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As Filed with the Securities and Exchange Commission on January 14, 2000
Registration No. 333-____________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ENTREMED, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of 58-1959440
incorporation or organization) (IRS Employer Identification No.)
9640 Medical Center Drive
Rockville, Maryland 20850
(301) 217-9858
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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John W. Holaday, Ph.D.
Chairman of the Board, President and Chief Executive Officer
ENTREMED, INC.
9640 Medical Center Drive
Rockville, Maryland 20850
(301) 217-9858
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
ROBERT B. OTT, ESQ.
RICHARD E. BALTZ, ESQ.
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004
(202) 942-5000
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Approximate date of commencement of proposed sale to the public: from
time to time as described in the prospectus after the effective date of this
Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [X ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Class of Securities to Amount to be Proposed Maximum Proposed Maximum Amount of
be Registered Registered Offering Price Per Share (1) Aggregate Offering Price (1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value per 3,000,000 $28.4375 $85,312,500 $22,523
share(2)
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Warrants(3) (3) None
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) & (g) of the Securities Act. In no event
will the aggregate number of shares of Common Stock issued from time to
time pursuant to this Registration Statement exceed 3,000,000.
(2) Subject to footnote (1), there also are being registered hereunder an
indeterminate number of shares of Common Stock that may be issued upon
exercise of the Warrants registered hereunder.
(3) Subject to footnote (1), there are being registered hereunder an
indeterminate number of Warrants representing rights to purchase shares
of the Common Stock registered hereunder.
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The Company hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Company shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
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PROSPECTUS
Subject to Completion
Preliminary Prospectus Dated January 14, 2000
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.
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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 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
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
About This Prospectus........................................................2
Risk Factors.................................................................2
The Company.................................................................15
Use of Proceeds.............................................................16
Plan of Distribution........................................................16
Description of Common Stock.................................................17
Description of Warrants.....................................................18
Incorporation of Certain Documents by Reference.............................19
Where You Can Find More Information.........................................20
Legal Matters...............................................................21
Experts.....................................................................21
</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.
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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 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 September 30, 1999, we had an accumulated deficit of approximately
$67,360,000. Significant losses have continued since September 30, 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
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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.
DEPENDENCE 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 2 of human clinical trials for 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.
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. 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(TM) protein, Angiostatin(R) protein,
2-Methoxyestradiol (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
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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.
WE ARE DEPENDENT ON IDENTIFYING NEW COLLABORATIVE PARTNERS
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(R) 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.
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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(R) and Endostatin(TM) protein, 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(R)
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 Endostatin(TM) protein recently has entered Phase
1 clinical trials on humans, and our product candidate thalidomide is currently
being tested in Phase 2 and 3 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(R) protein, 2ME2, 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
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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 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 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.
THERE ARE MARKETING RISKS RELATED TO THE HISTORY OF THALIDOMIDE
One of our products, thalidomide, has caused 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
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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 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 and its officers
and
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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(R) PROTEIN AND ENDOSTATIN(TM) PROTEIN
We have entered into agreements with Covance Biotechnology Services Inc.
under which Covance is responsible for producing sufficient amounts of the
Angiostatin(R) and Endostatin(TM) proteins for preclinical toxicology studies
and for scaling-up the 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 Endostatin(TM) protein. We
have spent significant time and funds to transfer the technology underlying the
production of the Angiostatin(R) and Endostatin(TM) proteins to Covance and
Chiron. As such, we are reliant on Covance and Chiron for the production of
sufficient quantities of the Angiostatin(R) and Endostatin(TM) proteins 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 the Angiostatin(R) and Endostatin(TM) proteins in a cost-effective
manner.
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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 $9,000,000 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 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.
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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
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
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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(R) protein and
Endostatin(TM) protein. While we do not know the potential effectiveness of this
product in comparison to Angiostatin(R) protein, Endostatin(TM) 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:
- failure of EntreMed 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
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 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
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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. 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 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.
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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:
- 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 EntreMed 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
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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 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.
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(R) protein, Endostatin(TM) protein, 2-Methoxyestradiol,
thalidomide and thalidomide analogs, and others which are used to block the
growth of blood vessels supplying primary and metastatic tumors.
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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
"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;
- 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
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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.
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 14,756,197 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
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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 of the Company 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 the assets of the Company 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 ourstockholders 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.
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;
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<PAGE> 22
- 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 prospectus
and the termination of the offering of the securities. These documents contain
important information about us.
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 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. The Company's 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 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.
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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 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."
20
<PAGE> 24
LEGAL MATTERS
The validity of the shares 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.
21
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses in
connection with the sale and distribution of the securities being registered,
all of which will be paid by the Company.
<TABLE>
<CAPTION>
To be Paid
By The
Company
-------
<S> <C>
SEC Registration Fee $22,523
Nasdaq filing fee 17,500
Accounting fees and expenses 10,000
Printing fees and expenses 7,500
Legal fees and expenses 15,000
Miscellaneous expenses 5,000
Total..............................................77,523
</TABLE>
- -----------------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") sets
forth conditions and limitations governing the indemnification of officers and
directors of the Company and certain other persons. Section 145 of the DGCL is
hereby incorporated herein by reference. The Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") and Bylaws
provide that the Company shall indemnify any person to the full extent permitted
by the DGCL.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers or controlling persons of the Company pursuant to the Company's
Certificate of Incorporation and Bylaws and the DGCL, the Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
As authorized by Section 102(b)(7) of the DGCL, the Certificate of
Incorporation also limits, to the fullest extent permitted by Delaware law, a
director's liability for monetary damages for breach of fiduciary duty as a
director. The effect of this provision is to eliminate the rights of the Company
and its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in
II-1
<PAGE> 26
certain limited situations. This provision does not eliminate a director's duty
of care nor does it limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief or remedies such as an injunction or
rescission in the event of a director's breach of the duty of care. These
provisions will not alter the liability of directors under federal securities
laws.
The Company has entered into indemnification agreements with each of its
executive officers and directors, the form of which is filed as Exhibit 10.21 to
the Company's Registration Statement on Form S-1 (File No. 333-3536) and is
incorporated by reference herein.
The Company has obtained and maintains insurance policies having a face
amount totaling $20,000,000 (subject to certain deductible provisions and
exclusions) covering its officers and directors and indemnifying them against
loss on account of claims made against them, including, but not limited to,
damages, judgments, costs and the costs of defense of such claims, arising from
breach of duty, neglect, error, negligent misrepresentations, omission or act,
or any claim arising solely by reason of status as an officer or director.
ITEM 16. EXHIBITS.
The exhibits listed on the Index to Exhibits of this Registration
Statement are filed herewith or are incorporated herein by reference to other
filings.
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by section
10(a)(3) of the Securities Act;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in
volume of securities offered (if the total
dollar value of securities offered would not
exceed that which was registered) and any
deviation from the low or high end of the
estimated maximum offering range may be
reflected in the form of Prospectus filed with
the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price
represent no more than a 20% change in the
maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in
the effective Registration Statement;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the Registration
II-2
<PAGE> 27
Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Securities and Exchange Commission by the Registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Rockville, State of Maryland on January 14, 2000.
ENTREMED, INC.
By: /s/ JOHN W. HOLADAY
-------------------------------------
John W. Holaday, Ph.D.
Chairman of the Board of Directors,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: that each person whose signature appears
below constitutes and appoints John W. Holaday and Donald S. Brooks, or either
of them, individually, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ JOHN W. HOLADAY Chairman of the Board of Directors, January 14, 2000
- --------------------- President and Chief Executive
John W. Holaday, Ph.D. Officer (Principal Executive
Officer)
/s/ R. NELSON CAMPBELL Chief Financial Officer (Principal January 14, 2000
- ------------------------ Financial and Accounting Officer)
R. Nelson Campbell
/s/ DONALD S. BROOKS Director January 14, 2000
- ----------------------
Donald S. Brooks
</TABLE>
II-4
<PAGE> 29
<TABLE>
<S> <C> <C>
/s/ JERRY FINKELSTEIN Director January 14, 2000
- -----------------------
Jerry Finkelstein
/s/ LEE F. MEIER Director January 14, 2000
- ------------------
Lee F. Meier
Director January 14, 2000
- -----------------------
Mark C. M. Randall
/s/ WENDELL M. STARKE Vice Chairman and Director January 14, 2000
- -----------------------
Wendell M. Starke
</TABLE>
II-5
<PAGE> 30
INDEX TO EXHIBITS
Exhibit 5(1) Opinion of Arnold & Porter.
Exhibit 23.1(1) Consent of Ernst & Young LLP.
Exhibit 23.2(1) Consent of Arnold & Porter, included in the opinion filed
as Exhibit 5 hereto.
Exhibit 24(2) Powers of Attorney of certain directors of the Company.
(1) Filed herewith.
(2) Included herein with Signatures beginning on Page II-4.
II-6
<PAGE> 1
EXHIBIT 5
[Arnold & Porter Letterhead]
January 14, 2000
EntreMed, Inc.
9640 Medical Center Drive
Rockville, MD 20850
Re: EntreMed, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel to EntreMed, Inc., a Delaware
corporation ("Company") in connection with a Registration Statement on Form S-3
(the "Registration Statement"), relating to the proposed offer and sale by the
Company of up to 3,000,000 shares of the Company's common stock, $.01 par value
(the "Common Stock") and an indeterminate number of warrants to purchase such
shares of Common Stock. This opinion is furnished to you at your request to
enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17
C.F.R. Section 229.601(b)(5), in connection with the Registration Statement.
In connection with rendering the opinions set forth in this letter, we
have examined such corporate records of the Company, the Company's Amended and
Restated Certificate of Incorporation and amendments thereto, its By-laws, and
resolutions of the Board of Directors, as well as made such investigation of
matters of fact and law and examined such other documents as we deem necessary
for rendering the opinions hereinafter expressed.
The opinions set forth herein are subject to the following
qualifications, which are in addition to any other qualifications contained
herein:
A. We have assumed without verification the genuineness of all
signatures on all documents, the legal capacity and authority of the parties
(other than the Company) executing such documents, the accuracy and completeness
of all documents submitted to us, the authenticity of all documents submitted to
us as originals, and the conformity to original documents of all documents
submitted to us as copies (including telecopies).
B. The opinions set forth herein are based on existing laws, ordinances,
rules, regulations, court and administrative decisions as they presently have
been interpreted and we can give no assurances that our opinions would not be
different after any change in any of the foregoing occurring after the date
hereof.
<PAGE> 2
C. We have assumed without verification that, with respect to the
minutes of any meetings of the Board of Directors or any committees thereof of
the Company that we have examined, due notice of the meetings was given or duly
waived, the minutes accurately and completely reflect all actions taken at the
meetings and a quorum was present and acting throughout the meetings.
D. We have assumed without verification the accuracy, completeness, and
authenticity of all corporate records made available to us by the Company and
statements of fact on which we are relying.
E. We express no opinion as to the effect or application of any laws or
regulations other than the internal laws of the State of Delaware and the
federal laws of the United States. As to matters governed by the laws specified
in the foregoing sentence, we have relied exclusively on the latest standard
compilations of such statutes and laws as reproduced in commonly accepted
unofficial publications available to us.
Based on the foregoing, and upon the assumption that there will be no
material changes in the documents we have examined and the matters investigated
referred to above, we are of the opinion that:
1. the 3,000,000 shares of Common Stock included in the Registration
Statement have been duly authorized and (i) when the Registration Statement
has become effective under the Securities Act of 1933, as amended
(the "Act") and (ii) when issued in exchange for legal consideration of not
less than $0.01 per share, will be validly issued, fully paid, and
nonassessable; and
2. the execution and delivery of the warrants to purchase such shares of
Common Stock included in the Registration Statement have been duly
authorized by all necessary corporate action of the Company and (i) when the
Registration Statement has become effective under the Act and (ii) when
issued in exchange for legal consideration, will be validly issued and will
constitute valid, binding and enforceable obligations of the Company.
This letter does not address any matters other than those expressly
addressed herein. This letter is given for your sole benefit and use. No one
else is entitled to rely hereupon. This letter speaks only as of the date
hereof. We undertake no responsibility to update or supplement it after such
date.
We hereby consent to your filing of this opinion as Exhibit 5 to the
Registration Statement and to reference to our firm under Legal Matters thereof.
By giving such consent we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act, or
the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ ARNOLD & PORTER
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of EntreMed, Inc. for
the registration of 3,000,000 shares of its common stock and warrants to
purchase such shares of common stock and to the incorporation by reference
therein of our report dated February 10, 1999, with respect to the consolidated
financial statements of EntreMed, Inc. included in its Annual Report (Form 10-K)
for the year ended December 31, 1998, filed with the Securities and Exchange
Commission.
/s/ ERNST & YOUNG LLP
January 13, 2000
Atlanta, Georgia
