<PAGE> 1
As filed with the Securities and Exchange Commission on June 18, 1998
Registration No. 333-
---------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
MARTEK BIOSCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-1399362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
----------------------
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
(410) 740-0081
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
HENRY LINSERT, JR.
CHIEF EXECUTIVE OFFICER
MARTEK BIOSCIENCES CORPORATION
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
(410) 740-0081
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
MICHAEL J. SILVER
HOGAN & HARTSON L.L.P.
111 SOUTH CALVERT STREET, 16TH FLOOR
BALTIMORE, MARYLAND 21202
(410) 659-2700
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
----------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than the 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. [ ]
<PAGE> 2
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
-2-
<PAGE> 3
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
JUNE 18, 1998
MARTEK BIOSCIENCES CORPORATION
1,475,017 SHARES OF COMMON STOCK
WARRANTS TO PURCHASE 442,506 SHARES OF COMMON STOCK
442,506 SHARES OF COMMON STOCK UNDERLYING WARRANTS
This Prospectus relates to (i) the offering by the selling
securityholders hereunder (the "Selling Stockholders") for resale of up to
1,475,017 shares of common stock, $.10 par value ("Common Stock") of Martek
Biosciences Corporation ("Martek" or the "Company") acquired in a direct
private placement by the Company to the Selling Stockholders, (ii) the offering
by the Selling Stockholders for resale of up to 442,506 shares of Common Stock
acquired by the Selling Stockholders through exercise of certain warrants (the
"Warrants") issued in a direct private placement by the Company to the Selling
Stockholders, (iii) the offering of the Warrants for resale by the Selling
Stockholders and (iv) the offering by the Company of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") by holders other than the
Selling Stockholders and affiliates thereof. The shares of Common Stock being
offered by the Selling Stockholders are herein referred to as the "Common
Shares." The Common Shares and the Warrants were or will be issued pursuant to
a Common Stock and Warrant Purchase Agreement (the "Purchase Agreement")
entered into between the Company and the Selling Stockholders. This Prospectus
has been prepared by the Company pursuant to the terms of the Purchase
Agreement. See "Selling Stockholders and Plan of Distribution."
The Common Shares and Warrants may be offered and sold from time to
time by the Selling Stockholders directly or through broker-dealers or
underwriters who may act solely as agents, or who may acquire Common Shares or
Warrants as principals. In connection with any sales of Common Shares and
Warrants hereunder, the Selling Stockholders and any broker-dealers
participating in such sales may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"). The
distribution of the Common Shares by the Selling Stockholders may be effected
in one or more transactions that may take place through the Nasdaq National
Market or any national securities exchange on which the Common Stock is
approved for listing in the future, including block trades or ordinary brokers'
transactions, or through privately negotiated transactions, through an
underwritten public offering, or through a combination of any such methods of
sale, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Usual and customary or
specially negotiated brokerage fees or commissions may be paid by the Selling
Stockholders in connection with such sales. See "Selling Stockholders and Plan
of Distribution." The Warrants are not listed for trading on any national
securities exchange or approved for quotation on the Nasdaq National Market or
any other inter-dealer quotation system, and the Company does not intend to
qualify the Warrants for such trading or quotation in the future. Certain
expenses incurred in connection with the registration of the securities offered
hereby under the federal and state securities laws are being borne by the
Company. The Company will not bear any commissions or discounts paid or
allowed by the Selling Stockholders to underwriters, dealers, brokers or
agents. The Company will not receive any proceeds from the sale of the Common
Shares or Warrants by the Selling Stockholders. The aggregate proceeds to the
Selling Stockholders from the sale of the Common Shares and Warrants will be
the purchase price thereof less the aggregate agents' commissions and
underwriters' discounts, if any. Any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be
sold under Rule 144 rather than pursuant to this Prospectus. See "Selling
Stockholders and Plan of Distribution."
Warrant Shares are being offered hereunder in connection with the
exercise of the Warrants by holders other than Selling Stockholders and their
affiliates. Any Warrant Shares so offered will be issued upon payment of the
warrant exercise price specified therein and the Warrant holder's compliance
with the other terms of the Warrants. Such warrant exercise price, aggregating
up to approximately $7,380,000 (if the Warrants are exercised in full), will be
received by the Company and no underwriters' or agents' commissions or
discounts will be payable thereunder. Common Shares issuable upon exercise of
Warrants held by Selling Stockholders and their affiliates will be or have been
issued in reliance upon an exemption from the registration requirements of the
Securities Act of 1933 and are not being offered for issuance by means of this
Prospectus.
The Common Stock is traded on The Nasdaq Stock Market's National
Market (the "Nasdaq National Market") under the symbol "MATK". On May 22,
1998, the last sale price of the Common Stock on the Nasdaq National Market was
$12.63 per share.
-------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN MARTEK.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June , 1998.
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied, at prescribed
rates, at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's New York Regional Office at Seven World Trade Center, Suite
1300, New York, New York 10048 and at the Commission's Chicago Regional Office
at Suite 1400, Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. The Commission also maintains a World Wide Web site that
contains reports, proxy statements and other information regarding registrants,
including the Company, that file such information electronically with the
Commission. The address of the Commission's Web site is http:\\www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the Common Stock and
Warrants offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference and made a
part hereof: the Company's Annual Report on Form 10-K for the year ended
October 31, 1997, the description of the Company's Common Stock set forth in
the Company's Registration Statement on Form 8-A, dated September 9, 1993,
filed under the Exchange Act with respect to the Common Stock, including all
amendments and reports filed for the purpose of updating such description, the
Company's Quarterly Reports on Form 10-Q for the quarters ended January 31, and
April 30, 1998, and the Company's Current Report on Form 8-K, dated May 5,
1998. All documents filed by the Company with the Commission pursuant to
Section 13(a) of the Exchange Act and any definitive proxy statement so filed
pursuant to Section 14 of the Exchange Act and any reports filed pursuant to
Section 15(d) of the Exchange Act after the date of this Prospectus and prior
to the termination of the offering of the Common Stock and Warrants shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is
incorporated by reference herein modifies or supersedes such earlier statement.
Any such 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 furnish without charge upon written or oral request to each person to whom
a copy of this Prospectus is delivered, including any beneficial owner, a copy
of any or all of the documents specifically incorporated herein by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference therein). Requests should be addressed to: Peter L.
Buzy, Chief Financial Officer, Martek Biosciences Corporation, 6480 Dobbin
Road, Columbia, Maryland 21045, (410) 740-0081.
To the extent that any proxy statement is incorporated by reference
herein, such incorporation shall not include any information contained in such
proxy statement that is not, pursuant to the Commission's rules, deemed to be
"filed" with the Commission or subject to the liabilities of Section 18 of the
Exchange Act.
-2-
<PAGE> 5
RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus, prospective investors should consider carefully
the following risk factors in evaluating the Company and its business before
purchasing the Common Stock and Warrants offered hereby. The following
discussion identifies important factors that could cause the Company's actual
results to differ materially from results predicted or implied in any
forward-looking statements made in this Prospectus or elsewhere by or on behalf
of the Company.
History of Operating Losses; Uncertainty of Future Financial Results.
The Company has experienced net operating losses since its inception. The
Company expects such losses to continue until significant sales of its
nutritional oils occur and/or until significant royalties from sales of infant
formula products containing the Company's oils are recognized. The Company
expects to have quarter-to-quarter and year-to-year fluctuations in revenues,
expenses and losses, some of which could be significant. Future financial
results will be affected by, among other things, the following factors: the
Company's ability to complete successfully the commercialization and cost
optimization of its products; the willingness and ability of infant formula
licensees to incorporate the product into their infant formula products; the
willingness of potential strategic partners to market the Company's products;
growth in revenues from the Company's nutritional oils; growth in revenues from
sales of products for use in molecular structure research and structure-based
drug design; the progress of the Company's research and development programs
and its preclinical and clinical product studies; the time and costs of
obtaining regulatory approvals for those products subject to such approval; the
Company's ability to protect its proprietary rights; the costs of protecting
the Company's patent claims; competing technological and market developments;
manufacturing costs associated with its various products and potential
products; and the costs of commercializing and marketing the Company's
products.
Early Stage of the Company and its Products. The Company was founded
in 1985. Although the Company expects to receive most of its future revenues
from direct sales of products, royalty income and licensing fees, a portion of
its revenues to date has come from research and development contracts
(primarily from the federal government) and federal government grants. The
Company first realized revenues from its products for use in molecular
structure research and structure-based drug design in 1989 and from license
fees and sales of sample quantities of certain of its nutritional and
diagnostic products in 1992. Certain of the Company's products will require
substantial additional research and development. Some will require laboratory
and clinical testing and regulatory approval. There can be no assurance that
the Company's product development efforts will be successfully completed, that
required regulatory approvals will be obtained on a timely basis or at all,
that the Company's products will be capable of being manufactured in commercial
quantities at reasonable cost or that any new products, if introduced, will
achieve market acceptance. In addition, although the Company anticipates the
introduction of new products over the next several years, some of the Company's
potential products, especially in the area of pharmaceuticals, are not expected
to become commercially available for many years, if at all.
Need for Additional Capital. Substantial expenditures will be
required to enable the Company to continue its research and development
activities, to conduct preclinical and clinical studies and to manufacture and
market its products. The level of expenditures required for these activities
will depend in part on the extent to which the Company develops, manufactures
and markets its products independently or with other companies through
collaborative arrangements. The Company's future capital requirements will
also depend, among other things, on one or more of the following factors: the
extent and progress of its research and development programs; the progress of
preclinical and clinical studies; the time and costs of obtaining regulatory
clearances for those products subject to such clearances; the costs involved in
filing, protecting and enforcing patent claims; competing technological and
market developments; the cost of capital expenditures at the Company's
manufacturing facilities; the cost of acquiring additional and/or operating
existing manufacturing facilities for its various products and potential
products (depending on which products the Company decides to manufacture and
continues to manufacture itself); and the costs of marketing and
commercializing the Company's products. There can be no assurance that funding
to carry on these activities will be available at all or on favorable terms to
permit successful commercialization of the Company's products. The Company has
only established limited debt financing arrangements, which require the Company
to meet certain financial covenants related to its outstanding term loans.
There can be no assurance that it will be able to continue such arrangements,
to continue to comply with bank covenants or to establish additional debt
financing arrangements on satisfactory terms, if at all. If adequate funds are
not available, the Company may be required to curtail one or more of its
research and development, manufacturing and commercialization programs or
obtain funds through arrangements with collaborative partners or others that
may require the Company to relinquish certain technology or product rights
including patent and other intellectual property rights.
Dependence on Third Parties; Reliance on Future Collaborations. To
date, a portion of the Company's revenues has consisted of license fees and
anniversary payments received from infant formula manufacturers which have
licensed the Company's nutritional oils. Under these agreements, the Company
is entitled to receive royalty payments based on the licensees' sales of
products including the Company's nutritional oils. Such licensees will be
responsible for performing all clinical testing on, obtaining regulatory
approvals for and marketing products containing the Company's nutritional oils.
These licensees are not required to use the Company's nutritional oils in any
of their products and are not restricted under the licensing agreements from
obtaining docosahexaenoic acid ("DHA") or arachidonic acid ("ARA") from other
sources for use in their infant formula products. Although some of the
licensees have introduced infant formula products containing the
-3-
<PAGE> 6
Company's nutritional oils overseas, the Company cannot predict whether any
licensee will broaden its use of the Company's oils or whether they will be
used by any of the Company's other licensees in their infant formula products.
Accordingly, future revenues from the Company's nutritional oils are largely
dependent on factors over which the Company will have no control.
The Company's strategy for the development, clinical testing,
manufacturing and commercialization of certain of its products includes
entering into various collaborations with corporate partners, licensors,
licensees and others. In 1997, the Company entered into a supply agreement
with a third party manufacturer for its ARA-containing oil. Although the
Company is able to produce its ARA oil in its Kentucky manufacturing plant, a
halt in supply from its third-party ARA oil manufacturer could adversely impact
the Company's ability to meet product demand in the short-run and in the
long-run, if this source of ARA oil could not be replaced. There can be no
assurance that the Company will be able to negotiate other collaborative
arrangements in the future on acceptable terms, if at all, or that such
collaborative arrangements will be beneficial to the Company. To the extent
that the Company is not able to establish such arrangements, it would face
increased capital requirements to undertake such activities at its own expense
and might encounter significant delays in introducing its products into certain
markets or find that the development, manufacture, marketing and sale of its
products in such markets is adversely affected. In particular, the continuing
ability of the Company to generate nutritional oil-related revenues is
dependent on the Company's ability to enter into agreements with additional
licensees. Certain of the Company's nutritional oil licensing agreements
contain provisions which restrict the Company from entering into agreements
with future licensees for infant formula applications containing payment terms
more favorable, or with lower royalty rates, than those granted to current
licensees. Such provisions may restrict the Company's ability to negotiate
with potential infant formula licensees.
Dependence on Major Customers. The Company's dependence on sizable
product orders from its infant formula licensees and other marketing partners
will make the relationship with each customer critically important to the
Company's business. While each customer relationship is typically structured
around a detailed, heavily negotiated contract, as the relationship evolves
over time, adjustments to such items as product pricing, royalty rates and
delivery timetables may be required in response to customer demands and
expectations. There can be no assurance that the Company will be able to
manage its licensees and other customer relationships successfully.
Additionally, the size and complexity of the Company's licensees and other
marketing partners, and the typically long and unpredictable product launch
cycles require the Company to make considerable early investments in account
management and other efforts without the assurance of future revenues. There
can be no assurance that the Company will be able to convert these investments
into significant revenue-generating relationships.
Technological Change and Competition. The Company operates in rapidly
evolving fields. Competition from larger, more experienced and better
capitalized companies has been and will continue to be intense. There can be
no assurance that developments by others will not render the Company's products
or technologies obsolete or noncompetitive or that the Company will be able to
keep pace with any new technological developments. Currently, DHA-containing
fish oils provide alternative sources of DHA, and the Company is aware of
another company which produces DHA from fungal sources. In addition, DHA and
ARA have been derived from egg yolk lipids, and the Company is currently aware
of several European infant formula manufacturers that are adding DHA derived
from egg yolk lipids to their infant formula. Further, although the Company
has obtained seven U.S. patents and a number of patents outside the U.S.
covering certain aspects of its nutritional oils to date, and has additional
patent applications pending covering certain aspects of these DHA- and
ARA-containing oils, the Company has not been awarded any European patents
relating to its ARA-containing oil. Accordingly, competitors may be able to
produce, sell and use ARA in Europe during the period when patents have not
been issued or have been invalidated using similar or identical processes to
those used by the Company, although they generally are prohibited from
manufacturing, using or selling such materials where patents have been issued.
Competitors may also be able to produce, sell and use DHA-and/or ARA-containing
oils in countries where the Company has not applied for patent protection. In
addition, competitors may produce certain DHA- and ARA-containing oils that are
not covered by the Company's patents. The Company is aware of several other
companies offering ARA-containing oils for sale. In addition, there can be no
assurance that other sources of DHA and ARA, the two primary components of the
Company's nutritional oil, will not become commercially viable.
Uncertainty Regarding Patents and Proprietary Technology. The
Company's success is dependent in part on its ability to obtain patent
protection for its products, maintain trade secret protection and operate
without infringing the proprietary rights of others. The Company's policy is
to protect aggressively its proprietary technology through patents, where
appropriate, and through trade secrets in other cases. Additionally, the
Company, in certain cases, relies on the licenses of patents and technology of
third parties. The Company has obtained over 18 U.S. patents, covering various
aspects of its technology, which will expire on various dates between 2007 and
2015. The Company has filed, and intends to file, applications for additional
patents covering both products and processes as appropriate. There can be no
assurance that any patent applications filed by, assigned to, or licensed to,
the Company will be granted, that the Company will develop additional products
that are patentable or that any patents issued to or licensed by the Company
will provide the Company with any competitive advantages or adequate protection
for inventions. Moreover, no assurance can be given that any patents issued to
or licensed by the Company will not be challenged, invalidated or circumvented
by others.
There can be no assurance that issued patents, or patents that may
issue, will provide protection against competitive products or otherwise be
commercially valuable. Furthermore, patent law relating to the scope of claims
in the fields
-4-
<PAGE> 7
of health care and biosciences is still evolving, and the Company's patent
rights are subject to this uncertainty. The Company's patent rights on its
products therefore might conflict with the patent rights of others, whether
existing now or in the future. Alternatively, the products of others could
infringe the patent rights of the Company. The defense and prosecution of
patent claims are both costly and time consuming, even if the outcome were
favorable to the Company. An adverse outcome could subject the Company to
significant liabilities to third parties, require disputed rights to be
licensed from third parties or require the Company to cease selling its
products.
The Company has been issued seven U.S. patents covering certain
aspects of its DHA and/or ARA oils. The Company has applied for other patents
in the United States covering certain other aspects of its nutritional oils and
has also filed patent applications on a selective basis in other industrialized
countries, some of which are pending and some of which have been granted. The
Company is unable to predict, however, whether these patents will be
challenged, invalidated or circumvented by others. Failure by the Company to
obtain adequate patent protection for its nutritional oils would have a
material adverse effect on the Company's results of operations, particularly
future sales of its nutritional oils, future royalties on sales of infant
formula containing these oils or license fees related thereto. In particular,
failure to maintain patent protection would permit competitors of the company
to produce products which would be directly competitive with its nutritional
oils using similar or identical processes, and it is possible that the infant
formula manufacturers currently under license by the Company or which may be
under license in the future may choose formula ingredients from these
competitors if they choose to include the ingredients in their formulas at all.
The Company's other patents cover its photobioreactor system for
culturing microalgae and certain aspects of Martek's breath test technology;
its Celtone and Celtone M technology; and its combinatorial library technology.
The Company also relies on trade secrets and proprietary know-how,
which it seeks to protect in part by confidentiality agreements with its
collaborators, employees and consultants. There can be no assurance that these
agreements will not be breached, that the Company will have adequate remedies
for any such breach or that the Company's trade secrets will not otherwise
become known or be independently developed by competitors.
Risks Associated with Infant Formula and Nutritional Products
Industries. To the extent the Company's nutritional oils are included in
infant formula, and/or the Company's oils are included in nutritional products
for consumer use, the Company is subject to the risks generally associated with
these industries. These risks include, among others, that (i) product
tampering or production defects may occur which may require a recall or may
reduce the demand for such products; (ii) an ingredient used in such products,
including the Company's nutritional oils, may be banned or its use limited or
declared unhealthful; and (iii) sales of infant formula may decline or use of
the Company's nutritional oils may be limited or discontinued due to perceived
health concerns, adverse publicity or other reasons beyond the control of the
Company.
Potential Difficulty in Obtaining FDA and other Government Approvals.
The Company's products and its manufacturing and research activities are
subject to varying degrees of regulation by a number of government authorities
in the United States and other countries, including the FDA pursuant to the
Federal Food, Drug and Cosmetic Act (the "FDC Act"). The FDA regulates, to
varying degrees and sometimes in very different ways, infant formulas, dietary
supplements, medical foods, enteral and parenteral nutritional products and
diagnostic and pharmaceutical products, including their manufacture and
labeling. Generally, prescription pharmaceuticals and certain types of
diagnostic products are regulated more rigorously than foods, such as dietary
supplements. Infant formulas are special types of food that are regulated more
rigorously than most other types of foods. Federal and state laws, regulations
and policies are always subject to change and depend heavily on administrative
policies and interpretations. There can be no assurance that any changes with
respect to federal and state laws, regulations and policies, and, particularly,
with respect to the FDA or other such regulatory bodies, with possible
retroactive effect, will not have a material adverse effect on the Company.
Martek's infant formula licensees are responsible for obtaining the
requisite regulatory clearances to market their products containing Martek's
oils. To date, none of the company's infant formula licensees have obtained
the requisite marketing clearances for any of the Company's products that
require such clearances in the United States. Sales of the Company's products
outside the United States are subject to foreign regulatory requirements that
may vary widely from country to country. Term infant formula products
containing the Company's nutritional oils are currently being marketed outside
the U.S. in three countries, and pre-term infant formula products containing
the Company's oils are currently being marketed outside the U.S. in 30
countries. Martek understands that its licensees have received appropriate
regulatory clearances to the extent they are required to market such products
in those countries.
The time required to obtain clearances from additional foreign
countries and for term infant formulas containing Martek's oils in foreign
countries may be longer or shorter than that required by the FDA or other such
agencies, and clearance or other product requirements may differ. There can be
no assurance that such foreign clearances or other requirements can be obtained
or met on a timely basis, if at all.
-5-
<PAGE> 8
There can be no assurance that DHA and ARA used in medical foods,
infant formulas or enteral nutritional products will not be subject to food
additive regulation under the FDC Act. Additional data also may be needed to
support the use of DHA and ARA in medical foods.
The process of obtaining FDA clearances can be time-consuming and
expensive, and there is no assurance that such clearances will be granted or
that the FDA review process will not involve delays that materially and
adversely affect the testing, marketing and sale of the Company's products.
Moreover, regulatory clearances for products such as medical devices, new
drugs, or new food additives, even if granted, may include significant
limitations on the uses for which such products may be marketed. Additionally,
product clearances could be withdrawn for failure to comply with regulatory
standards. There can be no assurance that any clearances that are required,
once obtained, will not be withdrawn or that compliance with other regulatory
requirements can be maintained.
Many of the Company's products are in research and development phases.
The Company cannot predict all regulatory requirements or issues that may apply
to or arise in connection with the Company's products. Changes in existing
laws, regulations or policies and the adoption of new laws, regulations or
policies could prevent the Company or its licensees or collaborators from, or
could affect the timing of, achieving compliance with regulatory requirements,
including obtaining current and future regulatory clearances, where necessary.
Due to the cost and time commitment associated with the FDA regulatory
process, as well as the Company's lack of experience in obtaining FDA
regulatory clearances, the Company will decide on a product-by-product basis
whether to handle relevant clearance and other requirements independently or to
assign such responsibilities to its licensees or future collaborative partners.
There can be no assurance that the Company, its licensees or collaborators will
be able to obtain such regulatory clearances, if required, on a timely basis or
at all. Delays in receipt of, or failure to receive, such clearances, the loss
of previously received approvals or clearances, or failure to comply with
existing or future regulatory requirements would have a material adverse effect
on the Company's business, financial condition and results of operations.
In connection with the Company's decision to manufacture certain of
its products which it markets directly, or licenses to or collaborates with
others to market, it will be required to adhere to applicable current Good
Manufacturing Practices ("GMP") as required by the FDA. GMP regulations
specify component and product testing standards, control quality assurance
requirements, and records and other documentation controls. In general, drug
GMP requirements are more stringent than food GMP requirements although
significant quality control procedures exist for infant formulas. Depending
upon the type of FDA application that is submitted, compliance with relevant
GMP requirements can be onerous and time consuming, and there can be no
assurance that the Company can meet relevant FDA manufacturing requirements,
particularly for scale-up operations involving product marketing applications.
Because the Company is manufacturing its DHA and ARA oils, it is subject to GMP
and various other requirements applicable to infant formulas and dietary
supplements as well as periodic inspections by the FDA. Further, the Company
has had only limited experience in the area of regulatory compliance with
respect to its products. There can be no assurance that the company will be
able to continue to manufacture its nutritional oils in accordance with
relevant infant formula and dietary supplement requirements for commercial use.
Ongoing compliance with GMP and other applicable regulatory requirements are
monitored through periodic inspections by state and federal agencies, including
the FDA and comparable agencies in other countries. A determination that the
Company is in violation of such GMP and other regulations could lead to the
imposition of civil penalties, including fines, product recalls or product
seizures, and, in the most egregious cases, criminal sanctions.
Each line of products that is or may be marketed by the Company or its
licensees or collaborators can present unique regulatory problems and risks,
depending on the product type, uses and method of manufacture.
The Federal Dietary Supplement Health and Education Act of 1994
("DSHEA") regulates the use and marketing of dietary supplements. The DSHEA
sets forth standards for adulteration of dietary supplements or ingredients
thereof, prescribes detailed requirements for labeling dietary supplements and
establishes GMP requirements for dietary supplements. Martek is currently
marketing a line of DHA dietary supplements, Neuromins(TM) and Neuromins(TM)PL.
In addition, it is researching and developing new applications for its DHA and
ARA oils. There can be no assurance that the Company will be able to comply
with the requirements of the DSHEA or any regulations that the FDA may
promulgate thereunder with regards to ARA as a dietary supplement or that the
Company will be able to continue to meet such requirements with regard to DHA
as a dietary supplement.
The Company's fluorescent pigments and other products derived from
microalgae are subject to potential regulation by the FDA as either medical
devices or as a combination medical device/drug product to the extent that they
are used in the diagnosis, mitigation, treatment, cure or prevention of
diseases. Such classification would subject the products to premarket
clearances and/or regulatory approvals. There can be no assurances that the
Company or its licensees or collaborators would be able to develop the
extensive safety and efficacy data needed to support such FDA premarket
clearances and/or regulatory approvals or that the FDA ultimately would
authorize the marketing of such products on a timely basis, if at all.
-6-
<PAGE> 9
For pharmaceutical uses of products derived from microalgae, there can
be no assurance that required clinical testing will be completed successfully
within any specified time period, if at all, with respect to the Company's
products. Additionally, there is no assurance that the Company or its licensees
or collaborators will be able to develop the extensive data needed to establish
the safety and efficacy of these products for approval for drug uses, or that
such drug products will not be subject to regulation as biological products or
as controlled substances, which would affect marketing and other requirements.
Limited Manufacturing and Sales and Marketing Experience and
Capabilities. In 1995, the Company acquired a fermentation plant in
Winchester, Kentucky for the manufacture of its nutritional oils. During 1996,
the Company completed the construction of an oil extraction and refining
facility at its Winchester plant. The Company has limited experience operating
its manufacturing facility. There can be no assurance that the Company will be
able to scale-up or successfully optimize production of its nutritional oils or
its other nutritional, diagnostic or pharmaceutical products or comply with
applicable regulatory, including GMP, requirements or that these production
facilities will be sufficient to meet future demand for the Company's products.
If the Company is not able to develop adequate manufacturing capability or
contract for manufacturing on acceptable terms, the Company may not be able to
commercialize certain of its current or planned products or such
commercialization may be significantly delayed. In addition, the Company has
only limited experience managing operations at a remote geographic location.
Managing a remote manufacturing plant may place a substantial strain on the
managerial resources of the Company.
The Company believes that its Winchester, Kentucky plant will be able
to produce the Company's nutritional oils in sufficient quantity to meet
near-term demand. Nevertheless, because demand for the Company's nutritional
oils under the Company's infant formula licensing agreements and other
marketing relationships is based on factors beyond the Company's control, the
Company is unable to predict whether it has sufficient manufacturing capacity
to meet any such future demand. During 1997, the Company entered into a supply
agreement with one of the world's largest fermentation companies to provide ARA
oil. In addition, the company has conducted DHA production trials with
third-party manufacturers to prepare for future DHA oil demand in excess of the
Company's current plant capacity. Although the Company believes that it will
be able to use third party manufacturing for its DHA oil if demand requires,
there is no assurance that the Company will be able to do so successfully. The
failure to meet demand for the Company's nutritional oils could encourage the
Company's infant formula licensees and other nutritional product customers to
look for alternative manufacturing sources.
The Company currently does not have the capability to manufacture
therapeutic and diagnostic products in accordance with GMP requirements.
Should the Company decide to manufacture and scale-up the production of future
diagnostic and pharmaceutical products, substantial start-up expenses would be
incurred, expansion of facilities would be required and additional personnel
would have to be hired.
The Company currently markets its nutritional supplements, formula and
nutritional products for use in molecular structure research and
structure-based drug design and fluorescent pigments both directly to end users
and through distributors. The Company markets its infant formula oils and its
nutritional supplements primarily through distributors, and to a lesser extent,
directly to consumers. Other nutritional products and products the Company
develops in the diagnostic and pharmaceutical areas will require the Company to
form corporate alliances with companies capable of marketing such products
and/or develop its own sales and marketing force. There can be no assurance
that the Company will be able to maintain existing or establish an effective
sales or marketing force at an acceptable cost, or at all, or to establish
additional third-party sales and marketing arrangements.
No Clinical and Limited Regulatory Compliance Capabilities. The
Company has limited experience and capabilities in the area of product testing
and no experience and limited capabilities in the area of regulatory compliance
with respect to its products and will have to expend significant sums of money
to acquire and expand such capabilities, reach collaborative arrangements with
third parties to provide these capabilities or contract with third parties to
provide these capabilities. These capabilities will be important to the
Company for the successful commercialization of its existing and potential
nutritional, human diagnostic and pharmaceutical products.
The Company intends to depend on its current licensees to obtain any
required regulatory clearances for its nutritional oils to be used by such
licensees as infant formula ingredients. See "--Dependence on Third Parties;
Reliance on Future Collaborations." Although the Company believes that its
infant formula licensees will perform required testing and obtain any required
regulatory clearances, the Company cannot control the timing or the resources
such licensees will devote to these activities. The Company may, in the
future, decide to seek FDA clearances itself for its nutritional oils or other
nutritional products, if such clearances are required. In the area of human
diagnostics, the Company has not yet decided whether to develop in-house
capability, contract with third parties, seek collaborative arrangements with
partners or use a combination of the three to test its product candidates and
obtain any required regulatory clearances. If the Company were to manufacture
these diagnostic products for certain uses, it would be subject to applicable
regulatory requirements. For its potential pharmaceutical products, the
Company will likely contract with third parties and seek collaborative
arrangements for these activities. In any case, these activities may require
the devotion of substantial resources by the Company and a significant portion
of management's time. There can be no assurance that the Company can
effectively test and obtain regulatory clearances for its
-7-
<PAGE> 10
products and delays in testing or obtaining such regulatory clearances may
result in delays in or the inability to commercialize the affected product.
Product Liability. The Company faces an inherent business risk of
exposure to product liability claims alleging that the use of its technology or
products resulted in adverse effects. Such risk exists in the conduct of
clinical studies and even with respect to those products, if any, that receive
regulatory clearances for commercial sale. There can be no assurance that the
Company's current level of product and clinical study liability insurance
together with indemnification rights under its infant formula license
agreements and other collaborative arrangements will be adequate to protect the
Company. It is uncertain whether the Company will be able to obtain increased
levels of insurance as the Company grows, that any level of insurance would be
economically practical or that it would be able to renew its current or future
policies. A product liability claim or recall in excess of insured amounts or
amounts recoverable under applicable contractual arrangements could adversely
affect the business, financial condition or future prospects of the Company.
Dependence Upon Key Personnel. The Company is highly dependent on the
principal members of its management, production, sales and marketing and
scientific staff. The loss of certain key management and scientific employees
could have a material adverse effect on the Company. In addition, the Company
believes that its future success will depend in large part upon its ability to
attract and retain highly skilled scientific, managerial and marketing
personnel. The Company faces competition for such personnel from other
companies, research and academic institutions, government entities and other
organizations. There can be no assurance that the Company will be successful
in hiring or retaining the personnel it requires for continued growth.
Limited Availability of Certain Supplies. The availability of
carbon-13 and nitrogen-15 is critical for production of the Company's products
for use in drug design. Although the current supplies of these items are
adequate for the Company's near-term needs, they may not be adequate if the
demand for the Company's products for use in drug design and/or breath test
diagnosis were to sustain significant growth.
Possible Volatility of Stock Price; Limited Liquidity; Absence of
Dividends. The market price of the Common Stock may experience a high level of
volatility, as frequently occurs with publicly traded emerging growth companies
and biosciences companies. Announcements of technological innovations or new
commercial products by the Company or its competitors, developments or disputes
concerning patent or proprietary rights, publicity regarding actual or
potential medical results relating to products under development by the Company
or its competitors, general regulatory developments affecting the Company's
products in both the United States and foreign countries, market conditions for
emerging growth companies and biosciences companies and economic and other
internal and external factors, as well as period-to-period fluctuations in
financial results, may have a significant impact on the Company's business or
the future market price of the Common Stock. Since the Company's initial public
offering of Common Stock on November 23, 1993, the average daily trading volume
in the Common Stock as reported on the Nasdaq National Market has been
relatively low. There can be no assurance that a more active trading market
will develop in the future. The Company has never declared or paid any cash
dividends on its Common Stock and does not intend to do so for the foreseeable
future.
Anti-Takeover Provisions; Preferred Stock. The Company's Board of
Directors is divided into three classes with each class of directors being
elected to three-year terms on a rotating basis. As such, only one-third of
the members of the Board of Directors stand for election every year. The
Company has adopted a stockholder rights plan which may have the effect of
deterring hostile or coercive attempts to acquire the Company through the
distribution of rights to stockholders enabling those stockholders to acquire
shares of the Company's Common Stock, or that of an acquiror, at a substantial
discount to the public market price should any person or group acquire more
than 20% of the Common Stock without approval of the Board of Directors under
certain circumstances. The Company has reserved 300,000 shares of Series A
Junior Participating Preferred Stock for issuance in connection with the
Stockholder Rights Plan. The Company is authorized to issue an additional
4,700,000 shares of Preferred Stock in one or more series, having terms fixed
by the Board of Directors without a stockholder vote. While the Board of
Directors has no current intentions or plans to issue any Preferred Stock,
issuance of these shares could also be used as an anti-takeover device.
Shares Eligible for Future Sale; Registration Rights. As of May 26,
1998, the Company had 14,863,749 outstanding shares of Common Stock,
substantially all of which are available for sale in the public marketplace.
As of May 26,1998 there were also outstanding stock options to purchase an
aggregate of 1,881,505 shares of Common Stock at various exercise prices
ranging from $2.00 to $32.88 per share and warrants issued in connection with
the Purchase Agreement to purchase 196,670 shares of Common Stock at an
exercise price of $18.76 per share. If the Company elects to sell all the
shares of Common Stock and Warrants which have not been sold pursuant to the
Purchase Agreement but which the Selling Stockholders are irrevocably obligated
to purchase, there would be up to an additional outstanding 819,454 shares of
Common Stock and 245,836 warrants, with exercise prices ranging from $15.01 to
$18.76 per share. Shares of Common Stock which may be issued under outstanding
options and warrants will be available for sale in the public markets. To the
extent that these outstanding stock options and warrants are exercised, the
percentage ownership of certain of the Company's stockholders will be diluted.
In addition, certain holders of the Common Stock have certain demand and
piggyback registration rights pursuant to a Registration Rights Agreement
between the Company and these holders. No prediction can
-8-
<PAGE> 11
be made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices of the
Common Stock prevailing from time to time. The possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities. Further,
if the Company were required to include shares, through exercise of the
outstanding piggyback registration rights, in a Company-initiated registration,
the sale of such shares could have a material adverse effect on the Company's
ability to raise additional capital.
Year 2000 Compliance. The Company uses a number of computer software
programs and operating systems in its internal operations, including
applications used in financial business systems and various administrative
functions. Management is in the process of evaluating the business risk
associated with the Company's information systems. Based upon the information
known at this time about the Company's current systems, management does not
anticipate that the "Year 2000" issue will have a significant impact on its
information systems. However, there can be no assurance that "Year 2000"
issues will not require a significant commitment of resources to resolve
potential problems.
-9-
<PAGE> 12
THE COMPANY
Martek, founded in 1985, is a leader in the development and
commercialization of high value products derived from microalgae, including
nutritional products, pharmaceutical research and development tools and
diagnostics. Martek develops, manufactures and sells products from microalgae.
The Company's products include: (1) specialty, nutritional oils for infant
formula, nutritional supplements and food ingredients which play a central role
in the development of the eyes and central nervous system; (2) high value
reagents to visualize molecular interactions for drug discovery and
development; and (3) new and powerful fluorescent markers for diagnostics,
rapid, miniaturized screening and gene and protein detection. The Company's
principal executive offices are located at 6480 Dobbin Road, Columbia, Maryland
21045, and its telephone number is (410) 740-0081.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common
Shares or Warrants by the Selling Stockholders. If all the Warrants are
exercised in full, the Company will receive up to approximately $7,380,000,
which will be used for general corporate purposes. There can be no assurance,
however, that the Warrants will be exercised in full, or at all.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The securities offered hereby consist of (i) an aggregate of up to
1,475,017 Common Shares that may be offered for resale by the Selling
Stockholders named below, (ii) Warrants to purchase 442,506 shares of Common
Stock that may be offered for resale by the Selling Stockholders named below,
and (iii) up to 442,506 Warrant Shares issuable by the Company upon exercise of
the Warrants by persons or entities other than the Selling Stockholders and
their affiliates. Of the securities offered hereby, 655,563 shares of Common
Stock and 196,670 Warrants were issued to the Selling Stockholders in a private
placement which took place in April 1998. The Selling Stockholders are
irrevocably obligated to acquire up to an additional 819,454 shares of Common
Stock and 245,836 additional Warrants upon (i) the satisfaction of certain
conditions, all of which are outside of the control of the Selling
Stockholders, and (ii) the request of the Company. Any additional closings
will take place between January 1999 and April 2000, if at all. If the Company
does not issue the additional shares of Common Stock and Warrants described
above, it will be obligated to issue up to a maximum of 102,500 Warrants, which
Warrants will have an exercise price equal to or less than $18.76. The
Warrants described in the preceding sentence, and their underlying Common Stock
are not being registered hereunder.
The following table sets forth certain information with respect to the
Selling Stockholders as of May 26, 1998, as follows: (i) the name of each
Selling Stockholder; (ii) the number of the shares of Common Stock beneficially
owned by each Selling Stockholder (including shares obtainable under options
exerciseable within sixty (60) days of such date) prior to the offering hereby;
(iii) the number of maximum shares of Common Stock being offered hereby; (iv)
the maximum number of Warrants being offered hereby; and (v) the maximum number
and percentage (if one percent or more) of the Company's outstanding shares of
Common Stock to be beneficially owned by each Selling Stockholder after the
completion of the sale of Common Stock and Warrants being offered hereby.
There is no assurance that any of the Selling Stockholders will sell any or all
of the securities offered hereby.
<TABLE>
<CAPTION>
Name of Selling Number of Shares Number of Shares of Number of Warrants Shares Beneficially
--------------- ---------------- ------------------- ------------------ -------------------
Stockholder Beneficially Owned Common Stock Offered Offered Hereby Owned After the Offering
----------- ------------------ -------------------- -------------- ------------------------
Prior to the Hereby (1) (2)
------------ ---------- ---
Offering Number Percentage
-------- ------ ----------
<S> <C> <C> <C> <C> <C>
Vector Later-Stage 103,931 103,931 23,984 0 --
Equity Fund II,
L.P. (3)
Vector Later-Stage 311,792 311,792 71,952 0 --
Equity Fund II (QP),
L.P. (3)
Moore Global 306,804 306,804 70,801 0 --
Investments, Ltd.
Remington Investment 67,347 67,347 15,542 0 --
Strategies, L.P.
J. N. Whipple, III (4) 86,573 41,573 9,594 45,000 --
Buena Vista 20,786 20,786 4,797 0 --
Partners, LLC
</TABLE>
-10-
<PAGE> 13
- -------------------------------------------
(1) Consists of shares of Common Stock currently owned by the Selling
Stockholders and offered hereby as well as shares of Common stock
issuable to such Selling Stockholders upon exercise of Warrants
currently held and offered hereby by such Selling Stockholders.
(2) Consists of Warrants currently owned by the Selling Stockholders and
offered hereby, which are exerciseable at $18.76 per share and expire
on April 27, 2008.
(3) Sandra Panem, a director of the Company since May 22, 1995, is the
President of Vector Fund Management, L.L.C. ("VFM"), which is the
general partner of Vector Later-Stage Equity Fund II, L.P. ("VLSEF II")
and Vector Later-Stage Equity Fund II (QP), L.P. ("VLSEF QP"), and
a Senior Vice President of Vector Asset Management, Inc., which is the
managing member of VFM and is the general partner of Vector Fund
Management L.P., the general partner of Vector Later-Stage Equity Fund,
L.P. ("VLSEF"). Ms. Panem served as a director of the Company from
June 1990 until February 1993 and has served as a director of the
Company from May 1995 to the present. VLSEF II and VLSEF QP currently
own a total of 319,787 shares of Common Stock and warrants to purchase
a total of 95,936 shares of Common Stock, all of which are registered
hereby, and VLSEF currently owns 70,565 shares of Common Stock.
Ms. Panem currently owns 4,500 shares of Common Stock as well as
options to purchase an additional 17,500 shares of Common Stock issued
under the Company's Directors' Stock Option Plan. Ms. Panem disclaims
beneficial ownership of the shares of Common Stock and warrants held
by VLSEF II, VLSEF QP and VLSEF, except to the extent of her
proportionate partnership interest in any Vector entity.
(4) Includes 20,000 shares of Common Stock currently owned by J.N. Whipple,
Inc., a company controlled by J.N. Whipple. Mr. Whipple disclaims
beneficial ownership of the shares of Common Stock held by J. N.
Whipple, Inc.
In addition to resale of the Common Shares and Warrants by the Selling
Stockholders, this Prospectus also covers the issuance by the Company of
Warrant Shares upon exercise of the Warrants by a party or parties other than
the Selling Stockholders and their affiliates ("Transferees"). In the event of
the exercise of any or all of the Warrants by the Selling Stockholders or
Transferees, the Company will receive as consideration for issuance of the
underlying Common Stock an amount equal to the applicable exercise price of the
Warrants multiplied by the number of shares issued to such Selling Stockholder
or Transferee. See "Use of Proceeds."
The Company will not receive any proceeds from the sale of the Common
Shares or Warrants by the Selling Stockholders. The Selling Stockholders or
Transferees may sell the Common Shares or Warrants directly to market makers
acting as principals and/or through broker-dealers or underwriters acting as
agents for themselves or their customers. The distribution of the Common
Shares by the Selling Stockholders may be effected in one or more transactions
that may take place through the Nasdaq National Market or any national
securities exchange on which the Common Stock is approved for listing in the
future, including block trades or ordinary broker's transactions, or through
privately negotiated transactions, or through an underwritten public offering,
or through a combination of any such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Stockholders in
connection with such sales. It is possible that a Selling Stockholder will
attempt to sell shares of Common Stock in block transactions to market makers
or other purchasers at a price per share which may be below the then market
price. The shares may also be sold pursuant to Rule 144. There can be no
assurance that all of the Common Shares or Warrants offered hereby will be
issued to the Selling Stockholders or that all or any of the Common Shares or
Warrants offered hereby will be sold by the Selling Stockholders. The Warrants
are not listed for trading on any national securities exchange or approved for
quotation on the Nasdaq National Market or any other inter-dealer quotation
system, and the Company does not intend to qualify the warrants for such
trading or quotation in the future.
The aggregate proceeds to the Selling Stockholders from the sale of
the Common Shares or Warrants will be the sale price of the Common Shares and
Warrants sold less the aggregate agents' commissions and underwriters'
discounts. Under the terms of the Purchase Agreements, the Company has agreed
to bear the expenses of registration of the Common Shares, Warrant Shares and
Warrants under the federal and state securities laws. The Company will not
bear any commissions or discounts paid or allowed by the Selling Stockholders
to underwriters, dealers or agents. The Selling Stockholders and any dealers
or agents that participate in the distribution of Common Shares and Warrants
may be deemed to be "underwriters" within the meaning of the Securities Act,
and any profit on the sale of Common Shares or Warrants by them and any
commissions received by any such dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholders may effect transactions by selling Common Stock or Warrants
directly or through broker-dealers acting either as principal or as agent, and
such broker-dealers may receive compensation in the form of usual and customary
or specifically negotiated underwriting discounts, concessions or commissions
from the Selling Stockholders. To the extent required, the specific shares of
Common Stock or Warrants to be sold, purchase price, public offering price, the
names of any such agent, dealer or underwriter and any applicable commission or
discount with respect to a particular offering may be set forth in an
accompanying Prospectus Supplement.
The Selling Stockholders and any other persons participating in the
sale or distribution of the Common Shares or Warrants will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales of any
of the Common Shares or Warrants by the Selling Stockholders or any other such
person. The foregoing may affect the marketability of the Common Shares or
Warrants.
-11-
<PAGE> 14
The Company has agreed to indemnify the Selling Stockholders, or their
transferees or assigns, against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Selling Stockholders
or Transferees may be required to make in respect thereof.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock.
COMMON STOCK
As of May 26, 1998, the Company has outstanding 14,863,749 shares of
Common Stock, $.10 par value per share. Each holder of Common Stock is
entitled to one vote per share on all matters to be voted upon by the
stockholders. Stockholders do not have cumulative voting rights in the
election of directors. Subject to preferences that may be applicable to any
outstanding Preferred Stock, the holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. The Company
has not paid and does not presently intend to pay cash dividends on its common
Stock. In the event of a liquidation, dissolution, or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of Preferred Stock, if any, then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions available to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and non-assessable.
PREFERRED STOCK
The Company is authorized to issue 4,700,000 shares of undesignated
Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock from time to time in one or more series and to
establish the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued shares of undesignated Preferred Stock and to
fix the number of shares constituting any series and the designation of such
series, without any further vote or action by the stockholders. Any future
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the
holders of Common Stock. At present, the Company has no plans to issue any
Preferred Stock.
RIGHTS PLAN
On September 26, 1995, the Board of Directors of the Company approved
a stockholder rights plan (the "Rights Plan") designed to protect stockholders
in the event of an unsolicited attempt to acquire the Company, including a
gradual accumulation of shares in the open market, a partial or two-tier tender
offer that does not treat all stockholders equally, and other takeover tactics
which the Board of Directors believes may be abusive and not in the best
interests of stockholders. The implementation of the Rights Plan increases the
Board of Director's power in the event of an unsolicited proposal by giving the
Board of Directors more time and the opportunity to evaluate an offer and
exercise its good faith business judgment to take appropriate steps to protect
and advance stockholders' interests by negotiating with the bidder, auctioning
the Company, implementing a recapitalization or restructuring designed as an
alternative to the offer, or taking other action. In connection with the
Rights Plan, the Company designated 300,000 shares of Series A Junior
Participating Preferred Stock, par value $.01 per share.
Under the Rights Plan, each holder of the Company's Common Stock is
entitled to purchase 1/1,000th of a share of Series A Junior Participating
Preferred Stock. Currently, the Rights are neither exerciseable nor traded
separately from the Common Stock. The Rights will be exerciseable only if a
person or group in the future becomes the beneficial owner of 20% or more of
the Common Stock or announces a tender or exchange offer which would result in
its ownership of 20% or more of the Common Stock. Ten days after a public
announcement that a person has become the beneficial owner of 20% or more of
the Common Stock, each holder of a Right, other than the acquiring person,
would be entitled to purchase one share of Common Stock of the Company for each
Right at one-half of the then-current price. If the Company is acquired in a
merger, or 50% or more of the Company's assets are sold in one or more related
transactions, each Right would entitle the holder thereof to purchase common
stock of the acquiring company at half of the then-current market price of such
common stock. At any time after a person or group of persons becomes the
beneficial owner of 20% or more of the Common Stock, the Board of Directors may
exchange one share of Common Stock for each Right, other than Rights held by
the acquiring person.
The Board of Directors generally may redeem the Rights at any time
until ten days following the public announcement that person or group of
persons has acquired beneficial ownership of 20% or more of the outstanding
Common Stock. The redemption price is $.001 per Right.
-12-
<PAGE> 15
REGISTRATION RIGHTS
Certain holders of the Common Stock have certain demand and piggyback
registration rights pursuant to a Registration Rights Agreement between the
Company and these holders. If the Company were required to include shares
through exercise of the outstanding piggyback registration rights, in a
Company-initiated registration, the sale of such shares could have a material
adverse affect on the Company's ability to raise additional capital.
WARRANTS
The Warrants offered hereby are exerciseable for 442,506 shares of
Common Stock which are also registered pursuant to the Registration Statement
of which this Prospectus is a part. The Warrants are immediately exerciseable
upon issuance, have an exercise price of $18.76 per share, and expire on April
27, 2008. Any of the additional 245,836 Warrants which may be issued pursuant
to the Purchase Agreement will have an exercise price between $15.01 and $18.76
per share and will expire three years from their respective dates of issue.
Further, if the additional 245,836 Warrants and 819,454 shares of Common Stock
are not issued to the Selling Stockholders, the Company will issue a maximum of
102,500 Warrants with a maximum exercise price of $18.76 per share, which
Warrants will also expire three years from their respective dates of issue.
The exercise prices of the Warrants and number of shares of Common
Stock issuable upon exercise thereof are subject to adjustment in the event of
stock splits, stock dividends or other similar events. In the event of any
reclassification, capital reorganization or other change in the outstanding
shares of Common Stock, or in the case of any consolidation or merger of the
Company with or into another corporation or business entity (other than a
consolidation or merger (a) with a subsidiary in which merger of the Company is
the surviving corporation or (b) which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock),
the Warrants will thereupon become exerciseable to purchase such kind and
amount of shares of stock and other securities and property which holders
thereof would have received had such holders exercised the Warrants in full
immediately prior to such reclassification, capital reorganization or other
change, consolidation or merger. In addition, if the Company effects an
offering of shares of Common Stock or other stock pro rata among its
stockholders, holders of the Warrants shall be entitled, at their option to the
extent the Warrants are then exerciseable and have not been exercised, to elect
to participate in each and every such offering as though the Warrants had been
exercised and such holders were, at the time of any rights offering, then
holders of that number of shares of Common Stock to which such holders are then
entitled upon exercise of the Warrants.
LIMITATION OF LIABILITY
The Company's Restated Certificate of Incorporation and revised
By-laws limit the liability of directors to the maximum extent permitted by
Delaware law. Delaware law provides that directors of a corporation will not
be personally liable for monetary damages for breach of their fiduciary duties
as directors, including gross negligence, except liability for (i) breach of
the directors' duty of loyalty, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
the unlawful payment of a dividend or unlawful stock purchase or redemption and
(iv) any transaction from which the director derives an improper personal
benefit. Delaware law does not permit a corporation to eliminate a director's
duty of care, and this provision of the Company's revised Restated Certificate
of Incorporation has no effect on the availability of equitable remedies, such
as injunction or rescission, based upon a director's breach of the duty of
care.
The Company has entered or will enter into indemnification agreements
with each of its current and future directors which provide for indemnification
of, and advancement or expenses to, such persons to the greatest extent
permitted by Delaware law, including by reason of action or inaction occurring
in the past and circumstances in which indemnification and the advancement of
expenses are discretionary under Delaware law. The Company believes that the
limitation of liability provision in its revised Restated Certificate of
Incorporation and the indemnification agreement will facilitate the Company's
ability to continue to attract and retain qualified individuals to serve as
directors of the Company.
The Company's revised By-laws, authorize the Company to purchase and
maintain insurance for purposes of indemnification, which the Company has
purchased. At present, there is no pending litigation or proceeding involving
any director, officer, employee or agent where indemnification will be required
or permitted under the Company's revised Restated Certificate of Incorporation,
revised By-laws or indemnification agreements. The Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
SECTION 203 OF THE DELAWARE CORPORATION LAW
Under Section 203 of the Delaware General Corporation Law ("Section
203"), certain "business combinations" between a Delaware corporation whose
stock generally is publicly traded or held on record by more than 2,000
stockholders and an "interested stockholder" are prohibited for a three-year
period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected in its original certificate
of incorporation not to be governed by Section 203 (the Company did not make
such an election) or has amended its certificate of incorporation electing not
to be so governed, (ii) the business combination was approved by the board of
directors of the corporation before the other party to the business combination
became an interested stockholder, (iii) upon consummation of the transaction
that made it an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the
-13-
<PAGE> 16
commencement of the transaction (excluding voting stock owned by directors who
are also officers or held in employee benefit plans in which the employees do
not have a confidential right to tender or vote stock held by the plan) or (iv)
the business combination was approved by the board of directors of the
corporation and ratified by two-thirds of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of the majority of the corporation's directors.
The term "business combination" is defined generally to include mergers or
consolidations between a Delaware corporation and an "interested stockholder,"
transactions with an "interested stockholder" involving assets or stock of the
corporation or its majority-owned subsidiaries and transactions which increase
an interested stockholder's percentage ownership of stock. The term
"interested stockholder" is defined generally as a stockholder who, together
with affiliates and associates, owns (or, within three years prior, did own)
15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of the Company
and therefore could discourage attempts to acquire the Company.
The Company adopted an amendment to its Restated Certificate of
Incorporation electing not to be governed by the provisions of Section 203.
The amendment does not apply to any business combination between the Company
and any person who became an interested stockholder prior to June 17, 1993.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Registrar and
Transfer Company, Cranford, New Jersey.
LEGAL MATTERS
Certain legal matters with respect to the Common Shares, Warrants and
Warrant Shares offered hereby have been passed upon for the Company by Hogan &
Hartson L.L.P., Baltimore, Maryland.
EXPERTS
The financial statements of Martek Biosciences Corporation incorporated
by reference in the Martek Biosciences Corporation's Annual Report (Form 10-K)
for the year ended October 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.
-14-
<PAGE> 17
<TABLE>
<S> <C>
======================================================== =================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THE OFFERING MADE HEREBY TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN MARTEK
AUTHORIZED BY THE COMPANY OR THE SELLING BIOSCIENCES
STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN CORPORATIONS
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR COMMON STOCK
BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL AND
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE WARRANTS
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.
---------------------
PROSPECTUS
---------------------
------------------------
TABLE OF CONTENTS PAGE
----
Available Information . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . 10
Use of Proceeds . . . . . . . . . . . . 10
Selling Stockholders and Plan of
Distribution . . . . . . . . . . . . 10
Description of Capital Stock . . . . . . 12
Legal Matters . . . . . . . . . . . . 14
Experts . . . . . . . . . . . . 14 June , 1998
======================================================== =================================================
</TABLE>
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be paid by the
Company in connection with the issuance and distribution of the securities
being registered hereby. All the amounts are estimates, except the Commission
registration fee. The Selling Stockholders will bear the cost of all selling
commissions and underwriting discounts with respect to the sale of any
securities by them.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . . $ 7,179
NASDAQ listing fee . . . . . . . . . . . . . . . . . . . . . . . . 13,111
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . 20,000
Accounting and Miscellaneous expenses . . . . . . . . . . . . . . 9,710
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL"), a corporation may indemnify its directors, officers,
employees and agents and its former directors, officers, employees and agents
and those who serve, at the corporation's request, in such capacities with
another enterprise, against expenses (including attorney's fees), as well as
judgments, fines and settlements in nonderivative lawsuits, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding in which they or any of them were or are made parties or are
threatened to be made parties by reason of their serving or having served in
such capacity. The DGCL provides, however, that such person must have acted in
good faith and in a manner he or she reasonably believed to be in (or not
opposed to) the best interests of the corporation and, in the case of a
criminal action, such person must have had no reasonable cause to believe his
or her conduct was unlawful. In addition, the DGCL does not permit
indemnification in an action or suit by or in the right of the corporation,
where such person has been adjudged liable to the corporation, unless, and only
to the extent that, a court determines that such person fairly and reasonably
is entitled to indemnity for costs the court deems proper in light of liability
adjudication. Indemnity is mandatory to the extent a claim, issue or matter
has been successfully defended.
Article ELEVENTH of the Company's Certificate of Incorporation
provides that the Company will indemnify its directors and officers to the full
extent permitted by law and that no director shall be liable for monetary
damages to the Registrant or its stockholders for any breach of fiduciary duty,
except to the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the DGCL, or (iv)
for any transaction from which such director derived an improper personal
benefit. In addition, under indemnification agreements with its directors, the
Registrant is obligated, to the fullest extent permissible by the DGCL, as it
currently exists or may be amended, to indemnify and hold harmless its
directors, from and against all expense, liability and loss reasonably incurred
or suffered by such directors.
II-1
<PAGE> 19
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
4.1* Form of certificate representing shares of Martek common stock, par value $0.10 per share
(filed as Exhibit 4.01 to the Company's Registration Statement on Form S-1, File No. 33-
68922, declared effective November 23, 1993, and incorporated herein by reference).
4.2* Common Stock and Warrant Purchase Agreement, dated April 27, 1998 including form of
Warrant, by and among the Company and the Selling Stockholders (filed as Exhibit 99.2 to
the Company's Current Report on Form 8-K, File No. 22354, incorporated herein by reference).
5 Opinion of Hogan & Hartson L.L.P. (filed herewith).
23.1 Consent of Ernst & Young LLP, as independent auditors for the Company (filed herewith).
23.2 Consent of Hogan & Hartson L.L.P. (included in their opinion filed as Exhibit 5).
24* Powers of Attorney (included in the Signature Page to this Registration Statement).
--------------------
*Previously filed.
</TABLE>
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(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 those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities and Exchange Act of 1934 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.
II-2
<PAGE> 20
(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.
(b) 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 Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the County of Howard, State of Maryland on June 18, 1998.
MARTEK BIOSCIENCES CORPORATION
By: /s/ Henry Linsert, Jr.
------------------------------------
Henry Linsert, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: June 18, 1998 /s/ Henry Linsert, Jr.
------------------------------------------
Henry Linsert, Jr.
Chief Executive Officer and Director
(Principal Executive Officer)
Date: June 18, 1998 /s/ Peter L. Buzy
------------------------------------------
Peter L. Buzy
(Chief Financial and Accounting Officer)
Date: June 18, 1998 /s/ Jules Blake*
------------------------------------------
Jules Blake
Director
Date: June 18, 1998 /s/ Bruce E. Elmblad*
------------------------------------------
Bruce E. Elmblad
Director
Date: June 18, 1998 /s/ Ann L. Johnson*
------------------------------------------
Ann L. Johnson
Director
</TABLE>
II-4
<PAGE> 22
<TABLE>
<S> <C>
Date: June 18, 1998 /s/ Douglas J. MacMaster, Jr.*
------------------------------------------
Douglas J. MacMaster, Jr.
Director
Date: June 18, 1998 /s/ John H. Mahar*
------------------------------------------
John H. Mahar
Director
Date: June 18, 1998 /s/ Sandra Panem*
------------------------------------------
Sandra Panem
Director
Date: June 18, 1998 /s/ Richard J. Radmer*
------------------------------------------
Richard J. Radmer
Director
Date: June 18, 1998 /s/ Eugene H. Rotberg*
------------------------------------------
Eugene H. Rotberg
Director
Date: June 18, 1998 /s/ William D. Smart*
------------------------------------------
William D. Smart
Director
By: /s/ Peter L. Buzy
--------------------------
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<S> <C>
4.1* Form of certificate representing shares of Martek common stock, par value $0.10 per share (filed
as Exhibit 4.01 to the Company's Registration Statement on Form S-1, File No. 33-68922, declared
effective November 23, 1993, and incorporated herein by reference).
4.2* Common Stock and Warrant Purchase Agreement, dated April 27, 1998, including form of Warrant, by
and among the Company and the Selling Stockholders (filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K, File No. 22354, incorporated herein by reference).
5 Opinion of Hogan & Hartson L.L.P. (filed herewith).
23.1 Consent of Ernst & Young LLP, as independent auditors for the Company (filed herewith).
23.2 Consent of Hogan & Hartson L.L.P. (included in their opinion filed as Exhibit 5).
24* Powers of Attorney (included in the Signature Page to this Registration Statement).
</TABLE>
-----------------------
*Previously filed.
<PAGE> 1
[HOGAN & HARTSON L.L.P. LETTERHEAD]
June 18, 1998
Board of Directors
Martek Biosciences Corporation
6480 Dobbin Road
Columbia, Maryland 21045
Ladies and Gentlemen:
We are acting as counsel to Martek Biosciences Corporation, a Delaware
corporation (the "Company"), in connection with its registration statement on
Form S-3 (the "Registration Statement") filed with the Securities and Exchange
Commission relating to the proposed registration for resale of (i) warrants
(the "Warrants") to purchase up to 442,506 shares of the Company's common
stock, par value $.10 per share ("Common Stock"), and (ii) up to 1,917,523
shares of Common Stock, 1,475,017 shares of which (the "Common Shares") have
been or, in accordance with the terms of the Purchase Agreement (as defined
below), may be, issued to and are to be sold by certain selling stockholders
(the "Selling Stockholders") and 442,506 shares of which (the "Warrant Shares")
are or, following issuance of additional Warrants in accordance with the terms
of the Purchase Agreement (as defined below) will be, issuable upon exercise of
the Warrants. This opinion letter is furnished to you at your request to
enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17
C.F.R. Section 229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Amended and Restated Certificate of Incorporation of the
Company, as certified by the Secretary of the State of the
State of Delaware on June 18, 1998 and by the Secretary of the
Company on the date hereof as then being complete, accurate and
in effect.
<PAGE> 2
June 18, 1998
HOGAN & HARTSON L.L.P.
3. The Bylaws of the Company, as certified by the Secretary of the
Company on the date hereof as then being complete, accurate and
in effect.
4. Resolutions of the Board of Directors of the Company adopted on
April 6 and June 4, 1998, as certified by the Secretary of the
Company on the date hereof as then being complete, accurate and
in effect, relating to the issuance and sale of the Common
Shares, the Warrants and the Warrant Shares and arrangements in
connection therewith.
5. Executed copies of the common stock and warrant purchase
agreement, dated April 27, 1998, by and among the Company and
the Selling Stockholders (the "Purchase Agreement"), relating
to, among other things, the issuance of the Common Shares and
the Warrants to the Selling Stockholders.
6. Executed copies of the Warrants.
We have not, except as specifically identified above, made any
independent review or investigation of factual or other matters, including the
organization, existence, good standing, assets, business or affairs of the
Company. In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on the General
Corporation Law of the State of Delaware. We express no opinion herein as to
any other laws, statutes, regulations, or ordinances.
Based upon, subject to and limited by the foregoing, we are of the
opinion that (i) the Common Shares are or, when issued in accordance with the
terms of the Purchase Agreement will be, validly issued, fully paid and
nonassessable under the General Corporation Law of the State of Delaware, (ii)
the Warrants are or, when issued in accordance with the Purchase Agreement,
will be, validly issued and constitute binding obligations of the Company and
(iii) following issuance of the Warrant Shares pursuant to the terms of the
Purchase Agreement and the Warrants and receipt by the Company of the
consideration for the Warrant Shares specified in the resolutions of the Board
of Directors referred to above and the Warrants, the Warrant Shares will be
validly issued, fully paid and nonassessable under the General Corporation Law
of the State of Delaware.
2
<PAGE> 3
June 18, 1998
HOGAN & HARTSON L.L.P.
We assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has
been prepared solely for your use in connection with the filing of the
Registration Statement on the date of this opinion letter and should not be
quoted in whole or in part or otherwise be referred to, nor filed with or
furnished to any governmental agency or other person or entity, without the
prior written consent of this firm.
We hereby consent to the filing of this opinion letter as Exhibit 5.01 to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus constituting a part of the Registration
Statement. In giving this consent, we do not thereby admit that we are an
"expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
HOGAN & HARTSON L.L.P.
3
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-53803) of
Martek Biosciences Corporation for the registration of 1,475,017 shares of its
Common Stock, 442,506 Warrants to Purchase Common Stock, and 442,506 shares
of Common Stock Underlying Warrants, and to the incorporation by reference
therein of our report dated December 12, 1997, with respect to the financial
statements of Martek Biosciences Corporation included in its Annual Report
(Form 10-K) for the year ended October 31, 1997, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Vienna, Virginia
June 16, 1998
