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Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GERON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-2287752
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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230 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 473-7700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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THOMAS B. OKARMA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GERON CORPORATION
230 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 473-7700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
ALAN C. MENDELSON
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(650) 843-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT
BECOMES EFFECTIVE UNTIL THE DATE THAT IS TWO YEARS FOLLOWING THE EFFECTIVE DATE
OF THIS REGISTRATION STATEMENT OR UNTIL AN EARLIER TIME THAT ALL OF THE SHARES
REGISTERED HEREIN HAVE BEEN SOLD.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER SHARE(1) AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.001 par 2,899,390(2) $9.91 $28,732,955 $7,988
value...................... shares
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act. The price per share
and aggregate offering price are based on the average of the high and
low prices of the Registrant's common stock on October 26, 1999 as
reported on the Nasdaq National Market.
(2) Includes shares issuable upon conversion of $12,500,000 of Series C two
percent convertible debentures and warrants exercisable to purchase
1,100,000 shares of common stock. For purposes of estimating the number
of shares of common stock to be included in this registration statement,
Geron calculated 125% of the number of shares of common stock issuable
upon conversion of the debentures and exercise of the warrants at their
current conversion and exercise prices, respectively, which number
represents Geron Corporation's good faith estimate of the number of
shares of common stock issuable upon conversion of the debentures and
exercise of the warrants. Also includes an indeterminate number of
shares issuable upon conversion of the Series C two percent convertible
debentures and exercise of the warrants solely by reason of stock
splits, stock dividends and similar transactions in accordance with Rule
416.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON A DATE THAT THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. 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 IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
SUBJECT TO COMPLETION
DATED OCTOBER 29, 1999
GERON CORPORATION
2,899,390 SHARES
OF COMMON STOCK
The selling stockholder is offering up to 2,899,390 shares of Geron
Corporation common stock.
The selling stockholder will determine the price of the common stock
independent of Geron. Our common stock trades on the Nasdaq National Market
under the symbol GERN. On October 28, 1999, the last reported sale price of our
common stock was $9.63 per share.
We will not be paying any underwriting discounts or commissions in this
offering.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
October 29, 1999
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TABLE OF CONTENTS
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PAGE
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INFORMATION ABOUT GERON................................................................2
RECENT DEVELOPMENT.....................................................................2
RISK FACTORS...........................................................................3
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY
ARE INHERENTLY UNCERTAIN...............................................................16
WHERE CAN YOU FIND MORE INFORMATION....................................................16
USE OF PROCEEDS........................................................................17
SELLING STOCKHOLDER....................................................................18
PLAN OF DISTRIBUTION...................................................................20
LEGAL MATTERS..........................................................................22
EXPERTS................................................................................22
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We have not authorized any dealer, salesperson or other person to give
any information or represent anything not contained in this prospectus. You
should not rely on any unauthorized information. This prospectus does not offer
to sell or buy any shares in any jurisdiction in which it is unlawful. The
information in this prospectus is current as of the date on the cover.
1.
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INFORMATION ABOUT GERON
We are a biopharmaceutical company focused on discovering, developing
and commercializing therapeutic and diagnostic products to treat cancer and
other age-related chronic degenerative diseases. Our technology includes the
discovery of small molecule inhibitors of telomerase for cancer therapy;
telomere and telomerase-based research and diagnostic tools; telomerase
activation to extend the replicative lifespan of normal cells; and complementary
stem cell, gene therapy and nuclear transfer approaches to restore the function
of degenerating organs. Telomeres are structures at the ends of chromosomes that
protect chromosomes from degradation and act as a molecular clock of cellular
aging. Telomerase is an enzyme that has the capability of restoring telomere
length and stopping the molecular clock, thereby conferring cellular
immortality. By manipulating telomere length through telomerase regulation, we
hope to be able to kill cancer cells where telomerase is abnormally turned on.
Conversely, we seek to increase the lifespan of normal cells, where telomerase
is normally turned off, to treat age-related diseases.
We were incorporated in 1990 under the laws of Delaware. Our principal
executive offices are located at 230 Constitution Drive, Menlo Park, California
94025 and our telephone number is (650) 473-7700. References in this prospectus
to "we," "us," "our," and "Geron" refer to Geron Corporation and its
subsidiaries.
RECENT DEVELOPMENT
On September 30, 1999, we completed a private placement of $12.5 million
face amount of Series C two percent (2%) convertible debentures and warrants to
purchase up to 1.1 million shares of our common stock, for an aggregate purchase
price of $12.5 million. The debentures are convertible into common stock at the
option of the holder until the date which is three years following the date of
issuance at a conversion price of $10.25 per share, subject to adjustment under
certain circumstances. The debentures are convertible at our option when the
closing bid price of our common stock on the Nasdaq National Market is greater
than 175% of the conversion price for ten consecutive trading days. The warrants
are exercisable for common stock at the option of the holder until the earlier
of (i) 540 days after our authorized common stock is duly increased by at least
1,710,381 shares or (ii) September 21, 2001. The exercise price is $12.50 per
share for 1,000,000 warrants and $12.75 per share for 100,000 warrants, subject
to adjustment under certain circumstances. Under the terms of the private
placement, we agreed to file a registration statement on Form S-3 to cover the
shares of common stock issuable upon conversion of the debentures and exercise
of the warrants.
2.
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RISK FACTORS
Before you invest in our common stock, you should be aware that there
are various risks, including those described below. You should carefully
consider these risk factors, together with all of the other information included
in this prospectus, before you decide whether to purchase shares of our common
stock. Any of these risks could materially adversely affect our business,
operating results and financial condition.
OUR PRODUCT DEVELOPMENT PROGRAMS ARE AT AN EARLY STAGE AND MAY NOT RESULT IN ANY
COMMERCIALLY VIABLE PRODUCTS; FAILURE TO DEVELOP ANY COMMERCIALLY VIABLE
PRODUCTS MAY IMPAIR OUR ABILITY TO ATTRACT FUTURE FUNDING AND OUR ABILITY TO
SUSTAIN OPERATIONS
The study of the mechanisms of cellular aging and cellular immortality,
including telomere biology and telomerase, the study of human pluripotent stem
cells, and the process of nuclear transfer are relatively new areas of research.
While our development efforts are at different stages for different products, we
cannot assure you that we will successfully develop any products or that we will
not abandon some or all of our proposed research programs. In the long term, for
any of our cancer treatments or other discoveries to be proven commercially
viable, we will need to demonstrate to the health care community that the
treatment or products are:
- safe;
- effective;
- reliable; and
- not subject to other problems that would affect commercial
viability.
If and when potential lead drug compounds or product candidates are
identified through our research programs, they will require significant
preclinical and clinical testing prior to regulatory approval in the United
States and elsewhere. In addition, we will also need to determine whether any of
these potential products can be manufactured in commercial quantities at an
acceptable cost. Our efforts may not result in a product that can be marketed.
Because of the significant scientific, regulatory and commercial milestones that
must be reached for any of our research programs to be successful, any program
may be abandoned, even after significant resources have been expended.
Our inability to identify an effective compound for inhibiting
telomerase may prevent us from developing a viable cancer treatment
product, which would adversely impact our future business prospects
As a result of our drug discovery efforts to date, we have identified
compounds in laboratory studies that demonstrate potential for inhibiting
telomerase in humans. However, additional development efforts will be required
before we select a lead compound for preclinical development and clinical trials
as a telomerase inhibitor for cancer. We will have to conduct additional
research before we can select a compound and we may never identify a compound
that will enable us to fully develop a commercially viable treatment for cancer.
If and when selected, a lead compound may prove to have undesirable and
unintended side effects or other characteristics affecting its safety or
effectiveness that may prevent or limit its commercial use. In terms of safety,
our discoveries may result in cancer treatment solutions that cause unacceptable
side effects for the human body. Our discoveries may also not be as effective as
is necessary to market a commercially viable product for the treatment of
cancer. For example, we expect that telomerase inhibition may have delayed
effectiveness as telomeres resume normal shortening. As a result, telomerase
inhibition may need to be used in conjunction with other cancer therapies.
Accordingly, it may become extremely difficult for us to proceed with
preclinical and clinical development, to obtain regulatory approval or to market
a telomerase inhibitor for the treatment of cancer. If we abandon our research
for cancer treatment for any of these reasons or for other reasons, our business
prospects would be materially and adversely affected.
Our research related to the treatment of age-related degenerative
diseases has not yet identified a compound that has potential as a
therapeutic agent and failure to do so would lead to the termination of
this program
The research resulting from our telomerase activation and expression
program has shown us that the activation of telomerase can extend cell lifespan
in normal human cells. While telomere length and replicative capacity have
3.
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been extended in laboratory studies, we may not discover a compound that will
modulate telomere length or increase replicative capacity effectively for
clinical use. We have yet to identify any lead compounds that have been
demonstrated to modulate gene expression in human cells and we cannot guarantee
that we will be able to discover or develop the necessary compound.
There is currently insufficient clinical data to determine the full
utility of our cancer diagnostic tests and negative data could cause
cancellation of the program.
There is, as yet, insufficient clinical data to confirm the full utility
of our proprietary telomerase detection technology to diagnose, prognose,
monitor patient status and screen for cancer. Although Intergen, Roche
Diagnostics, Kyowa Medex and PharMingen, our licensees, have begun to sell kits
for research use, additional development work and regulatory consents will be
necessary prior to the introduction of tests for clinical use.
Our research on human pluripotent stem cells is at an early stage and
may not result in any commercially viable products
Our pluripotent stem cell therapies program is also at an early stage.
While human pluripotent stem cells have been derived and allowed to expand and
differentiate into numerous cell types, our efforts to direct differentiation of
human pluripotent stem cells and develop products from our research may not
result in any commercial applications.
Our research related to nuclear transfer may not result in any
commercially viable products
Nuclear transfer techniques are still in the process of being fully
understood. Our research collaboration with the Roslin Institute focuses at its
most fundamental level on understanding the molecular mechanisms used by egg
cell cytoplasm to reprogram adult cells. Our goal is to confer reprogramming
capability to the cytoplasm of any mature cell in order to produce
transplantable tissue-matched cells for an intended transplant recipient.
However, our research in this area is in its early stages and may not result in
any commercially viable products for human health or agriculture.
WE HAVE A HISTORY OF OPERATING LOSSES AND ANTICIPATE FUTURE LOSSES; CONTINUED
LOSSES COULD IMPAIR OUR ABILITY TO SUSTAIN OPERATIONS
We have incurred net operating losses every year since our operations
began in 1990. As of June 30, 1999, our accumulated deficit was approximately
$87,971,000. Losses have resulted principally from costs incurred in connection
with our research and development activities and from general and administrative
costs associated with our operations. We expect to incur additional operating
losses over the next several years as our research and development efforts and
preclinical testing activities are expanded. Substantially all of our revenues
to date have been research support payments under the collaborative agreements
with Kyowa Hakko and Pharmacia & Upjohn. Research support payments under the
agreement with Kyowa Hakko expired in April 1998. Research payments under the
agreement with Pharmacia & Upjohn expire in January 2000. We are unable to
estimate at this time the level of revenue to be received from the sale of
diagnostic products, and do not expect to receive significant revenues from the
sale of research-use-only kits. Our ability to achieve profitability is
dependent on our ability, alone or with others, to:
- continue to have success with our research and development
efforts;
- select therapeutic compounds for development;
- obtain the required regulatory approvals; and
- manufacture and market resulting products.
We cannot assure you when or if we will receive material revenues from
product sales or achieve profitability. Failure to generate significant
additional revenues and achieve profitability could impair our ability to
sustain operations.
4.
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WE DEPEND ON OUR COLLABORATIVE PARTNERS TO HELP US COMPLETE THE PROCESS OF
DEVELOPING AND TESTING OUR PRODUCTS AND OUR ABILITY TO DEVELOP AND COMMERCIALIZE
PRODUCTS MAY BE IMPAIRED OR DELAYED IF OUR COLLABORATIVE PARTNERSHIPS ARE
UNSUCCESSFUL
Our strategy for the development, clinical testing and commercialization
of our products requires entering into collaborations with corporate partners,
licensors, licensees and others. We are dependent upon the subsequent success of
these other parties in performing their respective responsibilities and the
continued cooperation of our partners. We cannot assure you that our partners
will cooperate with us or perform their obligations under our agreements with
them. We cannot control the amount and timing of our collaborators' resources
that will be devoted to our research activities related to our collaborative
agreements with them. Our collaborators may choose to pursue existing or
alternative technologies in preference to those being developed in collaboration
with us.
Our ability to successfully develop and commercialize telomerase
inhibition products depends on our corporate partnerships with Kyowa Hakko and
Pharmacia & Upjohn, and our ability to successfully develop and commercialize
telomerase diagnostic products depends on our corporate partnership with Roche
Diagnostics. Under our collaborative agreements with these partners, we rely
significantly on them, among other activities, to:
- design and conduct advanced clinical trials;
- fund research and development activities with us;
- pay us fees upon the achievement of milestones; and
- co-promote with us any commercial products that result from our
collaborations.
The development and commercialization of products from these
collaborations will be delayed if Kyowa Hakko, Pharmacia & Upjohn or Roche
Diagnostics fail to conduct these collaborative activities in a timely manner or
at all. In addition, Kyowa Hakko, Pharmacia & Upjohn or Roche Diagnostics could
terminate these agreements and we cannot assure you that we will receive any
development or milestone payments. If we do not receive research funds or
achieve milestones set forth in the agreements, or if Kyowa Hakko, Pharmacia &
Upjohn or Roche Diagnostics or any of our future partners breach or terminate
collaborative agreements with us, our business may be damaged significantly.
We are also, to a lesser extent, dependent upon collaborative partners
other than Kyowa Hakko, Pharmacia & Upjohn and Roche Diagnostics. For example,
we have entered into licensing arrangements with several diagnostic companies
for our telomerase detection technology. However, because these licenses are
limited to the research-use-only market, these arrangements are not expected to
generate significant commercial revenues, if at all.
UNEXPECTED COSTS AND OTHER DIFFICULTIES ARISING FROM OUR ACQUISITION OF ROSLIN
BIO-MED LTD. AND SIMULTANEOUS RESEARCH COLLABORATION WITH THE ROSLIN INSTITUTE
MAY DRAIN HUMAN AND FINANCIAL RESOURCES, OR OTHERWISE NEGATIVELY AFFECT OUR
OPERATIONS
In May 1999, we acquired Roslin Bio-Med, a private company located in
Scotland which was established by the Roslin Institute to develop nuclear
transfer technology. Our acquisition of Roslin Bio-Med and formation of a
research collaboration with the Roslin Institute have expanded the scope of our
business and operations. As a result, we may be presented with operational
issues that we have not previously faced as a company, but which generally
accompany acquisitions and research collaborations of this nature, including:
- the difficulty of assimilating Roslin Bio-Med's operations and
personnel;
- the potential disruption of ongoing business and distraction of
management;
- unanticipated expenses related to technology and research
integration;
- the difficulty of implementing and maintaining uniform
standards, controls, procedures and policies;
- the potential impairment of relationships with employees and
collaborators as a result of integration of new management
personnel; and
- the potential unknown liabilities associated with acquired
businesses.
5.
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We cannot assure you that we will be able to overcome any of these
obstacles, and our failure to do so could prevent us from achieving the
perceived benefits of the acquisition and collaboration and negatively impact
our research activities and results of operations.
In addition, our agreement with the Roslin Institute obligates us to
provide approximately $21 million in development funding. If we are unable to
fulfill this significant obligation, the Roslin Institute could terminate the
agreement and we would lose our rights to the technology.
THE ACQUISITION OF ROSLIN BIO-MED HAS SUBJECTED US TO THE UNCERTAINTY INHERENT
IN INTERNATIONAL OPERATIONS, AND WE HAVE LIMITED EXPERIENCE WITH INTERNATIONAL
OPERATIONS
To date, we have only limited experience in managing operations
internationally. Our acquisition of Roslin Bio-Med represents our first
experience in managing international operations. As a result of our
international expansion, we are now subject to the uncertainties inherent in
international operations, including:
- unexpected changes in regulatory requirements;
- compliance with international laws;
- difficulties in staffing and managing international operations
including those that arise as a result of distance, language and
cultural differences;
- currency exchange rate fluctuations;
- political instability;
- export restrictions; and
- potentially adverse tax consequences.
One or more of these factors could have a material adverse effect on our
future international operations, the success of our acquisition of Roslin
Bio-Med and, consequently, on our business, operating results, and financial
condition. Similarly, our collaborations with international partners such as the
Roslin Institute, Pharmacia & Upjohn, Kyowa Hakko and Roche Diagnostics could
also subject us to the above described international uncertainties.
IF WE ARE UNABLE TO ENTER INTO COLLABORATIVE RELATIONSHIPS FOR MANUFACTURING,
MARKETING AND SALES, WE WILL NEED TO DEVELOP THESE CAPABILITIES ON OUR OWN WHICH
WOULD BE COSTLY AND WOULD SLOW OUR PRODUCT DEVELOPMENT EFFORTS
We currently have no manufacturing infrastructure and no marketing or
sales organization. As a result, we intend to rely almost entirely on our
current and future collaborative partners for manufacturing and principal
marketing and sales responsibilities for any potential products. To the extent
that we choose not to or are unable to establish these arrangements, we will
require substantially greater capital to develop our own manufacturing,
marketing and sales capabilities.
We cannot assure you that we will be able to negotiate additional
strategic arrangements in the future on acceptable terms, if at all, or that any
potential strategic arrangement will be successful. In the absence of these
arrangements, we may encounter significant delays in introducing any product or
find that the research, development, manufacture, marketing or sale of any
product is adversely affected. In the event we need to enter into strategic
arrangements in the future, but are unable to do so, our business will be
significantly and negatively impacted.
OUR RELIANCE ON THE RESEARCH ACTIVITIES OF OUR NON-EMPLOYEE SCIENTIFIC ADVISORS
AND OTHER RESEARCH INSTITUTIONS, WHOSE ACTIVITIES ARE NOT WHOLLY WITHIN OUR
CONTROL, MAY LEAD TO DELAYS IN TECHNOLOGICAL DEVELOPMENTS
We rely extensively and have relationships with scientific advisors at
academic and other institutions, some of whom conduct research at our request.
These scientific advisors are not our employees and may have commitments to, or
consulting or advisory contracts with, other entities that may limit their
availability to us. We have limited control over the activities of these
advisors and, except as otherwise required by our collaboration and consulting
agreements, can expect only limited amounts of their time to be dedicated to our
activities. If our scientific advisors
6.
<PAGE> 9
are unable or refuse to contribute to the development of any of our potential
discoveries, our ability to generate significant advances in our technologies
will be significantly harmed.
In addition, we have formed research collaborations with many academic
and other research institutions throughout the world, including the Roslin
Institute. These research facilities may have commitments to other commercial
and non-commercial entities. We have limited control over the operations of
these laboratories and can expect only limited amounts of time to be dedicated
to our research goals.
IMPAIRMENT OF OUR INTELLECTUAL PROPERTY RIGHTS, WHICH ARE COSTLY AND DIFFICULT
TO PROTECT, MAY LIMIT OUR ABILITY TO PURSUE THE DEVELOPMENT OF OUR INTENDED
TECHNOLOGIES AND PRODUCTS
Our success will depend on our ability to obtain and enforce patents for
our discoveries; however, legal principles for biotechnology patents are
not firmly established and the extent to which we will be able to obtain
patent coverage is uncertain
Protection of our proprietary compounds and technology is critically
important to our business. Our success will depend in part on our ability to
obtain and enforce our patents and maintain trade secrets, both in the United
States and in other countries. The patent positions of pharmaceutical and
biopharmaceutical companies, including ours, are highly uncertain and involve
complex legal and technical questions for which legal principles are not firmly
established. We cannot assure you that we will continue to develop products or
processes that are patentable or that patents will issue from any of our pending
applications, including allowed patent applications. Further, we cannot assure
you that our current patents, or patents that issue on pending applications,
will not be challenged, invalidated or circumvented, or that our current or
future patent rights will provide proprietary protection or competitive
advantages to us. In the event that we are unsuccessful in obtaining and
enforcing patents, our business would be negatively impacted.
Patent applications in the United States are maintained in secrecy until
patents issue. Publication of discoveries in the scientific or patent literature
tends to lag behind actual discoveries by at least several months and sometimes
several years. Therefore, we cannot assure you that the persons or entities that
we or our licensors name as inventors in our patents and patent applications
were the first to invent the inventions disclosed in the patent applications or
patents, or file patent applications for these inventions. As a result, we may
not be able to obtain patents from discoveries that we otherwise would consider
patentable and that we consider to be extremely significant to our future
success.
Patent prosecution or litigation may also be necessary to obtain
patents, enforce any patents issued or licensed to us or to determine the scope
and validity of our proprietary rights or the proprietary rights of another. We
cannot assure you that we would be successful in any patent prosecution or
litigation. Patent prosecution and litigation in general can be extremely
expensive and time consuming, even if the outcome is favorable to us. An adverse
outcome in a patent prosecution, litigation or any other proceeding in a court
or patent office could subject our business to significant liabilities to other
parties, require disputed rights to be licensed from other parties or require us
to cease using the disputed technology.
We may be subject to infringement claims that are costly to defend, and
which may limit our ability to use disputed technologies and prevent us
from pursuing research and development or commercialization of potential
products
Our commercial success depends significantly on our ability to operate
without infringing patents and proprietary rights of others. We cannot assure
you that our technologies do not and will not infringe the patents or
proprietary rights of others. In the event our technologies do infringe on the
rights of others, we may be prevented from pursuing research, development or
commercialization of potential products or may be required to obtain licenses to
these patents or other proprietary rights or develop or obtain alternative
technologies. We may not be able to obtain alternative technologies or any
required license on commercially favorable terms, if at all. If we do not obtain
the necessary licenses or alternative technologies, we may be delayed or
prevented from pursuing the development of some potential products. Our breach
of an existing license or failure to obtain alternative technologies or a
license to any technology that we may require to develop or commercialize our
products will significantly and negatively affect our business.
7.
<PAGE> 10
Patent law relating to the scope and enforceability of claims in the
technology fields in which we operate is still evolving, and the degree of
future protection for any of our proprietary rights is highly uncertain. In this
regard we cannot assure you that independent patents will issue from any of our
patent applications, some of which include many interrelated applications
directed to common or related subject matter. As a result, our success may
become dependent on our ability to obtain licenses for using the patented
discoveries of others. We are aware of patent applications and patents that have
been filed by others with respect to telomerase and telomere length technology
and we may have to obtain licenses to use this technology. For example, there
are a number of issued patents and pending applications owned by others directed
to differential display, stem cell and other technologies relating to our
research, development and commercialization efforts. We may also become aware of
discoveries and technology controlled by third parties that are advantageous to
our other research programs. We cannot assure you that our discoveries and
treatments can be further developed and commercialized without a license to
these discoveries or technologies. Moreover, other patent applications may be
granted priority over patent applications that we or any of our licensors have
filed. Furthermore, others may independently develop similar or alternative
technologies, duplicate any of our technologies or design around the patented
technologies we have developed. In the event that we are unable to acquire
licenses to critical technologies that we cannot patent ourselves, we may be
required to expend significant time and resources to develop similar technology,
and we may not be successful in this regard. If we cannot acquire or develop the
necessary technology, we may be prevented from pursuing some of our business
objectives. Moreover, one of our competitors could acquire or license the
necessary technology. Any of these events could have a material adverse effect
on our business.
We cannot assure you that we will not be subject to claims or litigation
as a result of entering into license agreements with third parties or infringing
on the patents of others. For example, we signed a licensing and sponsored
research agreement relating to our pluripotent stem cell therapies program with
The Johns Hopkins University School of Medicine in August 1997. Prior to signing
this agreement, we had been informed by a third party that we and Johns Hopkins
University would violate the rights of that third party and another academic
institution in doing so. After a review of the correspondence with the third
party and Johns Hopkins University, as well as related documents, including an
issued U.S. patent, we believe that both we and Johns Hopkins University have
substantial defenses to any claims that might be asserted by the third party. We
have agreed to provide indemnification to Johns Hopkins University relating to
potential claims. However, any litigation resulting from this matter may divert
significant resources, both financial and otherwise, from our research programs.
We cannot assure you that we would be successful if the matter is litigated. If
the outcome of litigation is unfavorable to us, our business could be materially
and adversely affected.
Much of the information and know-how that is critical to our business is
not patentable and we may not be able to prevent others from obtaining
this information and establishing competitive enterprises
We rely extensively on trade secrets to protect our proprietary
technology, especially in circumstances in which patent protection is not
believed to be appropriate or obtainable. We attempt to protect our proprietary
technology in part by confidentiality agreements with our employees, consultants
and contractors. We cannot assure you that these agreements will not be
breached, that we would have adequate remedies for any breach, or that our trade
secrets will not otherwise become known or be independently discovered by
competitors, any of which would harm our business significantly.
WE WILL NEED ADDITIONAL CAPITAL TO CONDUCT OUR OPERATIONS AND DEVELOP OUR
PRODUCTS, AND OUR ABILITY TO OBTAIN THE NECESSARY FUNDING IS UNCERTAIN
We will require substantial capital resources in order to conduct our
operations and develop our products. We estimate that our existing capital
resources, payments under the Pharmacia & Upjohn collaborative agreement,
interest income and equipment financing will be sufficient to fund our current
level of operations through the second quarter of 2001. The timing and degree of
any future capital requirements will depend on many factors, including:
- the accuracy of the assumptions underlying our estimates for our
capital needs in 1999 and beyond;
- continued scientific progress in our research and development
programs;
- the magnitude and scope of our research and development
programs;
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- our ability to maintain and establish strategic arrangements for
research, development, clinical testing, manufacturing and
marketing;
- our progress with preclinical and clinical trials;
- the time and costs involved in obtaining regulatory approvals;
- the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims; and
- the potential for new technologies and products.
We intend to acquire additional funding through strategic
collaborations, public or private equity financings and capital lease
transactions. Additional financing may not be available on acceptable terms, or
at all. Additional equity financings could result in significant dilution to
stockholders. Further, in the event that additional funds are obtained through
arrangements with collaborative partners, these arrangements may require us to
relinquish rights to some of our technologies, product candidates or products
that we would otherwise seek to develop or commercialize ourselves. If
sufficient capital is not available, we may be required to delay, reduce the
scope of or eliminate one or more of our research or development programs, each
of which could have a material adverse effect on our business.
SOME OF OUR COMPETITORS MAY DEVELOP TECHNOLOGIES THAT ARE SUPERIOR TO OR MORE
COST-EFFECTIVE THAN OURS, WHICH MAY IMPACT THE COMMERCIAL VIABILITY OF OUR
TECHNOLOGIES AND WHICH MAY SIGNIFICANTLY DAMAGE OUR ABILITY TO SUSTAIN
OPERATIONS
The pharmaceutical and biopharmaceutical industries are intensely
competitive. We believe that other pharmaceutical and biopharmaceutical
companies and research organizations currently engage in or have in the past
engaged in efforts related to the biological mechanisms of cell aging and cell
immortality, including the study of telomeres, telomerase, human pluripotent
stem cells, and nuclear transfer. In addition, other products and therapies that
could compete directly with the products that we are seeking to develop and
market currently exist or are being developed by pharmaceutical and
biopharmaceutical companies, and by academic and other research organizations.
Many companies are also developing alternative therapies to treat cancer and, in
this regard, are competitors of ours. The pharmaceutical companies developing
and marketing these competing products have significantly greater financial
resources and expertise than we do in:
- research and development;
- manufacturing;
- preclinical and clinical testing;
- obtaining regulatory approvals; and
- marketing.
Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish collaborative arrangements for research, clinical development and
marketing of products similar to ours. These companies and institutions compete
with us in recruiting and retaining qualified scientific and management
personnel as well as in acquiring technologies complementary to our programs.
There is also competition for access to libraries of compounds to use for
screening. Should we fail to secure and maintain access to sufficiently broad
libraries of compounds for screening potential targets, our business would be
materially harmed. In addition to the above factors, we expect to face
competition in the following areas:
- product efficacy and safety;
- the timing and scope of regulatory consents;
- availability of resources;
- reimbursement coverage;
- price; and
- patent position, including potentially dominant patent positions
of others.
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As a result of the foregoing, our competitors may develop more effective
or more affordable products, or achieve earlier patent protection or product
commercialization than us. Most significantly, competitive products may render
our products that we develop obsolete.
THE LOSS OF KEY PERSONNEL COULD SLOW OUR ABILITY TO CONDUCT RESEARCH AND DEVELOP
PRODUCTS
Our future success depends to a significant extent on the skills,
experience and efforts of our executive officers and key members of our
scientific staff. The loss of any or all of these individuals could damage our
business and might significantly delay or prevent the achievement of research,
development or business objectives.
We also rely on consultants and advisors, including the members of our
Scientific Advisory Board, who assist us in formulating our research and
development strategy. We face intense competition for qualified individuals from
numerous pharmaceutical, biopharmaceutical and biotechnology companies, as well
as academic and other research institutions. We may not be able to attract and
retain these individuals on acceptable terms. Failure to do so would adversely
affect our business.
THE ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF THE PLURIPOTENT STEM CELL
THERAPIES AND NUCLEAR TRANSFER PROGRAMS COULD PREVENT US FROM DEVELOPING OR
GAINING ACCEPTANCE FOR COMMERCIALLY VIABLE PRODUCTS IN THIS AREA
Our pluripotent stem cell therapies program may involve the use of human
pluripotent stem cells that would be derived from human embryonic or fetal
tissue. The use of human pluripotent stem cells gives rise to ethical, legal and
social issues regarding the appropriate use of these cells. In the event that
our research related to human pluripotent stem cell therapies becomes the
subject of adverse commentary or publicity, our name and goodwill could be
adversely affected.
In addition, our nuclear transfer program involves the same techniques
that have previously been utilized to clone sheep. It is possible that these
nuclear transfer techniques could also be used in attempts to reproductively
clone living human beings, an application that we believe to be unnecessary and
unethical. Although we and the Roslin Institute support the current
international prohibitions on human reproductive cloning, the process of nuclear
transfer itself still gives rise to ethical, legal and social issues regarding
the appropriate nature of this type of research. In the event that our research
related to nuclear transfer becomes the subject of adverse commentary or
publicity, our name and goodwill could be adversely affected.
We have established an Ethics Advisory Board comprised of independent
and recognized medical ethicists to advise us with respect to these issues.
Indeed, the use of human pluripotent stem cell and nuclear transfer techniques
in scientific research is an issue of national interest. Many research
institutions, including several of our scientific collaborators, have adopted
policies regarding the ethical use of these types of human cells. These policies
may have the effect of limiting the scope of research conducted in this area.
The United States government currently does not fund research that involves the
use of human pluripotent cells or tissue and may in the future regulate or
otherwise restrict its use. The pluripotent stem cell therapies program would be
significantly harmed if we are prevented from conducting research on these cells
due to government regulation or otherwise. Also, in the event that regulatory
bodies ban nuclear transfer processes, our nuclear transfer program could be
cancelled and our business could be negatively affected.
OUR ABILITY TO EARN REVENUES FROM THE SALE OF MARKETABLE PRODUCTS IS PARTLY
DEPENDENT ON THE SCOPE OF GOVERNMENT REGULATION AND OUR SUCCESS IN OBTAINING
REGULATORY APPROVAL FOR OUR PRODUCTS
Our business is subject to intense government regulation and this
regulation may significantly impact our ability to create and market
commercially viable products
Federal, state and local governments in the United States and
governments in other countries have significant regulations in place that govern
many of our activities. The preclinical testing and clinical trials of the
products that we develop ourselves or that our collaborative partners develop
are subject to intense government regulation and may prevent us from creating
commercially viable products from our discoveries. In addition, the sale by us
or our
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<PAGE> 13
collaborative partners of any commercially viable product will be subject to
government regulation from several standpoints, including the processes of:
- manufacturing;
- labeling;
- selling;
- distributing;
- marketing;
- advertising; and
- promoting.
We cannot assure you that we will be able to comply with these
regulations for any of our potentially marketable products. To the extent that
we are unable, our ability to earn revenues will be significantly and negatively
impacted.
The regulatory process, particularly for biopharmaceutical products like
ours, is uncertain, can take many years and requires the expenditure of
substantial resources. Any product that we or our collaborative partners develop
must receive all relevant regulatory agency approvals or clearances, if any,
before it may be marketed in the United States or other countries. Generally,
biological drugs and non-biological drugs are regulated more rigorously than
medical devices. In particular, human pharmaceutical therapeutic products,
including a telomerase inhibitor, are subject to rigorous preclinical and
clinical testing and other requirements by the Food and Drug Administration in
the United States and similar health authorities in foreign countries. The
regulatory process, which includes extensive preclinical testing and clinical
trials of each product in order to establish its safety and efficacy, is
uncertain, can take many years and requires the expenditure of substantial
resources.
Data obtained from preclinical and clinical activities is susceptible to
varying interpretations that could delay, limit or prevent regulatory agency
approvals or clearances. In addition, delays or rejections may be encountered
based upon changes in regulatory agency policy during the period of product
development and/or the period of review of any application for regulatory agency
approval or clearance for a product. Delays in obtaining regulatory agency
approvals or clearances could:
- significantly harm the marketing of any products that we or our
collaborative partners develop;
- impose costly procedures upon our activities or the activities
of our collaborative partners;
- diminish any competitive advantages that we or our collaborative
partners may attain; or
- adversely affect our ability to receive royalties and generate
revenues and profits.
Even if we commit the time and resources, both economic and otherwise,
that are necessary, the required regulatory agency approvals or clearances may
not be obtained for any products developed by or in collaboration with us. If
regulatory agency approval or clearance for a new product is obtained, this
approval or clearance may entail limitations on the indicated uses for which it
may be marketed that could limit the potential market for the product.
Furthermore, approved products and their manufacturers are subject to continual
review, and discovery of previously unknown problems with a product or its
manufacturer may result in restrictions on the product or manufacturer,
including withdrawal of the product from the market. Failure to comply with
regulatory requirements can result in severe civil and criminal penalties,
including but not limited to:
- recall or seizure of products;
- injunction against manufacture, distribution, sales and
marketing; and
- criminal prosecution.
The imposition of any of these penalties could significantly impair our
business.
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<PAGE> 14
TO BE SUCCESSFUL, OUR PRODUCTS MUST BE ACCEPTED BY THE HEALTH CARE COMMUNITY
THAT CAN BE VERY SLOW TO ADOPT OR UNRECEPTIVE TO NEW TECHNOLOGIES AND PRODUCTS
We cannot assure you that any products successfully developed by us or
by our collaborative partners, if approved for marketing, will achieve market
acceptance since physicians, patients or the medical community in general may
decide not to accept and utilize these products. The products that we are
attempting to develop may represent substantial departures from established
treatment methods and will compete with a number of traditional drugs and
therapies manufactured and marketed by major pharmaceutical companies. The
degree of market acceptance of any of our developed products will depend on a
number of factors, including:
- our establishment and demonstration to the medical community of
the clinical efficacy and safety of our product candidates;
- our ability to create products that are superior to alternatives
currently on the market;
- our ability to establish in the medical community the potential
advantage of our treatments over alternative treatment methods;
and
- reimbursement policies of government and third-party payors.
If the health care community does not accept our products for any of the
foregoing reasons, our ability to generate revenues will be significantly
impaired.
THE REIMBURSEMENT STATUS OF NEWLY-APPROVED HEALTH CARE PRODUCTS IS UNCERTAIN AND
FAILURE TO OBTAIN REIMBURSEMENT APPROVAL COULD SEVERELY LIMIT THE USE OF OUR
PRODUCTS
Significant uncertainty exists as to the reimbursement status of newly
approved health care products, including pharmaceuticals. If we fail to generate
adequate third party reimbursement for the users of our potential products and
treatments, then we may be unable to maintain price levels sufficient to realize
an appropriate return on our investment in product development.
In both domestic and foreign markets, sales of our products, if any,
will depend in part on the availability of reimbursement from third-party
payors, examples of which include:
- government health administration authorities;
- private health insurers;
- health maintenance organizations; and
- pharmacy benefit management companies.
Both federal and state governments in the United States and foreign
governments continue to propose and pass legislation designed to contain or
reduce the cost of health care through various means. Legislation and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of our potential products are approved for
marketing. Cost control initiatives could decrease the price that we receive for
any product we may develop in the future. In addition, third-party payors are
increasingly challenging the price and cost-effectiveness of medical products
and services and any of our potential products and treatments may ultimately not
be considered cost effective by these third parties. Any of these initiatives or
developments could negatively impact our business.
OUR ACTIVITIES INVOLVE HAZARDOUS MATERIALS AND IMPROPER HANDLING OF THESE
MATERIALS BY OUR EMPLOYEES OR AGENTS COULD EXPOSE US TO SIGNIFICANT FINANCIAL
PENALTIES
Our research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive compounds. As a
consequence, we are subject to numerous environmental and safety laws and
regulations. We may be required to incur significant costs to comply with
current or future environmental laws and regulations and may be adversely
affected by the cost of compliance with these laws and regulations. Although we
believe that our safety procedures for using, handling, storing and disposing of
hazardous materials comply with the standards prescribed by state and federal
regulations, the risk of accidental contamination or injury from these materials
cannot be eliminated. In the event of an accident of this nature, our use of
these materials could be
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curtailed by state or federal authorities and we could be held liable for any
resulting damages. Should either of these contingencies arise, our business
could be materially and adversely affected.
WE MAY NOT BE ABLE TO OBTAIN OR MAINTAIN SUFFICIENT INSURANCE ON COMMERCIALLY
REASONABLE TERMS OR WITH ADEQUATE COVERAGE AGAINST POTENTIAL LIABILITIES IN
ORDER TO PROTECT OURSELVES AGAINST PRODUCT LIABILITY CLAIMS
Although we believe that we do not currently have any exposure to
product liability claims, our future business will expose us to potential
product liability risks that are inherent in the testing, manufacturing and
marketing of human therapeutic and diagnostic products. We currently have no
clinical trial liability insurance and we may not be able to obtain and maintain
this type of insurance for any of our clinical trials. In addition, we may not
be able to obtain or maintain product liability insurance in the future on
acceptable terms or with adequate coverage against potential liabilities.
THE SUBSTANTIAL NUMBER OF SHARES THAT WILL BE ELIGIBLE FOR SALE IN THE NEAR
FUTURE MAY ADVERSELY AFFECT THE MARKET PRICE FOR OUR COMMON STOCK AND MAY RESULT
IN SIGNIFICANT DILUTION TO OUR CURRENT STOCKHOLDERS
Sales of a substantial number of shares of our common stock in the
public market could significantly and negatively affect the market price for our
common stock. As of October 25, 1999, we had outstanding approximately
16,788,293 shares of common stock. As of October 25, 1999, we also had reserved
4,946,196 shares of common stock for issuance upon exercise of outstanding
warrants and options that we issued to our employees and other entities.
In addition, the conversion of outstanding debentures and the exercise
of outstanding warrants would result in our issuance of a minimum of 4,369,512
additional shares of common stock in the aggregate. This number of shares could
prove to be significantly greater, and you would be increasingly diluted, in the
event that the conversion or exercise prices are reduced because we:
- have a rights offering, or a similar offering of securities to
all investors, at less than the conversion or exercise price per
share respectively; or
- issue common stock or securities convertible into common stock,
other than under our stock plans or in connection with a
strategic joint venture, at a price less than the conversion
price per share.
Current holders of our common stock will also be immediately and
substantially diluted to the extent that the weighted average conversion and
exercise price of any of the above-described convertible and exercisable
securities is less than the price of our common stock on the date holders of
these securities convert or exercise their convertible or exercisable
securities.
In connection with the acquisition of Roslin Bio-Med, we issued
2,100,000 shares of our common stock. We are contractually required to register
these shares for resale within 120 days following May 3, 1999. We have filed a
registration statement covering these shares. Of these shares 860,000 shares are
held in escrow. Subject to claims against the shares held in escrow, 545,000 of
these shares will be released from escrow to the former Roslin Bio-Med
shareholders in November 1999, and the remaining 315,000 shares will be released
from escrow to the former Roslin Bio-Med shareholders in May 2000.
Pursuant to a professional services agreement, we have also agreed to
issue and register for resale an additional 75,000 shares of our common stock.
Further, in connection with a registration rights agreement with the holders of
Series C debentures and warrants, we have agreed to register for resale an
aggregate of 2,899,390 shares of our common stock issuable upon conversion of
Series C debentures and exercise of Series C warrants, subject to adjustment
under certain circumstances. We anticipate this registration will occur in the
first quarter of 2000. The registration of all the shares described above will
cause them to be saleable in the public markets at the time of and following
registration, and could cause downward pressure on the market price of our
common stock. Additionally, one of our current strategic partners and
stockholders, Pharmacia & Upjohn, has contractually agreed not to sell the
696,787 shares of common stock that it holds until April 2000, at which time
these shares will be eligible for sale and freely transferable in the public
market.
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COMPLIANCE WITH CERTAIN PROVISIONS OF OUR OUTSTANDING DEBENTURES ARE SUBJECT TO
OBTAINING APPROVAL OF OUR STOCKHOLDERS, WHICH IS OUTSIDE OUR CONTROL; FAILURE TO
OBTAIN SUCH APPROVALS COULD REQUIRE US TO REDEEM THE DEBENTURES
Currently, we do not have a sufficient number of authorized shares of
common stock to fulfill our reserve commitments under our Series C debentures
and warrants. An increase in authorized capital would require the approval of
our stockholders to amend our Certificate of Incorporation. We cannot assure you
that we can obtain such approval. Our failure to do so prior to March 31, 2000
would be an event of default under our Series C debentures and would require us
to redeem the remaining debentures at a 15% premium to their principal balance
at such time. In addition, under the rules of the Nasdaq Stock Market, we may
not issue shares upon conversion of the Series A, B and C debentures in an
aggregate amount greater than 19.99 percent of the number of shares outstanding
prior to the issuance of the debentures without the prior approval of our
stockholders. If, as a result of an adjustment in the conversion price of any of
the debentures, we would be required to issue shares of our common stock in
excess of such limitation and have not obtained stockholder approval to do so,
we would be required to redeem the remaining debentures at a 15% premium to
their principal balance at such time. As of the date of this prospectus,
approximately $20.5 million aggregate principal amount of debentures is
outstanding, including $12.5 million of Series C debentures. Redemption of a
significant amount of debentures could deplete our cash reserves significantly.
OUR STOCK PRICE HAS HISTORICALLY BEEN VERY VOLATILE, WHICH MAY MAKE IT MORE
DIFFICULT FOR YOU TO RESELL SHARES WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE
Stock prices and trading volumes for many biopharmaceutical companies
fluctuate widely for a number of reasons, including some reasons which may be
unrelated to their businesses or results of operations. This market volatility,
as well as general domestic or international economic, market and political
conditions, could materially and adversely affect the market price of our common
stock and your return on your investment.
Historically, our stock price has been extremely volatile. Between
January 1998 and September 1999, our stock price traded as high as $24.50 per
share and as low as $3.50 per share. The significant market price fluctuations
of our common stock are due to a variety of factors, including:
- depth of the market for the common stock;
- the experimental nature of our prospective products;
- fluctuations in our operating results;
- market conditions relating to the biopharmaceutical and
pharmaceutical industries;
- any announcements of technological innovations, new commercial
products or clinical progress or lack thereof by us, our
collaborative partners or our competitors; or
- announcements concerning regulatory developments, developments
with respect to proprietary rights and our collaborations.
In addition, the stock market is subject to other factors outside our
control that can cause extreme price and volume fluctuations. Securities class
action litigation has often been brought against companies, including many
biotechnology companies, which then experience volatility in the market price of
their securities. Litigation brought against us could result in substantial
costs and a diversion of management's attention and resources, which could
adversely affect our business.
OUR UNDESIGNATED PREFERRED STOCK MAY INHIBIT POTENTIAL ACQUISITION BIDS; THIS
MAY ADVERSELY AFFECT THE MARKET PRICE FOR OUR COMMON STOCK AND THE VOTING RIGHTS
OF THE HOLDERS OF COMMON STOCK
Our certificate of incorporation provides our Board of Directors with
the authority to issue up to 3,000,000 shares of undesignated preferred stock
and to determine the rights, preferences, privileges and restrictions of these
shares without further vote or action by the stockholders. In March 1998, we
designated and issued 15,000 shares as series A preferred stock, all of which
have since been converted into common stock or redeemed. As of the date of this
prospectus, the Board of Directors still has authority to designate and issue up
to 2,985,000 shares of preferred stock. The rights of the holders of common
stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred stock that may be issued in the future. The issuance of
shares of preferred stock may
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delay or prevent a change in control transaction without further action by our
stockholders. As a result, the market price of our common stock may be adversely
affected. The issuance of preferred stock may also result in the loss of voting
control by others.
PROVISIONS IN OUR CHARTER AND BYLAWS, AND PROVISIONS OF DELAWARE LAW, MAY
INHIBIT POTENTIAL ACQUISITION BIDS FOR US, WHICH MAY PREVENT HOLDERS OF OUR
COMMON STOCK FROM BENEFITING FROM WHAT THEY BELIEVE MAY BE THE POSITIVE ASPECTS
OF ACQUISITIONS AND TAKEOVERS
In addition to the undesignated preferred stock, provisions of our
charter documents and bylaws may make it substantially more difficult for a
third party to acquire control of us and may prevent changes in our management,
including provisions that:
- prevent stockholders from taking actions by written consent;
- divide the board of directors into separate classes with terms
of office that are structured to prevent all of the directors
from being elected in any one year; and
- set forth procedures for nominating directors and submitting
proposals for consideration at stockholders' meetings.
Provisions of Delaware law may also inhibit potential acquisition bids
for us or prevent us from engaging in business combinations.
Either collectively or individually, these provisions may prevent
holders of our common stock from benefiting from what they may believe are the
positive aspects of acquisitions and takeovers, including the potential
realization of a higher rate of return on their investment from these types of
transactions.
YEAR 2000 PROBLEMS COULD AFFECT OUR DAY-TO-DAY OPERATIONS AND CAUSE SIGNIFICANT
ECONOMIC LIABILITIES
Potential year 2000 problems are the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
our computer programs or laboratory equipment that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions in
operations, including, among other things, a temporary inability to:
- process transactions;
- send checks;
- perform research and development activities; or
- engage in similar normal business activities.
Based on a recent assessment, we have determined that we will be
required to modify or replace portions of our software so that our computer
systems will function properly with respect to dates in the year 2000 and
beyond. These software programs include our accounting package and voicemail
system. We presently believe that with modifications to existing software and
conversions to new software, potential year 2000 problems will not pose
significant operational problems for our computer systems. However, if these
modifications and conversions are not made, or are not completed timely,
potential year 2000 problems could have a significant and negative impact on our
operations.
We are completing formal communications with all of our significant
suppliers, service providers and corporate partners to determine the extent to
which our interface systems and other operations are vulnerable to those third
parties' failure to remediate their own year 2000 issues. Our total year 2000
project cost and estimated time to complete includes the estimated costs and
time associated with the impact of third party year 2000 issues and is based on
presently available information. However, we cannot assure you that the systems
of other companies on which our systems rely will be upgraded or converted and
will not have an adverse effect on our systems. Such suppliers, service
providers and corporate partners include our payroll service provider, local
financial institutions and website maintenance organization.
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The total cost of our year 2000 project is estimated at $200,000 and is
being funded through current cash holdings. Of the total project cost,
approximately $100,000 is attributable to the purchase of new software and
equipment, which will be capitalized. The remaining $100,000, which will be
expensed as incurred, is not expected to have a material effect on our results
of operations. To date, we have incurred approximately $175,000 ($85,000
capitalized for new systems and $90,000 expensed), related to the assessment of,
and preliminary efforts on, our year 2000 project.
The costs of the project and the date on which we believe we will
complete the year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, we cannot assure you that these estimates will prove
to be accurate, and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes and
similar uncertainties.
Although we do not believe that we will incur any material costs or
experience material disruptions in our business associated with preparing our
internal systems for the year 2000, we cannot assure you that we will not
experience serious unanticipated negative consequences and/or material costs
caused by undetected errors or defects in the technology used in our internal
systems, which are composed of third party software and third party hardware
that contains embedded software. The most reasonably likely worst case scenarios
could include: (i) corruption of data contained in our internal information
systems, (ii) hardware failure, and (iii) the failure of infrastructure services
provided by government agencies and other third parties, such as electricity,
phone service, water, transport and Internet services.
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE
INHERENTLY UNCERTAIN
This prospectus contains forward-looking statements that involve risks
and uncertainties. You should not rely on these forward-looking statements. We
use words such as "anticipates," believes," "plans," "expects," "future,"
"intends" and similar expressions to identify forward-looking statements. These
statements appear throughout the prospectus and are statements regarding our
intent, belief, or current expectations, primarily with respect to our
operations and related industry developments. You should not place undue
reliance on these forward-looking statements, which apply only as of the date of
this prospectus. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us and described in the preceding pages and elsewhere in this
prospectus.
WHERE CAN YOU FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission, or the "Commission." Some
information in the registration statement has been omitted from this prospectus
in accordance with the Commission rules. We file annual, quarterly and special
reports, proxy statements and other information with the Commission. You can
read and copy the registration statement as well as reports, proxy statements
and other information we have filed with the Commission at the public reference
room maintained by the Commission at 450 Fifth Street, NW, Washington, D.C.
20549, and at the following Regional Offices of the Commission: Seven World
Trade Center, New York, New York 10048, and Northwest Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. You can call the Commission at
1-800-732-0330 for further information about the public reference room. We are
also required to file electronic versions of these documents with the
Commission, which may be accessed through the Commission's World Wide Web site
at http://www.sec.gov. Our common stock is quoted on The Nasdaq National Market.
Reports, proxy and information statements and other information concerning our
company may be inspected at The Nasdaq Stock Market at 1735 K Street, NW,
Washington, D.C. 20006.
The Commission allows us to "incorporate by reference" the information
we have previously filed with them, which means we can disclose important
information by referring you to those documents. All information that we have
incorporated by reference is available to you in accordance with the above
paragraph. Information that we file with the Commission subsequent to the date
of this prospectus will automatically update and supersede this
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information. We incorporate by reference the documents listed below and any
future filings made with the Commission under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), until the selling
stockholder has sold all the shares.
The following documents filed with the Commission are incorporated by
reference in this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 0-20859).
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999
and June 30, 1999 (File No. 0-20859)
3. Our Current Report on Form 8-K, filed with the Commission on May 4, 1999
(File No. 0-20859).
4. Our Current Report on Form 8-K, filed with the Commission on May 18,
1999 and amended on May 21, 1999 and June 29, 1999 (File No. 0-20859).
5. Our Current Report on Form 8-K, filed with the Commission on October 5,
1999 (File No. 0-20859).
6. The description of our common stock set forth in our registration
statement on Form 8-A, filed with the Commission on June 13, 1996 (File
No. 0-20859).
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, including
exhibits to these documents. You should direct any requests for documents to
David L. Greenwood, Chief Financial Officer, Geron Corporation, 230 Constitution
Drive, Menlo Park, California 94025, telephone: (650) 473-7700.
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the account of the selling stockholders. We will not
receive any proceeds from the sale of these shares of common stock.
17.
<PAGE> 20
SELLING STOCKHOLDER
The following table sets forth the name of the selling stockholder, the
number of shares of common stock owned beneficially by the selling stockholder
as of October 28, 1999, the number of shares which may be offered pursuant to
this prospectus and the number of shares to be owned by the selling stockholder
after this offering. This information is based upon information provided by the
selling stockholder. Because the selling stockholder may offer all, some or none
of its common stock, no definitive estimate as to the number of shares thereof
that will be held by the selling stockholder after the offering can be provided.
To our knowledge, the stockholder named in the table has sole voting and
investment power with respect to all shares of common stock beneficially owned.
Percent of beneficial ownership is calculated assuming the sale of all shares
offered and 16,788,293 shares of common stock outstanding as of October 28,
1999.
The number of shares set forth in the table represents an estimate of
the number of shares of common stock to be offered by the selling stockholder.
The selling stockholder will acquire such shares upon conversion of outstanding
Series C debentures and exercise of outstanding Series C warrants. The actual
number of shares of common stock potentially issuable upon conversion of
debentures and exercise of warrants is indeterminate, is subject to adjustment
and could be materially less or more than such estimated number depending on
factors which are not known at this time. The actual number of shares of common
stock offered hereby, and included in the registration statement of which this
Prospectus is a part, includes such additional number of shares of common stock
as may be issued or issuable upon conversion of the debentures and exercise of
the warrants by reason of any stock split, stock dividend or similar
transaction, in accordance with Rule 416 under the Securities Act.
This prospectus covers the sale of all 2,319,512 shares that we expect
to be issuable to the selling stockholder based on the current conversion and
exercise prices. The actual number of shares of common stock issuable upon
conversion of the debentures and exercise of the warrants is indeterminate and
could be materially less or more than the amount estimate due to the conversion
and exercise price adjustment provisions contained in the debentures and the
warrants. We have therefore registered, under a registration statement on Form
S-3 of which this prospectus is a part, 579,878 more shares than are covered by
this prospectus for sale by the selling stockholders in the event the actual
number of shares issuable upon conversion of the debentures or exercise of
warrants increases as a result of adjustments in the conversion or exercise
prices. These additional shares may be sold by the selling stockholder only
after we reflect the change in the number of shares offered in a supplement to
this prospectus. This table assumes no price adjustment to the conversion price
of the debentures or exercise price of the warrants. The selling stockholder may
sell all, some or none of the shares that it may acquire upon its exercise of
warrants or conversion of debentures.
The terms of the Series A, B and C debentures and warrants provide that
the debentures are convertible and the warrants are exercisable by a holder only
to the extent that the number of shares of common stock issuable upon such
conversion or exercise, together with the number of shares of common stock
beneficially owned by that holder and its affiliates, determined in accordance
with Section 13(d) of the Exchange Act, would not exceed 9.9% of our
then-outstanding common stock. Accordingly, the number of shares of common stock
set forth in the table as beneficially owned by the selling stockholder exceeds
the number of shares of common stock that it could own beneficially at any given
time as a result of its ownership of the debentures and warrants. In that
regard, beneficial
18.
<PAGE> 21
ownership of the selling stockholder set forth in the table is not determined in
accordance with Rule 13d-3 under the Exchange Act.
The number of shares beneficially owned prior to this offering includes
916,666 shares issuable upon conversion of Series A and Series B debentures and
exercise of Series A and B warrants, which have been registered for sale by the
selling stockholder under another prospectus, and 2,319,512 shares currently
issuable upon conversion of Series C debentures and exercise of Series C
warrants.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY SHARES OWNED AFTER OFFERING
OWNED PRIOR TO BEING ---------------------
SELLING STOCKHOLDER OFFERING OFFERED NUMBER PERCENT
- ------------------- ------------------- ------- -------- -------
<S> <C> <C> <C> <C>
RGC International Investors, LDC 3,236,718 2,319,512 916,666 5.5
</TABLE>
19.
<PAGE> 22
PLAN OF DISTRIBUTION
The shares being offered by the selling stockholder or its respective
pledgees, donees, transferees or other successors in interest, will be sold from
time to time in one or more transactions, which may involve block transactions,
on the Nasdaq National Market or on such other market on which the common stock
may from time to time be trading:
- in privately-negotiated transactions;
- through the writing of options on the shares;
- short sales; or
- any combination thereof.
The sale price to the public may be:
- the market price prevailing at the time of sale;
- a price related to such prevailing market price;
- at negotiated prices; or
- such other price as the selling stockholder determines from time
to time.
The shares may also be sold pursuant to Rule 144. The selling stockholder shall
have the sole and absolute discretion not to accept any purchase offer or make
any sale of shares if it deems the purchase price to be unsatisfactory at any
particular time.
The selling stockholder or its respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholder
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that the selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholder cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholder. The selling
stockholder and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations under such acts.
The selling stockholder, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. The selling
stockholder has not entered into any agreement with a prospective underwriter
and there is no assurance that any such agreement will be entered into. If the
selling stockholder enters into such an agreement or agreements, the relevant
details will be set forth in a supplement or revisions to this prospectus.
The selling stockholder and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
stockholder or any other such person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and certain other activities with respect to such
securities for a specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.
20.
<PAGE> 23
We have agreed to indemnify the selling stockholder and certain
transferees against certain liabilities, including liabilities under the
Securities Act in connection with the sale of the common stock by the selling
stockholder or to contribute to payments the selling stockholder or such
transferees may be required to make in respect of such liabilities. We have
agreed to pay all reasonable fees and expenses incident to the filing of this
registration statement, estimated to be approximately $25,000. We also agreed to
reimburse Rose Glen Capital Management, L.P., investment manager to RGC
International Investors, LDC, for expenses incurred by the selling stockholder
in its purchase of the debentures and warrants, up to a maximum of $25,000.
21.
<PAGE> 24
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Cooley Godward LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements included in our Annual Report on Form 10-K for the three
years ended December 31, 1998, as set forth in their report which is
incorporated in this prospectus by reference. Our consolidated financial
statements are incorporated by reference in reliance upon Ernst & Young LLP's
report given on their authority as experts in accounting and auditing.
The audited financial statements and schedules of Roslin Bio-Med
Limited, incorporated by reference in this prospectus and elsewhere in the
registration statement, have been audited by Arthur Andersen, independent public
accountants, as indicated in their report dated April 15, 1999, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
22.
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The registrant will bear no expenses in connection with any sale or
other distribution by the selling stockholder of the shares being registered
other than the expenses of preparation and distribution of this registration
statement and the prospectus included in this registration statement. The extent
of these expenses is set forth in the following table. All of the amounts shown
are estimates except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC registration fee $ 7,988
Legal fees and expenses 17,000
Accounting fees and expenses 3,000
Miscellaneous expenses 2,012
-------
Total $30,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify these persons for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
registrant's certificate of incorporation and bylaws provide for indemnification
of the registrant's directors, officers, employees and other agents to the
extent and under the circumstances permitted by the Delaware General Corporation
Law. The registrant has also entered into agreements with its directors and
officers that will require the registrant, among other things, to indemnify them
against liabilities that may arise by reason of their status or service as
directors to the fullest extent not prohibited by law. In addition, the
registrant carries director and officer liability insurance.
In connection with this offering, the selling stockholder has agreed to
indemnify the registrant, its directors and officers and each person who
controls the registrant, against any and all liability arising from inaccurate
information provided to the registrant by the selling stockholder and contained
herein.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBITS.
- ---------
<S> <C>
5.1* Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Arthur Andersen, Independent Public Accountants
23.3 Consent of Cooley Godward LLP (included in Exhibit 5.1)
24.1* Power of Attorney (see page II-4)
</TABLE>
* To be filed by amendment.
II-1.
<PAGE> 26
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to that information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities it offers, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of this offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of the securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC this form of indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against these
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of this issue.
II-2.
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Geron Corporation certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Menlo Park, State of California, on October 29, 1999.
GERON CORPORATION
By: /s/ David L. Greenwood
-------------------------------------
David L. Greenwood
Chief Financial Officer
II-3.
<PAGE> 28
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Thomas B. Okarma and David L.
Greenwood, jointly and severally, his or her true and lawful attorneys-in-fact,
each with full power of substitution, for him or her in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to sign any registration statement for the same
offering covered by this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, and
all post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact or any of them, or his or their substitute or substitutes, may
lawfully do or cause to be done or by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas B. Okarma President, Chief Executive Officer October 29, 1999
- ----------------------------- and Director
Thomas B. Okarma
/s/ David L. Greenwood Senior Vice President and Chief October 29, 1999
- ----------------------------- Financial Officer (Principal
David L. Greenwood Financial and Accounting Officer)
/s/ Alexander E. Barkas Director October 29, 1999
- -----------------------------
Alexander E. Barkas
/s/ Ronald W. Eastman Director October 29, 1999
- -----------------------------
Ronald W. Eastman
Director October 29, 1999
- -----------------------------
Edward V. Fritzky
Director October 29, 1999
- -----------------------------
Thomas D. Kiley
/s/ Gary L. Neil Director October 29, 1999
- -----------------------------
Gary L. Neil
/s/ Robert B. Stein Director October 29, 1999
- ------------------------------------
Robert B. Stein
Director October 29, 1999
- -----------------------------
John P. Walker
</TABLE>
<PAGE> 29
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Arthur Andersen, Independent Public Accountants
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Geron Corporation
for the registration of 2,899,309 shares of its Common Stock and to the
incorporation by reference therein of our report dated February 12, 1999 with
respect to the financial statements of Geron Corporation included in its Annual
Report on Form 10-K for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Palo Alto, California
October 28, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report on the audited financial
statements of Roslin Bio-Med Limited dated April 15, 1999, included in Geron
Corporation's Form 8-K filed on May 18, 1999, and amended on May 21, 1999 and
June 29,1999, and to all references to our Firm included in this Form S-3
registration statement filed by Geron Corporation on October 29, 1999.
/s/ ARTHUR ANDERSEN
--------------------
ARTHUR ANDERSEN
Edinburgh, Scotland
October 29, 1999
