PROSPECTUS
ENTREMED, INC.
953,751 SHARES OF COMMON STOCK
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The persons listed in this Prospectus under 'Selling Stockholders' may
offer and sell from time to time an aggregate of up to 953,751 shares of common
stock that they have acquired or may acquire upon exercise of warrants and other
rights granted by us.
The Selling Stockholders may offer their shares through public or private
transactions, on or off the Nasdaq National Market, at prevailing market prices
or at privately negotiated prices. We will not receive any of the proceeds from
the sale of shares by the Selling Stockholders.
Our common stock is quoted on the Nasdaq National Market and traded under
the symbol 'ENMD.' On June 29, 1999, the closing sale price of the Common Stock
on the Nasdaq National Market was $22.50.
Our principal executive offices are located at 9640 Medical Center Drive,
Rockville, Maryland 20850 and our telephone number is (301) 217-9858.
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SEE 'RISK FACTORS' BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN OUR COMMON
STOCK.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June 29, 1999
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TABLE OF CONTENTS
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Risk Factors................................................... 2
The Company.................................................... 13
Use of Proceeds................................................ 13
Selling Stockholders........................................... 14
Plan of Distribution........................................... 17
Legal Matters.................................................. 17
Experts........................................................ 17
Where You Can Find More Information............................ 18
THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THESE FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, STATEMENTS
REGARDING THE VALUE OF OUR COMMON STOCK; UNCERTAINTIES RELATING TO OUR
TECHNOLOGICAL APPROACH, OUR HISTORY OF OPERATING LOSSES AND ANTICIPATION OF
FUTURE LOSSES; UNCERTAINTY OF OUR PRODUCT DEVELOPMENT; OUR NEED FOR ADDITIONAL
CAPITAL AND UNCERTAINTY OF ADDITIONAL FUNDING; OUR DEPENDENCE ON COLLABORATORS
AND LICENSEES; INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE IN THE
BIOPHARMACEUTICAL INDUSTRY; UNCERTAINTIES RELATING TO OUR PATENT AND PROPRIETARY
RIGHTS; UNCERTAINTIES RELATING TO CLINICAL TRIALS; GOVERNMENT REGULATION AND
UNCERTAINTIES OF OBTAINING REGULATORY APPROVAL ON A TIMELY BASIS OR AT ALL; OUR
DEPENDENCE ON KEY PERSONNEL, RESEARCH COLLABORATORS AND SCIENTIFIC ADVISORS;
UNCERTAINTIES RELATING TO HEALTH CARE REFORM MEASURES AND THIRD-PARTY
REIMBURSEMENT; AND RISKS ASSOCIATED WITH PRODUCT LIABILITY.
OUR FORWARD-LOOKING STATEMENTS ARE BASED ON INFORMATION AVAILABLE TO US AS OF
TODAY'S DATE, AND WE WILL NOT UPDATE THESE STATEMENTS. OUR ACTUAL RESULTS MAY
DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED.
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RISK FACTORS
You should carefully consider the risks described below together with all
of the other information provided and incorporated by reference in this
Prospectus before making an investment decision. The risks and uncertainties
described below are not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of our common stock could decline, and you may lose
all or part of your investment.
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES
To date, we have been engaged primarily in research and development
activities. Although we have received license fees and research and development
funding from our collaboration with Bristol-Myers Squibb Company and research
grants, we have not derived any revenues from operations.
At March 31, 1999, we had an accumulated deficit of approximately
$52,456,000. Significant losses have continued since March 31, 1999. We also
will be required to conduct substantial research and development and clinical
testing activities for all of our proposed products. We expect that these
activities will result in operating losses for the foreseeable future,
particularly due to the extended time period before we expect to commercialize
any products, if ever. In addition, to the extent we rely upon others for
development and commercialization of our products, our ability to achieve
profitability will depend upon the success of these other parties. We also rely
to a significant extent on grants from governmental and other organizations as a
source of revenues and funding for our research and the development of our
products. If our grant revenue were to be reduced to any substantial extent, it
may impair our revenues and hence our ability to continue our research and
development efforts. We cannot assure you that we will be able to generate
revenues from operations or achieve profitability on a sustained basis, if at
all.
NATURE OF OUR COLLABORATIVE RELATIONSHIP WITH BRISTOL-MYERS SQUIBB
We entered into a license and research collaboration agreement with
Bristol-Myers Squibb in December of 1995. We modified the terms of this
agreement in mid-February 1999 and now have assumed full responsibility for the
research and development of the Angiostatin(Registered) protein. Under the
revised agreement, we have undertaken both financial and operational
responsibility for preclinical pharmaceutical development and clinical work on
the Angiostatin(Registered)protein. Bristol-Myers Squibb has agreed to provide
us with advice on structuring a clinical program but, otherwise, will not have
any direct involvement with our development of the Angiostatin(Registered)
protein.
Our relationship with Bristol-Myers Squibb has been an important component
of our public image. Bristol-Myers Squibb continues to own our common stock and
has agreed to certain restrictions on its ability to sell this interest.
Specifically, Bristol-Myers Squibb is unable to sell its full interest in us
until at least December 1, 2001 without our consent. A decision by Bristol-Myers
Squibb to sell some or all of its interest in the Company could have an adverse
impact on our business.
The outcome of the research and development of Angiostatin(Registered)will
now depend heavily upon our ability to successfully establish and fund the
preclinical pharmaceutical development and clinical work on the
Angiostatin(Registered) protein. In addition, if we are not successful in
establishing, funding and completing the preclinical pharmaceutical development
and clinical work on the Angiostatin(Registered) protein, we would be materially
adversely affected. Even if the research and development phase is successful, if
we are unable to commercialize the Angiostatin(Registered) protein, we would be
materially adversely affected.
In addition, our research payments from Bristol-Myers Squibb will end on
August 9, 1999, and the semi-annual research support payment due June 5, 1999 to
us will be prorated to cover the period from June 5 to August 9, 1999. This
payment will be the final research payment under the original terms of the
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license and research collaboration agreement. Bristol-Myers Squibb also will
reimburse all of our patent and related costs incurred prior to August 9, 1999.
DEPENDENCE ON CELGENE TO COMMERCIALIZE THALIDOMIDE
We have sublicensed to Celgene Corporation all of our rights to
commercialize and sell thalidomide worldwide. We will receive royalties on all
sales of thalidomide by Celgene. The success of our relationship with Celgene
and the marketing of thalidomide will depend, in part, on Celgene's own
competitive, marketing, and strategic considerations, including the relative
advantages of alternative products being developed and marketed by its
competitors. In addition, if Celgene is not successful in marketing thalidomide,
we would be materially adversely affected.
Thalidomide is currently in Phase 2 of human clinical trials for cancer
indications. Thalidomide has received orphan drug designation from the FDA as a
treatment for Kaposi's sarcoma, a form of skin cancer most frequently associated
with AIDS, and for primary brain malignancies. Celgene, to whom we have licensed
the rights to commercialize thalidomide, has received approval from the FDA to
market thalidomide for the treatment of erythema nodosum leprosum, an
inflammatory skin condition of some leprosy patients. The FDA, however, has not
yet approved the marketing and sale of thalidomide for cancer. Celgene still
must pass significant regulatory hurdles before thalidomide will be commercially
available for the treatment of cancer, if ever.
NATURE OF OUR RELATIONSHIP WITH CHILDREN'S HOSPITAL, BOSTON
We have relationships with collaborators at academic and other institutions
who conduct research either on our behalf or whose research we have the right to
license and use. Since our founding, our primary research collaboration has been
with Children's Hospital, Boston. Pursuant to our agreement with Children's
Hospital, Boston, we agreed to provide funding for some of their
antiangiogenesis research projects and granted them options to acquire an
ownership interest in us. In return, they gave us the right to fund additional
research projects and obtain licenses to any discoveries arising from that
research. Children's Hospital, Boston, originally discovered
Endostatin(Trademark) protein, Angiostatin(Registered) protein, 2ME2, and the
antiangiogenic properties of thalidomide and thalidomide analogs. To date, we
have received licenses from Children's Hospital, Boston, for these products.
Researchers at Children's Hospital, Boston, also may be working on other
products that may be used to treat cancer in a variety of ways, including by
antiangiogenesis. Although we believe that, pursuant to our agreement, we are
entitled to license and use all products related to antiangiogenesis, Children's
Hospital, Boston, may take a different position. Children's Hospital, Boston,
has licensed, and may in the future license, products to our existing and
potential competitors.
We recently extended our agreement with Children's Hospital, Boston, for an
additional year. However, while this agreement has been renewed before, we do
not know whether this agreement will be renewed again in the future. Because
Children's Hospital, Boston, has, in the past, been an important source of
product candidates for us, the expiration of this collaboration may adversely
impact our ability to acquire future product candidates. We cannot be sure that
we will be able to negotiate research collaborations with new institutions or
that any new collaboration will be successful. The expiration of the
collaboration with Children's Hospital, Boston, may subject us to increased
competition. It also is possible that, after the expiration of our agreement,
Children's Hospital, Boston, may develop products that have antiangiogenic
qualities superior to those contained in the products that we currently license
and could license those products to our competitors.
The expiration of our agreement with Children's Hospital, Boston, would
also sever our formal relationship with Dr. Judas Folkman. Dr. Folkman's
authority and experience in the field of angiogenic research has been an
important component of our public image. We cannot guarantee that we will find
an adequate replacement for Dr. Folkman. The termination of this relationship
could have an adverse impact on our business.
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WE ARE DEPENDENT ON IDENTIFYING NEW COLLABORATIVE PARTNERS
We intend to seek new corporate alliances and partners to develop,
commercialize and market our products. We expect to grant to our partners
certain rights to commercialize any products developed under these agreements,
and we may rely on our partners to conduct research and development efforts and
clinical trials on, obtain regulatory approvals for, and manufacture and market
any products licensed to them. Each individual partner will control the amount
and timing of resources devoted to these activities generally. Our revenues will
be obtained from strategic partners as research and development payments and
upon achievement of certain milestones. Since we generally expect to retain a
royalty for sales or a percentage of profits of products licensed to third
parties, our revenues may be less than if we retained all commercialization
rights and marketed products directly. In addition, there is a risk that our
corporate partners will pursue alternative technologies or develop competitive
products as a means for developing treatments for the diseases targeted by our
programs.
We also may elect to collaborate with another partner to replace
Bristol-Myers Squibb. Even if we find such a partner to assist us with the
research, development and eventual commercialization of Angiostatin(Registered)
protein, our work on the product may not be successful. We will depend, in part,
on our partner's own competitive, marketing and strategic considerations,
including the relative advantages of other products being developed and
marketed.
We cannot guarantee that we will be successful in establishing any
additional collaborative arrangements, that products will be successfully
commercialized under any collaborative arrangement or that we will derive any
revenues from our arrangements. Our strategy also involves entering into
multiple, concurrent strategic alliances to pursue commercialization of our core
technologies. There is a risk that we will not be able to manage simultaneous
programs successfully. With respect to existing and potential future strategic
alliances and collaborative arrangements, we will depend on the expertise and
dedication of sufficient resources by these outside parties to develop,
manufacture, or market products. If a strategic alliance or collaborative
partner fails to develop or commercialize a product to which it has rights, our
business could be materially and adversely affected.
DEVELOPMENT OF OUR PRODUCTS IS AT AN EARLY STAGE AND IS UNCERTAIN
Our proposed products and research programs are in the early stage of
development and require significant, time-consuming and costly research and
development, testing and regulatory clearances. In developing our products, we
are subject to risks of failure that are inherent in the development of products
and therapeutic procedures based on innovative technologies. For example, it is
possible that any or all of these proposed products or procedures will be
ineffective or toxic, or otherwise will fail to receive necessary FDA
clearances. There is a risk that the proposed products or procedures will be
uneconomical to manufacture or market or will not achieve broad market
acceptance. There also is a risk that third parties may hold proprietary rights
that preclude us from marketing our proposed products or that others will market
a superior or equivalent product. The failure of our research and development
activities to result in any commercially viable products would materially
adversely affect our business.
Angiostatin(Registered) and Endostatin(Trademark) protein, 2ME2 and
thalidomide analogs are at the preclinical stages of development. These product
candidates have only been tested on animals and not on humans. Although these
product candidates have demonstrated some success in preclinical studies in
combating tumors in mice, there is absolutely no assurance that the agents will
be similarly effective in combating tumors in humans. Mice are not people, and
although the scientific community considers the study of mice useful, we cannot
even say whether agents that are successful in treating tumors in mice will be
non-toxic to humans, let alone beneficial. In the cancer context, testing on
mice occurs under different conditions than testing in people including the
manner in which tumors are introduced into mice (by injection as opposed to
natural development), the genetic make-up of laboratory mice populations
(homogeneity as opposed to diversity), tumor location (near the skin as opposed
to deep-seated), or other unidentified factors. There are many regulatory steps
that must be taken before any of these product candidates will be eligible for
FDA approval and subsequent sale, including the completion of preclinical
(animal) and clinical (human)
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trials. We do not expect that these product candidates will be commercially
available for several years, if ever.
WE MUST SUBJECT POTENTIAL PRODUCTS TO CLINICAL TRIALS, THE RESULTS OF WHICH ARE
UNCERTAIN
Before obtaining regulatory approvals for the commercial sale of our
products, we or our collaborative partners will be required to demonstrate
through preclinical studies (animal testing) and clinical trials (human testing)
that our proposed products are safe and effective for use in each target
indication. The majority of our product candidates, including
Angiostatin(Registered) protein, Endostatin(Trademark)protein, 2ME2 and
thalidomide analogs, have only been subjected to preclinical studies on mice and
monkeys and have not yet been tested on humans. The results from these
preclinical studies on animals may not be predictive of results that will be
obtained in clinical trials and large-scale testing on humans.
Our product candidate thalidomide is currently being tested in Phase 2
clinical trials on humans for a variety of types of cancer. In the future, we
will be required to conduct clinical trials on humans for
Angiostatin(Registered) protein, Endostatin(Trademark) protein, 2ME2 and
thalidomide analogs. We have only limited experience in conducting clinical
trials on humans and intend to rely on pharmaceutical companies, the National
Cancer Institute, and contract research organizations with which we collaborate
for clinical development and regulatory approval of our product candidates. We
cannot guarantee that the clinical trials conducted by our partners or us will
demonstrate sufficient safety and efficacy to obtain the required regulatory
approvals or will result in marketable products.
The results of initial preclinical studies and clinical trials of products
under development are not necessarily indicative of results that will be
obtained from subsequent or more extensive preclinical studies and clinical
testing. In advanced clinical development, numerous factors may be involved that
may lead to different results in larger, later-stage trials from those obtained
in earlier-stage trials. Early stage trials usually involve a small number of
patients and thus may not accurately predict the actual results regarding safety
and efficacy that may be demonstrated with a large number of patients in a
later-stage trial. Also, differences in the clinical trial design between an
early-stage and late-stage trial may cause different results regarding the
safety and efficacy of a product to be obtained. In addition, many early stage
trials are unblinded and based on qualitative evaluations by clinicians involved
in the performance of the trial whereas later-stage trials are generally
required to be blinded in order to provide more objective data for assessing the
safety and efficacy of the product. The failure to adequately demonstrate the
safety and efficacy of a product under development could delay or prevent
regulatory clearance of the potential product and would have a significant
adverse effect on the Company.
Clinical trials involving cancer patients are often conducted with
terminally ill patients having the most advanced stages of a disease. During the
course of treatment, these patients can die or suffer other adverse events due
to the advanced stage of their disease despite the efficacy of the agents being
tested. These deaths and/or adverse events, though unrelated to the agent being
tested, can nevertheless adversely affect clinical trial results. Various
companies in the pharmaceutical industry, including biotechnology companies,
have suffered significant setbacks in advanced clinical trials, even after
attaining promising results in earlier trials. Clinical trials for the product
candidates being developed by EntreMed and its collaborators may be delayed by
many factors, including that potential candidates for testing are limited in
number. Any delays in, or termination of, the clinical trials of any of our
product candidates, or the failure of any clinical trials to meet applicable
regulatory standards, could have a material adverse effect on our business.
In addition, we hope eventually to market our products outside of the
United States. This will entail foreign regulatory approvals from governments in
other countries that may have different requirements from the regulatory process
in the United States, subjecting our products to additional clinical trials and
approvals, as well as licensing, manufacturing and labeling standards, even
though the products are fully approved for manufacture, marketing and
distribution in the United States. In order to meet any additional requirements
that might be imposed by foreign governments, we may incur additional costs that
will inhibit our profitability. If the relevant approvals cannot be obtained or
will be too expensive to obtain, foreign distribution may not be feasible, which
could have a material adverse impact on our business.
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THERE ARE MARKETING RISKS RELATED TO THE HISTORY OF THALIDOMIDE
One of our potential products, thalidomide, has resulted in serious birth
defects in children whose mothers used it during pregnancy. Therefore,
physicians prescribing the drug to women with childbearing potential must take
strict precautions, and there can be no assurance that such precautions will be
observed in all cases or, if observed, will be effective. Use of thalidomide has
also been associated, in a limited number of cases, with other side effects,
including nerve damage. We believe that the characteristics of thalidomide that
may have affected fetal development and caused birth defects by blocking new
blood vessel growth are the same characteristics that may make thalidomide
useful in the prevention and treatment of angiogenic disorders such as cancer.
However, we cannot guarantee that clinical trials with the drug will demonstrate
its safety and efficacy or that the drug will not be associated with other
characteristics that prevent or limit its commercial use.
Even if thalidomide is demonstrated to be safe and effective for use in
treating angiogenic disorders, we may face difficulties in gaining public
acceptance of the drug based on its history of causing birth defects. This may
adversely affect our marketing efforts as well as the marketing efforts of our
collaborator Celgene Corporation. In addition, we may be subject to liability
arising out of any adverse effects of thalidomide. Pursuant to our agreement
with Celgene, Celgene has agreed to indemnify us from any liability that may
arise from its sales of thalidomide. However, we cannot guarantee that we will
be protected from such liability and the possible related losses.
WE HAVE NO CURRENT MANUFACTURING OR MARKETING CAPACITY
We do not expect to manufacture or market products in the near term, but we
may try to do so in certain cases. We do not currently have the capacity to
manufacture or market products or any experience in these activities. If we
elect to perform these functions, we will be required to either develop these
capacities, or contract with others to perform some or all of these tasks. We
may be dependent to a significant extent on corporate partners, licensees, or
other entities for manufacturing and marketing of products. If we engage
directly in manufacturing or marketing, we will require substantial additional
funds and personnel and will be required to comply with extensive regulations.
We cannot guarantee that we will be able to develop or contract for these
capacities when required in connection with our business.
The manufacture of pharmaceutical products can be an expensive, time
consuming, and complex process. Manufacturers often encounter difficulties in
scaling up production of new products, including problems involving production
yields, quality control and assurance, and shortages of personnel. Delays in
formulation and scale-up to commercial quantities could result in additional
expense, delays in our clinical trials, regulatory submissions, and
commercialization. The manufacturing processes for several of the small
molecules and proteins we are developing as product candidates have not yet been
tested at commercial levels, and we cannot guarantee that it will be possible to
manufacture these materials in a cost-effective manner.
In addition, we will depend on all such third-party manufacturers to
perform their obligations effectively and on a timely basis. There can be no
assurance that such parties will perform such obligations and any such
non-performance may delay clinical development or submission of products for
regulatory approval, or otherwise impair our competitive position, which would
have a material adverse affect on our business. Any manufacturer of our product
candidates will be subject to applicable good manufacturing practices ('GMP')
prescribed by the FDA or other rules and regulations prescribed by foreign
regulatory authorities. We cannot guarantee that we or any of our collaborators
will be able to enter into or maintain relationships either domestically or
abroad with manufacturers whose facilities and procedures comply or will
continue to comply with GMP and who are able to produce our small molecules and
proteins. Should manufacturing agreements be entered into, our collaborators and
we will be dependent on such manufacturers for continued compliance with GMP.
Failure by a manufacturer of our products to comply with GMP could result in
significant time delays or our inability to commercialize or continue to market
a product. Changes in our manufacturers could require new product testing and
facility compliance inspections. In the United States, failure to comply with
GMP or other applicable legal requirements can lead to federal seizure of
violative products, injunctive actions brought by the federal government, and
potential criminal and civil liability on the part of a company
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and its officers and employees. Because of these and other factors, we may not
be able to replace our manufacturing capacity quickly or efficiently, in the
event that our current or future manufacturers are unable to manufacture our
products at one of more of their facilities. For certain of our potential
products, we will need to substantially increase the capacity of our production
facilities (or those of our manufacturers) in order to conduct human clinical
trials and to produce such products for commercial sale at an acceptable cost.
At this time, we have limited marketing and sales staff. To the extent that
we undertake to market our products, or are unable to enter into co-promotion
agreements or to arrange for third-party distribution of our products,
additional expenditures and management resources will be required to develop an
effective sales force. There can be no assurance that we will be able to
establish a sales force or to enter into co-promotion or distribution agreements
on favorable terms or on a timely basis. In addition, other companies offering
similar or substitute products may have well-established sales forces or
agreements in place that will allow them to market their products more
successfully. Failure to establish sufficient marketing capabilities may have a
material adverse impact on our business.
WE CANNOT GUARANTEE THAT OUR PRODUCTS WILL ACHIEVE MARKET ACCEPTANCE
Even if our products eventually do reach the market, our success will be
dependent on market acceptance of our products in the United States and, later,
in international markets. Since we have not received the necessary approvals to
sell our products in the United States or elsewhere, we cannot predict whether
any of our products will achieve market acceptance, either in the United States
or abroad. A number of factors may limit the market acceptance of our products,
including the timing of regulatory approval and market entry relative to
competitive products, the availability of alternative therapies or treatments,
the price of our products relative to any alternatives, the availability of
third-party reimbursement to pay for them, and the extent of the marketing
efforts by competitors. Other risk factors identified in this section also may
affect market acceptance.
WE CANNOT GUARANTEE THAT IT WILL BE COMMERCIALLY FEASIBLE TO MANUFACTURE
ANGIOSTATIN(REGISTERED) PROTEIN AND ENDOSTATIN(TRADEMARK) PROTEIN
We have entered into an agreement with Covance Biotechnology Services Inc.
under which Covance is responsible for producing sufficient amounts of the
Angiostatin(Registered) and Endostatin(Trademark) proteins for preclinical
toxicology studies and for scaling-up the production of these proteins in
commercial quantities under GMP conditions for clinical trials. We have spent
significant time and funds to transfer the technology underlying the production
of the Angiostatin(Registered) and Endostatin(Trademark) proteins to Covance. As
such, we are reliant on Covance for the production of sufficient quantities of
the Angiostatin(Registered) and Endostatin(Trademark) proteins to complete our
clinical studies, and if Covance fails to produce such quantities, then we would
have to delay our clinical studies. If we are required to change to a new
manufacturer, and if any suitable manufacturer can be found, significant
additional time and funds would be required for technology transfer and testing.
Furthermore, Covance has only recently initiated production of the
Angiostatin(Registered) and Endostatin(Trademark)proteins and, therefore, has
little experience in manufacturing these proteins. Delays in Covance's scale-up
to commercial quantities could result in delays that will affect our clinical
trials, regulatory submissions, and commercialization. Indeed, the production of
protein-based therapeutics using recombinant DNA techniques and fermentation is
a difficult, expensive process. There is, therefore, no assurance that it will
be possible to manufacture commercial quantities of the Angiostatin(Registered)
and Endostatin(Trademark) proteins in a cost-effective manner.
WE ARE UNCERTAIN WHETHER ADDITIONAL FUNDING WILL BE AVAILABLE FOR OUR FUTURE
CAPITAL NEEDS AND COMMITMENTS
We will require substantial funds in addition to our existing working
capital to develop our product candidates and otherwise to meet our business
objectives. We have never generated enough cash during any period since our
inception to cover our expenses and have spent, and expect to continue to spend,
substantial funds to continue our research and development programs. We
anticipate that our existing resources and the funds provided to us by
Bristol-Myers Squibb through August 9, 1999 will be sufficient to meet our
planned
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expenditures until 2000. However, any one of the following factors, among
others, could cause us to require additional funds or otherwise cause our cash
requirements in the future to materially increase:
o results of research and development activities;
o progress of our preclinical studies or clinical trials;
o changes in or terminations of our relationships with strategic partners;
o changes in the focus, direction, or costs of our research and development
programs;
o competitive and technological advances; or
o the regulatory approval process.
Also pursuant to sponsored research agreements, we have agreed to fund
$851,000 through 2000. Under the terms of certain license agreements, we must be
diligent in bringing potential products to market and must make certain
milestone payments that, in some instances, are substantial. If we fail to
comply with the milestones or fail to make any required sponsored research or
milestone payment, we could face the termination of the relevant sponsored
research or license agreement, which could have a material adverse effect on our
business.
We may seek additional funding through collaborative arrangements and
public or private financing, including equity financing. We cannot guarantee
that collaborative arrangements or additional financing will be available on
acceptable terms to us or at all. If we issue more common stock to raise funds
in the future, your ownership in us may be diluted. If adequate funds are not
available, we may be required to take one or more of the following actions:
o delay, reduce the scope of, or eliminate one or more of our research and
development programs;
o forfeit our rights to future technologies;
o obtain funds through arrangements with collaborative partners or others
that may require us to relinquish rights to certain of our technologies,
product candidates or products that we would otherwise seek to develop or
commercialize on our own; or
o license the rights to such products on terms that are not favorable to
us.
OUR POTENTIAL PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATORY REQUIREMENTS AND A
LENGTHY APPROVAL PROCESS
Our research, development, preclinical and clinical trials, manufacturing,
and marketing of most of our product candidates are subject to an extensive
regulatory approval process by the FDA and other regulatory agencies in the
United States and abroad. The process of obtaining FDA and other required
regulatory approvals for drug and biologic products, including required
preclinical and clinical testing, is lengthy, expensive and uncertain. Even
after spending time and money, we may not receive regulatory approvals for
clinical testing or for the manufacturing or marketing of any products. Our
collaborators or we may encounter significant delays or excessive costs in the
effort to secure necessary approvals or licenses. Even if we obtain regulatory
clearance for a product, that product will be subject to continual review. Later
discovery of previously unknown defects or failure to comply with the applicable
regulatory requirements may result in restrictions on a product's marketing or
withdrawal of the product from the market, as well as possible civil or criminal
penalties.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY
The pharmaceutical and biotechnology industries are intensely competitive
and we expect competition from other companies and other research and academic
institutions to increase. Many of these companies have substantially greater
financial and research and development capabilities than we have and have
substantially greater experience in undertaking preclinical and clinical testing
of products, obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products. We are aware of a number of other companies and
academic institutions that are pursuing angiogenesis research and are testing
other angiogenesis inhibitors.
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These other companies and academic institutions may be larger than we are
and have significantly greater financial resources, or be supported by large
entities with greater financial resources than are currently available to us.
They may also have established marketing and distribution channels. The drug
industry is characterized by intense price competition, and we anticipate that
we will face this and other forms of competition. There can be no assurance that
developments by others will not render our products or technologies obsolete or
noncompetitive or that we will be able to keep pace with technological
developments. Competitors may develop products that use an entirely different
approach or means of accomplishing the desired therapeutic effect that our
products seek to achieve and may be more effective or less costly, or both. In
addition, other competitors may have significantly greater experience than we do
in undertaking preclinical testing and human clinical trials and obtaining
regulatory approvals of pharmaceutical products. Accordingly, our competitors
may succeed in commercializing products more rapidly than we do. Were these
competitors to develop their products more rapidly and complete the regulatory
process sooner, it could have a material adverse effect on our business.
If other companies were to get FDA approval to market thalidomide for other
disease indications, 'off-label' use of thalidomide could adversely affect the
Company's business and operations. We are aware of other companies engaged in
the development of thalidomide for various disease indications. Although the FDA
does not permit a manufacturer or distributor to market or promote an approved
drug for an unapproved off-label use or dosage level, under its 'practice of
medicine' policy, the FDA generally does not prohibit a physician from
prescribing an approved drug product for an unapproved use or dosage. In
addition, the FDA has from time to time proposed to liberalize its restrictions
on the dissemination of off-label information.
Our blood oxygen enhancement product candidate may also compete for certain
applications with numerous other available therapeutics and with blood and blood
substitute products being developed by others. In addition to competing with
universities and other research institutions to develop products, technologies,
and processes, we may compete with other companies to acquire rights to products
or technologies from universities.
The pharmaceutical and biotechnology industries are rapidly evolving. We
may not be able to develop products that are more effective or achieve greater
market acceptance than our competitors' products. Our competitors may succeed in
developing products and technologies that are more effective than those being
developed by us or that render our products and technologies less competitive or
obsolete. One competitor in particular is working on the development for
clinical trials of an antiangiogenic developed by the same researcher at
Children's Hospital, Boston, who developed Angiostatin(Registered) protein and
Endostatin(Trademark)protein. While we do not know the potential effectiveness
of this product in comparison to Angiostatin(Registered) protein,
Endostatin(Trademark)protein or our other products, it is possible that this
product will be more effective than our products, will be easier to manufacture,
will come to market before any of our products or will achieve market acceptance
over our products.
WE DEPEND ON PATENTS AND OTHER PROPRIETARY RIGHTS, SOME OF WHICH ARE UNCERTAIN
Our success will depend in part on our ability to obtain patents for our
products, both in the United States and abroad. The patent position of
biotechnology and pharmaceutical companies in general is highly uncertain and
involves complex legal and factual questions. Risks related to patenting our
products include the following:
o failure of EntreMed to obtain additional patents;
o challenge, invalidation, or circumvention of patents already issued to
us;
o failure of the rights granted under our patents to provide sufficient
protection;
o independent development of similar products by third parties; or
o ability of third parties to design around patents issued to EntreMed or
its collaborators.
For several of the products that we are developing, including thalidomide
and 2ME2, composition of matter patents are not available because the compounds
are in the public domain. In these cases, only patents covering the 'use' of the
product are available. In general, patents covering a new use for a known
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compound can be more difficult to enforce against infringers of the use claims
in the patent. We have secured use patents covering the use of thalidomide for
the treatment of angiogenic diseases. We are aware of at least two other issued
patents covering certain non-antiangiogenic uses of thalidomide. Although we
believe that the claims in such patents will not interfere with our proposed use
of thalidomide, we cannot guarantee that the holders of such patents will not be
able to exclude the Company from marketing thalidomide for other uses. We have
also secured use patents covering 2ME2.
The enactment of the legislation implementing the General Agreement on
Tariffs and Trade caused certain changes to United States patent laws that
became effective on June 8, 1995. Most notably, the term of patent protection
for patent applications filed on or after June 8, 1995 is no longer a period of
seventeen years from the date of grant. The new term of a United States patent
will commence on the date of issuance and terminate twenty years from the
earliest effective filing date of the application. Since the time from filing to
issuance of biotechnology patents is often more than three years, a twenty-year
term from the effective date of filing may result in a term of patent protection
that is substantially shorter than seventeen years. This may adversely impact
our patent position. Often, the duration and level of the royalties we are
entitled to receive from a collaborative partner is based on the existence of a
valid patent. Thus, the shorter period of patent protection may adversely affect
our future operating results and financial condition.
Our potential products may conflict with patents that have been or may be
granted to competitors, universities or others. As the biotechnology industry
expands and more patents are issued, the risk increases that our potential
products may give rise to claims that they infringe the patents of others. Such
other persons could bring legal actions against us claiming damages and seeking
to enjoin clinical testing, manufacturing and marketing of the affected
products. Any such litigation could result in substantial cost to us and
diversion of effort by our management and technical personnel. If any these
actions are successful, in addition to any potential liability for damages, we
could be required to obtain a license in order to continue to manufacture or
market the affected products. We cannot guarantee that we would prevail in any
action or that any license required under any needed patent would be made
available on acceptable terms, if at all. Failure to obtain needed patents,
licenses, or proprietary information held by others may have a material adverse
effect on our business.
We are a party to sponsored research agreements and license agreements that
require us to make milestone payments upon attainment of certain regulatory
milestones. One of the milestones requires us to file an IND application with
the FDA regarding Angiostatin(Registered) protein during the fourth quarter of
1999. Our failure to file this IND application could result in a loss of our
rights with regard to Angiostatin(Registered)protein. We believe that we will be
able to make this filing within the required time period, but no assurance can
be given that we will do so.
We also rely on trade secret protection for our confidential and
proprietary information. However, trade secrets are difficult to protect and we
cannot guarantee that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
our trade secrets or disclose our technology, or that we can meaningfully
protect our rights to unpatented trade secrets. We require our employees,
consultants, and advisors to execute a confidentiality agreement when beginning
an employment or a consulting relationship with EntreMed. The agreements
generally provide that all trade secrets and inventions conceived by the
individual and all confidential information developed or made known to the
individual during the term of the relationship automatically become our
exclusive property. Employees and consultants must keep such information
confidential and may not disclose such information to third parties except in
specified circumstances. We cannot guarantee, however, that these agreements
will provide meaningful protection for our proprietary information in the event
of unauthorized use or disclosure of such information.
To the extent that consultants, key employees, or other third parties apply
technological information independently developed by them or by others to our
proposed projects, disputes may arise as to the proprietary rights to such
information which may not be resolved in our favor. Certain of our consultants
are employed by or have consulting agreements with others and any inventions
discovered by them generally will not become our property.
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LOSS OF KEY PERSONNEL AND CONSULTANTS COULD ADVERSELY AFFECT OUR BUSINESS
We are dependent on certain of our executive officers and scientific
personnel, including John W. Holaday, Ph.D., our co-founder, Chairman, President
and Chief Executive Officer. We have a three-year employment agreement with Dr.
Holaday through December 31, 2001. Competition for qualified employees among
pharmaceutical and biotechnology companies is intense, and the loss of certain
of our personnel, or an inability to attract, retain, and motivate additional
highly skilled scientific, technical, and management personnel, could materially
adversely affect our business and prospects. We cannot guarantee that we will be
able to retain our existing personnel or attract and retain additional qualified
employees.
We may also be dependent, in part, upon the continued contributions of the
lead investigators of our sponsored research programs. Our scientific
consultants and collaborators may have commitments to or consulting or advisory
agreements with other entities that may affect their ability to contribute to
EntreMed or may be competitive with it. Inventions or processes discovered by
them will not necessarily become our property, but may remain the property of
these persons or of these persons' full-time employers.
POTENTIAL PRODUCTS MAY SUBJECT US TO PRODUCT LIABILITY FOR WHICH INSURANCE MAY
NOT BE AVAILABLE
The use of our potential products in clinical trials and the marketing of
any pharmaceutical products may expose us to product liability claims. We have
obtained a level of liability insurance coverage that we believe is appropriate
for our current stage of development. However, there is a risk that our present
insurance coverage is not adequate. Such existing coverage will not be adequate
as we further develop products, and there is a risk that in the future adequate
insurance coverage and indemnification by collaborative partners will not be
available in sufficient amounts or at a reasonable cost. A successful product
liability claim could have a material adverse effect on our business and
financial condition.
THE MARKETABILITY OF OUR POTENTIAL PHARMACEUTICAL PRODUCTS MAY DEPEND ON
REIMBURSEMENT AND REFORM MEASURES IN THE HEALTH CARE INDUSTRY
Our success may depend, in part, on the extent to which reimbursement for
the costs of therapeutic products and related treatments will be available from
third-party payors such as government health administration authorities, private
health insurers, managed care programs, and other organizations. Over the past
decade, the cost of health care has risen significantly, and there have been
numerous proposals by legislators, regulators, and third-party health care
payors to curb these costs. Some of these proposals have involved limitations on
the amount of reimbursement for certain products. We cannot guarantee that
similar federal or state health care legislation will not be adopted in the
future or that any products sought to be commercialized by us or our
collaborators will be considered cost-effective or that adequate third-party
insurance coverage will be available for us to establish and maintain price
levels sufficient for realization of an appropriate return on our investment in
product development. Moreover, the existence or threat of cost control measures
could have an adverse effect on the willingness or ability of our corporate
collaborators to pursue research and development programs related to our product
candidates.
WE ARE SUBJECT TO RISK DUE TO OUR USE OF HAZARDOUS MATERIALS
Our research and development involves the controlled use of hazardous
biological, chemical, and radioactive materials. We are subject to federal,
state, and local laws and regulations governing the use, manufacture, storage,
handling, and disposal of such materials and certain waste products. Although we
believe that our safety procedures for handling and disposing of such materials
comply with the standards prescribed by such laws and regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, we could be held liable for any
damages that result and any such liability could have a material adverse effect
on us.
THE PRICE OF OUR STOCK IS HIGHLY VOLATILE
The market price of our common stock, like that of the common stock of many
other biopharmaceutical companies, has at times been, and again may be, highly
volatile. Factors that may have a significant impact on the market price of our
common stock include:
o the results of preclinical studies and clinical trials by us or our
competitors;
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o FDA actions with respect to our product candidates;
o other evidence of the safety or efficacy of our product candidates or
those of our competitors;
o announcements of technological innovations or new commercial products by
us or our competitors;
o changes in reimbursement policies;
o health care legislation;
o developments in patent or other proprietary rights;
o developments in our relationships with collaborative partners;
o public concern as to the safety and efficacy of drugs we develop;
o fluctuations in our operating results;
o actions by traders and shortsellers;
o articles in the public press; and
o general market conditions.
FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD HAVE AN ADVERSE
IMPACT ON THE PRICE OF OUR STOCK
Certain of our current stockholders may sell shares of common stock with
this Prospectus or under Rule 144 under the Securities Act by exercising
outstanding registration rights and by selling shares of common stock issued
upon exercise of options or warrants or otherwise. Any such sales could have an
adverse effect on the price of our common stock.
PROVISIONS OF OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
AND DELAWARE LAW COULD DETER TAKEOVER ATTEMPTS
Any of the following provisions could discourage, hinder or preclude an
unsolicited acquisition of EntreMed and could make it less likely that
stockholders receive a premium for their shares as a result of any such attempt:
o Without shareholder approval, our Board of Directors may issue up to
5,000,000 shares of preferred stock with voting rights equal to the
common stock and conversion, liquidation, or dissolution rights and
preferences that may be superior to the common stock. The rights of the
holders of any such preferred stock may adversely affect the rights of
holders of common stock. The issuance of preferred stock or of rights to
purchase preferred stock could be used to discourage an unsolicited
acquisition proposal.
o In addition, our Board of Directors is divided into three classes, the
members of each of which will serve for a staggered three-year term.
Because shareholders only may elect one-third of the Directors each year,
it is more difficult for a third party to gain control of our Board of
Directors.
o Furthermore, we are subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, which prohibits us form
engaging in a 'business combination' with an 'interested stockholder,'
unless the business combination is approved in a prescribed manner.
RISKS RELATED TO POTENTIAL YEAR 2000 PROBLEMS MIGHT ADVERSELY AFFECT OUR
BUSINESS
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a result, those
computer programs having time-sensitive software would recognize a date using
'00' as the year 1900 rather than the year 2000.
Based on a recent assessment, we determined that our accounting software
will need to be updated or modified. This should be accomplished through updates
from the software manufacturer. However, if such
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updates are not made, or are not completed on a timely basis, the Year 2000
issue could have a material impact on our business.
We have queried our most significant supplier that does not also share
information systems with us. To date, we are not aware that this, or any other
supplier, has a Year 2000 issue that would materially impact our results of
operations, liquidity, or capital resources. However, we have no means of
ensuring that suppliers will be Year 2000 ready. The inability of suppliers to
complete the Year 2000 resolution process in a timely fashion could materially
impact our business. The effect of non-compliance by suppliers is not
determinable.
We anticipate no other Year 2000 problems that are reasonably likely to
have a material adverse effect on our operations. There can be no assurance,
however, that such problems will not arise.
Our plans to complete the Year 2000 modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, and other
factors. Estimates on the status of completion and the expected completion dates
are based on costs incurred to date compared to total expected costs. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those plans. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
THE COMPANY
We were incorporated in Delaware in September 1991 and are engaged
primarily in the research and development of biopharmaceutical products that
address the role of angiogenesis in the prevention and treatment of a broad
range of diseases.
We are an innovative biopharmaceutical company with a research and product
focus on the role of angiogenesis in disease. Our core technologies include an
antiangiogenesis program focused on the development of proprietary products
intended to inhibit the abnormal growth of new blood vessels associated with
cancer and certain causes of blindness. Our other core technology is a blood
cell permeation device designed to enhance the ability of red blood cells to
deliver oxygen to organs and tissues.
Angiogenesis is the biological process by which new blood vessels are
formed and is a normal process during the first three months of embryonic
development, the reproductive cycle of women, and in wound healing. At other
times, angiogenesis is harmful when associated with disease, particularly that
of cancer and macular degeneration, a leading cause of blindness. We believe
that antiangiogenic products, which inhibit the abnormal growth of blood
vessels, may have fewer adverse side effects than traditional therapies for
these diseases. Our portfolio of potential products includes antiangiogenic
compounds, Angiostatin(Registered) protein, Endostatin(Trademark) protein,
2-Methoxyestradiol and thalidomide which are used to block the growth of blood
vessels supplying primary and metastatic tumors.
Our principal executive offices are located at 9640 Medical Center Drive,
Rockville, Maryland 20850, and our telephone number is (301) 217-9858. For
further information about the business and operations of the Company, reference
is made to the Company's reports incorporated herein by reference. See 'Where
You Can Find More Information.'
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common
stock offered by this Prospectus. We will use the net proceeds, if any, realized
from the exercise of the warrants and other rights for working capital and for
general corporate purposes, at the discretion of management.
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SELLING STOCKHOLDERS
The Selling Stockholders will hold shares of Common Stock which are
issuable upon exercise of the Warrants and other rights. The Warrants and other
rights originally were issued by the Company in private placements exempt from
registration under Section 4(2) of the Securities Act or pursuant to Rule 701
thereunder.
The table below lists the following information: (a) identity of the
Selling Stockholders, (b) number of shares of Common Stock owned by each Selling
Stockholder as of May 12, 1999, assuming the exercise by the Selling
Stockholders of all the Warrants and other rights held by such Selling
Stockholder as of or prior to said date, (c) number of shares of Common Stock
subject to sale by each Selling Stockholder pursuant to this Prospectus, and (d)
number of shares of Common Stock that would be owned by each Selling Stockholder
assuming the sale of all shares of Common Stock registered by this Registration
Statement and no other transactions in the Common Stock by such Selling
Stockholder. There can be no assurance that any shares of Common Stock will be
sold pursuant to this Prospectus.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY SHARES OFFERED SHARES BENEFICIALLY
OWNED PRIOR TO THE BY THIS OWNED AFTER
SELLING STOCKHOLDER(1) OFFERING(2) PROSPECTUS(2) THE OFFERING(3)
- ----------------------------------------------------------- ------------------ -------------- -------------------
<S> <C> <C> <C>
John W. Holaday, Ph.D.(4).................................. 1,316,400 366,667 949,733
Donald S. Brooks(5)........................................ 137,251 6,667 130,584
Samuel R. Dunlap, Jr.(6)................................... 408,612 319,283 89,329
Mark C. M. Randall(7)...................................... 78,001 6,667 71,334
Wendell M. Starke(8)....................................... 398,366 10,648 387,718
Elena J. Allen............................................. 5,324 5,324 --
Tracy Allen................................................ 5,324 5,324 --
Ulrich Bruggemann.......................................... 2,625 2,625 --
Anne Fortier............................................... 1,667 1,667 --
GATX Corporation(9)........................................ 15,000 15,000 --
Naomi Kleinhandler......................................... 6,667 6,667 --
Marcia Kubovetz............................................ 1,389 1,389 --
John Madsen................................................ 1,667 1,667 --
Meier Mitchell & Company(10)............................... 10,000 10,000 --
Youssef Mouneimne.......................................... 2,625 2,625 --
Yves C. Nicolau............................................ 2,625 2,625 --
W.B.M., LLC(11)............................................ 13,423 13,423 --
Eric C. Roux............................................... 2,625 2,625 --
Don Sallee................................................. 10,648 10,648 --
Averell W. Satloff(12)..................................... 22,500 22,500 --
John C. Thomas, Jr.(13).................................... 118,100 72,269 45,831
Children's Medical Center Corporation(14).................. 45,000 45,000 --
Fletcher Spaght, Inc.(15).................................. 3,333 3,333 --
Leo Einck(16).............................................. 8,375 5,774 2,601
Delta Shipping Agency...................................... 13,334 13,334 --
</TABLE>
- ------------------
(1) Except as otherwise indicated below, to the knowledge of the Company, each
Selling Stockholder named in the table has sole voting and investment power
with respect to all shares shown as beneficially owned by such Selling
Stockholder, subject to community property laws, where applicable.
(2) The number of shares set forth in the table assumes the exercise of all
Warrants and other rights held by the Selling Stockholder and represents an
estimate of the number of shares of Common Stock to be offered and
(Footnotes continued on next page)
14
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(Footnotes continued from previous page)
sold by the Selling Stockholder. The actual number of shares of Common
Stock issuable upon exercise of the Warrants and other rights is subject to
adjustment. The actual number of shares of Common Stock offered hereby, and
included in the Registration Statement of which this Prospectus is a part,
includes such additional number of shares of Common Stock as may be issued
or issuable upon exercise of the Warrants and other rights by reason of
adjustment mechanisms described therein, or by reason of any future stock
splits, stock dividends or similar transaction involving the Common Stock,
in order to prevent dilution, in accordance with Rule 416 under the
Securities Act.
(3) Assumes the sale of all shares offered hereby and no
other transactions in the Common Stock by the Selling Stockholder.
(4) The shares beneficially owned by Dr. Holaday prior to the offering include
126,666 shares held by a limited partnership of which Dr. Holaday is the
general partner, and 609,168 shares issuable upon exercise of options and
warrants which are exercisable within 60 days following May 12, 1999,
including (i) 100,000 shares issuable upon exercise of a Warrant granted on
August 6, 1992 and (ii) 200,002 of 266,666 shares issuable upon exercise of
a Warrant granted on November 2, 1995. Dr. Holaday is a co-founder of the
Company and has served as its President and Chief Executive Officer and a
director since August 1992 and as Chairman of the Board of Directors since
November 1995.
(5) The shares beneficially owned by Mr. Brooks prior to the offering include
6,667 shares issuable upon exercise of a Warrant granted to Mr. Brooks on
November 2, 1995 and 124,334 shares issuable upon exercise of options all
of which may be exercised within 60 days following May 12, 1999. Mr. Brooks
has been a director of the Company since April 1996 and Vice President of
Legal Affairs since 1998.
(6) The shares beneficially owned by Mr. Dunlap prior to the offering include
(i) 150,000 shares issuable upon exercise of the unexercised portion of
Warrants covering 433,334 shares granted on August 6, 1992, (ii) 133,333
shares issuable upon exercise of a Warrant covering 166,667 shares granted
on November 2, 1995, (iii) 33,333 shares issuable to Mr. Dunlap upon
exercise of the portion of the Warrant covering 100,000 shares granted to
Mr. Gorlin on November 2, 1995 (the 'Gorlin Warrant') covering 33,333
shares transferred to Mr. Dunlap in 1996, and (iv) 2,617 shares issuable to
Mr. Dunlap upon exercise of the portion of a warrant covering 31,667 shares
owned by Mr. Thomas. 350,282 of such shares are issuable upon exercise of
options which may be exercised within 60 days following May 12, 1999. Mr.
Dunlap served as an Executive Advisor to the Company between August 1992
and December 1998 and has served as a director of the Company since August
1992. Mr. Dunlap is not seeking reelection at the annual shareholders
meeting to be held in June 1999.
(7) The shares beneficially owned by Mr. Randall prior to the offering consist
of 6,667 shares issuable upon exercise of the Warrant held by Mr. Randall
and 71,334 shares issuable upon exercise of options which may be exercised
within 60 days following May 12, 1999. Mr. Randall has been a director of
the Company since April 1996.
(8) The shares beneficially owned by Mr. Starke prior to the offering include
189,815 shares issuable upon exercise of options and warrants held by Mr.
Starke which may be exercised within 60 days following May 12, 1999. Does
not include 40,761 shares owned by various family members of Mr. Starke, as
to which Mr. Starke disclaims beneficial ownership. Mr. Starke has been a
director of the Company since April 1994.
(9) The shares beneficially owned by GATX Corporation ('GATX') prior to the
offering consist of 15,000 shares issuable upon exercise of a Warrant which
may be exercised within 60 days following May 12, 1999. GATX is a provider
of a wide array of financial and supply chain management services. During
1997, the Company paid lease payments in the amount of approximately
$148,000 to MMC/GATX Partnership No. 1 ('MMC/GATX'), of which GATX is a
partner, for certain equipment and purchased the leased equipment for a
total of $263,000. See footnote 10.
(10) The shares beneficially owned by Meier Mitchell & Company ('MMC') prior to
the offering consist of 10,000 shares issuable upon exercise of a Warrant
which may be exercised within 60 days following May 12, 1999. MMC is an
investment banking firm specializing in providing debt and lease financing
(Footnotes continued on next page)
15
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(Footnotes continued from previous page)
products. Lee F. Meier, a director of the Company since July 1997, is the
founder and Managing Director of MMC. During 1997, the Company paid lease
payments in the amount of approximately $148,000 to MMC/GATX, of which MMC
is the general partner, for certain equipment and purchased the leased
equipment for a total of $263,000. See footnote 9.
(11) The shares beneficially owned by W.B.M., LLC ('WBM') prior to the offering
consist of 13,423 shares issuable upon exercise of a Warrant granted on
September 23, 1994 to Josephthal Lyons & Ross pursuant to a certain Warrant
Agreement, dated September 23, 1994 by and between the Company and
Josephthal Lyons & Ross (the 'Warrant Agreement') and transferred in part
to Mr. Purjes on May 29, 1997 and subsequently transferred to WBM on May
21, 1998.
(12) The shares beneficially owned by Mr. Satloff prior to the offering consist
of 22,500 shares issuable upon exercise of a Warrant granted on September
23, 1994 to Josephthal Lyons & Ross pursuant to the Warrant Agreement and
transferred in part to Mr. Satloff on May 29, 1997.
(13) The shares beneficially owned by Mr. Thomas prior to the offering include
(i) 5,602 shares issuable to the John C. Thomas Profit Sharing Plan (the
'Profit Sharing Plan') upon exercise of the unexercised portion of Warrants
covering 45,001 shares granted to Mr. Dunlap and transferred to the Profit
Sharing Plan, and (ii) 66,667 shares issuable upon exercise of a Warrant
granted on August 6, 1992. 127,018 of such shares are issuable upon
exercise of options which may be exercised within 60 days following May 12,
1999. Mr. Thomas is the sole beneficiary and trustee of the Profit Sharing
Plan and shares, or will share, voting and investment power with respect to
all shares issued, or issuable, to the Profit Sharing Plan and may be
deemed to be the beneficial owner of all such shares. Mr. Thomas has served
as Secretary and Treasurer of the Company since January 1997 and as part-
time Chief Financial Officer of the Company from September 1991 until
January 1997.
(14) The shares beneficially owned by Children's Medical Center Corporation
('Children's') consist of 45,000 shares issuable upon exercise of a portion
of a Warrant covering 50,000 shares granted on August 11, 1995 (the
'August 1995 Warrant'), which Warrant may be exercised with respect to
30,000 of such shares within 60 days following May 12, 1999. On May 8,
1998, Children's transferred to Fletcher Spaght, Inc. a portion of the
August 1995 Warrant covering 5,000 shares.
(15) The shares beneficially owned by Fletcher Spaght, Inc. ('Fletcher') consist
of 3,334 shares issuable upon exercise of the unexercised part of that
portion of the August 1995 Warrant transferred to Fletcher by
Children's, which unexercised part may be exercised with respect to 1,666
of such shares within 60 days following May 12, 1999. See footnote 14.
(16) The shares beneficially owned by Dr. Einck prior to the offering include
5,774 shares issuable upon exercise of a Warrant previously held by Mr.
Dunlap and Mr. Thomas that was transferred to Dr. Einck in September 1998.
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PLAN OF DISTRIBUTION
We are registering shares of our common stock on behalf of the Selling
Stockholders. As used in this Prospectus, 'Selling Stockholders' includes donees
and pledgees selling shares received from a named Selling Stockholder after the
date of this Prospectus. We will pay for all costs, expenses and fees in
connection with the registration of the shares. The Selling Stockholders will
pay for all selling discounts and commissions, if any. The Selling Stockholders
may offer and sell their shares from time to time in one or more of the
following types of transactions (including block transactions):
o on the Nasdaq National Market,
o in the over-the-counter market,
o in privately negotiated transactions,
o through put or call options transactions relating to the shares,
o through short sales of shares, or
o a combination of such methods of sale.
The Selling Stockholders may sell their shares at prevailing market prices,
or at privately negotiated prices. Such transactions may or may not involve
brokers or dealers. The Selling Stockholders have advised us that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their shares, nor is there
an underwriter or coordinating broker acting in connection with the proposed
sale of shares by the Selling Stockholders.
The Selling Stockholders may offer and sell their shares directly to
purchasers or to or through broker-dealers, which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Stockholders and/or the
purchasers of shares. The Selling Stockholders and any broker-dealers or agents
that participate with the Selling Stockholders in sales of the shares may be
deemed to be 'underwriters' within the meaning of the Securities Act in
connection with such sales. In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of the shares purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
We have agreed to indemnify each Selling Stockholder against certain
liabilities, including liabilities arising under the Securities Act.
Selling Stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such rule.
LEGAL MATTERS
The validity of the Shares of Common Stock offered hereby has been passed
upon for the Company by Arnold & Porter, Washington, D.C.
EXPERTS
The consolidated financial statements of EntreMed, Inc. appearing in
EntreMed, Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1998
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon, included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may 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-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov.
The SEC allows us to incorporate by reference the information that we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be 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 (File
No. 000-20713) we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1998, filed with the Commission on March 31, 1999, as amended;
2. The Company's Quarterly Report on Form 10-Q for the Quarter ended March
31, 1999, filed with the Commission on May 17, 1999, as amended; and
3. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed under the Exchange Act,
including any amendment or report filed for the purpose of updating such
description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
John C. Thomas, Jr.
EntreMed, Inc.
9640 Medical Center Drive
Rockville, Maryland 20850
Telephone: (301) 217-9858
This Prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
Prospectus. We have authorized no one to provide information other than that
provided in this Prospectus. We have authorized no one to provide you with
different information. We are not 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 this document.
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF ITS
AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH
IT RELATES, OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
ENTREMED, INC.
953,751 SHARES
COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
June 29, 1999
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