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As filed with the Securities and Exchange Commission on July 14, 1999
Registration No. 333-81739
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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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)
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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, ESQ.
HOGAN & HARTSON L.L.P.
111 SOUTH CALVERT STREET, 16TH FLOOR
BALTIMORE, MARYLAND 21202
(410) 659-2700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If 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. [ ]
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT, THE PROSPECTUS INCLUDED
HEREIN IS A COMBINED PROSPECTUS AND RELATES TO THIS REGISTRATION STATEMENT AND
REGISTRATION STATEMENT NO. 333-53803, WHICH WAS DECLARED EFFECTIVE ON JUNE 19,
1998.
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.
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INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS
EFFECTIVE. THIS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
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PROSPECTUS SUBJECT TO COMPLETION
JULY 14, 1999
MARTEK BIOSCIENCES CORPORATION
3,003,952 SHARES OF COMMON STOCK
952,435 COMMON STOCK PURCHASE WARRANTS
We have prepared this prospectus to allow the selling stockholders we
identify herein to sell up to 3,003,952 shares of our common stock and up to
952,435 common stock purchase warrants. We will not receive any of the
proceeds from the sale of common stock by the selling stockholders.
Our common stock is traded on the Nasdaq Stock Market under the symbol
"MATK." On July 13, 1999, the last reported sale price of our common stock on
Nasdaq was $11.00 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE COMMON
STOCK OR THE COMMON STOCK PURCHASE WARRANTS, NOR HAVE THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is July , 1999.
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THE COMPANY
Martek Biosciences Corporation develops, manufactures and sells
products from microalgae. Our products include: (1) specialty, edible oils for
infant formula, nutritional supplements and food ingredients that play a
beneficial role in promoting mental and cardiovascular health, and in the
development of the eyes and central nervous system in infants; (2) high value
reagents and technologies to visualize molecular interactions for drug
discovery and development; and (3) new, powerful fluorescent markers for
diagnostics, rapid miniaturized screening, and gene and protein detection. Our
principal executive offices are located at 6480 Dobbin Road, Columbia, Maryland
21045, and our telephone number is (410) 740-0081.
RISK FACTORS
In evaluating our business, you should carefully consider the
following factors, as well as other information in this prospectus before
purchasing our common stock.
You should be cautioned that the following important factors
have affected, and in the future could affect, our actual results. There may
also be additional factors not discussed in this report that could also affect
future results. These factors could cause our future financial results to
differ materially from those expressed in any forward-looking statements made
by us. Forward-looking statements may relate to such matters as:
- our ability to generate future revenues;
- the potential commercialization of our products; and
- the optimization of production costs.
Forward-looking statements may include words such as "will," "should," "could,"
"anticipate," "believe," "plan," "estimate," "expect," "intend," and other
similar expressions. This list does not constitute all factors which you should
consider prior to making an investment decision in our securities. You should
also not assume that the information contained herein is complete or accurate
in all respects after the date of this filing. We disclaim any duty to update
the statements contained herein.
WE HAVE A HISTORY OF OPERATING LOSSES AND OUR FUTURE FINANCIAL RESULTS ARE
UNCERTAIN.
We have experienced net operating losses since our inception.
We expect such losses to continue until significant sales of our nutritional
oils occur
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and/or until significant royalties from sales of infant formula products
containing our oils are recognized. We expect 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:
- our ability to complete successfully the
commercialization and cost optimization of
our products;
- the willingness and ability of infant formula
licensees to incorporate our product into their
infant formula products;
- our ability to enter into a strategic marketing
relationship and the willingness of potential
strategic partners to market our products;
- growth in revenues from our nutritional oils;
- growth in revenues from sales of our products for use
in molecular structure research and structure-based
drug design;
- the progress of our research and development
programs;
- the progress of our preclinical and clinical product
studies;
- the time, costs and ability of obtaining regulatory
approvals for those products subject to such
approval;
- our ability to protect our proprietary rights;
- the costs of protecting our patent claims;
- competing technological and market developments;
- manufacturing costs associated with our various
products and potential products; and
- the costs of commercializing and marketing our
products.
OUR PRODUCTS ARE AT AN EARLY STAGE OF DEVELOPMENT.
Martek was founded in 1985. Certain of our products require
substantial additional research and development. Some require laboratory and
clinical testing and regulatory approval. In addition, although we anticipate
the introduction of new products over the next several years, some of our
potential products, especially in the area of pharmaceuticals and clinical
diagnostics, are not
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expected to become commercially available for many years, if at all. There is
no assurance that:
- we will successfully complete our product development
efforts;
- we will obtain required regulatory approvals on a
timely basis or at all;
- we will be capable of manufacturing our products in
commercial quantities at a reasonable cost; or
- any new products, if introduced, will achieve market
acceptance.
We expect to receive most of our future revenues from direct sales of products,
royalty income and licensing fees. A portion of our revenues to date has come
from research and development contracts (primarily from the federal government)
and federal government grants. We first realized revenues from our products for
use in molecular structure research and structure-based drug design in 1989. We
recognized revenues from license fees and sales of sample quantities of
nutritional and diagnostic products beginning in 1992.
WE MAY BE UNABLE TO OBTAIN ADDITIONAL CAPITAL NEEDED TO OPERATE AND GROW OUR
BUSINESS.
Substantial expenditures will be required to:
- enable us to continue our research and development
activities;
- conduct preclinical and clinical studies; and
- manufacture and market our products.
The level of expenditures required for these activities will depend in part on
the extent to which we develop, manufacture and market our products
independently or with other companies through collaborative arrangements. Our
future capital requirements will also depend, among other things, on one or
more of the following factors:
- growth in our infant formula and nutritional product
sales;
- the extent and progress of our 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;
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- the costs involved in filing, protecting and
enforcing patent claims;
- competing technological and market developments;
- the cost of capital expenditures at our manufacturing
facilities;
- the cost of acquiring additional and/or operating
existing manufacturing facilities for our various
products and potential products (depending on which
products we decide to manufacture and continue to
manufacture ourselves); and
- the costs of marketing and commercializing our
products.
There is no assurance that funding to carry on these activities will be
available at all or on favorable terms to permit successful commercialization
of our products. We have only limited debt financing arrangements. These
arrangements require us to meet certain financial covenants related to our
outstanding term loans. There is no assurance that we will be able to:
- continue such arrangements;
- continue to comply with financial covenants; or
- establish additional debt financing arrangements on
satisfactory terms, if at all.
If adequate funds are not available, we may be required to:
- curtail one or more of our research and development
programs;
- curtail manufacturing and commercialization programs;
and/or
- obtain funds through arrangements with collaborative
partners or others.
These arrangements may require us to relinquish certain technology or product
rights including patent and other intellectual property rights.
WE ARE DEPENDENT ON COLLABORATIONS WITH THIRD PARTIES FOR THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR PRODUCTS.
Future revenues from our nutritional oils are largely
dependent on factors over which we will have no control. To date, a portion of
our revenues has consisted of license fees and anniversary payments received
from infant formula manufacturers which have licensed our nutritional oils.
Under these agreements, we are entitled to receive royalty payments based on
the licensees' sales of products
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including our nutritional oils. These licensees will be responsible for
performing all clinical testing on, obtaining regulatory approvals for and
marketing products containing our nutritional oils. These licensees are not
required to use our nutritional oils in any of their products. They are also
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 our licensees have introduced infant
formula products containing our nutritional oils overseas, we cannot predict
whether any licensee will broaden its use of our oils or whether they will be
used by any of our other licensees in their infant formula products.
Our strategy for the development, clinical testing,
manufacturing and commercialization of certain of our products includes
entering into various collaborations with corporate partners, licensors,
licensees and others. In 1997, we entered into a supply agreement with a third
party manufacturer for its ARA-containing oil. Although we are able to produce
ARA oil in our Kentucky manufacturing plant, a halt in supply from this third
party ARA oil manufacturer could adversely impact our ability to meet product
demand in the short-run. It could also adversely impact our ability to meet
product demand in the long-run if this source of ARA oil could not be replaced.
There is no assurance that we will negotiate other collaborative arrangements
in the future on acceptable terms, if at all, or that such collaborative
arrangements will be beneficial to our operations. If we cannot establish such
arrangements, we may face increased capital requirements to undertake such
activities at our own expense. As a result, we could encounter significant
delays in introducing our products into certain markets. This could also
adversely affect the development, manufacture, marketing and sale of products
in such markets. In particular, our continuing ability to generate nutritional
oil-related revenues depends on our ability to enter into agreements with
additional licensees. Some of our nutritional oil licensing agreements contain
provisions which will not allow us to enter into future agreements containing
payment terms more favorable than those granted to current licensees. Such
provisions may restrict our ability to negotiate with potential infant formula
licensees.
WE ARE DEPENDENT ON A RELATIVELY SMALL NUMBER OF CUSTOMERS.
Our dependence on sizable product orders from infant formula
licensees and other marketing partners will make the relationship with each
customer critically important to our business. While we have detailed contracts
with each of our major customers, changes to product pricing, royalty rates and
delivery timetables may be required to meet their demands and expectations.
There is no assurance that we will be able to manage our licensees and other
customer relationships successfully. Our major customers are large and complex
and the launch cycles of new products are typically long and unpredictable.
This requires us to make considerable early investments in account management
and other efforts
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without the assurance of future revenues. There is no assurance that we will be
able to convert these investments into significant revenue generating
relationships.
OUR BUSINESS IS DEPENDENT ON OUR ABILITY TO KEEP PACE WITH THE LATEST
TECHNOLOGICAL CHANGES.
We operate in rapidly evolving fields. Competition from
larger, more experienced and better capitalized companies has been and will
continue to be intense. There is no assurance that developments by others will
not render our products or technologies obsolete or noncompetitive, or that we
will keep pace with new technological developments. Currently, DHA-containing
fish oils provide alternative sources of DHA, and we are aware of another
company which produces DHA from fungal sources. In addition, DHA and ARA have
been derived from egg yolk lipids, and we are currently aware of several
European infant formula manufacturers that are adding DHA and ARA derived from
egg yolk lipids and/or DHA derived from fish oil to their infant formula. We
have obtained seven U.S. patents and a number of patents outside the U.S.
covering certain aspects of our nutritional oils to date. We have additional
patent applications pending covering certain aspects of these DHA- and
ARA-containing oils. However, we have not been awarded any European patents
relating to our ARA-containing oil. Accordingly, competitors may be able to
produce, sell and use ARA in Europe until patents are issued or once they are
invalidated, using similar or identical processes to those we use. Generally,
however, they are prohibited from manufacturing, using or selling materials
where patents have been issued. Competitors may be able to produce, sell and
use DHA- and/or ARA-containing oils in countries where we have not applied for
patent protection. In addition, competitors may produce certain DHA- and
ARA-containing oils that are not covered by our patents. We are aware of
several other companies offering ARA-containing oils for sale. In addition,
there is no assurance that other sources of DHA and ARA, the two primary
components of our nutritional oils, will not become commercially viable.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, PERMITTING COMPETITORS TO
DUPLICATE OUR PRODUCTS AND SERVICES.
Our success depends on our ability to:
- obtain patent protection for our products;
- maintain trade secret protection; and
- operate without infringing the proprietary rights of
others.
Our policy is to aggressively protect our proprietary technology through
patents and, in some cases, trade secrets. Additionally, in certain cases we
rely on the licenses of patents and technology of third parties. We have
obtained approximately
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25 U.S. patents covering various aspects of our technology. These patents will
expire on various dates between 2007 and 2015. We have filed, and intend to
continue to file, applications for additional patents covering both products
and processes as appropriate. There is no assurance that
- the relevant authorities will grant any patent
applications filed by, assigned to, or licensed to,
us;
- we will develop additional products that are
patentable; or
- any patents issued to or licensed by us will provide
us with any competitive advantages or adequate
protection for inventions.
Moreover, there is no assurance that any patents issued to or licensed by us
will not be challenged, invalidated or circumvented by others.
There is no assurance that issued patents, or patents that may
issue, will provide protection against competitive products or otherwise be
commercially valuable. Furthermore, since patent laws relating to the scope of
claims in the fields of health care and biosciences are still evolving, our
patent rights are subject to this uncertainty. Our patent rights on our
products therefore might conflict with the patent rights of others, whether
existing now or in the future. Alternatively, the products of others could
infringe our patent rights. The defense and prosecution of patent claims is
both costly and time consuming, even if the outcome were favorable to us. An
adverse outcome could:
- subject us to significant liabilities to third
parties;
- require disputed rights to be licensed from third
parties; and/or
- require us to cease selling our products.
We have obtained seven U.S. patents covering certain aspects
of our DHA and/or ARA oils. We have applied for other patents in the United
States covering certain other aspects of our nutritional oils. We have also
filed patent applications on a selective basis in other industrialized
countries, some of which are pending and some of which have been granted. We
are unable to predict, however, whether these patents will be challenged,
invalidated or circumvented by others. Failure to obtain adequate patent
protection for our nutritional oils would have a material adverse affect on our
results of operations. This could particularly affect:
- future sales of our nutritional oils;
- future royalties on sales of infant formula
containing our oils; and
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- future license fees related to our oils.
In particular, failure to maintain patent protection could
permit our competitors to produce products which could directly compete with
our nutritional oils using similar or identical processes. It is also possible
that the infant formula manufacturers currently under license by us or
potential future licensees may choose formula ingredients from these
competitors if they choose to include the ingredients in their formulas at all.
Other patents that we have cover:
- our photobioreactor system which is used for
culturing microalgae and certain aspects of our
breath test technology;
- our Celtone and Celtone M technology; and
- our combinatorial library technology.
We also rely on trade secrets and proprietary know-how, which
we protect in part by confidentiality agreements with our collaborators,
employees and consultants. There is no assurance that:
- other parties to these agreements will not breach
them;
- we will have adequate remedies for any such breach;
or
- competitors will not otherwise learn of or
independently develop our trade secrets.
IF OUR PRODUCTS ARE INCLUDED IN INFANT FORMULA OR NUTRITIONAL PRODUCTS FOR
CONSUMER USE, WE MAY BE SUBJECT TO PRODUCTS LIABILITY.
To the extent that our nutritional oils are included in infant
formula or in nutritional products for consumer use, we are subject to the
risks generally associated with these industries. These risks include, among
others:
- product tampering or production defects which may
require a recall or may reduce the demand for such
products;
- the risk that authorities may ban an ingredient used
in such products, including our nutritional oils,
limit its use or declare it unhealthful; or
- sales of infant formula may decline or authorities
may limit or discontinue use of our nutritional oils
due to perceived health concerns, adverse publicity
or other reasons beyond our control.
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WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION, WHICH MAY CHANGE AND HARM
OUR BUSINESS.
A number of government authorities in the United States and
other countries regulate our products and our manufacturing and research
activities. This includes 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. Their regulatory authority includes the manufacture
and labeling of such products. Generally, authorities regulate prescription
pharmaceuticals and certain types of diagnostic products 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 is no assurance
that any changes to federal and state laws will not have a material adverse
effect on the company.
Our infant formula licensees are responsible for obtaining the
requisite regulatory clearances to market their products containing our oils.
To date, none of our infant formula licensees have obtained the necessary
approval to sell an infant formula product containing our oils in the United
States. Sales of our products outside the United States are subject to foreign
regulatory requirements that may vary widely from country to country. Term
infant formula products containing our nutritional oils are currently being
marketed outside the U.S. in over seven countries. Pre-term infant formula
products containing our oils are currently being marketed outside the U.S. in
over 50 countries. We understand that our licensees have received appropriate
regulatory clearances as needed to market products containing our oils in those
countries.
The time required to obtain clearances from additional foreign
countries may vary. It may be longer or shorter than that required by the FDA.
There is no assurance that additional foreign clearances can be obtained or met
on a timely basis, if at all.
We are assisting our licensees in responding to certain
questions raised by the FDA in connection with evaluating our oils for
inclusion in U.S. infant formula. There is no assurance that:
- we will be able to, with the assistance of our
licensees, adequately respond to the FDA's questions;
- our licensees will continue to press forward;
- the FDA will in fact grant clearances;
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- the process will not involve significant delays;
- potential delays will not materially and adversely
affect the timing and extent of potential future
introductions of our products; or
- once and if approval is obtained, a licensee will
actually market a U.S. infant formula product
containing our oils.
There is no assurance that the FDC Act will not impose food
additive regulation on DHA and ARA used in medical foods, infant formulas or
enteral nutritional products. Use of DHA and ARA in medical foods may also
require additional supportive data.
The process of obtaining FDA clearances can be time-consuming
and expensive. There is no assurance that the FDA will grant such clearances.
The FDA review process may involve delays that may materially and adversely
affect the testing, marketing and sale of our products. Moreover, regulatory
clearances for products such as medical devices, new drugs, or new food
additives, even if granted, may include significant limitations on their uses.
Additionally, the FDA could withdraw product clearances for failure to comply
with regulatory standards. There is 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 our products are in research and development phases.
We cannot predict all regulatory requirements or issues that may apply to or
arise in connection with our products. Changes in existing laws, regulations or
policies or the adoption of new laws, regulations or policies could prevent us
or our licensees or collaborators from achieving compliance with regulatory
requirements. Such changes could also affect the timing of achieving such
clearances.
Since the FDA regulatory process may be costly and time
consuming, we will decide on a product-by-product basis whether to handle their
requirements independently or to assign such responsibilities to our licensees
or future collaborative partners. There is no assurance that we will be able to
obtain such regulatory clearances, if required, on a timely basis or at all.
If such clearances are delayed or not achieved at all, it may adversely effect
our business, financial condition and results of operations. If we lose
previously received approvals or clearances, or fail to comply with existing or
future regulatory requirements, it would have a similar adverse effect.
We are currently required to meet FDA Good Manufacturing
Practices ("GMP") requirements as applicable to infant formula and dietary
supplements. GMP regulations specify component and product testing standards,
control quality assurance requirements, and records and other documentation
controls. Depending
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upon the type of FDA application that is submitted, compliance with relevant
GMP requirements can be difficult and time consuming. If we continue to
manufacture our own products we will continue to fall under the GMP
requirements of the FDA. It may even be necessary in the future to meet more
stringent drug GMP requirements. There is no assurance that we can meet
relevant FDA manufacturing requirements, particularly for scale-up operations
involving product marketing applications. Further, we have only limited
experience in the area of regulatory compliance with respect to our products.
There is no assurance that we will be able to continue to manufacture our
nutritional oils in accordance with relevant infant formula and dietary
supplement requirements for commercial use. State and federal agencies,
including the FDA and comparable agencies in other countries, conduct periodic
inspections to monitor ongoing compliance with GMP and other applicable
regulatory requirements. A determination that we are in violation of such GMP
and other regulations could lead to the imposition of civil penalties,
including fines, product recalls or product seizures. In situations where
serious violations are noted, criminal sanctions may be imposed.
Each line of products that is or may be marketed by us or our
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;
- prescribes detailed requirements for labeling dietary
supplements; and
- establishes GMP requirements for dietary supplements.
We are currently marketing a line of DHA dietary supplements, Neuromins(R) and
Neuromins(R)PL. In addition, we are researching and developing new applications
for our DHA and ARA oils. There is no assurance that we will be able to comply
with the requirements of the DSHEA or any other regulations that the FDA may
promulgate regarding DHA or ARA use as a dietary supplement and/or food
ingredient.
Our 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. This classification subjects these products to premarket clearances
and/or regulatory approvals. There is no assurance that:
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- we or our collaborators will be able to develop the
extensive safety and efficacy data needed to support
FDA premarket clearances and/or regulatory approvals
for these products; or
- the FDA ultimately would authorize the marketing of
such products on a timely basis, if at all.
For pharmaceutical uses of products derived from microalgae,
there is no assurance that required clinical testing of our products will be
completed successfully within any specified time period, if at all.
Additionally, there is no assurance that:
- we will be able to develop the extensive data needed
to establish the safety and efficacy of our products
for approval for drug uses; or
- authorities will not begin to regulate these drug
products as biological products or as controlled
substances, which would affect marketing and other
requirements.
WE HAVE LIMITED MANUFACTURING AND SALES AND MARKETING EXPERIENCE AND
CAPABILITIES.
We have limited experience operating our manufacturing
facility. In 1995, we acquired a fermentation plant in Winchester, Kentucky to
manufacture our nutritional oils. During 1996, we completed the construction of
an oil extraction and refining facility in this plant. There is no assurance
that we will be able to scale-up or successfully optimize production of our
nutritional oils. There is also no assurance that these production facilities
will be sufficient to meet future demand for our products. If we do not develop
adequate manufacturing capability or contract for manufacturing on acceptable
terms, we may not be able to commercialize some of our current or planned
products. Or, if we are able to adequately manufacture them, commercialization
of the products may be significantly delayed. In addition, we have only limited
experience managing operations at a remote geographic location. Managing a
remote manufacturing plant may place a substantial strain on our managerial
resources.
We believe that our Winchester, Kentucky plant will be able to
produce our nutritional DHA oil in sufficient quantity to meet near-term
demand. Nevertheless, because demand for our nutritional DHA oil is based on
factors beyond our control, we are unable to predict whether we have sufficient
manufacturing capacity to meet any such future demand. During 1997, we entered
into a supply agreement with one of the world's largest fermentation companies
to provide ARA oil. In addition, we have conducted DHA production trials with
third-party manufacturers to prepare for future DHA oil demand in excess of our
current
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plant capacity. Although we believe that we will be able to use third party
manufacturing for our DHA oil if demand requires, there is no assurance that we
will be able to do so successfully. The failure to meet demand for our
nutritional oils could encourage our infant formula licensees and other
nutritional product customers to look for alternative manufacturing sources.
We currently do not have the capability to manufacture
therapeutic and diagnostic products in accordance with GMP requirements. Should
we decide to manufacture and scale-up the production of future diagnostic and
pharmaceutical products, we would incur substantial start-up expenses, we would
need to expand our facilities, and we would have to hire additional personnel.
We market infant formula oils and nutritional supplements
primarily through distributors, and to a lesser extent, directly to consumers.
We market our products for use in molecular structure research and
structure-based drug design, and fluorescent pigments both directly to end
users and through distributors. Other nutritional products and products that we
develop in the diagnostic and pharmaceutical areas will require us to enter
into strategic marketing relationships with companies capable of marketing such
products and/or develop our own sales and marketing force. There is no
assurance that we will be able to establish an effective sales or marketing
force or enter into a successful strategic marketing relationship. Even if we
are able to achieve the above, the cost may be prohibitive.
WE HAVE NO CLINICAL AND LIMITED REGULATORY COMPLIANCE CAPABILITIES.
We have limited experience and capabilities in the area of
product testing. We have limited experience and capabilities in the area of
regulatory compliance with respect to our products. We will have to expend
significant sums of money to acquire and expand such capabilities. We may need
to 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 us for the successful commercialization
of our existing and potential future nutritional and human diagnostic products.
We will depend on our current licensees to obtain any required
regulatory clearances for our nutritional oils which they will use as infant
formula ingredients. Although we believe that our infant formula licensees will
perform required testing and obtain any required regulatory clearances, we
cannot control the timing or the resources that they will devote to these
activities. We may, in the future, decide to seek FDA clearances ourselves for
our nutritional oils or other nutritional products, if such clearances are
required. In the area of human diagnostics, we have 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 our
product candidates and obtain any required
- 14 -
<PAGE> 17
regulatory clearances. If we were to manufacture these diagnostic products for
certain uses, they would be subject to applicable regulatory requirements. For
potential pharmaceutical products, we will likely contract with third parties
and seek collaborative arrangements. In any case, these activities may require
the devotion of substantial resources and a significant portion of our time.
There is no assurance that we can effectively test and obtain regulatory
clearances for our products. Delays in testing or obtaining such regulatory
clearances may result in delay in or the inability to commercialize the
affected product. See "--Dependence on Third Parties; Reliance on Future
Collaborations."
WE MAY BE EXPOSED TO POTENTIAL PRODUCT LIABILITY CLAIMS.
We face an inherent business risk of exposure to product
liability claims alleging that the use of our 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 is no assurance that our current level of product
and clinical study liability insurance together with indemnification rights
under our infant formula license agreements and other collaborative
arrangements will be adequate to protect us from this exposure. It is uncertain
whether we will be able to obtain increased levels of insurance as we grow.
There is no assurance that this level of insurance would be economically
practical or that we would be able to renew our 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
our business, financial condition and future prospects.
THE LIMITED AVAILABILITY OF CERTAIN SUPPLIES MAY HAVE AN ADVERSE EFFECT ON OUR
ABILITY TO GROW.
The availability of carbon-13 and nitrogen-15 is critical for
production of our products for use in drug design. Although the current
supplies of these items are adequate for our near-term needs, they may not be
adequate if the demand for our products for use in drug design and/or breath
test diagnosis were to grow significantly.
OUR STOCK PRICE IS VOLATILE.
The market price of our common stock may experience a high
level of volatility, as frequently occurs with publicly traded emerging growth
companies and biosciences companies. The market price of our stock may be
significantly impacted by:
- announcements of technological innovations or new
commercial products by us or our competitors;
- 15 -
<PAGE> 18
- developments or disputes concerning patent or
proprietary rights;
- publicity regarding actual or potential medical
results relating to products under development by us
or our competitors;
- regulatory developments affecting our products in
both the United States and foreign countries;
- our ability to enter into strategic marketing
relationships;
- market conditions for emerging growth companies and
biosciences companies and economic and other internal
and external factors; and
- period-to-period fluctuations in financial results.
Since our 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 is no assurance that a more
active trading market will develop in the future. We have never declared or
paid any cash dividends on our common stock and do not intend to do so for the
foreseeable future.
EFFECTING A CHANGE OF CONTROL OF MARTEK WOULD BE DIFFICULT, WHICH MAY
DISCOURAGE OFFERS FOR SHARES OF OUR COMMON STOCK.
Our 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. We have adopted a stockholder rights plan which may have
the effect of deterring hostile or coercive attempts to acquire the company.
The plan does this through the distribution of rights to stockholders enabling
those stockholders to acquire shares of our 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. We have reserved 300,000
shares of Series A Junior Participating Preferred Stock for issuance in
connection with the Stockholder Rights Plan. We are 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.
- 16 -
<PAGE> 19
THE COMMON STOCK SOLD IN THIS OFFERING MAY INCREASE THE AMOUNT OF OUR COMMON
STOCK ON THE PUBLIC MARKET, CAUSING OUR STOCK PRICE TO DECLINE.
To the extent that these outstanding stock options and
warrants are exercised, the percentage ownership of certain of our stockholders
will be diluted. As of May 27, 1999, we had 14,953,294 outstanding shares of
common stock, substantially all of which are available for sale in the public
marketplace. Further, as a result of this registration statement, up to an
additional 3,003,952 shares may be sold in the public market. As of May 27,
1999, there were also outstanding stock options to purchase an aggregate of
2,259,960 shares of common stock at various exercise prices ranging from $8.00
to $34.25 per share and warrants to purchase an aggregate of 247,920 shares of
common stock. There were also warrants issued in connection with the Common
Stock Warrant and Purchase Agreement dated May 28, 1999 to purchase 458,679
shares of common stock at an exercise price of $10.84 per share. If we elect to
sell all the shares of common stock and warrants which have not been sold
pursuant to the Common Stock and Warrant Purchase Agreement dated April 27,
1998, but which, under certain circumstances, 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. In addition, certain holders of the common stock have
certain demand and piggyback registration rights pursuant to a registration
rights agreement between Martek and these holders. No prediction can 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. This could impair our ability to raise
capital through the sale of equity securities. Further, if we 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 our ability to raise additional capital.
OUR OPERATIONS AND BUSINESS COULD BE DISRUPTED OR DAMAGED IF OUR SYSTEMS AND
PRODUCTS ARE NOT YEAR 2000 COMPLIANT.
We use a number of computer software programs and operating
systems in our internal operations. These include applications used in
financial business systems and various administrative functions. We believe
that the business risk associated with these internal information systems is
minimal. We have completed more than 90% of our "Year 2000" compliance
implementation work on them. We are also evaluating our non-information
technology systems, including the various equipment in operation at our oil
production facilities in Winchester, Kentucky. We have completed more than 75%
of this evaluation and subsequent
- 17 -
<PAGE> 20
implementation, and believe that the business risk associated with this
equipment is minimal. Additionally, our third party relationships are being
reviewed to assess their Year 2000 status and potential impact on our
operations. We have completed approximately 75% of this review and, where
potential business risk has been identified, are requesting additional
information from certain third parties to obtain assurance that they are Year
2000 compliant.
Based on currently available information, we believe that
total costs associated with Year 2000 issues will be less than $200,000, and
that we will be able to manage the Year 2000 transition without any material
adverse effect on our operations, liquidity or capital resources. However,
there is no assurance that Year 2000 issues will not require a significant
commitment of resources to resolve potential problems.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public
over the Internet at the SEC's web site at http://www.sec.gov. You may also
read and copy any document we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-732-0330 for further information on the public reference rooms.
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you
by referring you to these documents. The information incorporated by reference
is an important part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until the selling stockholders sell all of their common stock:
- Annual Report on Form 10-K for the fiscal year ended October
31, 1998;
- Quarterly reports on Form 10-Q for the fiscal quarters ended
January 31 and April 30, 1999
- Current reports on Form 8-K dated November 5, 1998 and May 28,
1999; and
- The description of the Company's common stock contained in
Form 8-A.
To obtain a copy of these filings at no cost, you may write or
telephone us at the following address:
- 18 -
<PAGE> 21
Chief Financial Officer
Martek Biosciences Corporation
6480 Dobbin Road
Columbia, Maryland 21045
(410) 740-0081
This prospectus contains forward-looking statements relating to future
events or our future financial performance. These statements are only
predictions and actual events or results may be materially different from our
predictions. In evaluating these statements, you should consider the various
factors identified in this prospectus, including but not limited to the matters
set forth under the heading "Risk Factors," which could cause actual results to
differ materially from those indicated by such forward-looking statements.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. Neither we nor the
Selling Stockholders have authorized anyone else to provide you with different
information. Neither we nor the Selling Stockholders are making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the prospectus.
USE OF PROCEEDS
We 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 $13.8 million, which will be
used for general corporate purposes. There can be no assurance, however, that
the selling stockholders will exercise the warrants in full or at all.
SELLING STOCKHOLDERS
This prospectus relates to the offering by the selling stockholders
named in this prospectus of up to 3,003,952 shares of common stock and 952,435
common stock purchase warrants. All of the selling stockholders have acquired
common stock in private placements and may acquire additional shares of common
stock upon the exercise of warrants issued in the private placements.
Additionally, the first six selling stockholders listed in the table may
acquire additional shares of common stock and warrants upon (i) the
satisfaction of conditions which are outside of the control of these selling
stockholders and (ii) Martek's request.
The following table sets forth important information with respect to
the selling stockholders as of June 28, 1999, as follows:
- 19 -
<PAGE> 22
- the name and position or other relationship with Martek within
the past three years of the selling stockholders;
- the number of Martek's outstanding shares of common stock
beneficially owned by the selling stockholders (including
shares obtainable under warrants exercisable within sixty (60)
days of June 28, 1999) prior to this offering.
- the number of shares of common stock and warrants being
offered through this prospectus; and
- the number and percentage of Martek's outstanding shares of
common stock to be beneficially owned by the selling
stockholders after the sale of common stock being offered
through this prospectus.
The selling stockholders do not have to sell all of the shares and
warrants that they own.
<TABLE>
<CAPTION>
Number of
----------
Shares
--------
Beneficially Number of Number of Shares Beneficially
------------ ---------- ---------- --------------------
Owned Prior Shares Warrants Owned After the
------------ ------- --------- ----------------
Selling to the Offered Owned and Offering
-------- ------- -------- ---------- --------
Stockholder Offering Hereby (1) Offered Hereby Number Percentage
----------- -------- ---------- --------------- ------ ----------
<S> <C> <C> <C> <C> <C>
Vector Later-Stage 110,181 110,181 30,234 0 *
Equity Fund II, L.P.
Moore Global 325,254 325,254 89,251 0 *
Investments, Ltd.
Remington 71,397 71,397 19,592 0 *
Investment
Strategies, L.P.
J. N. Whipple, III 316,173 44,073 12,094 272,100 1.65
(2)
Buena Vista 22,036 22,036 6,047 0 *
Partners, LLC
Vector Later Stage 330,542 330,542 90,702 0 *
Equity Fund (QP),
L.P.
Black Bear Fund I, 215,996 215,966 49,838 0 *
L.P.
</TABLE>
- 20 -
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C> <C>
Black Bear Fund II, 20,877 20,877 4,818 0 *
L.L.C.
Black Bear 219,566 219,566 50,669 0 *
Offshore Ltd.
Black Bear Pacific 47,512 47,512 10,964 0 *
Master Fund Unit
Trust
George Haywood 1,107,584 431,934 99,677 675,650 4.07
State of Wisconsin 2,227,612 575,912 132,903 1,651,700 9.94
Investment Board
(3)
MFS Mid Cap 278,471 187,171 43,193 91,300 *
Growth Fund
(EXOT)
MFS Mid Cap 171,685 100,785 23,258 70,900 *
Growth Fund
(OTC)
MFS New 143,978 143,978 33,226 0 *
Discovery Fund
(NDF)
MFS/Sun Life New 7,199 7,199 1,661 0 *
Discovery Fund
(NWD)
MFS New 720 720 166 0 *
Discovery Fund
(UND)
AGR Halifax Fund, 35,994 35,994 8,306 0 *
Ltd.
- -------------------------------------------
</TABLE>
* Less than 1%.
(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) Includes 36,000 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.
- 21 -
<PAGE> 24
(3) The State of Wisconsin Investment Board holds the securities for the
benefit of the Wisconsin Retirement Trust.
PLAN OF DISTRIBUTION
The common stock being offered by the selling stockholders, or by
their respective pledgees, donees, transferees, or other successors in
interest, will be sold in one or more transactions (which may involve block
transactions) on the Nasdaq Stock Market or on another market on which the
common stock may from time to time be trading, in privately-negotiated
transactions, through the writing of options on the common stock, short sales
or any combination thereof. The sale price to the public may be the market
price prevailing at the time of sale, a price related to the prevailing market
price or at any other price as the selling stockholders determine from time to
time. The common stock may also be sold pursuant to Rule 144. The selling
stockholders shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of common stock if they deem the purchase price
to be unsatisfactory at any particular time.
The selling stockholders may also sell the common stock directly to
market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the selling
stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the common
stock will do so for their own account and at their own risk. It is possible
that the selling stockholders 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. In addition, the selling stockholders
or their successors in interest may enter into hedging transactions with
broker-dealers who may engage in short sales of common stock in the course of
hedging the positions they assume with a selling stockholder. There can be no
assurance that all or any of the common stock offered hereby will be issued to,
or sold by, the selling stockholders. The selling stockholders and any brokers,
dealers or agents, upon effecting the sale of any of the common stock offered
hereby, may be deemed "underwriters" as that term is defined under the
Securities Act or the Exchange Act, or the rules and regulations thereunder.
The selling stockholders and any other persons participating in the
sale or distribution of the common stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder. These
rules may limit the timing of purchases and sales of any of the common stock by
the selling stockholders or any other person participating in the distribution.
Furthermore, under Regulation M, persons engaged in a distribution of
securities are prohibited from simultaneously engaging in market making and
other market activities with respect to the common stock for a specified period
of time before the distribution begins. These restrictions may reduce the
marketability of the common stock.
- 22 -
<PAGE> 25
Martek has agreed to indemnify the selling stockholders, or their
respective transferees or assignees, against potentially significant
liabilities, including liabilities under the Securities Act, or to contribute
to payments these selling stockholders or their respective pledgees, donees,
transferees or other successors in interest, may be required to make.
LEGAL MATTERS
Certain legal matters with respect to the common shares, warrants and
warrant shares offered hereby has been passed upon for the Company by Hogan &
Hartson L.L.P., Baltimore, Maryland.
EXPERTS
Ernst & Young, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended
October 31, 1998, as set forth in their report, which is incorporated in this
registration statement by reference. Our financial statements are incorporated
by reference in reliance upon their report, given on their authority as experts
in accounting and auditing.
- 23 -
<PAGE> 26
<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 CORPORATION
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 . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . 2
Use of Proceeds . . . . . . . . . . . . 19
Selling Stockholders . . . . . . . . . . 19
Plan of Distribution . . . . . . . . . . 22
Legal Matters . . . . . . . . . . . . 25
Experts . . . . . . . . . . . . 25 July , 1999
======================================================= =========================================
</TABLE>
<PAGE> 27
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 . . . . . . . $ 4,429
NASDAQ listing fee . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . 9,000
Accounting and Miscellaneous expenses . . . . . . . . . . . . . . 21,571
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> 28
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
4.2 Common Stock and Warrant Purchase Agreement, dated May 28, 1999 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. 0-22354,
incorporated herein by reference).
5 Opinion of Hogan & Hartson L.L.P.
23.1* Consent of Ernst & Young LLP, as independent auditors for the Company.
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.
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> 29
(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> 30
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 July 14, 1999.
MARTEK BIOSCIENCES CORPORATION
By: /s/ Henry Linsert, Jr.
---------------------------------
Henry Linsert, Jr.
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Henry Linsert, Jr., Peter L. Buzy and Michael J. Silver, and each of them, with
full power of substitution and resubstitution and each with full power to act
without the other, his or her true and lawful attorney-in-fact and agent, for
him or her and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission or any state, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their, his or her substitutes or substitute, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: July 14, 1999 /s/ Henry Linsert, Jr.
------------------------------------------
Henry Linsert, Jr.
Chief Executive Officer and Director
(Principal Executive Officer)
Date: July 14, 1999 /s/ Peter L. Buzy
---------------------------------------------------
Peter L. Buzy
(Chief Financial and Accounting Officer)
Date: July 14, 1999 /s/ Jules Blake
------------------------------------------
Jules Blake
Director
Date: July 14, 1999 /s/ Gordon S. Macklin
------------------------------------------
Gordon S. Macklin
Director
Date: July 14, 1999 /s/ Ann L. Johnson
------------------------------------------
Ann L. Johnson
Director
</TABLE>
II - 4
<PAGE> 31
<TABLE>
<S> <C>
Date: July 14, 1999 /s/ Douglas J. MacMaster, Jr.
------------------------------------------
Douglas J. MacMaster, Jr.
Director
Date: July 14, 1999 /s/ John H. Mahar
------------------------------------------
John H. Mahar
Director
Date: July 14, 1999 /s/ Sandra Panem
------------------------------------------
Sandra Panem
Director
Date: July 14, 1999 /s/ Richard J. Radmer
------------------------------------------
Richard J. Radmer
Director
Date: July 14, 1999 /s/ Eugene H. Rotberg
------------------------------------------
Eugene H. Rotberg
Director
Date: July 14, 1999 /s/ William D. Smart
------------------------------------------
William D. Smart
Director
</TABLE>
II - 5
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<S> <C>
4.2 Common Stock and Warrant Purchase Agreement, dated May 28, 1999, 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. 0-22354, incorporated herein by reference).
5 Opinion of Hogan & Hartson L.L.P.
23.1* Consent of Ernst & Young LLP, as independent auditors for the Company.
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
EXHIBIT 5
[HOGAN & HARTSON L.L.P. LETTERHEAD]
July 14, 1999
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 resale of (i) warrants (the "Warrants")
to purchase up to 509,933 shares of the Company's common stock, par value $.10
per share ("Common Stock"), and (ii) up to 2,038,862 shares of Common Stock,
1,528,929 of which have been issued (the "Common Shares") and 509,933 of which
are issuable upon the exercise of the Warrants (the "Warrant Shares") and are to
be sold by the holders thereof (the "Selling Stockholders"). 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. The Registration Statement.
2. The Certificate of Incorporation of the Company, as certified
by the Secretary of the State of the State of Delaware on July
9, 1999 and by the Assistant Treasurer of the Company on the
date hereof as being complete, accurate, and in effect.
3. The Bylaws of the Company, as certified by the Assistant
Treasurer of the Company on the date hereof as being complete,
accurate, and in effect.
<PAGE> 2
HOGAN & HARTSON L.L.P.
Board of Directors
July 14, 1999
Page 2
4. Resolutions of the Board of Directors of the Company dated
April 6 and June 4, 1998 and May 26, 1999, as certified by the
Assistant Treasurer of the Company on the date hereof as being
complete, accurate, and in effect, relating to the issuance
and sale of the Warrants, the Warrant Shares and the Common
Shares and arrangements in connection therewith.
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 Delaware
corporate law. We express no opinion herein as to any other laws, statutes,
ordinances, rules, or regulations.
Based upon, subject to and limited by the foregoing, we are of the
opinion that (i) the Common Shares are validly issued, fully paid and
nonassessable, (ii) the Warrants are validly issued and constitute binding
obligations of the Company, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights (including,
without limitation, the effect of statutory and other law regarding fraudulent
conveyances, fraudulent transfers and preferential transfers) and as may be
limited by the exercise of judicial discretion and the application of principles
of equity including, without limitation, requirements of good faith, fair
dealing, conscionability and materiality (regardless of whether such agreement
is considered in a proceeding in equity or at law), and (iii) following issuance
of the Warrant Shares pursuant to the terms of 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.
The opinion expressed above in clause (ii) shall be understood to
mean only that if there is a default in performance of an obligation, (a) if a
failure to pay or other damage can be shown and (b) if the defaulting party can
be brought into a court which will hear the case and apply the governing law,
then, subject to the
<PAGE> 3
HOGAN & HARTSON L.L.P.
Board of Directors
July 14, 1999
Page 3
availability of defenses, and to the exceptions set forth above, the court will
provide a money damage (or perhaps injunctive or specific performance) remedy.
This opinion letter has been prepared for your use in connection
with the Registration Statement and speaks as of the date hereof. We assume no
obligation to advise you of any changes in the foregoing subsequent to the
delivery of this opinion letter.
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,
/s/ HOGAN & HARTSON L.L.P.
----------------------------------
HOGAN & HARTSON L.L.P.
