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Rule 424(b)(3)
Registration No. 333-14555
PROSPECTUS
4,375 SHARES
MAGAININ PHARMACEUTICALS INC.
COMMON STOCK
The shares offered hereby (the "Shares") consist of 4,375 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 stockholder listed herein under "Selling
Stockholder" (the "Selling Stockholder"). The shares may be offered from time to
time by the Selling Stockholder. All expenses of registration incurred in
connection herewith are being borne by the Company, but all selling and other
expenses incurred by the 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 Stockholder.
The Selling Stockholder has 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
Stockholder 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 March 31, 1998, the last
reported closing price of the Common Stock was $5.563 per share.
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" ON PAGES 5 TO 12 OF THIS PROSPECTUS.
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 April 3, 1998
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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 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. Such material
also may be accessed electronically by means of the Commission's home page on
the Internet (http://www.sec.gov). 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, 1997.
(b) 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.
Cytolex(TM) is a registered trademark of the Company. All other brand
names or trademarks appearing in this Prospectus are the property of their
respective holders.
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THE COMPANY
GENERAL
Magainin Pharmaceuticals Inc. ("Magainin" or the "Company") is a
biopharmaceutical company engaged in the development of medicines for serious
diseases. The Company's development efforts are focused on anti-infectives,
oncology, and pulmonary and allergic disorders.
Magainin's research and drug development efforts are focused on two
technology platforms:
- Host Defense Drug Discovery--the Company isolates and develops
therapeutically active compounds from the host defense systems of
animals. Magainin peptides represent a new class of antibiotics being
developed for the treatment of infection. The Company's second host
defense class, aminosterols, is a new class of pharmaceuticals which
the Company believes may have multiple applications, including the
control of cell proliferation.
- Asthma Genomics--the Company employs a broad range of genomics
techniques to identify genes associated with the pathogenesis of
asthma, with the objective of utilizing the optimal biologic gene
targets in the development of novel therapeutics for asthma and
allergy.
Magainin Peptides--Cytolex(TM)
The Company's most advanced class of compounds under development are
magainin peptides. Discovered in the skin of the African clawed frog, magainins
have demonstrated broad activity against a variety of pathogens in preclinical
studies. These molecules act by puncturing the membrane of the pathogen cell,
resulting in the death of the pathogen.
The Company's lead product development candidate is Cytolex(TM)
(formerly called MSI-78), a topical cream antibiotic. The Company has completed
two pivotal Phase III clinical trials of Cytolex for the treatment of infection
in diabetic foot ulcers. These studies were designed as equivalence trials, with
the goal of demonstrating that topically applied Cytolex is as effective as
orally administered ofloxacin, a quinolone antibiotic indicated for the
treatment of infection, including skin and soft tissue infections. The Company
intends to submit a New Drug Application ("NDA") to the U.S. Food and Drug
Administration (the "FDA") based on the results of these trials early in the
second half of 1998.
In February 1997, the Company and SmithKline Beecham ("SB") entered
into a development, supply and distribution agreement pursuant to which SB will
market and sell Cytolex in North America. Under this agreement, SB has paid $10
million to the Company, and may make additional payments of up to $22.5 million
upon the occurrence of certain product milestones. SB will also fund a majority
of development expenses for any additional indications for Cytolex.
Cytolex(TM) is a registered trademark of the Company. All other
brand names or trademarks appearing herein are the property of their respective
holders.
Aminosterols--Squalamine
Squalamine is the lead product development candidate in the Company's
aminosterol program. Squalamine was discovered in the body tissues of the
dogfish shark. The shark was initially examined because of its known resistance
to infection and cancer. Since the discovery of squalamine, the Company has
discovered several other aminosterol compounds in the shark. In preclinical
testing conducted to date, certain of these compounds have demonstrated an
ability to control cell growth, along with other pharmacological properties.
These properties may have application in the treatment of disease indications
characterized by cell proliferation, such as cancer.
The Company's initial disease focus for squalamine is solid tumors.
The formation of new blood vessels, or angiogenesis, is believed to be a
critical factor in tumor growth. Squalamine may be of benefit in the
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treatment of a number of solid tumors by inhibition of new blood vessel growth
required for tumor nourishment.
The Company is currently conducting Phase I clinical testing of
squalamine in patients with advanced malignancy.
Asthma Genomics
In 1996, the Company initiated a research program in the genomics of
asthma. These efforts led to the identification of AAF1, a gene which varies in
DNA structure and function in asthmatic and allergic humans and animals. The
Company maintains a comprehensive research and development program to identify
additional genes in the AAF1 biologic pathway, which genes are believed to be
important in mediating the allergic responses controlled by AAF1. AAF2 has been
discovered in humans as a key second gene candidate in the AAF1 pathway, and
other genes have also been identified by the Company. The Company continues to
investigate the role of such genes in the allergic inflammatory response.
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Since commencing operations, the Company has not generated any
sales revenue. The Company has funded operations primarily from the proceeds
of public and private placements of securities. The Company has incurred
losses in each year since its inception, and expects to incur substantial
additional losses for the next several years. The Company currently has no
marketable products, and it may be several years, if ever, until marketable
products are developed and approved.
Magainin was incorporated in the State of Delaware in June 1987. The
Company's primary offices and research facility are located at 5110 Campus
Drive, Plymouth Meeting, PA 19462. The Company's telephone number is
(610) 941-4020.
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Investment in the securities offered hereby involves a high degree of
risk. See "Risk Factors." This Prospectus contains forward looking statements
which involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors," as well as those discussed elsewhere in this
Prospectus.
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RISK FACTORS
This Prospectus contains, in addition to historical information,
statements by the Company with regard to its expectations as to financial
results and other aspects of its business that involve risks and uncertainties
and may constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements reflect management's
current views and are based on certain assumptions. Actual results could differ
materially from those currently anticipated as a result of a number of factors,
including, but not limited to, the risks and uncertainties discussed below, as
well as those discussed elsewhere in this Prospectus. Given these
uncertainties, current or prospective investors are cautioned not to place
undue reliance on any such forward-looking statements. In addition to the other
information in this Prospectus, prospective investors should carefully consider
the following factors in evaluating the Company and its business before
purchasing any shares of Common Stock offered hereby.
Risks Associated with Clinical Testing and FDA Approval of Cytolex. The
Company has completed two pivotal Phase III clinical trials of Cytolex for the
treatment of infection in diabetic foot ulcers and intends to submit an NDA to
the FDA based on the results of these trials early in the second half of 1998.
Although the Company believes the two pivotal trials conducted for Cytolex
yielded successful results, there can be no assurance that the FDA will concur
with the Company's analysis in this regard.
The clinical trials conducted for Cytolex yielded substantial data
including data relating to clinical cure or improvement of infection, and data
relating to overall microbiological results. The Company's data package will
include extensive additional data, including clinical data on key patient
cohorts (subgroups), and microbiology data for specific pathogens. Certain of
the data favor ofloxacin. Additionally, the Company is continuing its analyses
of data from the studies.
There can be no assurance that Cytolex will receive FDA approval on a
timely basis, if at all. The guidelines pursuant to which clinical trials of
this nature are to be conducted have evolved since the commencement of these
studies by the Company. There can be no assurance that the FDA will not, after
completing its own analysis of the two pivotal trials conducted for Cytolex,
determine that such trials should have been conducted or analyzed differently,
and thus reach a different conclusion from that reached by the Company or
request that further studies be conducted. Conducting additional studies would
likely be time consuming and expensive. The failure of the Company to obtain FDA
approval for Cytolex, any significant delay in obtaining such approval, or the
imposition of highly restrictive conditions on such approval, would have a
material adverse effect on the Company.
Accumulated Deficit; Continuing Losses. The Company has been engaged
to date primarily in research and development activities and, through December
31, 1997, has generated no revenue from product sales. The Company has incurred
losses in each year since its inception, and at December 31, 1997, had an
accumulated deficit of approximately $109.6 million. There can be no assurance
that the Company will realize
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product revenues on a timely basis, if at all. The Company's operations are
subject to numerous risks associated with research and development companies,
including a competitive and regulatory environment in an industry characterized
by numerous well-established and well-capitalized companies and exhaustive and
expensive regulatory scrutiny. The Company will be required to continue to
conduct significant research, development and testing activities which, together
with projected general and administrative expenses, are expected to result in
continued substantial losses for the foreseeable future.
Need for Substantial Additional Funds. The Company will require
substantial additional funds to continue its research and development programs
and to commercialize potential products. The Company may not have sufficient
funds to complete development activities for any of its proposed products,
including Cytolex.
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 to obtain any additional funds and has no established
banking arrangements through which it can obtain additional debt financing.
There can be no assurance that future funding will be available to the Company,
or, if available, will be obtainable on terms favorable to the Company. The
receipt of funding, if any, from any corporate partners, including SB, will
depend largely on the progress of research and development programs. Under
collaborative arrangements, the Company may convey 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 of such
products 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 arrangements on
favorable terms, if at all.
If the Company does not enter into appropriate collaborations, receive
additional funds from SB under its current agreement, or raise sufficient funds
from the periodic sale of securities, the Company will be required to delay or
eliminate expenditures for potential products, including Cytolex, or to enter
into collaborations with third parties to commercialize potential products or
technologies that the Company would otherwise seek to develop itself, or seek
other arrangements.
Manufacturing Uncertainties; Dependence on Third Parties. 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. Production of peptides (such as Cytolex and other
magainins) is expensive relative to production of traditional antibiotics.
Additionally, there are a limited number of companies which are currently able
to produce bulk peptides on the scale which the Company expects to require to
commercialize Cytolex. There can be no assurance that qualified outside
contractors will be available to manufacture materials for the Company, or do
so at costs which are affordable by the Company.
Contract manufacturers may utilize their own technology, technology
developed by the Company, or technology acquired or licensed from third
parties. When contract manufacturers develop proprietary process technology and
have ownership of the Drug Master File, the Company's reliance on such contract
manufacturer is increased, and the Company may have to obtain a license from
such contract manufacturer to have its products manufactured by another party.
Technology transfer from the original contract manufacturer may also be
required. There can be no assurance that any such license will be available on
terms acceptable to the Company, or, if available, that such technology will be
successfully transferred to the Company. Any such technology transfer may also
require transfer of requisite data for regulatory purposes, including
information contained in a proprietary Drug Master File held by a contract
manufacturer. There can be no assurance that any such transfer can be
completed.
The Company is working with Abbott Laboratories ("Abbott") with regard
to development by Abbott of a solution phase chemical process to manufacture
bulk drug substance for Cytolex on a commercial scale. The
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Company is currently dependent upon Abbott for the production of bulk drug
substance for Cytolex. In the event that bulk drug substance for Cytolex is not
manufactured at Abbott, the Company will need to secure other manufacturing
arrangements. The process developed by Abbott is proprietary, and in the event
the Company desires to utilize, or have another party utilize, such technology,
the Company would be required to make license payments to Abbott. Further
progress in scale-up and manufacturing development efforts will be required to
enable the Company to manufacture and sell Cytolex on a profitable basis. This
may require substantial additional funds. The Company has certain efforts
underway with respect to alternative manufacturing sources, including
recombinant manufacturing; however, these programs are at an early stage, and
significant expenditures over an extended period of time will be required to
develop a commercially viable process. No assurance can be given that a
cost-effective manufacturing process can ultimately be developed, or that any
such process would be approved by the FDA, or that the Company, Abbott, or
others will be able to manufacture Cytolex on a commercially viable basis.
The Company also expects to conduct significant manufacturing
development activities for its other products under development. The Company is
currently working with outside contractors for the chemical production of
squalamine. The Company expects to expend significant resources in the
production of squalamine and any other compounds under development, and there
can be no assurance that these efforts will be successful.
Dependence on Sales and Marketing Partners; 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. The Company has entered into such an
arrangement with SB with respect to Cytolex in North America, and intends to
seek a sales and marketing collaboration for Cytolex in other territories. Such
sales and marketing arrangements may also involve delegating to the Company's
partner in such collaborations the responsibility for all or a significant
portion of the development and regulatory approval process. In the event that
such collaborators 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 enter into
any such arrangements in the future, or that such collaborations will be
successful.
The amount and timing of resources to be devoted to the Company's
products by any of its collaborative partners is not within the control of the
Company. There can be no assurance that the interests of the Company will
continue to coincide with the interests of its collaborators. Collaborators
could develop products independently or through third parties which could
compete with the Company's proposed products. With respect to Cytolex, SB
maintains a significant presence in the antibiotic area, and currently sells a
topical antibiotic product indicated for the treatment of certain skin
infections. Furthermore, SB may unilaterally terminate its agreement with the
Company. There can be no assurance that any of the Company's collaborative
agreements will not be terminated by the Company's collaborators.
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.
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 will be 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. The Company has submitted an Investigational New Drug
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Application ("IND") to the FDA, to obtain authorization for human testing, for
only two compounds, Cytolex and squalamine. 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. Additionally, 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 manufacture or to market,
that third parties hold proprietary rights that preclude the Company from
marketing any products, or that third parties market superior or equivalent
products.
No Assurance of Market Acceptance of Cytolex. Even if the requisite
regulatory approvals for Cytolex are obtained, there is no assurance that such
product would be accepted in the United States or foreign markets. A number of
factors may affect the rate and overall market acceptance of Cytolex, including
the perception by physicians and other members of the health care community of
the safety and efficacy of Cytolex on an absolute basis or in comparison to
other drugs, the price of Cytolex relative to other drugs or competing treatment
modalities, the availability of third-party reimbursement, and the effectiveness
of the sales and marketing efforts by SB and the Company relative to the sales
and marketing efforts of competitors. In addition, side effects or unfavorable
publicity concerning Cytolex or comparable drugs on the market could have an
adverse effect on the Company's ability to obtain physician, patient or
third-party payor acceptance.
Government Regulation. The production and marketing of the Company's
products and its research and development activities are subject to regulation
by numerous governmental authorities in the United States and other countries.
In the United States, drug products are subject to rigorous review by the FDA.
The Federal Food, Drug, and Cosmetic Act and other federal statutes and
regulations govern or influence the testing, manufacture, safety, efficacy,
labeling, storage, recordkeeping, approval, advertising, promotion and
distribution of such products. Noncompliance with applicable requirements can
result in Warning Letters, fines, recall or seizure of products, refusal of the
government to approve marketing applications or to allow the Company to enter
into government supply contracts, the withdrawal of previously approved new
drug applications and criminal prosecution.
In order to obtain FDA approval to market a new drug product, the
Company must submit proof of safety, efficacy and quality. Such proof entails
extensive and time consuming preclinical and clinical testing. The results of
preclinical studies are submitted to the FDA as part of an IND. Once the IND
is effective, human clinical trials may be conducted. The results of the
clinical trials are submitted to the FDA as part of an NDA.
Detailed manufacturing information is also required to be included in
the NDA for review and approval by the FDA. Among other things, the Company must
submit data indicating that the drug product can be consistently manufactured at
the same quality standard, that the drug product is stable over time, and that
the level of chemical impurities in the drug product is under specified levels.
Peptides are an especially difficult compound to manufacture at these standards,
particularly in the quantities at which Cytolex will be required to be
manufactured. Any contract manufacturers that the Company may use must adhere
to the Good Manufacturing Practices prescribed by the FDA. Drug manufacturing
facilities must pass a plant inspection before the FDA will issue approval to
market a new drug product. There can be no assurance that the manufacturing
information submitted for Cytolex, or other products under development, will be
sufficient for approval by the FDA.
Following extensive review of the NDA, the FDA may grant marketing
approval, require additional testing or information, or deny the application.
Sales of a new drug may commence following FDA approval of an NDA and
satisfactory completion of a pre-approval inspection of the manufacturing
facility, including a review of pertinent production records. If there are any
modifications to the drug, including any changes in indication, manufacturing
process, labeling or manufacturing facility, an NDA supplement may be required
to
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be submitted to the FDA. The FDA may also require post-marketing testing and
surveillance to monitor the effects of approved products or place conditions on
any approvals that could restrict the commercial applications of such products.
Product approvals may be withdrawn if compliance with regulatory standards is
not maintained or if problems concerning safety, efficacy or quality of the
product occur following approval.
Continued compliance with all FDA requirements and conditions in an
approved application, including those concerning product specifications,
manufacturing process, validation, labeling, promotional material,
recordkeeping and reporting, is necessary for all approved drug products.
Failure to comply could result in Warning Letters, product recall or other
FDA-initiated actions, which could delay further marketing until the products
are brought into compliance.
In October 1992, the Prescription Drug User Fee Act of 1992 ("PDUFA")
was enacted, imposing substantial fees on a one-time basis for applications for
approval, and on an annual basis for manufacturing and marketing of
prescription drugs. Legislation reauthorizing PDUFA is currently pending in
Congress and it is anticipated that such user fees will continue and may
increase in the future.
The Company is also subject to regulation by other regulatory
authorities, including the Occupational Safety and Health Administration, the
Environmental Protection Agency, the Nuclear Regulatory Commission, the Drug
Enforcement Agency and the United States Department of Agriculture, and to
regulation under the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other regulatory statutes, and may in the future be subject to
additional federal, state or local regulations. These agencies may promulgate
regulations that affect the Company's research and development programs.
Sales of pharmaceutical products outside the United States are subject
to foreign regulatory requirements that vary widely from country to country.
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities of foreign countries must be obtained prior
to the commencement of marketing the product in those countries. The time
required to obtain such approvals may be longer or shorter than that required
for FDA approval.
There can be no assurance that any required FDA or other governmental
approval will be granted, or if granted, will not be withdrawn. Governmental
regulation may prevent or substantially delay the marketing of the Company's
proposed products, cause the Company to undertake costly procedures, and
furnish a competitive advantage to the more substantially capitalized companies
with which the Company competes. In addition, the extent of potentially adverse
government regulations which might arise from future administrative action or
legislation cannot be predicted. Efforts are currently underway in the U.S.
Congress to reform federal regulation of drug and biological products. The
reform provisions, when and if implemented, could modify a number of existing
legal requirements and standards and create new legal requirements and
standards. Although certain of these provisions, if implemented, could
streamline and otherwise benefit development, marketing and related
requirements for drugs and biologics, others could increase regulatory
requirements or otherwise materially adversely affect the Company.
Competition. The pharmaceutical industry is characterized by intense
competition. Many companies, research institutions and universities are working
in a number of areas similar to the Company's field of interest. The Company is
aware that research is being conducted by others in connection with compounds
derived from the host defense systems of various animals. Additionally, many
companies are involved in research and development activities focused on the
pathogenesis of disease, and competition among companies attempting to find
genes responsible for disease is intense. Furthermore, 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's proposed products will also be subject to competition
from products using techniques other than those developed by the Company or
based on advances that may render the Company's products obsolete.
The Company expects technological developments in the
biopharmaceutical field to occur at a rapid rate and expects competition to
intensify as advances in this field are made. Accordingly, the Company will be
required to continue to devote substantial resources and efforts to research
and development activities in order
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to maintain a competitive position in this field. 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 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.
Colleges, universities, governmental agencies and other public and
private research organizations are becoming more active in seeking patent
protection and licensing arrangements to collect royalties for use of
technology that they have developed, some of which may be directly competitive
with that of the Company. In addition, these institutions, along with
pharmaceutical and specialized biotechnology companies, can be expected to
compete with the Company in recruiting highly qualified scientific personnel.
As to the disease areas being targeted by the Company, there can be no
assurance that Cytolex will be successfully marketed against oral antibiotics
for the treatment of infection in diabetic foot ulcers. These infections have
historically been treated with systemically administered antibiotics, such as
ofloxacin, which may be perceived by some medical professionals as having
certain advantages over Cytolex. There also can be no assurance that Cytolex can
be manufactured at a cost which will allow it to be sold at a competitive price
relative to oral antibiotics, or other topical antibiotics that may be used for
this indication. Significant efforts are underway by many companies in the
development and marketing of products intended for the additional disease areas
being targeted by the Company, including cancer and asthma. A number of major
pharmaceutical companies have significant franchises in these disease areas, and
can be expected to invest heavily to protect these interests. In addition, in
the cancer field, anti-angiogenic agents are under development at a number of
companies. In the asthma field, other biopharmaceutical companies have also
reported the discovery of genes relating to asthma.
Uncertainties Relating to Patents and Proprietary Rights. The
Company's success will depend in part upon its ability to obtain patent
protection for compounds, uses of compounds, and processes. Patent matters
involve complex legal and factual issues, and can be highly uncertain. Host
defense 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 or their uses. Additionally, chemical entities that are similar
to, but not identical with, the Company's compounds, may not be protected by
issued patents of the Company. 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 criteria for obtaining patent protection for genes is unclear and
the impact of this uncertainty on the Company's business cannot be determined.
The Company owns or has exclusive rights under license agreements to
45 issued patents, and an additional 26 patent applications are pending,
including the patent application relating to Cytolex. Of the 71 patents or
patent applications to which the Company has rights, 45 are related to host
defense and 26 are related to the Company's research efforts in genomics. 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, or will not be
challenged by third parties. 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. In addition, 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.
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. There can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to such proprietary technology or
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that the Company can meaningfully protect its rights in such unpatented
proprietary technology. Additionally, if the Company is unable to obtain strong
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.
Virtually all of the Company's key scientists worked at other
biotechnology or pharmaceutical companies or at universities and research
institutions before joining the Company. Disputes may arise as to whether
technology developed by such scientists while employed by or associated with
the Company was first discovered when they were employed by or associated with
others in a manner that would give third parties rights to such technology
superior to the rights, if any, of the Company. Disputes of this nature have
occurred in the past, and are expected to continue to arise in the future, and
there can be no assurance that the Company will prevail in any such disputes.
To the extent that consultants, vendors 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. Consultants
to the Company 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 has rights under license agreements to certain patents and
patent applications under which the Company expects to owe royalties on sales
of any products which are covered by issued patent claims. Additionally,
certain of these agreements also 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.
Product Liability and Insurance Risks. 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. The Company carries limited clinical trial insurance, and 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 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 such insurance or that such insurance can be maintained
in sufficient amounts to protect the Company against such liabilities or at a
reasonable cost. Certain arrangements also require the Company to indemnify
third parties with whom the Company has entered into contractual arrangements
against any liabilities that may arise in connection with such third party's
activities on behalf of the Company.
In the event of an uninsured or inadequately insured claim, the
Company's business and financial condition could be materially adversely
affected.
Uncertainty Related to Reimbursement Policies; Health Care Reform.
Successful commercialization of Cytolex and the Company's other potential
products will be dependent in part on the coverage and reimbursement of such
products from third-party payors, such as government authorities, private
health insurers and other organizations, such as managed care organizations.
There can be no assurance that such coverage and reimbursement will be
available or, if available, will be in adequate amounts.
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The revenues and profitability of pharmaceutical companies can be
significantly affected by the efforts of governmental and third-party payors to
contain or reduce the cost of health care through various means. For example,
in the United States, pricing of prescription pharmaceutical products has been
impacted by the efforts of managed care organizations and other third-party
payors, and, in certain foreign markets, pricing of prescription pharmaceutical
products is subject to government control. Government and third-party payors
have also taken more aggressive steps to limit the availability of new and
often more costly therapeutics especially where they believe that the
incremental therapeutic benefit is not justified by the additional cost. All of
these trends are expected to continue in the future.
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.
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 an 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 of which could have
an 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 events concerning the Company or its
competitors, including product testing results, technological innovations, new
commercial products, government regulations, proprietary rights, regulatory
actions, litigation and other matters, 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. As of December 31, 1997, the Company had outstanding options to purchase
2,974,000 shares at prices ranging from $.002 per share to $16.75 per share, of
which 1,586,000 were exercisable as of such date. Also outstanding at December
31, 1997 were warrants to purchase 229,739 shares of the Company's Common Stock
exercisable at $8 per share, a warrant to purchase 300,000 shares of the
Company's Common Stock, exercisable at $7.50 per share, and warrants to purchase
an aggregate of 1,017,872 shares of the Company's Common Stock, exercisable at
$8.43 per share, subject to adjustment. 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.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholder.
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SELLING STOCKHOLDERS
Prior to the offering of the Shares being offered hereby, the Selling
Stockholder, Julio H. Cuervo, beneficially owned 4,375 shares of Common Stock,
all of which are being offered hereby. Accordingly, the Selling Stockholder will
not beneficially own any shares of Common Stock following completion of the
offering of the Shares. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Stockholder may offer the
Shares for resale from time to time. See "Plan of Distribution."
In recognition of the fact that the Selling Stockholder may wish to be
legally permitted to sell his Shares when he deems 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
Stockholder.
The shares being offered hereby by the Selling Stockholder were
acquired by him from The Scripps Research Institute ("Scripps"), which acquired
the shares from the Company in a private placement transaction in connection
with certain amendments to license agreements relating to Cytolex. In
consideration for the issuance of the shares, Scripps and Houghten
Pharmaceuticals Inc. agreed to amend such license agreements to provide that the
Company's license as it relates to Cytolex will be fully-paid and royalty-free.
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PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Stockholder 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 the 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 Stockholder). 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.
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 on their report, given upon the authority of said firm as experts in
accounting and auditing.
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No dealer, salesman or other person has 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 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 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................................ 2
Incorporation of Certain Documents
by Reference...................................... 2
The Company ......................................... 3
Risk Factors......................................... 5
Use of Proceeds...................................... 12
Selling Stockholders................................. 13
Plan of Distribution................................. 14
Legal Opinion........................................ 14
Experts.............................................. 14
</TABLE>
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4,375 Shares
MAGAININ PHARMACEUTICALS INC.
Common Stock
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PROSPECTUS
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April 3, 1998
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