior management could adversely affect the business of the Company. The
success of the Company will depend, among other factors, upon the successful
recruitment and retention of qualified personnel.
Reimbursement. Successful commercialization of the Company's
potential products will be dependent in part on the availability of
reimbursement of the costs of such products from third-party payors, such as
government authorities, private health insurers and other organizations, such
as health maintenance organizations. There can be no assurance that such
reimbursement will be available or, if available, will be in adequate amounts.
Risk of Product Liability. Before obtaining required regulatory
approvals for the commercial sale of products, the Company must demonstrate
through human clinical testing that such products are safe and efficacious for
use in each target indication. The administration of any product being
developed by the Company could produce undesirable side effects in humans.
Although the Company carries limited clinical trial insurance, there can be no
assurance that such coverage is adequate.
In addition, in the event the Company successfully develops any
products, the marketing of such products could expose the Company to product
liability claims. Certain of the Company's agreements require the Company to
maintain insurance coverage naming third parties as additional insureds at such
time as any related products may be marketed. There can be no assurance that
the Company will be able to obtain any product liability insurance or that such
insurance can be maintained in sufficient amounts to protect the Company
against such liabilities or at a reasonable cost.
In the event of an uninsured or inadequately insured claim, the
Company's business and financial condition could be materially adversely
affected.
Health Care Reform. Various proposals have been put forth to reform
the current health care system in the United States. Additionally, several
states have enacted modifications to the current health care system to both
improve access and control costs. Such reform measures could adversely affect
the amount of reimbursement available from governmental agencies or third party
insurers, or could affect the ability to set prices for newly approved
therapeutic products. Similar proposals are being considered by governmental
officials in other significant pharmaceutical markets, including Europe.
Governmental or private payors for health care goods and services can be
expected to continue to undertake cost reduction efforts.
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The Company cannot predict if such reforms will be implemented or the
effect any such reforms might have on the Company's business, and no assurance
can be given that any such reforms will not have a material adverse effect on
the Company's business. In particular, it is possible that any such reform
could impact the manner in which drugs or therapies are marketed and could
include restrictions on the ability of pharmaceutical and biotechnology
companies to price drugs or therapies, which in turn could impact the ability
of biotechnology companies such as the Company to obtain financing for the
continued development of potential products. Furthermore, any such reform
could also impose limits on the overall growth of health care spending, as well
as limits on the growth of Medicare and Medicaid spending, all which could have
a material adverse effect on the Company.
Possible Volatility of Stock Price. The market prices for securities
of emerging and biotechnology companies, including the Company, have
historically been highly volatile. Future announcements concerning the Company
or its competitors, including the results of testing, technological innovations
or new commercial products, government regulations, developments concerning
proprietary rights, litigation or public concern as to safety of products
developed by the Company or others, may have a significant impact on the market
price of the Common Stock.
Effect of Exercise of Options and Warrants, and Other Issuance of
Shares. The Company grants stock options to employees, directors and
consultants. As of June 30, 1996, the Company had 2,407,384 outstanding
options at prices ranging from $.002 per share to $16.75 per share, of which
approximately 1,070,783 were exercisable as of such date. Warrants to purchase
229,739 shares of the Company's Common Stock exercisable at $8 per share, and a
warrant to purchase 300,000 shares exercisable at $7.50, were also outstanding
as of June 30, 1996. In addition, warrants to purchase an aggregate of
1,011,896 shares of Common Stock were issued in a private placement on August
6, 1996. Exercise of options and warrants at prices below the market price of
the Company's Common Stock could adversely affect the price of the Company's
Common Stock. Additional dilution may result from the issuance of shares in
connection with collaborations or manufacturing arrangements, or in connection
with other financings. See "-Need for Substantial Additional Funds."
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholders.
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SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock of each Selling Stockholder and as
adjusted to give effect to the sale of the Shares offered hereby. The Shares
are being registered to permit public secondary trading of the Shares, and the
Selling Stockholders may offer the Shares for resale from time to time. See
"Plan of Distribution."
In recognition of the fact that the Selling Stockholders may wish to
be legally permitted to sell their Shares when they deem appropriate, the
Company has filed with the Commission, under the Securities Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time on the Nasdaq National Market of The
Nasdaq Stock Market or in privately-negotiated transactions and has agreed to
prepare and file such amendments and supplements to the Registration Statement
as may be necessary to keep the Registration Statement effective until the
Shares are no longer required to be registered for the sale thereof by the
Selling Stockholders.
The shares being offered hereby by the Selling Stockholders were
acquired by them from the Company in private placement transactions in
connection with certain amendments to license agreements relating to MSI-78.
In consideration for the issuance of the shares, the Selling Stockholders
agreed to amend such license agreements to provide that the Company's license
as it relates to MSI-78 will be fully-paid and royalty-free.
<TABLE>
<CAPTION>
Beneficial Ownership
Number of After Offering
Number of Shares Shares ---------------------------
Name of Beneficially Owned Being Number of
Selling Stockholder Prior to Offering Offered Shares Percent
-------------------------------- ----------------- -------------- ---------------- -------
<S> <C> <C> <C> <C>
Houghten Pharmaceuticals, Inc. 275,000 275,000 0 -
The Scripps Research Institute 275,000 275,000 0 -
</TABLE>
10
<PAGE> 11
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Stockholders may be sold from
time to time by the Selling Stockholder, or by pledgees, donees, transferees or
other successors in interest. Such sales may be made on one or more exchanges
or in the over-the-counter market (including the Nasdaq National Market of The
Nasdaq Stock Market), or otherwise at prices and at terms then prevailing or at
prices related to the then-current market price, or in negotiated transactions.
The Shares may be sold by one or more of the following methods, including,
without limitation: (a) 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; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) face-to-face
transactions between the Selling Stockholder and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholder may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from the Selling
Stockholder in amounts to be negotiated immediately prior to the sale. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act, in connection
with such sales. In addition, any securities covered by this Prospectus that
qualify for sale pursuant to Rule 144 might be sold under Rule 144 rather than
pursuant to this Prospectus.
Upon the Company being notified by a Selling Stockholder that any
material arrangement has been entered into with a broker or dealer for the sale
of shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplemented
Prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act, disclosing (a) the name of each such broker-dealer, (b) the
number of shares involved, (c) the price at which such shares were sold, (d)
the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (e) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus, as supplemented, and (f) other facts material to
the transaction.
The Company is bearing all costs relating to the registration of the
Shares (other than fees and expenses, if any, of counsel or other advisers to
the Selling Stockholders). Any commissions, discounts or other fees payable to
broker-dealers in connection with any sale of the Shares will be borne by the
Selling Stockholder selling such Shares.
The Company has agreed to indemnify the Selling Stockholders in
certain circumstances, against certain liabilities, including liabilities
arising under the Securities Act. Each Selling Stockholder has agreed to
indemnify the Company and its directors, and its officers who sign the
registration statement against certain liabilities, including liabilities
arising under the Securities Act.
LEGAL OPINION
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Morgan, Lewis & Bockius LLP, Philadelphia,
Pennsylvania.
EXPERTS
The financial statements contained in the Company's Annual Report on
Form 10-K, incorporated by reference in this Prospectus, have been audited by
Richard A. Eisner & Company, LLP, independent auditors, as indicated in their
report with respect thereto, and are incorporated herein by reference in
reliance upon the authority of said firm as experts in accounting and auditing.
11
<PAGE> 12
<TABLE>
<S> <C>
======================================================= ======================================================
No dealer, salesman or other person has 550,000 Shares
been authorized to give any information or to make
any representations other than those contained in
this Prospectus and, if given or made, such
information or representations must not be relied MAGAININ PHARMACEUTICALS INC.
upon as having been authorized by the Company or
the Selling Stockholders. This Prospectus does
not constitute an offer to sell or a solicitation
of an offer to buy to any person in any
jurisdiction in which such offer or solicitation
would be unlawful or to any person to whom it is
unlawful. Neither the delivery of this Prospectus
nor any offer or sale made hereunder shall, under Common Stock
any circumstances, create any implication that
there has been no change in the affairs of the
Company or that information contained herein is
correct as of any time subsequent to the date ---------------
hereof.
PROSPECTUS
---------------
---------------
TABLE OF CONTENTS
Page
----
Available Information . . . . . . . . . . . . 2
Incorporation of Certain Documents October 31, 1996
by Reference . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . 9
Selling Stockholders . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . 11
Legal Opinion . . . . . . . . . . . . . . . . 11
Experts . . . . . . . . . . . . . . . . . . . 11
======================================================= ======================================================
</TABLE>
