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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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)
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DELAWARE 75-2287752
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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230 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA 94025
(650) 473-7700
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(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) 473-7300
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(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
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Alan C. Mendelson, Esq.
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
(650) 328-4600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
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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. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================================
AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share 2,086,951 shares $30.35(2) $63,338,962.85 $16,721.49
=========================================================================================================
</TABLE>
(1) Includes shares which may be offered by the selling stockholder pursuant to
this registration statement issuable upon conversion of $25,000,000 of
Series D zero coupon convertible debentures and warrants exercisable to
purchase 834,836 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 D zero coupon convertible debentures and exercise
of the warrants solely by reason of stock splits, stock dividends and
similar transactions in accordance with Rule 416.
(2) The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) using the average of the
high and low price reported by the Nasdaq National Market for the common
stock on July 5, 2000, which was approximately $30.35 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH 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 SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
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SUBJECT TO COMPLETION
DATED JULY 7, 2000
GERON CORPORATION
1,669,561 SHARES
OF COMMON STOCK
The information in this prospectus is not complete and may be changed. The
selling stockholder 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 or sale is not
permitted.
The selling stockholder is offering up to 1,669,561 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 July 5, 2000, the last reported sale price of our
common stock was $30.25 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 2.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of the prospectus. Any representation to the contrary is a
criminal offense.
----------------------
Subject to completion, dated July 7, 2000.
<PAGE> 3
TABLE OF CONTENTS
Page
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Information About Geron.................................................... 1
Recent Development......................................................... 1
Risk Factors............................................................... 2
You Should Not Rely on Forward-Looking Statements
Because They Are Inherently Uncertain.................................... 18
Where Can You Find More Information....................................... 19
Use of Proceeds........................................................... 20
Selling Stockholder....................................................... 21
Plan of Distribution...................................................... 23
Legal Matters............................................................. 24
Experts................................................................... 24
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.
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INFORMATION ABOUT GERON
We are a biopharmaceutical company focused on discovering, developing and
commercializing therapeutic and diagnostic products for applications in
oncology, research tools for drug discovery and regenerative medicine. Our
product development programs are based on three patented, independent and
synergistic technologies: telomerase, human pluripotent stem cells and nuclear
transfer. Telomeres are the ends of chromosomes that protect chromosomes from
degradation and act as a molecular clock of cellular aging. Telomerase is an
enzyme that restores telomere length and rewinds the molecular clock, thereby
extending the cell's ability to multiply or replicate. By activating telomerase,
we seek to increase the lifespan of normal cells which have prematurely aged in
the body to treat certain chronic degenerative diseases. Conversely, by
inhibiting telomerase using small molecules, we hope to kill cancer cells where
telomerase is abnormally turned on and to diagnose cancer by measuring
telomerase activity. Human pluripotent stem cells can develop and differentiate
into all cells and tissues in the body. As such, they are a potential source for
the manufacture of replacements cells and tissues for applications in
regenerative medicine. Nuclear transfer is a method for generating human cells
or whole animals from genetic material derived solely from the nucleus of a
single cell obtained from a single individual. We intend to develop this
technology to produce genetically-matched cells for use in repairing organs
damaged by chronic degenerative disease that would not be rejected by the
patient's immune system.
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 June 29, 2000, we completed a private placement of $25 million face
amount of Series D zero coupon convertible debentures and warrants to purchase
up to 834,836 shares of our common stock, for an aggregate purchase price of $25
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 $29.95 per share, subject to adjustment under certain
circumstances. The debentures are convertible at our option at any time
following the one year anniversary of the effectiveness of this registration
statement when the average closing bid price of our common stock on the Nasdaq
National Market is greater than 150% of the conversion price for twenty
consecutive trading days. The warrants are exercisable for common stock at the
option of the holder until December 29, 2001 at an exercise price of $37.43 per
share, subject to adjustment under certain circumstances. In connection with the
issuance of the Series D convertible debentures, we will record approximately
$616,000 in interest expense in June 2000 for the difference between the fair
market value of the Geron common stock on the date of the closing and the
conversion price of the debentures. In addition, in June 2000, we will record
the value of the warrants issued with the debentures as a credit to
additional-paid-in capital and the offsetting debit to interest expense. 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.
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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 BUSINESS IS AT AN EARLY STAGE OF DEVELOPMENT AND WE MAY NOT DEVELOP ANY
PRODUCTS THAT REACH CLINICAL TRIALS
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.
Our business is at an early stage of development. We have not yet produced any
products that have progressed to clinical trials and we may never do so. Our
ability to produce products that progress to clinical trials is subject to our
ability to, among other things:
- 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.
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.
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 March 31, 2000, our accumulated deficit was approximately $110.6
million. 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 collaboration agreements
with Kyowa Hakko and Pharmacia. The agreements provide that through 2001, Kyowa
Hakko and Pharmacia will provide additional funding. We may be unsuccessful in
entering into any new corporate collaboration that results in revenues. Even if
we are able to obtain new collaboration arrangements with third parties the
revenues generated
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from these arrangements will be insufficient to continue or expand our research
activities and otherwise sustain our operations.
We are unable to estimate at this time the level of revenue to be received
from the sale of diagnostic products, and do not currently expect to receive
significant revenues from the sale of research-use-only kits. Our ability to
continue or expand our research activities and otherwise sustain our operations
is dependent on our ability, alone or with others to, among other things,
manufacture and market therapeutic products.
We may never receive material revenues from product sales or if we do
receive revenues, such revenues may not be sufficient to continue or expand our
research activities and otherwise sustain our operations.
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. While we estimate that our existing capital
resources, payments under the Kyowa Hakko and Pharmacia collaborative
agreements, interest income and equipment financing arrangements will be
sufficient to fund our current level of operations through December 2002, we
cannot guarantee that this will be the case. 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 2000 and beyond;
- continued scientific progress in our research and development programs;
- the magnitude and scope of our research and development programs;
- 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
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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.
OUR INABILITY TO IDENTIFY AN EFFECTIVE INHIBITOR FOR 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. 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.
IF OUR ACCESS TO NECESSARY TISSUE SAMPLES, INFORMATION OR LICENSED
TECHNOLOGIES IS RESTRICTED, WE WILL NOT BE ABLE TO DEVELOP OUR BUSINESS
To continue the research and development of our therapeutic and diagnostic
products, we need access to normal and diseased human and other tissue samples,
other biological materials and related clinical and other information. We
compete with many other companies for these materials and information. We may
not be able to obtain or maintain access to these materials and information on
acceptable terms, if at all. In addition, government regulation in the United
States and foreign countries could result in restricted access to, or
prohibiting the use of, human and other tissue samples. If we lose access to
sufficient numbers or sources of tissue samples, or if tighter restrictions are
imposed on our use of the information generated from tissue samples, our
business will be materially harmed.
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 biotechnology industries are intensely competitive.
We believe that other pharmaceutical and biotechnology 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,
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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. Many of 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.
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
the products that we develop obsolete.
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THE ETHICAL, LEGAL AND SOCIAL IMPLICATIONS OF OUR RESEARCH USING
PLURIPOTENT STEM CELLS AND NUCLEAR TRANSFER COULD PREVENT US FROM DEVELOPING OR
GAINING ACCEPTANCE FOR COMMERCIALLY VIABLE PRODUCTS IN THIS AREA
Our programs in regenerative medicine 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 cells becomes the subject of
adverse commentary or publicity, the market price for our common stock could be
significantly harmed.
Some groups have voiced opposition to our technology and practices. The
concepts of cell regeneration, cell immortality, and genetic cloning have
stimulated significant ethical debates in both the social and political arenas.
We use human pluripotent stem cells derived through a process that uses either
donated embryos that are no longer necessary following a successful in vitro
fertilization procedure or donated fetal material as the starting material.
Further, many research institutions, including some of our scientific
collaborators, have adopted policies regarding the ethical use of human
embryonic and fetal tissue. These policies may have the effect of limiting the
scope of research conducted using human pluripotent stem cells, resulting in
reduced scientific progress. In addition, the United States government and its
agencies currently do not fund research which involves the use of human
embryonic tissue and may in the future regulate or otherwise restrict or
prohibit the public or private use of human embryonic or fetal tissue. Our
inability to conduct research using human pluripotent stem cells due to such
factors as government regulation or otherwise could have a material adverse
effect on us. Finally we acquired Roslin Bio-Med to gain the rights to nuclear
transfer technology. The Roslin Institute produced Dolly the sheep in 1997 --
the first mammal cloned from an adult cell in history. Geron acquired exclusive
rights to this technology for all areas except human cloning and certain other
limited applications. Although we will not be pursuing human reproductive
cloning, all of the techniques we continue to develop for use in agricultural
cloning and our nuclear transfer work for organ regeneration are directly
applicable to human cloning should some other group in the future decide to
pursue this avenue. Negative associations with any or all of these practices
could:
- harm our ability to establish critical partnerships and collaborations;
- prompt government regulation of our technologies;
- cause delays in our research and development; and
- cause a decrease in the price of our stock.
Also, if regulatory bodies were to ban nuclear transfer processes, our
research using nuclear transfer technology could be cancelled and our business
could be significantly harmed.
PUBLIC ATTITUDES TOWARDS GENE THERAPY MAY NEGATIVELY AFFECT REGULATORY
APPROVAL OR PUBLIC PERCEPTION OF OUR PRODUCTS
The commercial success of our product candidates will depend in part on
public acceptance of the use of gene therapies for the prevention or treatment
of human diseases. Public attitudes may
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be influenced by claims that gene therapy is unsafe, and gene therapy may not
gain the acceptance of the public or the medical community. Adverse events in
the field of gene therapy that have occurred or may occur in the future also may
result in greater governmental regulation of our product candidates and
potential regulatory delays relating to the testing or approval of our product
candidates.
Negative public reaction to gene therapy in the development of certain of
our therapies could result in greater government regulation, stricter clinical
trial oversight, commercial product labeling requirements of gene therapies and
could cause a decrease in the demand for any products that we may develop. The
subject of genetically modified organisms has received negative publicity in
Europe, which has aroused public debate. The adverse publicity in Europe could
lead to greater regulation and trade restrictions on imports of genetically
altered products. If similar adverse public reaction occurs in the United
States, genetic research and resultant products could be subject to greater
domestic regulation and could cause a decrease in the demand for our potential
products.
EVEN IF WE REACH CLINICAL TRIALS WITH ONE OR MORE OF OUR PRODUCTS, THEY MAY
NOT RESULT IN ANY COMMERCIALLY VIABLE PRODUCTS
We do not expect to generate any significant revenues from product sales
for a period of several years. We may never generate revenues from product sales
or become profitable because of a variety of risks inherent in our business,
including risks that:
- clinical trials may not demonstrate the safety and efficacy of our
products;
- completion of clinical trials may be delayed, or costs of clinical trials
may exceed anticipated amounts;
- we may not be able to obtain regulatory approval of our products, or may
experience delays in obtaining such approvals;
- we may not be able to manufacture our drugs economically on a commercial
scale;
- we and our licensees may not be able to successfully market our products;
- physicians may not prescribe our products, or patients may not accept
such products;
- others may have proprietary rights which prevent us from marketing our
products; and
- competitors may sell similar, superior or lower-cost products.
IMPAIRMENT OF OUR INTELLECTUAL PROPERTY RIGHTS 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 in the
United States and in other countries are not firmly established and the extent
to which we will be able to obtain patent coverage is uncertain.
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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 may not continue to develop products or processes that are
patentable, and it is possible that patents will not issue from any of our
pending applications, including allowed patent applications. Further, our
current patents, or patents that issue on pending applications, may be
challenged, invalidated or circumvented, and our current or future patent rights
may not 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, the persons or entities that we or our licensors name
as inventors in our patents and patent applications may not have been 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 may
not 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. Our technologies
may infringe the patents or proprietary rights of others. In addition, we may
become aware of discoveries and technology controlled by third parties that are
advantageous to our research programs. In the event our technologies do infringe
on the rights of others or we require the use of discoveries and technology
controlled by third parties, 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.
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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, patents may not issue from any of our patent applications or our
existing patents may be found to be invalid by a court. In addition, 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 our technologies and we may have to obtain
licenses to use these 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 alternative
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 or more of our competitors could acquire or
license the necessary technology. Any of these events could materially harm our
business.
We may 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 research relating to pluripotent stem cells 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 United States
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 may be unsuccessful 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,
collaborators 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.
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SOME OF OUR PATENTS AND PATENT APPLICATIONS RELATING TO TELOMERASE MAY BE
SUBJECT TO CHALLENGE AND PROSECUTION OF TWO OF OUR PATENT APPLICATIONS HAVE BEEN
SUSPENDED BY THE UNITED STATES PATENT AND TRADEMARK OFFICE. THESE MATTERS COULD
JEOPARDIZE OUR ABILITY TO COMMERCIALIZE TELOMERASE PRODUCTS
Our patents and patent applications relating to telomerase are critically
important to our development and commercialization of therapeutic and diagnostic
products for applications in oncology and regenerative medicine. Patent
applications covering cloned human telomerase and its uses are pending in
several countries and patent prosecution is ongoing. Although we have been
granted patents in the United Kingdom and Switzerland, we have received
rejections in certain other countries and we may be unable to overcome those
rejections or any others that we may encounter.
The United States Patent and Trademark Office has advised us that the
claims of two of our United States patent applications relating to cloned human
telomerase are allowable, but that further prosecution of these applications has
been suspended pending a determination of whether the initiation of an
interference proceeding is appropriate to ascertain who made the claimed
inventions first. We believe this event indicates, among other things, that the
Patent and Trademark Office has established that at least one other entity has
filed a United States patent application also claiming cloned human telomerase
or its uses. As a result, one or more interferences could be declared, in which
case the United States Patent and Trademark Office would undertake a multi-year
process to decide who made the underlying invention or inventions first. If an
interference is declared one result is that another entity could be awarded the
patents.
Based on the information presently available to us, we believe that we
cloned human telomerase protein prior to any other entity. However, we do not
yet have access to other entities' invention records or their patent application
files, which are maintained in secrecy by the United States Patent and Trademark
Office. We, therefore, do not have access to all pertinent information for this
analysis. Moreover, as interferences are typically complex, highly contested
legal proceedings subject to appeal, accurately predicting an outcome is not
possible, particularly at this stage. An interference would divert significant
resources, both financial and otherwise, from our research programs.
If interferences or other challenges to our patents are not resolved
promptly in our favor, our existing business relationships could be jeopardized
and we could be delayed or prevented from entering into new collaborations or
from commercializing telomerase products, which could materially harm our
business.
WE DEPEND ON OUR COLLABORATORS 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. Our collaborators may not 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.
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<PAGE> 14
Our ability to successfully develop and commercialize telomerase inhibition
products depends on our corporate alliances with Kyowa Hakko and Pharmacia, and
our ability to successfully develop and commercialize telomerase diagnostic
products depends on our corporate alliance with Roche Diagnostics. Under our
collaborative agreements with these collaborators, we rely significantly on
them, among other activities, to:
- design and conduct advanced clinical trials in the event that we reach
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 or Roche Diagnostics fail to conduct
these collaborative activities in a timely manner or at all. In addition, Kyowa
Hakko, Pharmacia or Roche Diagnostics could terminate these agreements and we
may not 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 or Roche Diagnostics or any of our future collaborators breach
or terminate collaborative agreements with us, our business may be materially
harmed.
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 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.
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
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<PAGE> 15
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 potential disruption of ongoing business and distraction of
management;
- unanticipated expenses related to technology and research integration;
and
- the difficulty of implementing and maintaining uniform standards,
controls, procedures and policies.
We may not 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 obligated us to
provide approximately $20 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 materially harm our future international
operations, the success of our acquisition of Roslin Bio-Med and, consequently,
our business, operating results, and financial condition. Similarly, our
collaborations with international partners such as the Roslin Institute,
Pharmacia, Kyowa Hakko and Roche Diagnostics could also subject us to the above
described international uncertainties.
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<PAGE> 16
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. Competition for personnel is intense and we may be unable to
retain our current personnel or attract or assimilate other highly qualified
management and scientific personnel in the future. The loss of any or all of
these individuals could harm 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 materially
harm our business.
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
Our business exposes us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of human therapeutic and
diagnostic products. We may become subject to product liability claims if the
use of our products is alleged to have injured subjects or patients. This risk
exists for products tested in human clinical trials as well as products that are
sold commercially. 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, product liability insurance is becoming
increasingly expensive. As a result, 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 which could have a material adverse
effect on us.
BECAUSE WE OR OUR COLLABORATORS MUST OBTAIN REGULATORY APPROVAL TO MARKET
OUR PRODUCTS IN THE UNITED STATES AND FOREIGN JURISDICTIONS, WE CANNOT PREDICT
WHETHER OR WHEN WE WILL BE PERMITTED TO COMMERCIALIZE OUR 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 collaborators 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 collaborators
of any commercially viable product will be subject to government regulation from
several standpoints, including the processes of:
- manufacturing;
- advertising and promoting;
- selling and marketing;
- labeling; and
- distributing.
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<PAGE> 17
We may not obtain regulatory approval for the products we develop and our
collaborators may not obtain regulatory approval for the products they develop.
Regulatory approval may also entail limitations on the indicated uses of a
proposed product. Because certain of our product candidates involve the
application of new technologies and may be based upon a new therapeutic
approach, such products may be subject to substantial additional review by
various government regulatory authorities, and, as a result, we may obtain
regulatory approvals for such products more slowly than for products based upon
more conventional technologies. If, and to the extent that, we are unable to
comply with these regulations, our ability to earn revenues will be materially
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
collaborators develop;
- impose costly procedures upon our activities or the activities of our
collaborators;
- 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 commercial use of 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
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<PAGE> 18
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, financial condition and results of operations.
TO BE SUCCESSFUL, OUR PRODUCTS MUST BE ACCEPTED BY THE HEALTH CARE
COMMUNITY, WHICH CAN BE VERY SLOW TO ADOPT OR UNRECEPTIVE TO NEW TECHNOLOGIES
AND PRODUCTS
Our products and those developed by our collaborative partners, if approved
for marketing, may not achieve market acceptance since physicians, patients or
the medical community in general may decide to not 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, or for any other reason, our business would be materially
harmed.
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:
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<PAGE> 19
- 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 materially harm our business.
OUR ACTIVITIES INVOLVE HAZARDOUS MATERIALS AND IMPROPER HANDLING OF THESE
MATERIALS BY OUR EMPLOYEES OR AGENTS COULD EXPOSE US TO SIGNIFICANT LEGAL AND
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, including those governing laboratory procedures, exposure to
blood-borne pathogens and the handling of biohazardous materials. 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 such an accident,
state or federal authorities could curtail our use of these materials and we
could be liable for any civil damages that result, the cost of which could be
substantial. Further, any failure by us to control the use, disposal, removal or
storage of, or to adequately restrict the discharge of, or assist in the cleanup
of, hazardous chemicals or hazardous, infectious or toxic substances could
subject us to significant liabilities, including joint and several liability
under certain statutes, and any liability could exceed our resources and could
have a material adverse effect on our business, financial condition and results
of operations. Additionally, an accident could damage our research and
manufacturing facilities and operations.
Additional federal, state and local laws and regulations affecting us may
be adopted in the future. We may incur substantial costs to comply with and
substantial fines or penalties if we violate any of these laws or regulations.
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<PAGE> 20
OUR STOCK PRICE HAS HISTORICALLY BEEN VERY VOLATILE
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 such as media coverage,
legislation and regulatory measures and the activities of various protest groups
or organizations. 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 March 31, 2000, our stock has traded as high as $75.88 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.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES, INCLUDING SHARES THAT WILL
BECOME ELIGIBLE FOR SALE IN THE NEAR FUTURE, MAY ADVERSELY AFFECT THE MARKET
PRICE FOR OUR COMMON STOCK
Sales of 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 June 29, 2000, we had approximately 21,504,845 shares of common
stock outstanding. Of these shares, approximately 10,284,534 shares were issued
(including shares issuable upon conversion or exercise of convertible notes or
warrants) since December 1998 pursuant to private placements. Of these shares,
approximately 9,423,463 shares have been registered pursuant to shelf
registration statements and therefore may be resold (if not sold prior to the
date hereof) in the public market and approximately 861,071 of the remaining
shares may be resold pursuant to Rule 144 into the public markets as early as
March 9, 2002 upon the expiration of a lockup agreement with us.
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<PAGE> 21
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. As of the date of this
prospectus, the Board of Directors still has authority to designate and issue up
to 3,000,000 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 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.
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.
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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
under the symbol "GERN". Reports, proxy and information statements and other
information concerning our company may be inspected at The Nasdaq Stock Market,
Inc., National Market System 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 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:
Our Annual Report on Form 10-K for the year ended December 31, 1999 (File
No. 0-20859);
Our Proxy Statement for our Annual Meeting of Stockholders held on May 26,
2000, filed with the Commission on April 26, 2000 (File No. 0-20859);
Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
(File No. 0-20859);
Our Current Report on Form 8-K, filed with the Commission on March 15, 2000
(File No. 0-20859);
Our Current Report on Form 8-K, filed with the Commission on July 6, 2000
(File No. 0-20859); and
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).
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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 stockholder. We will not
receive any proceeds from the sale of these shares of common stock; however, if
the selling stockholder pays the exercise price of the warrants in cash, we
could receive up to $31,247,911 upon such exercise.
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<PAGE> 24
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 June 29, 2000, 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 21,504,845 shares of common stock outstanding as of June 29, 2000.
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 D zero coupon debentures and exercise of outstanding Series D 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 1,669,561 shares that we expect to
be issuable to the selling stockholder based on the current conversion and
exercise prices. We have registered, under a registration statement on Form S-3
of which this prospectus is a part, 417,390 more shares than are covered by this
prospectus for sale by the selling stockholder 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 C and D debentures and the Series D 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
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<PAGE> 25
and warrants. In that regard, beneficial 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
618,877 shares issuable upon conversion of Series C debentures, which have been
registered for sale by the selling stockholder under another prospectus, and
1,669,561 shares currently issuable upon conversion of Series D zero coupon
debentures and exercise of the Series D warrants.
<TABLE>
<CAPTION>
SHARES OWNED AFTER OFFERING
SHARES BENEFICIALLY OWNED SHARES BEING ---------------------------
SELLING STOCKHOLDER PRIOR TO OFFERING OFFERED NUMBER PERCENTAGE
-------------------------------- ------------------------- ------------ -------- ----------
<S> <C> <C> <C> <C>
RGC International Investors, LDC 2,288,438 1,669,561 618,877 2.9%
</TABLE>
22
<PAGE> 26
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):
o on the Nasdaq National Market or on such other market on which
the common stock may from time to time be trading;
o in privately-negotiated transactions;
o through the writing of options on the shares;
o short sales; or
o any combination thereof.
The sale price to the public may be:
o the market price prevailing at the time of sale;
o a price related to such prevailing market price;
o at negotiated prices; or
o 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
23
<PAGE> 27
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.
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.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon by Latham & Watkins, Menlo Park, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, 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.
24
<PAGE> 28
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.
SEC registration fee $16,700
Legal fees and expenses 17,000
Accounting fees and expenses 5,500
Miscellaneous expenses 2,000
-------
Total $41,200
=======
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.
EXHIBITS.
4.1 Securities Purchase Agreement dated as of June 29, 2000, by and
between Registrant and the Purchaser (incorporated herein by
reference to the Registrant's Current Report on Form 8-K dated
July 6, 2000)
4.2 Registration Rights Agreement dated as of June 29, 2000, by and
between Registrant and the Purchaser (incorporated herein by
reference to the Registrant's Current Report on Form 8-K dated
July 6, 2000)
II-1
<PAGE> 29
4.3 Series D Zero Coupon Convertible Debenture (incorporated herein
by reference to the Registrant's Current Report on Form 8-K,
dated July 6, 2000)
4.4 Warrant to purchase 834,836 shares of common stock issued by
Registrant to the Purchaser, dated as of June 29, 2000
(incorporated herein by reference to the Registrant's Current
Report on Form 8-K, dated July 6, 2000)
5.1 Opinion of Latham & Watkins
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Latham & Watkins (included in Exhibit 5.1)
24.1 Power of Attorney included on signature page
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 Securities and Exchange Commission
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> 30
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 July 6, 2000.
GERON CORPORATION
By: /s/ David L. Greenwood
-----------------------------
David L. Greenwood
Senior Vice President and
Chief Financial Officer
II-3
<PAGE> 31
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 July 6, 2000
---------------------------- Officer and Director
Thomas B. Okarma
/s/ David L. Greenwood Senior Vice President and July 6, 2000
---------------------------- Chief Financial Officer
David L. Greenwood (Principal Financial and
Accounting Officer)
/s/ Alexander E. Barkas Director July 6, 2000
----------------------------
Alexander E. Barkas
/s/ Ronald W. Eastman Director July 6, 2000
----------------------------
Ronald W. Eastman
Director
----------------------------
Edward V. Fritzky
/s/ Thomas D. Kiley Director July 6, 2000
----------------------------
Thomas D. Kiley
Director
----------------------------
Gary L. Neil
/s/ Robert B. Stein Director July 6, 2000
----------------------------
Robert B. Stein
/s/ John P. Walker Director July 6, 2000
----------------------------
John P. Walker
</TABLE>
II-4
<PAGE> 32
INDEX TO EXHIBITS
Exhibit Number Description
-------------- -----------
4.1 Securities Purchase Agreement dated as of June 29, 2000, by
and between Registrant and the Purchaser (incorporated herein
by reference to the Registrant's Current Report on Form 8-K
dated July 6, 2000)
4.2 Registration Rights Agreement dated as of June 29, 2000, by
and between Registrant and the Purchaser (incorporated herein
by reference to the Registrant's Current Report on Form 8-K
dated July 6, 2000)
4.3 Series D Zero Coupon Convertible Debenture (incorporated
herein by reference to the Registrant's Current Report on Form
8-K dated July 6, 2000)
4.4 Warrant to purchase 834,836 shares of common stock issued by
Registrant to the Purchaser, dated as of June 29, 2000
(incorporated herein by reference to the Registrant's Current
Report on Form 8-K dated July 6, 2000)
5.1 Opinion of Latham & Watkins
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Latham & Watkins (included in Exhibit 5.1)
24.1 Power of Attorney included on signature page
