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As filed with the Securities and Exchange Commission on August 16, 2000
Registration No. 333-36612
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------
TREGA BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0336233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9880 Campus Point Drive
San Diego, California 92121
(858) 410-6500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
MICHAEL G. GREY COPIES TO:
CHIEF EXECUTIVE OFFICER THOMAS E. SPARKS, JR.
TREGA BIOSCIENCES, INC. Pillsbury Madison & Sutro LLP
9880 Campus Point Drive 50 Fremont Street
San Diego, California 92121 San Francisco, California 94120
(858) 410-6500 (415) 983-1000
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / _____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================= ======================= ======================= ================= ====================
PROPOSED
MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
--------------------------------------------- ----------------------- ----------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 3,886,668 Shares $3.86 $15,002,538 $3,961
============================================= ======================= ======================= ================= ====================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low prices
of the Registrant's Common Stock on the Nasdaq National Market on May 5,
2000.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 16, 2000
PROSPECTUS
3,886,668 SHARES
TREGA
BIOSCIENCES, INC.
COMMON STOCK
----------------------
The selling stockholders identified in this prospectus may sell up to
3,886,668 shares of our common stock. We will not receive any of the proceeds
from the sale of shares by the selling stockholders.
Our common stock is traded on the Nasdaq National Market under the symbol
"TRGA."
----------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY READ AND CONSIDER THE "RISK FACTORS" BEGINNING ON PAGE 3.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
The date of this prospectus is _________, 2000
<PAGE>
Table of Contents
THE COMPANY............................................................1
RISK FACTORS...........................................................3
PROCEEDS FROM THE OFFERING............................................12
SELLING STOCKHOLDERS..................................................13
PLAN OF DISTRIBUTION..................................................14
LEGAL MATTERS.........................................................14
EXPERTS...............................................................14
WHERE YOU CAN FIND MORE INFORMATION...................................15
DOCUMENTS INCORPORATED BY REFERENCE...................................15
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THE COMPANY
We primarily develop and market products designed to assist
pharmaceutical and biotechnology companies in the identification of drug
candidates and to accelerate the traditional drug discovery process. These
products include our proprietary iDiscovery-TM- technologies, comprised of our
Chem.Folio-Registered Tradmark- chemical compounds and our IDEA-TM- software. We
also conduct an internal drug discovery program in the areas of obesity,
diabetes and syndrome X, a syndrome associated with obesity and diabetes,
involving the human body's resistance to insulin.
The Opportunity
Traditional drug discovery involves several sequential steps, creating
a time-consuming process with a high attrition rate. In order to discover a
drug, scientists first must identify targets in the human body. Targets are
biological molecules that cause medical conditions or diseases. Most drugs work
by binding to a target and changing the target's function or activity. Thus,
after selecting a target, scientists then must identify those chemical compounds
that change the target's function. These compounds are known as "hits."
Scientists often identify hits by first acquiring hundreds of thousands of
chemical compounds. This large quantity of compounds, otherwise known as a
compound library, may be generated by a technology called combinatory chemistry.
Combinatorial chemistry permits the rapid creation of hundreds of thousands of
chemical compounds through automated techniques. Prior to the advent of
combinatorial chemistry, chemists had to create new compounds one at a time.
The generated compounds are then tested, or screened, against the
selected target. Such screening may identify hundreds of hits. Then, in a series
of labor intensive and time consuming steps, scientists determine how the human
body absorbs, distributes, metabolizes and excretes these hits and whether they
are toxic. The pharmaceutical industry refers to these characteristics as ADMET
(absorption, distribution, metabolism, excretion and toxicity). Scientists then
chemically modify the hits to identify those with the appropriate activity and
ADMET characteristics for potentially safe and effective use in humans. This
entire process of determination and modification is called "lead optimization"
and results in the identification of drug candidates. Traditionally, lead
optimization involves the use of animal models, which is slow and inefficient
and poorly predicts successful human drug candidates. It takes approximately
three to five years for scientists to complete this initial phase of drug
discovery. A drug candidate then undergoes preclinical development and three
phases of human clinical development before receiving marketing approval from
the U.S. Food and Drug Administration. The entire process from target selection
to FDA approval of a drug typically ranges from 12-16 years, and the failure
rate is high.
Our Solution
We believe that our iDiscovery-TM- technologies increase the likelihood
of clinical success by identifying those hits with essential drug-like
characteristics at the early stages of the drug discovery process. Therefore, we
believe our products and services will improve the probability of success and
result in a shorter drug discovery process.
CHEM.FOLIO-REGISTERED TRADMARK- COMPOUNDS LIBRARIES AND SERVICES. These
include:
- off-the-shelf chemical compounds available for immediate screening
against a selected target, and rapid manufacture of closely
related compounds, or analogues, if requested by a customer;
- chemical compounds made to a customer's specifications;
- information that will enable a customer to make additional
quantities of the chemical compounds; and
- information on the solubility, or the ability of the compound to
dissolve, and cytotoxity, the toxic effect of the compound on
cells, of the Chem. Folio-Registered Trademark- compounds.
We believe that the information provided to our customers will help
them determine whether the compounds would be appropriate drug
candidates at a much earlier stage of the drug development process than
under traditional methods of discovery. In addition to a direct sales
effort, we offer our compounds over the Internet through an electronic
commerce company, ChemNavigator.com, Inc. and through screening
companies, including EVOTEC BioSystems AG.
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IDEA-TM- PREDICTIVE MODELS. IDEA-TM- predictive models are computer
simulation programs. We commercially launched one predictive model, the
IDEA-TM- absorption module, designed to predict the absorption
characteristics of chemical compounds in humans. We based the
development of this absorption module on human clinical data provided
by a consortium of major pharmaceutical companies. In addition, we plan
to develop other models to predict the other ADMET characteristics and
offer our predictive models over the Internet. We believe that our
IDEA-TM- predictive models will reduce the time and effort required in
the lead optimization process by reducing or eliminating the
traditional drug discovery process' reliance on animal testing.
Internal Drug Discovery
We discovered a group of chemical compounds that appear to influence
the production and activity of particular cytokines, or proteins that act as
messengers between cells, through interaction with melanocortin receptors, which
are protein molecules that bind to hormones produced by the pituitary gland
called melanocortins. We completed a Phase II clinical trial of one of these
compounds, HP-228, in the treatment of post-operative pain in hip and knee
replacements. In the past, we conducted a number of internal drug discovery
programs in the melanocortin receptor area with collaborators, including Ono
Pharmaceuticals, Co., Ltd. On February 11, 2000, we announced that we will only
conduct internal drug discovery programs if collaborators are available to fully
fund them. Currently, we are carrying out a collaborative program, fully funded
by Novartis Pharma AG, in the area of diabetes, obesity and syndrome X.
Additionally, we are seeking collaborators for our HP-228 compound and our
compounds for the treatment of sexual dysfunction.
Trega became a Delaware corporation in 1991. We have executive offices
at 9880 Campus Point Drive, San Diego, California 92121 and our telephone number
is (858) 410-6500.
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RISK FACTORS
WE EXPECT TO CONTINUE TO INCUR LOSSES AND MAY NEVER ACHIEVE PROFITABILITY, WHICH
MAY HARM OUR FUTURE OPERATING PERFORMANCE AND CAUSE OUR STOCK PRICE TO DECLINE.
We have experienced significant operating losses since our inception in
1991. For the years ended December 31, 1999, 1998 and 1997, we had net losses of
approximately $8.7 million, $12.8 million and $9.4 million, respectively. As of
March 31, 2000, we had an accumulated deficit of approximately $81.4 million.
Throughout 2000, we intend to continue to spend additional amounts on
developing, marketing and selling our iDiscovery-TM- products and services.
These amounts include investments in marketing our IDEA-TM- absorption software
module, developing additional IDEA-TM- predictive modules, expanding our
Chem.Folio-Registered Tradmark- chemical compound inventory, acquiring and
licensing complementary technologies and expanding our use of the Internet and
intranet to market and disseminate our products and services.
If revenues do not correspondingly increase, our operating results and
financial condition could be negatively affected. Should we continue to incur
net losses in future periods, we may not be able to increase our investment in
the development of our products and services under our present plans. Although
we have set an objective to reach positive quarterly cash flow by the end of
2000, we may never obtain sufficient revenues to achieve profitability. If we do
achieve profitability, we may not sustain or increase profitability in the
future. This in turn may cause our stock price to decline.
OUR OPERATING RESULTS ARE UNPREDICTABLE, WHICH MAY CAUSE OUR STOCK PRICE TO
DECLINE AND RESULT IN LOSSES TO OUR INVESTORS.
Our operating results are unpredictable and may fluctuate significantly
from period to period, which may cause our stock price to decline and result in
losses to investors. Some of the factors that could cause our operating results
to fluctuate include:
- changes in the demand for our iDiscovery-TM- products and
services;
- the introduction of competitive products or services;
- the nature, pricing and timing of other products and services
provided to our customers;
- acquisition, licensing and other costs related to the expansion of
our operations;
- changes in the research and development budgets of our customers
and collaborators; and
- payments of milestones, license fees or royalty payments under the
terms of our external alliances or future collaborations.
Moreover, the nature of our revenues underwent a significant shift due
to the change in our strategic focus. For example, in 1999, revenues from our
compound libraries accounted for approximately 56% of our total revenues as
compared to only 21% in 1998. In 1999, revenues from research conducted under
collaborative research agreements accounted for only 42% of our total revenues
versus 79% in 1998. As a result of these changes, we believe that
period-to-period comparisons of our financial results will not necessarily be
meaningful. You should not rely on these comparisons as an indication of our
future performance. If our operating results in any future period fall below the
expectations of securities analysts and investors, our stock price will likely
fall, possibly by a significant amount.
OUR NEW BUSINESS STRATEGY OF FOCUSING ON OUR iDISCOVERY-TM- TECHNOLOGIES AND
UNPREDICTABLE FUTURE REVENUES MAKES EVALUATION OF OUR BUSINESS AND PROSPECTS
DIFFICULT.
Our new business strategy of focusing on iDiscovery-TM- technologies,
that we believe will allow our customers to identify drug candidates more
efficiently, is unproven. Because of this recent strategic shift in focus, we
cannot accurately predict our future revenues. We currently have only one
customer for our first predictive model, the IDEA-TM- absorption module. We
generated only limited revenues of approximately $7.5 million for the fiscal
year ended 1999 from our Chem.Folio-Registered Tradmark- compound customers. In
addition, we still depend in part on
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revenues received from a collaborator, Novartis, for one of our internal drug
discovery programs. Our success will depend in large part upon:
- the performance of our iDiscovery-TM- technologies in accelerating
the drug discovery process;
- the acceptance of our iDiscovery-TM- technologies by our
customers;
- our ability to enter into collaboration, licensing and other
agreements for iDiscovery-TM- technologies on favorable terms;
and
- our ability to generate revenues with existing and potential
collaborators in our internal drug discovery programs.
Moreover, we have limited experience marketing our IDEA-TM- absorption
module, which we launched in December 1999. Additionally, the sales cycle of the
IDEA-TM- predictive models is unknown. Furthermore, the plans for our future
predictive modules, such as a metabolism module, are unproven, and we cannot be
sure that we will ever develop these products or that any product that we
develop will be commercially successful. As a result of these factors, it is
difficult to predict our future revenues and evaluate our business prospects.
OUR iDISCOVERY-TM- TECHNOLOGIES AND PRODUCTS MAY NOT BE COMMERCIALLY VIABLE OR
SUCCESSFUL, WHICH COULD CAUSE US TO GENERATE INSUFFICIENT REVENUES TO BECOME
PROFITABLE.
Our ability to succeed depends upon the acceptance by potential
customers of our iDiscovery-TM- technologies, in place of more traditional
methods, as effective tools in the discovery of new drugs. Drug discovery
methods based upon our iDiscovery-TM- technologies may not lead to the discovery
or development of commercial pharmaceutical products. Moreover, we have not yet
completed or commenced most of our IDEA-TM- predictive model development
programs. These technology programs may not be developed, employed or
commercialized successfully, work efficiently or otherwise enhance our ability
to engage in the acceleration of the drug discovery process. Some of the factors
that will determine the demand for our IDiscovery-TM- technologies include:
- the efficacy of our predictive models;
- the development of predictive models in addition to the absorption
module; and
- the novelty and diversity of our compound libraries.
In order for us to achieve our business objectives, we must convince
these companies that our predictive models and compound libraries will reduce
both the cost and length of the drug discovery process. If we cannot convince
companies in the pharmaceutical industry of the effectiveness of our
iDiscovery-TM- technologies, we may be unable to keep our existing customers or
attract additional customers on acceptable terms or develop a sustainable,
profitable business.
OUR INTERNAL DRUG DISCOVERY PROGRAMS MAY NEVER RESULT IN PRODUCTS, WHICH MEANS
WE MAY NOT RECEIVE MILESTONE OR ROYALTY PAYMENTS.
Our internal drug discovery programs, including our programs to develop
potential melanocortin-related drug candidates, are at early stages. We only
intend to proceed with such internal drug discovery programs if, and to the
extent, collaborators fund them. Moreover, our collaborators will probably
control the development of any drug candidates resulting from our internal drug
discovery programs. We do not expect drugs resulting in part from our efforts to
become commercially available for a number of years, if ever, even if any such
compounds are successfully developed and are proven to be safe and effective.
The failure to commercialize such compounds would result in us not receiving any
milestone or royalty payments.
IF WE FAIL TO SECURE NEW COLLABORATORS, OR LOSE OUR EXISTING COLLABORATORS, OR
IF OUR COLLABORATORS DO NOT APPLY ADEQUATE RESOURCES TO THEIR COLLABORATIONS
WITH US, OUR PRODUCT DEVELOPMENT ACTIVITIES AND OUR POTENTIAL FOR PROFITABILITY
MAY SUFFER.
While our reliance on collaborators to date has been limited, our
current strategy for the utilization and development of our iDiscovery-TM-
technologies and internal drug discovery programs requires us to enter into
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contractual arrangements with corporate collaborators, licensors, licensees and
others. In fact, we intend to proceed with our internal drug discovery programs
only if collaborators are available to fully fund such programs. There may only
be a limited number of pharmaceutical or biotechnology companies that would
potentially collaborate with us. Thus, we may not be successful in negotiating
additional commercially and scientifically sound collaborations.
We currently have material arrangements with the following third
parties: EVOTEC Biosystems AG, Chemnavigator.com, Inc., Novartis Pharma AG and
The Scripps Clinic and Research Foundation. To date, we have relied on
collaborators such as Novartis to fund our internal drug discovery programs in
the area of melanocortin receptors. In addition, we license from Scripps the Tea
Bag technology, which is a key production technique used in our compound
business.
Our success depends in part upon the performance by these collaborators
under these arrangements. We will have little or no control over the resources
that any collaborator may devote to its collaboration with us. If any
collaborator breaches or terminates its agreement with us to develop an
IDiscovery-TM- product or service, or fails to conduct its collaborative
activities in a timely manner, the commercialization of our products could be
delayed or prevented completely. In the case of our internal drug discovery
programs, the failure to conduct a collaborative program in a timely manner
would prevent us from receiving potential milestones and royalties. Furthermore,
our collaborators may resist sharing revenue derived from the successful
commercialization of a drug through royalty payments, or others may have
competing claims to all or a portion of such revenue.
Disputes may arise with our collaborators over ownership rights to
intellectual property, know-how or technologies developed with our
collaborators. Our arrangements with our collaborators involving our
Chem.Folio-TM- chemical compounds may require us to provide identical or similar
chemical compounds, or chemical compound technologies or information to multiple
parties. Disputes may arise between collaborators as to proprietary rights to
particular compounds in our libraries. If disputes arise, our existing customers
could stop using our chemical compounds; we could lose existing and potential
customers; we could have difficulty in attracting future collaborators to assist
with our product development efforts; and we could incur litigation costs, which
would affect our financial position.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY BE UNAVAILABLE, WHICH COULD
ADVERSELY AFFECT OUR OPERATIONS AND STOCK PRICE.
We may need to raise more money to continue the research and
development necessary to bring our products to market and to establish or expand
manufacturing and marketing capabilities. Additionally, we intend to consider
acquisitions and licensing of technologies that will add value to our
iDiscovery-TM- technologies. We may seek additional funds through public and
private stock offerings, arrangements with corporate partners, borrowings under
lease lines of credit or other sources. The amount of money needed will depend
on many factors, including among others:
- expenses in connection with the development of our iDiscovery-TM-
technologies or other products or services;
- expenses in connection with maintaining our intellectual property,
including preparing, filing, and prosecuting patent claims and
enforcing patents;
- our current and potential collaborative relationships; and
- the need to increase research and development spending to keep
up with competing technologies and market developments.
As of June 30, 2000, we had a net quarterly cash outlay for operations of
approximately $6 million. Assuming our net cash outlay declines when our
existing research and development collaboration expires (at the end of the
second quarter of 2001), we will need total capital of approximately $45
million over the next twenty-four months ($24 million in the first
twelve-month period and $21 million in the second twelve-month period).
Assuming a level of Chem.Folio-Registered Tradmark- compound library revenues
for the next twelve months that is comparable to Chem.Folio-Registered
Tradmark-compound library revenues for the twelve months ended June 30, 2000
and assuming sales growth of approximately ten percent in the second twelve
months, we anticipate that our existing capital resources, funding under an
existing research and development collaboration, the potential sale of
nonessential assets, and our currently available property and equipment
financing and line of credit, will be sufficient to fund approximately $31
million of our current and planned operations through the next twenty four
months. We believe that the product licenses of our IDEA-TM-
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predictive models over the next two years will provide a portion of this
remaining needed capital while the balance may come from additional financing.
However, the level of anticipated revenues and sales growth may not be achieved.
Additional capital may not be available on terms acceptable to us, or
at all. If we cannot raise more money we may have to reduce our capital
expenditures, scale back our development of new products, delay, reduce the
scope of or eliminate our acquisition activities, or curtail operations
significantly. Any additional equity financing may be dilutive to stockholders,
and debt financing, if available, may include restrictive covenants.
FAILURE TO COMPETE EFFECTIVELY IN OUR INTENSELY COMPETITIVE INDUSTRY WILL CAUSE
OUR REVENUES TO DECLINE.
We compete in markets that are intensely competitive, new and rapidly
changing. Many of our current and potential competitors have greater financial,
human and other resources than we do. If we cannot respond quickly to changing
customer requirements, secure intellectual property positions, or adapt quickly
and obtain access to new and emerging technologies, our revenues may decline.
Our competitors include:
- major pharmaceutical companies who manufacture compound libraries
or predictive software for their own use or who are developing
drugs focused on the melanocortins;
- specialized biotechnology/software firms, such as Simulations
Plus, Inc. and Camitro Corporation;
- combinatorial chemistry companies, such as Tripos, Inc., ArQule,
Inc. and Pharmacopeia, Inc.;
- academic institutions;
- governmental agencies; and
- other public and private research institutions.
Many pharmaceutical and biotechnology companies, which represent the
largest market for our products and services, develop, have developed or have
entered into collaborations with companies with internal predictive modeling
and/or combinatorial chemistry programs. We also compete for access to new
pharmacophores, which are three-dimensional representations of parts of
molecules responsible for drug activity. Any inability by us to develop new
pharmacophores would material effect our business development. Our competitors
may develop products that are more effective and/or less costly than any of our
current or future products. Many of these competitors have substantially more
resources and product development, production and marketing capabilities than we
do. In addition, many of our competitors have significantly greater experience
than we do in competing for the scarce research and development budgets of
pharmaceutical companies. Therefore, the market for our iDiscovery-TM-
technologies may not generate sufficient revenues for us to become profitable.
In addition, products currently exist that will compete directly with
any drug candidates that we seek to develop, such as HP-228, or that our
collaborators may seek to develop. Any product candidate that our collaborators
or we develop must then compete for market acceptance and market share. If our
collaborators or we are successful in achieving significant commercial sales of
products, our collaborators and we also will compete in manufacturing efficiency
and marketing capability, an area in which we have limited or no experience.
Furthermore, our competitors may obtain FDA approval for products sooner and be
more successful in manufacturing and marketing their products than our
collaborators or us.
Significant factors in determining whether we will be able to compete
successfully include:
- the performance, pricing and ease of use of our iDiscovery-TM-
technologies;
- the novelty, diversity, purity and target specificity of our
compound libraries;
- speed and costs of identifying and optimizing potential lead
compounds;
- the reputation and acceptance of our iDiscovery-TM- technologies;
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- the quality and availability of customer service and customer
support; and
- the effectiveness of our sales and marketing efforts.
If our products are not competitive based on these or other factors,
our business, financial condition and results of operations will be materially
harmed.
IF WE DO NOT PROTECT OUR PROPRIETARY RIGHTS, THEN WE MAY NOT BE ABLE TO CREATE A
SUSTAINABLE BUSINESS.
Our success depends in part on obtaining, maintaining and enforcing
patents, maintaining our trade secrets, licensing patent rights owned by others,
and operating without infringing on third parties' proprietary rights. We
currently pursue patent protection for our predictive models, our compound
libraries and our efforts in the melanocortin area. We believe that our patent
applications claiming our IDEA-TM- absorption module are especially important to
our business because we believe that the module is the first of its kind. We
also hold licenses to a number of patents owned by third parties, including a
license to the Tea Bag technology. The Tea Bag patent expires in 2003. The
expiration of this patent will enable our competitors to use the Tea Bag
technique, but the existence of the patent has not prevented the development of
competing techniques for the creation of compound libraries. The expiration of
the Tea Bag patent will be an additional factor increasing competitiveness in
the compound library field.
Patent positions in our industry are highly uncertain and involve many
complex legal and technical issues. The United States Patent and Trademark
Office, USPTO, and its foreign counterparts may not issue patents from our
pending patent applications. If issued, the patents may not give us an advantage
over competitors with similar technologies. If we do not receive patents for our
core technologies or inventions, the value of our patent portfolio may diminish
and our revenue may decline.
In addition to the intellectual property rights described above, we
also rely on unpatented technology, trade secrets and confidential information.
We may not be able to effectively protect such rights because third parties may
independently develop substantially equivalent information and techniques or
otherwise gain access to our technology or disclose such technology. We require
each of our employees and consultants to execute a confidentiality agreement at
the commencement of an employment or consulting relationship with us. However,
these agreements may not provide meaningful protection for our trade secrets or
other proprietary information in the event of unauthorized disclosure of this
confidential information.
THE SCOPE OF OUR ISSUED PATENTS MAY NOT PROVIDE US WITH ADEQUATE PROTECTION OF
OUR PRODUCTS AND SERVICES, WHICH COULD HARM OUR COMPETITIVE POSITION.
Any issued patents that cover our proprietary technologies may not
provide us with substantial protection or be commercially beneficial to us.
Issuance of a patent is not conclusive as to its validity, enforceability or its
scope. The USPTO or the courts may invalidate our patents. While we are not
engaged in any patent litigation currently, third parties may challenge the
validity, enforceability and the scope of a patent. Moreover, the cost of
litigation to uphold the validity of patents and to prevent infringement can be
substantial. In addition, any litigation could also divert our technical and
management personnel's time and attention from the operation of our business. If
the outcome of litigation is adverse to us, third parties may be able to use our
patented inventions without payment to us. During the course of litigation,
there may be public announcements of the results of legal proceedings.
Securities analysts or investors may perceive these announcements to be
negative, which could cause the market price of our stock to drop. Any of these
events may materially and adversely affect our business and financial
operations.
THE USE OF OUR TECHNOLOGIES COULD POTENTIALLY CONFLICT WITH THE RIGHTS OF
OTHERS, WHICH COULD NEGATIVELY AFFECT OUR FINANCIAL POSITION.
There may be patent rights belonging to others that require us to alter
our products, pay licensing fees or cease activities using such technologies. If
our products conflict with patent rights of others, the owners of those patent
rights could bring legal actions against us claiming damages and seeking to stop
us from manufacturing and marketing the affected products. If these legal
actions are successful, in addition to any potential liability for damages, we
could be required to obtain a license in order to continue to manufacture or
market the affected products. We may not prevail in any legal action or we may
not be able to obtain any license required under any
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patent on acceptable terms, or at all. Any of these events may materially harm
our business, financial condition and results of operations.
There are numerous third party patents in the fields of combinatorial
chemistry and our other drug discovery technologies. Thus, to pursue the
preferred development route of one or more of our products, we may need to
obtain a license to a patent, which would decrease the ultimate profitability of
the applicable product. If we cannot negotiate a license, we may have to pursue
a less desirable development route or terminate the program altogether. Third
parties may have claimed discoveries similar to those covered by our patent
applications. We do not expect to know for several years the relative strength
of our patent position as compared to these other entities. In addition, other
companies, including competitors of ours, may obtain patents and proprietary
rights relating to products or processes used in, necessary to, competitive with
or otherwise related to our patents and products.
WE DEPEND ON KEY EMPLOYEES IN A COMPETITIVE MARKET FOR SKILLED PERSONNEL, AND
THE LOSS OF THEIR SERVICES WOULD AFFECT OUR ABILITY TO ACHIEVE OUR OBJECTIVES.
Our products and services are highly technical. Our key personnel must
have specialized training or advanced degrees in order to develop and refine
these products and services. There is a shortage of qualified scientific,
management and software development personnel who possess the technical
background necessary to adequately understand and improve our products and
services. We compete for these personnel with other pharmaceutical and
biotechnology companies, software firms, academic institutions and government
entities. If we are unable to attract and retain scientific and management
personnel with the appropriate credentials and experience, our products and
services could become noncompetitive and obsolete. Our product development,
operations and marketing efforts would be delayed or curtailed if we lose the
services of any of these people. We do not carry any key person life insurance
for any of our personnel. Further development of our products, including our
IDEA-TM- predictive models and Chem.Folio-Registered Tradmark- compound
libraries, requires us to hire additional qualified scientific personnel to
perform research and development, as well as personnel with software development
expertise. If we are unable to continue to attract, train and retain these
personnel, we may be unable to expand our business.
SECURITY RISKS IN ELECTRONIC COMMERCE OR UNFAVORABLE INTERNET REGULATIONS MAY
DETER FUTURE USE OF OUR PRODUCTS AND SERVICES, WHICH COULD RESULT IN A LOSS OF
REVENUES.
Currently, customers may purchase Chem.Folio-Registered Tradmark-
chemical compounds through an electronic commerce web site, ChemNavigator.com.
We plan to make our IDEA-TM- predictive software available through our own web
site. Our ability and the ability of ChemNavigator.com to provide secure
transmissions of confidential information over the Internet may limit online
uses and purchases of products. Advances in computer capabilities and new
discoveries in the field of cryptography may compromise the security measures
that Chem.Navigator.com and we will use to protect our web sites and access to
our databases. A breach of our security measures may result in the
misappropriation of our proprietary information or confidential information
about our customers. Also, a security breach could result in interruptions in
our operations. The security measures we adopt may not be sufficient to prevent
breaches, and we may be required to incur significant costs to protect against
security breaches or to alleviate problems caused by breaches. Further, a breach
of the security of our web site, the ChemNavigator.com web site, or the web site
of another company, may result in our customers not using the Internet to access
our products. For example, the attacks earlier this year by computer hackers on
major electronic commerce web sites and other Internet service providers have
heightened concerns regarding the security and reliability of the Internet.
Because of the growth in electronic commerce, the United States
Congress has held hearings on whether to further regulate providers of services
and transactions in the electronic commerce market. The federal government could
enact laws, rules and regulations that would affect our business and operations.
Individual states could also enact laws regulating the use of the Internet. If
enacted, these federal and state laws, rules and regulations could require us or
ChemNavigator.com to change online business and operations, which could limit
the growth and development of our online products.
BECAUSE OUR ACTIVITIES INVOLVE THE USE OF HAZARDOUS MATERIALS, WE MAY BE SUBJECT
TO COSTLY ENVIRONMENTAL LIABILITY THAT COULD EXCEED OUR RESOURCES AND ADVERSELY
AFFECT OUR FINANCIAL OPERATIONS.
Our research and development activities involve the controlled use of a
large number of hazardous or potentially hazardous materials, chemicals and
various radioactive compounds. The primary hazardous substance that we use in
our activities is hydrogen fluoride. We also use flammable solvents that are
potentially hazardous in the event of a fire. Such solvents include methanol,
diethyl ether, acetone, and isopropanol. Federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
these materials and specific
8
<PAGE>
waste products apply to us. Although we believe that our safety procedures for
handling and disposing of these materials comply with legally prescribed
standards, the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of an accident, we could be held
liable for damages, and this liability could exceed our resources. We do not
carry any environmental pollution liability insurance.
We believe that we comply in all material respects with applicable
environmental laws and regulations. However, we may have to incur significant
costs to comply with current or future environmental laws and regulations. Any
additional expenditures would harm our financial operations.
BECAUSE OUR REVENUES ARE DERIVED PRIMARILY FROM THE PHARMACEUTICAL AND
BIOTECHNOLOGY INDUSTRIES, OUR REVENUES MAY FLUCTUATE SUBSTANTIALLY DUE TO
REDUCTIONS AND DELAYS IN RESEARCH AND DEVELOPMENT EXPENDITURES.
We expect to derive revenues primarily from products and services
provided to the pharmaceutical and biotechnology industries. Accordingly, our
success will depend in large part upon the success of the companies within those
industries and their demand for our products and services. Our operating results
may fluctuate substantially due to reductions and delays in research and
development expenditures by companies in those industries. These reductions and
delays may result from factors such as:
- changes in economic conditions;
- consolidation in the pharmaceutical and biotechnology industries;
- changes in the regulatory environment affecting health care and
health care providers;
- pricing pressures;
- market-driven pressures on companies to consolidate and reduce
costs; and
- other factors affecting research and development spending.
We have no control over these factors.
OUR STOCK PRICE HAS BEEN AND WILL LIKELY CONTINUE TO BE VOLATILE, AND YOU MAY BE
UNABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAID.
Our stock price has been and is likely to continue to be highly
volatile. For example, our stock price has since the beginning of 2000 closed as
high as $13.375 on March 7, 2000 and as low as $1.938 on January 3, 2000. Our
stock price could fluctuate significantly due to a number of factors, including:
- variations in our actual or anticipated operating results;
- sales of substantial amounts of our stock;
- announcements about us or about our competitors, including
technological innovation or new products or services;
- litigation and other developments relating to our patents or other
proprietary rights or those of our competitors;
- conditions in the pharmaceutical and biotechnology industries;
- governmental regulation and legislation; and
- changes in securities analysts' estimates of our performance, or
our failure to meet analysts' expectations.
We have no control over most of these factors.
9
<PAGE>
In addition, the stock markets in general, and the Nasdaq National
Market and the market for life sciences and technology companies in particular,
have experienced extreme price and volume fluctuations recently. These
fluctuations often have been unrelated or disproportionate to the operating
performance of these companies. These broad market and industry factors may
decrease the market price of our common stock, regardless of our actual
operating performance.
Historically, stockholders have brought securities class action
litigation against companies following periods of volatility in the market
prices of their securities. We may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and a
diversion of management's attention and resources, which could affect our
profitability.
HEALTH CARE REFORM AND RESTRICTIONS ON REIMBURSEMENT MAY AFFECT THE ABILITY OF
PHARMACEUTICAL AND BIOTECHNOLOGY COMPANIES TO PURCHASE OR LICENSE OUR PRODUCTS
AND SERVICES, WHICH MAY AFFECT OUR PROFITABILITY.
The continuing efforts of government and third party payors to contain
or reduce the costs of health care may reduce the profitability of
pharmaceutical and biotechnology companies. For example, in some foreign
markets, the government controls pricing or profitability of prescription
pharmaceuticals. In the U.S., we expect the continuation of federal and state
proposals to implement similar governmental control. We cannot predict what
actions federal, state or private payors for health care goods and services may
take in response to any health care reform proposals or legislation. We expect
to derive almost all of our revenues in the foreseeable future from the
pharmaceutical and biotechnology industries. Accordingly, our success depends
upon the success of the companies within those industries and their demand for
our products and services. Any reduction in the profitability of actual or
prospective customers for our products and services could result in reduced
revenues for us.
THE STRICT REGULATORY APPROVAL PROCESS FOR PHARMACEUTICALS MAY PREVENT OUR
COLLABORATORS OR US FROM OBTAINING APPROVALS FOR THE COMMERCIALIZATION OF OUR
MELANOCORTIN-RELATED PRODUCTS, REDUCING ANY FUTURE ROYALTIES OR REVENUES.
The manufacturing and marketing of melanocortin-related pharmaceutical
products developed by our collaborators or us will be subject to regulation in
the United States and other countries. These regulations could subject our
collaborators or us to several problems such as:
- failure to obtain necessary regulatory approvals or clearances for
our melanocortin-related products on a timely basis, or at all;
- delays in receipt of or failure to receive approvals or
clearances;
- the loss of previously received approvals or clearances; or
- limitations on intended uses imposed as a condition of approvals.
In the United States, pharmaceuticals are subject to rigorous
regulation by the Food and Drug Administration, the FDA. Under the federal Food,
Drug and Cosmetic Act, the FDA regulates the testing, manufacture, safety,
efficacy, labeling, storage, record keeping, approval, advertising and promotion
of pharmaceutical products. Our collaborators will not be able to commence
marketing or commercial sales of pharmaceutical products until our collaborators
receive clearance or approval from the FDA, which can be a lengthy, expensive
and uncertain process. Our collaborators and we have not applied for FDA or
other regulatory approvals with respect to the sale of any of our pharmaceutical
products under development, such as HP-228. For marketing outside the United
States, our collaborators and we will also be subject to foreign regulatory
requirements governing human clinical trials and marketing approval for
pharmaceutical products. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary widely from country to
country. We may experience difficulties that could delay or prevent the
successful development, introduction and marketing of proposed products.
Regulatory clearance or approval or clearance of any proposed products may not
be granted by the FDA or foreign regulatory authorities on a timely basis, if at
all. If our collaborators or we do not receive FDA approval on a timely basis or
at all, we may not receive milestone or royalty payment, and our business and
financial position may be harmed.
10
<PAGE>
IF WE FAIL TO DEVELOP OR MAINTAIN OUR RELATIONSHIPS WITH THIRD PARTY
MANUFACTURERS, OR IF THESE MANUFACTURERS FAIL TO PERFORM ADEQUATELY, WE MAY BE
UNABLE TO COMMERCIALIZE OUR PHARMACEUTICAL PRODUCTS AND OUR BUSINESS WILL BE
HARMED.
Our capacity to conduct clinical trials and commercialize our
melanocortin-related pharmaceutical products will depend in part on the
abilities of our collaborators or contract manufacturers to make products on a
large scale, at a competitive cost and under regulatory requirements. Our
collaborators or we must establish and maintain a commercial scale formulation
and manufacturing process for all of the potential pharmaceutical products to
complete clinical trials. We, our collaborators or third party manufacturers may
encounter difficulties with these processes at any time that could result in
delays in clinical trials, regulatory submissions or in the commercialization of
potential pharmaceutical products. Third party manufacturers are subject to
regulatory review and may fail to comply with good manufacturing practices
regulations. Our collaborators or we must conduct new product testing and
facility compliance inspections for any third party manufacturer with whom we
intend to contract. This testing and inspection is costly and time-consuming.
Any of these factors could prevent, or cause delays in, obtaining regulatory
approvals for, and manufacturing, marketing or selling of, our products and
could also result in significantly higher operating expenses.
WE HAVE VARIOUS MECHANISMS IN PLACE THAT A STOCKHOLDER MAY NOT CONSIDER
FAVORABLE, WHICH MAY DISCOURAGE TAKEOVER ATTEMPTS AND WHICH MAY LOWER THE PRICE
THAT INVESTORS MIGHT BE WILLING TO PAY FOR OUR COMMON STOCK.
Our amended and restated certificate of incorporation and bylaws
contain provisions that may discourage, delay or prevent a change in our
control, even if the change in control would benefit stockholders. These
provisions include:
- authorizing the issuance of up to 5,000,000 shares of preferred
stock by our Board of Directors to increase the number of
outstanding shares and thwart a takeover attempt, without any
further approval of our stockholders;
- a classified Board of Directors with staggered, three-year terms,
which may lengthen the time to gain control of our Board of
Directors;
- prohibiting stockholder action by written consent, which requires
all actions to be taken at a meeting of stockholders;
- requiring super-majority voting to effect specified amendments to
our certificate of incorporation and bylaws;
- limiting who may call special meetings of stockholders; and
- establishing advance notice requirements for nominations of
candidates for election to the board of Directors or for proposing
matters that can be acted upon by stockholders at stockholders
meetings.
In addition, provisions of Section 203 of Delaware General Corporate
Law govern us. These provisions may prohibit large stockholders, in particular
those owning 15% or more of our outstanding voting stock, from merging or
combining with us. These and other provision in our amended and restated
certificate of incorporation and bylaws and Delaware law could reduce the price
that investors might be willing to pay for shares of our common stock in the
future and result in the market price being lower than it would be without these
provisions.
WE MAY HAVE SUBSTANTIAL EXPOSURE TO PRODUCT LIABILITY CLAIMS AND MAY NOT HAVE
ADEQUATE INSURANCE TO COVER THOSE CLAIMS, WHICH WOULD ADVERSELY AFFECT OUR
FINANCIAL OPERATIONS.
We may be held liable if any product we develop, or any product made by
others using our technologies, causes injury. We carry only limited product
liability insurance coverage for our clinical trials. We intend to obtain
product liability insurance to cover our products approved for marketing and
sale. This insurance may be prohibitively expensive or may not fully cover our
potential liabilities. Our inability to obtain adequate insurance coverage and
at an acceptable cost could prevent or inhibit the commercialization of our
products. If a third party sues us for any injury caused by products made by us
or third parties using our technologies, our liability could exceed our total
assets, materially harming our financial position.
11
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this prospectus, the words "expects," "anticipates,"
"estimates," "plans," and similar expressions are intended to identify
forward-looking statements. These are statements that relate to future periods
and include statements under the captions "Risk Factors" and "The Company" as to
the adequacy of capital resources, growth in operations, the ability to
commercialize products developed under collaborations and alliances, and the
performance and utility of our products and services. Forward-looking statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected. These risks and uncertainties include, but are
not limited to, risks relating to the development of new IDEA-TM- predictive
models and expansion of our Chem.Folio-Registered Tradmark- compound libraries
and their use by our potential customers, and the risks set forth under "Risk
Factors."
PROCEEDS FROM THE OFFERING
We will not receive any proceeds from the sale of the shares by the
selling stockholders. All proceeds from the sale of the shares will be for the
account of the selling stockholders, as described below. See "Selling
Stockholders" and "Plan of Distribution" below.
12
<PAGE>
SELLING STOCKHOLDERS
The following table discloses information as of August 15, 2000,
regarding each selling stockholder's beneficial ownership of our common stock
and the shares being offered by each selling stockholder. We have based the
information about beneficial ownership upon information obtained from the
selling stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR
TO OFFERING
------------------------------------- NUMBER OF SHARES
SELLING STOCKHOLDERS NUMBER PERCENT BEING OFFERED
----------------------------------------------------- ------------------------- ----------- ------------------------
<S> <C> <C> <C>
BayStar Capital, L.P. 300,000 1.07 300,000
BayStar International, LTD 200,000 * 200,000
Cypress VI Partners 33,333 * 33,333
EGM Medical Technology Fund LP 199,667 * 109,667
EGM Medical Technology Offshore Fund 135,600 * 72,000
First Security Van Kasper (1) 220,000 * 220,000
Jackson Square Partners, L.P. 181,667 * 181,667
Narragansett I, LP 30,934 * 30,934
Narragansett Offshore Ltd. 22,400 * 22,400
Paul M. Ginsburg 33,333 * 33,333
Pequot Scout Fund, L.P. 300,000 1.07 300,000
Special Situations Private Equity Fund, L.P. 300,000 1.07 300,000
The Timken Living Trust U/A/D 9/14/99 83,334 * 83,334
T. Rowe Price Associates, Inc.(2) 2,089,600 7.48 2,000,000(2)
</TABLE>
* Less than 1%
(1) Represents the number of shares of our common stock issuable upon the
exercise of a warrant granted to First Security Van Kasper for financial
services.
(2) Includes 1,333,334 shares held by T. Rowe Price New Horizons Fund, Inc.,
440,666 shares held by T. Rowe Price Health Sciences Fund, Inc. and 226,000
shares held by Green Line Mutual Funds - Green Line Health Sciences Fund.
On April 4 and April 11, 2000, we agreed to sell 3,666,668 shares of our common
stock and grant a warrant to First Security Van Kasper, the placement agent, to
purchase up to 220,000 additional shares of our common stock. In connection with
this financing, we agreed to file a registration statement with the SEC covering
the resale of the shares issued or issuable to each selling stockholder. Our
agreement requires us to cause this registration statement to remain effective
until the earlier of (a) April 12, 2002, (b) the date on which each selling
stockholder's shares could be sold in a single three-month period under Rule 144
of the Securities Act of 1933 or (c) such time as all the shares offered by this
prospectus have been sold. We also agreed to indemnify each selling stockholder
against claims made against them arising out of, among other things, statements
made in this registration statement.
13
<PAGE>
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold at
various times by the selling stockholders. The selling stockholders will act
independently of us in making decisions with respect to the timing, manner and
size of each sale. The shares may be sold by or for the account of the selling
stockholders in transactions on the Nasdaq National Market, the over-the-counter
market, or otherwise. These sales may be made at fixed prices, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices. The shares may be sold by means of one or more of the
following methods:
- a block trade in which the broker-dealer so engaged will attempt
to sell the shares as agent, but may position and resell a portion
of the block as principal to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by that
broker-dealer for its account under this prospectus;
- ordinary brokerage transactions in which the broker solicits
purchasers;
- in connection with short sales, in which the shares are
redelivered to close out short positions;
- in connection with the loan or pledge of shares registered
hereunder to a broker-dealer, and the sale of the shares so loaned
or the sale of the shares so pledged upon a default;
- in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options;
- privately negotiated transactions; or
- in a combination of any of the above methods.
In effecting sales, broker-dealers engaged by the selling stockholders
may arrange for other broker-dealers to participate in resales. Broker-dealers
may receive compensation in the form of discounts, concessions or commissions
from the selling stockholders or from the purchasers of the shares or from both.
This compensation may exceed customary commissions.
The selling stockholders and any broker-dealers, agents or underwriters
that participate with the selling stockholders in the distribution of the shares
may be deemed to be "underwriters" within the meaning of the Securities Act. Any
commissions paid or any discounts or concessions allowed to any of those
persons, and any profits received on the resale of the shares purchased by them,
may be deemed to be underwriting commissions or discounts under the Securities
Act.
We have agreed to bear all expenses of registration of the shares
(other than fees and expenses, if any, of legal counsel or other advisors to the
selling stockholders). Any commissions, discounts, concessions or other fees, if
any, payable to broker-dealers in connection with any sale of the shares will be
borne by the selling stockholders selling those shares.
LEGAL MATTERS
Certain legal matters with respect to the validity of common stock
offered by this prospectus are being passed upon for us by Pillsbury Madison &
Sutro LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
referenced in this prospectus and elsewhere in the registration statement. Our
consolidated financial statements are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
14
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and
other information with the Securities and Exchange Commission. You may read and
copy any materials we file with the Commission at the Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Commission at 1-800-SEC-0330 for more information on its public reference
rooms. The Commission also maintains an Internet Website at http://www.sec.gov
that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission.
We have filed with the Commission a registration statement (which
contains this prospectus) on Form S-3 under the Securities Act of 1933. The
registration statement relates to the common stock offered by the selling
stockholders. This prospectus does not contain all of the information set forth
in the registration statement and the exhibits and schedules to the registration
statement. Please refer to the registration statement and its exhibits and
schedules for further information with respect to us and our common stock.
Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance, we refer you
to the copy of that contract or document filed as an exhibit to the registration
statement. You may read and obtain a copy of the registration statement and its
exhibits and schedules from the Commission, as described in the preceding
paragraph.
DOCUMENTS INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" the information
we file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be a part of this prospectus, and later information that we
file with the Commission will automatically update and supersede this
information. We incorporate by reference the documents listed below and any
future filings we make with the Commission under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until this offering is completed.
The documents we incorporate by reference are:
- Our Annual Report on Form 10-K for the year ended December 31,
1999.
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 2000.
- Our Current Report on Form 8-K, filed August 7, 2000.
- The description of our common stock contained in our registration
statement on Form 8-A filed under the Exchange Act on March 13,
1996.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address and number:
Cynthia Reindal
Corporate Communications and Investor Relations
Trega Biosciences, Inc.
9880 Campus Point Drive
San Diego, California 92121
Telephone (858) 410-6500
We have not authorized anyone to provide you with information or to
represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. The selling stockholders are
offering to sell, and seeking offers to buy, only the shares of Trega common
stock covered by this prospectus, and only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date, regardless of the time of delivery of
this prospectus or of any sale of the shares.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Commission registration fee and the Nasdaq National Market listing fee.
AMOUNT
SEC registration fee......................................... $ 3,961.00
Nasdaq National Market listing fee........................... $ 17,500.00
Accounting fees and expenses................................. $ 10,000.00
Legal fees and expenses...................................... $ 25,000.00
Miscellaneous fees and expenses.............................. $ 25,000.00
Total...................................... $ 81,461.00
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides 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 for expenses incurred) arising under the
Securities Act. Our charter documents provide for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the Delaware General Corporation Law. The
Registrant has also entered into agreements with its directors and officers that
will require the Registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors or officers to the fullest extent not prohibited by law.
ITEM 16. EXHIBITS
Exhibit
NUMBER DESCRIPTION OF DOCUMENT
4.1* Subscription Agreement by and among Trega and certain
Investors, dated as of April 4, 2000.
4.2* Warrant, dated April 11, 2000, for common stock of
Trega issued to First Security Van Kasper.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.3* Consent of Pillsbury Madison & Sutro LLP (included in
its opinion filed as Exhibit 5.1 to this Registration
Statement).
24.1* Power of Attorney.
--------------------------
* Filed previously
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 foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in
II-1
<PAGE>
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 or 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 the 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
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the Registration Statement;
Provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such 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 that remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on August 16,
2000.
TREGA BIOSCIENCES, INC.
/s/ Michael G. Grey
-----------------------------------------
Michael G. Grey
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
II-2
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Harvey S. Sadow, Ph.D.*
---------------------------------
Harvey S. Sadow, Ph.D. Chairman of the Board of Directors August 16, 2000
/s/ Michael G. Grey
---------------------------------
Michael G. Grey Director, President and Chief Executive August 16, 2000
Officer
/s/ James C. Blair Ph.D.*
---------------------------------
James C. Blair, Ph.D. Director August 16, 2000
/s/ Bruce L.A. Carter, Ph.D.*
---------------------------------
Bruce L.A. Carter, Ph.D. Director August 16, 2000
/s/ Lawrence D. Muschek, Ph.D.*
---------------------------------
Lawrence D. Muschek, Ph.D. Director August 16, 2000
/s/ Ronald R. Tuttle, Ph.D.*
---------------------------------
Ronald R. Tuttle, Ph.D. Director August 16, 2000
/s/ Robert S. Whitehead*
---------------------------------
Robert S. Whitehead Director August 16, 2000
/s/ Myra N. Williams, Ph.D.*
---------------------------------
Myra N. Williams, Ph.D. Director August 16, 2000
*/s/ Michael G. Grey
---------------------------------
Michael G. Grey August 16, 2000
As Attorney-In-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
4.1* Subscription Agreement by and among Trega and certain
Investors, dated as of April 4, 2000.
4.2* Warrant, dated April 11, 2000, for common stock of
Trega issued to First Security Van Kasper.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.3* Consent of Pillsbury Madison & Sutro LLP (included in
its opinion filed as Exhibit 5.1 to the Registration
Statement).
24.1* Power of Attorney.
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* Filed previously
II-4
