<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
File Number 333-94665
Prospectus Supplement
(To Prospectus dated January 24, 2000, as amended March 31, 2000)
1,000,000 SHARES
[ENTREMED LOGO]
COMMON STOCK
------------------------
EntreMed, Inc. is offering 1,000,000 shares of common stock in a firmly
underwritten offering.
------------------------
Our common stock is traded on the Nasdaq National Market under the symbol
"ENMD." The last reported sale price of our common stock on the Nasdaq National
Market on June 13, 2000 was $25.875 per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3 OF THE ATTACHED PROSPECTUS.
------------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Offering price $22.00 $22,000,000
Discounts and Commissions to the Underwriter $ 1.32 $ 1,320,000
Offering Proceeds to EntreMed $20.68 $20,680,000
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the attached prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Banc of America Securities LLC expects to deliver the shares of common
stock to investors on June 19, 2000.
BANC OF AMERICA SECURITIES LLC
------------------------
June 13, 2000
<PAGE> 2
(THIS PAGE INTENTIONALLY LEFT BLANK)
S-2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
EntreMed, Inc............................................... S- 4
The Offering................................................ S- 5
Use of Proceeds............................................. S- 6
Dilution.................................................... S- 7
Capitalization.............................................. S- 8
Plan of Distribution........................................ S- 9
Legal Matters............................................... S-10
Experts..................................................... S-10
PROSPECTUS
About This Prospectus....................................... 3
Risk Factors................................................ 3
The Company................................................. 14
Use of Proceeds............................................. 14
Plan of Distribution........................................ 14
Description of Common Stock................................. 16
Description of Warrants..................................... 17
Incorporation of Certain Documents by Reference............. 17
Where You Can Find More Information......................... 18
Legal Matters............................................... 19
Experts..................................................... 19
</TABLE>
------------------------
In this prospectus supplement and the accompanying prospectus, "EntreMed,"
"we," "us," and "our" refer to EntreMed, Inc.
------------------------
We own, have the right to, or have filed application for, various
trademarks, service marks and trade names used in our business, including THE
ANGIOGENESIS COMPANY, ENDOSTATIN, ANGIOSTATIN, WE'RE NOT MAKING BETTER BLOOD,
WE'RE MAKING BLOOD BETTER, VASCULOSTATIN, DOING WELL BY DOING GOOD, METASTATIN,
THERAMED, and ENTREVEST. THALOMID is a registered trademark of Celgene
Corporation. All other trademarks, service marks and trade names appearing in
this prospectus supplement are the property of their respective holders.
------------------------
THIS PROSPECTUS SUPPLEMENT 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
TODAY, AND WE WILL NOT UPDATE THESE STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED.
S-3
<PAGE> 4
ENTREMED, INC.
We are an innovative biopharmaceutical company engaged in the development
of products that address the role of blood and blood vessels in health and
disease. Angiogenesis is the biological process by which new blood vessels are
formed. As The Angiogenesis Company, our primary efforts are focused on
developing antiangiogenic drugs designed to inhibit the abnormal new blood
vessel growth associated with a broad range of diseases, such as cancer, certain
types of blindness and atherosclerosis. Our current portfolio of antiangiogenic
products includes Endostatin, Angiostatin and 2-Methoxyestradiol, or 2ME2. We
began Phase I clinical trials of Endostatin in September 1999 and of Angiostatin
and 2ME2 in March 2000.
Our core technologies represent one of the new paradigms in medicine.
Traditional cancer treatment involves surgery or radiation therapy to treat the
primary tumor, and follow-up radiation therapy or chemotherapy to eliminate any
remaining cancer and discourage the initiation or spread of metastatic disease.
We are pioneering a different approach, by which we attempt to starve the tumor
rather than directly attack the tumor itself. To support their rapid growth,
tumors are dependent upon newly formed blood vessels to provide nutrients and to
transport cancerous cells to distant sites. In this respect, the blood vessel
network feeding a tumor functions much like the roots of a plant -- when taken
away, or weakened significantly, the plant starves and dies. To date,
preclinical studies have shown our antiangiogenic drug candidates to be
effective in starving cancerous tumors in mice.
Preclinical studies have shown that our antiangiogenic drug candidates have
the potential to not only inhibit new blood vessels from forming, but also break
up and weaken the existing network of blood vessels that feed primary and
metastatic tumors. We believe that these antiangiogenic drugs can be efficacious
without producing the traditional chemotherapy limitations of drug resistance
and toxicity, and may prove effective when used in combination with current
cancer therapies.
EntreMed, Inc. is a Delaware corporation incorporated on September 18,
1991. Our offices are located at 9640 Medical Center Drive, Rockville, Maryland
20850, and our telephone number is (301) 217-9858. Our world wide web site is
www.entremed.com. The information on our web site is not incorporated by
reference into this prospectus supplement or the attached prospectus.
S-4
<PAGE> 5
THE OFFERING
The following information is based on 15,764,094 shares of common stock
outstanding on June 13, 2000 (16,055,761 shares of common stock net of 291,667
shares of treasury stock). This number excludes 3,562,123 shares of common stock
issuable upon the exercise of stock options and warrants outstanding granted to
employees, directors and consultants as of June 13, 2000 and 608,294 shares of
common stock issuable upon the exercise of our warrants to purchase common stock
outstanding as of June 13, 2000. As of June 13, 2000, there are no additional
shares of common stock available for future issuance under our stock option and
other employee benefit plans.
Common stock offered.......... 1,000,000 shares
Common stock to be outstanding
after the offering......... 16,764,094 shares
Use of proceeds............... We intend to use the net proceeds of this
offering for development of current and future
products, working capital and general corporate
purposes. See "Use of Proceeds."
Nasdaq National Market
Symbol..................... ENMD
On June 13, 2000, the last price of our common stock, as reported by the
Nasdaq National Market, was $25.875 per share. As of June 13, 2000 there were
approximately 794 holders of record of our common stock.
S-5
<PAGE> 6
USE OF PROCEEDS
Our net proceeds from the sale of 1,000,000 shares of our common stock in
this offering are estimated to be approximately $20,580,000, after deducting
underwriting discounts and estimated offering expenses, based upon the public
offering price of $22.00 per share. We intend to use the net proceeds for
development of current and future products, working capital and general
corporate purposes. Some of these uses may include investments in subsidiaries
and advances to third parties in connection with sponsored research, the
development of future product candidates, in-licensing and other corporate
affiliations. Pending application of the net proceeds as described above, we
intend to invest the net proceeds from this offering in short-term investment
grade instruments.
S-6
<PAGE> 7
DILUTION
The net tangible book value of our common stock as of March 31, 2000 was
$27,837,464 or $1.84 a share. Net tangible book value per share represents the
amount of our common stock and other stockholders' equity, less intangible
assets, divided by shares of our common stock outstanding. Purchasers of our
common stock will have an immediate dilution of net tangible book value per
share. This dilution excludes the further dilutive effect of options and
warrants granted.
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of our common stock in
this offering and the pro forma net tangible book value per share of the common
stock immediately after completion of this offering. After giving effect to the
sale by us of 1,000,000 shares of our common stock in this offering at the
public offering price of $22.00 per share, and after deduction of underwriting
discounts and estimated offering expenses, our pro forma net tangible book value
as of March 31, 2000 was $48,417,464 or $3.00 per share of common stock. This
represents an immediate increase in net tangible book value of $1.16 per share
to existing stockholders and an immediate dilution of net tangible book value of
$19.00 per share to purchasers of our common stock in this offering, as
illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed public offering price per share of common stock..... $22.00
Net tangible book value per share of common stock before
the offering........................................... $1.84
Increase per share of common stock attributable to the
offering............................................... 1.16
----- ------
Pro forma net tangible book value per share of common
stock after the offering.............................. 3.00
------
Net tangible book value dilution per share............. $19.00
======
</TABLE>
S-7
<PAGE> 8
CAPITALIZATION
The following table sets forth as of March 31, 2000 information about our
cash and cash equivalents:
- on an actual basis; and
- giving effect to our receipt of the estimated net proceeds from the sale
of the 1,000,000 shares of common stock in this offering at the public
offering price per share of $22.00 after deducting underwriting discounts
and estimated offering expenses.
The actual information is based on 15,157,393 shares of common stock
outstanding on March 31, 2000 (15,449,060 shares of common stock net of 291,667
shares of treasury stock). It excludes 3,700,220 shares of common stock issuable
upon the exercise of outstanding stock options and warrants granted to employees
and directors, and 1,064,253 shares of common stock issuable upon the exercise
of common stock purchase warrants. As of March 31, 2000 there are no additional
shares of common stock available for future issuance under our stock option and
other employee benefit plans.
<TABLE>
<CAPTION>
MARCH 31, 2000
-------------------------------
ACTUAL AS ADJUSTED
-------- -----------
IN THOUSANDS, EXCEPT SHARE DATA
<S> <C> <C>
Cash and cash equivalents................................... $ 29,329 $ 49,909
======== ========
Long-term debt, less current portion........................ $ 1,755 $ 1,755
Stockholders' equity:
Preferred Stock, $1.00 par value, 5,000,000 shares
authorized, no shares issued and outstanding actual and
as adjusted............................................ -- --
Common Stock, $.01 par value, 35,000,000 shares
authorized, 15,449,060 shares issued and outstanding
actual; 16,449,060 shares issued and outstanding as
adjusted............................................... 154 164
Treasury Stock, at cost, 291,667 shares actual and as
adjusted............................................... (3,833) (3,833)
Additional paid-in capital................................ 124,350 144,920
Accumulated deficit....................................... (92,834) (92,834)
-------- --------
Total stockholders' equity........................ 27,837 48,417
-------- --------
Total capitalization.............................. $ 29,592 $ 50,172
======== ========
</TABLE>
S-8
<PAGE> 9
PLAN OF DISTRIBUTION
We are offering the shares of common stock described in this prospectus
supplement through an underwriter, Banc of America Securities LLC. Subject to
the terms and conditions set forth in the underwriting agreement dated June 13,
2000, we have agreed to sell to the underwriter, and the underwriter has agreed
to purchase from us, 1,000,000 shares of common stock. The underwriting
agreement provides that the obligations of the underwriter are subject to
certain conditions precedent, and that the underwriter is committed to purchase
all of such shares of common stock if any are purchased.
The underwriter proposes to offer the shares of common stock (i) directly
to the public, initially at the public offering price on the cover page of this
prospectus supplement, (ii) to certain dealers at such price less a concession
not in excess of $0.42 per share and (iii) to one or more purchasers at prices
related to prevailing market prices at the time of sale, which sale price may
not exceed the public offering price on the cover page of this prospectus
supplement. The underwriter may allow and the dealers referred to in (ii) above
may reallow a concession not in excess of $0.10 per share to certain other
dealers. After the initial offering of the shares, the offering price and other
selling terms may be changed by the underwriter.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriter.
<TABLE>
<S> <C>
Per share underwriting discounts and commissions............ $ 1.32
Total underwriting discounts and commissions to be paid by
us........................................................ $1,320,000.00
</TABLE>
The underwriting agreement provides that EntreMed, Inc. will indemnify the
underwriter and its controlling persons against liabilities, including civil
liabilities, under the Securities Act of 1933, or will contribute to payments
the underwriter may be required to make in respect of these liabilities.
EntreMed, Inc., our directors and our executive officers have entered into
lock-up agreements with the underwriter. Under those agreements, EntreMed, Inc.
and those holders of stock, options or warrants may not, without the prior
written consent of Banc of America Securities LLC (which consent may be withheld
in its sole discretion), directly or indirectly, sell, offer, contract or grant
any option to sell (including without limitation any short sale), pledge,
transfer, establish an open "put equivalent position" within the meaning of Rule
16a-1(h) under the Securities Exchange Act of 1934, as amended, or otherwise
dispose of any shares of common stock, options or warrants to acquire shares of
common stock currently or hereafter owned either of record or beneficially by
them, or publicly announce the intention to do any of the foregoing, for a
period commencing on the date of this prospectus supplement and continuing
through the close of trading on the date 90 days after such date. The
restrictions described above do not apply to any bona fide gift of stock or
issuances of stock in connection with business acquisitions and strategic
alliances to a person or entity that agrees in writing to be bound by the same
terms as the grantor. Banc of America Securities LLC may, in its sole discretion
and at any time without notice, release all or any portion of the securities
subject to those lock-up agreements.
In connection with this offering, the underwriter may purchase and sell
shares of common stock in the open market. These transactions may include:
- short sales;
- stabilizing transactions; and
- purchases to cover positions created by short sales.
Short sales involve the sale by the underwriter of a greater number of
shares than it is required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while this offering
is in progress.
S-9
<PAGE> 10
The underwriter may engage in activities that stabilize, maintain or
otherwise affect the price of the common stock, including:
- over-allotment;
- stabilization;
- syndicate covering transactions; and
- imposition of penalty bids.
As a result of these activities, the price of the common stock may be
higher than the price that otherwise might exist in the open market. If the
underwriter commences these activities, it may discontinue them at any time. The
underwriter may carry out these transactions on the Nasdaq National Market, in
the over-the-counter-market or otherwise.
In connection with this offering, the underwriter and any selling group
members who are qualified market makers on the Nasdaq National Market may engage
in passive market making transactions in the common stock on the Nasdaq National
Market in accordance with Rule 103 of Regulation M, under the Securities
Exchange Act of 1934, as amended, during the business day before the pricing of
the offering, before the commencement of offers or sales of the common stock.
Passive market makers must comply with applicable volume and price limitations
and must be identified as passive market makers. In general, a passive market
maker must display its bid at a price not in excess of the highest independent
bid for the security; if all independent bids are lowered below the passive
market maker's bid, however, the bid must then be lowered when purchase limits
are exceeded.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed
upon for us by Arnold & Porter, Washington, D.C. The statements included in the
attached prospectus regarding intellectual property matters have been passed
upon for us by Jones & Askew, LLP, Atlanta, Georgia. Certain legal matters in
connection with this offering are being passed upon for the underwriter by
Cahill Gordon & Reindel, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in the attached prospectus and elsewhere in the registration
statement. Our financial statements are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
S-10
<PAGE> 11
PROSPECTUS
ENTREMED, INC.
3,000,000 SHARES OF COMMON STOCK
AND
WARRANTS TO PURCHASE THE SHARES OF COMMON STOCK
We may offer from time to time in one or more offerings an aggregate of up
to 3,000,000 shares of our common stock and warrants to purchase such shares. We
may offer the common stock and warrants (collectively, the "securities")
separately or together, in separate series in amounts, at prices and on terms to
be set forth in one or more supplements to this prospectus (each, a "prospectus
supplement"). When we decide to issue securities, we will provide you with the
specific terms and the public offering price of the securities in prospectus
supplements. You should read this prospectus and the prospectus supplements
carefully before you invest. This prospectus may not be used to offer or sell
securities unless accompanied by a prospectus supplement.
Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "ENMD."
Our principal executive offices are located at 9640 Medical Center Drive,
Rockville, Maryland 20850 and our telephone number is (301) 217-9858.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH AN INVESTMENT IN OUR
SECURITIES.
------------------------
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 January 24, 2000,
as amended March 31, 2000
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 3
Risk Factors................................................ 3
The Company................................................. 14
Use of Proceeds............................................. 14
Plan of Distribution........................................ 14
Description of Common Stock................................. 16
Description of Warrants..................................... 17
Incorporation of Certain Documents by Reference............. 17
Where You Can Find More Information......................... 18
Legal Matters............................................... 19
Experts..................................................... 19
</TABLE>
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
TODAY, AND WE WILL NOT UPDATE THESE STATEMENTS. OUR ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED.
2
<PAGE> 13
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may from time to time sell any number of the shares of
common stock described in this prospectus in one or more offerings up to a total
of 3,000,000 shares and an indeterminate number of warrants to purchase such
shares.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with the additional information described below
under the heading "Where You Can Find More Information."
The registration statement that contains this prospectus, including the
exhibits to the registration statement and the information incorporated by
reference, contains additional information about the securities offered under
this prospectus. That registration statement can be read at the Securities and
Exchange Commission, or SEC, web site or at the SEC offices mentioned below
under the heading "Where You Can Find More Information."
You should rely only on the information provided in this prospectus and in
any prospectus supplement, including the information incorporated by reference.
We have not authorized anyone to provide you with different information. You
should not assume that the information in this prospectus, or any supplement to
this prospectus, is accurate at any date other than the date indicated on the
cover page of these documents.
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 former collaboration with Bristol-Myers Squibb Company, limited
revenues from Celgene as royalties on the sale of THALOMID(R), and certain
research grants, we have not derived significant revenues from operations.
At December 31, 1999, we had an accumulated deficit of approximately
$82,193,000. Significant losses have continued since December 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. To support
our research and development of certain product candidates, we also rely to a
significant extent on grants and cooperative agreements from governmental and
other organizations as a source of revenues and clinical support. If our grant
revenue or cooperative agreements were to be reduced to any substantial extent,
it may impair 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.
3
<PAGE> 14
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 and Endostatin, 2-Methoxyestradiol (2ME2) and thalidomide
analogs are at the preclinical and early clinical stages of development. Until
very recently, these product candidates had 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 prove to be similarly effective in combating
tumors in humans during clinical trials and testing. Mice are not people, and
although the scientific community considers the study of mice useful, we cannot
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 may occur under different conditions than testing in people, including the
manner in which tumors are introduced into mice, the genetic make-up of
laboratory mice populations (homogeneity as opposed to diversity), tumor type or
location 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) 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, 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 Endostatin recently entered Phase I clinical trials
on humans. Patient recruitment is underway for Phase I clinical trials of
Angiostatin and 2ME2, and we plan to commence drug administration in April 2000.
Thalidomide, which we licensed to Celgene, is currently being tested in Phase II
and III 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 thalidomide
analogs and other new molecules developed by our scientists. 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,
4
<PAGE> 15
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 generally are 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 us.
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 us and our 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.
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. 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:
-- results of research and development activities;
-- progress of our preclinical studies or clinical trials;
-- changes in or terminations of our relationships with strategic
partners;
-- changes in the focus, direction, or costs of our research and
development programs;
-- competitive and technological advances;
-- establishment of marketing and sales capabilities;
-- the regulatory approval process; or
-- product launch.
Also, we are a party to sponsored research agreements pursuant to which we
have agreed to fund an aggregate of approximately $2,853,000 through 2001
(including $2,250,000 to Children's Hospital), and materials production costs of
up to $6,000,000 for clinical trials. In addition, under the terms of certain
license agreements, we must be diligent in bringing potential products to market
and must make future
5
<PAGE> 16
milestone payments of up to $3,535,000 and additional payments upon attainment
of regulatory milestones. 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:
-- delay, reduce the scope of, or eliminate one or more of our research
and development programs;
-- forfeit our rights to future technologies;
-- 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
-- license the rights to such products on terms that are not favorable to
us.
WE MAY NEED NEW COLLABORATIVE PARTNERS TO DEVELOP AND COMMERCIALIZE PRODUCTS
We plan to develop and commercialize our product portfolio with or without
corporate alliances and partners. Nonetheless, we intend to explore
opportunities for new corporate alliances and partners to help us 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 seek to 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 obtain 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, 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.
WE HAVE NO CURRENT MARKETING CAPACITY
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
6
<PAGE> 17
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. 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 HAVE NO CURRENT MANUFACTURING 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 upon 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 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.
WE CANNOT GUARANTEE THAT IT WILL BE COMMERCIALLY FEASIBLE TO MANUFACTURE
ENDOSTATIN AND ANGIOSTATIN
We have entered into agreements with Covance Biotechnology Services Inc.
under which Covance is responsible for producing sufficient amounts of the
Endostatin and Angiostatin for preclinical toxicology studies and for scale-up
production of these proteins under GMP conditions for clinical trials. We also
have entered into a letter of understanding with Chiron Corporation for the
large-scale production of GMP
7
<PAGE> 18
Endostatin. We have spent significant time and funds to transfer the technology
underlying the production of the Endostatin and Angiostatin to Covance and
Chiron. As such, we are reliant on Covance and Chiron for the production of
sufficient quantities of the Endostatin and Angiostatin to complete our clinical
studies, and if they fail 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. 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
Endostatin and Angiostatin in a cost-effective manner.
WE DEPEND ON CELGENE TO COMMERCIALIZE THALIDOMIDE
We have sublicensed to Celgene Corporation all of our rights to
commercialize and sell thalidomide worldwide. We have received and will continue
to receive royalties on all sales of thalidomide (THALOMID(R)) 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 II/III human clinical trials for a
variety of cancer indications. Based upon our efforts, 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 approved use for
treatment of cancer, if ever.
THERE ARE RISKS RELATED TO THE HISTORY OF THALIDOMIDE
Thalidomide has caused serious birth defects in children whose mothers used
it during pregnancy. Therefore, physicians prescribing the drug to women of
childbearing age 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-mediated disease, we may face difficulties in gaining public
acceptance of the drug based on its history of causing birth defects. This may
adversely affect the marketing efforts of our collaborator Celgene Corporation.
In addition, although Celgene has agreed to indemnify us from any liability that
may arise from its sales of thalidomide, we cannot guarantee that we will be
protected from such liability and the possible related losses.
WE CANNOT GUARANTEE THAT OUR PRODUCTS WILL ACHIEVE MARKET ACCEPTANCE
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,
8
<PAGE> 19
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 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:
-- our failure to obtain additional patents;
-- challenge, invalidation, or circumvention of patents already issued to
us;
-- failure of the rights granted under our patents to provide sufficient
protection;
-- independent development of similar products by third parties; or
-- ability of third parties to design around patents issued to us or our
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
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 us 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 of 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.
9
<PAGE> 20
We are a party to sponsored research agreements and license agreements that
require us to make milestone payments upon attainment of certain regulatory
milestones. Failure to meet such milestones could result in the loss of certain
rights to compounds covered under such license agreements.
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 us. 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.
THE EXPIRATION OF OUR RELATIONSHIP WITH CHILDREN'S HOSPITAL, BOSTON, COULD
ADVERSELY IMPACT OUR ABILITY TO ACQUIRE FUTURE PRODUCT CANDIDATES AND COULD
SUBJECT US TO INCREASED COMPETITION
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. 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, Angiostatin, 2ME2, and the antiangiogenic
properties of thalidomide and certain 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 a wide variety of 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.
Early last year, we extended our agreement with Children's Hospital, Boston
for another year. However, while this agreement has been renewed before, we do
not know whether this agreement will be renewed again this year. 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 other products that have antiangiogenic
qualities similar to those contained in the products that we currently license
and could license those products to our competitors.
10
<PAGE> 21
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. In addition to competing with universities and other
research institutions to develop products, technologies, and processes, we may
compete with other companies to acquire the rights to products, technologies,
and processes developed by universities and other research institutions. 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.
These other companies and academic institutions may be larger than we are
and may 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 our
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.
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 and Endostatin. While we
do not
11
<PAGE> 22
know the potential effectiveness of this product in comparison to Angiostatin,
Endostatin 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.
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 us
or may be competitive with us. 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
12
<PAGE> 23
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:
-- the results of preclinical studies and clinical trials by us or our
competitors;
-- FDA actions with respect to our product candidates;
-- other evidence of the safety or efficacy of our product candidates or
those of our competitors;
-- announcements of technological innovations or new commercial products
by us or our competitors;
-- changes in reimbursement policies;
-- health care legislation;
-- developments in patent or other proprietary rights;
-- developments in our relationships with collaborative partners;
-- public concern as to the safety and efficacy of drugs we develop;
-- fluctuations in our operating results;
-- actions by traders and shortsellers;
-- articles in the public press;
-- general market conditions; and
-- sales of substantial numbers of shares of 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 us and could make it less likely that securityholders
receive a premium for their securities as a result of any such attempt:
-- 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.
-- 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.
-- Furthermore, we are subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, which prohibits us from
engaging in a "business combination" with an "interested stockholder,"
unless the business combination is approved in a prescribed manner.
13
<PAGE> 24
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.
Even though the date is now past January 1, 2000 and we have not
experienced any immediate adverse impact on our operations from the transition
to the Year 2000, we cannot provide complete assurance that our operations have
not been affected in a manner that is not yet apparent or that will arise in the
future. In addition, certain computer programs that were date sensitive to the
Year 2000 may not have been programmed to process the Year 2000 as a leap year,
and any negative consequential effects remain unknown. As a result, we will
continue to monitor our Year 2000 compliance and the Year 2000 compliance of our
suppliers and customers. However, we anticipate no Year 2000 problems that are
reasonably likely to have a material adverse effect on our operations.
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 technology includes 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.
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, Endostatin, 2-Methoxyestradiol, thalidomide and
thalidomide analogs, and others 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 our business and operations, reference is made to our
reports incorporated herein by reference. See "Incorporation of Certain
Information by Reference" above.
USE OF PROCEEDS
We will use the net proceeds received from the sale of the securities for
development of current and future products, advances to and investments in
subsidiaries, working capital and general corporate purposes, at the discretion
of management.
PLAN OF DISTRIBUTION
We may sell the securities being offered by this prospectus separately or
together:
-- through agents;
-- to or through underwriters;
-- through dealers;
14
<PAGE> 25
-- through a block trade in which the broker or dealer engaged to handle
the block trade will attempt to sell the securities as agent, but may
position and resell a portion of the block as principal to facilitate
the transaction;
-- directly to purchasers, through a specific bidding, auction or other
process; or
-- through a combination of any of these methods of sale.
We may effect the distribution of the securities from time to time in one
or more transactions at a fixed price or prices, which may be changed from time
to time:
-- at market prices prevailing at the times of sale;
-- at prices related to such prevailing market prices; or
-- at negotiated prices.
We will describe the method of distribution of the securities in the
prospectus supplement.
Agents designated by us from time to time may solicit offers to purchase
the securities. We will name any agent involved in the offer or sale of the
securities and set forth any commissions payable by us to an agent in the
prospectus supplement. Unless otherwise indicated in the prospectus supplement,
any agent will be acting on a best efforts basis for the period of its
appointment. Any agent may be deemed to be an "underwriter" of the securities as
that term is defined in the Securities Act.
If we use an underwriter or underwriters in the sale of securities, we will
execute an underwriting agreement with the underwriter or underwriters at the
time we reach an agreement for sale. We will set forth in the prospectus
supplement the names of the specific managing underwriter or underwriters, as
well as any other underwriters, and the terms of the transactions, including
compensation of the underwriters and dealers. This compensation may be in the
form of discounts, concessions or commissions. Underwriters and others
participating in any offering of securities may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities. We will
describe any of these activities in the prospectus supplement.
If a dealer is used in the sale of the securities, we or an underwriter
will sell securities to the dealer, as principal. The dealer may then resell the
securities to the public at varying prices to be determined by the dealer at the
time of resale. The prospectus supplement will set forth the name of the dealer
and the terms of the transactions.
We may directly solicit offers to purchase the securities, and we may sell
directly to institutional investors or others. These persons may be deemed to be
underwriters within the meaning of the Securities Act with respect to any resale
of the securities. The prospectus supplement will describe the terms of any
direct sales, including the terms of any bidding or auction process.
Agreements we enter into with agents, underwriters and dealers may entitle
them to indemnification by us against specified liabilities, including
liabilities under the Securities Act, or to contribution by us to payments they
may be required to make in respect of these liabilities. The prospectus
supplement will describe the terms and conditions of indemnification or
contribution.
No securities may be sold under this prospectus without delivery, in paper
format, in electronic format on the internet, or both, of the applicable
prospectus supplement describing the method and terms of the offering.
15
<PAGE> 26
DESCRIPTION OF COMMON STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
As of December 31, 1999, we had 35,000,000 shares of common stock
authorized, of which 14,755,998 shares were outstanding, and 5,000,000 shares of
preferred stock authorized, of which no shares were outstanding.
LISTING
Our common stock is quoted on the Nasdaq National Market and traded under
the symbol "ENMD."
DIVIDENDS
Our board of directors may authorize, and we may make, distributions to our
common stockholders, subject to any restriction in our articles of incorporation
and to those limitations prescribed by law.
FULLY PAID AND NON-ASSESSABLE
All of our outstanding common shares are fully paid and non-assessable. Any
additional common shares that we issue will be fully paid and non-assessable.
VOTING RIGHTS
Each of our outstanding common shares as of the applicable record date is
entitled to one vote in each matter submitted to a vote at a meeting of
stockholders and, in all elections for directors, every stockholder has the
right to vote the number of shares owned by it for as many persons as there are
directors to be elected, provided directors are elected according to our
articles of incorporation and by-laws. Our stockholders may vote either in
person or by proxy.
PREEMPTIVE AND OTHER RIGHTS
Holders of our common stock have no preemptive rights and have no other
rights to subscribe for additional shares nor does the common stock have any
conversion rights or rights of redemption, either of which rights have not been
waived. Upon liquidation, all holders of our common stock are entitled to
participate pro rata in our assets available for distribution, subject to the
rights of any class of preferred stock then outstanding.
STOCKHOLDER ACTION BY WRITTEN CONSENT; MEETINGS
Under Delaware corporate law, any action required to be taken by our
stockholders may be taken without a meeting, without prior notice and without a
vote if a consent in writing is signed by holders of shares having at least the
number of votes necessary at a stockholder meeting and prompt notice of the
taking of such action is given to the other stockholders.
Our by-laws provide that special meetings of our stockholders may be called
at any time only by the board of directors or by the president, secretary, or an
assistant secretary at the written request of the holders of at least fifty
percent (50%) of all outstanding shares entitled to vote on the matter for which
the meeting is called.
STAGGERED BOARD OF DIRECTORS
Our Board of Directors is divided into three classes, the members of each
of which will serve for a staggered three-year term. Our shareholders may elect
only one-third of the directors each year; therefore, it is more difficult for a
third party to gain control of our Board of Directors than if our Board was not
staggered.
16
<PAGE> 27
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company is our transfer agent and
registrar, and is located in Brooklyn, New York.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of shares of the common stock.
Warrants may be issued independently or together with the shares of common stock
offered by any prospectus supplement to this prospectus and may be attached to
or separate from such shares. Further terms of the warrants will be set forth in
the applicable prospectus supplement.
The applicable prospectus supplement will describe the terms of the
warrants in respect of which this prospectus is being delivered, including,
where applicable, the following:
-- the title of such warrants;
-- the aggregate number of such warrants;
-- the price or prices at which such warrants will be issued;
-- the designation, terms and number of shares of common stock
purchasable upon exercise of such warrants;
-- the designation and terms of the shares of commons stock with which
such warrants are issued and the number of such warrants issued with
such shares;
-- the date on and after which such warrants and the related common stock
will be separately transferable, including any limitations on
ownership and transfer of such warrants;
-- the price at which each share of common stock purchasable upon
exercise of such warrants may be purchased;
-- the date on which the right to exercise such warrants shall commence
and the date on which such right shall expire;
-- the minimum or maximum amount of such warrants which may be exercised
at any one time;
-- information with respect to book-entry procedures, if any;
-- a discussion of certain federal income tax consequences; and
-- any other terms of such warrants, including terms, procedures and
limitations relating to the exchange and exercise of such warrants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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 part of this prospectus. These documents may include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as Proxy Statements. Any documents that we
subsequently file with the SEC will automatically update and replace the
information previously filed with the SEC. Thus, for example, in the case of a
conflict or inconsistency between information set forth in this prospectus and
information incorporated by reference into this prospectus, you should rely on
the information contained in the document that was filed later.
This prospectus incorporates by reference the documents listed below that
we previously have filed with the SEC and any additional documents that we may
file with the SEC (File No. 000-20713) under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 between the date of this
17
<PAGE> 28
prospectus and the termination of the offering of the securities. These
documents contain important information about us.
1. Our Annual Report on Form 10-K for the year ended December 31, 1998,
filed with the Commission on March 31, 1999, as amended;
2. Our Quarterly Reports on Form 10-Q for the quarter ended March 31, 1999,
filed with the Commission on May 17, 1999, as amended; for the quarter
ended June 30, 1999, filed with the Commission on August 16, 1999; and
for the quarter ended September 30, 1999, filed with the Commission on
November 12, 1999;
3. Our Current Reports on Form 8-K filed under the Exchange Act, filed with
the Commission on February 11, 1999 and August 10, 1999; and
4. The description of our common stock contained in our 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 can obtain a copy of any or all of the documents incorporated by
reference in this prospectus (other than an exhibit to a documents unless that
exhibit is specifically incorporated by reference into that document) from the
SEC on its web site at http://www.sec.gov. You also can obtain these documents
from us without charge by visiting our internet web site at
http://www.entremed.com or by requesting them in writing, by email or by
telephone at the following address:
Francine K. Jackson
Finance Assistant
EntreMed, Inc.
9640 Medical Center Drive
Rockville, Maryland 20850
(301) 738-2493
[email protected]
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement under the Securities
Act of 1933 that registers the distribution of the securities offered under this
prospectus. The registration statement, including the attached exhibits and
schedules and the information incorporated by reference, contains additional
relevant information about us and the securities. The rules and regulations of
the SEC allow us to omit from this prospectus certain information included in
the registration statement.
In addition, we file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy this
information and the registration statement at the following locations of the
SEC:
-- Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20459;
-- Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and
-- New York Regional Office, Seven World Trade Center, 13th Floor, New
York, New York 10048.
You may also read and copy this information at the SEC's Public Reference
Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20459, at prescribed
rates. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains an Internet World Wide Web site that
contains reports, proxy statements and other information about issuers of
securities, like us, who file such material electronically with the SEC. The
address of that web site is http://www.sec.gov. You also can inspect such
reports, proxy statements and other information about us at the offices of the
National Association of Securities
18
<PAGE> 29
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. Our common stock is
traded on The Nasdaq National Market under the symbol "ENMD."
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for us
by Arnold & Porter, Washington, D.C.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1998, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
19
<PAGE> 30
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1,000,000 Shares
ENTREMED LOGO
------------------------
Prospectus Supplement
June 13, 2000
------------------------
BANC OF AMERICA SECURITIES LLC
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
