As filed with the Securities and Exchange Commission on May 21, 1998
Registration Statement No. 333-47825
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 3
TO
FORM S-3
----------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
DIACRIN, INC.
(Exact name of registrant as specified in its charter)
----------------------
DELAWARE 22-3016912
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Building 96 13th Street
Charlestown Navy Yard
Charlestown, MA 02129
(617) 242-9100
(Address, including zip code, and
telephone number, including area code,
of registrant's principal
executive offices)
----------------------
Thomas H. Fraser
President and Chief Executive Officer
Diacrin, Inc.
Building 96 13th Street
Charlestown Navy Yard
Charlestown, MA 02129
(617) 242-9100
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
with a copy to:
Steven D. Singer, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
<PAGE>
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
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. _ 333-_______.
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. _ 333-__________.
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. _
The Company hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Company 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 Commission, acting pursuant to said Section 8(a),
shall determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 21, 1998
PROSPECTUS
DIACRIN, INC.
1,027,027 SHARES OF COMMON STOCK
---------------------
This Prospectus relates to 1,027,027 shares (the "Shares") of Common
Stock, par value $.01 per share (the "Common Stock"), of Diacrin, Inc.
("Diacrin" or the "Company"). The shares were acquired by the persons named
herein (the "Selling Stockholders") pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) thereof. The Shares are being
registered by the Company pursuant to the terms of a Common Stock Purchase
Agreement dated February 26, 1998, between the Company and each of the Selling
Stockholders (the "Purchase Agreement"). See "Selling Stockholders."
The Shares may be offered by the Selling Stockholders from time to time
in transactions on the Nasdaq National Market ("Nasdaq"), in privately
negotiated transactions, through the writing of options on the Shares or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling Stockholders may
effect such transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders or the purchasers of
the Shares for whom such broker-dealers may act as agent or to whom they sell as
principal or both (which compensation to a particular broker-dealer might be in
excess of customary commissions). See "Selling Stockholders" and "Plan of
Distribution."
This Prospectus may be used by the Selling Stockholders or by any
broker-dealer who may participate in sales of the Shares. The Selling
Stockholders will pay all commissions, transfer taxes and other expenses
associated with the sale of the Shares by them.
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Shares being
offered by the Selling Stockholders. The Company and the Selling Stockholders
have agreed to indemnify each other against certain liabilities, including
certain liabilities under the Securities Act.
The Company's Common Stock is traded on Nasdaq under the symbol "DCRN." On
May 20, 1998, the closing sale price of the Common Stock on Nasdaq was $8.50
per share.
- 1 -
<PAGE>
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is May __, 1998.
- 2 -
<PAGE>
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 may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the Commission's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048, and
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials also may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of the Nasdaq
Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006. The Company is
required to file electronic versions of certain documents through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
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 (together with all amendments, supplements, exhibits and schedules
thereto, the "Registration Statement") under the Securities Act with respect to
the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, as certain items are
omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the Shares, reference is made
to such Registration Statement. Statements contained in this Prospectus
regarding the contents of any agreement or other document are not necessarily
complete, and in each instance reference is made to the copy of such agreement
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement may be inspected without charge at the office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part
thereof may be obtained from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998, filed with the Commission on May 15,
1998.
(2) The Company's Annual Report on Form 10-K for the year ended
December 31, 1997 filed with the Commission on February 17,
1998, as amended by a Form 10-K/A filed April 22, 1998 and a
Form 10-K/A filed May 8, 1998.
(3) The Company's Current Report on Form 8-K dated February 26,
1998, filed with the Commission on March 6, 1998.
(4) The description of the Common Stock of the Registrant, $0.01
par value per share (the "Common Stock"), contained in the
Registrant's Registration Statement on Form 10 filed with the
Commission on April 29, 1992 as amended on July 20, 1992.
- 3 -
<PAGE>
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
initial filing of the Registration Statement of which this Prospectus is a part
and prior to the termination of the offering of the Shares registered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing such documents. Any statement contained 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 other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated by reference into this
Prospectus (without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). All such requests shall be
directed to: Diacrin, Inc., Building 96, 13th Street, Charlestown Navy Yard,
Charlestown, MA 02129, Attention: Vice President of Finance and Administration,
Telephone: (617) 242-9100.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This Prospectus contains forward-looking statements, including
information with respect to planned timetables for the completion of ongoing
clinical trials and commencement of new clinical trials, the planned timetables
and duration of any planned future clinical or preclinical trials, development
funding expected to be received in connection with the Diacrin/Genzyme joint
venture and the expected sources of porcine cells used in the Company's
products. For this purpose, any statements contained herein (or incorporated
herein by reference) that are not statements of historical fact may be deemed to
be forward-looking statements. Without limiting the foregoing, the words
"believes", "anticipates", "plans", "expects" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause actual events or the Company's actual results to differ
materially from those indicated by such forward-looking statements. These
factors include, without limitation, those set forth below under the caption
"Risk Factors".
THE COMPANY
Diacrin is developing transplantable cells for the treatment of human
diseases which are characterized by cell dysfunction or cell death and for which
current therapies are either inadequate or nonexistent. Products under
development for the treatment of neurological disorders include:
NeuroCell(TM)-PD for Parkinson's disease and NeuroCell(TM)-HD for Huntington's
disease, both of which are being developed in a joint venture with Genzyme
Corporation ("Genzyme"), NeuroCell(TM)-FE for focal epilepsy, porcine neural
cells for stroke and intractable pain and spinal cord cells for spinal cord
injury. Also under development are hepatocytes for alcoholic hepatitis and
cirrhosis, myoblasts for cardiac disease and retinal epithelial cells for
macular degeneration.
In March 1995, the United States Food and Drug Administration ("FDA")
cleared the Company to conduct the first ever clinical trial of transplanted
porcine cells in humans and in April 1995 the Company initiated a Phase 1
clinical trial to evaluate NeuroCell (TM)-PD for the treatment of Parkinson's
disease. Enrollment in this 12-patient Phase 1 clinical trial was completed in
October 1996 and patient recruitment in a 36-patient pivotal Phase 2 clinical
trial of NeuroCell (TM)-PD was
- 4 -
<PAGE>
recently initiated. In May 1996, the Company
initiated a Phase 1 clinical trial to evaluate NeuroCell(TM)-HD for the
treatment of Huntington's disease. In March 1997, enrollment of all 12 patients
in the trial was completed. In January 1998, the Company initiated a Phase 1
clinical trial to evaluate NeuroCell (TM)-FE for the treatment of complex
partial epileptic seizures in patients whose disease is not well-controlled with
drug therapy.
While the feasibility of cell transplantation has been demonstrated
clinically, widespread use of cell transplantation in clinical applications has
been hampered by the lack of an adequate supply of human donor cells. To
overcome this constraint, Diacrin has pioneered the use of porcine cells for
clinical transplantation. The Company believes that pigs will be a reliable
source of a wide range of cell types suitable for transplantation into humans.
The Company has shown in preclinical studies and early clinical trials that,
under standard immunosuppressive regimens, transplanted porcine cells appear
capable of addressing the functional deficits caused by cell damage or cell
death.
In addition, Diacrin is developing a proprietary immunomodulation
technology which is exclusively licensed to the Company from the Massachusetts
General Hospital ("MGH"). This technology involves the selective treatment of
major histocompatibility complex ("MHC") class I antigens on cell populations
prior to transplantation to prevent the patient's immune system from rejecting
the transplanted cells. The Company's approach would obviate the need for
standard immunosuppressive regimens, which may leave the patient vulnerable to a
wide range of undesirable side effects, including susceptibility to infectious
agents and cancer. Preclinical studies in animal models, including primates,
have demonstrated the ability of the Company's immunomodulation technology to
prevent rejection of transplanted porcine cells without compromising the ability
of the immune system to protect the recipient in its normal fashion. Neurons,
hepatocytes and cardiac myocytes treated with Diacrin's proprietary
immunomodulation technology have been successfully transplanted into animals
without immunosuppression. This technology is presently being evaluated in
Parkinson's disease, Huntington's disease and focal epilepsy patients as part of
Phase 1 clinical trials of NeuroCell (TM)-PD, NeuroCell(TM)-HD and
NeuroCell(TM)-FE, respectively. Phase 1 clinical trial results suggest that
NeuroCell(TM)-PD treated with the Company's immunomodulation technology may be
effective without the use of standard immunosuppression.
The FDA has granted orphan drug designation for NeuroCell (TM)-PD for
advanced Parkinson's disease and NeuroCell(TM)-HD for Huntington's disease. Each
received a designation for use of the product with Diacrin's immunomodulation
technology to prevent rejection and a designation for use without this
technology. Under current law, the first developer to receive FDA marketing
approval for a designated orphan drug is generally entitled to a seven-year
exclusive marketing period in the United States.
In September 1996, the Company and Genzyme formed Diacrin/Genzyme LLC
(the "Joint Venture"), a joint venture to develop and commercialize
NeuroCell(TM)-PD and NeuroCell(TM)-HD (the "Joint Venture Products"). Under the
terms, and subject to certain conditions, of the joint venture agreement, which
was effective October 1, 1996, Genzyme has agreed to provide 100% of the first
$10 million in funding and 75% of the following $40 million in funding for the
development and commercialization of the Joint Venture Products. The Company
agreed to provide the remaining 25% of the following $40 million in funding. All
costs incurred in excess of $50 million are to be shared equally between Genzyme
and the Company in accordance with the terms of the agreement. Any profits of
the Joint Venture are to be shared equally by the two parties. The Joint Venture
plans that Diacrin and Genzyme will perform, on behalf of the Joint Venture, the
- 5 -
<PAGE>
development activities in connection with the Joint Venture Products and that
Genzyme will market and sell the Joint Venture Products on a cost reimbursement
basis on behalf of the Joint Venture.
In addition to NeuroCell(TM)-PD, NeuroCell(TM)-HD and NeuroCell(TM)-FE,
Diacrin has seven other products in various stages of preclinical development:
(i) porcine hepatocytes for alcoholic hepatitis; (ii) human hepatocytes for
cirrhosis; (iii) human myoblasts for cardiac disease; (iv) neural cells for
stroke; (v) neural cells for intractable pain; (vi) spinal cord cells for spinal
cord injury and (vii) retinal epithelial cells for macular degeneration.
The Company was incorporated under the laws of the State of Delaware in
1989 and commenced operations in 1990. The Company's principal executive offices
are located at Charlestown Navy Yard, Building 96, Charlestown, Massachusetts
02129 and its telephone number if (617) 242-9100.
RECENT DEVELOPMENTS
On April 21, 1998, the Company announced financial results for the quarter
ended March 31, 1998. The selected financial data set forth below as of March
31, 1998 and for the three months ended March 31, 1997 and 1998 is unaudited.
<TABLE>
<CAPTION>
DIACRIN, INC.
SELECTED FINANCIAL DATA
Three Months Ended March 31,
Statement of Operations Data: 1998 1997
<S> <C> <C>
REVENUES:
Research and development $ 1,142,746 $ 1,191,326
Interest income 351,185 331,396
---------------- -----------------
Total revenues 1,493,931 1,522,722
---------------- -----------------
OPERATING EXPENSES:
Research and development 1,839,443 1,611,269
General and administrative 402,177 411,480
Interest expense 26,438 18,846
---------------- -----------------
Total operating expenses 2,268,058 2,041,595
---------------- -----------------
EQUITY IN OPERATIONS OF JOINT VENTURE 54,989 -
---------------- -----------------
NET LOSS $ (829,116) $ (518,873)
================ =================
NET LOSS PER COMMON SHARE $ (.06) $ (.04)
================ =================
SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE 13,657,209 13,192,471
================ =================
Balance Sheet Data: March 31, 1998 December 31, 1997
-------------- -----------------
Cash, cash equivalents and investments $ 29,977,718 $ 21,347,164
Total assets 31,284,712 22,779,793
Long-term debt 581,805 672,426
Stockholders' equity 28,821,694 20,203,668
</TABLE>
RISK FACTORS
The Shares offered hereby involve a high degree of risk. The following
risk factors should be considered carefully in addition to the other information
included or incorporated by reference in this Prospectus before purchasing the
Shares offered hereby.
Reliance on Joint Venture with Genzyme Corporation
- --------------------------------------------------
The Company and Genzyme are parties to a joint venture agreement
relating to the development and commercialization of NeuroCell (TM)-PD and
NeuroCell(TM)-HD, the Company's most advanced product candidates. Under the
agreement, Genzyme has agreed to provide the first $10 million of product
development and commercialization funding required after October 1, 1996 for the
Joint Venture Products, 75% of the next $40 million of funding and 50% of
funding thereafter. In addition, Genzyme has agreed to market and sell the Joint
Venture Products on behalf of the Joint Venture. Furthermore, the Joint Venture
plans to manufacture the Joint Venture Products in facilities controlled by
Genzyme.
Genzyme has the right, at any time after it has contributed $10 million
of funding, to terminate the joint venture agreement, without cause, upon 180
days notice to Diacrin. In the event of such termination, the Company (i) would
lose a significant source of funding for the NeuroCell(TM)-PD and the
NeuroCell(TM)-HD product development programs, (ii) would lose access to
Genzyme's experienced sales, marketing, development and manufacturing
organizations, and (iii) would need to establish clinical production facilities
for the production of the Joint Venture Products. There can be no assurance that
the Company would be able to complete development or commercialization of
NeuroCell (TM)-PD and NeuroCell(TM)-HD if Genzyme terminated the joint venture
agreement.
In addition, under certain circumstances, Genzyme has the right to
terminate the joint venture agreement following an unremedied breach by Diacrin
of any material term of the agreement. In the event of such termination, Genzyme
has the option to obtain an exclusive, worldwide, royalty-bearing license to
certain Diacrin technology required to manufacture and market the Joint Venture
Products. If Genzyme exercised its option, the Company would be entitled to
receive a royalty on the net sales of the Joint Venture Products, which royalty
may be significantly less than amounts the Company would be entitled to receive
under the 50%/50% profit split agreed to as part of the joint venture agreement.
- 6 -
<PAGE>
Any termination of the joint venture agreement, whether by Genzyme or
Diacrin, could have a material adverse effect on the Company's business, results
of operations or financial position. In addition, there can be no assurance that
the economic and other interests of the Company and Genzyme will coincide during
the term of the joint venture agreement or that disagreements will not occur
between the Company and Genzyme during the term of the agreement, either of
which could have a material adverse effect on the Company's business, results of
operations or financial position. See "- - Dependence on Others."
Reliance on Cell Transplantation Technology; No Currently Approved
- ------------------------------------------------------------------
Xenotransplantation-Based Products; PERV Testing
- ------------------------------------------------
Diacrin has concentrated its efforts and therapeutic product research
on its cell transplantation technology and will be dependent on the successful
development of the technology. Cell transplantation technology is an emerging
technology with, as yet, limited clinical applications. There can be no
assurance that the Company's cell transplantation technology will result in the
development of any therapeutic products. If it does not, the Company may be
required to change dramatically the scope and direction of its product
development activities.
The Company's approach involves xenotransplantation -- the
transplantation of cells from one species into another. Although several
companies are focusing on this area, xenotransplantation-based products
represent a novel therapeutic approach that has not yet been subject to
extensive clinical testing. Xenotransplantation also poses a risk that viruses
or other animal pathogens may be unintentionally transmitted to a human patient.
The Company is aware of recent scientific publications by others which
demonstrate, under laboratory conditions, that porcine endogenous retroviruses
("PERV") have the potential to infect human cells. In response to these
findings, the Company has been required by the FDA to perform certain tests to
determine whether PERV is present in patients that have received porcine cells.
These tests have been performed on samples from patients who have received
NeuroCell (TM)-PD and no PERV was detected in these samples. Given the
satisfactory results of those tests, the FDA cleared the Company to proceed with
its planned clinical trials in NeuroCell(TM)-PD and NeuroCell(TM)-FE in December
1997. The Company has also been required by the FDA to perform additional tests
on porcine neural cells to determine if infectious PERV is present. These tests
have been performed and no PERV was detected. The Company has been required by
the FDA to develop an additional test for the detection of PERV and has been
instructed to routinely monitor patient blood samples for the presence of PERV.
If PERV is detected in this test or samples, additional tests may be required to
assess the risk to patients of PERV infection. If such additional tests are
required, trials of the Company's porcine cell products may be delayed. While
PERV has not been shown to cause any disease in pigs, it is not known what
effect, if any, PERV may have on human beings. The Company's porcine cell
product development programs would be negatively impacted by the detection of
infectious PERV in porcine cells or clinical trial subjects. An inability to
proceed with further trials or a substantial delay in the clinical trials would
have a material adverse effect on the Company.
No xenotransplantation-based therapeutic product has been approved for
sale by the FDA. The FDA has not yet established definitive regulatory
guidelines for xenotransplantation, but has proposed guidelines in an attempt to
reduce the risk of contamination of transplanted cellular products with
infectious agents. Diacrin has provided the FDA with a written response to the
proposed guidelines, however, there can be no assurance that such guidelines
will be issued, or that Diacrin will be able to comply with final guidelines
that may be issued. Furthermore, there can be no assurance that any products
developed and tested by Diacrin will be approved by the FDA or
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<PAGE>
regulatory
authorities in other countries, or that xenotransplantation-based products,
including the Company's product candidates, will be accepted by the medical
community or third-party payers or that the degree of acceptance will not limit
the size of the market for such products.
History of Operating Losses; No Assurance of Revenue or Operating Profit
- ------------------------------------------------------------------------
The Company has generated no revenue from product sales to date.
Diacrin has accumulated net losses from its inception in 1989 through December
31, 1997 of approximately $34.7 million, and losses are continuing. The Company
expects to incur substantial operating losses for the foreseeable future. The
Company expects that the Joint Venture's 1998 product development plans together
with the Company's commencement of funding of the Joint Venture will
significantly increase the Company's net loss in 1998 as compared with 1997. The
Company currently has no material sources of revenue from product sales or
license fees, and there can be no assurance that it will be able to develop such
revenue sources or that its operations will become profitable, even if it is
able to commercialize any products.
Lack of Commercial Products; No Assurance of Successful Product Development
- ---------------------------------------------------------------------------
The Company has no products available for sale and does not expect to
have any therapeutic products commercially available for at least the next
several years, if at all. The Company's potential products will require
significant additional development, preclinical and clinical testing, regulatory
approval and additional investment prior to commercialization. The Company's
potential therapeutic products are at early stages of research and development
and the Company's growth will depend on the successful development and
commercialization of its products. There can be no assurance that any such
potential products will be successfully developed, prove to be safe and
efficacious in clinical trials, meet applicable regulatory standards, be capable
of being produced in commercial quantities at acceptable costs or be
successfully marketed.
Need for Substantial Additional Funds
- -------------------------------------
The Company will require substantial additional funding for its
research and product development programs and operating expenses, and for
pursuing regulatory clearances and building production capabilities. Adequate
funds for these purposes, whether obtained through equity or debt financings,
collaborative or other arrangements with corporate partners or from other
sources, may not be available when needed or on terms acceptable to the Company.
Insufficient funds may require the Company to delay, scale back or eliminate
certain of its product development programs or to license others to
commercialize products or technologies that the Company would otherwise seek to
develop and commercialize itself, any of which would have a material adverse
effect on the Company.
Uncertainty Associated with Preclinical and Clinical Testing
- ------------------------------------------------------------
Before obtaining regulatory approvals for the commercial sale of any of
the Company's potential products, the products will be subjected to extensive
preclinical and clinical testing to demonstrate their safety and efficacy in
humans. To date, the Company has administered NeuroCell (TM)-PD,
NeuroCell(TM)-HD and NeuroCell (TM)-FE to an aggregate of 25 patients in Phase 1
human clinical trials. Results of initial preclinical and clinical testing of
products under development by the Company are not necessarily predictive of
results that will be obtained from subsequent or more extensive preclinical and
clinical testing. Furthermore, there can be no assurance that clinical trials of
products under development will demonstrate the safety and efficacy
- 8 -
<PAGE>
of such
products at all or to the extent necessary to obtain regulatory approvals.
Companies in the biotechnology industry have suffered significant setbacks in
advanced clinical trials, even after promising results in earlier trials. The
failure to adequately demonstrate the safety and efficacy of a therapeutic
product under development could delay or prevent regulatory approval of the
product and would have a material adverse effect on the Company.
The rate of completion of clinical trials is dependent upon, among
other factors, the enrollment of patients. Patient accrual is a function of many
factors, including the size of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the study and the existence of
competitive clinical trials. Delays in planned patient enrollment in the
Company's current clinical trial or future clinical trials may result in
increased costs, program delays or both, which could have a material adverse
effect on the Company.
No Assurance of FDA Approval; Government Regulation
- ---------------------------------------------------
The FDA and comparable government agencies in foreign countries impose
substantial regulations on the manufacture and marketing of pharmaceutical
products through lengthy and detailed laboratory and clinical testing
procedures, sampling activities and other costly and time-consuming procedures.
Satisfaction of these regulations typically takes several years or more and
varies substantially based upon the type, complexity and novelty of the proposed
product. The Company cannot yet accurately predict when it might first submit
any Product License Application ("PLA") or Biologics License Application ("BLA")
for FDA or other regulatory approval.
The effect of government regulation may be to delay marketing of new
products for a considerable or indefinite period of time, to impose costly
procedures upon the Company's activities or to diminish or eliminate any
competitive advantage the Company may enjoy. There can be no assurance that FDA
or other regulatory approval for any products developed by the Company will be
granted on a timely basis, if at all. Any such delay in obtaining, or failure to
obtain, such approvals could adversely affect the marketing of the Company's
products and the ability to generate product revenue. The extent of potentially
adverse government regulation which might arise from future legislation or
administrative action cannot be predicted.
If regulatory approval of a product is obtained, such approval may be
conditioned upon limitations and restrictions on the product use. In addition,
any marketed product and its manufacturer are subject to continuing governmental
review and any subsequent discovery of previously unrecognized problems could
result in restrictions on the product or manufacturer, including, without
limitation, withdrawal of the product from the market. Failure of the Company to
comply with applicable regulatory requirements can, among other things, result
in fines, suspension of regulatory approvals, product recalls, seizure of
products, operating restrictions or civil or criminal prosecution.
Additionally, the Company is or may become subject to various federal,
state and local laws, regulations and recommendations relating to safe working
conditions, laboratory and manufacturing practices, the experimental use of
animals and the use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious disease agents, used
in connection with the Company's research and development work. The Company is
unable to predict the extent of restrictions that might arise from any
governmental or administrative action. There can also be no assurance that the
Company will not be required to incur significant costs to comply with
environmental laws and regulations, or any assurance that the operations,
business or assets of
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<PAGE>
the Company will not be materially adversely affected by
current or future environmental laws or regulations.
Rapid Technological Changes; Competition
- ----------------------------------------
The Company is engaged in activities in the biopharmaceutical field,
which is characterized by extensive research efforts and rapid technological
progress. There can be no assurance that research and discoveries by other
biotechnology or pharmaceutical companies will not render the Company's programs
or products uneconomical, result in therapies superior to any therapy developed
by the Company or that any products developed by the Company will be preferred
to any existing or newly-developed technologies.
The biotechnology and pharmaceutical industries are characterized by
intense competition. The Company competes against numerous companies, many of
which have substantially greater financial and other resources than the Company.
Several such enterprises have initiated cell transplantation research programs
and/or efforts to treat the same diseases targeted by the Company through
alternate technologies. These competitive enterprises have devoted, and will
continue to devote, substantial resources to the development of cell
transplantation or other products to treat such diseases. Private and public
academic and research institutions also compete with Diacrin in the research and
development of human therapeutic products.
In addition, many of the Company's competitors have significantly
greater experience than the Company in preclinical testing and human clinical
trials of biotechnology and pharmaceutical products and in obtaining FDA and
other regulatory approvals of products. Accordingly, the Company's competitors
may succeed in obtaining FDA approval for products more rapidly or effectively
than the Company. If the Company commences significant commercial sales of its
products, it will also be competing with respect to manufacturing efficiency and
sales and marketing capabilities, areas in which it has no experience.
Limited Regulatory, Manufacturing, Marketing and Sales Capabilities
- -------------------------------------------------------------------
The Company has not yet invested significantly in regulatory,
manufacturing, marketing, distribution or product sales resources. To date, the
Company has relied on others for the supply and production of pigs for its
clinical programs. Although the Company intends to develop regulatory,
manufacturing, marketing, distribution and sales resources in the future, there
can be no assurance that the Company will be able to develop such resources
successfully.
Uncertain Ability to Protect Proprietary Technology; Reliance Upon Licenses
- ---------------------------------------------------------------------------
The biotechnology and pharmaceutical industries place considerable
importance on obtaining patent and trade secret protection for new technologies,
products and processes. The Company's success will depend, in part, on its
ability to obtain patent protection for its products, preserve its trade secrets
and operate without infringing the proprietary rights of others. The Company has
ongoing research efforts and expects to seek additional patents covering this
research in the future. There can be no assurance of its success or timeliness
in obtaining any patents, or of the breadth or degree of protection that any
such patents will afford the Company.
The patent position of biotechnology products is often highly uncertain
and usually involves complex legal and factual questions. There can be no
assurance that patent applications relating to the Company's potential products
or technology will result in additional patents being issued or
- 10 -
<PAGE>
that, if issued,
such patents will afford adequate protection to the Company or not be
challenged, invalidated or infringed. Furthermore, there can be no assurance
that others will not independently develop similar products and processes,
duplicate any of the Company's products or, if patents are issued to the
Company, design around such patents. In addition, the Company could incur
substantial costs in defending itself in suits brought against it or in suits in
which it may assert its patents against others. If the outcome of any such
litigation is unfavorable, the Company's business could be adversely affected.
To determine the priority of inventions, the Company may also have to
participate in interference proceedings declared by the United States Patent and
Trademark Office, which could result in substantial cost to the Company.
Much of the Company's know-how and technology is not patentable. To
protect its rights, the Company requires all employees, consultants, advisors
and collaborators to enter into confidentiality agreements with Diacrin. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets, know-how or other proprietary
information in the event of any unauthorized use or disclosure. Further, in the
absence of patent protection, the Company's business may be adversely affected
by competitors who independently develop substantially equivalent technology.
Uncertain Availability of Third-Party Reimbursement and Product Pricing
- -----------------------------------------------------------------------
The Company's ability to commercialize products successfully will depend
substantially on reimbursement of the costs of such products and related
treatments at acceptable levels from government authorities, private health
insurers and other organizations, such as health maintenance organizations
("HMOs"). There can be no assurance that reimbursement in the United States or
foreign countries will be available for any products the Company may develop or,
if available, will not be decreased in the future, or that reimbursement amounts
will not reduce the demand for, or the price of, the Company's products, thereby
adversely affecting the Company's business.
Third-party payers are increasingly challenging the prices charged for
medical products and services. Also, the trend toward managed health care in the
United States and the concurrent growth of organizations, such as HMOs, which
can control or significantly influence the purchase of health care services and
products, as well as legislative proposals to reform health care or reduce
government insurance programs, may result in lower prices for therapeutic
products. The cost containment measures that health care providers are
instituting, including practice protocols and guidelines and clinical pathways,
and the effect of any health care reform, could materially adversely affect the
Company's ability to sell its products if successfully developed and approved.
Moreover, the Company is unable to predict what additional legislation or
regulation, if any, relating to the health care industry or third-party coverage
and reimbursement may be enacted in the future or what effect such legislation
or regulation would have on the Company's business.
Dependence on Key Personnel
- ---------------------------
Because of the specialized nature of its business, the Company is
highly dependent on its ability to attract and retain qualified scientific and
technical personnel for the research and development activities conducted or
sponsored by the Company. The loss of certain key executive officers could be
significantly detrimental to the Company. Recruiting and retaining qualified
scientific personnel to perform research and development work is critical to the
Company's success. In addition, the Company's anticipated growth and expansion
into areas and activities requiring additional expertise, such as clinical
testing, regulatory compliance, manufacturing and marketing, will require the
addition of new management personnel and the development of additional expertise
- 11 -
<PAGE>
by existing management personnel. There is intense competition for qualified
personnel in the areas of the Company's activities, and there can be no
assurance that the Company will be able to continue to attract and retain the
qualified personnel necessary for the development of its business. The failure
to attract and retain such personnel or to develop such expertise would
adversely affect the Company's business.
Dependence on Others
- --------------------
The Company's strategy for development and commercialization of its
product candidates entails entering into arrangements with corporate partners,
collaborators, licensees and others and upon the subsequent success of these
third parties in performing their obligations, including, as the case may be,
any or all of preclinical and clinical testing, obtaining regulatory approvals,
manufacturing and marketing. There can be no assurance that the Company will be
able to maintain its existing arrangements or establish additional collaborative
arrangements on favorable terms, if at all. If the Company is able to enter into
any additional arrangements, such arrangements may require the Company to
transfer certain material rights to third parties.
There can be no assurance that any such corporate partners,
collaborators, licensees or others will perform their obligations as expected or
that the Company will derive any revenue or profit from any existing or future
arrangements. While the Company believes its partners, collaborators, licensees
and others will have an economic motivation to succeed in performing their
contractual responsibilities, the amount and timing of resources to be devoted
by such parties is not within the control of the Company. Furthermore, there can
be no assurance that the interest of the Company will coincide with those of
such other parties or that disagreements over rights to technology or other
proprietary information or other matters will not occur. In addition, it is
possible that such other parties will be independently involved in the
development of products that may be competitive with the products they are
developing in collaboration with the Company. If any of the Company's partners,
collaborators, licensees or others breaches or terminates its agreement with the
Company or otherwise fails to conduct its required activities in a timely
manner, the development or commercialization of the product candidate under such
collaborative agreement may be delayed, the Company may be required to undertake
unforeseen additional responsibilities or devote unforeseen additional resources
to such development or commercialization or such development or
commercialization could be terminated. Any such event could adversely effect the
Company's business, results of operations or financial position.
Potential Product Liability; Limited Product Liability Insurance
- ----------------------------------------------------------------
The testing, marketing and sale of human health care products entail an
inherent risk of product liability claims, and there can be no assurance that
substantial product liability claims will not be asserted against the Company.
The Company has limited product liability insurance and may need to increase its
coverage as it expands human clinical trials and if and when it begins to market
products. There can be no assurance that adequate insurance coverage will be
available on acceptable terms, if at all, or that a product liability claim
would not materially adversely affect the business or financial condition of the
Company.
Possible Price Volatility of Common Stock
- -----------------------------------------
The market prices for securities of biopharmaceutical companies have
been highly volatile. The announcement of technological innovations or new
commercial products by the Company or its competitors, the impact of health care
reform, developments relating to regulatory matters or to
- 12 -
<PAGE>
patents or proprietary
rights, publicity regarding actual or potential clinical trial results with
respect to products under development by the Company or others as well as
period-to-period variances in financial results could cause the market price of
the Common Stock to fluctuate substantially. In addition, the stock market has
experienced extreme price and volume fluctuations that have particularly
affected the market price for many high technology companies and that have often
been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of the Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Stockholders.
The Company will bear all costs (excluding any brokerage fees,
underwriting discounts and selling commissions and expenses incurred by the
Selling Stockholders for legal services in excess of $7,500), fees and expenses
incurred in effecting the registration of the Shares covered by this Prospectus,
including, without limitation, all registration and filing fees required under
federal and state securities laws, fees and expenses of counsel for the Company
and fees and expenses of accountants for the Company.
SELLING STOCKHOLDERS
The following table sets forth, to the knowledge of the Company, certain
information regarding the beneficial ownership of Common Stock of each Selling
Stockholder as of March 31, 1998 and as adjusted to give effect to the sale of
the Shares offered hereby. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Stockholders may offer the
Shares for resale from time to time.
On February 26, 1998, the Company issued 1,027,027 shares of its Common
Stock in a private placement to the three entities identified herein as Selling
Stockholders. The shares were sold at a purchase price of $9.25 per share,
resulting in aggregate gross proceeds to the Company of $9,500,000. The Company
intends to use the net proceeds from the sale of the shares to fund research and
development and preclinical and clinical testing of potential products, to fund
the Company's commitments to Diacrin/Genzyme LLC and for general corporate
purposes. All of the Shares being offered by the Selling Stockholders were
acquired by them from the Company in private placement transactions pursuant to
an exemption from the registration requirements of the Securities Act provided
by Section 4(2) thereof. The Shares are being registered by the Company pursuant
to the terms of the Purchase Agreement. In the Purchase Agreement, the Company
has agreed, among other things, to bear certain expenses in connection with the
registration and sale of the Shares being offered by the Selling Stockholders.
See "Plan of Distribution."
Each Selling Stockholders represented in the Purchase Agreement that it
was acquiring the Shares for investment and with no present intention of
distributing any of such Shares. In recognition of the fact that investors, even
though purchasing Common Stock without a view to distribution, may wish to be
legally permitted to sell publicly their Shares when they deem appropriate, the
Company has filed with the Commission, under the Securities Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time and has agreed to prepare and file
such amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective until February 26, 2000.
See "Plan of Distribution."
- 13 -
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage of
Number of Percentage of Number of Shares of
Shares of Shares of Shares of Common
Common Stock Common Stock Number of Common Stock Stock
Name of Selling Beneficially Beneficially Shares of Beneficially Beneficially
Stockholder Owned Prior Owned Prior to Common Stock Owned After Owned after
to Offering(1) Offering (1)(2) Offered Hereby Offering(1)(2) Offering (1)(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hudson Trust(3) 1,229,680 8.6% 540,541 689,139 4.8%
c/o Summit Asset Management
Co., Inc.
666 Plainsboro Road
Suite 445
Plainsboro, New Jersey 08536
Rho Management Trust II (4) 1,592,887 11.1% 378,378 1,214,509 8.5%
c/o Rho Management
Company, Inc.
767 Fifth Avenue
43rd Floor
New York, New York 10153
Kaufman Family LLC (5) 188,108 1.3% 108,108 80,000 *
660 Madison Avenue
15th Floor
New York, New York 10021
</TABLE>
- --------------------
* Less than one percent of the number of shares of Common Stock outstanding.
(1) The number of Shares beneficially owned is determined under rules
promulgated by the Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Unless otherwise
indicated, the Selling Stockholders have sole voting power and investment
power with respect to all Shares listed as owned by the Selling
Stockholders.
(2) It is unknown if, when or in what amounts a Selling Stockholder may offer
Shares for sale and there can be no assurance that the Selling Stockholders
will sell any or all of the Shares offered hereby. Because the Selling
Stockholders may offer all or some of the Shares pursuant to this Offering,
and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the Shares that will be
held by the Selling Stockholders after completion of the Offering, no
estimate can be given as to the amount of the Shares that will be held by
the Selling Stockholders after completion of the Offering. However, for
purposes of this table, the Company has assumed that, after completion of
the Offering, none of the Shares covered hereby will be held by the Selling
Stockholders.
(3) Hudson Trust may be considered to be controlled by Bernd Diethelm Honer, a
German citizen, who as sole grantor of Hudson Trust exercises investment
and voting authority over shares owned by Hudson Trust. Excludes shares of
Common Stock held by HealthCare Ventures II, L.P. ("HCV II"), HealthCare
Ventures IV, L.P. ("HCV IV"), and HealthCare Partners II, L.P. ("HCP II").
HCV II and HCV IV are shareholders of the Company. HCP II is the general
partner of HCV II, and as such, may be deemed additionally to be a
beneficial owner of shares in the Company. Hudson Trust is a limited
partner of each of HCV II, HCV IV and HCP II.
(4) Rho Management Partners, L.P. exercises investment and voting control over
the shares owned by Rho Management Trust II. Joshua Ruch, a citizen of
South Africa and U.S. resident, may be considered the controlling person of
Rho Management Partners L.P. Excludes shares of Common Stock held by HCV II
and HCV IV and described in Note (3). Rho Management Trust II is a limited
partner of each of HCV II and HCV IV.
(5) Henry Kaufman, a U.S. citizen and resident, may be considered to be the
controlling person of Kaufman Family LLC.
- 14 -
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Stockholders may sell
Shares from time to time in transactions on Nasdaq, in privately negotiated
transactions, through the writing of options on the shares or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). The Shares may be sold by one or a combination of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the Shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; (c) an over-the-counter distribution in accordance
with the rules of the Nasdaq National Market; (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (e)
in privately negotiated transactions. In connection with distributions of the
Shares or otherwise, any Selling Stockholder may enter into hedging transactions
with broker-dealers and the broker-dealers may engage in short sales of the
Shares in the course of hedging the positions they assume with such Selling
Stockholder. Any Selling Stockholder also may sell Shares short and deliver
Shares to close out such short positions. Any Selling Stockholder also may enter
into option or other transactions with broker-dealers that involve the delivery
of the Shares to the broker-dealers, which may then resell or otherwise transfer
such Shares. Any Selling Stockholder also may loan or pledge the Shares to a
broker-dealer or other financial institution may sell the Shares so loaned or
upon a default may sell or otherwise transfer the pledged Shares.
The Selling Stockholders and any broker-dealers who act in connection
with the sale of Shares hereunder may be deemed to be "underwriters" as the term
is defined in the Securities Act and any commissions received by them as profit
or any resale of the Shares as principal might be deemed to be underwriting
discounts or commissions under the Securities Act.
The Company and the Selling Stockholders have agreed to indemnify each
other against certain liabilities, including certain liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Hale and Dorr LLP.
EXPERTS
The financial statements incorporated by reference in this prospectus
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
- 15 -
<PAGE>
No person has been authorized to give
any information or to make any representations
other than those contained in this Prospectus
and, if given or made, such information or
representations must not be relied upon as DIACRIN, INC.
having been authorized by the Company or the
Selling Stockholders. This Prospectus does not
constitute an offer to sell or a solicitation of any
offer to buy to any person in any jurisdiction in 1,027,027 Shares
which such offer or solicitation of an offer or Common Stock
solicitation would be unlawful. Neither the
delivery of this Prospectus nor any offer or sale
hereunder shall, under any circumstances, create
any implication that there has been no change
in the affairs of the Company or that the
information contained herein is correct as of any
date hereof.
---------------
TABLE OF CONTENTS
Page --------------
Available Information....................... 3
Incorporation of Certain Documents PROSPECTUS
By Reference.............................. 3
Special Note Regarding Forward-Looking --------------
Information............................... 4
The Company................................. 4
Recent Developments......................... 6
Risk Factors................................ 6
Use of Proceeds............................. 13
Selling Stockholders........................ 13
Plan of Distribution........................ 15
Legal Matters............................... 15
Experts..................................... 15 May __, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
- ------------------------------------------------------
The following table sets forth the various expenses to be incurred in connection
with the sale and distribution of the securities being registered hereby, all of
which will be borne by the Company (except expenses incurred by the Selling
Stockholders for brokerage fees, selling commissions, underwriting discounts and
fees and disbursements of counsel to the Selling Stockholders exceeding $7,500).
All amounts shown are estimates except the Securities and Exchange Commission
registration fee.
Filing Fee - Securities and Exchange Commission $2,900
Legal fees and expenses of the Company $5,000
Accounting fees and expenses $1,000
Miscellaneous expenses $1,100
------
Total Expenses $10,000
======
Item 15. Indemnification of Directors and Officers.
- ----------------------------------------------------
Section 145 of the General Corporation Law of Delaware provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Article ELEVENTH of the Registrant's Amended and Restated Certificate
of Incorporation provides that a director or officer of the Registrant (a) shall
be indemnified by the Registrant against all expenses (including attorney's
fees), judgments, fines and amounts paid in settlement reasonably incurred in
connection with any litigation or other legal proceeding (other than an action
by or in the right of the Registrant) brought against him by virtue of his
position as a director or officer if he acted in good faith and in a manner he
reasonable believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, and (b) shall be
indemnified by the Registrant against expenses (including attorney's fees) and
amounts paid in settlement reasonably incurred in connection with any action by
or in the right of the Registrant by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Registrant, except that no indemnification shall be made with respect to any
such matter as to which such director or officer shall have been adjudged to be
liable to the Registrant, unless and only to the extent that a court determines
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled
- II-1 -
<PAGE>
to indemnity for such
expenses as the court deems proper. Notwithstanding the foregoing, to the extent
that a director or officer has been successful, on the merits or otherwise, he
shall be indemnified against all expenses (including attorney's fees) reasonably
incurred by him in connection therewith. Expenses incurred in defending a civil
or criminal action, suit or proceeding shall be advanced by the Registrant to a
director or officer, at his request, upon receipt of an undertaking by the
director or officer to repay such amount if it is ultimately determined that he
is not entitled to indemnification.
Indemnification is required to be made unless the Registrant determines
(in the manner provided in its Amended and Restated Certificate of
Incorporation) that the applicable standard of conduct required for
indemnification has not been met. In the event of a determination by the
Registrant that the director or officer did not meet the applicable standard of
conduct required for indemnification, or if the Registrant fails to make an
indemnification payment within 60 days after such payment is claimed by such
person, such person is permitted to petition a court to make an independent
determination as to whether such person is entitled to indemnification. As a
condition precedent to the right of indemnification, the director or officer
must give the Registrant notice of the action for which indemnity is sought and
the Registrant has the right to participate in such action or assume the defense
thereof.
Article ELEVENTH of the Registrant's Amended and Restated Certificate
of Incorporation further provides that the indemnification provided therein is
not exclusive, and provides that in the event that the General Corporation Law
of Delaware is amended to expand the indemnification permitted to officers and
directors, the Registrant must indemnify those persons to the fullest extent
permitted by such law as so amended.
The Company has purchased a general liability insurance policy which
covers certain liabilities of directors and officers of the Company arising out
of claims based on acts or omissions in their capacity as directors or officers.
Article SEVENTH of the Registrant's Amended and Restated Certificate of
Incorporation provides that, except to the extent that the General Corporation
Law of Delaware prohibits the elimination of liability of directors for breaches
of fiduciary duty, no director of the Registrant shall be personally liable to
the Registrant or its stockholders for monetary damages for any breach of
fiduciary duty as a director.
Item 16. Exhibits
- --------------------------
EXHIBIT
NUMBER DESCRIPTION
5.1** Opinion of Hale and Dorr LLP
23.1* Consent of Arthur Andersen LLP
23.2** Consent of Hale and Dorr LLP, included in Exhibit 5.1 filed
herewith.
24.1* Power of Attorney
* Previously filed.
** Filed herewith.
- II-2 -
<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:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any derivation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the 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
the offering.
The Registrant hereby undertakes 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 15(d) of the Exchange Act of 1934, as
amended (the "Exchange Act") (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein and
the offering of such securities at the 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 indemnification provisions described herein, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such 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 such 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 such issue.
- II-3 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 3 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston,
Commonwealth of Massachusetts, on this 21st day of May, 1998.
DIACRIN, INC.
By: /s/ Thomas H. Fraser
-------------------------
Thomas H. Fraser
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas H. Fraser President, Chief Executive Officer and May 21, 1998
- ---------------------- Director (Principal Executive Officer)
Thomas H. Fraser
/s/ Mark J. Fitzpatrick Vice President of Finance and May 21, 1998
- ----------------------- Administration, Chief Financial Officer and
Mark J. Fitzpatrick Treasurer (Principal Financial and
Accounting Officer)
* Director May 21, 1998
- -----------------------
Zola P. Horovitz
* Director May 21, 1998
- -----------------------
John W. Littlechild
- II-4 -
<PAGE>
Director
- -------------------------
Stelios Papadopoulous
* Director May 21, 1998
- -----------------------
Henri A. Termeer
* Director May 21, 1998
- -------------------------
Christopher T. Walsh
* Mark J. Fitzpatrick, Attorney-in-Fact
</TABLE>
- II-5 -
HALE AND DORR LLP
Counsellors at Law
60 State Street
Boston, Massachusetts 02109
617-516-6000 * Fax 616-526-5000
May 21, 1998
Diacrin, Inc.
Building 96, 13th Street
Charlestown Navy Yard
Charlestown, Massachusetts 02129
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
This opinion is furnished to you in connection with a Registration
Statement on Form S-3 (File No. 333-47825) (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of an aggregate of 1,027,027 shares of Common Stock, $.01 par value per share
(the "Shares"), of Diacrin, Inc., a Delaware corporation (the "Company"). All of
the Shares are being registered on behalf of certain stockholders of the Company
(the "Selling Stockholders").
We have acted as counsel for the Company in connection with the
registration for resale of the Shares. We have examined signed copies of the
Registration Statement and all exhibits thereto, all as filed with the
Commission. We have also examined and relied upon the minutes of meetings of the
stockholders and the Board of Directors of the Company as provided to us by the
Company, stock record books of the Company as provided to us by the Company, a
copy of the Certificate of Incorporation and By-Laws of the Company, each as
restated and/or amended to date, and such other documents as we have deemed
necessary for purposes of rendering the opinions hereinafter set forth.
In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.
WASHINGTON, DC BOSTON, MA LONDON, UK*
HALE AND DORR LLP INCLUDES PROFESSIONAL CORPORATIONS
*BROBECK HALE AND DORR INTERNATIONAL (IN INDEPENDENT JOINT VENTURE LAW FIRM)
<PAGE>
We assume that the appropriate action will be taken, prior to the offer
and sale of the Shares, to register and qualify the Shares for sale under all
applicable state securities or "blue sky" laws.
For purposes of our opinion below as to full payment for the Shares, we
have relied solely on a certificate of an officer of the Company.
We express no opinion herein as to the laws of any state or jurisdiction
other than the state laws of the Commonwealth of Massachusetts, the corporation
law of the State of Delaware and the federal laws of the United States of
America.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized and are validly issued, fully paid and
nonassessable.
This opinion is based upon currently existing statutes, rules,
regulations and judicial decisions, and we disclaim any obligation to advise you
of any change in any of these sources of law or subsequent legal or factual
developments which might affect any matters or opinions set forth herein.
Please note that we are opining only as to the matters expressly set
forth herein, and no opinion should be inferred as to any other matters. This
opinion is rendered solely in connection with the Registration Statement and may
not be quoted or relied upon by any other person or used for any other purpose,
without our prior written consent.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters." In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.
Very truly yours,
HALE AND DORR LLP
