As filed with the Securities and Exchange Commission on September 5, 1996
Registration No. 33-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
CELLEGY PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
California 82-0429727
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
----------------------
1065 E. Hillsdale Blvd., Suite 418
Foster City, California 94404
(415) 524-1600
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
--------------------
Carl R. Thornfeldt, M.D.
Acting Chief Executive Officer and Chairman of the Board
Cellegy Pharmaceuticals, Inc.
1065 E. Hillsdale Blvd., Suite 418
Foster City, California 94404
(415) 524-1600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------
Copies to:
C. Kevin Kelso, Esq.
Mark Porter, Esq.
Fenwick & West LLP
Two Palo Alto Square, Suite 800
Palo Alto, California 94306
--------------------
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
<TABLE>
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
-------------------
CALCULATION OF REGISTRATION FEE
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price per Aggregate Offering Amount of
to be Registered Registered Share Price Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
5,966,250 $5.8125(1) $34,678,828.13(1) $11,958.22(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Issuable Upon Exercise
of Initial Public Offering Warrants 661,250(3) $9.375(3) $6,199,218.75(3) $2,137.66(3)
- ------------------------------------------------------------------------------------------------------------ -----------------------
Common Stock Issuable upon exercise
of Representatives' Warrants 115,000(3) $10.313(3) $1,185,937.50(3) $408.94(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stock Issuable upon exercise
of warrants included in 57,500(3) $15.469(3) $889,467.50(3) $306.71(3)
Representatives" Warrants
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Total....................................................................................................... $14,811.53(2)(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee, pursuant to Rule 457(c) under the Securities Act, based
on the last sales price of the Common Stock on the Nasdaq SmallCap Market
on September 3, 1996.
(2) Pursuant to Rule 429 under the Securities Act, this Registration
Statement relates to securities previously registered on Form SB-2,
Registration No. 33-03401, on or about June 27, 1996. On that
Registration Statement, the Company registered 5,000,000 shares of Common
Stock at a maximum offering price per shares of $6.56, and paid a
registration fee of $11,311. Of the shares registered on that Form SB-2,
4,000,000 were shares issuable upon conversion of 750 Shares of Series A
Convertible Preferred Stock. The number of shares obtainable upon such
conversions depends on several factors, including a fixed conversion
ratio and a variable conversion ratio and the date on which such shares
are converted. Since the filing of that Form SB-2, the Company has issued
171,640 shares registered thereon as a result of such conversions. The
Company now believes that only 3,379,857 shares will be necessary to
cover the remaining conversions. As a result, 448,503 shares covered by
that Form SB-2 are no longer reserved for such conversions. In order to
take credit for the filing fee paid on that Form SB-2, the Company has
removed the 171,640 shares related to past conversions from the 5,000,000
shares registered on that Form SB-2, and carried the remaining 4,828,360
shares of Common Stock, for which the Company previously paid a
registration fee of $10,922.08, onto this Registration Statement. As a
result of this credit against the registration fee herein, Registrant now
owes $1,036.14 for the registration of the shares of Common Stock to
which this note relates. Registrant has previously caused the payment of
$1,164.72 in connection with this filing fee.
(3) Pursuant to Rule 429 under the Securities Act, this Registration
Statement relates to securities previously registered on Form SB-2,
Registration No. 333-93288-LA, on or about August 11, 1995. From this
earlier statement 833,750 shares of Common Stock have been carried
forward and $3,652.27 filing fee associated with such securities was
previously paid, leaving no filing fee due for these shares.
</FN>
</TABLE>
--------------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
This Prospectus and the information contained herein are subject to completion
or amendment. These securities may not be sold, nor may offers to buy be
accepted, prior to the time the prospectus is delivered in final form. Under no
circumstances shall this Preliminary Prospectus constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such jurisdiction.
Subject to Completion dated September 5, 1996
PROSPECTUS
6,800,000 Shares Of Common Stock
CELLEGY PHARMACEUTICALS, INC.
This prospectus (this "Prospectus") covers the resale of shares (the
"Shares") of Common Stock, no par value (the "Common Stock"), of Cellegy
Pharmaceuticals, Inc. ("Cellegy" or the "Company"), held or acquirable by
certain persons ("Selling Shareholders") named in this Prospectus. The Shares
include shares of Common Stock that are issuable upon conversion of
previously-issued shares of Series A Preferred Stock (the "Series A Preferred")
held by certain of the Selling Shareholders (the "Series A Holders"), and up to
an additional 2,586,393 shares of Common Stock that are held by certain other
Selling Shareholders or that are issuable upon exercise of warrants to purchase
Common Stock held by certain other Selling Shareholders (the "Selling
Shareholders Warrants"). In addition, this Prospectus covers 661,250 shares of
Common Stock issuable upon exercise of warrants to purchase Common Stock (the
"IPO Warrants") issued and sold as part of the Company's initial public offering
in August 1995 (the "IPO"). Each IPO Warrant entitles its holder to acquire one
share of Common Stock (each an "IPO Warrant Share") at an exercise price of
$9.375, subject to adjustments under certain circumstances, from the date of
issuance until August 11, 2000, if not earlier redeemed by the Company. Finally,
this Prospectus covers 172,500 shares issuable upon exercise of warrants to
purchase Common Stock (the "Representatives' Warrants") issued and sold to the
Representatives of the Underwriters in the IPO. Each Representatives' Warrant
entitles the holder to acquire, for a purchase price of $20.625, two shares of
Common Stock and one Common Stock Purchase Warrant to acquire an additional
share of Common Stock at an exercise price of $15.469. The shares obtainable
upon exercise of the Representatives' Warrants including those obtainable upon
exercise of the warrant included therein are referred to as "Representatives'
Warrant Shares." The Shares, IPO Warrant Shares, and the Representatives'
Warrant Shares are referred to hereafter collectively as the "Securities." While
the Company will receive proceeds from the exercise of all warrants described in
this paragraph, it will not receive any of the proceeds from the resale of the
Securities. See "Selling Shareholders" for information with respect to Shares
held or acquirable by the Selling Shareholders.
The number of Shares issuable upon conversion of the Series A Preferred
depends on several factors, including a fixed conversion ratio and a variable
conversion ratio and the date on which shares are converted. The variable
conversion ratio could result in a greater number of Shares being issued than
under the fixed conversion ratio. In order to have a sufficient number of Shares
registered upon conversion of Series A Preferred, this Prospectus covers a
larger number of Shares of Common Stock (3,379,857 Shares) than the Company
believes will actually be issued upon conversion of all of the Series A
Preferred. Except for the total number of shares to which this Prospectus
relates as set forth above, references in this Prospectus to the "number of
Shares covered by this Prospectus," or similar statements, and information in
this Prospectus regarding the number of Shares issuable to or held by the Series
A Holders and percentage information relating to the Shares or the outstanding
capital stock of the Company, are based upon the fixed conversion ratio set
forth in the instruments establishing the rights of the Series A Preferred and
assume that 1,614,138 Shares are issued upon conversion of all remaining shares
of Series A Preferred. See "Selling Shareholders," "Plan of Distribution."
The Securities covered by this Prospectus represent approximately 90% of
the Company's currently outstanding Common Stock (assuming conversion of all
shares of Series A Preferred into 1,614,138 shares of Common Stock and that
Selling Shareholders' Warrants, IPO Warrants, the Representatives' Warrants and
the warrants issuable upon exercise of the Representatives' Warrants are
exercised). The Securities are being offered on a continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"). No
underwriting discounts, commissions or expenses are payable or applicable in
connection with the sale the Securities, except that the Company will pay to
Paulson Investment, Inc. or National Securities Corporation, as the case may be,
a 3% solicitation fee for each exercise of the IPO Warrants that it solicits in
the event the Company exercises its rights to redeem the IPO Warrants. The
Company will not receive any of the proceeds from the sale of the Shares by the
Selling Shareholders. The Common Stock of Cellegy is quoted on the Nasdaq
SmallCap Market under the symbol "CLGY" and the IPO Warrants under the symbol
"CLGYW." The Shares offered hereby will be sold from time to time at then
prevailing market prices, at prices relating to prevailing market prices or at
negotiated prices. On August 28, 1996, the closing price of the Common Stock on
the Nasdaq SmallCap Market was $5.875 per share. This Prospectus may be used by
the Selling Shareholders, the IPO Warrant holders, the Representatives' Warrant
holders or by any broker-dealer who may participate in sales of the Common Stock
covered hereby.
1
<PAGE>
See "RISK FACTORS" commencing on page 4 for a discussion of certain factors that
should be considered in connection with an investment in the Common Stock
offered hereby.
<TABLE>
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.
============================================================================================================
<CAPTION>
Underwriting
Discounts and Proceeds to Proceeds to Selling
Price to Public Commissions Company Shareholders
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... see text above(1) none none see text above(2)
Per IPO Warrant Share........ $9.375 none(2) none none
Per Representatives' Warrant
Share....................... $10.313 none none none
Per Underlying Share......... $15.469 none none none
- ------------------------------------------------------------------------------------------------------------
Total......................... See text above(1) none none see text above (2)
============================================================================================================
<FN>
(1) The shares of Common Stock registered hereunder will be sold from time to
time at the then prevailing market prices, at prices relating to prevailing
market prices or at negotiated prices.
(2) However, the Company will pay solicitation fees to National Securities
Corporation and Paulson Investments, Inc., respectively for all exercises of
the IPO Warrants it successfully solicits in the event of a redemption call.
See -- Plan of Distribution, "IPO Warrants, IPO Warrant Shares,
Representatives' Warrants and Representatives' Warrant Shares" below.
(3) The Company will pay the expenses of registration estimated at $16,036.
The date of this Prospectus is , 1996.
</FN>
</TABLE>
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 filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the
Commission's regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such materials can also be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Company's Common Stock is listed on the Nasdaq SmallCap Market and
reports, proxy statements and other information concerning the Company may be
inspected at the offices of the Nasdaq Stock Market, 1735 K Street, N.W.,
Washington, D.C. 20006-1500.
The Company has filed with the Commission a Registration Statement on Form
S-3 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 and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made to
the Registration Statement and the exhibits filed therewith. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration Statement may be
inspected, without charge, at the offices of the Commission in Washington, D.C.,
and copies of all or any part of the Registration Statement may be obtained from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, upon the payment of the fees
prescribed by the Commission.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (not including the
Exhibits to the information that is incorporated by reference unless such
Exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Requests should be directed to Mr. A Richard
Juelis, Chief Financial Officer, Cellegy Pharmaceuticals, Inc., 1065 E.
Hillsdale Blvd., Suite 418, Foster City, CA 94404; telephone number (415)
524-1600.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(a) The Company's Annual Report on Form 10-KSB filed with the
Commission for the fiscal year ended December 31, 1995.
(b) The Company's Quarterly Report on Form 10-QSB filed with the
Commission for the quarter ended March 31, 1996.
(c) The Company's Quarterly Report on Form 10-QSB filed with the
Commission for the quarter ended June 30, 1996.
(d) All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act following the date of this Prospectus
and prior to the termination of the Offering contemplated hereby.
(e) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the Commission on August
1, 1995.
(f) The Company's report on Form 8-K, dated July 10, 1996.
3
<PAGE>
THE COMPANY
Cellegy Pharmaceuticals, Inc. is a pharmaceutical company which is engaged
in the development of proprietary products for the skin, including prescription
therapeutic products for skin disorders, non-prescription over-the-counter
consumer products to repair and protect damaged skin and drug delivery products
using the skin as a portal of entry.
The Company was incorporated in California in 1989. In April 1992, the
Company entered into an agreement with Neutrogena Corporation pursuant to which
Neutrogena made a $5,000,000 equity investment in the Company and licensed
certain of the Company's products, principally for consumer applications.
Neutrogena also acquired the rights to the Company's azelaic acid product for
$1,000,000 in 1994. In 1993, Dr. Carl Thornfeldt, Co-Founder and Chairman of the
Board of the Company, recruited Dr. Peter Elias to collaborate with Cellegy. Dr.
Elias is the Vice-Chairman of the Department of Dermatology of the University of
California, San Francisco School of Medicine, and a director of the Company and
Co-Chairman of the Company's Scientific Advisory Board. In 1993, the Company
entered into a license agreement with the University of California providing for
a skin barrier repair formulation developed by Dr. Elias. In March 1994, the
Company entered into a second license agreement for technology relating to drug
delivery by skin barrier disruption.
The principal executive offices of the Company are located at 1065 E.
Hillsdale Blvd., Suite 418, Foster City, CA 94404 and its telephone number is
(415) 524-1600. In this Prospectus, the term "Cellegy" or "Company" refers to
Cellegy Pharmaceuticals, Inc., a California corporation, and subsidiaries,
unless the context otherwise requires.
RISK FACTORS
Investors should consider carefully the following factors, in addition to
the other information contained in this Prospectus, before purchasing the shares
of Common Stock offered hereby. Except for the historical information contained
in this Prospectus, this Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ in
material respects from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed below.
Early Stage of Product Development. Cellegy has not yet completed the
development of any products or sought regulatory approval for the marketing of
products and, accordingly, has not begun to market or generate revenues from the
commercialization of products. Development of products will require significant
additional research and development, including process development, extensive
clinical testing and market research. All of the Company's product development
efforts are based upon technologies and therapeutic approaches that have not
been widely tested or used. Moreover, the Company's beliefs regarding the
therapeutic and commercial potential for its potential products, including
without limitation its drug delivery and skin protectant products, are based on
preliminary assays or studies, and later studies may not support the Company's
current beliefs. In addition, results of the Company's tests and studies have
not been published in medical journals or reviewed by independent third parties
(other than the third parties that in some instances conducted the studies on
behalf of the Company), and as a result have not been subjected to the same
degree of scrutiny as results that have been published or subjected to review by
independent parties. To the Company's knowledge, no company has yet completed
human clinical trials for the regulatory approval process, or undertaken
successfully commercial manufacture, of products that are based on the Company's
proprietary technologies, and it is extremely difficult to predict whether or
when the Company's products will meet with regulatory approval, can be
manufactured successfully, or will be accepted in the marketplace.
As a result, the Company's potential products are subject to the risks of
failure inherent in the development of products based on new technologies. These
risks include the possibilities that the Company's therapeutic approaches will
not be successful, as was the case with an assay study conducted using Glylorin
for impetigo; that the results from future clinical trials may not correlate
with any safety or effectiveness results from prior clinical studies conducted
by the Company or others; that some or all of the Company's potential products
will not be successfully developed or will not be found to be safe and effective
by the United States Food and Drug Administration (the "FDA"), or otherwise will
fail to meet applicable regulatory standards or receive necessary regulatory
clearances; that the products, if safe and effective, will be difficult to
manufacture in commercial quantities at reasonable costs or will be uneconomical
to market; that proprietary rights of third
4
<PAGE>
parties will preclude the Company from commercializing such products; or that
third parties will market superior or equivalent products. In addition, the
failure of the Company's most advanced clinical compound, Glylorin, to
successfully complete it current phase III and future clinical testing,
including toxicology studies, could have a material adverse effect on the
Company. There can be no assurance the Company's research and development
activities will result in any commercially viable products.
The timetable for the completion of the various milestone events that must
occur in order for the Company's products to be approved and marketed is very
uncertain. Pharmaceutical research and development is frequently characterized
by scientific and regulatory delays and disappointments. Although the Company
may set target dates for the completion of various milestone events, the
uncertainties and risks in the Company's product development and testing efforts
mean that decisions on whether to invest in the Company should not assume that
the targets will be met.
The evaluation of animal and human clinical test results involves making
judgments about data and other information that often are not conclusive. Later
testing may show those judgments to have been erroneous. For example, the
Company's beliefs regarding the potential comparative therapeutic benefits of
its products compared to currently marketed products may be erroneous, or the
FDA may not agree with the Company's conclusions regarding such matters.
Furthermore, due to the independent and blind nature of certain human clinical
testing, there will be extended periods during the testing process when the
Company will have only limited, or no, access to information about the status or
results of the tests. Other pharmaceutical companies have believed that their
products performed satisfactorily in early tests, only to find their performance
in later tests, including Phase III clinical trials, to be inadequate or
unsatisfactory, or that FDA Advisory Committees have declined to recommend
approval of the drugs, or that the FDA itself refused approval, with the result
that such companies' stock prices have fallen precipitously.
Shares Eligible for Sale; Possible Effect on Stock Price. The Securities
offered by this Prospectus represent approximately 50% of the outstanding shares
of Common Stock, calculated assuming the issuance of 1,614,138 shares of Common
Stock upon conversion of all shares of Series A Preferred and that all
Securities issuable upon the exercise of outstanding warrants have been issued
and are outstanding. Especially since the Company's Common Stock has
historically had a low trading volume, sale of Securities in the open market
could have a material adverse effect on the market price of the Common Stock.
All persons who were shareholders of the Company before its initial public
offering in August 1995 ("IPO") and who owned more than 1% of the shares
outstanding after the IPO ("Pre-IPO Shareholders") executed lock-up agreements
with the representatives (the "Representatives") of the underwriters in the IPO
that restricted the sale or disposition of such shares until August 17, 1996.
With the expiration of the Lock-up agreements on August 17, 1996, most of the
shares of Common Stock that were outstanding before the IPO have become eligible
for sale in the public market, subject to compliance with Rule 144 or Rule 701,
and subject to any applicable state securities law restrictions on resale of
such shares.
Competition and Technological Change. The pharmaceutical industry is
subject to rapid and significant technological change. Competitors of the
Company in the United States and abroad are numerous and include, among others,
major pharmaceutical, chemical and biotechnology companies, specialized firms,
universities and other research institutions. There can be no assurance that the
Company's competitors will not succeed in developing technologies and products
that are more effective than any which are being developed by the Company or
that would render the Company's technology and potential products obsolete and
noncompetitive. Many of these competitors have substantially greater financial
and technical resources and production and marketing capabilities than the
Company. In addition, many of the Company's competitors have significantly
greater experience than the Company in preclinical testing and human clinical
trials of pharmaceutical products and in obtaining FDA and other regulatory
approvals of products for use in health care. There can be no assurance that the
Company's products under development will be able to compete successfully with
existing products or products under development by other companies, universities
and other institutions or that they will obtain regulatory approval in the
United States or elsewhere.
Accumulated Deficit; Anticipated Income or Losses. The Company had an
accumulated net loss of $12.012 million at June 30, 1996. The Company incurred
net losses for the fiscal years ended December 31, 1994 and 1995, of $2,543,499
and $2,151,877, respectively, a net income for the six months ended June 30,
1995 of $306,000 and a net loss of $992,000 for the six months ended June 30,
1996, respectively. The
5
<PAGE>
Company expects to incur substantial and increasing net losses for at least the
next several years, the amount of which is highly uncertain. There can be no
assurance that the Company will ever be able to generate product revenues or
achieve or sustain profitability. The Company will be required to conduct
significant research, development, testing and regulatory compliance activities
that, together with projected general and administrative expenses, are expected
to result in significant operating losses for at least the next several years.
The Company's ability to achieve profitability depends upon its ability to
successfully complete, either alone or with others, development of its potential
products, successfully conduct clinical trials, obtain required regulatory
approvals, find appropriate third party manufacturers and market its products or
enter into license agreements on acceptable terms. In the event the Company
enters into any future license agreements, such license agreements may adversely
affect the Company's profit margins on its products.
Future Capital Needs; Uncertainty of Additional Funding. The Company's
operations to date have consumed substantial amounts of cash. The Company has no
current source of ongoing revenues or capital beyond existing cash. In order to
complete the research and development and other activities necessary to
commercialize its products, additional financing may be required. The Company's
capital requirements depend on numerous factors, including without limitation
the progress of its research and development programs, the progress of
preclinical and clinical testing, the time and costs involved in obtaining
regulatory approvals, the costs of filing, prosecuting, defending and enforcing
any patent claims and other intellectual property rights, competing
technological and market developments, changes in the Company's existing
research relationships, the ability of the Company to establish collaborative
arrangements, the development of commercialization activities and arrangements,
and the purchase of capital equipment.
In April 1996, the Company completed a private placement of 750 shares of
Series A Preferred Stock resulting in net proceeds of approximately $6.8
million. The Company believes that its existing resources will satisfy its cash
requirements for at least 18 months from the date of this Prospectus, based upon
the Company's current plan. At some future date thereafter, however, the Company
may require substantial additional capital to fund its operations, continue
research and development programs and preclinical and clinical testing of its
potential products and conduct its business. The Company may seek any required
additional funding through equity offerings, private financings and
collaborative or other arrangements with third parties. There can be no
assurance that additional funds will be available on acceptable terms. If
additional funds are raised by issuing equity securities, further substantial
dilution to existing shareholders may result. If adequate funds are not
available, the Company may be required to delay, scale back or eliminate one or
more of its research and development programs, or to obtain funds through
entering into arrangements with third parties that may require the Company to
relinquish rights to certain of its technologies or potential products that the
Company would not otherwise relinquish.
Limits on Secondary Trading; Liquidity of Trading Market. Under the blue
sky laws of most states, public sales of Common Stock and IPO Warrants by
persons other than the Company in "non-issuer transactions" must either be
qualified under applicable blue sky laws, or exempt from such qualification
requirements. Blue sky authorities in California or other states may impose
other restrictions on the secondary trading of Common Stock or IPO Warrants in
those states. In particular, the California Department of Corporations imposed
legend and transfer restrictions on the securities issued in connection with the
Bridge Financing (as defined below) transaction in January 1995. As a result of
these restrictions, resale of the Securities by the Bridge Investors (as defined
below), and by subsequent purchasers, requires the consent of the California
Department of Corporations unless the transfer is otherwise exempt under
California blue sky law. In either event, buyers of such Securities in secondary
transactions will themselves hold Securities subject to the same legend
requirements and restrictions on transfers until such time, if any, as the
Department of Corporations elects to lift such restrictions. Moreover, in many
states, secondary trading of the Common Stock or IPO Warrants is permitted only
by virtue of an exemption so long as information about the Company is published
in a recognized manual such as manuals published by Moody's Investor Service or
Standard & Poor's Corporation. As a result of these or other restrictions that
might be imposed, shareholders may be restricted or prohibited from selling
Common Stock or IPO Warrants in particular states as a result of applicable blue
sky laws. These restrictions may have the effect of reducing the liquidity of
the Common Stock or IPO Warrants and could adversely affect the market price of
the Common Stock or IPO Warrants.
6
<PAGE>
The Common Stock and the IPO Warrants are listed on the Nasdaq SmallCap
Market. If the Company should be unable to maintain the standards for continued
quotation on the Nasdaq SmallCap Market, the Common Stock and the IPO Warrants
could be subject to removal from the Nasdaq SmallCap Market. Trading, if any, in
the Common Stock and the IPO Warrants would then be conducted in the
over-the-counter market on an electronic bulletin board established for
securities that do not meet the Nasdaq SmallCap Market listing requirements or
in what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations as
to the price of, the Company's securities. In addition, depending on several
factors including the future market price of the Common Stock, the Company's
securities could become subject to the so-called "penny stock" rules that impose
additional sales practice and market making requirements on broker-dealers who
sell and/or make a market in such securities, which could affect the ability or
willingness of broker-dealers to sell and/or make a market in the Company's
securities and the ability of purchasers of the Company's securities to sell
their securities in the secondary market.
Government Regulation and Product Approvals. The research, testing,
manufacture, labeling, distribution, marketing and advertising of products such
as the Company's products and its ongoing research and development activities
are subject to extensive regulation by governmental regulatory authorities in
the United States and other countries. The rigorous preclinical and clinical
testing requirements and regulatory approval process of the FDA in the United
States and of certain foreign regulatory authorities can take five to ten years
or more and require the expenditure of substantial resources. There can be no
assurance that the Company will be able to obtain the necessary approvals for
clinical testing or for the marketing of products. Moreover, additional
government regulations may be established that could prevent or delay regulatory
approval of the Company's products. Delays in obtaining regulatory approvals
could have a material adverse effect on the Company. Even if regulatory approval
of a product is granted, such approval may include significant limitations on
the indicated uses of the product or the manner in which or conditions under
which the product may be marketed. For example, even if the Company seeks FDA
approval of a non-cosmetic product for non-prescription consumer sales, the FDA
could instead require that the product be distributed by means of a prescription
before considering approval for distribution as a non-prescription product.
Prescription only approval, which the Company believes is common where a company
seeks approval for a product involving a new compound or a compound previously
approved for other uses, could delay for several years, or indefinitely,
distribution through the consumer (non-prescription) channel of the Company's
consumer products which are subject to premarket review and approval by the FDA.
Moreover, failure to comply with regulatory requirements could subject the
Company to regulatory or judicial enforcement actions, including, but not
limited to, product recalls or seizures, injunctions, civil penalties, criminal
prosecution, refusals to approve new products and withdrawal of existing
approvals, as well as potentially enhanced product liability exposure. Sales of
the Company's products outside the United States will be subject to regulatory
requirements governing clinical trials and marketing approval. These
requirements vary widely from country to country and could delay introduction of
the Company's products in those countries.
Patents and Proprietary Technology. The Company's success depends, in
part, on its ability to obtain patent protection for its products and methods,
both in the United States and in other countries. Several of the Company's
products are based on existing compounds with a history of use in humans but
which are being developed by the Company for new therapeutic use for skin
diseases unrelated to the systemic diseases for which the compounds were
previously approved. The Company cannot obtain composition patent claims on all
formulations that include these compounds, and will instead need to rely on
patent claims, if any, directed to use of the compound to treat certain
conditions. The Company will not be able to prevent a competitor from using that
formulation or compound for a different purpose. No assurance can be given that
any additional patents will be issued to the Company, that the protection of any
patents that may be issued in the future will be significant, or that current or
future patents will be held valid if subsequently challenged. There is a
substantial backlog of patent applications at the United States Patent and
Trademark Office ("USPTO").
The patent position of companies engaged in businesses such as the
Company's business generally is uncertain and involves complex legal and factual
questions. Further, issued patents can later be held invalid by the patent
office issuing the patent or by a court. There can be no assurance that any
patent applications relating to the Company's products or methods will issue as
patents, or, if issued, that the patents will not be challenged, invalidated, or
circumvented or that the rights granted thereunder will provide a competitive
advantage to the Company. In addition, other entities may currently have, or may
obtain in the future, legally blocking proprietary rights, including patent
rights, in one or more products or methods under development or consideration by
the Company. These rights may prevent the Company from commercializing
technology, or may require the Company to obtain a license from the entity to
practice the technology. There can be no
7
<PAGE>
assurance that the Company will be able to obtain any such licenses that may be
required on commercially reasonable terms, if at all, or that the patents
underlying any such licenses will be valid or enforceable. Moreover, the laws of
certain foreign countries do not protect intellectual property rights relating
to U.S. patents as extensively as those rights are protected in the United
States. As with other companies in the pharmaceutical industry, the Company is
subject to the risk that persons located in such countries will engage in
development, marketing or sales activities of products that would infringe the
Company's patent rights if such activities were in the United States.
The agreement pursuant to which the Company has exclusive license rights
to certain barrier repair and drug delivery technology contains certain
development and performance milestones which the Company must satisfy in order
to retain such rights. The Company has been granted an extension on certain
milestone dates. While the Company currently believes it will satisfy the
milestones or be able to negotiate satisfactory extensions, a loss of exclusive
rights to such technology could have a material adverse effect on the Company.
Limited Staff; Third Party Relationship. In view of the early stage of the
Company and its research and development programs, the Company has restricted
hiring to research and development scientists and a small administrative staff
and has made limited investments in marketing, product sales and regulatory
compliance resources. The Company has certain key academic collaborations
relating to the research, development and commercialization of its potential
products. Therefore, the Company may be dependent upon the subsequent success of
these outside parties in performing their responsibilities. In addition, the
Company may enter into additional arrangements with corporate and academic
collaborators and others to research, develop or commercialize potential
products. There can be no assurance that the Company will be able to establish
any such arrangements or that they will be successful. Failure to enter into any
such arrangements that in the future might be necessary could have a material
adverse effect on the Company's business.
Risk of Product Liability; Limited Product Liability Insurance;
Environmental Matters. The testing, marketing and sale of human health care
products entails an inherent risk of allegations of product liability, and there
can be no assurance that substantial product liability claims will not be
asserted against the Company. The Company has obtained limited amounts of
insurance relating to its clinical trials. There can be no assurance that the
Company will be able to obtain or maintain insurance on acceptable terms for its
clinical and commercial activities or that any insurance obtained will provide
adequate protection against potential liabilities. Moreover, the Company is
subject to federal, state and local laws and regulations governing the use,
generation, manufacture, storage, handling and disposal of certain materials and
wastes. The Company's research and development processes involve the limited,
controlled use of hazardous and radioactive materials. The Company believes its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by such laws and regulations, but the risk of accidental
contamination or injury to the Company's employees or others from these
materials cannot be eliminated. In the event of such an accident, the Company
could be held liable for any damages that result, and any such liability could
exceed the resources of the Company. Although the Company believes it is in
compliance in all material respects with applicable environmental laws and
regulations and currently does not expect to make material capital expenditures
for environmental control facilities in the near-term, there can be no assurance
that the Company will not be required to incur significant costs to comply with
environmental laws and regulations in the future, or that the operations,
business or assets of the Company may not be materially adversely affected by
current or future environmental laws or regulations.
Dependence Upon Key Employees and Consultants. The success of the Company
is dependent upon the efforts of its senior management team and key consultants,
including Dr. Carl R. Thornfeldt, Acting Chief Executive Officer and Chairman of
the Board of Directors of the Company, and Dr. Peter M. Elias, a director of and
consultant to the Company and Co-Chairman of the Company's Scientific Advisory
Board. A change in the association of one or more of these individuals with the
Company could adversely affect the Company if suitable replacement personnel
could not be employed. The Company currently maintains key man insurance or life
insurance policies only on Dr. Peter Elias. The success of the Company also
depends upon its ability to continue to attract and retain qualified scientific
and technical 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 or expansion of its business. The failure to
attract and retain such personnel could adversely affect the Company's business.
In addition, certain members of the Company's management team, including Dr.
Thornfeldt,
8
<PAGE>
are not full-time employees of the Company. The Company believes that the time
commitments of the members of its management team have been appropriate given
the Company's developmental stage.
On July 10, 1996, the Company announced the deaths of William E. Bliss,
its President and Chief Executive Officer, and Lionel N. Simon, Ph.D., its Vice
President, Corporate Development, in an automobile accident. These losses are
likely to have at least a temporary adverse effect on the Company. Dr. Carl
Thornfeldt, the Company's Chairman of the Board, has been named Acting Chief
Executive Officer. Dr. Thornfeldt, Dr. Denis Burger, a director, Dr. Michael
Francoeur, Vice President of Research and Development, and A. Richard Juelis,
Vice President, Finance and Chief Financial Officer, are serving on a transition
committee responsible for continuing the Company's corporate development and
operations. The Company has also established a search committee, headed by Dr.
Burger, has engaged Heidrick & Struggles, the executive recruiting firm which
originally recruited Mr. Bliss, to conduct a nationwide search for a new Chief
Executive Officer, and is in the process of interviewing several candidates for
this position. Although the Company believes that qualified personnel will be
retained to succeed Mr. Bliss, there can be no assurance that this will be the
case, and failure to retain qualified replacement personnel in a timely manner
could have a material adverse effect on the Company.
Anti-Takeover Provisions. Certain provisions of the Company's Amended and
Restated Articles of Incorporation, as well as the California General
Corporation Law, could discourage a third party from attempting to acquire, or
make it more difficult for a third party to acquire, control of the Company
without approval of the Company's Board of Directors. Such provisions could also
limit the price that certain investors might be willing to pay in the future for
shares of the Common Stock. Certain of such provisions allow the Board of
Directors to authorize the issuance of preferred stock with rights superior to
those of the Common Stock. The Company is also subject to the provisions of
Section 1203 of the California General Corporation Law which requires that a
fairness opinion be provided to the Company's shareholders in connection with
their consideration of any proposed "interested party" reorganization
transaction.
Volatility of Stock Price. 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 addition, the market price
of the Common Stock and the IPO Warrants, like the stock prices of many
publicly-traded pharmaceutical, chemical and biotechnology companies, may prove
to be highly volatile. Announcements of technological innovations or new
commercial products by the Company or its competitors, developments or disputes
concerning patent or proprietary rights, publicity regarding actual or potential
medical results relating to products under development by the Company or its
competitors, regulatory developments in both the United States and foreign
countries, public concern as to the safety of pharmaceutical products, sales of
a large number of shares of Common Stock in the market, and economic and other
external factors, as well as period-to-period fluctuations in financial results,
among other factors, may have a significant impact on the market price of the
Common Stock and the IPO Warrants.
SELLING SHAREHOLDERS
The Selling Shareholders consist of (i) the Series A Holders, (ii) the
Selling Shareholders who acquired warrants (the "Bridge Warrants") in a bridge
financing transaction in January 1995 (the "Bridge Financing"), and (iii)
certain other holders of outstanding shares of Common Stock or warrants to
purchase Common Stock (the "Other Shareholders").
The registration statement of which this Prospectus is a part is being
filed, and the Shares offered hereby are included herein, pursuant to various
registration rights agreements entered into at various dates between the Company
and the Series A Holders, Bridge Investors, and certain, but not all, of the
Other Selling Shareholders (collectively, the "Registration Rights Agreements").
Due to (i) the ability of the Selling Shareholders to determine individually
when and whether they will sell any Shares under this Prospectus and (ii) the
uncertainty as to how many of the Bridge Warrants or other warrants will be
exercised and how many shares of Common Stock will be issued upon conversion of
shares of Series A Preferred, the Company is unable to determine the exact
number of Shares that will actually be sold pursuant to this Prospectus.
9
<PAGE>
The Series A Holders
The Selling Shareholders identified in the table below as "Series A
Holders" acquired an aggregate of 750 shares of Series A Preferred in a private
placement transaction (the "Series A Transaction") pursuant to Securities
Subscription Agreements dated as of April 18 and 19, 1996 (collectively, the
"Subscription Agreements"). On July 3, 1996, the Series A Preferred became
convertible into Common Stock at the option of the Series A Holder. The number
of shares of Common Stock into which shares of Series A Preferred are
convertible depends on several factors, including the date on which the shares
are converted and the market price of the Common Stock at the time of
conversion. The figures in the table below representing the number of shares of
Common Stock beneficially owned and offered by the Series A Holders make a
number of assumptions concerning the applicable conversion ratio and the date on
which shares of Series A Preferred are converted. The number of shares of Common
Stock issuable upon conversion of Series A Preferred is calculated in part on
the basis of the lower of a fixed conversion price or a variable conversion
price. The variable conversion price depends primarily on the market price of
the Common Stock on the date of conversion. The fixed conversion price is
$6.6275 per share. Since the Series A Holders paid $10,000 per share of Series A
Preferred, each share of Series A Preferred is, in general, convertible into a
number of shares determined by dividing 10,000 by the applicable conversion
price (plus the premium, as described below). If the variable conversion price
on the date of conversion is lower than the fixed conversion price, then a
greater number of shares will be issued. In addition, a conversion premium of 8%
per annum accrues from April 19, 1996 until the date of conversion and will
result in issuance of a certain number of additional shares of Common Stock upon
conversion of shares of Series A Preferred.
For the above reasons, it is not possible to set forth in the table the
maximum number of shares that could be acquired by the Series A Holders upon
conversion of Shares of Series A Preferred. The number of shares set forth in
the table is based on conversion of the Series A Preferred at a conversion price
of $4.25 per share with the 8% premium calculated assuming conversion of all
shares of Series A Preferred on August 19, 1996. Several factors, including
whether the market price of the Common Stock is lower than the conversion price
of $4.25 per share as of August 19, 1996, could result in a greater number of
shares being issued to the Series A Holders than are reflected in the table
below.
As of August 19, 1996, 82 shares of Series A Preferred have been converted
into 171,640 shares of Common Stock.
The Bridge Investors
The Bridge Investors acquired the Bridge Warrants in the Bridge Financing
in January 1995. The Bridge Warrants include a warrant (the "Initial Warrant")
with an exercise price of $0.01 one cent per warrant. Upon exercise of an
Initial Warrant, a Bridge Investor is entitled to receive one share of Common
Stock and a warrant (the "Unit Warrant") to purchase one share of Common Stock
at an exercise price of $7.81 per share (in some cases, $5.19 per share). The
number of shares of Common Stock shown as beneficially owned and offered by
Bridge Investors in the table below assumes exercise of both the Initial
Warrants and the Unit Warrants.
Larry J. Wells, one of the Bridge Investors, is a director of the Company
and is the Chairman of the entity that acts as the manager of Sundance Venture
Partners, L.P., a shareholder of the Company. Mr. Wells is also a partner of
Anacapa Venture Partners, one of the Bridge Investors.
As a result of restrictions on transfers of the Securities held by the
Bridge Investors which were imposed by the California Department of Corporations
as a condition of granting a permit qualifying the issuance of securities in the
Bridge Financing transaction in January 1995, even though the Shares issuable to
the Bridge Investors are covered by this Prospectus, public resale of Shares by
the Bridge Investors requires the consent of the California Department of
Corporations unless the transaction is otherwise exempt under the California
Blue Sky law. In either event, the buyers of such Shares will receive legended
certificates subjecting the Securities in the hands of such buyers to like
legends and restrictions on further resale.
Other Selling Shareholders
The Other Selling Shareholders include, Neutrogena Corporation, the
Commitment Warrant holders (as defined below), Consultants Warrant holders (as
defined below), Broadmark Capital Corporation ("Broadmark") and Swartz
Investments, LLC ("Swartz"). Neutrogena, which is a subsidiary of Johnson &
Johnson, is a party with the Company to (i) a License Option Agreement dated
April 16,
10
<PAGE>
1992, (ii) a Metabolic Moisturizer OTC License Agreement dated April 16, 1992
and (iii) a Patent License Agreement effective June 1, 1994.
In October 1994, warrants to acquire 44,604 shares of Common Stock were
issued at an exercise price of $9.02 per share to investors who planned to
participate in a proposed private placement of preferred stock which was never
consummated (the "Series D Transactions").
In April 1996, common stock purchase warrants were granted to James H.
Caplan, Rene Matthews, and Jeffrey C. Bruss (the "Consultants Warrants"), to
acquire a total of 57,000 shares at an exercise price of $6.25 per share subject
to certain terms and conditions.
The Company issued 497,817 shares of Common Stock to Carl R. Thornfeldt
and Peter M. Elias who are founders of the Company and directors.
Broadmark Capital Corporation acted as placement agent in connection with
the Bridge Financing and received a placement agent's fee and warrants to
purchase 35,496 shares of Common Stock in consideration of its services in the
Series D Transactions. At various times before May 1, 1992, Broadmark also
purchased shares of Common Stock and has received warrants to purchase shares of
Common Stock in consideration of financial services provided to the Company.
In connection with it services as placement agent for the Series A
Transaction, Swartz received warrants to purchase up to 86,006 shares of Common
Stock at an exercise price of $7.23 per share, and received a placement agent's
fee of $570,000.
<TABLE>
The following table and accompanying footnotes identify each Selling
Shareholder based upon information provided to the Company, set forth as of
August 19, 1996, with respect to the Shares beneficially held by or acquirable
by, as the case may be, each Selling Shareholder and the shares of Common Stock
beneficially owned by the Selling Shareholders which are not covered by this
Prospectus. Except as described above, based on information supplied to the
Company, no Selling Shareholder has had any position, office or other material
relationship with the Company within the past three years. The percentage
figures reflected in the table assume conversion of all shares of Series A
Preferred into 1,614,138 shares of Common Stock, and exercise of all Bridge
Warrants, and all other warrants.
<CAPTION>
Shares Beneficially Owned Number of Shares Beneficially
Prior to Offering Shares Being Owned After Offering
Name Number Percent(1) Offered Number Percent
- ---- ------ ---------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Series A Preferred Holders
AG Super Fund International Partners, L.P. . 36,246 * 36,246 0 0
Banque Scandinave En Suisse ................ 120,819 1.6 120,819 0 0
Cameron Capital Ltd. ....................... 84,573 1.2 84,573 0 0
Darissco Diversified Investments, Inc. ..... 23,005 * 23,005 0 0
Everest Capital International, Ltd.......... 244,054 3.3 244,054 0 0
Everest Capital Investments, Ltd. .......... 118,402 1.6 118,402 0 0
GAM Arbitrage, Inc. ........................ 72,491 1.0 72,491 0 0
GRACECHURCH and Co. ........................ 120,819 1.6 120,819 0 0
KA Investments, LDC ........................ 16,915 * 16,915 0 0
LAKE Management LDC ........................ 67,658 * 67,658 0 0
Leonardo, L.P............................... 302,047 4.1 302,047 0 0
Raphael, L.P. .............................. 72,491 1.0 72,491 0 0
Richcourt $ Strategies, Inc. ............... 60,409 * 60,409 0 0
The Gifford Fund, Ltd. ..................... 84,573 1.2 84,573 0 0
The Tail Wind Fund, Ltd. ................... 60,409 * 60,409 0 0
The OTATO Limited Partnership............... 55,577 * 55,577 0 0
Trustees' IFM Pension Plan Limited. ........ 24,164 * 24,164 0 0
West Merchant Bank Nominees, Ltd. .......... 38,341 * 38,341 0 0
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned Number of Shares Beneficially
Prior to Offering Shares Being Owned After Offering
Name Number Percent(1) Offered Number Percent
- ---- ------ ---------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Bridge Investors
A. B. Laffer, Canto & Associates ........... 6,400 * 6,400 0 0
Larry Adler, CPA............................ 16,000 * 16,000 0 0
Anacapa Venture Partners ................... 16,000 * 16,000 0 0
Alan & Lois Bauer .......................... 7,200 * 7,200 0 0
J. Thomas Bentley .......................... 32,000 * 32,000 0 0
Peter Block ................................ 7,680 * 7,680 0 0
Dr. & Mrs. Robert Cancro ................... 8,000 * 8,000 0 0
Ken Chamberlin.............................. 32,000 * 32,000 0 0
Paul Escobosa .............................. 3,200 * 3,200 0 0
Davis Fox .................................. 12,000 * 12,000 0
James Freitag .............................. 3,200 * 3,200 0 0
G & G Diagnostics LPI ...................... 12,000 * 12,000 0 0
Michael Hubbard............................. 7,200 * 7,200 0 0
Intervivos Charitable Remainder
Unitrust for the Stock's .................. 8,000 * 8,000 0 0
Bernard Keiser ............................. 32,000 * 32,000 0 0
Anita Laken ................................ 16,000 * 16,000 0 0
Glenn Laken ................................ 16,000 * 16,000 0 0
Priscilla J. Ledbetter RevocableTrust....... 4,000 * 4,000 0 0
Chai Mann .................................. 12,000 * 12,000 0 0
Robert Paget ............................... 12,000 * 12,000 0 0
Paradigm Venture Investors, LLC ............ 160,000 2.2 160,000 0 0
Herbert L. Pruzan .......................... 8,000 * 8,000 0 0
Barry Reder ................................ 3,200 * 3,200 0 0
Dr. David R. Rosencrantz ................... 9,600 * 9,600 0 0
Steven Safran .............................. 12,000 * 12,000 0 0
Seligmann, Dreiling, Beckerman
Pension Plan FBO Thomas
R. Dreiling ............................ 6,000 * 6,000 0 0
Dr. James C. Shaw........................... 12,000 * 12,000 0 0
Donald and Lucy Stoner...................... 24,000 * 24,000 0 0
Timothy Stoner.............................. 9,600 * 9,600 0 0
Dr. William M. Tucker....................... 16,000 * 16,000 0 0
United Mizrahi Bank ........................ 160,000 2.2 160,000 0 0
Rory Veal .................................. 7,200 * 7,200 0 0
Westminster Associates Limited.............. 64,000 * 64,000 0 0
Jon D. Wheeler ............................. 12,000 * 12,000 0 0
Frank D. Woodard ........................... 3,200 * 3,200 0 0
Other Selling Shareholders
Goldberg Family Partnership #4 ............. 2,957 * 2,957 0 0
Mr. Rory Veal............................... 276 * 276 0 0
William M. Tucker........................... 461 * 461 0 0
Intervivos Charitable Remainder............. 461 * 461 0 0
Peter Rettman............................... 2,772 * 2,772 0 0
Dr. & Mrs. Robert Cancro.................... 461 * 461 0 0
James C. Shaw............................... 230 * 461 0 0
Donald and Lucy Stoner...................... 1,386 * 1,386 0 0
Harold & Marilyn Fogelquist................. 461 * 461 0 0
Alan & Lois Bauer........................... 276 * 276 0 0
Ken Chamberlin.............................. 923 * 923 0 0
Dr. David R. Rosencrantz.................... 554 * 554 0 0
Davis Fox................................... 461 * 461 0 0
Jack J. Spritzer............................ 461 * 461 0 0
Seligmann, Dreiling, Beckerman Pension Plan. 230 * 230 0 0
Priscilla J. Ledbetter Revocable Trust...... 461 * 461 0 0
Northlee Partners, LTD...................... 461 * 461 0 0
Herbert L. Pruzan........................... 461 * 461 0 0
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned Number of Shares Beneficially
Prior to Offering Shares Being Owned After Offering
Name Number Percent(1) Offered Number Percent
- ---- ------ ---------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Other Selling Shareholders, cont.
Peter Block................................. 923 * 923 0 0
Jon D. Wheeler PS Profit Sharing Plan Trust. 461 * 461 0 0
Chai Mann c/o Fox's Gam Shop................ 461 * 461 0 0
Michael Hubbard............................. 184 * 184 0 0
Gary MacLeod................................ 923 * 923 0 0
Edward F. Garth............................. 230 * 230 0 0
Dr. John Yaa................................ 230 * 230 0 0
Robert B. Spitzer........................... 230 * 230 0 0
G&G Diagnostics LPI......................... 461 * 461 0 0
Craig Tall.................................. 369 * 369 0 0
Dorothy Stoner.............................. 461 * 461 0 0
Sally Bigger................................ 230 * 230 0 0
Joseph L. Schocken c/o Broadmark Capital Corp. 1,848 * 1,848 0 0
Geoffrey Boguch............................. 1,848 * 1,848 0 0
David Lindsey............................... 461 * 461 0 0
David Hartman............................... 1,848 * 1,848 0 0
Reed A. Corey............................... 923 * 923 0 0
Michael E. Morgan........................... 923 * 923 0 0
Pride E. Davies............................. 276 * 276 0 0
John Meisenbach............................. 1,848 * 1,848 0 0
Universal Partners.......................... 1,848 * 1,848 0 0
New York Life Insurance..................... 13,865 * 13,865 0 0
James H. Caplan............................. 30,000 * 30,000 0 0
Rene Matthews............................... 7,000 * 7,000 0 0
Jeffrey C. Bruss............................ 20,000 * 20,000 0 0
Carl D. Thornfeldt.......................... 400,755 5.5 400,755 0 0
Peter M. Elias.............................. 97,062 1.3 97,062 0 0
Neutrogena Corporation ..................... 475,560 6.5 475,560 0 0
Broadmark Capital Corporation.............. 60,780 * 60,780 0 0
Swartz Investments, LLC..................... 86,006 1.2 86,006 0 0
Larry J. Wells(1)........................... 594,946 8.1 594,946 0 0
- ----------
<FN>
* Less than 1%.
(1) Includes 569,617 shares and warrants to purchase 13,865 shares held by
Sundance Venture Partners, LP. Mr. Wells is Chairman of the entity that acts
as manager of Sundance.
</FN>
</TABLE>
13
<PAGE>
PLAN OF DISTRIBUTION
Selling Shareholders
The registration statement of which this Prospectus forms a part has been
filed, in part, to fulfill the Company's obligation under the Registration
Rights Agreements. To the Company's knowledge, as of the date hereof, no Selling
Shareholder has entered into any agreement, arrangement or understanding with
any particular broker or market maker with respect to the Shares offered hereby,
nor does the Company know the identity of the brokers or market makers which
will participate in the offering. The Shares covered hereby may be offered and
sold from time to time by the Selling Shareholders. The Selling Shareholders
will act independently of the Company in making decisions concerning the
exercise of their rights to obtain shares of Common Stock, and will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. Such sales may be made on the Nasdaq SmallCap
Market or otherwise, at prices and on terms then prevailing or at prices related
to the then market price, or in negotiated transactions.
The Shares may be sold by one or more of the following methods: (a) a
block trade in which the broker-dealer engaged by the Selling Stockholder 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 the
broker-dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. To the Company's
knowledge, the Selling Shareholders have not, as of the date hereof, entered
into any arrangement with a broker-dealer for the sale of shares through a block
trade, special offering, or secondary distribution of a purchase by a
broker-dealer. In effecting sales, broker-dealers engaged by the Selling
Shareholders may arrange for other broker-dealers to participate. Broker-dealers
will receive commissions or discounts from the Selling Shareholders in amounts
to be negotiated.
In offering their Shares, the Selling Shareholders and any
broker-dealers who execute sales for the Selling Shareholders may be deemed to
be "underwriters" within the meaning of the Securities Act in connection with
such sales, and any profits realized by the Selling Shareholders and the
compensation of such broker-dealer may be deemed to be underwriting discounts
and commissions.
Rule 10b-6 under the Exchange Act prohibits participants in a
distribution from bidding for or purchasing for an account in which the
participant has a beneficial interest, any of the securities that are the
subject of the distribution. Rule 10b-7 under the Exchange Act governs bids and
purchases made to stabilize the price of a security in connection with a
distribution of the security.
This offering will terminate as to each Selling Shareholder on the
earlier of (a) the date on which such Selling Shareholder's shares may be resold
without volume restrictions under the Securities Act; or (b) the date on which
all Shares offered hereby have been sold by the Selling Shareholders. There can
be no assurance that any of the Selling Shareholders will sell any or all of the
shares of Common Stock offered hereby.
IPO Warrants, IPO Warrant Shares, Representatives' Warrants and Representatives
Warrant Shares
The Registration Statement of which this Prospectus forms a part covers
the issuance of the IPO Warrant Shares upon exercise of the IPO Warrants
including the warrants included therein. The IPO Warrants are redeemable by the
Company, in whole or in part, at any time upon at least 30-days' prior written
notice to the registered holders thereof, at a price of $0.05 per IPO Warrant,
provided the closing price of the Common Stock has been at least $12.50 for at
least ten consecutive trading days ending on a date within 30 days before the
date of the notice of redemption. Furthermore, the Company has agreed that if it
elects to redeem the IPO Warrants, to retain National Securities Corporation and
Paulson Investments, Inc., the Representatives of the Underwriters in the IPO,
as the Company's solicitation agents ("Warrant Solicitation Agents"). The
Company has agreed to pay the Warrant Solicitation Agents for their services a
solicitation fee equal to three percent (3%) of the total amount paid by the
holders of the IPO Warrants whom the Warrant Solicitation Agents solicited to
exercise the IPO Warrants. The exercise will be presumed to be unsolicited
unless the customer states in writing that the transaction was solicited and
designates in writing the broker-dealer to receive compensation from the
exercise. The fee is not payable for the exercise of any IPO Warrant held by a
Warrant Solicitation Agent in a discretionary account at the time of the
exercise, unless the Warrant Solicitation Agent receives from the customer prior
specific written approval for such exercise. As a condition to
14
<PAGE>
receipt of the solicitation fee, the Warrant holder must acknowledge in
writing that the exercise of the IPO Warrant was solicited by the Warrant
Solicitation Agent.
This Registration Statement also covers the issuance of the
Representatives' Warrant Shares upon issuance of the Representatives' Warrants
(including shares issuable upon exercise of the Warrants included therein). The
Company believes that the Representatives' Warrants are presently held by
National Securities Corporation and one of its affiliates and by Paulson
Investment Company Inc. The holders of the IPO Warrants and Representatives'
Warrants will act independently of the Company in determining the timing of
their exercise, if any, of rights under their various agreements with the
Company, including the exercise of their rights to obtain shares of Common
Stock, and will act independently of the Company in making decisions with
respect to the timing, manner and size of each sale. Such sales may be made on
the Nasdaq SmallCap Market or otherwise, at prices and on terms then prevailing
or at prices related to the then market price, or in negotiated transactions.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fenwick & West LLP, Two Palo Alto Square,
Suite 800, Palo Alto, California 94306.
EXPERTS
The financial statements of Cellegy Pharmaceuticals, Inc. appearing in
Cellegy Pharmaceuticals, Inc.'s Annual Report (Form 10-KSB) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report incorporated by reference therein and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
15
<PAGE>
======================================= =======================================
No dealer, salesperson or other person
has been authorized to give any
information or to make any
representation not contained in this [GRAPHIC OMITTED]
Prospectus and, if given or made, such ===================================
information or representation must no
be relied upon as having been
authorized by the company. This
Prospectus does not constitute an
offer to sell or a solicitation of an
offer to buy any of the securities
offered hereby in any jurisdiction to
any person to whom it is unlawful to
make such offer or solicitation in
such jurisdiction. Neither the delivery __________________
of this Prospectus nor any sale made
hereunder shall, under any PROSPECTUS
circumstances, create any implication __________________
that the information herein is correct
as of any time subsequent to the date 6,800,000 shares of
hereof or that there has been no Common Stock
change in the affairs of the Company
since such date. [Date]
----------------------
TABLE OF CONTENTS
Page
Available Information.............. 3
Incorporation of Certain Documents. 3
By Reference.......................
The Company ....................... 4
Risk Factors ...................... 4
Selling Shareholders .............. 9
Plan of Distribution ..............14
Legal Matters .....................15
Experts ...........................15
====================================== ========================================
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses to be paid in connection
with the sale of the shares of Common Stock being registered hereby, all of
which will be paid by the Registrant. All amounts are estimates except for the
Securities and Exchange Commission registration fee.
Securities and Exchange Commission registration fee.... $ 1,036
Nasdaq SmallCap Market filing fee...................... -0-
Accounting fees and expenses........................... 2,500
Legal fees and expenses................................ 10,000
Printing and miscellaneous............................. 2,500
------
Total................................................. $16,036
======
ITEM 15. Indemnification of Directors and Officers.
The Registrant's Amended and Restated Articles of Incorporation
(the "Restated Articles") include a provision that eliminates the personal
liability of its directors to the Registrant and its shareholders for monetary
damages for breach of the directors' fiduciary duties to the maximum extent
permitted under California law. This limitation has no effect on a director's
liability (i) for acts or omissions that involve intentional misconduct or a
knowing and culpable violation of law, (ii) for acts or omissions that a
director believes to be contrary to the best interests of the Registrant or its
shareholders or that involve the absence of good faith on the part of the
director, (iii) for any transaction from which a director derived an improper
personal benefit, (iv) for acts or omissions that show a reckless disregard for
the director's duty to the Registrant or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duties, of a risk of a serious injury to the
Registrant or its shareholders, (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the Registrant or its shareholders, (vi) under Section 310 of the
California Corporations Code (the "California Code") (concerning contracts or
transactions between the Registrant and a director) or (vii) under Section 316
of the California Code (concerning directors' liability for improper dividends,
loans and guarantees). The provision does not extend to acts or omissions of a
director in his capacity as an officer. Further, the provision has no effect on
claims arising under federal or state securities laws and will not affect the
availability of injunctions and other equitable remedies available to the
Registrant's shareholders for any violation of a director's fiduciary duty to
the Registrant or its shareholders.
The Restated Articles also include an authorization for the
Registrant to indemnify its agents (as defined in Section 317 of the California
Code), through bylaws provisions, by agreement or otherwise, to the fullest
extent permitted by law. Pursuant to this latter provision, the Registrant's
Bylaws provide for indemnification of the Registrant's directors, officers and
employees. Indemnification may only be authorized by a majority of Registrant's
directors or shareholders or by order of a court, unless the agent has been
successful on the merits. In addition, the Registrant's policy is to enter into
indemnification agreements with each of its officers and directors. These
indemnification agreements provide that directors and officers will be
indemnified and held harmless to the fullest extent permitted by law. These
agreements, together with the Restated Articles, may require the Registrant,
among other things, to indemnify such directors, officers and employees against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities resulting from willful misconduct
of a culpable nature), to advance expenses to them as they are incurred,
provided that they undertake to repay the amount advanced if it is ultimately
determined by a court that they are not entitled to indemnification, and to
obtain directors' and officers' insurance if available on reasonable terms.
II-1
<PAGE>
Section 317 of the California Code makes provisions for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons, under certain circumstances, for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act.
The Underwriting Agreement related to the IPO sets forth certain
provisions with respect to the indemnification of the Registrant and certain
directors, officers, and controlling persons against certain losses and
liabilities, including certain liabilities under the Securities Act.
The Amended and Restated Registration Rights Agreement dated
April 10, 1992, entered into by and among the Registrant and various investors,
and the Amended and Restated Registration Rights Agreement dated February 10,
1995, entered into by and among the Registrant and various investors provide for
cross indemnification of certain holders of Registrant's securities, and of
Registrant and its officers and directors for certain liabilities existing under
the Securities Act and otherwise.
The Registrant also maintains a director and officer liability
policy.
II-2
<PAGE>
ITEM 16. Exhibits.
<TABLE>
The following exhibits are filed herewith or incorporated by reference herein:
<CAPTION>
Exhibit
Number Exhibit Title
- ------- -------------
<S> <C>
4.1 Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form SB-2) (Registration No. 33-93288-LA declared effective on August 11, 1995
(the "SB-2"))
4.2 Specimen Warrant Certificate. (Incorporated by reference to Exhibit 4.2 to the SB-2)
4.3 Form of Warrant Agreement Between the Company and First Interstate Bank of California. (Incorporated by
reference to Exhibit 4.3 to the SB-2)
4.4 Form of Representatives' Warrant Agreement. (Incorporated by reference to Exhibit 27.2 to the
SB-2)
4.5 Certificate of Determination, as amended, relating to the Series A
Preferred Stock. (Incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-QSB for the three months ended
March 31, 1996 (the "Q1 1996 Form 10-QSB")
4.6 Securities Subscription Agreement dated April 1996 relating to the Series A Preferred Stock.
(Incorporated by reference from Exhibit 4.2 to the Q1 1996 Form 10-QSB)
4.7 Registration Rights Agreement dated April 18, 1996 relating to the Series A Preferred Stock.
(Incorporated by reference to Exhibit 4.3 to the Q1 1996 Form 10-QSB)
5.1 Form of Opinion of Fenwick & West LLP.
10.1 Amended and Restated Registration Rights Agreement dated April 10, 1992. (Incorporated by reference to
Exhibit 10.11 to the SB-2)
10.2 1992 Stock Option Plan. (Incorporated by reference to Exhibit 10.12 to the SB-2)
10.3 Secured Debenture and Warrant Purchase Agreement dated as of February 10, 1995. (Incorporated by
reference to Exhibit 10.13 to the SB-2)
10.4 Amended and Restated Registration Rights Agreement dated as of February 10, 1995. (Incorporated by
reference to Exhibit 10.14 to the SB-2)
10.5 Warrant Agreement dated as of February 10, 1995. (Incorporated by reference to Exhibit 10.15 to the
SB-2)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See page II-5).
</TABLE>
II-3
<PAGE>
ITEM 17. Undertakings.
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 provisions described under Item 15 above, 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.
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; (ii) to
reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end 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 a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table on
the effective registration statement; and (iii) to include any additional
or changed material information with respect to the plan of distribution.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed a new registration
statement relating to the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial bona fide
offering thereof.
(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.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Foster City, State of California, on September 3,
1996.
CELLEGY PHARMACEUTICALS, INC.
By: /s/ Carl R. Thornfeldt
------------------------------
Carl R. Thornfeldt, M.D.
Acting Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints Carl R. Thornfeldt, M.D. and A. Richard
Juelis, and each of them, his true and lawful attorneys-in-fact and agents with
full power of substitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement on Form S-3, and to file the same
with all exhibits thereto and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all of said attorneys-in-fact and
agents, or any of them, or his or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
<TABLE>
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Carl R. Thornfeldt
- ---------------------------------------- Acting Chief Executive Officer and September 3, 1996
Carl R. Thornfeldt, M.D. Director (Principal Executive Officer)
/s/ A. Richard Juelis
- ---------------------------------------- Chief Financial Officer and Secretary September 3, 1996
A. Richard Juelis (Principal Financial and Accounting Officer)
/s/ Peter M. Elias .
- ---------------------------------------- Director September 3, 1996
Peter M. Elias, M.D.
- ----------------------------------------
/s/ Tobi B. Klar, M.D. Director September 3, 1996
- ----------------------------------------
Larry J. Wells Director September 3, 1996
/s/ Alan A. Steigrod
- ----------------------------------------
Alan A. Steigrod Director September 3, 1996
- ----------------------------------------
Denis R. Burger, Ph.D Director September 3, 1996
</TABLE>
II-5
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
Exhibit Page
Number Description No.
- ------ ----------- ---
<S> <C>
4.1 Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form SB-2) (Registration No. 33-93288-LA
declared effective on August 11, 1995 (the "SB-2"))
4.2 Specimen Warrant Certificate. (Incorporated by reference to Exhibit 4.2 to the SB-2)
4.3 Form of Warrant Agreement Between the Company and First Interstate Bank of California.
(Incorporated by reference to Exhibit 4.3 to the SB-2)
4.4 Form of Representatives' Warrant Agreement. (Incorporated by reference to Exhibit 27.2
to the SB-2)
4.5 Certificate of Determination, as amended, relating to the Series A Preferred Stock.
(Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on
Form 10-QSB for the three months ended March 31, 1996 (the "Q1 1996 Form 10-QSB")
4.6 Securities Subscription Agreement dated April 1996 relating to the Series A Preferred Stock.
(Incorporated by reference from Exhibit 4.2 to the Q1 1996 Form 10-QSB)
4.7 Registration Rights Agreement dated April 18, 1996 relating to the Series A Preferred Stock.
(Incorporated by reference to Exhibit 4.3 to the Q1 1996 Form 10-QSB)
5.1 Form of Opinion of Fenwick & West LLP
10.1 Amended and Restated Registration Rights Agreement dated April 10, 1992. (Incorporated by
reference to Exhibit 10.11 to the SB-2)
10.2 1992 Stock Option Plan. (Incorporated by reference to Exhibit 10.12 to the SB-2)
10.3 Secured Debenture and Warrant Purchase Agreement dated as of February 10, 1995.
(Incorporated by reference to Exhibit 10.13 to the SB-2)
10.4 Amended and Restated Registration Rights Agreement dated as of February 10, 1995.
(Incorporated by reference to Exhibit 10.14 to the SB-2)
10.5 Warrant Agreement dated as of February 10, 1995. (Incorporated by reference to Exhibit 10.15
to the SB-2)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See Page II-5).
</TABLE>
Exhibit 5.1
FENWICK & WEST LLP
A Limited Liability Partnership
Including Professional Corporations
2nd Floor Two Palo Alto Square Suite 650
282 Second Street Palo Alto, California 94306 1920 N Street Northwest
San Francisco, Ca 94105 Telephone (415) 494-0600 Washington, D.C. 20036
(415) 281-1330 Facsimile (415) 494-1417 (202) 463-6300
September 4, 1996
Cellegy Pharmaceuticals, Inc.
1065 East Hillsdale Blvd., Suite 418
Foster City, CA 94404
Re: Registration Statement of Form S-3
Ladies and Gentlemen:
At your request we have examined the Registration Statement on Form S-3
to be filed by you with the Securities and Exchange Commission ("SEC") on or
about September 4, 1996 (the "Registration Statement") in connection with the
registration under the Securities Act of 1933, as amended, of 6,800,000 shares
of your Common Stock (the "Shares"). The Registration Statement relates to the
resale of Shares which are either (i) issued and outstanding and held by
certain of the shareholders named in the Registration Statement (the "Selling
Shareholders"), (ii) issuable upon conversion of shares of Series A Preferred
held by certain Selling Shareholders, and (iii) issuable upon exercise of
warrants (the "Warrants") held by certain of the Selling Shareholders. In
addition, the Registration Statement relates to the issuance of certain shares
of Common Stock issuable upon exercise of warrants issued and sold in the
Company's initial public offering (the "IPO") in August 1995 (the "IPO
Warrants"), and issuable upon exercise of warrants issued and sold to the
Representatives' of the Underwriters in the IPO.
As your counsel, we have examined the proceedings taken by you in
connection with the issuance of the Shares. It is our opinion that the currently
outstanding Shares are legally issued, non-assessable and, to our knowledge,
fully paid, and that, when issued as described in the Registration Statement,
the Shares consisting of the shares that are issuable upon conversion of the
Series A Preferred and upon exercise of the Warrants, the IPO Warrants, and the
Representatives' Warrants will be legally issued, non-assessable and, to our
knowledge, fully paid.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement and the Prospectus, constituting a part thereof and any amendments
thereto which may have been approved by us.
Very truly yours,
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Cellegy
Pharmaceuticals, Inc. for the registration of 6,800,000 shares of its common
stock and to the incorporation by reference therein of our report dated March
11, 1996, with respect to the financial statements of Cellegy Pharmaceuticals,
Inc. included in its Annual Report (Form 10-KSB) for the year ended December 31,
1995, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Walnut Creek, California
August 30, 1996
