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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-44312
PROSPECTUS
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4,320,362 SHARES
Magainin Pharmaceuticals Inc.
Common Stock
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The shares of common stock covered by this prospectus are being offered by the
selling stockholders named in the section entitled "Selling Stockholders"
beginning on page 18 of this prospectus. We will not receive any of the proceeds
from the sale of the shares by the selling shareholders.
Our common stock is quoted on the Nasdaq National Market under the symbol
"MAGN." On August 22, 2000 the last reported closing price of our common stock
was $3.25 per share.
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You should read this prospectus carefully before you invest. Please refer to
the "Risk Factors" section beginning on page 6 of this prospectus for a
discussion of the material risks involved in investing in the shares.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
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The information in this prospectus is not complete and may change. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
The date of this prospectus is October 12, 2000
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TABLE OF CONTENTS
Page
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About this Prospectus................ 2
Magainin Pharmaceuticals Inc......... 3
Risk Factors......................... 5
Forward-Looking Statements........... 16
Use of Proceeds...................... 17
Selling Stockholders................. 17
Plan of Distribution................. 19
Legal Opinion........................ 20
Experts.............................. 20
Where You Can Find More Information.. 20
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ABOUT THIS PROSPECTUS
You should only rely on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell, and
seeking offers to buy, shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock.
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MAGAININ PHARMACEUTICALS INC.
Magainin Pharmaceuticals is a biopharmaceutical company with research and
development efforts in anti-angiogenesis, respiratory genomics and infectious
disease.
Anti-Angiogenesis
Cancer includes many different types of uncontrolled cellular growth. Clusters
of cancer cells, known as tumors, may invade and destroy surrounding organs,
impair physiological function and lead to death. Cancer cells require oxygen and
nutrients, which are received from the body's blood supply. In order to access
this blood supply, cancer cells initiate a biochemical mechanism that stimulates
angiogenesis, providing the blood supply that nourishes the tumor. As cancer
cells grow and metastasize, they require continuous angiogenesis. Anti-
angiogenic substances are intended to inhibit the growth of new blood vessels
and may therefore be effective in treating various cancers.
Squalamine is our lead product development candidate currently being evaluated
in Phase II clinical studies for the treatment of solid tumors. Clinical studies
are currently ongoing in non-small cell lung cancer, ovarian cancer and certain
other solid tumors. Additional studies are expected to commence this year in
pediatric neuroblastoma and prostate cancer.
In each of these indications, squalamine will be evaluated in conjunction with
leading chemotherapeutics. We have determined that squalamine synergizes well
with these cytotoxic agents, having studied squalamine extensively in multiple
preclinical cancer models.
Squalamine has a unique mechanism of action that directly blocks endothelial
cell activation, migration and proliferation by multiple growth factors. This
intracellular blockage of multiple growth factors contrasts to most other
angiogenesis inhibitors currently under development that focus on a single
growth factor or on a single stage of blood vessel recruitment.
Squalamine's anti-angiogenic properties may have application in additional
disease indications characterized by abnormal blood vessel growth. New research
programs have been initiated in ophthalmic disease, including macular
degeneration and diabetic retinopathy, as well as in fibrodysplasia ossificans
progressiva (FOP), a rare genetic disorder in which there is progressive
formation of new bone in large muscles.
Respiratory Genomics
We initiated a research program in the genomics of asthma in 1996. Genomics
analyses in both humans and animals have generated substantial support for
interleuken-9 (IL9) as a major mediator of asthma. IL9 is a gene that varies in
DNA structure and function in asthmatic and allergic humans and animals. We
maintain a comprehensive research and development program to identify additional
genes that may be implicated in respiratory disease; and investigate the role of
these genes in the allergic inflammatory response with the objective of
utilizing the optimal biologic gene targets in the development of novel
therapeutics for asthma and allergy.
We focus our efforts on three distinct areas within the respiratory program:
Biologics Based Anti-IL9 Therapeutics. In May 2000, we entered into a
research, development and commercialization collaboration agreement with
Genentech, Inc. Under this agreement, we will co-develop with Genentech an
antibody to IL9 for asthma, with options for other products in respiratory
disease.
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Respiratory Gene Database (Screening Program). We employ functional genomics
to discover therapeutic targets for respiratory disease. Numerous targets have
been identified, validated and added to our Respiratory Gene Database. These
include genes and gene products that can be antagonized by biological
therapeutics, such as proteins and traditional small molecules. Chemical
libraries can be screened for activity against these targets using our
proprietary high throughput screening programs. Genentech is the first
subscriber to this database.
Small Molecule Therapeutics. Our researchers have identified several small
molecules that we believe to be excellent drug development candidates, including
MSI-1432, which blocks T-cell adhesion and proliferation in response to
antigens. Other small molecules have also been evaluated, such as MSI-1953, an
inhibitor of mucin production.
Infectious Disease
We have conducted research and development efforts in infectious diseases over
many years. The magainin class of compounds has been shown to have activity
against a variety of pathogens, including bacteria, amoebae, fungi and
parasites.
Antibiotic resistance is the process by which antibiotics lose their
effectiveness over time as bacteria develop the means to produce enzymes capable
of diminishing the utility of an antibiotic. We have not noted the development
of antibiotic resistance to the magainins and believe this is due to the unique
mechanism of action of the magainins. Magainins puncture the cell membrane and
break down the integrity of the cell, killing bacteria differently than
traditional antibiotics.
LOCILEX(TM) Cream, a topical cream antibiotic for the treatment of infection
in diabetic foot ulcers, had been our lead product development candidate, but
did not obtain approval from the FDA in July 1999. In conjunction with
SmithKline Beecham, our marketing partner, we are currently considering the
feasibility of continuing this program.
Other Programs
The aminosterols are a novel class of small molecules with unique
pharmacological activities. We have discovered a number of other aminosterol
compounds in the shark, each differing from squalamine in chemical structure and
interacting with a separate, specific receptor. These compounds affect the
intracellular metabolism in a manner that disturbs the target cell responses to
certain growth factors, hormones and other signals. Therapeutic opportunities
for these compounds may include obesity, various malignancies, inflammatory
diseases, and viral infections.
Additionally, we have research efforts underway with regard to human host-
defense molecules (defensins) and has identified several natural inducers of
local antimicrobial defenses.
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RISK FACTORS
Any investment in shares of our common stock involves a high degree of risk.
You should carefully consider the following risk factors, together with the
other information presented in this prospectus, before deciding to invest in the
shares of common stock covered by this prospectus.
If We Do Not Raise Additional Capital, We May Not Be Able To Continue Our
Research and Development Programs and May Never Commercialize Any Products.
We maintained cash and investments of $12.3 million at June 30, 2000. At June
30, 2000, we had current liabilities of $3.7 million and long-term liabilities
of $3.2 million, which is primarily comprised of accrued development expenses
payable to Abbott Laboratories in certain circumstances. In August 2000, we
entered into agreements to sell approximately 4.1 million shares of our common
stock, through a private placement, at a price of $3.00 per share. Proceeds to
us from this private placement totaled approximately $11.7 million, net of
approximately $750,000 of offering expenses. As a result of this private
placement and the $5.5 million Genentech, Inc. private placement in May 2000,
$1.1 million of the Abbott liability will be payable to Abbott in March 2001.
In the absence of raising additional funds or significantly reducing expenses,
we have sufficient resources to sustain operations through 2001. We will need to
raise substantial additional funds in the future to continue our research and
development programs and to commercialize our potential products. If we are
unable to raise such funds, we may be unable to complete our development
activities for any of our proposed products.
We regularly explore alternative means of financing our operations and seek
funding through various sources, including public and private securities
offerings and collaborative arrangements with third parties. We currently do not
have any commitments to obtain additional funds and may be unable to obtain
sufficient funding in the future on acceptable terms. If we cannot obtain
funding, we will need to delay, scale back or eliminate research and development
programs or enter into collaborations with third parties to commercialize
potential products or technologies that we might otherwise seek to develop or
commercialize ourselves, or seek other arrangements. If we engage in
collaborations, we will receive lower consideration upon commercialization of
such products than if we had not entered into such arrangements, or if we
entered into such arrangements at later stages in the product development
process.
We expect to evaluate all available strategic alternatives to finance our
programs and technology, including broad-based alliances or mergers intended to
create better-financed entities.
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We Expect to Continue to Incur Substantial Losses.
To date, we have engaged primarily in the research and development of drug
candidates. We have not generated any revenues from product sales and have
incurred losses in each year since our inception. As of June 30, 2000, we had
an accumulated deficit of approximately $150.6 million.
Our proposed products are in a relatively early developmental stage and will
require significant research, development and testing. We must obtain
regulatory approvals for all of our proposed products prior to commercialization
of the product. Our operations are also subject to various competitive and
regulatory risks. As a result, we are unable to predict when or if we will
achieve any product revenues. We expect to experience substantial losses in the
foreseeable future as we continue our research, development and testing efforts,
which will cause us to have continued negative results of operations.
The U.S. Food and Drug Administration Has Deemed Our New Drug Application for
LOCILEX(TM) Cream to Be Not Approvable, Which Will Prevent Near Term
Commercialization of the Product.
We announced on July 26, 1999 that we received notification from the U.S. Food
and Drug Administration, or FDA, that our New Drug Application, or NDA, for
LOCILEX(TM) Cream had been deemed not approvable.
LOCILEX(TM) Cream, a topical cream antibiotic for the treatment of infection
in diabetic foot ulcers, was our lead product development candidate. With the
FDA's decision, near-term commercialization of LOCILEX(TM) Cream will not occur,
and we will generate no revenues from LOCILEX(TM) Cream in the near future.
In order to again seek approval of LOCILEX(TM) Cream, the FDA has indicated
that we must conduct further development activities, including clinical and
manufacturing activities. The specific nature of the clinical activities will be
determined after consultations with the FDA. As a result of its review of
manufacturing of the cream product, the FDA issued certain observations of
deficiencies in compliance with good manufacturing procedures. In any additional
clinical studies to be conducted, new batches of the cream product will need to
be manufactured from the bulk drug substance, in compliance with good
manufacturing procedures, and meeting strict product specifications. Further
clinical and manufacturing development efforts may be unsuccessful again. The
time required to conduct such activities may be lengthy and the costs
considerable.
If We Do Not Obtain Required Regulatory Approvals, We Will Not Be Able to
Commercialize Any of Our Product Candidates.
Numerous governmental authorities, including the FDA in the United States,
regulate our business and activities. Federal, state and foreign governmental
agencies impose rigorous preclinical and clinical testing and approval
requirements on our product candidates. In general,
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the process of obtaining government approval is time consuming and costly.
Governmental authorities may delay or deny the approval of any of our drug
candidates. In addition, governmental authorities may enact new legislation or
regulations that could limit or restrict our efforts. A delay or denial of
regulatory approval for any of our drug candidates, such as that which has
occurred for LOCILEX Cream, will materially affect our business. Even if we
receive approval of a product candidate, it may be conditioned upon certain
limitations and restrictions as to the drugs used and may be subject to
continuous review. If we fail to comply with any applicable regulatory
requirements, we could be subject to penalties, including:
. warning letters;
. fines;
. withdrawal of regulatory approval;
. product recalls;
. operating restrictions;
. injunctions; and
. criminal prosecution.
1) FDA Marketing Approval:
The primary regulatory agency overseeing all phases of our drug development
and marketing programs is the FDA. In order to obtain approval from the FDA to
market any drug, we must submit proof of safety, efficacy and quality for each
of our proposed products for each indication, which requires extensive and time
consuming preclinical and clinical testing. The results of preclinical studies
are submitted to the FDA as part of an Investigational New Drug Application, or
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.
Following review of the NDA, the FDA may:
. grant marketing approval;
. require additional testing or information; or
. deny the application.
2) FDA Manufacturing Approval:
Detailed manufacturing information is also required to be included in the NDA
for review and approval by the FDA. All manufacturing facilities and processes
must comply with good manufacturing practices, or GMP, regulations prescribed by
the FDA. All manufacturers must, among other things, pass manufacturing plant
inspections and provide records of detailed manufacturing processes. Among other
things, it must be demonstrated that:
. the drug product can be consistently manufactured at the same quality
standard;
. the drug product is stable over time; and
. the level of chemical impurities in the drug product are under a designated
level.
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3) Ongoing FDA Oversight:
We will continue to be subject to regulation by the FDA even after our drug
products have been approved and commercialized. Among other things, the FDA
may:
. require additional submissions if there are any modifications to the drug
product including, for example, any changes in manufacturing process,
labeling, or manufacturing facility;
. require post-marketing testing and surveillance to monitor the effects of
approved drug products; and
. enforce conditional approvals that restrict the commercial applications of a
drug product.
Further, the FDA has numerous requirements governing labeling, promotional
material, storage, record keeping and reporting.
The Prescription Drug User Fee Act of 1992 imposes substantial fees on a one-
time basis for applications for approval and on an annual basis for
manufacturing and marketing, of prescription drugs.
4) Other Regulatory Bodies:
We are 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.
Drug product marketing outside the United States is subject to foreign
regulatory requirements which may or may not be influenced by FDA approval.
While the requirements vary widely from country to country, generally, the drug
product must be approved by a foreign regulatory authority comparable to the FDA
prior to marketing the product in those countries. The time required to obtain
foreign approvals may be longer than that in the United States.
In the future, we may be subject to additional federal, state or local
regulations or additional fees. Efforts are continually underway to reform
federal regulation of drug products. Although some of these changes could
streamline and otherwise benefit development, marketing and related requirements
for drugs, others could increase regulatory requirements.
We Will Rely on Marketing and Development Partners and if They Do Not Perform as
Expected, We May Not Successfully Commercialize Our Products.
We do not have our own sales and marketing staff. In order to successfully
develop and market our products, we must enter into marketing and distribution
arrangements with third parties. We also expect to delegate the responsibility
for all, or a significant portion, of the development and regulatory approval
for certain products to partners. If our partners do not
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develop an approvable or marketable product or do not market a product
successfully, we may not achieve necessary product revenues. Additionally, we
may be unable to enter into other successful arrangements.
We do not have control over the amount and timing of resources to be devoted
to our products by our collaborative partners. In the future, the interests of
our collaborators may not be consistent with our interests. Collaborators may
develop products independently or through third parties that could compete with
our proposed products. For example, SmithKline maintains a significant presence
in the antibiotic area and currently sells a topical antibiotic product
indicated for the treatment of certain skin infections and Genentech has
recently launched an antibody-based asthma product.
We may also decide to establish our own sales force to market and sell certain
products. Although certain members of our management have limited experience in
the marketing of pharmaceutical products, we have no experience with respect to
marketing our products. If we choose to pursue this alternative, we will need to
spend significant additional funds and devote significant management resources
and time to establish a successful sales force. Given our inexperience in
establishing and managing a sales force, this effort may not be successful.
Given our financial resources, efforts in this area would likely be modest
compared to our competitors.
If We Are Not Able to Innovate and Develop Products as Rapidly as Our
Competitors, Our Products May Not Achieve Market Acceptance.
The pharmaceutical industry is characterized by intense competition. Many
companies, research institutions and universities are conducting research and
development activities in a number of areas similar to our fields of interest.
We are aware that research on compounds derived from animal host-defense systems
is being conducted by others. Many companies are also currently involved in
research and development activities focused on the pathogenesis of disease, and
the competition among companies attempting to find genes responsible for disease
is intense. Most of these entities have substantially greater financial,
technical, manufacturing, marketing, distribution and other resources. We may
also face competition from companies using different or advanced techniques that
could render our products obsolete.
We expect technological developments in the biopharmaceutical field to occur
at a rapid rate and expect competition to intensify as advances in this field
are made. Accordingly, we must continue to devote substantial resources and
efforts to research and development activities in order to maintain a
competitive position in this field. Our compounds, products or processes may
become obsolete before we are able to recover a significant portion of our
research and development expenses. We will be competing 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 our proposed
products.
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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 our technology. In
addition, these institutions, along with pharmaceutical and specialized
biotechnology companies, can be expected to compete with us in recruiting highly
qualified scientific personnel.
Many companies are working to develop and market products intended for the
additional disease areas being targeted, 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 their interests. 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.
Even if eventually approved, LOCILEX(TM) Cream may not 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, which may be perceived by some medical professionals
as having certain advantages over LOCILEX(TM) Cream. In addition, we may be
unable to manufacture LOCILEX(TM) Cream 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.
If We Do Not Develop and Maintain Relationships With Contract Manufacturers, We
May Not Successfully Commercialize Our Products.
We currently do not have the resources, facilities, or technical capabilities
to manufacture any of our proposed products in the quantities and quality
required for commercial sale. We have no plans to establish a manufacturing
facility. We depend upon contract manufacturers for commercial scale
manufacturing of our proposed products in accordance with regulatory standards.
This dependence may restrict our ability to develop and deliver products on a
timely, profitable and competitive basis. Additionally, the number of companies
capable of producing our proposed products is limited. We may be unable to
maintain arrangements with qualified outside contractors to manufacture
materials at costs which are affordable to us, if at all.
Contract manufacturers may utilize their own technology, our technology, or
technology acquired or licensed from third parties in developing a manufacturing
process. In order to engage another manufacturer, we may need to obtain a
license or other technology transfer from the original contract manufacturer.
Even if a license is available from the original contract manufacturer on
acceptable terms, we may be unable to successfully effect the transfer of the
technology to the new contract manufacturer. Any such technology transfer may
also require the transfer of requisite data for regulatory purposes, including
information contained in a proprietary drug master file held by a contract
manufacturer. If we rely on a contract manufacturer that owns the drug master
file, our ability to change contract manufacturers may be more limited.
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We had an agreement with Abbott Laboratories providing for the purchase of
approximately $10.0 million of bulk drug substance for LOCILEX(TM) Cream. As FDA
approval of LOCILEX(TM) Cream did not occur, we renegotiated this agreement with
Abbott in 1999, paying Abbott $4.2 million and receiving partial delivery of
material. An additional $3.4 million is due to Abbott and payable if we receive
in excess of $10.0 million of additional funds in any year beginning in 2000, in
which case 15% of such excess over $10.0 million shall be payable to Abbott up
to an aggregate of $3.4 million. As a result of two private placements in Year
2000, we have received approximately $17.2 million in cash proceeds year to date
and, therefore, $1.1 million of the Abbott liability is payable to Abbott in
March 2001. We have no further purchase commitments to Abbott and Abbott has no
further supply requirements to us.
We are also currently working with outside contractors for the chemical
production of squalamine. Production of squalamine and other proposed products
will also require significant expenditure.
We Depend on Our Intellectual Property and, If We Are Unable to Protect Our
Intellectual Property, We May Not Realize Optimal Value from Our Technology.
1) Patents:
Our success depends, in part, on our ability to develop and maintain a strong
patent position for our products and technologies both in the United States and
other countries. As with most biotechnology and pharmaceutical companies, our
patent position is highly uncertain and involves complex legal and factual
questions. Without patent and other protections, other companies could offer
substantially identical products for sale without incurring the sizeable
development and testing costs that we have incurred. Our ability to recoup
these expenditures and realize profits upon commercialization could be
diminished.
We cannot be certain that:
. patents will issue from any of our patent applications;
. our patent rights will be sufficient to protect our technology;
. our patents will not be successfully challenged or circumvented by our
competitors; or
. our patent rights will provide us with any commercial advantages.
The process of obtaining patents can be time consuming and expensive. Even
after significant expenditure, a patent may not issue. We can never be certain
that we were the first to develop the technology or that we were the first to
file a patent application for the particular technology because U.S. patent
applications are maintained in secrecy until a patent issues and publications in
the scientific or patent literature lag behind actual discoveries.
Even after we are issued patent rights, we cannot be certain that:
. others will not develop similar technologies or duplicate the technology;
. others will not design around the patented aspects of the technology;
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. we will not be obliged to defend ourselves in court against allegations of
infringement of third-party patents;
. our issued patents will be held valid in court; or
. an adverse outcome in a suit would not subject us to significant liabilities
to third parties, require rights to be licensed from third parties, or
require us to cease using such technology.
The cost of litigation can be substantial, regardless of the outcome.
2) Potential Ownership Disputes:
There may be disputes arising as to the ownership of our technology. Most of
our research and development personnel previously worked at other biotechnology
companies, pharmaceutical companies, universities, or research institutions.
These entities may raise questions as to when technology was developed, and
assert rights to the technology. These kinds of disputes have occurred in the
past. We may not prevail in any such disputes.
Similar technology ownership disputes may arise in the context of consultants,
vendors or third parties, such as contract manufacturers. For example, our
consultants are employed by or have consulting agreements with third parties.
There may be disputes as to the capacity in which consultants are operating when
they make certain discoveries. We may not prevail in any such disputes.
3) Other Intellectual Property:
In order to protect our proprietary technology and processes, we also rely on
trade secrets and confidentiality agreements with our corporate partners,
employees, consultants, outside scientific collaborators, and other advisors.
We may find that these agreements will be breached, or that our trade secrets
have otherwise become known or independently developed or discovered by our
competitors.
Certain of our exclusive rights to patents and patent applications are
governed by contract. Generally, such contracts require that we pay royalties
on sales of any products which are covered by patent claims. If we are unable to
pay the royalties, we may lose our patent rights. Additionally, some of these
agreements also require that we develop the licensed technology under certain
timelines. If we do not adhere to an acceptable schedule of commercialization,
we may lose our rights.
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If We Cannot Recruit and Retain Qualified Management, We May Not Be Able to
Successfully Develop and Commercialize Our Products.
We depend to a considerable degree on a limited number of key personnel. Many
key responsibilities have been assigned to a relatively small number of
individuals. We do not maintain "key man" insurance on any of our employees. The
loss of certain management and technical personnel could adversely affect our
ability to develop and commercialize products.
We are Subject to Potential Product Liability Claims, Which Could Result in
Significant Expense if a Claim Arose.
We are subject to significant potential product liability risks inherent in
the testing, manufacturing and marketing of human therapeutic products,
including the risk that:
. our proposed products cause some undesirable side effects or injury during
clinical trials;
. our products cause undesirable side effects or injury in the market; or
. third parties that we have agreed to indemnify incur liability.
While we carry insurance, this coverage is expensive and we may be unable to
maintain adequate coverage on acceptable terms.
If We Do Not Receive Adequate Third-Party Reimbursement for Any of Our Drug
Candidates, Some Patients May Be Unable to Afford Our Products and Sales Could
Suffer.
In both the United States and elsewhere, the availability of reimbursement
from third-party payers, such as government health administration authorities,
private health insurers and other organizations can impact prescription
pharmaceutical sales. These organizations are increasingly challenging the
prices charged for medical products and services, particularly where they
believe that there is only an incremental therapeutic benefit which does not
justify the additional cost. Coverage and reimbursement may not be available
for our proposed products or, if available, may not be adequate. Without
insurance coverage, many patients may be unable to afford our products, and we
may not reach optimal sales levels.
There has also been a trend toward government reforms intended to contain or
reduce the cost of health care. In certain foreign markets, pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been a number of federal and state proposals to
implement similar government control.
We expect this trend to continue, but we cannot predict the nature or extent
of any reform that results. It is possible that reform could impact
pharmaceutical marketing and pricing. Not only would this affect possible
future profit margins, it could adversely affect our ability to obtain financing
for the continued development of our proposed products. Furthermore, reforms
could have a broader impact by limiting overall growth of health care spending,
such as Medicare and Medicaid spending, which could also adversely affect our
business.
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Our Stock Price Is Extremely Volatile Due to a Number of Factors.
The market prices and trading volumes for securities of biopharmaceutical and
biotechnology companies, including ours, have historically been, and will likely
continue to be, highly volatile. Future events affecting our business or that
of our competitors may significantly impact our stock price, including:
. product testing results;
. technological innovations;
. new commercial products;
. government regulations;
. proprietary rights;
. regulatory actions; and
. litigation.
We May Be Unable to Maintain the Standards for Listing on the Nasdaq National
Market, Which Could Make it More Difficult for Investors to Dispose of Our
Common Stock and Could Subject Our Common Stock to the "Penny Stock" Rules.
Our common stock is listed on the Nasdaq National Market. Nasdaq requires
listed companies to maintain standards for continued listing, including a
minimum bid price for shares of a company's stock and a minimum tangible net
worth. If we are unable to maintain these standards, our common stock could be
delisted. Trading in our stock would then be conducted on the Nasdaq Small Cap
Market unless we are unable to meet the requirements for inclusion therein. If
we were unable to meet the requirements for inclusion in the Small Cap Market,
our common stock would be traded on an electronic bulletin board established for
securities that do not meet the Nasdaq listing requirements or in quotations
published by the National Quotation Bureau, Inc. that are commonly referred to
as the "pink sheets." As a result, it could be more difficult to sell or
obtain an accurate quotation as to the price of our common stock.
In addition, if our common stock were delisted, it would be subject to the so-
called "penny stock" rules. The SEC has adopted regulations that define a
"penny stock" to be any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. For any transaction involving a
"penny stock," unless exempt, the rules impose additional sales practice
requirements on broker-dealers, subject to certain exceptions.
For transactions covered by the "penny stock" rules, a broker-dealer must make
a special suitability determination for the purchaser and must have received the
purchaser's written consent to the transaction prior to the sale. The "penny
stock" rules also require broker-dealers to deliver monthly statements to "penny
stock" investors disclosing recent price information for the "penny stock" held
in the account, and information on the limited market in "penny stocks." Prior
to the transaction, a broker-dealer must provide a disclosure schedule relating
to the "penny stock" market.
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In addition, the broker-dealer must disclose the following:
. commissions payable to the broker-dealer and the registered representative;
and
. current quotations for the security as mandated by the applicable
regulations.
If our common stock were delisted and determined to be a "penny stock," a
broker-dealer may find it to be more difficult to trade our common stock and an
investor may find it more difficult to acquire or dispose of our common stock in
the secondary market.
The Exercise of Options and Warrants and Other Issuances of Shares Could Have a
Dilutive Effect on Our Stock Price.
As of June 30, 2000, there were outstanding options to purchase an aggregate
of approximately 3,480,000 shares of our common stock at prices ranging from
$0.40 per share to $16.75 per share, of which approximately 2,250,000 were
exercisable as of such date. Also outstanding at June 30, 2000 were warrants to
purchase 229,739 shares of our common stock exercisable at $8.00 per share and
warrants to purchase an aggregate of 1,168,808 shares of our common stock,
currently exercisable from $5.33 per share to $7.28 per share, and subject to
adjustment with future offerings. In addition, in connection with our private
placement in August 2000, we issued warrants to purchase an aggregate of 167,166
shares of our common stock exercisable at $3.50 per share, subject to adjustment
under certain circumstances. Exercise of options and warrants at prices below
the market price of our common stock could adversely affect the price of our
common stock. Additional dilution may result from the issuance of shares in
connection with collaborations or manufacturing arrangements or in connection
with other financing efforts.
Our Certificate of Incorporation and Delaware Law Contain Provisions that Could
Discourage a Takeover.
Our certificate of incorporation provides our board of directors the power to
issue shares of preferred stock without stockholder approval. This preferred
stock could have voting rights, including voting rights that could be superior
to that of our common stock, and the board of directors has the power to
determine these voting rights. In addition, Section 203 of the Delaware General
Corporation Law contains provisions which impose restrictions on stockholder
action to acquire control of Magainin. The effect of these provisions of our
certificate of incorporation and Delaware law provisions would likely discourage
third parties from seeking to obtain control.
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<PAGE>
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this prospectus contains some forward-looking
statements. Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by the fact that
they do not relate strictly to historical or current facts. Such statements may
include words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "believe" and other words and terms of similar meaning in connection
with any discussion of future operating or financial performance. In
particular, these include statements relating to present or anticipated
scientific progress, development of potential pharmaceutical products, future
revenues, capital expenditures, research and development expenditures, future
financing and collaborations, personnel, manufacturing requirements and
capabilities, and other statements regarding matters that are not historical
facts or statements of current condition.
Any or all of our forward-looking statements in this prospectus may turn out
to be wrong. They can be affected by inaccurate assumptions we might make or by
known or unknown risks and uncertainties. Many factors mentioned in the
discussion below will be important in determining future results. Consequently,
no forward-looking statement can be guaranteed. Actual future results may vary
materially.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects
in our 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission.
Also note that we provide the following cautionary discussion of risks and
uncertainties relevant to our business. These are factors that we think could
cause our actual results to differ materially from expected results. Other
unanticipated occurrences besides those listed here or in the "Risk Factors"
section could also adversely affect us. This discussion is provided as
permitted by the Private Securities Litigation Reform Act of 1995.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock held by the
selling stockholders or the sale of the common stock that is issuable upon the
exercise of the warrants held by Lindsay A. Rosenwald, M.D., Chairman of the
Board of Paramount Capital, Inc., the Aries Domestic Fund, L.P., the Aries
Domestic Fund II, L.P., and The Aries Master Fund II. See the "Selling
Stockholders" section of this prospectus, which follows, for more information.
However, because the shares offered by these warrant holders under this
prospectus will be issued only if they exercise all or a portion of the
warrants, we would receive the proceeds from any warrant exercise. We will use
the proceeds, if any, from the exercise of these warrants to fund both ongoing
and planned research and development activities, including clinical trials and
manufacturing development efforts for squalamine, activities associated with our
respiratory program, and working capital to be used for general corporate
purposes.
SELLING STOCKHOLDERS
Pursuant to stock purchase agreements, dated in August 2000, we issued an
aggregate of 4,153,196 shares of our common stock at a purchase price of $3.00
per share to the selling stockholders in a private placement transaction.
Paramount Capital, Inc. acted as a financial advisor in connection with certain
of the investors in the private placement transaction and, as compensation for
its services, received a fee from us of $702,097 and the right to receive a
warrant to purchase 167,166 shares of our common stock exercisable at $3.50 per
share through August, 2007. Paramount designated its warrant right to the
following holders:
. a warrant to purchase 133,833 shares in the name of Lindsay Rosenwald,
M.D., Chairman of the Board of Paramount Capital, Inc.;
. a warrant to purchase 10,578 shares in the name of the Aries Domestic Fund,
L.P.;
. a warrant to purchase 3,300 shares in the name of the Aries Domestic Fund
II, L.P.; and
. a warrant to purchase 19,455 shares in the name of The Aries Master Fund II.
The shares issued upon exercise of the warrants are sometimes referred to as
the warrant shares. After the exercise of the warrant, the warrant holders may
also offer or sell the warrant shares from time to time in the manner
contemplated under the "Plan of Distribution" section of this prospectus, which
follows.
We are obligated to use our best efforts to maintain an effective registration
statement for the period beginning with the effectiveness of the registration
statement of which this prospectus forms a part and ending with the earlier of
(i) such date when either all of the shares and the warrant shares have been
sold pursuant to the registration statement, or (ii) by reason of Rule 144(k) of
the Securities and Exchange Commission under the Securities Act of 1933 or any
other rule of similar effect, the shares and warrant shares are no longer
required to be registered for the resale thereof by the holders in ordinary
market transactions without imposition of any volume restrictions.
The following table sets forth certain information known to us regarding the
beneficial ownership of our common stock of each selling stockholder as of
August 22, 2000 and as adjusted to give effect to the sale of the shares and the
warrant shares offered hereby. The following table states the maximum number of
shares each selling stockholder may offer under this prospectus assuming that
(i) each selling stockholder chooses to sell all of the shares purchased in the
private placement in August 2000 and (ii) the warrant holders exercise their
entire warrant and sell all of the warrant shares. 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 the "Plan of
Distribution" section of this prospectus, which follows. We cannot assure you
that the selling stockholders will sell any or all of the shares.
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<TABLE>
<CAPTION>
Ownership Before Offering Ownership After Offering (2)
----------------------------------- Common Shares -------------------------
Percent of that May Be Percent of
Common Common Sold Pursuant to Common Common
Name of Selling Shareholder Shares Shares Held (1) the Offering Shares Shares Held
--------------------------------------- ------------ --------------- ----------------- ------ -----------
<S> <C> <C> <C> <C> <C>
Archibald Cox, Jr. 83,333 * 83,333 -- --
Narragansett I, LP 93,166 * 93,166 -- --
Narragansett Offshore, Ltd. 123,500 * 123,500 -- --
Albert Fried, Jr. 333,333 1.03% 333,333 -- --
J.F. Shea Co., Inc. 199,999 * 199,999 -- --
Bruno Widmer 8,333 * 8,333 -- --
Tis Prager 16,666 * 16,666 -- --
Keys Foundation 166,666 * 166,666 -- --
David W. Ruttenberg 16,666 * 16,666 -- --
Michael H. Schwartz Profit Sharing Plan 16,666 * 16,666 -- --
Mitchell D. Silber 65,000 * 65,000 -- --
Myron M. Teitelbaum, M.D. 10,833 * 10,833 -- --
Sands Point Partners 75,000 * 75,000 -- --
Robert J. Whetten 33,333 * 33,333 -- --
Michael C. Miles 15,000 * 15,000 -- --
Jose and Magdalena Sanchez-Padilla 8,333 * 8,333 -- --
Roberto Segovia 8,333 * 8,333 -- --
S.A.C. Capital Associates, LLC 333,334 1.03% 333,334 -- --
Leonard J. Adams 16,666 * 16,666 -- --
RL Capital Partners 22,667 * 16,667 6,000 *
Concordia Partners L.P. 166,666 * 166,666 -- --
Wayne Saker 50,000 * 50,000 -- --
Melvyn I. Weiss 83,333 * 83,333 -- --
Wayne Rothbaum 65,000 * 65,000 -- --
Roger and Margaret Coleman 16,666 * 16,666 -- --
Eugenia VI Venture Holdings, Ltd. 333,333 1.03% 333,333 -- --
Peter Grabler 33,333 * 33,333 -- --
Jack Hirschfield 4,166 * 4,166 -- --
James D. Stern 16,666 * 16,666 -- --
Richard J. Stern 66,666 * 66,666 -- --
Balanced Investment LLC 66,666 * 66,666 -- --
Tokenhouse Trading S.P. 33,333 * 33,333 -- --
The Aries Master Fund II (3) 408,551(4) 1.26% 389,096 -- --
Aries Domestic Fund, L.P. (3) 222,139(5) * 211,561 -- --
Aries Domestic Fund II, L.P. (3) 69,309(6) * 66,009 -- --
M.S.B. Research 100,000 * 100,000 -- --
State of Wisconsin Investment Board 6,090,775 18.73% 809,875 5,280,900 16.24%
Lindsay A. Rosenwald, M.D. (3) 133,833(7) * 167,166 -- --
</TABLE>
--------------------------
* Less than 1.00%.
(1) Both the numerator and the denominator of the fraction used to arrive at
this percentage include the number of warrant shares held by the selling
stockholder whose percent of common shares held is being calculated.
(2) These figures assume that all common stock received by the selling
stockholders in the August 2000 private placement and all shares of common
stock issuable upon the exercise of the warrants have been sold.
(3) Paramount Capital Asset Management, Inc. is the general partner of each of
the Aries Domestic Fund, L.P. and Aries Domestic Fund II, L.P., each a
Delaware limited partnership, and also serves as the investment manager of
The Aries Master Fund II, a Cayman Island exempted company. Dr. Rosenwald
is the chairman and sole stockholder of Paramount Capital Asset Management,
Inc. Additionally, Dr. Rosenwald serves as chairman and sole stockholder of
Paramount Capital, Inc. a NASD member broker-dealer. Paramount acted as
financial advisor in connection with certain of the investors in the private
placement transaction and received a fee for its services. In connection
with the investment by the Aries funds in the private placement transaction,
Paramount Capital, Inc. allocated back to the Aries funds the cash and
warrant commission that it would have otherwise received. Accordingly, The
Aries Master Fund II received 19,455 warrants; the Aries Domestic Fund, L.P.
received 10,578 warrants; and the Aries Domestic Fund II, L.P. received
3,300 warrants.
(4) This number includes 19,455 shares of our common stock issuable upon the
exercise of The Aries Master Fund II warrant.
(5) This number includes 10,578 shares of our common stock issuable upon the
exercise of the Aries Domestic Fund, L.P. warrant.
(6) This number includes 3,300 shares of our common stock issuable upon the
exercise of the Aries Domestic Fund II, L.P. warrant.
(7) This number reflects the aggregate number of shares of our common stock
issuable upon the exercise of the Rosenwald warrant.
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<PAGE>
PLAN OF DISTRIBUTION
To the extent required, the names of any agent or broker-dealer and applicable
commissions or discounts and any other required information with respect to any
particular offer will be set forth here or in the accompanying prospectus
supplement. The selling stockholders reserve the sole right to accept or reject,
in whole or in part, any proposed purchase of the shares to be made directly or
through agents.
The selling stockholders may from time to time, in one or more transactions,
sell all or a portion of the shares on the Nasdaq National Market, in negotiated
transactions, in underwritten transactions or otherwise, at prices then
prevailing or related to the then current market price or at negotiated prices.
The offering price of the shares from time to time will be determined by the
selling stockholders and, at the time of such determination, may be higher or
lower than the market price of the shares on the Nasdaq National Market. In
connection with an underwritten offering, underwriters or agents may receive
compensation in the form of discounts, concessions or commissions from a selling
shareholder or from purchasers of shares for whom they may act as agents, and
underwriters may sell shares to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Under agreements that may be entered into by us, underwriters, dealers
and agents who participate in the distribution of shares may be entitled to
indemnification by us against certain liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments which such
underwriters, dealers or agents may be required to make in respect thereof. The
shares may be sold directly or through broker-dealers acting as principal or
agent, or pursuant to a distribution by one or more underwriters on a firm
commitment or best-efforts basis. The methods by which the shares may be sold
include:
. a block trade in which the broker-dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by such broker-dealer
for its account pursuant to this prospectus;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. privately negotiated transactions; and
. underwritten transactions.
The selling stockholders and any underwriters, dealers or agents participating
in the distribution of the offered shares may be deemed to be "underwriters"
within the meaning of the Securities Act, and any profit on the sale of the
shares by the selling stockholders and any commissions received by these broker-
dealers may be deemed to be underwriting commissions under the Securities Act.
19
<PAGE>
When the selling stockholders elect to make a particular offer of shares, a
prospectus supplement, if required, will be distributed which will identify any
underwriters, dealers or agents and any discounts, commissions and other terms
constituting compensation from the selling stockholders and any other required
information.
In order to comply with the securities laws of certain states, if applicable,
the shares may be sold only through registered or licensed brokers or dealers.
In addition, in certain states, the shares may not be sold unless they have been
registered or qualified for sale in such state or an exemption from such
registration or qualification requirement is available and is complied with.
We have agreed to pay all costs and expenses incurred in connection with the
registration under the Securities Act of the shares, including, without
limitation, all registration and filing fees, printing expenses and fees and
disbursements of counsel and our accountants. The selling stockholders will pay
any brokerage fees and commissions, fees and disbursements of legal counsel for
the selling stockholders and stock transfer and other taxes attributable to the
sale of the shares. We also have agreed to indemnify the selling stockholders
and their respective officers, directors and trustees and each person who
"controls", within the meaning of the Securities Act, the selling stockholders
against certain losses, claims, damages, liabilities and expenses arising under
the securities laws in connection with this offering. Each of the selling
stockholders has agreed to indemnify us, our officers and directors and each
person who "controls" Magainin against any losses, claims, damages, liabilities
and expenses arising under the securities laws in connection with this offering
with respect to written information furnished to us by such selling
stockholders.
LEGAL OPINION
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will pass on the
validity of the shares of common stock offered hereby.
EXPERTS
The financial statements of Magainin Pharmaceuticals Inc. as of December 31,
1999 and 1998, and for each of the years in the three-year period ended December
31, 1999 have been incorporated by reference in this prospectus and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, incorporated by reference in this prospectus and
in the registration statement, and upon the authority of KPMG LLP as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Exchange Act, which
means we are required to file annual, quarterly and current reports, proxy
statements and other information with the SEC. Copies of the registration
statement are on file at the offices of the SEC and may be inspected without
charge at the Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of the registration statement may be obtained from the Public
Reference Section of the SEC upon payment of the fee prescribed by the SEC.
20
<PAGE>
Information on Magainin can be obtained from the Public Reference Room by
calling 1-800-SEC-0330. The Commission maintains a Web site that contains all
information filed electronically by us, including reports, proxy and information
statements. The address of the SEC's Web site is http://www.sec.gov.
We have filed a registration statement on Form S-3, of which this prospectus
forms a part, to register the securities with the SEC. As allowed by SEC rules,
this prospectus does not contain all the information you can find in the
registration statement or the exhibits to the registration statement. The SEC
allows us to "incorporate by reference" information into this prospectus, which
means that we can disclose important information to you by referring you to
another document filed separately with the SEC. The historical and future
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information in this prospectus. This
prospectus incorporates by reference the documents set forth below that we have
previously filed with the SEC. These documents contain important information
about us, our business and our finances.
The documents that we are incorporating by reference are:
. Our Annual Report on Form 10-K for the year ended December 31, 1999, SEC
file 000-19651;
. Our Current Report on Form 8-K filed with the SEC on May 9, 2000, SEC file
000-19651;
. Our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31,
2000 and June 30, 2000, SEC files 000-19651; and
. The description of our common stock contained in our Form 8-A registration
statement filed with the SEC on November 7, 1991 and amended on January 15,
1993, SEC files 33-43579 and 000-19651, respectively.
Any documents which we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this prospectus but before the end of any
offering of securities made under this prospectus will also be considered to be
incorporated by reference.
If you request, either orally or in writing, we will provide you with a copy
of any or all documents which are incorporated by reference. We will provide
such documents to you free of charge, but will not include any exhibits, unless
those exhibits are incorporated by reference into the document. You should
address written requests to Christopher P. Schnittker, Vice President and Chief
Financial Officer, Magainin Pharmaceuticals Inc., 5110 Campus Drive, Plymouth
Meeting, PA 19462, (610) 941-5231.
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4,320,362 Shares
Magainin Pharmaceuticals Inc.
Common Stock
____________________
PROSPECTUS
October 12, 2000
____________________
