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Filed Pursuant to
Rule 424(b)(4)
Registration Statement No.
033-70994
PROSPECTUS
TEXAS BIOTECHNOLOGY CORPORATION
4,792,500 SHARES
COMMON STOCK
This Prospectus relates to an Offering (the "Offering") of 4,792,500
shares (the "Shares") of common stock, par value $.005 per share (the "Common
Stock"), of Texas Biotechnology Corporation ("TBC" or "Company"). The Shares
are issuable to holders of outstanding warrants to purchase shares of the
Common Stock. 4,082,500 of the Shares are issuable upon exercise of
outstanding, publicly traded redeemable warrants (the "Warrants") issued as
part of a unit sold (the "Units") in conjunction with the Company's initial
public offering in 1993 (the "IPO"). The remaining Shares are issuable upon
exercise of 355,000 shares underlying options and 355,000 shares underlying
warrants issued as part of a unit issued to D. Blech & Company, Incorporated
(the "Underwriter") in conjunction with the IPO. The 4,082,500 Warrants are
currently exercisable at $8.44 per share and expire December 15, 1998. The
remaining 710,000 options and warrants (collectively, the "Underwriter's
Warrants") are currently exercisable at $11.14 per share, expire December 15,
1998 and are not redeemable. The Warrants are redeemable for $.05 per Warrant,
at the option of the Company, upon 30 days prior written notice at any time
after the last sale price of the Common Stock has been at least 140% of the
exercise price for 30 consecutive business days ending within 15 days of the
date of the notice of redemption. All of the Warrants must be redeemed if any
are redeemed.
The shares of Common Stock and Warrants are quoted on the AMEX under
the symbol "TXB" and "TXB.WS," respectively. On March 12, 1998, the last
reported sale prices of the Common Stock and Warrants were $7.125 per share and
$1.125 per Warrant.
SEE "RISK FACTORS" ON PAGES 3-10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================
Underwriting
Price to Discounts Proceeds to
Public(1) and Commissions Company (2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Warrant . . . . . . . . . . . . . . . . $ 8.44 -- $ 8.44
Per Underwriter's Warrant . . . . . . . . . $11.14 -- $11.14
- ---------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . $42,365,700 -- $42,365,700
=========================================================================================================
</TABLE>
(1) Subject to adjustment in certain circumstances as set forth in the
Warrant Agreement relating to the Warrants (the"Warrant Agreement") and
Underwriter's Unit Purchase Option.
(2) Before deducting estimated expenses payable by the Company of
approximately $26,000. The Company may engage broker-dealers to
solicit exercises of the Warrants. See "Plan of Distribution".
The date of this Prospectus is March 13, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. and at the Commission's regional
offices at the 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and Seven World Trade Center, Suite 1300, New York, 10048. Copies
of such material may also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Such materials also can be inspected at the offices of
the AMEX, 86 Trinity Place, New York, New York 10006, on which the Common Stock
is listed. In addition, the Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding registrants that file electronically with the
Commission.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company and
the Common Stock, reference is made to the Registration Statement and the
exhibits and schedules thereto. Statements made in this Prospectus regarding
the contents of any contract or document filed as an exhibit to the
Registration Statement are not necessarily complete and, in each instance,
reference is hereby made to the copy of such contract or document so filed.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference in this
Prospectus:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.
(2) A description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A effective December 15, 1993
(Commission File No. 1-12574), as amended by the Company's proxy
materials dated April 22, 1994 and April 4, 1996 relating to its 1994
and 1996 annual shareholders' meetings, respectively.
(3) The Company's Current Reports on Form 8-K dated April 2, 1997, August
5, 1997 and October 1, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and before
the termination of the offering covered hereby will be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing such documents. Any statement contained herein, or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein, modified or
superseded such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide, without charge and on oral or written
request, to each person to whom this Prospectus is delivered, a copy of any or
all of the documents incorporated by reference in this Prospectus other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates. In
addition, a copy of the Company's most recent annual report to stockholders
will be promptly furnished, without charge and on oral or written request, to
such persons. All such requests should be directed
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to Texas Biotechnology Corporation, 7000 Fannin, Suite 1920, Houston, Texas
77030, Attention: Stephen L. Mueller, vice president, finance and
administration, secretary and treasurer (telephone (713) 796-8822).
THE COMPANY
Texas Biotechnology Corporation ("TBC" or the "Company") is a
biopharmaceutical company engaged in discovering, developing and
commercializing synthetic small molecule drugs primarily for cardiovascular
indications. TBC's research philosophy is based upon combining its expertise
in vascular biology with its advanced computational chemistry capabilities to
identify and develop small molecule compounds. The Company's research and
development programs are currently focused on inhibitors (also referred to as
antagonists or blockers) of thrombosis, vasospasm/hypertension, vascular
inflammation, vascular proliferative disease, angiogenesis and apoptosis. The
Company has filed a new drug application ("NDA") with the United States
("U.S.") Food and Drug Administration (the "FDA") for its lead product
candidate, NOVASTAN(R) (argatroban) for use as an anticoagulant in patients
with heparin-induced thrombocytopenia ("HIT"). This NDA has been granted
priority review status by the FDA, and a decision on approval from the FDA is
anticipated by the end of the second quarter of 1998. The Company has begun
Phase II clinical trials for TBC 11251 (TBC's lead compound for
vasospasm/hypertension) in congestive heart failure ("CHF") and for TBC 1269
(TBC's lead compound for vascular inflammation) in allergic asthma. TBC has
licensed the U.S. and Canadian rights to NOVASTAN(R) from Mitsubishi Chemical
Corporation ("Mitsubishi"). The Company has entered into a collaboration with
SmithKline Beecham plc ("SmithKline") regarding the commercialization and
development of NOVASTAN(R) and has entered into collaborations with Synthelabo
S.A., the pharmaceutical division of L'Oreal S.A. ("Synthelabo"), and LG
Chemical, Ltd. ("LG Chemical") regarding other TBC compounds. The Company's
principal executive offices are located at 7000 Fannin Street, Suite 1920,
Houston, Texas 77030, and its telephone number is (713) 796-8822. References
to TBC or the Company include its subsidiary, IPI, unless otherwise indicated.
RISK FACTORS
In evaluating the Company and its business, prospective investors
should carefully consider all of the information set forth in this Prospectus
and the documents incorporated herein by reference and should give particular
attention to the following risk factors.
NO ASSURANCE OF REGULATORY APPROVAL; NEED FOR EXTENSIVE CLINICAL TRIALS
The production and marketing of the Company's products, as well as its
ongoing research and development activities, are subject to regulation by
governmental agencies in the United States ("U.S.") and other countries. Any
drug developed by the Company will be subject to rigorous preclinical and
clinical testing and approval pursuant to regulations administered by the FDA,
comparable agencies in other countries and, to a lesser extent, by state
regulatory authorities. This approval process is likely to take several years
and will involve significant expenditures.
For example, in August 1997, the Company filed with the FDA its NDA
regarding NOVASTAN(R) (a direct thrombin inhibitor that is being developed for
various indications as an anticoagulant alternative to heparin) for use in the
treatment of HIT. The NDA was subsequently granted priority review status. In
October 1997, the FDA accepted the filing, and commenced a further review that
was anticipated to take approximately 6 months regarding final approval of the
NDA. During January 1998, the FDA informed the Company that the review time
was being extended by 90 days and a decision on approval by the FDA's
anticipated by the end of the second quarter of 1998. The FDA's refusal to
approve the NDA on this schedule could significantly impair the Company's plans
to commence marketing of NOVASTAN(R) for use in the treatment of HIT.
The cost to the Company of conducting human clinical trials for any
potential product can vary dramatically based on a number of factors, including
the order and timing of clinical indications pursued and the extent of
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development and financial support, if any, from corporate partners. Because of
the intense competition in the cardiovascular market, the Company may have
difficulty obtaining sufficient patient populations or clinician support to
conduct its clinical trials as planned and may have to expend substantial
additional funds to obtain access to such resources, or delay or modify its
plans significantly. There is no assurance that the Company will have
sufficient resources to complete the required regulatory review process or that
the Company could survive the inability to obtain, or delays in obtaining, such
approvals. There can be no assurance that clinical testing of the Company's
products will provide evidence of safety and efficacy in humans, that
regulatory approvals will be granted for any of the Company's products or that
it will be economically feasible to commercialize any products for which
regulatory approvals are granted. Approvals that may be granted will be subject
to continual review, and later discovery of previously unknown problems may
result in restrictions on a product's future use or withdrawal of the product
from the market. Substantial changes in regulatory and reimbursement policy may
affect the Company's research and development expenditures and regulatory
approval of the Company's product candidates.
DEPENDENCE ON STRATEGIC RELATIONSHIPS
The Company will rely on strategic relationships with corporate
partners to provide the financing, marketing and technical support and, in
certain cases, the technology necessary to develop and commercialize certain of
its product candidates. TBC has entered into an agreement with Mitsubishi to
license Mitsubishi's rights and technology relating to NOVASTAN(R) (the
"Mitsubishi Agreement") in the U.S. and Canada for specified indications.
Either party may terminate the Mitsubishi Agreement on 60 days notice if the
other party defaults in its material obligations under the agreement, declares
bankruptcy or is insolvent, or if a substantial portion of its property is
subject to levy. Unless terminated sooner pursuant to the above described
termination provisions, the Mitsubishi Agreement expires on the later of
termination of patent rights in a particular country or 20 years after the
first commercial sale of products in a particular country. Under the Mitsubishi
Agreement, TBC has access to an improved formulation patent granted in 1993
which expires in 2010 and a use patent which expires in 2009.
In August 1997, the Company and SmithKline entered into a collaboration
regarding the commercialization and development of NOVASTAN(R) (the "SmithKline
Agreement"). Under the SmithKline Agreement the Company granted an exclusive
sublicense to SmithKline relating to the continued development and
commercialization of NOVASTAN(R). The SmithKline Agreement provides for the
payment of royalties and certain milestone payments upon the completion of
various regulatory filings and receipt of regulatory approvals. The SmithKline
Agreement generally terminates on a country by country basis upon the earlier
of the termination of TBC's rights under the Mitsubishi Agreement, the
expiration of applicable patent rights or, in the case of certain royalty
payments, the commencement of substantial third-party competition. SmithKline
also has the right to terminate the agreement on a country by country basis by
giving TBC at least three months written notice based on a reasonable
determination by SmithKline that the commercial profile of the indication in
question would not justify continued development or marketing in that country.
In addition, either party may terminate the SmithKline Agreement on 60 days
notice if the other party defaults in its obligations under the agreement,
declares bankruptcy or is insolvent.
In October 1994, the Company signed a collaborative agreement with
Synthelabo S.A., the pharmaceutical division of Synthelabo to develop and
market compounds for vascular proliferative disease derived from the Company's
research programs. Synthelabo has the right to terminate the agreement any time
on or after October 15, 1997 for any reason and either party has the right to
terminate the contract for breach of any material obligation. If Synthelabo
exercises this termination right, the license granted to Synthelabo will
terminate and TBC will pay Synthelabo a royalty on net sales of any products
sold in a certain territory (Europe, Middle East, Africa and countries of the
former Soviet Union) for a period of time. In addition, Synthelabo may, at its
option, require that the technology be transferred to and the development
program be conducted by a joint venture owned by TBC and Synthelabo should
TBC's "net worth", as defined in the agreement, be less than $5.0 million as of
the end of any calendar quarter during the term of the agreement.
In October 1996, the Company signed a strategic alliance agreement with
LG Chemical to develop and market compounds derived from the Company's
endothelin receptor and selectin antagonist programs for certain disease
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indications in certain territories. LG Chemical has committed to pay $10.7
million in research payments and has the right to terminate future research
payments if TBC fails to meet certain milestones to be established by the
parties in accordance with the agreement.
The Company's success will depend on these and any future strategic
alliances. There can be no assurance that the Company will satisfy the
conditions required to obtain additional milestone payments under the existing
agreements or to prevent these agreements from being terminated, some of which
conditions will not be within the control of the Company. There can be no
assurance that the Company will be able to enter into future strategic
alliances on acceptable terms. The termination of any existing strategic
alliances or the inability to establish additional collaborative arrangements
may limit the Company's ability to develop its technology and may have a
material adverse effect on the Company's business or financial condition.
DEVELOPMENT AND TECHNOLOGICAL UNCERTAINTY
The Company has not produced or marketed any material products and,
accordingly, has not begun to generate revenues from the commercialization of
its product candidates. To date, the Company's resources have been dedicated to
the research and development of small-molecule drugs for certain vascular and
other indications. The Company has developed lead compounds in its vasospasm/
hypertension, vascular inflammation and vascular proliferative disease
programs. The commercial applications of the Company's product candidates will
require further investment, research, development, preclinical and clinical
testing and regulatory approvals, both foreign and domestic. There can be no
assurance that the Company will be able to develop, produce at reasonable cost,
or market successfully, any of its product candidates. Further, these product
candidates may prove to have undesirable and unintended side effects and, in
some cases, may require complex delivery systems that may prevent or limit
their commercial use. All of the Company's products will require regulatory
approval before they may be commercialized. Products, if any, resulting from
the Company's research and development programs are not expected to be
commercially available for a number of years, and there can be no assurance
that any successfully developed products will generate substantial revenues or
that the Company will ever be profitable.
NEED FOR ADDITIONAL FUNDS; HISTORY OF OPERATING LOSSES
Because the Company has been unprofitable to date and expects to incur
losses for the next several years as the Company invests in product research
and development, preclinical and clinical testing and regulatory compliance,
the Company will require substantial additional funds to complete the research
and development of its product candidates, to establish commercial scale
manufacturing facilities and to market its products. The Company has
accumulated approximately $70.1 million in net losses through December 31,
1997. Estimates of the Company's future capital requirements will depend on
many factors, including: continued scientific progress in its drug discovery
programs; the magnitude of these programs; progress with preclinical testing
and clinical trials; the time and costs involved in obtaining regulatory
approvals; the costs involved in filing, prosecuting and enforcing patent
claims; competing technological and market developments; changes in its
existing research relationships; the ability of the Company to maintain and
establish additional collaborative arrangements; and effective
commercialization activities and arrangements. Subject to these factors, the
Company anticipates that its existing capital resources and its other revenue
sources, should be sufficient to fund its cash requirements through the end of
1999. Significant expenditures may be required if unanticipated clinical
trials are required to obtain regulatory approval for NOVASTAN(R) or the
Company's other product candidates. As a result, the Company may need
additional funds before any of its product candidates achieves regulatory
approval. Notwithstanding revenues which may be produced through sales of
potential future products if approved, the Company anticipates that additional
funds will need to be secured to continue the required levels of research and
development to reach its long term goals. The Company intends to seek such
additional funding through collaborative arrangements and/or through public or
private financings. There can be no assurance that additional financing will be
available, or, if available, that it will be available on acceptable terms. If
additional funds are raised by issuing securities, further dilution of the
equity ownership of existing stockholders will result. If adequate funds are
not available, the Company may be required to delay, scale back or eliminate
one or more of its drug discovery or development programs or obtain funds
through arrangements with collaborative partners or others that may require
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the Company to relinquish rights to certain of its technologies, product
candidates or products that the Company would not otherwise relinquish.
TECHNOLOGICAL CHANGE AND COMPETITION
The biopharmaceutical industry is undergoing rapid and significant
technological change and is highly competitive. The Company's success will
depend on its ability to develop and apply its technology and on its ability to
establish and maintain a market for its products. Potential competitors in the
U.S. and other countries include major pharmaceutical and chemical companies,
specialized biotechnology firms, universities and other research institutions,
many of which have substantially greater financial, technical, manufacturing
and marketing capabilities than the Company. Competitors may develop products
or other novel technologies that are more effective than any that have been or
are being developed by the Company or may obtain FDA approval for products more
rapidly than the Company. There can be no assurance that technological
development by others will not render the Company uncompetitive or that the
Company will be successful in establishing or maintaining its technological
competitiveness.
DEPENDENCE ON QUALIFIED PERSONNEL
The Company's success is highly dependent on its ability to attract and
retain qualified scientific and management personnel. The loss of the services
of the principal members of the Company's management and scientific staff may
impede the Company's ability to commercialize its products. In order to
commercialize its products, the Company must maintain and expand its personnel,
particularly in the areas of clinical trial management, manufacturing, sales
and marketing. The Company faces intense competition for such personnel from
other companies, academic institutions, government entities and other
organizations. There can be no assurance that the Company will be successful in
hiring or retaining qualified personnel. Managing the integration of new
personnel and company growth in general could pose significant risks to the
Company's development and progress.
The continued employment of David B. McWilliams, president and chief
executive officer and Richard A. F. Dixon, Ph.D., vice president of research is
key to the Company's success. Each of these employees has an employment
agreement with the Company. Mr. McWilliams' and Dr. Dixon's agreements are
effective through July 15, 1998 and provide for continuing one-year extensions.
The Company relies on consultants and advisors, including its
scientific advisors, to assist the Company in formulating its research and
development strategy. All of the Company's consultants and advisors are
employed by employers other than the Company and may have commitments to or
consulting or advisory contracts with other entities that may affect their
ability to contribute to the Company.
DEPENDENCE ON SUPPLIER
At present, Mitsubishi is the only manufacturer of NOVASTAN(R). In
connection with the SmithKline Agreement, Mitsubishi entered into a Supply
Agreement ("Mitsubishi Supply Agreement") with SmithKline, whereby Mitsubishi
will manufacture and supply NOVASTAN(R) in bulk in order to meet SmithKline's
and TBC's needs under the SmithKline Agreement. Should Mitsubishi fail during
any consecutive nine-month period to supply SmithKline at least 80% of its
requirements, and such requirements cannot be satisfied by existing
inventories, the Mitsubishi Supply Agreement provides for the nonexclusive
transfer of the production technology to SmithKline. However, in the event
Mitsubishi terminates manufacturing NOVASTAN(R) or defaults in its supply
commitment, there can be no assurance that SmithKline will be able to commence
manufacturing of NOVASTAN(R) in a timely manner or that alternate sources of
bulk NOVASTAN(R) will be available at reasonable cost, or at all. If SmithKline
cannot commence manufacturing of NOVASTAN(R) or alternate sources of supply are
unavailable or uneconomic, the Company's results of operations would be
materially and adversely affected.
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UNCERTAINTY REGARDING PATENTS AND PROPRIETARY INFORMATION
The Company actively seeks patent protection for its proprietary
technology, both in the U.S. and abroad. The Company's success will depend, in
part, on its ability to obtain patents and to operate without infringing on the
proprietary rights of others. There can be no assurance that patents issued to
or licensed by the Company will not be challenged, invalidated or circumvented,
or that the rights granted thereunder will provide competitive advantages to
the Company. There can be no assurance that the Company's pending patent
applications or patent applications in preparation presently or in the future,
if and when issued, will be valid and enforceable and withstand litigation.
There can be no assurance that others will not independently develop
substantially equivalent or superseding proprietary technology or that an
equivalent product will not be marketed in competition with the Company's
products, thereby substantially reducing the value of the Company's proprietary
rights. There is a substantial backlog of pharmaceutical and biotechnology
patent applications at the U.S. Patent and Trademark Office ("PTO"). Because
patent applications in the U.S. are maintained in secrecy until patents issue,
and because publication of discoveries in the scientific or patent literature
tends to lag behind actual discoveries by several months, there can be no
assurance that the Company will obtain patent protection for its inventions. In
addition, patent protection, even if obtained, is affected by the limited
period of time for which a patent is effective. Furthermore, patent positions
of pharmaceutical and biotechnology companies, as well as those of academic and
research institutions, are highly uncertain and involve complex legal and
factual questions. This is an uncertain and developing area of the law that is
potentially subject to significant change. Therefore, the scope or
enforceability of claims allowed in the patents on which the Company will rely
cannot be predicted with any certainty.
The Company also relies on trade secrets, know-how and continuing
technological advancement to maintain its competitive position. Although the
Company has entered into confidentiality agreements with its employees and
consultants, which contain assignment of invention provisions, no assurance can
be given that others will not gain access to these trade secrets, that such
agreements will be honored or that the Company will be able to effectively
protect its rights to its unpatented trade secrets. Moreover, no assurance can
be given that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the
Company's trade secrets.
In addition to protecting its proprietary technology and trade secrets,
the Company may be required to obtain licenses to patents or other proprietary
rights from third parties. No assurance can be given that any licenses required
under any patents or proprietary rights would be made available on acceptable
terms, if at all. If the Company does not obtain required licenses, it could
encounter delays in product introductions while it attempts to design around
blocking patents, or it could find that the development, manufacture or sale of
products requiring such licenses could be foreclosed.
The Company could incur substantial costs in defending any patent
infringement suits or in asserting any patent rights, including those granted
by third parties, in a suit with another party. The PTO could institute
interference proceedings involving the Company in connection with one or more
of the Company's patents or patent applications, and such proceedings could
result in an adverse decision as to priority of invention. TBC has one
interference proceeding pending which involves compounds not currently of
commercial interest to TBC. The PTO or a comparable agency of a foreign
jurisdiction could also institute re-examination or opposition proceedings
against the Company in connection with one or more of the Company's patents or
patent applications and such proceedings could result in an adverse decision as
to the validity or scope of the patents.
POSSIBLE VOLATILITY OF STOCK PRICE; TRADING MARKET FOR COMMON STOCK
The stock market has from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. In particular, the market price of the Company's
securities, like that of the securities of other biopharmaceutical companies,
may be highly volatile. Factors such as announcements by the Company or its
competitors concerning technological innovations, new commercial products or
procedures by the Company or its competitors, proposed governmental regulations
and developments in both the U.S. and foreign countries, disputes relating to
patents or proprietary rights, publicity regarding actual or potential medical
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results relating to products under development by the Company or its
competitors, public concern as to the safety of biotechnology products, and
economic and other external factors, as well as period-to-period fluctuations
and financial results, may have a significant effect on the market price of the
Company's securities.
From time to time, there has been limited trading volume with respect
to the Common Stock. In addition, there can be no assurance that there will
continue to be a trading market or that any analysts will continue to provide
research coverage with respect to the Common Stock. Accordingly, with respect
to the Common Stock being offered hereby, no assurances can be made that such
factors will not affect the market for the Common Stock.
NO MANUFACTURING, MARKETING OR SALES ACTIVITIES
The Company has no manufacturing, marketing or product sales
experience. If the Company develops any commercially marketable products, there
can be no assurance that contract manufacturing services will be available in
sufficient capacity to supply the Company's product needs on a timely basis. If
the Company decides to build or acquire commercial scale manufacturing
capabilities, the Company will require additional management and technical
personnel and additional capital. No assurance can be given that the raw
materials necessary for the manufacture of the Company's products will be
available in sufficient quantities or at a reasonable cost. Complications or
delays in obtaining raw materials or in product manufacturing could delay the
submission of products for regulatory approval and the initiation of new
development programs, each of which could materially impair the Company's
competitive position and potential profitability. There can be no assurance
that the Company will be able to enter into any other supply arrangements on
acceptable terms, if at all. If at some point in the future, the Company
decides to perform its own sales and marketing activities, the Company will
require additional management, will need to hire sales and marketing personnel
and will require additional capital. No assurance can be given that qualified
personnel will be available in adequate numbers or at a reasonable cost and
there can be no assurance that the Company's sales staff will achieve success
in its marketing efforts.
PRODUCT LIABILITY EXPOSURE
Product liability risk is inherent in the testing, manufacture,
marketing and sale of the Company's products, and there can be no assurance
that the Company will be able to avoid significant product liability exposure.
Product liability insurance for the pharmaceutical industry, when available, is
expensive. The Company has obtained $2.0 million of product liability insurance
to cover its clinical trial programs. Pursuant to the Mitsubishi Agreement and
the SmithKline Agreement, the Company is obligated to acquire additional
coverage as the Company develops products. Existing coverage will not be
adequate as the Company further develops products and there can be no assurance
that adequate insurance coverage will be available at a reasonable cost in the
future. A future product liability claim may have a material adverse effect on
the business or financial condition of the Company.
UNCERTAINTY OF PHARMACEUTICAL PRICING AND RELATED MATTERS; NEED FOR
REIMBURSEMENT
The future revenues and profitability of, and availability of capital
for biotechnology companies may be affected by the continuing efforts of
governmental and third-party payers to contain or reduce the costs of health
care through various means. For example, in certain foreign markets, the
pricing and profitability of prescription pharmaceuticals is subject to
government control. There have been, and there may continue to be, a number of
federal and state proposals to implement similar government control in the U.S.
It is uncertain what form any health care reform legislation may take or what
actions the federal, state and private payers may take in response to the
suggested reforms. The Company cannot predict when any reforms will be
implemented, if ever, or the effect of any implemented reform on the Company's
business. There can be no assurance that any implemented reform will not have a
material adverse effect on the Company's future results of operations. The
Company's long-term ability to market its products successfully may depend in
part on the extent to which reimbursement for the cost of such products and
related treatment will be available from public and private health insurers and
other organizations. Third-party payers are increasingly challenging the prices
of medical products and services. The reimbursement status of newly-approved
health care products is highly uncertain, and there can be no assurance that
third-party coverage will be available or that
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available third-party coverage will enable the Company to maintain price levels
sufficient to realize an appropriate return on its investment in product
development.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
As of December 31, 1997, substantially all of the Company's shares of
Common Stock were eligible for immediate sale in the public market. Moreover,
the resale of approximately 3.8 million shares are covered by currently
effective Form S-3 registration statements. As part of the Company's initial
public offering of securities in 1993 (the "Initial Public Offering"), warrants
covering approximately 4.1 million shares (with an exercise price of $8.44 per
share) were issued and remain outstanding and the shares issuable upon exercise
are registered for sale on this Registration Statement. In addition, as part of
the Initial Public Offering, the underwriters were issued 355,000 options to
purchase units (each unit consisting of one share of Common Stock and one
warrant to purchase Common Stock) at an exercise price of $11.14 per share (the
warrants are also exercisable at $11.14 per share). The sale of the Common
Stock underlying the units are also registered on this Registration Statement.
Furthermore, the resale of an aggregate of approximately 311,000 shares
issuable upon exercise of other warrants (with exercise prices from $3.50 to
$4.58 per share) are registered on currently effective Form S-3 registration
statements. Other warrants exercisable for approximately 500,000 shares (with
an exercise price of $3.66) are not currently registered for resale, but have
piggyback registration rights. SmithKline also has piggyback registration
rights on 176,992 shares issued pursuant to the SmithKline Agreement.
Approximately 2.9 million shares of Common Stock are issuable upon exercise of
outstanding employee stock options and will become eligible for sale in the
public markets at prescribed times in the future. The Company's issuances of
such 2.9 million shares are registered on Form S-8 registration statements. As
of December 31, 1997, such options were exercisable to purchase approximately
1.6 million shares of Common Stock. TBC has issued to Genentech, Inc.
("Genentech"), a former licensor of NOVASTAN(R), an additional 214,286 shares
of Common Stock, and has agreed to issue an additional 71,429 shares of Common
Stock within ten days after the FDA's first approval of an NDA for NOVASTAN(R).
The Company has also granted Genentech a warrant to purchase an additional
142,858 shares of Common Stock at an exercise price of $14.00 per share,
subject to adjustment. The Company has granted Genentech registration rights
for all 714,287 shares issued or issuable to Genentech. In total, as of
December 31, 1997 the Company has reserved approximately 8.7 million shares of
Common Stock for issuance pursuant to outstanding options, warrants, other
contingent agreements. Approximately 8.0 million of these shares of reserved
Common Stock are registered for sale or resale on currently effective
registration statements, and substantially all of the remaining shares of
reserved Common Stock are entitled to registration rights under the Securities
Act. The issuance of a significant number of shares of Common Stock upon the
exercise of stock options and warrants, or the sales of a substantial number of
shares of Common Stock pursuant to Rule 144 or otherwise, could adversely
affect the market price of the Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and the Delaware General
Corporation Law (the "DGCL") contain certain provisions that may delay or
prevent an attempt by a third-party to acquire control of the Company. In
addition, the severance provisions of employment agreements with certain
members of management could impede an attempted change of control of the
Company.
DILUTION AND ABSENCE OF DIVIDENDS
The last reported sale price of the Common Stock on March 12, 1998, on
the AMEX was $7.125. This price is higher than the net tangible book value per
share of the Common Stock. Assuming a price of $7.125, investors purchasing
shares of Common Stock as of December 31, 1997, will incur immediate and
substantial dilution in the amount of $4.825 per share. Future equity
financings may cause further dilution to investors. The Company has never paid
dividends on its Common Stock and will not pay dividends in the foreseeable
future.
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LEGAL PROCEEDINGS
The Company and certain of its officers and directors are parties to
certain litigation arising out of the Company's IPO. Given the early stage of
this case, the Company is unable to evaluate its potential outcome at this
time. The Company disputes these claims and intends to contest them vigorously.
There can be no assurance, however, that the final disposition of this case
will be favorable to the Company.
POSSIBLE REDEMPTION OF WARRANTS
The Warrants are subject to redemption at any time by the Company at
$.05 per warrant, on 30 days prior written notice if the closing sale price of
the Common Stock exceeds 140% of the current exercise price (presently $8.44)
for 30 consecutive business days ending within 15 days of the date of the
notice of redemption. If the Warrants are redeemed, warrantholders will lose
their right to exercise the Warrants except during such 30-day redemption
period. Redemption of the Warrants could force the holders to exercise the
Warrants at a time when it may be disadvantageous for the holders to do so or
to sell the Warrants at the then market price or accept the redemption price of
$.05 per warrant.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
All statements other than statements of historical fact included in and
incorporated by reference into this Prospectus are "forward looking
statements." Such forward looking statements include, without limitation,
statements under "Risk Factors -- Need for Additional Funds; History of
Operating Losses" regarding TBC's estimate of sufficiency of existing capital
resources and ability to raise additional capital to fund cash requirements for
future operations, and "Risk Factors - No Assurance of Regulatory Approval;
Need for Extensive Clinical Trials" regarding the uncertainties involved in the
drug development process and the timing of regulatory approvals required to
market these drugs. Although TBC believes that the expectations reflected in
such forward looking statements are reasonable, it can give no assurance that
such expectations reflected in such forward looking statements will prove to
have been correct. The ability to achieve TBC's expectations is contingent upon
a number of factors which include, without limitation, (i) ongoing cost of
research and development activities, (ii) cost of clinical development of
product candidates, (iii) attainment of research and clinical goals of product
candidates, (iv) timely approval of TBC's product candidates by appropriate
governmental and regulatory agencies, (v) effect of any current or future
competitive products, (vi) ability to manufacture and market products
commercially, (vii) retention of key personnel and (viii) capital market
conditions.
USE OF PROCEEDS
Assuming all of the Warrants and the Underwriter's Warrants are
exercised, the net proceeds to the Company from this Offering are estimated to
be approximately $42.3 million after deduction of estimated offering expenses.
The Company anticipates that approximately $33.0 million of the net proceeds
will be used for the clinical development of product candidates, including
NOVASTAN(R), and for the continued research and development of
biopharmaceuticals for the treatment of cardiovascular and other diseases. The
remaining net proceeds are expected to be used to fund general and
administrative expenditures and capital expenditures for laboratory and office
expansion, laboratory equipment and scientific instrumentation.
The preceding represents estimates only, and actual allocation of the
net proceeds for such purposes and timing of the expenditures will be dependent
on various factors, including the progress of the Company's research and
development programs, the results of preclinical and clinical trials, the
timing of regulatory approvals, competitive developments, payments, if any,
under any collaborative arrangements entered into by the Company and the
availability of additional financing. Such expenditures are likely to be
substantial and to exceed the net proceeds of this Offering. The Company may
also use a portion of the net proceeds to acquire, by license, purchase or
other arrangement, businesses, technologies, or products that complement the
Company's business, although the Company does not have
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any agreement or understanding, nor is it presently engaged in any discussions
or negotiations, with respect to any acquisition, and there can be no assurance
that any acquisition will be made. The Company's board of directors has broad
discretion in determining how the proceeds of this Offering will be applied.
Pending ultimate application, the net proceeds from this Offering will
be invested with other funds of the Company in cash equivalents and short-term
investments, including U.S. government securities and high-grade corporate
investments, commercial paper and bankers acceptances, at the discretion of the
Company.
PLAN OF DISTRIBUTION
The Shares issuable upon exercise of the Warrants and the Underwriter's
Warrants may be distributed if, as and when such Warrants and the Underwriter's
Warrants are exercised by the holders thereof. The Company may solicit the
exercise of the Warrants and the Underwriter's Warrants at any time by reducing
the exercise price of the Warrants. The Company also has the right to redeem
the Warrants, but not the Underwriter's Warrants, on the terms described in
this Prospectus. As of the date of this Prospectus, the Company does not have
the right to call the Warrants because the Common Stock has not traded at or
above the required price.
The Company may engage one or more broker-dealers to solicit the
exercise of Warrants in compliance with the provisions of Regulation M
promulgated under the Exchange Act. The Company may pay any such broker-dealer
a fee based on the exercise price of Warrants solicited for exercise which are
exercised. Pursuant to the terms of the Warrant Agreement, the Company has no
obligation to pay the Underwriter any compensation related to the exercise of
the Warrants.
LEGAL MATTERS
The legality of the securities offered hereby will be passed on for the
Company by Porter & Hedges, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the years in the three-year period ended December
31, 1997 have been incorporated by reference herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The statements in this Prospectus under the caption "Risk Factors --
Uncertainty Regarding Patents and Proprietary Information" and other
references herein to intellectual property matters have been reviewed and
approved by Rockey, Milnamow and Katz, Ltd., Chicago, Illinois, patent counsel
for the Company, as experts on such matters, and are included herein in
reliance upon that review and approval.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES IN WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 10
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . 11
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
____________________
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TEXAS BIOTECHNOLOGY CORPORATION
4,792,500 Shares
of
Common Stock
_____________________
P R O S P E C T U S
_____________________
March 13, 1998
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