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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1998
REGISTRATION NO. 333-49025
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SHAMAN PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2834 94-3095806
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(650) 952-7070
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LISA A. CONTE
PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(650) 952-7070
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPIES TO:
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J. STEPHAN DOLEZALEK, ESQ BRIAN W. PUSCH, ESQ.
TIMOTHY R. CURRY, ESQ. LAW OFFICES OF BRIAN W PUSCH
BROBECK, PHLEGER & HARRISON LLP PENTHOUSE SUITE
TWO EMBARCADERO PLACE, 2200 GENG ROAD 29 WEST 57TH STREET
PALO ALTO, CA 94301 NEW YORK, NY 10019
(650) 424-0160 (212) 980-0408
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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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 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. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(1) REGISTRATION FEE(3)
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Common Stock, $0.001 par value
per share................... 487,500 shares $3.1563 $1,538,672 $454
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(1) REPRESENTS (I) SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS TO
PURCHASE SHARES OF COMMON STOCK AND (II) AN INDETERMINATE NUMBER OF
ADDITIONAL SHARES OF COMMON STOCK AS MAY FROM TIME TO TIME BECOME ISSUABLE
UPON EXERCISE OF SUCH WARRANTS BY REASON OF STOCK SPLITS, STOCK DIVIDENDS
AND OTHER SIMILAR TRANSACTIONS, WHICH SHARES ARE REGISTERED HEREUNDER
PURSUANT TO RULE 416 UNDER THE SECURITIES ACT.
(2) THE PRICE OF $3.1563 PER SHARE, WHICH WAS THE AVERAGE OF THE HIGH AND LOW
BID PRICES OF THE COMMON STOCK REPORTED BY THE NASDAQ STOCK MARKET ON JULY
2, 1998, IS SET FORTH SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION
FEE IN ACCORDANCE WITH RULE 457(C) OF THE SECURITIES ACT OF 1933, AS
AMENDED.
(3) A REGISTRATION FEE OF $3,192 WAS PREVIOUSLY PAID.
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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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
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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 JULY 9, 1998
487,500 SHARES
SHAMAN PHARMACEUTICALS, INC.
COMMON STOCK
------------------------
This Prospectus relates to the offer and sale by certain persons listed
herein under "Selling Stockholders" (collectively, the "Selling Stockholders")
of (i) up to 487,500 shares (the "Shares") of Common Stock, par value $0.001 per
share (the "Common Stock"), of Shaman Pharmaceuticals, Inc. (the "Company"),
which consist of (a) 137,500 shares that may be issued from time to time to the
Selling Stockholders upon exercise of Common Stock Purchase Warrants issued by
the Company on March 18, 1998 (the "March Warrants") and (b) 350,000 shares that
may be issued from time to time to the Selling Stockholders upon exercise of
Common Stock Purchase Warrants issued by the Company on June 22, 1998 (the "June
Warrants" and collectively with the March Warrants, the "Warrants") and (ii) in
accordance with Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), an indeterminate number of additional shares of Common Stock
as may from time to time become exercisable upon exercise of the Warrants by
reason of stock splits, stock dividends and other similar transactions. The
March Warrants are exercisable for a period of three years after the date of
issuance at an exercise price of $7.50 per share. The June Warrants are
exercisable for a period of five years after the date of issuance at an exercise
price per share equal to 115% of the average trading price of the Common Stock
during specified measurement periods. The Warrants provide for adjustment of the
number of shares of Common Stock issuable upon exercise thereof in certain
circumstances. All of the Shares may be offered pursuant to this Prospectus by
the Selling Stockholders or by pledgees, donees, transferees or other successors
in interest that receive such shares as a gift, partnership distribution or
other non-sale related transfer. The Warrants and the Common Stock issuable upon
exercise thereof, have been and will be issued in transactions exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) or
3(a)(9) thereof. See "Recent Developments," "Selling Stockholders" and "Plan of
Distribution." The Shares are being registered by the Company pursuant to
registration rights granted to the Selling Stockholders.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus. It is
anticipated, however, that the Shares will be offered and sold by the Selling
Stockholders from time to time in transactions on The Nasdaq National Market or
other securities market on which the Common Stock is listed, in privately
negotiated transactions, or by a combination of such methods of sale, at such
fixed prices as may be negotiated from time to time, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Stockholders may effect such transactions by
selling the Shares to or through broker-dealers and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration of the Shares being offered by the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act.
The Common Stock of the Company is traded on The Nasdaq National Market
tier of The Nasdaq Stock Market under the symbol "SHMN." On July 7, 1998, the
last sale price for the Common Stock as quoted on The Nasdaq National Market was
$3.4375 per share.
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The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" herein for a description of
agreements by the Company to indemnify the Selling Stockholders against certain
liabilities.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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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.
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The date of this Prospectus is July 9, 1998
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No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, any Selling
Stockholders or by any other person. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities other than the
shares of Common Stock offered hereby, nor does it constitute an offer to sell
or a solicitation of an offer to buy any of the shares offered hereby to any
person in any jurisdiction in which such offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that the information
contained herein is correct as of any date subsequent to the date hereof.
AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement on
Form S-3 (the "Registration Statement") filed by the Company with the Securities
and Exchange Commission (the "Commission") under the Securities Act, omits
certain of the information set forth in the Registration Statement. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to such Registration Statement, exhibits and schedules.
Statements contained in this Prospectus regarding the contents of any contract
or other document are not necessarily complete; with respect to each such
contract or document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. A copy of the Registration Statement, including the exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities of the Commission described below, and copies of such material may be
obtained from such office upon payment of the fees prescribed by the Commission.
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
Commission. 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 Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and the following regional offices of
the Commission: New York Regional Office, Seven World Trade Center, 13th Floor,
New York, New York 10048; and Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed rates.
Furthermore, the Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. Such Web site is located at
http://www.sec.gov. The Company's Common Stock is quoted on The Nasdaq National
Market. Reports, proxy statements and other information concerning the Company
may be inspected at the National Association of Securities Dealers, Inc. at 1735
K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company (File
No. 0-21022) with the Commission are hereby incorporated herein by reference:
(a) the Company's Annual Report on Form 10-K for the year ended December 31,
1997, filed with the Commission on March 4, 1998 and amended on each of May 7,
1998, May 11, 1998 and May 28, 1998; (b) the Company's Definitive Proxy
Statement dated April 15, 1998, filed in connection with the Company's 1998
Annual Meeting of Stockholders; (c) the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998, filed with the Commission on May 15, 1998
and amended on May 28, 1998 and (d) the description of the Company's Common
Stock contained in its Registration Statement on Form 8-A, as amended, filed
with the Commission on December 18, 1992, including any amendments or reports
filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates that all
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securities offered hereby have been sold or which deregisters all securities
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of filing of such reports and documents. Any
statement contained in a document incorporated by reference herein shall be
deemed modified or superseded for purposes of this Prospectus to the extent that
a statement contained or incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been or may be incorporated by reference
in this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to Shaman Pharmaceuticals, Inc., 213 East Grand Avenue, South
San Francisco, California 94080-4812, telephone (650) 952-7070, facsimile (650)
873-8367, Attn: Vice President, Corporate Communications.
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Provir(TM) and the Company's stylized logo are trademarks of the Company.
Shaman Pharmaceuticals(R) and Virend(R) are registered U.S. trademarks of the
Company.
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3
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THE COMPANY
The following information is qualified in its entirety by the more detailed
information and financial statements, including notes thereto, appearing
elsewhere herein or incorporated by reference in this Prospectus. This
Prospectus contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain of the risk factors set forth elsewhere in
this Prospectus. Investors should carefully consider the information set forth
under the heading "Risk Factors."
Shaman discovers and develops novel pharmaceutical products for the
treatment of human diseases through the isolation and optimization of active
compounds found in tropical plants. The Company believes that by focusing on
drugs extracted from plants with a long history of medicinal use, its drug
discovery efforts will be quicker and more likely to lead to safe and effective
pharmaceuticals. Shaman has human clinical trials underway for its three lead
product candidates: SP-303/Provir, nikkomycin Z and SP-134101. Of these, the
most advanced, SP-303/Provir, entered into a Phase III human clinical trial for
the treatment of diarrhea in patients with AIDS in March 1998. In May 1998, the
Company announced that SP-303/Provir has been granted a "fast track product"
designation by the U.S. Food and Drug Administration ("FDA"). Earlier in 1998,
the FDA also advised the Company that upon completion, data from Shaman's single
Phase III study along with corroborative information from a previously completed
Phase II trial may serve as the basis for the submission of a New Drug
Application ("NDA"). In the Phase II trial, SP-303/Provir was shown to provide a
significant treatment effect for diarrhea in patients with AIDS. With a
successful determination by the FDA on the Company's full NDA package, expected
to be submitted as early as 1999, SP-303/Provir for diarrhea in patients with
AIDS will become Shaman's first commercialized product.
SP-303/Provir has shown an ability to inhibit a primary mechanism in watery
diarrhea, and is also being evaluated in human clinical trials for watery
diarrhea indications other than diarrhea in patients with AIDS. Two
dose-optimizing Phase II trials for SP-303/Provir in watery diarrhea began in
1997 and are intended to be completed in the first half of 1998. If successful,
these studies will lead to a Phase III clinical trial program. The Company also
intends to advance SP-303/Provir in clinical development for a third indication,
pediatric diarrhea. Shaman is currently engaged in formulation development and
in planning the ongoing clinical development program for this indication.
SP-303/Provir has now been tested in over 500 patients, including over 150
patients with AIDS, with no significant drug-related effects. Provir for
diarrhea in patients with AIDS will become the first product commercialized by
Shaman. Two additional dose-optimizing Phase II trials for Provir in watery
diarrhea commenced in 1997. These trials are intended to be completed in the
first half of 1998 and, if successful, will lead to Phase III trials.
Nikkomycin Z, an orally-active product, is the lead candidate in Shaman's
anti-fungal program, and the Company believes that nikkomycin Z has the
potential to treat endemic mycoses and other systemic fungal infections. Shaman
completed a Phase I trial on nikkomycin Z in the United Kingdom in 1997, and
filed an Investigational New Drug application ("IND") in the United States in
December 1997. The Company intends to continue multi-dose Phase I testing of
this compound in 1998.
Shaman's research and preclinical development is principally focused on the
identification and optimization of compounds to treat Type II (adult onset or
non-insulin dependent) diabetes, an effort that has led to the identification of
21 chemically distinct, orally-active compounds which have demonstrated glucose
lowering effects in preclinical animal testing. In October 1997, Shaman filed an
IND for SP-134101, an oral product for the treatment of Type II diabetes. This
first product to emerge from the diabetes discovery program entered clinical
trials in January 1998. Significant funding for this program has been and is
being provided through a collaboration with Lipha, s.a., a wholly-owned
subsidiary of Merck KGaA, Darmstadt, Germany ("Lipha/ Merck"), and has been
provided through a collaboration with Ono Pharmaceutical Co., Ltd. ("Ono"). Both
Lipha/Merck and Ono will pay milestone payments on any resulting products they
develop.
RECENT DEVELOPMENTS
Of the 487,500 Shares being registered, 137,500 represent shares underlying
the March Warrants, which were issued in connection with an Amendment Agreement
dated March 18, 1998 (the "Amendment Agreement") to the several Note Purchase
Agreements dated as of June 30, 1997 between the Company and certain of the
Selling Stockholders (the "Purchase Agreements"). Pursuant to the Purchase
Agreements, the Company issued $10,400,000 in Senior Subordinated Notes due
August 29, 2000 (the "Notes") and bearing
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interest at a rate of 5.5% per annum. Interest on the Notes, which is payable in
arrears on the first day of each November, February, May and August, may be paid
in Common Stock or in cash at the Company's option. Under the original terms of
the Purchase Agreements, the Notes are convertible into Common Stock of the
Company as follows: (i) until November 5, 1997 (the "Fixed Conversion Period"),
the Notes were convertible at the lowest trading price of the Common Stock
during a specified measurement period prior to each conversion, but in no event
less than $5.50 per share, (ii) thereafter the Notes are convertible at 90% of
such trading price during such measurement period prior to each conversion. The
maximum number of shares into which the Notes shall become convertible in the
aggregate is limited to 19.9% of the outstanding shares of Common Stock on July
9, 1997 (3,485,887 shares), with any excess to be redeemed by the Company. The
Company has the right, exercisable beginning January 10, 1999, to redeem the
then outstanding Notes for 130% of the then outstanding principal balance on
each Note plus accrued interest.
In March 1998, the Company and the purchasers of the Notes entered into the
Amendment Agreement, which extended the Fixed Conversion Period to March 31,
1998. The Amendment Agreement was entered into in order to avoid conversion of
the Notes at a price that would be unduly dilutive to the Company's existing
stockholders. As consideration for entering into the Amendment Agreement, the
Company issued to certain of the Selling Stockholders the March Warrants to
purchase an aggregate of 137,500 shares of Common Stock. The March Warrants are
exercisable through March 18, 2001 at an exercise price of $7.50 per share. The
March Warrants provide for adjustment of the number of shares of Common Stock
issuable upon exercise thereof, including upon the distribution of certain
dividends, upon the Company's reorganization, reclassification or merger, or
upon the division or combination of the Company's Common Stock.
At the date of issuance of the Notes, an allocation of a portion of the
proceeds of the Notes equal to the intrinsic value of the conversion feature
that is "in the money" was reflected as a non-cash charge to interest expense.
Such charge was reflected in the financial statements for the year ended
December 31, 1997. The Company believes this accounting treatment is consistent
with that required by the Commission.
In June 1998, the Company entered into Stock Purchase Agreements (the
"Stock Agreements") with certain of the Selling Stockholders (the "Buyers")
pursuant to which the Company acquired the right to sell to the Buyers, subject
to certain conditions, up to an aggregate of 7,000 shares of the Company's
Custom Convertible Preferred Stock (the "Series B Preferred") for an aggregate
purchase price of $7,000,000. The Stock Agreements became effective on June 22,
1998 (the "Effective Date"). The holders of the Series B Preferred are entitled
to receive dividends when, as and if declared by the Board of Directors. Each
share of Series B Preferred is convertible into that number of shares of Common
Stock as is determined by dividing the purchase price per share, plus an amount
accrued thereon at the rate of 5.5% per annum, by the applicable conversion
price per share. The conversion price is determined as follows: until 120 days
after the Effective Date, the Series B Preferred is convertible at $5.00 per
share (subject to adjustment), (ii) for any conversion effective after such
initial period and prior to three years after the issuance date of the shares of
Series B Preferred being converted, the Series B Preferred is convertible at 90%
of the lowest sale price of the Common Stock during a specified measurement
period prior to each conversion and (iii) for any conversion effected after
three years from the issuance date of the Series B Preferred being converted,
the Series B Preferred is convertible at the greater of $50.00 per share or 150%
of the average trading price of the Common Stock during a specified measurement
period prior to each conversion. Upon issuance of the Series B Preferred, the
Company will reflect a deemed dividend to the Buyers at the difference between
the market price on the date of issuance and 90% of the lowest sale price during
the specified measurement period set forth in (ii) above. The Stock Agreements
provide that the Company will register the shares of Common Stock that may be
issued on conversion of the Series B Preferred for resale under the Securities
Act. The number of shares that may be issued upon conversion of the Series B
Preferred Stock may increase or decrease with a corresponding decrease or
increase in the market price of the Common Stock, subject to the following
limitation: the maximum number of shares into which the Series B Preferred shall
become convertible in the aggregate is limited to 19.9% of the outstanding
shares of Common Stock on the Effective Date or such greater amount as approved
by stockholders or as permitted by Nasdaq or such other securities market on
which the Common Stock is listed. The Series B Preferred is redeemable upon the
occurrence of certain events, including (a) the failure of the Common Stock to
be listed on The Nasdaq National Market, The Nasdaq SmallCap Market, the New
York Stock Exchange or the American Stock Exchange, (b) the completion of a
merger or consolidation of the Company or other business combination, (c) the
adoption of an amendment to the Company's
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charter that disproportionately, materially and adversely affects the rights of
the holders of Series B Preferred, (d) the inability of the holders of the
Series B Preferred to effect a resale of the Common Stock underlying the Series
B Preferred by reason of the Company's failure to meet its obligations under the
Securities Act or the Exchange Act or (e) the Company's breach of a material
obligation owed the holders of Series B Preferred. Should one of the events in
(a) or (b) above occur by reason of events not solely within the control of the
Company and certain other conditions are met and actions are taken to benefit
the holders of Series B Preferred, the Company may elect not to redeem any
Series B Preferred requested to be redeemed. However, any such election will
result in an adjustment to the conversion price of such Series B Preferred and
the rate of amounts accruing thereon.
As consideration for entering into the Stock Agreements, the Company issued
to the Buyers on the Effective Date the June Warrants to purchase an aggregate
of 350,000 shares of Common Stock, which shares are being registered hereunder.
The June Warrants are exercisable for a period of five years after the Effective
Date at an exercise price per share equal to 115% of the average trading price
of the Common Stock during specified measurement periods. The June Warrants
provide for adjustment of the number of shares of Common Stock issuable upon
exercise thereof, including upon the distribution of certain dividends, upon the
Company's reorganization, reclassification or merger, or upon the division or
combination of the Company's Common Stock.
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RISK FACTORS
The shares offered hereby involve a high degree of risk. The following risk
factors should be considered carefully in addition to the other information
contained or incorporated by reference in this Prospectus before purchasing the
shares of Common Stock offered hereby. In addition to the historical information
contained herein, the discussion in this Prospectus may contain certain
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus should be read as being applicable
to all related forward-looking statements wherever they appear in this
Prospectus. The Company's actual results could differ materially from those
discussed in this Prospectus. Factors that could cause or contribute to such
differences include those discussed below as well as those cautionary statements
and other factors set forth elsewhere herein.
Early Stage of Development; Technological Uncertainty. Shaman has not yet
completed the development of any products. Many of the Company's products will
require significant additional clinical testing and investment prior to
commercialization. Products for therapeutic use in human health care must be
evaluated in extensive human clinical trials to determine their safety and
efficacy as part of a lengthy process to obtain government approval. The
Company's Provir, nikkomycin Z and SP-134101 products are each in clinical
development. Positive results for any of these products in a clinical trial do
not necessarily assure that positive results will be obtained in future clinical
trials or that government approval to commercialize the products will be
obtained.
Clinical trials may be terminated at any time for many reasons, including
toxicity or adverse event reporting. There can be no assurance that any of the
Company's products will be successfully developed, enter into human clinical
trials, prove to be safe and efficacious in clinical trials, meet applicable
regulatory standards, obtain required regulatory approvals, be capable of being
produced in commercial quantities at reasonable costs or be successfully
marketed or that the Company will not encounter problems in clinical trials that
will cause the Company to delay or suspend product development. Failure of any
of the Company's products to be commercialized could have a material adverse
effect on the Company's business, financial condition and results of operations.
History of Operating Losses; Products Still in Development; Future
Profitability Uncertain. Shaman was incorporated in 1989 and has experienced
significant operating losses in each of its fiscal years since operations began
and incurred an operating loss of approximately $8.5 million for the three
months ended March 31, 1998. The Company incurred an additional loss of $3.0
million in April 1998, which was a result of the Company's incurring research
and development expenses of approximately $2.8 million, general and
administrative expenses of approximately $364,000 and interest expense net of
interest income of approximately $151,000. These expenses were partially offset
by revenues of approximately $292,000 for the month. As of April 30, 1998, the
Company's accumulated deficit was approximately $123.4 million. The Company has
not generated any product revenues and expects to incur substantial operating
losses over the next several years. All of Shaman's products and compounds are
in research and development, which require substantial expenditures of funds. In
order to generate revenues or profits, the Company, alone or with others, must
successfully develop, test, obtain regulatory approval for and market its
potential products. No assurance can be given that Shaman's product development
efforts will be successful, that required regulatory approvals will be obtained,
or that the products, if developed and introduced, will be successfully marketed
or will achieve market acceptance.
Future Capital Needs; Uncertainty of Additional Funding. As of April 30,
1998, the Company had cash, cash equivalents and investment balances of
approximately $9.7 million. The Company will require substantial additional
funds to conduct the development and testing of its potential products and to
manufacture and market any products that may be developed. The Company's future
capital requirements will depend on numerous factors, including the progress of
its research and development programs, the progress of preclinical and clinical
testing, the time and costs involved in obtaining regulatory approvals, the cost
of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
changes in the Company's existing collaborative and licensing relationships, the
ability of the Company to establish additional collaborative relationships for
the manufacture and
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marketing of its potential products, and the purchase of additional capital
equipment. In addition, Note Purchase Agreements entered into by the Company in
connection with the 1997 Private Placement, provide that under certain
circumstances, which include a failure to meet applicable stock market or
exchange listing requirements, the Company would be required to redeem all or
some portion of the $8.1 million principal due thereunder as of May 31, 1998,
which redemption could significantly accelerate the Company's cash expenditures
and capital requirements beyond the levels currently anticipated, and would
materially and adversely affect the Company's ability to conduct its business.
The Company will need to seek additional funding through public or private
equity or debt financings, collaborative arrangements or from other sources. If
additional funds are raised by issuing equity securities, significant dilution
to existing stockholders may result. In the event that additional funds are
obtained through collaborative agreements, such agreements may require the
Company to relinquish rights to certain of its technologies, product candidates,
products or marketing territories that the Company would otherwise seek to
develop or commercialize itself. There can be no assurance that additional
financing will be available on acceptable terms or at all. If adequate funds are
not available, the Company may be required to delay, scale back or eliminate one
or more of its research, discovery or development programs, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
No Assurance of Successful Product Development. The Company's research and
development programs are at various stages of development, ranging from the
research stage to clinical trials. Substantial additional research and
development will be necessary in order for the Company to move additional
product candidates into clinical testing, and there can be no assurance that any
of the Company's research and development efforts on these or other potential
products, including Provir, nikkomycin Z, and SP-134101 will lead to development
of products that are shown to be safe and effective in clinical trials.
In addition, there can be no assurance that any such products will meet
applicable regulatory standards, be capable of being produced in commercial
quantities at acceptable costs, be eligible for third party reimbursement from
governmental or private insurers, be successfully marketed or achieve market
acceptance. Further, the Company's products may prove to have undesirable or
unintended side effects that may prevent or limit their commercial use. The
Company may find, at any stage of this complex product development process, that
products that appeared promising in preclinical studies or Phase I and Phase II
clinical trials do not demonstrate efficacy in larger-scale, Phase III clinical
trials and do not receive regulatory approvals. Accordingly, any product
development program undertaken by the Company may be curtailed, redirected,
suspended or eliminated at any time.
In addition, there can be no assurance that the Company's testing and
development schedules will be met. Any failure to meet such schedules could have
a material adverse effect on the Company's business, financial condition and
results of operations. The Company's clinical trials may be delayed by many
factors, including, but not limited to: slower than anticipated patient
enrollment; difficulty in finding a sufficient number of patients fitting the
appropriate trial profile; difficulties in the acquisition of sufficient
supplies of clinical trial materials; or, failure to show efficacy in clinical
trials or adverse events occurring during the clinical trials. Completion of
testing, studies and trials may take several years, and the length of time
varies substantially with the type, complexity, novelty and intended use of the
product. In addition, data obtained from preclinical and clinical activities are
susceptible to varying interpretations, which could delay, limit or prevent
regulatory approval. Delays or rejections may be encountered based upon many
factors, including changes in regulatory policy during the period of product
development and could have a material adverse effect on the Company's business,
financial condition and results of operations.
Uncertainties Associated with Clinical Trials. Shaman has conducted, and
plans to continue to conduct, extensive and costly clinical trials to assess the
safety and efficacy of its potential products. The rate of completion of the
Company's clinical trials is dependent upon, among other factors, the rate of
completion and approval of trial protocols, the availability of funds for trials
and the rate of patient enrollment. Patient enrollment is a function of many
factors, including the nature of the Company's clinical trial protocols,
existence of competing protocols, size of patient population, proximity of
patients to clinical sites and
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eligibility criteria for the study. Delays in patient enrollment will result in
increased costs and delays, which could have a material adverse effect on the
Company's ability to complete clinical trials in a timely fashion.
The Company cannot assure that patients enrolled in its clinical trials
will respond to the Company's product candidates. Setbacks are to be expected in
conducting human clinical trials. Failure to comply with the U.S. FDA
regulations applicable to such testing can result in delay, suspension or
cancellation of such testing, and/or refusal by the FDA to accept the results of
such testing. In addition, the FDA or the Company may suspend clinical trials at
any time if either of them concludes that any patients participating in any such
trial are being exposed to unacceptable health risks. Further, there can be no
assurance that human clinical testing will demonstrate that any current or
future product candidate is safe or effective or that data derived from any such
study will be suitable for submission to the FDA or other regulatory
authorities. Failure of the Company's clinical trials to demonstrate safety or
efficacy in humans could cause the delay, suspension, or termination of any
product program and could have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Collaborative Relationships. The Company's research and
development efforts in its diabetes program and, to a lesser extent, in its
other programs, have been dependent upon its arrangements with Lipha/Merck and
Ono and their funding for research and development efforts thereunder. As such
ongoing research and development funding from Ono has ended, the Company must
rely on continued funding from Lipha/Merck or milestone payments from products
developed by either Ono or Lipha/Merck, if any, or must seek new collaborations
to provide further funding for its diabetes program. There can be no assurance
that any significant revenues will ultimately be derived from such agreements.
The Company licensed the use of nikkomycin Z from Bayer AG in June 1995.
Under the terms of this licensing agreement, the Company has paid Bayer an
initial milestone payment and may be required, upon the occurrence of certain
events, to make additional milestone payments and to pay royalties on any
commercialized products derived from nikkomycin Z. The failure of the Company to
pay these milestone payments or the termination of this license agreement could
cause the Company to forfeit its rights to utilize nikkomycin Z and could have a
material adverse effect on the Company's business financial condition and
results of operations.
The Company expects to seek additional collaborative agreements to
commercialize its other product candidates and will, in particular, need to rely
on such third party arrangements to commercialize its products outside the
United States. No assurance can be given that the Company will be successful in
negotiating or entering into such agreements on terms favorable to the Company
or at all, or that any such agreement, if entered into by the Company will be
successful. A failure to successfully enter into such agreements and sell
products thereunder would have a material adverse effect on the Company's
business, financial condition and results of operations.
Rapid Technological Change and Substantial Competition. The pharmaceutical
industry is subject to rapid and substantial technological change. Technological
competition from pharmaceutical and biotechnology companies and universities is
intense. Many of these entities have significantly greater research and
development capabilities, as well as substantial marketing, manufacturing,
financial and managerial resources, and represent significant competition for
the Company. There can be no assurance that developments by others will not
render the Company's products or technologies noncompetitive or that the Company
will be able to keep pace with technological developments. Competitors have
developed or are in the process of developing technologies that are, or in the
future may be, the basis for competitive products. Some of these products may
have an entirely different approach or means of accomplishing the desired
therapeutic effect than products developed by the Company. These competing
products may be more effective and less costly than the products developed by
the Company. In addition, other forms of medical treatment may offer competition
to the Company's products. The development of competing compounds could have a
material adverse effect on the Company's business, financial condition or
results of operations.
Government Regulation; No Assurance of Regulatory Approvals. All new drugs,
including the Company's products under development, are subject to extensive and
rigorous regulation by the federal government, principally the FDA, and
comparable agencies in state and local jurisdictions and in foreign countries.
These authorities impose substantial requirements upon the preclinical and
clinical testing, manufacturing and
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marketing of pharmaceutical products. The steps required before a drug may be
approved for marketing in the United States generally include (i) preclinical
laboratory and animal tests, (ii) the submission to the FDA of an IND for human
clinical testing, (iii) adequate and well controlled human clinical trials to
establish the safety and efficacy of the drug, (iv) submission to the FDA of an
NDA, and (v) satisfactory completion of an FDA inspection of the manufacturing
facility or facilities at which the drug is made to assess compliance with
current Good Manufacturing Practices ("cGMP").
Lengthy and detailed preclinical and clinical testing, validation of
manufacturing and quality control processes, and other costly and time-consuming
procedures are required. Satisfaction of these requirements typically takes
several years and the time needed to satisfy them may vary substantially, based
on the type, complexity and novelty of the pharmaceutical product. The effect of
government regulation may be to delay or to prevent marketing of potential
products for a considerable period of time and to impose costly procedures upon
the Company's activities. There can be no assurance that the FDA or any other
regulatory agency will grant approval for any products developed by the Company
on a timely basis, or at all. Success in preclinical or early stage clinical
trials does not assure success in later stage clinical trials.
Data obtained from preclinical and clinical activities are susceptible to
varying interpretations which could delay, limit or prevent regulatory approval.
If regulatory approval of a product is granted, such approval may impose
limitations on the indicated uses for which a product may be marketed. Further,
even if regulatory approval is obtained, later discovery of previously unknown
problems with a product may result in restrictions on the product, including
withdrawal of the product from the market. Any delay or failure in obtaining
regulatory approvals would have a material adverse effect on the Company's
business, financial condition and results of operation.
Among the conditions for FDA approval of a pharmaceutical product is the
requirement that the manufacturer's (either the Company's own or a third-party
manufacturer) quality control and manufacturing procedures conform to cGMP,
which must be followed at all times. The FDA strictly enforces cGMP requirements
through periodic unannounced inspections. There can be no assurance that the FDA
will determine that the facilities and manufacturing procedures of the Company
or any third-party manufacturer of the Company's planned products will conform
to cGMP requirements. Additionally, the Company or its third-party manufacturer
must pass a pre-approval inspection of its manufacturing facilities by the FDA
before obtaining marketing approval. Failure to comply with applicable
regulatory requirements may result in penalties such as restrictions on a
product's marketing or withdrawal of a product from the market.
The FDA's policies may change and additional government regulations may be
promulgated which could prevent or delay regulatory approval of the Company's
potential products. Moreover, increased attention to the containment of health
care costs in the United States could result in new government regulations that
could have a material adverse effect on the Company's business. The Company is
unable to predict the likelihood of adverse governmental regulation that might
arise from future legislative or administrative action, either in the United
States or abroad.
The Company will also be subject to a variety of foreign regulations
governing clinical trials, registration and sales of its products. Regardless of
whether FDA approval is obtained, approval of a product by comparable regulatory
authorities of foreign countries must be obtained prior to marketing the product
in those countries. The approval process varies from country to country and the
time needed to secure approval may be longer or shorter than that required for
FDA approval. Delays in the approval process or the failure to obtain such
foreign approvals would have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Sources of Supply. The Company currently imports all of the
plant materials from which its products are derived from countries in South and
Latin America, Africa and Southeast Asia. To the extent that its products cannot
be economically synthesized or otherwise produced, the Company will continue to
be dependent upon a supply of raw plant material. The Company does not have
formal agreements in place with all of its suppliers. In addition, a continued
source of plant supply is subject to the risks inherent in international trade.
These risks include unexpected changes in regulatory requirements, exchange
rates, tariffs and barriers, difficulties in coordinating and managing foreign
operations, political instability and potentially
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adverse tax consequences. Interruptions in supply or material increases in the
cost of supply could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, tropical rain
forests, and certain irreplaceable plant resources therein, are currently
threatened with destruction. In the event portions of the rain forests are
destroyed which contain the source material from which Shaman's current or
future products are derived, such destruction could have a material adverse
effect on the Company's business, financial condition and results of operations.
Limited Manufacturing and Marketing Experience and Capacity. The Company
currently produces products only in quantities necessary for clinical trials and
does not have the staff or facilities necessary to manufacture products in
commercial quantities. As a result, the Company must rely on collaborative
partners or third-party manufacturing facilities, which may not be available on
commercially acceptable terms adequate for Shaman's long-term needs. If the
Company should encounter delays or difficulties in establishing relationships
with qualified manufacturers to produce, package and distribute its finished
products, clinical trials, regulatory filings, market introduction and
subsequent sales of such products could be adversely affected.
Contract manufacturers must adhere to cGMP regulations strictly enforced by
the FDA on an ongoing basis through its facilities inspection program. Contract
manufacturing facilities must pass a pre-approval plant inspection before the
FDA will approve an NDA. Certain material manufacturing changes that occur after
approval are also subject to FDA review and clearance or approval. There can be
no assurance that the FDA or other regulatory agencies will approve the process
or the facilities by which any of the Company's products may be manufactured.
The Company's dependence on third parties for the manufacture of products may
adversely affect the Company's ability to develop and deliver products on a
timely and competitive basis. Should the Company be required to manufacture
products itself, the Company will be subject to the regulatory requirements
described above, to similar risks regarding delays or difficulties encountered
in manufacturing any such products and will require substantial additional
capital. There can be no assurance that the Company will be able to manufacture
any such products successfully or in a cost-effective manner.
The Company currently has no sales staff. To the extent that the Company
does not or is unable to enter into co-promotion agreements or to arrange for
third party distribution of its products, significant additional resources will
be required to develop a complete marketing and sales force. There can be no
assurance that the Company will be able to enter into collaborative agreements
or successfully establish a marketing and sales force.
Uncertainty Regarding Patents and Proprietary Rights; Current Legal
Proceedings Regarding Patents and Proprietary Rights. The Company's success will
depend in large part on its ability to obtain and maintain patents, protect
trade secrets and operate without infringing upon the proprietary rights of
others. Moreover, competitors may have filed patent applications, may have been
issued patents or may obtain additional patents and proprietary rights relating
to products or processes competitive with those of the Company. There can be no
assurance that the Company's patent applications will be approved, that the
Company will develop additional proprietary products that are patentable, that
any issued patents will provide the Company with adequate protection for its
inventions or will not be challenged by others, or that the patents of others
will not impair the ability of the Company to commercialize its products. The
patent position of firms in the pharmaceutical industry generally is highly
uncertain, involves complex legal and factual questions, and has recently been
the subject of much litigation. No consistent policy has emerged from the U.S.
Patent and Trademark Office ("PTO") or the courts regarding the breadth of
claims allowed or the degree of protection afforded under pharmaceutical
patents. There is considerable variation between countries as to the level of
protection afforded under patents and other proprietary rights. Such differences
may expose the Company to differing risks of commercialization in each foreign
country in which it may sell products. There can be no assurance that others
will not independently develop similar products, duplicate any of the Company's
products or design around any patents of the Company.
A number of pharmaceutical companies and research and academic institutions
have developed technologies, filed patent applications or received patents on
various technologies that may be related to the Company's business. Some of
these technologies, applications or patents may conflict with the Company's
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technologies or patent applications. The European Patent Office, the French
Patent Office, the German Patent Office and the Australian Patent Office, have
each granted a patent containing broad claims to proanthocyanidin polymer
compositions (and methods of use of such compositions), which are similar to the
Company's specific proanthocyanidin polymer composition, to Leon Cariel and the
Institut des Substances Vegetales. The effective filing date of these patents is
prior to the effective filing date of the Company's foreign pending patent
application in Europe. Certain of the foreign patents have been granted in
jurisdictions where examination is not rigorous. The Company has instituted an
Opposition in the European Patent Office against granted European Patent No.
472531 owned by Leon Cariel and Institut des Substances Vegetales. The Company
believes that the granted claims are invalid and intends to vigorously prosecute
the Opposition.
There can be no assurance that the Company will be successful in having the
granted European patent revoked or the claims sufficiently narrowed so as not to
potentially cover the Company's proanthocyanidin polymer composition and methods
of use. There can be no assurance that Leon Cariel and the Institut des
Substances Vegetales will not assert claims relating to this patent against the
Company. There can be no assurance that the Company would be able to obtain a
license to this patent at all, or at reasonable cost, or be able to develop or
obtain alternative technology to use in Europe or elsewhere. The earlier
effective filing date of this patent could limit the scope of the patents, if
any, that the Company may be able to obtain or result in the denial of the
Company's patent applications in Europe or elsewhere.
In the United States, the Patent and Trademark Office has rendered judgment
in an Interference declared between the Company's issued patent covering its
specific proanthocyanidin polymer composition and certain claims of U.S.
application corresponding to the granted European patent of Leon Cariel and the
Institut des Substances Vegetales by Daniel Jean and Leon Cariel. Judgment was
awarded to the Company. Since the period for appeal has passed, this judgment is
now final.
Additionally, in connection with the Interference proceeding, the Company
has had an opportunity to review the claims and file history of the Daniel Jean
and Leon Cariel patent application which, under U.S. patent law, are kept
confidential. One broad claim, in particular, of the Daniel Jean and Leon Cariel
patent application, which was not involved in the Interference proceeding and
which has been indicated to be allowable, covers a large variety of
proanthocyanidin polymers. The Company believes that this broad claim is subject
to attack as invalid in view of prior art. Based on knowledge of the Company's
specific proanthocyanidin polymer composition, the Company believes that the
manufacture, use or sale of its specific proanthocyanidin polymer composition
would not constitute infringement of this broad claim, once it issues. There can
be no assurances, however, that the Company would prevail should an action for
infringement of such claim be commenced. In addition, if patents that cover the
Company's activities have been or are issued to other companies, there can be no
assurance that the Company would be able to obtain licenses to these patents at
a reasonable cost, or at all, or be able to develop or obtain alternative
technology.
If the Company does not obtain such licenses, it could encounter delays or
be precluded from introducing products to the market. Litigation may be
necessary to defend against or assert claims of infringement, to enforce patents
issued to the Company or to protect trade secrets or know-how owned by the
Company. Additional interference proceedings may be declared or necessary to
determine issues of invention; such litigation and/or interference proceedings
could result in substantial cost to and diversion of effort by, and may have a
material adverse effect on, the Company. In addition, there can be no assurance
that these efforts by the Company will be successful.
The Company's competitive position is also dependent upon unpatented trade
secrets. All employees of the Company are bound by confidentiality agreements.
However, there can be no assurance that others will not independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to the Company's trade secrets, that such trade secrets will not be
disclosed or that the Company can effectively protect its rights to unpatented
trade secrets. To the extent that the Company or its consultants or research
collaborators use intellectual property owned by others in their work for the
Company, disputes also may arise as to the rights in related or resulting
know-how and inventions.
Patent applications in the United States are generally maintained in
secrecy until patents are issued. Since publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries by
several months, Shaman cannot be certain that it was the first to discover
compositions covered by its pending
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patent applications or the first to file patent applications on such
compositions. There can be no assurance that the Company's patent applications
will result in issued patents or that any of its issued patents will afford
comprehensive protection against potential infringement.
The Company is prosecuting its patent applications with the PTO but the
Company does not know whether any of its applications will result in the
issuance of any patents or, if any patents are issued, whether any issued patent
will provide significant proprietary protection or will be circumvented or
invalidated. During the course of patent prosecution, patent applications are
evaluated, inter alia, for utility, novelty, non-obviousness and enablement. The
PTO may require that the claims of an initially filed patent application be
amended if it is determined that the scope of the claims includes subject matter
that is not useful, novel, non-obvious or enabled.
Furthermore, in certain instances, the practice of a patentable invention
may require a license from the holder of dominant patent rights. In cases where
one party believes that it has a claim to an invention covered by a patent
application or patent of a second party, the first party may provoke an
interference proceeding in the PTO or such a proceeding may be declared by the
PTO. In general, in an interference proceeding, the PTO would review the
competing patents and/or patent applications to determine the validity of the
competing claims, including but not limited to determining priority of
invention. Any such determination would be subject to appeal in the appropriate
U.S. federal courts.
There can be no assurance that additional patents will be obtained by the
Company or that issued patents will provide a substantial protection or be of
commercial benefit to the Company. The issuance of a patent is not conclusive as
to its validity or enforceability, nor does it provide the patent holder with
freedom to operate without infringing the patent rights of others. A patent
could be challenged by litigation and, if the outcome of such litigation were
adverse to the patent holder, competitors could be free to use the subject
matter covered by the patent, or the patent holder may license the technology to
others in settlement of such litigation. The invalidation of patents owned by or
licensed to the Company or non-approval of pending patent applications could
create increased competition, with potential adverse effects on the Company and
its business prospects. In addition, there can be no assurance that any
applications of the Company's technology will not infringe patents or
proprietary rights of others or that licenses that might be required as a result
of such infringement for the Company's processes or products would be available
on commercially reasonable terms, if at all.
The Company cannot predict whether its or its competitors' patent
applications will result in valid patents being issued. Litigation, which could
result in substantial cost to the Company, may also be necessary to enforce the
Company's patent and proprietary rights and/or to determine the scope and
validity of others' proprietary rights. The Company may participate in
interference proceedings that may in the future be declared by the U.S. Patent
and Trademark Office, which could result in substantial cost to the Company.
There can be no assurance that the outcome of any such litigation or
interference proceedings will be favorable to the Company or that the Company
will be able to obtain licenses to technology that it may require or that, if
obtainable, such technology can be licensed at a reasonable cost.
Year 2000 Compliance. The Company is in the process of assessing the impact
of year 2000 on its operations and systems, including those of its suppliers and
collaborators and other third parties. Management is in the process of
formalizing its assessment procedures and developing a plan to address
identified issues, if any. To date, the Company has evaluated its financial and
accounting systems and concluded that they are not and will not be materially
affected by the year 2000. The Company does not yet know the extent, if any, of
the impact of the year 2000 on its other systems and equipment or those of third
parties with which the Company does business. There can be no assurance that
third parties, such as suppliers, clinical research organizations and
collaborative parties, are using systems that are year 2000 compliant or will
address any year 2000 issues in a timely fashion, or at all. Any year 2000
compliance problems of either the Company, its suppliers, its clinical research
organizations, or its collaborative partners could have a material adverse
effect on the Company's business, operating results and financial conditions.
Uncertainty of Product Pricing, Reimbursement and Related Matters. The
Company's business may be materially adversely affected by the continuing
efforts of governmental and third party payers to contain or reduce the costs of
health care through various means. For example, in certain foreign markets, the
pricing or profitability of health care products is subject to government
control. In the United States, there have been,
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and the Company expects there will continue to be, a number of federal and state
proposals to implement similar government control. While the Company cannot
predict whether any such legislative or regulatory proposals or reforms will be
adopted, the announcement of such proposals or reforms could have a material
adverse effect on the Company's ability to raise capital or form collaborations,
and the adoption of such proposals or reforms could have a material adverse
effect on the Company's business, financial condition or results of operations.
In addition, in both the United States and elsewhere, sales of health care
products are dependent in part on the availability of reimbursement from third
party payers, such as government and private insurance plans. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and third party payers are increasingly challenging the prices charged
for medical products and services. If the Company succeeds in bringing one or
more products to the market, there can be no assurance that reimbursement from
third party payers will be available or will be sufficient to allow the Company
to sell its products on a competitive or profitable basis.
Possible Volatility of Stock Price. From time to time, the stock market has
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of particular companies or industries. In addition,
the market price of the Company's Common Stock, like the stock prices of many
publicly traded biotechnology and smaller pharmaceutical companies, has been and
may continue to be highly volatile. Announcements of technological innovations,
regulatory matters or new commercial products by the Company or its competitors,
developments or disputes concerning patent or proprietary rights, publicity
regarding actual or potential medical results relating to products under
development by the Company or its competitors, regulatory developments in both
the United States and foreign countries, public concern as to the safety of
pharmaceutical products, and economic and other external factors, as well as
period-to-period fluctuations in financial results, may have a significant
impact on the market price of Shaman's Common Stock.
Environmental Regulation. In connection with its research and development
activities and manufacturing of clinical trial materials, the Company is subject
to federal, state and local laws, rules, regulations and policies governing the
use, generation, manufacture, storage, air emission, effluent discharge,
handling and disposal of certain materials and wastes. Although the Company
believes that it has complied with these laws and regulations in all material
respects and has not been required to take any action to correct any
noncompliance, there can be no assurance that the Company will not be required
to incur significant costs to comply with environmental and health and safety
regulations in the future. The Company's research and development activities
involve the controlled use of hazardous materials, chemicals, viruses 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 such liability could exceed the resources of the Company.
Anti-Takeover Effect of Delaware Law and Certain Charter and Bylaws
Provisions. Certain provisions of the Company's Certificate of Incorporation and
Bylaws may have the effect of making it more difficult for a third party to
acquire, or discouraging a third party from attempting to acquire, control of
the Company. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of the Company's Common Stock. The
Company's Board of Directors has the authority to issue up to 600,000 additional
shares of Preferred Stock and to determine the price, rights, preferences,
privileges and restrictions of those shares without any further vote or action
by the stockholders.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock with voting rights,
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 a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock
with voting rights. Certain provisions of Delaware law applicable to the Company
could also delay or make more difficult a merger, tender offer or proxy contest
involving the Company, including Section 203 of
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the Delaware General Corporation Law, which prohibits a Delaware corporation
from engaging in any business combination with any interested stockholder for a
period of three years unless certain conditions are met.
Product Liability Exposure; Limited Insurance Coverage. The Company's
business exposes it to potential product liability risks which are inherent in
the development, testing, manufacture, marketing and sale of pharmaceutical
products. Product liability insurance for the pharmaceutical industry generally
is expensive. There can be no assurance that the Company's present product
liability insurance coverage, which includes acts by third parties, including
manufacturers of the Company's product candidates, is adequate. Such existing
coverage will not be adequate as the Company further develops its products, and
no assurance can be given that adequate insurance coverage against all potential
claims will be available in sufficient amounts or at a reasonable cost. Certain
of the Company's development and manufacturing agreements contain insurance and
indemnification provisions pursuant to which the Company could be held
accountable for certain occurrences.
Limitation of Liability and Indemnification. The Company's Certificate of
Incorporation limits, to the maximum extent permitted by Delaware Law, the
personal liability of directors for monetary damages for breach of their
fiduciary duties as a director. The Company's Bylaws provide that the Company
shall indemnify its officers and directors and may indemnify its employees and
other agents to the fullest extent permitted by law. The Company has entered
into indemnification agreements with its officers and directors containing
provisions which are in some respects broader than the specific indemnification
provisions contained in Delaware Law. The indemnification agreements may require
the Company, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company currently maintains directors' and officers' insurance.
Section 145 of the Delaware Law provides that a corporation may indemnify a
director, officer, employee or agent made or threatened to be made a party to an
action by reason of the fact that he was a director, officer, employee or agent
of the corporation or was serving at the request of the corporation against
expenses actually and reasonably incurred in connection with such action if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Delaware Law does not permit a corporation to eliminate a
director's duty of care, and the provisions of the Company's Certificate of
Incorporation have no effect on the availability of equitable remedies, such as
injunction or rescission, for a director's breach of the duty of care.
Dilution. Dilution may occur upon the exercise of outstanding options and
warrants, including the Warrants, and upon conversion of the Notes and, if
issued, the Series B Preferred. Stockholders may also suffer additional dilution
if the Company exercises its right to put additional shares of its Common Stock
to Fletcher International Limited, pursuant to its agreements with such
investor, as more fully set forth in Exhibit 10.47 to the Registration
Statement, of which this Prospectus forms a part.
Dependence on Key Personnel. The Company's ability to maintain its
competitive position depends in part upon the continued contributions of its key
senior management. The Company's future performance also depends on its ability
to attract and retain qualified management and scientific personnel. Competition
for such personnel is intense, and there can be no assurance that the Company
will be able to continue to attract, assimilate or retain other highly qualified
technical and management personnel in the future. The loss of key personnel or
the failure to recruit additional personnel or to develop needed expertise could
have a material adverse effect on the Company's business, financial condition
and results of operations.
15
<PAGE> 17
SELLING STOCKHOLDERS
The following table sets forth certain information, as of the date hereof,
with respect to the number of shares of Common Stock beneficially owned by each
of the Selling Stockholders and as adjusted to give effect to the sale of the
Shares offered hereby. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Stockholders, upon exercise of
the Warrants, may offer the Shares for resale from time to time. See "Plan of
Distribution."
The Shares being offered hereby by the Selling Stockholders may be
acquired, from time to time, upon exercise of the Warrants, which were acquired
by them from the Company in private placement transactions pursuant to the
Amendment Agreement and the Stock Agreements. This Prospectus covers the resale
by the Selling Stockholders of up to 487,500 Shares, plus, in accordance with
Rule 416 under the Securities Act, such additional number of shares of Common
Stock as may be issued pursuant to the Warrants resulting from stock splits,
stock dividends and similar transactions. See "Recent Developments."
Each Selling Stockholder that is party to either the Amendment Agreement or
the Stock Agreements represented to the Company that it will acquire the Shares
for investment and with no present intention of distributing the Shares except
in compliance with the registration requirements of the Securities Act or
pursuant to an exemption therefrom. In lieu of granting the Selling Stockholders
demand registration rights, the Company has filed with the Commission, under the
Securities Act, a Registration Statement on Form S-3, of which this Prospectus
forms a part, with respect to the resale of the Shares from time to time on The
Nasdaq National Market or other securities market on which the Common Stock is
listed for trading or in privately-negotiated transactions and has agreed to
prepare and file such amendments and supplements to the Registration Statement
as may be necessary to keep such Registration Statement effective until the
Shares are no longer required to be registered for the sale thereof by the
Selling Stockholders.
The Warrants provide for adjustment of the number of shares of Common Stock
issuable upon exercise thereof in certain circumstances, including upon the
distribution of certain dividends, upon the Company's reorganization,
reclassification or merger, or upon the division or combination of the Company's
Common Stock. The number of Shares shown in the following table as being offered
by the Selling Stockholders does not include such presently indeterminate number
of additional shares of Common Stock as may be issuable pursuant to the Warrants
resulting from stock splits, stock dividends and similar transactions, but which
shares are, in accordance with Rule 416 under the Securities Act, included in
the Registration Statement of which this Prospectus forms as part. The Shares
covered by this Prospectus may be offered from time to time by the Selling
Stockholders named below:
<TABLE>
<CAPTION>
OWNERSHIP
NUMBER OF AFTER OFFERING(1)
SHARES OWNED NUMBER OF -------------------
NAME AND ADDRESS OF PRIOR TO SHARES BEING NUMBER OF
SELLING STOCKHOLDERS OFFERING(1)(2) OFFERED(3) SHARES PERCENT
-------------------- -------------- ------------ --------- -------
<S> <C> <C> <C> <C>
Delta Opportunity Fund, Ltd.(4)(6)...................... 1,052,750 160,567 0 *
Nelson Partners(5)...................................... 624,265 21,950 0 *
Olympus Securities, Ltd.(5)............................. 624,265 21,950 0 *
Fisher Capital Ltd.(5).................................. 66,710 66,710 0 *
Wingate Capital Ltd.(5)................................. 35,955 35,955 0 *
CCG Capital Ltd.(5)..................................... 7,001 7,001 0 *
CCG Investment Fund Ltd.(5)............................. 7,001 7,001 0 *
Omicron Partners, L.P................................... 605,318 147,455 0 *
OTATO Limited Partnership(6)............................ 173,036 8,105 0 *
Overbrook Fund I, LLC(6)(7)............................. 115,061 5,403 0 *
Diaz & Altschul Group, LLC(4)(6)........................ 91,266 5,403 0 *
---------- ------- -- --
Total.......................................... 3,402,628 487,500 0 *
</TABLE>
- ---------------
* Less than one percent.
(1) Percentage of beneficial ownership is calculated assuming 18,470,608 shares
of Common Stock were outstanding as of July 6, 1998. Ownership after this
Offering assumes the sale of all shares held by such Selling Stockholders
that were registered pursuant to and included in that certain Registration
Statement
16
<PAGE> 18
on Form S-3 (Registration No. 333-31843) and all Shares offered hereby.
Beneficial ownership is determined in accordance with the rules of the
Commission and footnotes (1) and (2) to this table, 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 July 6, 1998, 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. Pursuant to the terms of the Notes and the Warrants, no
Selling Stockholder can convert or exercise any portion of such Selling
Stockholder's Notes or Warrants if such conversion or exercise would cause
such Selling Stockholder's beneficial ownership of the Common Stock (other
than shares so owned through ownership of unconverted Notes and Warrants)
to exceed 4.9% of the outstanding Common Stock. Except as indicated in the
footnotes to this table, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock
beneficially owned.
(2) Represents (i) the number of shares held directly by such Selling
Stockholder, (ii) the number of shares of Common Stock issuable upon
conversion of the Notes calculated using an assumed conversion price of
$2.70 with respect to the face value of the Notes, based upon certain
conversion provisions of the Notes (which price fluctuates from time to time
based on changes in the market price of the Common Stock) and (iii) the
number of shares of Common Stock issuable upon exercise of the Warrants.
Does not include (a) up to 315,000 shares of Common Stock which may be
issued and paid in lieu of cash, at the Company's option, as interest on the
Notes or (b) such presently indeterminate number of additional shares as may
be issuable upon conversion of the Notes or payment of interest on the
Notes, based upon fluctuations in the conversion price of the Notes.
(3) Represents the number of shares of Common Stock issuable upon exercise of
the Warrants.
(4) Diaz & Altschul Advisors, LLC, a New York limited liability company ("D&A
Advisors"), serves as investment advisor to Delta Opportunity Fund, Ltd.
("Delta"), and may be deemed to share beneficial ownership of the shares of
Common Stock beneficially owned by Delta by reason of shared power to
dispose of the shares beneficially owned by Delta. D&A Advisors is
controlled by Diaz & Altschul Group, LLC ("D&A Group"), whose managing
members are Mr. Reinaldo M. Diaz ("Mr. Diaz"), Mr. Arthur G. Altschul, Jr.
("Mr. Altschul") and Mr. Patrick G. Enright ("Mr. Enright"). D&A Advisors,
D&A Group and Messrs. Diaz, Altschul and Enright disclaim beneficial
ownership of the shares beneficially owned by Delta.
(5) Citadel Limited Partnership is the managing general partner of Nelson
Partners ("Nelson"), and the trading manager of each of Olympus Securities,
Ltd., Fisher Capital Ltd., Wingate Capital Ltd., CCG Capital Ltd. and CCG
Investment Fund Ltd. (collectively, the "Citadel Entities") and consequently
has voting control and investment discretion over securities held by the
Citadel Entities. Citadel Limited Partnership is indirectly controlled by
Mr. Kenneth C. Griffin ("Mr. Griffin"). The ownership information for each
of the Citadel Entities does not include the ownership information for the
other Citadel Entities. Citadel Limited Partnership and each of the Citadel
Entities disclaims beneficial ownership of the shares of Common Stock held
by the other Citadel Entities. Mr. Griffin disclaims beneficial ownership of
the shares held by Citadel Limited Partnership and the Citadel Entities.
(6) An affiliate of OTATO Limited Partnership serves as a trading consultant to
Delta, Overbrook Fund I, LLC ("Overbrook") and D&A Group and may be deemed
to share beneficial ownership of the shares of Common Stock beneficially
owned by such Selling Stockholders by reason of shared power to dispose of
the shares beneficially owned by such Selling Stockholders. Such affiliate
may be deemed to be controlled by Mr. Ira M. Leventhal who, together with
such affiliate, disclaims beneficial ownership of such shares.
(7) Mr. Altschul, a managing member of D&A Group, also serves as the managing
member of Overbrook. Mr. Altschul may be deemed to share beneficial
ownership of all shares of Common Stock beneficially owned by Overbrook by
reason of the power to dispose of the shares beneficially owned by
Overbrook. Mr. Altschul disclaims such beneficial ownership.
17
<PAGE> 19
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares offered
hereby may be sold pursuant to this Prospectus by the Selling Stockholders or by
pledgees, donees, transferees or other successors in interest that receive such
shares as a gift, partnership, distribution or other non-sale related transfer.
The Shares may be sold from time to time in transactions in the over-the-counter
market, in negotiated transactions, or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers, including block trades in which brokers or dealers will
attempt to sell the Shares as agent but may position and resell the block as
principal to facilitate the transaction, or in one or more underwritten
offerings on a firm commitment or best effort basis. Sales of Shares may also be
made pursuant to Rule 144 under the Securities Act, where applicable.
To the extent required under the Securities Act, the aggregate amount of
Selling Stockholders' Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the Shares may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from a Selling
Stockholder and/or purchasers of Selling Stockholders' Shares, for whom they may
act (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the Shares owned by
them, and the pledgees, secured parties or persons to whom such securities have
been hypothecated shall, upon foreclosure in the event of default, be deemed to
be Selling Stockholders hereunder. In addition, a Selling Stockholder may, from
time to time, sell short the Common Stock of the Company, and in such instances,
this Prospectus may be delivered in connection with such short sales and the
Shares offered hereby may be used to cover such short sales.
From time to time one or more of the Selling Stockholders may transfer,
pledge, donate or assign such Selling Stockholders' Shares to lenders or others
and each of such persons will be deemed to be a "Selling Stockholder" for
purposes of this Prospectus. The number of Selling Stockholders' Shares
beneficially owned by those Selling Stockholders who so transfer, pledge, donate
or assign Selling Stockholders' Shares will decrease as and when they take such
actions. The plan of distribution for Selling Stockholders' Shares sold
hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be Selling Stockholders hereunder.
A Selling Stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Common
Stock in the course of hedging the positions they assume with such Selling
Stockholder, including, without limitation, in connection with distributions of
the Common Stock by such broker-dealers. A Selling Stockholder may also enter
into option or other transactions with broker-dealers that involve the delivery
of the Common Stock to the broker-dealers, who may then resell or otherwise
transfer such Common Stock. A Selling Stockholder may also loan or pledge the
Common Stock to a broker-dealer and the broker-dealer may sell the Common Stock
so loaned or upon a default may sell or otherwise transfer the pledged Common
Stock.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in the distribution of the Shares may be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
18
<PAGE> 20
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not bid for or purchase shares of
Common Stock during a period which commences one business day (five business
days, if the Company's public float is less than $25 million or its average
daily trading volume is less than $100,000) prior to such person's participation
in the distribution, subject to exceptions for certain passive market making
activities. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including, without limitation, Regulation M,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by such Selling Stockholder.
The Warrants and the Shares were, or will be, as the case may be,
originally issued to the Selling Stockholders pursuant to an exemption from the
registration requirements of the Securities Act provided by Section 4(2)
thereof. The Company agreed to register the Shares under the Securities Act and
to indemnify and hold the Selling Stockholders harmless against certain
liabilities under the Securities Act that could arise in connection with the
sale by the Selling Stockholders of the Shares. The Company has agreed to pay
all reasonable fees and expenses incident to the filing of this Registration
Statement.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The financial statements of Shaman Pharmaceuticals, Inc. at December 31,
1997, appearing in the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1997 have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
19
<PAGE> 21
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Risk Factors.......................... 7
Selling Stockholders.................. 16
Plan of Distribution.................. 18
Legal Matters......................... 19
Experts............................... 19
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
487,500 SHARES
SHAMAN
PHARMACEUTICALS,
INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
JULY 9, 1988
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby. All amounts are estimated except the Securities and
Exchange Commission registration fee and The Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 454.00
NNM listing fees............................................ 2,750.00
Accounting fees and expenses................................ 10,000.00
Legal fees and expenses..................................... 25,000.00
Printing and engraving expenses............................. 25,000.00
Miscellaneous fees and expenses............................. 6,796.00
----------
Total............................................. $70,000.00
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended (the
"DGCL"), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, against expenses
actually and reasonably incurred in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
such other court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Registrant's Restated Certificate of Incorporation provides that the
Registrant's directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that exculpation from liabilities is not permitted under the DGCL as in
effect at the time
II-1
<PAGE> 23
such liability is determined. The Registrant has entered into indemnification
agreements with all of its officers and directors, as permitted by the DGCL.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits listed in the Exhibit Index as filed as part of this
Registration Statement.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.3* Form of Certificate of Designations of Series B Custom
Convertible Preferred Stock.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.66* Amendment Agreement, dated as of March 18, 1998, by and
between the Registrant and certain investors.
10.67* Form of Common Stock Purchase Warrant, dated as of March 18,
1998, issued to certain investors.
10.68* Form of Stock Purchase Agreement for Series B Custom
Convertible Preferred Stock.
10.69* Second Amendment Agreement, dated as of June 10, 1998, by
and between the Registrant and certain investors.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in the
opinion filed as Exhibit 5.1).
24.1* Power of Attorney (included under the caption "Signatures").
</TABLE>
- ------------------------
* Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are included because they are not required
or the required information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (i) and (ii) do not apply
if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i)
and (ii) is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
II-2
<PAGE> 24
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in 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.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
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 purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of South San Francisco, State of California, on the
7th day of July, 1998.
SHAMAN PHARMACEUTICALS, INC.
By /s/ LISA A. CONTE
------------------------------------
Lisa A. Conte
President, Chief Executive Officer
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the persons whose signatures
appear below, which persons have signed such Registration Statement in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ LISA A. CONTE Director, President, Chief July 7, 1998
- ----------------------------------------------------- Executive Officer and Chief
Lisa A. Conte Financial Officer (Principal
Executive and Financial
Officer)
Chairman of the Board July , 1998
- -----------------------------------------------------
G. Kirk Raab
* Director July 7, 1998
- -----------------------------------------------------
Adrian D.P. Bellamy
Director July , 1998
- -----------------------------------------------------
Jeffrey Berg
* Director July 7, 1998
- -----------------------------------------------------
Herbert H. McDade, Jr.
* Director July 7, 1998
- -----------------------------------------------------
M. David Titus
*By: /s/ LISA A. CONTE
- -----------------------------------------------------
Lisa A. Conte
(Attorney in fact)
</TABLE>
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<S> <C> <C>
3.3* Form of Certificate of Designations of Series B Custom
Convertible Preferred Stock.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.66* Amendment Agreement, dated as of March 18, 1998, by and
between the Registrant and certain investors.
10.67* Form of Common Stock Purchase Warrant, dated as of March 18,
1998, issued to certain investors.
10.68* Form of Stock Purchase Agreement for Series B Custom
Convertible Preferred Stock.
10.69* Second Amendment Agreement, dated as of June 10, 1998, by
and between the Registrant and certain investors.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in the
opinion filed as Exhibit 5.1).
24.1* Power of Attorney (included under the caption "Signatures").
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 3 to the Registration Statement (Form S-3) and related prospectus
of Shaman Pharmaceuticals, Inc. for the registration of 487,500 shares of its
common stock and to the incorporation by reference therein of our report dated
January 29, 1998, with respect to the financial statements of Shaman
Pharmaceuticals, Inc. included in its Annual Report (Form 10-K/A) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
July 7, 1998
Palo Alto, California
