<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 4, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
CELL THERAPEUTICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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WASHINGTON 2384 91-1533912
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
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201 ELLIOTT AVENUE WEST, SUITE 400
SEATTLE, WASHINGTON 98119
(206) 282-7100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
JAMES A. BIANCO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CELL THERAPEUTICS, INC.
201 ELLIOTT AVENUE WEST, SUITE 400
SEATTLE, WASHINGTON 98119
(206) 282-7100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF PROCESS)
--------------
COPIES TO:
MICHAEL J. KENNEDY
MICHAEL S. DORF
TAMARA L. TOMPKINS
BROBECK, PHLEGER & HARRISON LLP
SPEAR STREET TOWER, ONE MARKET
SAN FRANCISCO, CALIFORNIA 94105
(415) 442-0900
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, no par
value (including
associated Preferred
Stock Purchase 2,866,847
Rights).............. shares $15.81 $45,324,851 $13,735
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</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 and based upon
the average of the high and low prices of the Company's Common Stock as
reported on the Nasdaq National Market on October 30, 1997.
--------------
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 THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion, Dated November , 1997
2,866,847 SHARES
LOGO
CELL THERAPEUTICS, INC.
COMMON STOCK
-----------
The 2,866,847 shares (the "Resale Shares") of Common Stock, no par value (the
"Common Stock"), of Cell Therapeutics, Inc. ("cti" or the "Company") which may
be sold from time to time hereby (the "Offering") are comprised of (i) up to
2,861,037 shares of Common Stock which may be offered for resale by certain
shareholders of the Company named herein (collectively, the "Shareholders") and
(ii) up to 5,810 shares of Common Stock issuable upon exercise of certain
warrants to purchase Common Stock (the "Warrants") which are being registered
hereunder and may be offered for resale by the holders thereof named herein
(collectively, the "Warrantholders" and, together with the Shareholders, the
"Selling Holders") following exercise and issuance. See "Selling Holders." The
Company will not receive any proceeds from the sale of the Resale Shares.
The Resale Shares may be sold from time to time by the Selling Holders
directly, in underwritten offerings or in ordinary brokerage transactions at
prices at or near the market price or in other privately negotiated
transactions on terms to be negotiated at the time of sale. Usual and customary
or specifically negotiated underwriting discounts, brokerage fees or
commissions may be paid by the Selling Holders in connection with such sales.
To the effect required, the specific shares to be sold, the terms of the
offering, including price, the names of any broker-dealer or underwriter, and
any applicable commission, discount or other compensation with respect to a
particular sale will be set forth in an accompanying Prospectus Supplement. See
"Plan of Distribution."
The Company has agreed to bear all expenses (other than commissions or
discounts of underwriters, dealers or agents or the fees and expenses of their
counsel) in connection with the registration and sale of the Resale Shares
being registered hereby. Expenses to be paid by the Company are estimated at
approximately $75,000. The Company has agreed to indemnify the Selling Holders,
and the Selling Holders have agreed to indemnify the Company, against certain
liabilities under the Securities Act. See "Plan of Distribution" for possible
indemnification arrangements for broker-dealers and underwriters.
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "CTIC." On October 31, 1997, the reported last sale price of the Common
Stock on the Nasdaq National Market was $16.00 per share.
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The Selling Holders and any broker-dealers that participate in the
distribution of any of the Resale Shares may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), and any commission received by them and any profit on the Resale Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution."
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November , 1997.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto,
contained elsewhere in this Prospectus or incorporated herein by reference.
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in these forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors" as well as those discussed elsewhere in this Prospectus or
incorporated herein by reference. As used in this Prospectus, unless otherwise
indicated or the context otherwise requires, all references to "cti" or the
"Company" include Cell Therapeutics, Inc. and its wholly owned subsidiary, CTI
Technologies, Inc., and all references to "Johnson & Johnson" include Johnson &
Johnson, Ortho Biotech, Inc., The R.W. Johnson Pharmaceutical Research
Institute (a division of Ortho Pharmaceutical Corporation) and Johnson &
Johnson Development Corporation, each of which are wholly-owned subsidiaries of
Johnson & Johnson, but does not include any other subsidiary of Johnson &
Johnson.
THE COMPANY
Cell Therapeutics, Inc. ("cti" or the "Company") focuses on the discovery,
development and commercialization of small molecule drugs that selectively
regulate the metabolism of oxidized lipids and phospholipids relevant to the
treatment of cancer and inflammatory and immune diseases. The Company is
conducting three pivotal Phase III clinical trials for its lead product
candidate, Lisofylline ("LSF"), which is being developed to prevent or reduce
treatment-related toxicities, specifically serious and fatal infections,
mucositis and treatment-related mortality, among cancer patients receiving high
dose radiation and/or chemotherapy. In November 1996, cti entered into a
Collaboration and License Agreement (the "Collaboration Agreement") with
Johnson & Johnson for the joint development and commercialization of LSF to
prevent or reduce the toxic side effects among cancer patients receiving high
dose radiation and/or chemotherapy followed by bone marrow transplantation
("BMT"). In September 1997, Johnson & Johnson exercised an option under the
Collaboration Agreement to expand its participation in the development of LSF
for treatment of patients with newly diagnosed acute myelogenous leukemia
("AML") undergoing high dose induction chemotherapy.
In addition to its oncology applications, the Company is also investigating
LSF for use as an agent to prevent or reduce the incidence and severity of
acute lung injury ("ALI") and mortality among patients requiring mechanical
ventilation for respiratory failure for which it expects to begin a pivotal
Phase II/III trial in the fourth quarter of 1997. The Company is also
developing CT-2584, a novel small molecule drug for the treatment of patients
with multidrug (e.g., chemotherapy) resistant cancers, including prostate
cancer and sarcomas, for which it expects to begin a Phase II clinical trial in
the first quarter of 1998. The Company has devoted substantial resources to
building a unique drug discovery platform based on its proprietary technology
in oxidized lipid and phospholipid chemistry and believes it can leverage its
enabling oxidized lipid and phospholipid technologies to identify development
opportunities in other disease states, such as diabetes or cardiovascular
disease, where oxidized lipids may be implicated in the pathogenesis or
manifestations of such diseases.
Oncology
Cancer is the second leading cause of death in the United States, with
approximately 1.4 million new cases diagnosed each year. At some point in their
disease treatment, 70 percent of all cancer patients will receive radiation
therapy and 50 percent of all newly diagnosed cancer patients will receive
chemotherapy. Despite their benefits for treating cancer, there are significant
limitations of, and complications associated with, radiation and chemotherapy
which result in a high rate of treatment failure. The principal causes of
cancer treatment failure include treatment-related toxicities, multidrug
resistance and tumor resistance to radiation. The Company is focusing its
oncology development efforts on a portfolio of drugs that it believes will
address the three principal causes of cancer treatment failure: (i) LSF--a
supportive care agent being investigated to prevent or reduce the incidence of
serious and fatal infections, mucositis (damage to the epithelial cells lining
the mouth, stomach and intestinal tract) and treatment-related mortality among
cancer patients receiving high dose radiation and/or chemotherapy, (ii) CT-
2584--a novel anti-cancer drug in clinical trials for the treatment of patients
with multidrug resistant tumors and (iii) tumor sensitizing agents being
investigated to enhance sensitivity to radiation among tumors that have deleted
or mutated tumor suppressor genes. Additionally the Company may license or
acquire agents from third parties which, when used with other cti oncology
products, may provide added value to the integrated management of oncologic
disease.
2
<PAGE>
Lisofylline. LSF is a synthetic small molecule drug in three pivotal Phase
III clinical trials among cancer patients receiving high dose radiation and/or
chemotherapy. Unlike blood cell growth factors or chemotherapy protecting
agents, LSF is being developed to prevent or reduce the incidence of serious
and fatal infections, mucositis and treatment-related mortality. More than 578
people have participated in over 15 clinical trials of LSF as of September 30,
1997. The Company has completed two Phase II trials for LSF which resulted in a
statistically significant reduction in serious and fatal infections following
BMT and serious infections following induction chemotherapy for AML. The
Company is conducting two pivotal Phase III clinical trials of LSF in patients
who require BMT after receiving ablative, or bone marrow destroying, doses of
radiation and/or chemotherapy. In addition, the Company has an ongoing pivotal
Phase III trial in patients with newly diagnosed AML who receive high dose
induction chemotherapy. In the first quarter of 1998, the Company intends to
commence a Phase II/III clinical trial of LSF in patients with solid tumors
such as head and neck or breast cancers who receive dose-intensive radiation
and/or chemotherapy and who are at risk of developing severe mucositis and
neutropenic infections. Common to each of these three categories of anti-cancer
treatment (ablative, induction and dose-intensive) is the occurrence of
neutropenia and the breakdown of the epithelial barrier cells lining the mouth,
stomach and intestinal tract, placing patients at a high risk of life
threatening infections, severe mucositis and mortality.
CT-2584. CT-2584 is cti's novel small molecule drug under investigation for
the treatment of patients with multidrug resistant cancers, including prostate
cancer and sarcomas. The Company has an ongoing Phase I trial, co-sponsored by
the Cancer Research Campaign, at the Christie Hospital in the United Kingdom
among patients with advanced cancers and a parallel Phase I trial at the
Memorial Sloan Kettering Cancer Research Center in the United States for
patients with advanced cancers including prostate and ovarian cancer. As of
September 30, 1997, 36 patients have been treated with CT-2584 at five
different dose levels without exhibiting the bone marrow or gastrointestinal
toxicities observed with conventional high dose anti-cancer treatment regimens.
Based on the preliminary response rates observed in this trial the Company
anticipates initiating a Phase II trial in advanced hormone refractory prostate
cancer in the first quarter of 1998.
Inflammatory Disease
The Company believes that, in addition to its oncology applications, LSF may
be effective as an agent to prevent or reduce the incidence and severity of ALI
and mortality among patients requiring mechanical ventilation for respiratory
failure. The National Heart, Lung and Blood Institute (the "NHLBI") is
sponsoring a pivotal Phase II/III trial of LSF among patients experiencing ALI
which is expected to begin in the fourth quarter of 1997.
Corporate Collaboration
Under a Collaboration and License Agreement with Johnson & Johnson, cti is
responsible for the development of LSF in the United States, and Johnson &
Johnson has committed to fund 60 percent of cti's budgeted development expenses
incurred with obtaining regulatory approval for LSF in the United States for
BMT and AML indications. The Company and Johnson & Johnson will co-promote LSF
in the United States, and each will share equally in any resulting operating
profits and losses. Johnson & Johnson has the exclusive right to develop and
market LSF, at its own expense, for markets other than the United States and
Canada, subject to specified royalty payments to cti. The Company has recorded
approximately $19.1 million in equity payments, license fees and development
cost reimbursements from Johnson & Johnson as of June 30, 1997. Johnson &
Johnson purchased 300,000 shares of the Company's common stock in March 1997
concurrent with the closing of the Company's initial public offering for an
aggregate purchase price of $3.0 million and 125,000 shares of common stock in
October 1997 in the Company's follow-on public offering for an aggregate
purchase price of approximately $2.0 million.
Cell Therapeutics, Inc. was incorporated in Washington in September 1991. The
Company has not received any revenue from the sale of products to date and does
not expect to receive revenues from the sale of products for at least the next
several years. The Company's executive offices are located at 201 Elliott
Avenue West, Seattle, Washington 98119, and its telephone number is (206) 282-
7100.
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cti(R) is a registered trademark of the Company. LSF(TM) is a proprietary
trademark of the Company. This Prospectus contains trademarks and service marks
of companies other than cti.
3
<PAGE>
THE OFFERING
The Offering.................. (i) up to 2,861,037 of the Resale Shares which
may be sold from time to time hereby are being
offered for resale by certain persons who
received their shares of Common Stock between
1993 and 1996 in transactions exempt from the
registration requirements of the Securities Act
of 1933, as amended (the "Securities Act"); and
(ii) up to 5,810 of the Resale Shares which may
be sold from time to time hereby are being
offered for resale by a certain person,
following the exercise of outstanding warrants
to purchase shares of Common Stock at an
exercise price of $17.50 per share. See
"Selling Holders."
Common Stock Outstanding
atOctober 31, 1997...........
15,375,871 shares (1)
Use of Proceeds............... The Company will not receive any proceeds from
the sale of the Resale Shares which may be sold
from time to time hereby.
Nasdaq National Market CTIC
Symbol........................
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(1) Excludes (i) 1,530,346 shares of Common Stock issuable upon exercise of
stock options outstanding as of October 31, 1997, at a weighted average
exercise price of $11.92 per share and (ii) 14,817 shares of Common Stock
issuable upon exercise of warrants outstanding as of October 31, 1997, at a
weighted average exercise price of $26.01 per share.
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Common Stock offered hereby.
4
<PAGE>
RISK FACTORS
Prospective investors in the shares of Common Stock offered hereby should
carefully consider the following risk factors, in addition to the other
information contained in this Prospectus. This Prospectus contains forward-
looking statements which involve risks and uncertainties. When used in this
Prospectus, the words "believes," "anticipates," "expects," "intends" and
other predictive, interpretive and similar expressions are intended to
identify such forward-looking statements. The Company's actual results may
differ significantly 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 as well as those discussed elsewhere in this
Prospectus or incorporated herein by reference. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release
the results of any revisions to these forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
Dependence on Single Drug Candidate. The Company is conducting three pivotal
Phase III clinical trials for its lead product candidate, LSF. There can be no
assurance that such Phase III trials will be successfully completed, that
further clinical studies will not be needed or that any such clinical trials
will lead to product approval by the United States Food and Drug
Administration (the "FDA"). Furthermore, there can be no assurance that the
Company will be successful in its efforts to develop LSF for any indications.
The remainder of the Company's drug candidates are still in research and
development, preclinical trials or clinical trials. Any additional product
candidates will require significant research, development, preclinical and
clinical testing, regulatory approval and commitments of resources prior to
commercialization. The Company is, therefore, dependent on the successful
completion of its pivotal Phase III trials and obtaining regulatory approval
of LSF to generate revenues while it continues the research, development and
regulatory approval processes for its other drug candidates. Although the
Company is currently seeking to develop other drug candidates and to expand
the number of drug candidates it has under development, there can be no
assurance that it will be successful in such development or expansion. If LSF
does not successfully complete clinical testing and meet applicable regulatory
requirements, or is not successfully manufactured or marketed, the Company may
not have the financial resources to continue research and development of other
product candidates. The failure to successfully develop, manufacture or market
LSF would have a material adverse effect on the Company's business, prospects,
financial condition, liquidity and results of operations. See "--No Assurance
of FDA Approval; Comprehensive Government Regulation."
No Assurance of Successful Product Development; Uncertainties Related to
Clinical Trials. The Company has no products commercially available for sale
and does not expect to have any products commercially available for sale for
at least the next several years, if ever. The time frame for achievement of
market introduction for any potential product is long and uncertain. Two of
the Company's product candidates, LSF and CT-2584, are currently in clinical
trials for certain indications. However, the results obtained to date in
preclinical and clinical studies of LSF and in preclinical studies and
preliminary clinical trials of CT-2584 are not necessarily indicative of
results that will be obtained during future clinical testing. A number of
companies in the pharmaceutical industry, including biotechnology companies,
have suffered significant setbacks in advanced clinical trials, even after
reporting promising results in earlier trials. In addition, data obtained from
clinical trials are susceptible to varying interpretations. There can be no
assurance that the Company and its collaborators will agree on the
interpretation of the Company's future clinical trial results or that the
Company's clinical trials will demonstrate sufficient terms of safety and
efficacy necessary to obtain the requisite regulatory clearance or will result
in marketable products.
The Company's research and development programs for products other than LSF
and CT-2584 are at an early stage of development. Preclinical in vitro and
animal studies are not necessarily indicative of results that may be obtained
during human clinical testing. Many potential therapeutic products indicate
positive preclinical results which are not subsequently reproduced in humans.
Any additional product candidates will require significant research,
development, preclinical and clinical testing, regulatory approval and
commitments of resources prior to commercialization. There can be no assurance
that the Company's research will lead to the discovery of additional product
candidates or that LSF, CT-2584 or any other products will be successfully
5
<PAGE>
developed, prove to be safe and efficacious in clinical trials, meet
applicable regulatory standards, be capable of being produced in commercial
quantities at acceptable costs or be successfully or profitably marketed.
There can be no assurance as to the extent to which any products developed by
cti will be able to penetrate the potential market for a particular therapy or
indication or gain market acceptance among health care providers, patients or
third-party payors.
The rate of completion of the Company's clinical trials is dependent upon,
among other factors, the rate of patient enrollment. Patient enrollment is a
function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the study. Delays in planned patient enrollment may
result in increased costs, delays or termination of clinical trials, which
could have a material adverse effect on the Company's business, prospects,
financial condition, liquidity and results of operations. There can be no
assurance that the Company will be able to submit a New Drug Application
("NDA") as scheduled if clinical trials are completed, or that any such
application will be reviewed and cleared by the FDA in a timely manner, or at
all.
There can be no assurance that unacceptable toxicities or side effects will
not occur at any dose level at any time in the course of toxicology studies or
clinical trials of the Company's potential products. The appearance of any
such unacceptable toxicities or side effects in toxicology studies or clinical
trials could cause the Company or regulatory authorities to interrupt, limit,
delay or abort the development of any of the Company's potential products and
could ultimately prevent their clearance by the FDA or foreign regulatory
authorities for any or all targeted indications. Even after being cleared by
the FDA or foreign regulatory authorities, a product may later be shown to be
unsafe or to not have its purported effect, thereby preventing widespread use
or requiring withdrawal from the market. There can be no assurance that any
potential products under development by the Company will be safe or effective
when administered to patients.
Reliance on Relationship with Johnson & Johnson. The Company is dependent on
the future payments from Johnson & Johnson to continue the development and
commercialization of LSF as presently planned. Under the terms of the
Collaboration Agreement between Johnson & Johnson and the Company, Johnson &
Johnson has committed to fund 60 percent of cti's budgeted development
expenses in the United States incurred in connection with obtaining regulatory
approval for LSF for the prevention or reduction of the toxic side effects
among cancer patients receiving high dose radiation and/or chemotherapy
followed by BMT and the treatment of patients with newly diagnosed AML
undergoing high dose chemotherapy. Johnson & Johnson will be responsible for
obtaining regulatory approval for LSF outside of the United States and Canada
at its own expense. Although cti and Johnson & Johnson will co-promote LSF in
the United States, Johnson & Johnson will have primary responsibility for
commercializing LSF. There can be no assurance that Johnson & Johnson will be
able to establish effective sales and distribution capabilities or will be
successful in gaining market acceptance for LSF or that Johnson & Johnson will
devote sufficient resources to the commercialization of products under the
Collaboration Agreement. If Johnson & Johnson did not continue its
participation in the development and commercialization of LSF, the Company
would not be able to continue the development of LSF as presently planned
which could have a material adverse effect on the Company's business,
prospects, financial condition, liquidity and results of operations.
Although Johnson & Johnson has committed to fund 60 percent of cti's
budgeted development expenses incurred with obtaining regulatory approval in
the United States for the BMT and AML indications, Johnson & Johnson may
terminate the Collaboration Agreement at any time based upon material safety
or tolerability issues related to LSF upon 30 days notice, and for any reason
after November 8, 1997, subject to a six month notice period. Johnson &
Johnson would have no further obligation to fund cti's development expenses
related to LSF following such termination. However, the financial and other
obligations of Johnson & Johnson (aside from Johnson & Johnson's obligation to
make additional payments to, and equity investments in, cti if certain
development milestones are achieved after the notice date) would continue
during such six month notice period. If Johnson & Johnson were to terminate
its participation in the Collaboration Agreement, the Company would not be
able to continue the development of LSF as presently planned which could have
a material adverse effect on the Company's business, prospects, financial
condition, liquidity and results of operations. If adequate funds were not
6
<PAGE>
then available from other sources, the Company would be required to delay,
reduce the scope of, or eliminate one or more of its research, development and
clinical activities or seek to obtain funds through arrangements with
collaborative partners or others on terms which may be less favorable to cti
than the Collaboration Agreement. See "--Need for Substantial Additional
Funds."
Ability to Protect Intellectual Property. The Company's success will depend
in part on its ability to obtain patent protection for its products and
technologies in the United States and other countries, effectively preserve
its trade secrets, enforce its rights against third parties which may infringe
on its technology and operate without infringing on the proprietary rights of
third parties. The patent positions of biotechnology and pharmaceutical
companies can be highly uncertain and involve complex legal and factual
questions, and therefore the breadth of claims allowed in biotechnology or
pharmaceutical patents, or their enforceability, cannot be predicted. The
Company intends to file applications as appropriate for patents covering both
its products and processes. There can be no assurance that any patents will
issue from any present or future applications or, if patents do issue, that
such patents will be issued on a timely basis or that claims allowed on issued
patents will be sufficient to protect the Company's technology. In addition,
there can be no assurance that the patents issued to cti will not be
challenged, invalidated or circumvented or that the rights granted thereunder
will provide proprietary protection or commercial advantage to the Company.
There can be no assurance that patents issued to the Company currently or in
the future will effectively protect the technology involved, foreclose the
development of competitive products by others or otherwise be commercially
valuable.
The commercial success of the Company will also depend in part on the
Company's neither infringing the patents or proprietary rights of third
parties nor breaching any technological licenses which relate to the Company's
technologies and potential products. In general, the development of
therapeutic products is intensely competitive and many pharmaceutical
companies, biotechnology companies, universities and research institutions
have filed and will continue to file patent applications and receive patents
in this field. If patents are issued to other entities that contain
competitive or conflicting claims with respect to technology pursued by cti
and such claims are ultimately determined to be valid, no assurance can be
given that cti will be able to obtain licenses to these patents at a
reasonable cost or develop or obtain alternative technology or compounds. In
such case, the Company could be precluded from using technology that is the
subject matter of such patents, which could have a material adverse effect on
the Company's business, prospects, financial condition, liquidity and results
of operations. There has been significant litigation in the pharmaceutical and
biotechnology industry regarding patents and other proprietary rights, and
although the Company is not currently engaged in litigation regarding
intellectual property matters, from time to time the Company sends and
receives communications to and from third parties regarding such matters. In
order to enforce any patents issued to the Company or determine the scope,
validity or priority of other parties' proprietary rights, the Company may
have to engage in litigation or interference or other administrative
proceedings, which would result in substantial cost to, and diversion of
efforts by, the Company. There can be no assurance that third parties will not
assert infringement claims in the future with respect to the Company's current
or future products or that any such claims will not require the Company to
enter into license arrangements or result in litigation or interference or
other administrative proceedings, regardless of the merits of such claims. No
assurance can be given that any necessary licenses can be obtained on
commercially reasonable terms, or at all. Should litigation or interference or
other administrative proceedings with respect to any such claims commence,
such litigation or interference or other administrative proceedings could be
extremely costly and time consuming and could have a material adverse effect
on the Company's business, prospects, financial condition, liquidity and
results of operations, regardless of the outcome of such litigation or
interference or other administrative proceedings.
The Company has seven issued patents covering the pharmaceutical
composition, commercial manufacturing process and oncology and anti-
inflammatory uses of LSF in the United States. The Company is aware of a
patent belonging to third parties that could be interpreted to compromise the
Company's freedom to sell LSF in the United States for certain non-oncology
applications. The Company believes, upon the advice of its patent
counsel, that any such interpretation is relevant only in connection with the
Company's use of LSF in preventing lung injury following traumatic injury
(such as acute lung injury and Acute Respiratory Distress Syndrome) or sepsis
and, irrespective of such interpretation, that the Company's planned
manufacture, sale or use of LSF as described in this
7
<PAGE>
Prospectus does not infringe any valid claim of such third party patent. If
such third party patent rights were interpreted to limit the use of LSF, the
Company could be required to obtain a license from such parties. There can be
no assurance that any such license would be available to the Company upon
reasonably acceptable terms, if at all. If the Company were so required to
obtain a license from such parties, the inability of the Company to obtain
such a license on reasonably acceptable terms would have a material adverse
effect on the Company's business, prospects, financial condition, liquidity
and results of operations. The Company could also face significant costs
associated with any litigation relating to such patent.
In order to protect its proprietary technology and processes, cti also
relies on confidentiality and material transfer agreements with its corporate
partners, consultants, outside scientific collaborators and sponsored
researchers, other advisors and, in most cases, employees. There can be no
assurance that these agreements will not be breached, that the Company will
have adequate remedies for such a breach or that the Company's trade secrets
will not otherwise become known or independently discovered by competitors.
Technological Uncertainty and Medical Advances. The Company currently relies
exclusively upon its lipid-based technology for the discovery, development and
commercialization of drugs for the treatment of cancer and inflammatory and
immune diseases. To date, the Company's resources have been dedicated
primarily to the research and development of potential pharmaceutical products
that the Company believes regulate the production and/or degradation of
oxidized lipids such as hydroperoxyoctadecadienoic acids ("HPODEs") or
phospholipids such as phosphatidic acids ("PAs"). The physiology of cancer,
inflammatory and immune disease is complex, and the roles of HPODEs and PAs,
and the stress-activated pathways ("SAPs") which they appear to activate, are
not fully known. Although preclinical and clinical data to date suggest that
the species of HPODEs and PAs targeted by the Company's products under
development play an important role in the cellular inflammatory and injurious
response to cell-damaging stimuli such as radiation, chemotherapy and
oxidative injury, there can be no assurance that the Company's therapeutic
approaches are correct or that its drug candidates will be proven safe or
effective. The Company believes that the elevation and production of HPODEs
and PAs and the activation of SAPs do not appear to be primarily utilized for
normal cellular processes, and that the Company's drug candidates will not
substantially interfere with normal cellular processes at therapeutically
relevant levels. There can be no assurance that the HPODEs, PAs or SAPs
believed to be targeted by the Company's drug candidates do not serve a
currently unidentified beneficial purpose which might be adversely affected by
the mechanism of action of the Company's drug candidates. No assurance can be
given that unforeseen problems will not develop with the Company's
technologies or applications, or that commercial products will ultimately be
developed by cti. There can be no assurance that research and discoveries by
others will not render some or all of cti's programs or products
noncompetitive or obsolete or that the Company will be able to keep pace with
technological developments or other market factors. Technological changes or
medical advancements could diminish or eliminate the commercial viability of
the Company's focus on cell membrane lipids in regulating cellular processes.
The failure to commercialize such products would have a material adverse
effect on the Company's business, prospects, financial condition, liquidity
and results of operations.
History and Continuation of Losses; Development Stage Company. The Company
is a development stage company which currently has no sources of operating
revenues and has incurred net operating losses since its inception. As of June
30, 1997, the Company had an accumulated deficit of approximately $84.7
million. Such losses have resulted principally from costs incurred in
research, development, clinical trials and general and administrative costs
associated with the Company's operations. The Company expects that operating
losses will continue at increasing levels for at least the next several years
as its research, product development, clinical testing and marketing
activities expand, and does not expect to receive revenues from the sale of
products for at least the next several years, if ever. The Company is working
on a number of costly long-term development projects which involve
experimental and unproven technology and which may ultimately prove
unsuccessful. In addition, since cti does not currently have any marketable
products, it expects to incur substantial operating losses for a number of
years. The amount of net losses and the time required by the Company to reach
profitability are highly uncertain. There can be no assurance that the Company
will be able to develop additional revenue sources or that its operations will
ever become profitable.
8
<PAGE>
Need for Substantial Additional Funds. To date, the Company's operations
have been funded primarily through the sale of equity securities, which has
raised aggregate net proceeds of approximately $167.5 million as of October
31, 1997. The Company expects that its revenue sources for at least the next
several years will consist primarily of future expense reimbursements and
milestone payments under its collaboration agreements with Johnson & Johnson
and with an affiliate of BioChem Pharma, Inc. ("BioChem Pharma"), and interest
income. The Company will require substantial additional funds to conduct its
existing and planned preclinical and clinical trials, to establish
manufacturing and marketing capabilities for any products it may develop and
to continue research and development activities. The Company expects that its
existing capital resources and the interest earned thereon, combined with
anticipated funding from Johnson & Johnson under the Collaboration Agreement
and the proceeds from this Offering will enable the Company to maintain its
current and planned operations at least through the middle of 1999. The
Company will need to raise substantial additional capital to fund its
operations beyond such time. See "--Reliance on Relationship with Johnson &
Johnson."
The Company's future capital requirements will depend on, and could increase
as a result of, many factors, including: the continuation of the Company's
collaboration with Johnson & Johnson; continued scientific progress in its
research and development programs; the magnitude and scope of such programs;
the terms of any additional collaborative arrangements that the Company may
enter into; the progress of preclinical and clinical testing; the time and
costs involved in obtaining regulatory approvals; the costs involved in
preparing, filing, prosecuting, maintaining, enforcing and defending patent
claims; competing technological and market developments; changes in
collaborative relationships; the ability of the Company to establish research,
development and commercialization arrangements pertaining to products other
than those covered by existing collaborative arrangements; the cost of
establishing manufacturing facilities; the cost of commercialization
activities; and the demand for the Company's products if and when approved.
The Company intends to raise additional funds through additional equity or
debt financings, research and development financings, collaborative
relationships, or otherwise. The Company may engage in these capital raising
activities even if it does not have an immediate need for additional capital
at that time. There can be no assurance that any such additional funding will
be available to cti or, if available, that it will be on acceptable terms. If
additional funds are raised by issuing equity securities, further dilution to
existing shareholders may result. If adequate funds are not available, cti may
be required to delay, reduce the scope of, or eliminate one or more of its
research, development and clinical activities. If the Company seeks to obtain
funds through arrangements with collaborative partners or others, such
partners may require cti to relinquish rights to certain of its technologies,
product candidates or products that the Company would otherwise seek to
develop or commercialize itself.
No Assurance of FDA Approval; Comprehensive Government
Regulation. Regulatory approval to market human therapeutics must be obtained
from the FDA and comparable health authorities in foreign countries and, to a
lesser extent, by state and local regulatory authorities in the United States.
This process requires lengthy and detailed laboratory and clinical testing and
other costly and time-consuming procedures, which must establish that such
therapeutics are safe and efficacious. Obtaining regulatory approval to market
drugs typically takes one or more years after the completion of clinical
trials and the filing of an NDA, with no assurance that such approval will
ever be obtained. The time involved for regulatory review varies substantially
based upon the type, complexity and novelty of the drug. In addition, delays
or rejections may be encountered based upon existing and changing policies of
regulatory authorities for drug approval during the period of drug development
and regulatory review of each submitted NDA. The results obtained in
preclinical and early clinical studies are not necessarily indicative of
results that will be obtained during future clinical testing. There can be no
assurance that the results obtained by the Company to date will continue as
testing and trials progress or that the Company's products will ever be
approved for commercial sale by the FDA or other regulatory authorities.
In addition to the substantial time commitment required, the regulatory
process, which includes preclinical testing and clinical trials of each
compound to establish its safety and efficacy, requires the expenditure of
substantial resources. Preclinical studies must be conducted in conformity
with the FDA's current Good Laboratory Practices ("GLP"). Clinical trials must
meet requirements for institutional review board oversight and informed
9
<PAGE>
consent, as well as FDA prior review and acceptance of Investigational New
Drug applications ("IND"), continued FDA oversight and current Good Clinical
Practices ("GCP"). The Company's experience in conducting clinical trials is
limited. Data obtained from preclinical studies and clinical trials are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. Furthermore, studies conducted with alternative designs
or alternative patient populations could produce results which vary from those
obtained by the Company. There can be no assurance that the Company's data or
its interpretation of its data will be accepted by governmental regulators,
the medical community or the Company's collaborators. See "--No Assurance of
Successful Product Development; Uncertainties Related to Clinical Trials."
Government regulation also affects the manufacture and marketing of
pharmaceutical drug products. Any future FDA or other governmental approval of
drug products developed by cti may entail significant limitations on the
indicated uses for which such products may be marketed. Approved drug products
will be subject to additional testing and surveillance programs required by
the regulatory agencies. For example, the Company will be obligated to report
certain adverse reactions, if any, to the FDA. In addition, product approvals
may be withdrawn or limited for noncompliance with regulatory standards or the
occurrence of unforeseen problems following initial marketing. Failure to
comply with applicable regulatory requirements can result in, among other
things, fines, suspensions of approvals, seizures or recalls of products,
operating restrictions or criminal proceedings. In the event that cti were to
manufacture therapeutic products, cti would be required to adhere to
applicable standards for current Good Manufacturing Practices ("GMP")
prescribed by the FDA, engage in extensive record keeping and reporting, and
submit its manufacturing facilities to periodic inspections by state and
federal agencies, including the FDA, and comparable agencies in other
countries. In the event that third parties were to manufacture cti's
therapeutic products, cti would be required to obtain FDA approval for such
manufacture (or any change in manufacturer), and those third party
manufacturers would also be required to adhere to GMP requirements.
The effect of government regulation may be to considerably delay or prevent
the marketing of any product that cti may develop and/or to impose costly
procedures upon cti's activities, the result of which may be to furnish an
advantage to its competitors. There can be no assurance that regulatory
approval for any products developed by cti will be granted on a timely basis
or at all. Any such delay in obtaining or failure to obtain such approvals
would adversely affect cti's ability to market the proposed products and earn
product revenue. The Company is unable to predict the extent and impact of
regulation resulting from future federal, state or local legislation or
administrative actions, or whether such government regulation may have a
material adverse effect on cti.
Outside the United States, the Company's ability to market a product is
contingent upon receiving marketing authorizations from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary widely from
country to country. At present, foreign marketing authorizations are applied
for at a national level, although within the European Union ("EU") certain
registration procedures are available to companies wishing to market a product
in more than one EU member state. This foreign regulatory approval process
includes all of the risks associated with FDA approval set forth above.
Substantial Competition. The Company faces substantial competition from a
variety of sources, both direct and indirect. The Company faces direct
competition from many companies focusing on areas such as cell signal
transduction, surface receptor technology, transcription factors and gene
therapies. There are many companies, both public and private, including well-
known pharmaceutical companies, chemical companies and specialized
biotechnology companies, engaged more generally in developing synthetic
pharmaceutical and biotechnological products for the same therapeutic
applications as those which are the subject of the Company's research and
development efforts. In some instances, such products have already entered
clinical trials or received approval from the FDA. In addition, many of these
competitors have significantly greater experience than cti in undertaking
preclinical testing and clinical trials of new pharmaceutical products and
obtaining FDA and other regulatory approvals. The Company also competes with
companies that have substantially greater capital resources and research and
development, manufacturing, marketing and sales capabilities. Moreover,
certain academic institutions, governmental agencies and other public and
private research organizations are conducting research in areas in which the
Company is working. These institutions are becoming increasingly aware of the
10
<PAGE>
commercial value of their findings and are becoming more active in seeking
patent protection and licensing arrangements to collect royalties for the use
of technology that they have developed. These institutions may also market
competitive commercial products on their own or through joint ventures and
compete with the Company in recruiting highly qualified scientific personnel.
Other companies may succeed in developing products that are more effective or
less costly than any that may be developed by cti and may also prove to be
more successful than cti at marketing such products. Competition may increase
further as a result of the potential advances in the commercial applicability
of genetic engineering technologies and organic chemistry. There can be no
assurance that the Company's competitors will not develop more effective or
more affordable products or achieve earlier patent protection or product
commercialization than cti.
Reliance on Third Party Manufacturers; Manufacture of Products in Commercial
Quantities. The manufacturing of sufficient quantities of new drugs is a time
consuming, complex and unpredictable process. The Company currently has no
internal facilities for the manufacture of any of its products for clinical or
commercial production. The Company currently relies on one third party,
ChiRex, Ltd. ("ChiRex"), to manufacture LSF for preclinical testing and
clinical trials. The Company's manufacture and supply agreement with ChiRex
provides for the manufacture and supply of LSF bulk drug and corresponding
intermediate compounds for the Company's requirements for ongoing and future
clinical trials and commercial requirements during product launch and
commercialization. Under the terms of the Collaboration Agreement with Johnson
& Johnson, the Company will be responsible for the manufacture of LSF for
development and commercialization purposes until November 8, 1999. Thereafter,
Johnson & Johnson will assume responsibility for the manufacture of LSF.
However, Johnson & Johnson may elect to assume responsibility for the
manufacture of LSF at any time prior to such date. LSF has never been
manufactured on a commercial scale, and no assurance can be given that the
Company, together with Johnson & Johnson will be able to make the transition
to commercial production. The Company has recently entered into an agreement
with a third party vendor to furnish CT-2584 bulk drug substance for future
clinical studies. The Company may need to develop additional manufacturing
resources, or may seek to enter into collaborative arrangements with other
parties which have established manufacturing capabilities or may elect to have
other third parties manufacture its products on a contract basis. All
manufacturing facilities must comply with applicable regulations of the FDA.
The Company has established a quality control and quality assurance program,
including a set of standard operating procedures and specifications, designed
to ensure that the Company's products are manufactured in accordance with
current GMP and other applicable domestic and foreign regulations. However,
the Company is dependent upon Johnson & Johnson and contract manufacturers
including ChiRex to comply with such procedures and regulations. There can be
no assurance that Johnson & Johnson or these contract manufacturers will meet
the Company's requirements for quality, quantity or timeliness.
Absence of Sales and Marketing Organization. The Company has no experience
in marketing, sales or distribution. To directly market any of its potential
products, the Company must obtain access to marketing and sales forces with
technical expertise and with supporting distribution capability. To this end,
the Company has entered into a collaboration with Johnson & Johnson which
permits cti to co-promote LSF with Johnson & Johnson in the United States
while providing that Johnson & Johnson will have primary responsibility for
commercializing LSF. If the Company develops additional products with
commercial potential outside of the Johnson & Johnson collaboration, cti may
need to develop marketing and additional sales resources, may seek to enter
into collaborative arrangements with other parties which have established
marketing and sales capabilities or may choose to pursue the commercialization
of such products on its own. There can be no assurance that the Company,
Johnson & Johnson or any other third parties with whom the Company may enter
into any commercialization arrangements will establish adequate sales and
distribution capabilities or be successful in gaining market acceptance for
the Company's products.
The successful commercialization of the Company's products in certain
markets will be dependent, among other things, on the establishment of
commercial arrangements with others in such markets. Such arrangements could
include the granting of marketing or other rights to third parties in exchange
for royalties, milestone development payments or other payments. There can be
no assurance that any such additional arrangements will
11
<PAGE>
be established. If the Company is not able to establish such arrangements it
would encounter delays in introducing its products into certain markets. While
the Company believes that parties to any such arrangements will have an
economic motivation to succeed in performing their contractual
responsibilities, the amount and timing of resources they devote to these
activities will not be within the Company's control. There can be no assurance
that the Company will enter into any such arrangements on acceptable terms or
that any such parties will perform their obligations as expected or that any
revenue will be derived from such arrangements.
Management of Growth. The Company has recently experienced, and expects to
continue to experience, significant growth in the number of its employees and
the scope of its operations. This growth has placed, and may continue to
place, a significant strain on the Company's management and operations. The
Company's ability to manage effectively such growth will depend upon its
ability to broaden its management team and its ability to attract, hire and
retain skilled employees. The Company's success will also depend on the
ability of its officers and key employees to continue to implement and improve
its operational, management information and financial control systems and to
expand, train and manage its employee base. These demands are expected to
require the addition of new management personnel and the development of
additional expertise by existing management personnel. In addition, if cti
reaches the point where its activities require additional expertise in
clinical testing, in obtaining regulatory approvals, and in production and
marketing, there will be increased demands on cti's resources and
infrastructure. There can be no assurance that the Company will be able to
effectively manage the expansion of its operations, that its systems,
procedures or controls will be adequate to support the Company's operations or
that Company management will be able to exploit opportunities for the
Company's products or proprietary technology. There can be no assurance that
the Company will be successful in adding technical personnel as needed to meet
the staffing requirements of the Company's collaboration with Johnson &
Johnson or any additional collaborative relationships into which the Company
may enter. An inability to manage growth, if any, could have a material
adverse effect on the Company's business, prospects, financial condition,
liquidity and results of operations.
Attraction and Retention of Key Employees and Consultants. The Company is
highly dependent on the principal members of its scientific and management
staff, the loss of whose services might impede the achievement of research and
development objectives. Recruiting and retaining qualified scientific
personnel to perform research and development work are critical to cti's
success. There is intense competition for qualified scientists and managerial
personnel from numerous pharmaceutical and biotechnology companies, as well as
from academic and government organizations, research institutions and other
entities. Although cti believes it will be successful in attracting and
retaining skilled and experienced scientific and technical personnel, there
can be no assurance that cti will be able to attract and retain such personnel
on acceptable terms. Loss of the services of, or the failure to recruit, key
managerial and scientific and technical personnel could have a material
adverse effect on cti's research and product development programs, as well as
its business, financial condition and results of operations. In addition, cti
relies on consultants and advisors, including its scientific and clinical
advisors, to assist the Company in formulating its research and development
strategy. All of cti's consultants and advisors are employed by employers
other than the Company or are self-employed, and have commitments to or
consulting or advisory contracts with other entities that may limit their
availability to the Company.
Product Liability; Potential Difficulty of Obtaining Insurance. The
Company's business exposes it to potential product liability risks which are
inherent in the testing, manufacturing and marketing of human pharmaceutical
products. Although the Company is insured against such risks up to a $20
million annual aggregate limit in connection with human clinical trials, there
can be no assurance that the Company's present clinical trials liability
insurance coverage is adequate or that the Company will be able to maintain
such insurance on acceptable terms. The Company has no products commercially
available for sale and has not procured product liability insurance covering
claims in connection with commercially marketed products. There can be no
assurance that the Company will be able to obtain comparable insurance on
commercially reasonable terms if and when it commences the commercial
marketing of any products or that such insurance will provide adequate
coverage against potential liabilities. In addition, there can be no assurance
that any collaborators and licensees of the Company will agree to indemnify
the Company from, be adequately insured against or have a sufficient
12
<PAGE>
net worth to protect the Company from product liability claims. A successful
product liability claim in excess of the Company's insurance coverage could
have a material adverse effect on the Company and may prevent the Company from
obtaining adequate product liability insurance in the future on commercially
reasonable terms.
Uncertainty of Pharmaceutical Pricing and Reimbursement. Sales of cti's
proposed products will be dependent in part on the availability and extent of
reimbursement for the cost of such products and related treatments from third-
party health care payors, such as government and private insurance plans.
Significant uncertainty exists as to the reimbursement status of newly
approved health care products. Government and other third-party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new medical products and services and by
refusing, in some cases, to provide any coverage of uses of approved products
for disease indications other than those for which the FDA has granted
marketing approval. If cti succeeds in bringing any of its proposed products
to the market, there can be no assurance that any such products will be
considered cost-effective or that third-party reimbursement will be available
or will be sufficient to enable cti to sell its proposed products on a
competitive basis and to maintain price levels sufficient to realize an
appropriate return on its investment in product development. If adequate
coverage and reimbursement levels are not provided by government and other
third-party payors, the market acceptance of cti's products would be adversely
affected. In addition, legislation and regulations affecting the pricing of
pharmaceuticals may change in ways adverse to cti before or after any of the
Company's proposed products are approved for marketing. While cti cannot
predict whether any such legislative or regulatory proposals will be adopted,
the adoption of such proposals could have a material adverse effect on cti's
business, financial condition and results of operations.
No Assurance of Market Acceptance. There can be no assurance that the
Company's drug candidates, if approved by the FDA and other regulatory
agencies, will achieve market acceptance. The degree of market acceptance will
depend on a number of factors, including the receipt and timing of regulatory
approvals, the availability of third-party reimbursement and the establishment
and demonstration in the medical community of the clinical safety, efficacy
and cost-effectiveness of the Company's drug candidates and their advantages
over existing technologies and therapeutics. There can be no assurance that
the Company will be able to manufacture and successfully market its drug
candidates even if they perform successfully in clinical applications.
Furthermore, there can be no assurance that physicians or the medical
community in general will accept and utilize any therapeutic products that may
be developed by the Company.
Use of Hazardous Materials. The Company's research and development involves
the controlled use of hazardous materials, chemicals and various radioactive
compounds. Although the Company believes that its safety procedures for
handling and disposing of such materials comply with the standards prescribed
by state and federal regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result
and any such liability not covered by insurance could exceed the resources of
the Company.
Concentration of Ownership. Upon completion of this Offering, directors and
officers of cti, and their affiliates, will beneficially own in the aggregate
2,435,844 shares of the Company's Common Stock (including shares of Common
Stock subject to options or warrants exercisable or convertible within 60 days
of October 31, 1997), representing approximately 15.39 percent of the voting
power of the Company's outstanding securities. Such concentration of ownership
may have the effect of delaying, deferring or preventing a change in control
of the Company.
Possible Volatility of Stock Price. The market price for securities of
biopharmaceutical and biotechnology companies, including that of cti,
historically have been highly volatile, and the market from time to time has
experienced significant price and volume fluctuations that are unrelated to
the operating performance of such companies. Factors that may have a
significant impact on the market price and marketability of the Company's
Common Stock include: announcements of technological innovations or new
commercial therapeutic products by the Company, its collaborative partners or
the Company's present or potential competitors; announcements by the Company
or others of results of preclinical testing and clinical trials; developments
or disputes concerning
13
<PAGE>
patent or other proprietary rights; developments in the Company's
relationships with Johnson & Johnson or future collaborative partners;
acquisitions; litigation; adverse legislation; changes in governmental
regulation, third party reimbursement policies, or the status of the Company's
regulatory approvals or applications; changes in earnings; changes in
securities analysts' recommendations; changes in health care policies and
practices; economic and other external factors; and period-to-period
fluctuations in financial results of the Company and general market
conditions. Fluctuations in the trading price or liquidity of the Company's
Common Stock may adversely effect the Company's ability to raise capital
through future equity financing.
Shares Available for Future Sale; Registration Rights. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of
outstanding options) in the public market after this Offering or the prospect
of such sales could adversely affect the market price of the Common Stock and
the Company's ability to raise additional equity capital. The number of shares
of Common Stock available for sale in the public market is limited by
restrictions under the Securities Act of 1933, as amended (the "Securities
Act"), and lock-up agreements ("Lock-Ups") executed in connection with the
Company's follow-on public offering under which the holders of 4,591,562
shares, including 2,838,874 shares to be offered in this Offering, have agreed
not to sell or otherwise dispose of any of their shares for a period of 90
days ending on January 20, 1998 without the prior written consent of UBS
Securities LLC. In its sole discretion and at any time without notice, UBS
Securities LLC may release all or any portion of the shares subject to Lock-
Ups. While a majority of the shares of Common Stock outstanding at October 31,
1997 will be freely tradeable without restriction or further registration
under the Securities Act following the Lock-Up period, (i) 3,723,300 shares
currently owned by "affiliates" of the Company, as that term is defined in
Rule 144 under the Securities Act ("Affiliates"), and (ii) 1,066,091
additional shares, generally may be sold only in compliance with the volume
limitations and other provisions of Rule 144. The Company has registered
2,615,720 shares of Common Stock reserved for issuance under the Company's
1994 Equity Incentive Plan and 1996 Employee Stock Purchase Plan as of the
date of this Prospectus. Sales of a large number of such shares in the public
market could have a material adverse effect on the market price of the
Company's Common Stock.
Anti-Takeover Provisions; Possible Issuance of Preferred Stock; Rights
Plan. The Company's Restated Articles of Incorporation and Bylaws contain
provisions that may make it more difficult for a third party to acquire, or
may discourage acquisition bids for, cti. These provisions could limit the
price that certain investors might be willing to pay in the future for shares
of Common Stock. In addition, shares of the Company's preferred stock may be
issued in the future without further shareholder approval and upon such terms
and conditions, and having such rights, privileges and preferences, as the
Board of Directors may determine. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of any
holders of preferred stock that may be issued in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of cti.
The Company has no present plans to issue any shares of preferred stock. In
addition, the Company has adopted a shareholder rights plan that, along with
certain provisions of the Company's Restated Articles of Incorporation, may
have the effect of discouraging certain transactions involving a change of
control of the Company.
USE OF PROCEEDS
The Company will not receive any of the net proceeds from the sale of the
Resale Shares by the Selling Holders.
14
<PAGE>
SELLING HOLDERS
The following table sets forth certain information regarding the beneficial
ownership of cti's Common Stock as of October 31, 1997, as reported to cti by
each Selling Holder as of August 22, 1997 and as adjusted to reflect the
Company's recently completed follow-on public offering (the "Follow-On
Offering"), the number of Resale Shares which may be offered from time to time
by each of the Selling Holders and the number and percentage of currently
outstanding shares to be owned by each of the Selling Holders following this
Offering, assuming that all Resale Shares which may be offered from time to
time hereby are sold.
<TABLE>
<CAPTION>
SHARES OF NUMBER OF SHARES OF
COMMON STOCK SHARES OFFERED COMMON STOCK
BENEFICIALLY OWNED HEREBY FOR BENEFICIALLY OWNED
PRIOR TO SELLING HOLDER'S AFTER THE OFFERING
OFFERING (1) ACCOUNT (1)
-------------------- ---------------- ------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------ --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS:(2)
The International
Biotechnology Trust plc
(3).................... 1,358,156 8.83% 1,108,156 250,000 1.63%
Kummell Investments
Limited (4)............ 1,287,456 8.37 1,287,456 0 *
Johnson & Johnson
Development Corporation
(5).................... 868,262 5.65 443,262 425,000 2.76
Strategic Healthcare
Investment Fund........ 22,163 * 22,163 0 *
WARRANT HOLDERS:(6)
BT Alex. Brown
Incorporated(7)........ 5,810 * 5,810 0 *
</TABLE>
- --------
*Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible, or
exercisable or convertible within 60 days of October 31 , 1997 are deemed
outstanding for computing the percentage of the person holding such option
or warrant but are not deemed outstanding for computing the percentage of
any other person. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned.
(2) Information concerning holders of up to 1,181,969 additional shares of
Common Stock with the right to participate in the Offering will be set
forth in Prospectus Supplements from time to time, if required.
(3) Consists of 1,358,156 shares of Common Stock beneficially owned by The
International Biotechnology Trust plc, a company formed under the laws of
England ("IBT") and managed by Rothschild Asset Management Limited
("Rothschild"). Rothschild has or shares voting and investment power with
respect to the shares held by IBT and may be deemed to be the beneficial
owner of such shares. Mr. Jeremy L. Curnock Cook, a Director of cti, is a
director of IBT and Rothschild, and may be deemed to be the beneficial
owner of any shares beneficially owned by each of IBT and Rothschild. Mr.
Curnock Cook disclaims beneficial ownership of shares beneficially owned
by IBT and Rothschild except to the extent of his proportionate interest
therein. Rothschild is advisor to Biotechnology Investment Limited ("BIL")
and to Rothschild Asset Management (C.I.) Limited, which is the manager of
BIL.
(4) Mr. Terrence M. Morris, a Director of cti, is the Chief Executive Officer
of Morningside Ventures, which advises Kummell Investments Limited
("Kummell") on its private venture capital portfolio. Mr. Morris does not
have or share voting or investment power with respect to the shares held
by Kummell.
(5) Consist of 743,262 shares owned by Johnson & Johnson Development
Corporation ("JJDC") at August 22, 1997 and 125,000 shares purchased by
JJDC in the Follow-On Offering. Pursuant to the terms of the stock
purchase agreement executed by JJDC and the Company in connection with
the collaboration agreement (the "Collaboration Agreement") dated
November 8, 1996, JJDC has agreed that it will not sell or otherwise
dispose of the 443,262 shares which may be offered for resale from time
to time hereby until the earlier of (i) January 1, 1999, or (ii) the
termination of the Collaboration Agreement.
(6) Information concerning holders of additional warrants exercisable for up
to 9,007 shares of Common Stock with the right to participate in the
Offering will be set forth in Prospectus Supplements from time to time, if
required.
15
<PAGE>
(7) Consists of 5,810 shares of Common Stock issuable upon exercise of
warrants which are immediately exercisable at an exercise price of $17.50
per share. Warrants for 3,840 of such shares will expire on November 13,
1997 and warrants for the remaining 1,970 shares will expire on November
25, 1997.
In March 1995 The International Biotechnology Trust plc ("IBT") purchased
22,388.061 shares of Series A Convertible Preferred Stock ("Series A
Preferred"), for an aggregate purchase price of $7.5 million, in the Company's
1995 private placement of an aggregate of 76,789.5116 shares of Series A
Preferred. The holders of the outstanding shares of Series A Preferred, voting
as a separate class, were entitled to elect one Director to the Board of
Directors of the Company. At the 1996 Annual Meeting of Shareholders Mr.
Jeremy L. Curnock Cook, an affiliate of IBT, was elected as a Director by the
holders of the outstanding shares of Series A Preferred voting as a separate
class. In September 1996 IBT purchased an additional 14,925.373 shares of
Series A Preferred for an aggregate purchase price of $5.0 million. In March
1997 IBT purchased 250,000 shares of Common Stock in the Company's initial
public offering for an aggregate purchase price of $2.5 million. At the 1997
Annual Meeting of Shareholders, Mr. Curnock Cook was re-elected as Director by
the Company's Shareholders.
In March 1995 Kummell Investments Limited ("Kummell") purchased 14,925.374
shares of Series A Preferred, for an aggregate purchase price of $5.0 million,
in the Company's 1995 private placement. In June 1995 Kummell purchased an
additional 12,686.5672 shares of Series A Preferred for an aggregate purchase
price of $4.25 million. In connection with the June 1995 transaction, the
Company agreed that it would take all necessary action to nominate a designee
of Kummell to serve as a Director until the 1996 Annual Meeting of
Stockholders. In July 1995 the Company nominated Mr. Morris, as a designee of
Kummell, to the Board of Directors to serve until the 1996 Annual Meeting of
Stockholders. Mr. Morris is the Chief Executive Officer of Morningside
Ventures, which advises Kummell on its private venture capital portfolio. In
September 1996 Kummell purchased an additional 14,925.373 shares of Series A
Preferred for an aggregate purchase price of $5.0 million. In connection with
the September 1996 transaction, the Company agreed that (i) it would take all
necessary action to nominate a designee of Kummell at the 1999 Annual Meeting
of Stockholders to serve as a Director until the 2002 Annual Meeting of
Stockholders, and (ii) if prior to the 1999 Annual Meeting of Stockholders Mr.
Morris shall cease to be a Director, it will take all necessary action to
nominate a designee of Kummell as a Director to fill the vacancy created by
Mr. Morris' termination. Such agreement terminated upon the closing of the
Company's initial public offering in March 1997.
In November 1996 Johnson & Johnson Development Corporation ("JJDC"), a
wholly-owned subsidiary of Johnson & Johnson, purchased 14,925.373 shares of
Series B Convertible Preferred Stock, for an aggregate purchase price of $5.0
million, pursuant to a Stock Purchase Agreement entered into between cti and
JJDC in connection with the execution of the collaboration agreement between
the Company and subsidiaries of Johnson & Johnson. See "Risk Factors--Reliance
on Relationship with Johnson & Johnson" and "Business--Collaborations"
included in cti's Annual Report on Form 10-K for the year ended December 31,
1996, incorporated herein by reference, for a description of the collaboration
between cti and Johnson & Johnson. JJDC also purchased 300,000 shares of
Common Stock in March 1997 concurrent with the closing of the Company's
initial public offering for an aggregate purchase price of $3.0 million and an
additional 125,000 shares of Common Stock in October 1997 in the Company's
Follow-On Offering for an aggregate purchase price of approximately $2.0
million. Pursuant to the Stock Purchase Agreement, cti is entitled to require
JJDC to purchase additional shares of Common Stock upon the achievement of
certain milestones.
Other than as set forth above, none of the Selling Holders listed above has
had any material relationship with cti within the past three years.
16
<PAGE>
PLAN OF DISTRIBUTION
The Resale Shares offered hereby by the Selling Shareholders may be sold
from time to time to purchasers directly by the Selling Shareholders.
Alternatively, the Selling Shareholders may from time to time offer the Resale
Shares in ordinary brokerage transactions or to or through underwriters,
broker/dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Shareholders and/or the purchasers of the Resale Shares for whom they may act
as agents. The Selling Shareholders and any underwriters, broker/dealers or
agents that participate in the distribution of the Resale Shares may be deemed
to be underwriters and any profit on the sale of Resale Shares by them and any
discounts, commissions or concessions received by any such underwriters,
broker/dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act.
The sale of the Resale Shares by the Selling Shareholders may be effected
from time to time in the over-the-counter market, in the Nasdaq National
Market, in privately negotiated transactions or otherwise at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. At the time a particular offering of the
Shares is made, a Prospectus Supplement, if required, will be distributed
which will set forth the amount of Resale Shares being offered and the terms
of the offering, including the name or names of any additional Selling
Shareholders, any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the Selling
Shareholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker/dealers.
Any Resale Shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144, rather than
pursuant to this Prospectus.
The Company has paid substantially all of the expenses incident to the
offering of the Resale Shares offered hereby, other than commissions and
discounts of underwriters, dealers or agents and the fees and expenses of
counsel to the Selling Shareholders. The Selling Shareholders may agree to
indemnify any broker/dealer or agent that participates in transactions
involving sales of the Resale Shares against certain liabilities, including
liabilities arising under the Securities Act. The Company and certain of the
Selling Shareholders have agreed to indemnify each other for certain
liabilities arising out of material misstatements and omissions made by the
other party in the Registration Statement and Prospectus.
LEGAL MATTERS
The validity of the Resale Shares offered hereby will be passed upon for the
Company by Davis Wright Tremaine LLP, Seattle, Washington. Certain legal
matters with respect to information contained in this Prospectus under the
caption "Risk Factors--Ability to Protect Intellectual Property" will be
passed upon by Foley & Lardner, Washington, D.C., patent counsel to the
Company.
EXPERTS
The consolidated financial statements of Cell Therapeutics, Inc. appearing
in cti's Annual Report (Form 10-K) for the year ended December 31, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated 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.
17
<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"). This Registration
Statement, including exhibits thereto, and such reports, proxy statements and
other information filed by the Company with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at its Regional Offices located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov. Reports and other
information concerning the Company may be inspected at the offices of the
Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Resale Shares of the Company
being offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Resale Shares, reference is
hereby made to the Registration Statement. Statements contained in this
Prospectus as to the contents of any contract or 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, and June 30, 1997; and
(3) the description of the Company's capital stock contained in the
Company's Registration Statement on Form 10 filed on April 29, 1996 (as
amended on June 27, 1996, and June 28, 1996), and the description of
the Company's Preferred Stock Purchase Rights contained in its
Registration Statement on Form 8-A filed on November 15, 1996.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified of superseded, to constitute a part of
this Prospectus. The Company will provide without charge to each person to
whom a copy of the Prospectus has been delivered, and who makes a written or
oral request, a copy of any and all of the foregoing documents incorporated by
reference in the Registration Statement (other than exhibits unless such
exhibits are specifically incorporated by reference into such documents).
Requests should be submitted in writing or by telephone to Investor Relations,
Cell Therapeutics, Inc., 201 Elliott Avenue West, Seattle, Washington 98119,
telephone (206) 282-7100.
18
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or any other person has been authorized to give any
information or make any representation not contained in this Prospectus in
connection with the offer made by this Prospectus and, if given or made, such
information or representation must not be relied upon as having been
authorized by the Company or the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information herein is correct as of any time subsequent to the date
of this Prospectus or that there has been no change in the affairs of the
Company since such date.
-----------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 2
Risk Factors............................................................... 5
Use of Proceeds............................................................ 14
Selling Holders............................................................ 15
Plan of Distribution....................................................... 17
Legal Matters.............................................................. 17
Experts.................................................................... 17
Available Information...................................................... 18
Incorporation of Certain Documents by
Reference................................................................. 18
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,866,847 Shares
LOGO
Cell Therapeutics, Inc.
Common Stock
---------------------
PROSPECTUS
November , 1997
---------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions if the offering is underwritten, payable by the
Registrant in connection with the sale of the Resale Shares being registered.
All the amounts shown are estimates except for the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 13,735
Legal Fees and Expenses......................................... 20,000
Accounting Fees and Expenses.................................... 10,000
Printing and Engraving Expenses................................. 20,000
Miscellaneous Expenses.......................................... 11,265
-----------
TOTAL......................................................... $ 75,000
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on
terms sufficiently broad to permit indemnification under certain circumstances
for liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article IX of the Registrant's Restated Bylaws (Exhibit 4.8
hereto) provides for indemnification of the Registrant's directors, officers,
employees and agents to the maximum extent permitted by Washington law. The
directors and officers of the Registrant also may be indemnified against
liability they may incur for serving in such capacity pursuant to a liability
insurance policy maintained by the Company for such purpose.
Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary
damages for acts or omissions as a director, except in certain circumstances
involving intentional misconduct, knowing violations of law or illegal
corporate losses or distributions, or any transaction from which the director
personally receives a benefit in money, property or services to which the
director is not legally entitled. Article VI of the Registrant's Restated
Articles of Incorporation (Exhibit 4.1 hereto) contains provisions
implementing, to the fullest extent permitted by Washington law, such
limitations on a director's liability to the Registrant and its shareholders.
The Registrant has entered into an indemnification agreement with each of
its executive officers and directors in which the Registrant agrees to hold
harmless and indemnify the officer or director to the fullest extent permitted
by Washington law. The Registrant agrees to indemnify the officer or director
against any and all losses, claims, damages, liabilities or expenses incurred
in connection with any actual, pending or threatened action, suit, claim or
proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal, in which the officer or director is, was or
becomes involved by reason of the fact that the officer or director is or was
a director, officer, employee, trustee or agent of the Registrant or any
related company, partnership or enterprise, including service with respect to
an employee benefit plan, whether the basis of such proceeding is alleged
action (or inaction) by the officer or director in an official capacity and
any action, suit, claim or proceeding instructed by or at the direction of the
officer or director unless such action, suit, claim or proceeding is or was
authorized by the Registrant's Board of Directors. No indemnity pursuant to
the indemnification agreements shall be provided by the Registrant on account
of any suit in which a final, unappealable judgment is rendered against the
officer or director for an accounting of profits made from the purchase or
sale by the officer or director of securities of the Registrant in violation
of the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended, and amendments thereto, or for damages that have been paid directly
to the officer or director by an insurance carrier under a policy of
directors' and officers' liability insurance maintained by the Registrant.
cti has entered into Registration Rights Agreements with the Selling
Holders. Such agreements provide for indemnification by such Selling Holders
of the Company and its officers and directors, and by the Company of such
Selling Holders, for certain liabilities arising under the Securities Act or
otherwise.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1(1) Registrant's Restated Articles of Incorporation
4.2(1) Registrant's Articles of Amendment to Restated Articles of
Incorporation Establishing a Series of Preferred Stock (Series A
Convertible Preferred Stock)
4.3(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation Reducing the Number of Authorized Shares of Series A
Convertible Preferred Stock.
4.4(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation Establishing a Series of Preferred Stock (Series B
Convertible Preferred Stock)
4.5(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation Establishing a Series of Preferred Stock (Series C
Preferred Stock)
4.6(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation of Cell Therapeutics, Inc. Effecting a Reverse Stock
Split.
4.7(3) Registrant's Articles of Amendment to Restated Articles of
Incorporation of Undesignating Series A and Series B Preferred
Stock.
4.8(4) Registrant's Restated Bylaws
4.9(5) Specimen Common Stock Certificate
4.10(6) Form of Rights Agreement dated as of November 11, 1996, between the
Registrant and Harris Trust Company of California, which includes
the Form of Rights Certificate as Exhibit A, the Summary of Rights
to Purchase Preferred Stock as Exhibit B and the Form of
Certificate of Designation of the Series C Preferred Stock as
Exhibit C
4.11(1) Form of Sales Agent Warrant for the 1992 Private Placement
4.12(1) Registration Agreement between the Registrant and the other parties
included therein, dated as of November 23, 1993
4.13(1) Form of Sales Agent Warrant for the 1993 Private Placement
4.14(1) Registration Rights Agreement between the Registrant and the other
parties included therein, dated as of March 21, 1995
4.15(4) Registration Rights Agreement between the Company and the other
parties included therein, dated as of September 17, 1996, as
amended by Amendment No. 1 thereto dated as of October 11, 1996.
4.16(2)+ Stock Purchase Agreement, dated as of November 8, 1996, by and
between the Registrant and Johnson & Johnson Development
Corporation
5.1 Opinion of Davis Wright Tremaine LLP
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Davis Wright Tremaine LLP (included in its opinion filed
as Exhibit 5.1)
23.3 Consent of Foley & Lardner.
24.1 Powers of Attorney (included on pages II-5 and II-6 of this
Registration Statement)
</TABLE>
- --------
+Confidential Treatment Requested
(1) Incorporated by reference to exhibits to the Registrant's Registration
Statement on Form S-1 (No. 33-4154).
(2) Incorporated by reference to exhibits to Registrant's Registration
Statement on Form S-1 (No. 333-20855).
(3) Incorporated by reference to exhibits to Registrant's Registration
Statement on Form S-3 (No. 333-36603).
(4) Incorporated by reference to exhibits to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996.
(5) Incorporated by reference to exhibits to the Registrant's Registration
Statement on Form 10.
(6) Incorporated by reference to exhibits to the Registrant's Registration
Statement on Form 8-A.
II-2
<PAGE>
(b)Financial Statement Schedules
None.
All schedules have been omitted since they are either not required, are not
applicable, or the required information is shown in the financial statements
or related notes.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1a)To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) To include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (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. 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 and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; (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 (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference into the
registration statement.
(2b)That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(3c)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.
(4d)That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the 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
II-3
<PAGE>
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 Act and will be governed by the final
adjudication of such issue.
(1)That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of Prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in the form of Prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(2)For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, 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
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF SEATTLE, STATE OF WASHINGTON, ON
NOVEMBER 4, 1997.
Cell Therapeutics, Inc.
By:_____/s/ James A Bianco, M.D._____
JAMES A. BIANCO, M.D.
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints each of James A. Bianco and Louis A.
Bianco, and each of them acting individually, as such person's attorney-in-
fact and agent, each with full power of substitution or resubstitution, for
such person in any and all capacities, to sign any and all amendments (and any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, as amended, and all post-
effective amendments thereto) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, with full power of each to act alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully for all intents and
purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them or their
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Max E. Link, Ph.D. Chairman of the November 4,
- ------------------------------------- Board and Director 1997
MAX E. LINK, PH.D.
/s/ James A Bianco, M.D. President, Chief November 4,
- ------------------------------------- Executive Officer 1997
JAMES A. BIANCO, M.D. and Director
/s/ Louis A. Bianco Executive Vice November 4,
- ------------------------------------- President, Finance 1997
LOUIS A. BIANCO and Administration
(Principal Financial
Officer and
Principal Accounting
Officer)
/s/ Jack W. Singer, M.D. Director November 4,
- ------------------------------------- 1997
JACK W. SINGER, M.D.
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Jack L. Bowman Director November 4,
- ------------------------------------- 1997
JACK L. BOWMAN
/s/ Jeremy L. Curnock Cook Director November 4,
- ------------------------------------- 1997
JEREMY L. CURNOCK COOK
/s/ Wilfred E. Jaeger, M.D. Director November 4,
- ------------------------------------- 1997
WILFRED E. JAEGER, M.D.
/s/ Terrence M. Morris Director November 4,
- ------------------------------------- 1997
TERRENCE M. MORRIS
/s/ Mary O'Neil Mundinger, D.P.H. Director November 4,
- ------------------------------------- 1997
MARY O'NEIL MUNDINGER, D.P.H.
/s/ Phillip M. Nudelman, Ph.D. Director November 4,
- ------------------------------------- 1997
PHILLIP M. NUDELMAN, PH.D.
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
4.1(1) Registrant's Restated Articles of Incorporation
4.2(1) Registrant's Articles of Amendment to Restated Articles of
Incorporation Establishing a Series of Preferred Stock
(Series A Convertible Preferred Stock)
4.3(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation Reducing the Number of Authorized Shares of
Series A Convertible Preferred Stock.
4.4(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation Establishing a Series of Preferred Stock
(Series B Convertible Preferred Stock)
4.5(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation Establishing a Series of Preferred Stock
(Series C Preferred Stock)
4.6(2) Registrant's Articles of Amendment to Restated Articles of
Incorporation of Cell Therapeutics, Inc. Effecting a Reverse
Stock Split.
4.7(3) Registrant's Articles of Amendment to Restated Articles of
Incorporation of Undesignating Series A and Series B
Preferred Stock.
4.8(4) Registrant's Restated Bylaws
4.9(5) Specimen Common Stock Certificate
4.10(6) Form of Rights Agreement dated as of November 11, 1996,
between the Registrant and Harris Trust Company of
California, which includes the Form of Rights Certificate as
Exhibit A, the Summary of Rights to Purchase Preferred Stock
as Exhibit B and the Form of Certificate of Designation of
the Series C Preferred Stock as Exhibit C
4.11(1) Form of Sales Agent Warrant for the 1992 Private Placement
4.12(1) Registration Agreement between the Registrant and the other
parties included therein, dated as of November 23, 1993
4.13(1) Form of Sales Agent Warrant for the 1993 Private Placement
4.14(1) Registration Rights Agreement between the Registrant and the
other parties included therein, dated as of March 21, 1995
4.15(4) Registration Rights Agreement between the Company and the
other parties included therein, dated as of September 17,
1996, as amended by Amendment No. 1 thereto dated as of
October 11, 1996.
4.16(2)+ Stock Purchase Agreement, dated as of November 8, 1996, by and
between the Registrant and Johnson & Johnson Development
Corporation
5.1 Opinion of Davis Wright Tremaine LLP
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Davis Wright Tremaine LLP (included in its opinion
filed as Exhibit 5.1)
23.3 Consent of Foley & Lardner.
24.1 Powers of Attorney (included on pages II-5 and II-6 of this
Registration Statement)
</TABLE>
- --------
+Confidential Treatment Requested
(1) Incorporated by reference to exhibits to the Registrant's Registration
Statement on Form S-1 (No. 33-4154).
(2) Incorporated by reference to exhibits to Registrant's Registration
Statement on Form S-1 (No. 333-20855).
(3) Incorporated by reference to exhibits to Registrant's Registration
Statement on Form S-3 (No. 333-36603).
(4) Incorporated by reference to exhibits to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996.
(5) Incorporated by reference to exhibits to the Registrant's Registration
Statement on Form 10.
(6) Incorporated by reference to exhibits to the Registrant's Registration
Statement on Form 8-A.
<PAGE>
[LETTERHEAD FOR DAVIS WRIGHT TREMAINE LLP]
LAW OFFICES
November 3, 1997
Cell Therapeutics, Inc.
201 Elliott Avenue West
Suite 400
Seattle, WA 98119
Re: Cell Therapeutics, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion in connection with Cell Therapeutics,
Inc.'s, a Washington corporation (the "Company"), registration of an aggregate
of 2,866,847 shares of its Common Stock (the "Shares"), as described in a
Registration Statement on Form S-3 (the "Resale Shelf Registration Statement")
filed by the Company on this date with the Securities and Exchange Commission.
We understand that the Shares are to be sold to the public as described in the
Registration Statement.
As special local Washington counsel for the Company and in connection
with the opinions expressed below, we have examined copies of (a) the
Registration Statement and (b) the originals, or copies identified to our
satisfaction, of such corporate records of the Company, certificates of public
officials, officers of the Company and other persons, and such other documents,
agreements and instruments as we have deemed necessary as a basis for the
opinions hereinafter expressed. In our examinations, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies. In expressing the opinions set forth below, we have also relied on
certain certificates of officers of the Company and certificates of public
officials.
Our opinions expressed below are limited to the laws of the State of
Washington.
Based on such examination and subject to the foregoing, we are of the
opinion that, upon completion of the proceedings being taken or contemplated to
be taken prior to the issuance of the Shares, and the proceedings being taken in
order to permit the offering described in the Registration Statement to be
carried out in accordance with applicable state securities laws, the Shares,
when issued and sold in the manner described in the Registration Statement and
in
<PAGE>
Cell Therapeutics, Inc.
November 3, 1997
Page 2
accordance with the resolutions adopted by the Board of Directors of the
Company, will be legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
Davis Wright Tremaine LLP
<PAGE>
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 Cell Therapeutics,
Inc. for the registration of 2,866,847 shares of its common stock and to the
incorporation by reference therein of our report dated January 24, 1997,
except for paragraphs 2 through 4 of Note 12, as to which the date is March
26, 1997, with respect to the consolidated financial statements of Cell
Therapeutics, Inc. included in its Annual Report (Form 10-K) for the year
ended December 31, 1996, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Seattle, Washington
November 3, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF FOLEY & LARDNER
We consent to the reference to our firm as set forth at Page 54 under the
caption "Legal Matters" in the Registration Statement (Form S-3) and related
Prospectus of Cell Therapeutics, Inc. for the registration of 2,866,847 shares
its Common Stock.
/s/ Stephen A. Bent
By: Stephen A. Bent
Partner Foley &
Lardner
Washington, D.C.
November 3, 1997
