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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 2000
REGISTRATION NO. 333-36738
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALEXION PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 13-3648318
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)
</TABLE>
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25 SCIENCE PARK
NEW HAVEN, CT 06511
(203) 776-1790
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
------------------------------
LEONARD BELL, M.D.
ALEXION PHARMACEUTICALS, INC.
25 SCIENCE PARK
NEW HAVEN, CT 06511
(203) 776-1790
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
MERRILL M. KRAINES, ESQ.
LAWRENCE A. SPECTOR, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time 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 plan, 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, as amended, 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/
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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--------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 9, 2000
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 WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
[ALEXION LOGO]
$120,000,000 5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2007
AND 1,127,555 SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE NOTES
We issued the notes in a private placement in March 2000. This prospectus
will be used by selling securityholders to resell their notes and the common
stock issuable upon conversion of their notes.
The notes are convertible prior to the maturity date at an initial
conversion price of $106.425 per share, subject to adjustment in specified
events. We will pay interest on the notes each March 15 and September 15. The
first interest payment will be made on September 15, 2000. The notes will mature
on March 15, 2007, unless they are converted into shares of common stock or we
redeem them prior to that date.
We may redeem some or all of the notes on or after March 20, 2003 at the
redemption prices listed in this prospectus, plus accrued interest. In addition,
the holders of the notes may require us to repurchase the notes upon a
repurchase event in cash or, at our option, common stock, at 105% of the
principal amount of the notes, plus accrued interest.
We will not receive any proceeds from the sale by the selling
securityholders of the notes or the common stock.
Our common stock is listed on The Nasdaq National Market under the symbol
"ALXN." On August 9, 2000, the reported last sale price of our common stock on
The Nasdaq National Market was $77.875 per share.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
INVESTING IN THESE NOTES OR OUR COMMON STOCK INVOLVES
A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
August , 2000
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND THE
DOCUMENTS INCORPORATED BY REFERENCE. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE
OF NOTES OR COMMON STOCK. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS MAY CHANGE AFTER THAT DATE.
------------------------
TABLE OF CONTENTS
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Summary............................... 2
Alexion............................... 2
Recent Developments................... 3
Summary of the Notes.................. 4
Risk Factors.......................... 5
Special Note Regarding Forward-Looking
Statements.......................... 14
Use of Proceeds....................... 15
Selling Securityholders............... 16
</TABLE>
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Description of Notes.................. 17
Ratio of Earnings to Fixed Charges.... 28
United States Federal Income Tax
Consequences........................ 29
Plan of Distribution.................. 36
Legal Matters......................... 37
Experts............................... 37
Where You Can Find More Information... 37
</TABLE>
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SUMMARY
THIS SUMMARY PROVIDES AN OVERVIEW OF SELECTED INFORMATION AND DOES NOT
CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER. YOU SHOULD READ THE ENTIRE
PROSPECTUS, INCLUDING THE SECTION ENTITLED "RISK FACTORS," CAREFULLY BEFORE
MAKING AN INVESTMENT DECISION.
ALEXION
We develop pharmaceutical products for the treatment of heart disease,
diseases of the immune system and diseases of the nervous system in humans. Our
product candidates target specific diseases which arise when the human immune
system induces undesired inflammation in the human body. Our product candidates
are designed to block components of the human immune system which cause the
undesired inflammation while allowing beneficial components of the immune system
to remain functional.
One of our lead product candidates, which we call 5G1.1-SC, is for the
treatment of acute inflammation caused by the trauma of heart and lung bypass
procedures during open heart surgery and by heart attacks. A second lead product
candidate, which we call 5G1.1, is under development for the treatment of
rheumatoid arthritis, a chronic autoimmune disease, and membranous nephritis, a
kidney disease. We are also testing 5G.1.1 for the treatment of psoriasis, a
skin disorder, dermatomyositis, a muscle disorder, and pemphigoid, a severe
inflammatory skin disorder. These products are genetically altered antibodies
which block the inflammatory effects of "complement," one of the key components
of the human immune system. Each of these product candidates is undergoing
clinical trials, which test for safety, dosing and effectiveness in humans.
We have a collaboration agreement with Procter & Gamble Pharmaceuticals with
respect to the development and commercialization of 5G1.1-SC. The initial
subject of the collaboration is to study the use of 5G1.1-SC for the treatment
of inflammation caused by heart and lung bypass procedures during open heart
surgery, heart attacks and angioplasty procedures for cleaning clogged arteries.
In addition to our two lead product candidates which inhibit the
inflammatory effects of complement, we are developing another type of
anti-inflammatory drug known as Apogens. Apogens are designed to block
disease-causing T-cells which are another component of the human immune system.
We are currently completing preclinical studies of our first Apogen, targeting
the treatment of patients with multiple sclerosis.
We are also developing methods of blocking the human immune system to permit
the use of cells and organs from non-human species in the treatment of diseases
in humans. This product development program is initially targeting the treatment
of patients with Parkinson's disease and patients with spinal cord injury with
genetically altered pig cells.
We were incorporated in Delaware in January 1992. Our principal executive
offices are located at 25 Science Park, New Haven, Connecticut 06511, and our
telephone number is (203) 776-1790.
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RECENT DEVELOPMENTS
CLINICAL AND PRECLINICAL STUDIES
In February 2000, the FDA designated 5G1.1 for the treatment of patients
with the kidney disease known as membranous nephritis as a "fast track" product
eligible for expedited development and FDA review. We began enrolling patients
with this disease in a Phase II trial for effectiveness in 1999.
In March 2000, we announced results of an animal (or preclinical) study of
one of our anti-inflammatory complement inhibitor product candidates. Our
results showed that administration of our anti-inflammatory complement inhibitor
substantially prevented intestinal and lung damage associated with
gastrointestinal ischemia, a disease reducing the flow of blood to the stomach
and intestines. Further, in these preclinical studies, our complement inhibitor
therapy also substantially prevented increases in an inflammatory substance
called cytokine TNF-alpha, in the intestine.
In March 2000, we also announced that The National Institutes of Health
awarded a grant of approximately $1.0 million to the University of Colorado
Health Sciences Center to fund a multi-center study of, 5G1.1 in patients with
lupus nephritis, a kidney disease.
In March 2000, we and scientists from the Yale University School of
Medicine, presented results of a study in 11 patients with acute coronary
syndrome, a type of heart problem in which there is a sudden and inadequate
supply of blood and oxygen to the heart, and four patients with stable angina, a
type of heart problem in which there is a gradual reduction in the supply of
blood and oxygen to the heart. We observed severe inflammation and production of
harmful byproducts of complement activation in the arteries leading to the
heart. This study provides evidence that drugs which target and inhibit
complement activation could have substantial value in treating disease.
In April 2000, we announced the publication of a scientific study
demonstrating that animals deficient in the complement known as C5 are not
susceptible to the onset of active arthritis. The study resulted from
preclinical studies that are part of a collaboration between Alexion and Yale
University scientists. This study also provides evidence of the potential value
of drugs which inhibit complement activation.
COLLABORATION AGREEMENT
In February 2000, we entered into a research and license agreement with The
Brigham and Women's Hospital, Inc. Under this license agreement, we received
exclusive worldwide rights to new anti-inflammatory technologies and to
associated therapeutic products. These products consist of proteins which bind
to a substance that activates inflammatory complement in the human immune
system. These products may have broad therapeutic applications in patients
suffering from hardening of the arteries, problems with the flow of blood to the
heart, strokes and other circulatory system disorders.
3
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SUMMARY OF THE NOTES
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<S> <C>
SECURITIES OFFERED................... $120,000,000 principal amount of 5 3/4% convertible
subordinated notes due March 15, 2007.
INTEREST............................. 5 3/4% per annum on the principal amount, payable
semi-annually in arrears in cash on March 15 and September
15 of each year, beginning September 15, 2000. The first
interest payment will include interest from March 8, 2000.
CONVERSION........................... Holders may convert all or a portion of the notes at any
time on or before redemption, repurchase or maturity at a
conversion price of $106.425 per share of common stock,
subject to adjustment in specified events. Upon conversion
of the notes, except as otherwise described in this
prospectus, you will not receive any cash representing
accrued interest. See "Description of Notes--Conversion of
the Notes."
SUBORDINATION........................ The notes are subordinated to all of our existing and future
senior indebtedness.
OUTSTANDING INDEBTEDNESS............. As of July 31, 2000, Alexion and its subsidiaries had
approximately $4.3 million of indebtedness outstanding, all
of which is senior to the notes. We are not prohibited from
incurring debt, including senior indebtedness, under the
indenture. See "Description of Notes--Subordination of the
Notes."
OPTIONAL REDEMPTION.................. We may redeem some or all of the notes on or after March 20,
2003, at the declining redemption prices listed in this
prospectus, plus accrued interest. See "Description of
Notes--Optional Redemption by Alexion."
REPURCHASE AT HOLDER'S OPTION UPON A
REPURCHASE EVENT................... You may require us to repurchase your notes upon a
repurchase event in cash, or, at our option, in common
stock, at 105% of the principal amount of the notes, plus
accrued and unpaid interest.
REGISTRATION RIGHTS; LIQUIDATED
DAMAGES............................ If we do not register the sale of the notes by the
noteholders and the sale of the shares of common stock
issuable upon conversion of the notes by September 4, 2000,
we will be required to pay liquidated damages to the
noteholders. See "Description of the Notes--Registration
Rights."
USE OF PROCEEDS...................... We will not receive any cash proceeds from the sale of the
notes or underlying common stock by the selling
securityholders.
NASDAQ NATIONAL MARKET SYMBOL FOR
COMMON STOCK....................... ALXN.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE YOU DECIDE
TO INVEST IN THE NOTES OR THE COMMON STOCK. YOU SHOULD ALSO CONSIDER THE OTHER
INFORMATION IN THIS PROSPECTUS AND INFORMATION INCORPORATED BY REFERENCE IN THIS
PROSPECTUS. THE RISKS AND UNCERTAINTIES BELOW ARE NOT THE ONLY ONES FACING
ALEXION BECAUSE WE ARE ALSO SUBJECT TO ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN TO US. IF ANY OF THESE RISKS ACTUALLY OCCURS, OUR BUSINESS,
FINANCIAL CONDITION, OPERATING RESULTS OR CASH FLOWS COULD BE HARMED.
RISKS RELATED TO OUR BUSINESS
IF WE CONTINUE TO INCUR OPERATING LOSSES, WE MAY BE UNABLE TO CONTINUE OUR
OPERATIONS.
We have incurred losses since we started our company in January 1992. As of
April 30, 2000, we had an accumulated deficit of approximately $62.1 million. If
we continue to incur operating losses and fail to become a profitable company,
we may be unable to continue our operations. Since we began our business, we
have focused on research and development of product candidates. We have no
products that are available for sale. We expect to continue to operate at a net
loss for at least the next several years as we continue our research and
development efforts, continue to conduct clinical trials and develop
manufacturing, sales, marketing and distribution capabilities. Our future
profitability depends on our receiving regulatory approval of our product
candidates and our ability to successfully manufacture and market approved
drugs. The extent of our future losses and the timing of our profitability are
highly uncertain.
IF WE DO NOT OBTAIN REGULATORY APPROVAL FOR OUR DRUG PRODUCTS WE WILL NOT BE
ABLE TO SELL OUR DRUG PRODUCTS.
We cannot sell or market our drugs without regulatory approval. If we cannot
obtain regulatory approval for our products, the value of our company and our
results of operations will be harmed. In the United States, we must obtain
approval from the U.S. Food and Drug Administration, or FDA, for each drug that
we intend to sell. Obtaining FDA approval is typically a lengthy and expensive
process, and approval is highly uncertain. Foreign governments also regulate
drugs distributed outside the United States. None of our product candidates has
received regulatory approval to be marketed and sold in the United States or any
other country. We do not anticipate receiving regulatory approval of any of our
product candidates for at least the next several years.
IF OUR DRUG TRIALS ARE DELAYED OR ACHIEVE UNFAVORABLE RESULTS, WE WILL NOT
BE ABLE TO OBTAIN REGULATORY APPROVAL FOR OUR PRODUCTS.
We must conduct extensive testing of our product candidates before we can
obtain regulatory approval for our products. We need to conduct both preclinical
animal testing and clinical human trials. These tests and trials may not achieve
favorable results. We would need to reevaluate any drug that did not test
favorably and either alter the drug or the dose, or abandon the drug development
project. As a result, we would not be able to obtain regulatory approval on a
timely basis, if ever.
There are other reasons why drug testing could be delayed. For human trials,
patients must be recruited and each product candidate must be tested for each
clinical indication, at various doses and formulations. Also to ensure safety
and effectiveness, the effect of drugs often must be studied over a long period
of time, especially for the chronic diseases that we are studying. Unfavorable
results or insufficient patient enrollment in our clinical trials could delay or
cause us to abandon a product development program.
Additional factors that can cause delay or termination of our clinical
trials include:
- slow patient enrollment;
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<PAGE>
- long treatment time required to demonstrate effectiveness;
- lack of sufficient supplies of the product candidate;
- adverse medical events or side effects in treated patients;
- lack of effectiveness of the product candidate being tested; and
- lack of sufficient funds.
IF WE FAIL TO OBTAIN THE CAPITAL NECESSARY TO FUND OUR OPERATIONS, WE WILL
BE UNABLE TO CONTINUE OR COMPLETE OUR PRODUCT DEVELOPMENT.
In the future, we will need to raise substantial additional capital to fund
operations and complete our product development. We may not get funding when we
need it or on favorable terms. If we cannot raise adequate funds to satisfy our
capital requirements, we may have to delay, scale-back or eliminate our research
and development activities or future operations. We might have to license our
technology to others. This could result in sharing revenues which we might
otherwise retain for ourselves. Any of these actions may harm our business.
The amount of capital we may need depends on many factors, including:
- the progress, timing and scope of our research and development programs;
- the progress, timing and scope of our preclinical studies and clinical
trials;
- the time and cost necessary to obtain regulatory approvals;
- the time and cost necessary to further develop manufacturing processes,
arrange for contract manufacturing or build manufacturing facilities and
obtain the necessary regulatory approvals for those facilities;
- the time and cost necessary to develop sales, marketing and distribution
capabilities; and
- any new collaborative, licensing and other commercial relationships that
we may establish.
IF OUR COLLABORATION WITH PROCTER & GAMBLE IS TERMINATED, WE MAY BE UNABLE
TO COMMERCIALIZE 5G1.1-SC IN THE TIME EXPECTED, IF AT ALL, AND OUR BUSINESS
WOULD BE HARMED.
We rely exclusively on Procter & Gamble to provide funding and additional
resources for the development and commercialization of 5G1.1-SC. These include
funds and resources for:
- clinical development and manufacturing;
- obtaining regulatory approvals; and
- sales, marketing and distribution efforts worldwide.
We cannot guarantee that Procter & Gamble will devote the resources
necessary to successfully develop and commercialize 5G1.1-SC. Either party may
terminate our collaboration agreement for specified reasons, including a
material breach or the occurrence of a change of control.
Termination of our agreement with Procter & Gamble would cause significant
delays in the development of 5G1.1-SC and result in additional development
costs. We would need to fund the development and commercialization of 5G1.1-SC
on our own or identify a new development partner. We might also have to repeat
testing already completed with Procter & Gamble.
IF WE ARE UNABLE TO ENGAGE AND RETAIN THIRD-PARTY COLLABORATORS, OUR
RESEARCH AND DEVELOPMENT EFFORTS MAY BE DELAYED.
We depend upon third-party collaborators to assist us in the development of
our product candidates. If any of our existing collaborators breaches or
terminates its agreement with us or does not
6
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perform its development work under the agreement, we would experience
significant delays in the development or commercialization of our product
candidates. We would also experience significant delays if we cannot engage
additional collaborators when required. In either event, we would be required to
devote additional funds or other resources to these activities or to terminate
them.
We cannot assure you that:
- we will be able to negotiate acceptable collaborative agreements to
develop or commercialize our products;
- any arrangements with third parties will be successful; or
- current or potential collaborators will not pursue treatments for other
diseases or seek other ways of developing treatments for our disease
targets.
IF WE CANNOT PROTECT THE CONFIDENTIALITY AND PROPRIETARY NATURE OF OUR TRADE
SECRETS, OUR BUSINESS AND COMPETITIVE POSITION WILL BE HARMED.
Our business requires using sensitive technology, techniques and proprietary
compounds which we protect as trade secrets. However, since we are a small
company, we also rely heavily on collaboration with suppliers, outside
scientists and other drug companies. Collaboration presents a strong risk of
exposing our trade secrets. If our trade secrets were exposed, it would help our
competitors and adversely affect our business prospects.
In order to more effectively protect our drugs and technology, we need to
obtain patents covering the drugs and technologies we develop. Our drugs are
expensive and time-consuming to test and develop. Without patent protection,
competitors may copy our methods, or the chemical structure or other aspects of
our drug. Even if we obtain patents, the patents may not be broad enough to
protect our drugs from copy-cat products.
IF WE ARE FOUND TO BE INFRINGING ON PATENTS OWNED BY OTHERS, WE MAY BE
FORCED TO OBTAIN A LICENSE TO CONTINUE THE SALE OR DEVELOPMENT OF OUR DRUGS AND
PAY DAMAGES.
Parts of our technology--techniques and proprietary compounds and potential
drug candidates--may conflict with patents owned by or granted to others. If we
cannot resolve these conflicts, we may be liable for damages or be required to
obtain costly licenses. For example, we are aware of broad patents owned by
others relating to the manufacture, use and sale of recombinant humanized
antibodies, recombinant humanized single chain antibodies and genetically
engineered animals. Our products also consist of genetically engineered
antibodies and tissues from animals.
We have also received notices claiming the existence of specific patents
which may be relevant to the development of some of our drug candidates. In
response to some of these notices, we have obtained licenses. However, with
regard to other patents, we have either determined in our judgment that:
- our products do not infringe the patents;
- we do not believe the patents are valid; or
- we have identified and are testing various modifications which we believe
should not infringe the patents and which should permit commercialization
of our product candidates.
Any patent holders could sue us for damages and seek to prevent us from
selling or developing our drugs. Legal disputes can be costly and time consuming
to defend. If any of these actions are successful, we could be required to pay
damages or to obtain a license to sell or develop our drugs. A required license
may not be available on acceptable terms, if at all.
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IF THE TESTING OR USE OF OUR PRODUCTS HARMS PEOPLE, WE COULD BE SUBJECT TO
COSTLY AND DAMAGING PRODUCT LIABILITY CLAIMS.
The testing, manufacturing, marketing and sale of drugs for use in humans
exposes us to product liability risks. Side effects and other problems from
using our products could give rise to product liability claims against us. We
might have to recall our products, if any, from the marketplace. Some of these
risks are unknown at this time. For example, little is known about the potential
long-term health risks of transplanting pig tissue into humans, a goal of our
UniGraft product development program.
In addition, we may be sued by people who participate in our clinical
trials. A number of patients who participate in such trials are already
critically ill when they enter a study. Any waivers we may obtain from people
who sign up for our trials may not protect us from liability or litigation. Our
product liability insurance may not cover all potential liabilities. Moreover,
we may not be able to maintain our insurance on acceptable terms. As a result of
these factors, a product liability claim, even if successfully defended, could
have a material adverse effect on our business, financial condition and results
of operations.
IF WE CANNOT MANUFACTURE OUR DRUG CANDIDATES IN SUFFICIENT AMOUNTS AT
ACCEPTABLE COSTS AND ON A TIMELY BASIS, WE MAY BE UNABLE TO MEET THE NEED FOR
MATERIALS FOR PRODUCT TESTING AND LATER, FOR POTENTIAL SALE IN THE MARKET.
EITHER EVENT WOULD HARM OUR BUSINESS.
For our drug trials, we need to produce sufficient amounts of product for
testing. We do not have the capacity to produce more than one product candidate
at a time. In addition, our small manufacturing plant cannot manufacture enough
of our product candidates for later stage clinical development. We depend on a
few outside suppliers for manufacturing. If we experience interruptions in the
manufacture of our products for testing, our drug development efforts will be
delayed. If any of our outside manufacturers stops manufacturing our products or
reduces the amount manufactured, we will need to find other alternatives. If we
are unable to find an acceptable outside manufacturer on reasonable terms, we
will have to divert our own resources to manufacturing. As a result, our ability
to conduct testing would be materially adversely affected. Submission of
products and new development programs for regulatory approval would be delayed.
Our competitive position and our prospects for achieving profitability could be
materially and adversely affected.
We have no experience or capacity for manufacturing drug products in volumes
that will be necessary to support commercial sales. If we are unable to
establish and maintain commercial scale manufacturing within our planned time
and cost parameters, sales of our products and our financial performance will be
adversely affected.
We may encounter problems in any of the following areas as we attempt to
increase the scale, process or size of manufacturing:
- design, construction and qualification of manufacturing facilities that
meet regulatory requirements;
- production yields from the manufacturing process;
- purity of our drug products;
- quality control and assurance;
- shortages of qualified personnel; and
- compliance with FDA regulations.
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IF OUR BUSINESS AND PRODUCTS, EVEN AFTER REGULATORY APPROVAL IS OBTAINED,
FAIL TO COMPLY WITH REGULATORY REQUIREMENTS, OUR ABILITY TO SELL PRODUCTS AND
CONDUCT BUSINESS WILL BE HARMED.
Even if we receive regulatory approval for any product, our business will
always be subject to substantial regulation by the FDA or a comparable foreign
regulatory agency. The discovery of previously unknown problems with a product
or its manufacture may result in restrictions on the product or manufacturer,
including withdrawal of the product from the market. The consequences for
failure to comply with applicable regulatory requirements can be serious,
resulting in:
- warning letters;
- fines and other civil penalties;
- suspended regulatory approvals;
- refusal to approve pending applications or supplements to approved
applications;
- refusal to permit exports from the United States;
- product recalls;
- seizure of products;
- injunctions;
- operating restrictions;
- total or partial suspension of production; and/or
- criminal prosecutions.
Any of these consequences could result in withdrawal of approval, or require
reformulation of the drug, additional preclinical testing or clinical trials,
changes in labeling of the product, and/or additional marketing applications. We
would be required to expend time and resources in correcting the problem,
including any adverse publicity associated with the problem, in order to put the
product back on the market. These delays and uses of resources would hurt our
business, profitability and reputation.
IF WE ARE UNABLE TO ESTABLISH SALES, MARKETING AND DISTRIBUTION
CAPABILITIES, OR TO ENTER INTO AGREEMENTS WITH THIRD PARTIES TO DO SO, WE WILL
BE UNABLE TO SUCCESSFULLY MARKET AND SELL FUTURE DRUG PRODUCTS.
We have no sales, marketing or distribution personnel or capabilities. If we
are unable to establish those capabilities, either by developing our own
capabilities or entering into agreements with others, we will not be able to
successfully sell our products. In that event, we will not be able to generate
significant revenues. We cannot guarantee that we will be able to hire the
qualified sales and marketing personnel we need. We may not be able to enter
into any marketing or distribution agreements on acceptable terms, if at all. We
are relying on Procter & Gamble for sales, marketing and distribution, of
5G.1-SC. Procter & Gamble, or any future collaborators, may not succeed at
selling any of our future drug products.
IF WE ARE UNABLE TO OBTAIN REIMBURSEMENT FROM GOVERNMENT HEALTH
ADMINISTRATION AUTHORITIES, PRIVATE HEALTH INSURERS AND OTHER ORGANIZATIONS FOR
OUR FUTURE PRODUCTS, OUR PRODUCTS MAY BE TOO COSTLY FOR REGULAR USE AND OUR
ABILITY TO GENERATE REVENUES WOULD BE HARMED.
Our future revenues and profitability will be affected by the continuing
efforts of governmental and private third-party payors to contain or reduce the
costs of health care through various means. If these entities refuse to provide
reimbursement with respect to our products or determine to provide a low level
of reimbursement, our products may be too costly for general use. Any limitation
on the use of our products will have a material adverse effect on our ability to
generate revenues and achieve
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profitability. We expect a number of federal, state and foreign proposals to
control the cost of drugs through government regulation. We are unsure of the
form that any health care reform legislation may take or what actions any of
these authorities and private payors may take in response to the proposed
reforms. Therefore, we cannot precisely predict the effect of any reform on our
business.
EVEN IF WE SUCCESSFULLY DEVELOP OUR PRODUCTS FOR TRANSPLANTING ANIMAL CELLS
INTO HUMANS, THIS TECHNOLOGY MAY NOT BE ACCEPTED BY THE MARKET DUE TO MEDICAL
CONCERNS OR UNANTICIPATED REGULATION.
Our program for the development of animal cells for transplantation into
humans may never result in any therapeutic products. This technology is subject
to extensive clinical testing and we are not aware of any such technology that
has been approved for sale by the FDA or comparable foreign regulatory
authorities. Even if we succeed in developing these products, our products may
not be widely accepted by the medical community or third-party payors until more
facts are established and ethical consensus is reached regarding the use of
animal cells. In addition, concerns relating to the risk of introducing new
animal viruses to infect the human species through the transplantation process
may also create additional regulatory hurdles for FDA approval. If accepted, the
degree of acceptance may limit the size of the market for our products.
Moreover, due to the controversial nature of transplantation of animal cells
into humans generally, market prices for our securities may be subject to
increased volatility.
IF OUR COMPETITORS GET TO THE MARKETPLACE BEFORE WE DO WITH BETTER OR
CHEAPER DRUGS, OUR DRUGS MAY NOT BE PROFITABLE TO SELL OR TO CONTINUE TO
DEVELOP.
Each of Avant Immunotherapeutics, Inc, Leukosite Inc., a subsidiary of
Millenium Pharmaceuticals, Inc., Tanox, Inc., Abbott Laboratories, Gliatech Inc.
and Biocryst Pharmaceuticals have publicly announced their intentions to develop
drugs which target the inflammatory effects of complement in the immune system.
These and other large pharmaceutical companies with significantly greater
resources than ours, may develop, manufacture and market better or cheaper drugs
than our product candidates. They may establish themselves in the marketplace
before we are able to even finish our clinical trials. Larger pharmaceutical
companies also compete with us to attract academic research institutions as drug
development partners, including for licensing these institutions' proprietary
technology. If our competitors successfully enter into such arrangements with
academic institutions, we will be precluded from pursuing those specific unique
opportunities and may not be able to find equivalent opportunities elsewhere.
IF WE FAIL TO RECRUIT AND RETAIN PERSONNEL, OUR RESEARCH AND PRODUCT
DEVELOPMENT PROGRAMS MAY BE DELAYED.
We are highly dependent upon the efforts of our senior management and
scientific personnel. There is intense competition for qualified scientific and
technical personnel. Since our business is very science-oriented and
specialized, we need to continue to attract and retain such people. We may not
be able to continue to attract and retain the qualified personnel necessary for
developing our business. If we lose the services of, or fail to recruit, key
scientific and technical personnel, our research and product development
programs would be significantly and detrimentally affected.
In particular, we highly value the services of Dr. Leonard Bell, our
President and Chief Executive Officer. The loss of his services could materially
and adversely affect our ability to achieve our development objectives.
THE RIGHTS THAT HAVE BEEN AND MAY IN THE FUTURE BE GRANTED TO OUR
STOCKHOLDERS MAY FRUSTRATE ATTEMPTS BY OTHERS TO TAKE OVER OUR COMPANY.
We have in place a shareholder rights plan, or "poison pill," which enables
our board of directors to issue rights to purchase preferred stock when someone
acquires 20% or more of the outstanding shares of our common stock. As a result
of the plan, anyone wishing to take over the company would
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<PAGE>
most likely be forced to negotiate a transaction with the company in order not
to trigger the pill. If we refused to negotiate, or negotiations were
unsuccessful, a proposed takeover could be frustrated. This would prevent our
stockholders from participating in a takeover or tender offer which might be of
substantial value to them.
In addition, under our certificate of incorporation, our board of directors
is authorized to issue one or more series of preferred stock with rights and
preferences determined by the board. The preferences and rights of any preferred
stock may be superior to those of the holders of our common stock. By issuing
preferred stock with superior right to the common stock, the board could
frustrate a person who wishes to take over the company through a tender offer
for the outstanding common stock. These provisions are also intended to
encourage any person interested in acquiring us to negotiate with and obtain the
approval of our board of directors. These provisions could also delay, deter or
frustrate a merger or change in control.
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RISKS RELATED TO THE NOTES
IF WE CANNOT GENERATE ENOUGH CASH TO MAKE PAYMENTS TO REPAY OUR CREDITORS,
OUR ABILITY TO CONDUCT OUR BUSINESS AND OPERATIONS WILL BE MATERIALLY AND
ADVERSELY AFFECTED.
Our ability to make payments on and to refinance our debt, including the
notes, will depend on our ability to generate cash. We currently have no
products that are available for commercial sale. Our sole sources of cash, today
and for the foreseeable future, consist of cash from financing activities and
revenues from research and development support payments, license fees and
milestone payments under collaborations with third parties and awards under
various government grants. While the cash we have generated has been sufficient
to service our existing debt, the cash generated from these sources is not
expected to be sufficient to repay the notes. If we are unable to pay or service
the notes and our other indebtedness when due, we may not be able to continue
our business.
NO ASSETS ARE PLEDGED TO SECURE THE DEBT OWED TO NOTEHOLDERS. THEREFORE, IF
WE DO NOT HAVE ENOUGH MONEY TO REPAY OUR OBLIGATIONS TO ALL OF OUR CREDITORS,
ANY PAYMENTS WE MAKE WILL BE MADE TO ALL EXISTING AND FUTURE CREDITORS PRIOR TO
MAKING PAYMENTS TO THE NOTEHOLDERS.
The notes are unsecured and subordinated in right of payment in full to all
of our existing and future senior indebtedness. As a result, in the event of our
bankruptcy, liquidation or reorganization or upon acceleration of the notes due
to an event of default under the indenture and in certain other events, our
assets will be available to pay obligations on the notes only after all senior
indebtedness has been paid in full. After retiring our senior indebtedness, we
may not have sufficient assets remaining to pay amounts due on any or all of the
notes then outstanding. In addition, in the event of any acceleration of the
notes because of an event of default, holders of any senior indebtedness would
be entitled to payment in full before the holders of the notes are entitled to
receive any payment or distribution.
SINCE THE NOTES ARE NOT PROTECTED BY RESTRICTIVE COVENANTS, WE MAY FREELY
INCUR ADDITIONAL INDEBTEDNESS OR CONDUCT OTHER ACTIVITIES, WHICH WOULD LIMIT OUR
ABILITY TO MAKE PAYMENTS TO THE NOTEHOLDERS.
The indenture governing the notes does not contain any financial or
operating covenants or restrictions on the payments of dividends, the incurrence
of indebtedness or the issuance or repurchase of securities by us or any of our
subsidiaries. Accordingly, actions we take in the conduct and financing of our
business could adversely affect our ability to pay the notes. The indenture
contains no covenants or other provisions to afford protection to holders of the
notes in the event of a fundamental change involving Alexion except for certain
limited rights to have us redeem the notes. We cannot assure the noteholders
that we will be able to do so.
IF THE NOTEHOLDERS REQUIRE US TO REDEEM THE NOTES AS PERMITTED UNDER THE
INDENTURE, WE MAY NOT BE ABLE TO PAY THE NOTES IN CASH OR AT ALL.
The noteholders may require us to repurchase all or any portion of the notes
upon a repurchase event which is defined in the indenture. We may not have
sufficient cash funds to repurchase the notes upon a repurchase event. We may
elect, subject to certain conditions, to pay the repurchase price in shares of
common stock. Although there are currently no restrictions on our ability to pay
the repurchase price, future debt agreements may prohibit us from repaying the
repurchase price in either cash or common stock. If we are prohibited from
repurchasing the notes, we could seek consent from our lenders to repurchase the
notes. If we are unable to obtain their consent, we could attempt to refinance
the notes. If we are unable to obtain their consent, we could attempt to
refinance the notes and it would result in an event of default under the
indenture. An event of default under the indenture could result in a further
event of default under our other then-existing debt. In addition, the occurrence
of the repurchase event itself may be an event of default under our other debt.
As a result, we would be prohibited from paying amounts due on the notes under
the subordination provisions of the indenture.
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IF A PUBLIC MARKET DOES NOT DEVELOP FOR THE NOTES, THE NOTES MAY BE
DIFFICULT TO SELL OR TRADE OR VALUE.
No person is obligated to make a market in the notes and to the extent
anyone makes a market in the notes, this market making activity may be
discontinued at any time without notice. We do not intend to list the notes for
trading on any national securities exchange or on the Nasdaq National Market. As
a result of these factors, we cannot assure you that any market for the notes
will develop. Even if a market develops, we cannot assure you that it will be
maintained. In either event, the trading price of the notes and the ability of
the noteholder to trade notes could be materially adversely affected.
SINCE THE NOTES ARE CONVERTIBLE INTO COMMON STOCK, THE VALUE OF THE NOTES
MAY BE SEVERELY AFFECTED BY THE VOLATILITY OF THE PRICE OF OUR COMMON STOCK.
The market prices of securities of small capitalization biotechnology
companies, including ours, have historically been highly volatile. Since
August 1, 1999, the intraday sales price of our common stock has ranged from a
low of $10.00 per share to a high of $119.88 per share. The trading price of our
common stock has been extremely volatile and may continue to be volatile, due to
a variety of factors, including:
- results of our future clinical trials of our two complement inhibitors;
- results of preclinical testing and clinical trials by us or our
competitors;
- technological innovations or new therapeutic products;
- governmental regulations;
- developments in patent or other proprietary rights;
- litigation;
- public concern as to the safety of products developed by us or others;
- comments by security analysts;
- quarterly variations in results;
- general market conditions in our industry.
In addition, if any of the risks described in these "Risk Factors" actually
occurred, it could have a dramatic and adverse impact on the market price of our
common stock.
BECAUSE THERE IS A SUBSTANTIAL NUMBER OF SHARES THAT ARE ELIGIBLE FOR FUTURE
SALE, THE MARKET PRICE OF OUR COMMON STOCK MAY DROP WITH FUTURE SALES, WHICH MAY
IMPAIR THE VALUE OF THE NOTES.
As of June 30, 2000, we had 15,101,060 shares of common stock outstanding,
excluding 39,759 shares issuable upon the exercise of warrants and 2,202,678
shares issuable upon the exercise of options granted under our existing stock
option plans. We cannot predict the effect, if any, that future sales of the
notes or shares of common stock, including common stock issuable upon conversion
of the notes, or the availability of the notes or shares of common stock for
future sale, will have on the market price of common stock prevailing from time
to time.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains some "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995 and information relating to us
that are based on the beliefs of our management, as well as assumptions made by
and the information currently available to our management. When used in this
prospectus, the words "estimate," "project," "believe," "anticipate," "intend,"
"expect" and similar expressions are intended to identify forward-looking
statements. These statements reflect our current views with respect to future
events and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in these forward-looking
statements, including those risks discussed in this prospectus.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. Except for
special circumstances in which a duty to update arises when prior disclosure
becomes materially misleading in light of subsequent events, we do not intend to
update any of these forward-looking statements to reflect events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events.
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USE OF PROCEEDS
We will not receive any cash proceeds from the sale of the notes or
underlying common stock by the selling securityholders. See "Selling
Securityholders" for a list of those persons and entities receiving the proceeds
from the sales of the notes or the underlying common stock.
We are using the proceeds of approximately $116.1 million from the sale of
the notes to fund research and clinical development activities, manufacturing
development, manufacturing and commercialization of our product candidates; drug
discovery; as well as for working capital and general corporate purposes,
including for potential acquisitions of additional technologies and compounds.
Our management retained broad discretion in the allocation of the net proceeds
of the offering. Pending such uses, we invested the net proceeds in short-term,
investment grade, interest-bearing securities.
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SELLING SECURITYHOLDERS
We originally sold the notes to the initial purchasers on March 3, 2000. The
initial purchasers have advised us that they resold the notes in transactions
exempt from the registration requirements of the Securities Act of 1933 to
"qualified institutional buyers" (as defined in Rule 144A of the Securities
Act). These subsequent purchasers, or their transferees, pledgees, donees or
successors, may from time to time offer and sell any of the notes and/or shares
of our common stock issuable upon conversion of the notes pursuant to this
prospectus.
We are registering these notes and shares of common stock pursuant to a
registration rights agreement, dated March 3, 2000, between us and the initial
purchasers. Under the agreement, we filed the registration statement of which
this prospectus is part. We must also keep the registration statement effective
until March 8, 2002 or the earlier of (a) the sale pursuant to the registration
statement of all the securities registered, (b) the date on which all the
securities (x) held by the persons who are not our affiliates may sell such
securities under Rule 144(k) or (y) cease to be outstanding or (c) a subsequent
shelf registration statement covering all of these securities has been declared
effective under the Securities Act.
As of the date of this prospectus, the aggregate principal amount of notes
outstanding is $120,000,000. Prior to any use of this prospectus in connection
with an offering of the notes and/or shares of common stock, this prospectus
will be supplemented to set forth the name and number of shares beneficially
owned by the selling securityholder intending to sell these notes and/or shares
of common stock and the number of these securities to be offered. The prospectus
supplement will also disclose whether any selling securityholder selling in
connection with the prospectus supplement has held any position or office with,
been employed by or otherwise has had a material relationship with us or any of
our affiliates during the three years prior to the prospectus supplement.
Because the selling securityholders may offer all or some of the notes and
shares of common stock issued upon conversion of the notes, and because there
are currently no agreements, arrangements or understandings with respect to the
sale of any of the notes or shares of common stock that will be held by the
selling securityholders after completion of this offering, no estimate can be
given as to the principal amount of notes or shares of common stock that will be
held by the selling securityholders after completion of this offering. See "Plan
of Distribution."
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DESCRIPTION OF NOTES
We issued the notes under an indenture, dated as of March 8, 2000, between
Alexion and The Chase Manhattan Bank, as trustee. The following summarizes some,
but not all, of the provisions of the notes and the indenture.
GENERAL
The notes are unsecured general obligations of Alexion and will be
subordinate in right of payment as described under "--Subordination of the
Notes." The notes are convertible into common stock of Alexion as described
under "--Conversion of the Notes." The notes will be limited to $120,000,000
aggregate principal amount. The notes will be issued only in denominations of
$1,000 or in multiples of $1,000.
The notes bear interest at 5 3/4% per annum from March 8, 2000, or from the
most recent payment date to which interest has been paid or duly provided for.
Interest will be payable semi-annually in arrears on March 15 and September 15,
commencing on September 15, 2000, to holders of record at the close of business
on the preceding March 1 and September 1, respectively, except:
- that the interest payable upon redemption or repurchase, unless the date
of redemption or repurchase is an interest payment date, will be payable
to the person to whom principal is payable; and
- as set forth in the next succeeding paragraph.
In the case of any note, or portion of any note, that is converted into
common stock of Alexion during the period from, but excluding, a record date for
any interest payment date to, but excluding, that interest payment date, either:
- if the note, or portion of the note, has been called for redemption on a
redemption date that occurs during that period, or is to be repurchased on
a repurchase date, as defined below, that occurs during that period,
Alexion will not be required to pay interest on that interest payment date
in respect of any note, or portion of any note, that is so redeemed or
repurchased; or
- if otherwise, any note or portion of any note that is not called for
redemption is submitted for conversion during that period must be
accompanied by funds equal to the interest payable on that interest
payment date on the principal amount so converted.
See "--Conversion of the Notes."
Interest will be paid, at Alexion's option, either:
- by check mailed to the address of the person entitled to the interest as
it appears in the note register, provided that a holder of notes with an
aggregate principal amount in excess of $10 million will, at the written
election of the holder, filed on or before the relevant record date with
the trustee, be paid by wire transfer in immediately available funds; or
- by transfer to an account maintained by that person located in the United
States.
Payments to The Depository Trust Company, New York, New York, or DTC, will
be made by wire transfer of immediately available funds to the account of DTC or
its nominee. Interest will be computed on the basis of a 360-day year composed
of twelve 30-day months.
The notes will mature on March 15, 2007 unless earlier converted, redeemed
or repurchased as described below. The indenture does not contain any financial
covenants or restrictions on the payment of dividends, the incurrence of
indebtedness, or the issuance or repurchase of securities by Alexion or any of
its subsidiaries. The indenture contains no covenants or other provisions to
protect holders of the notes in the event of a highly leveraged transaction or a
change in control of Alexion except to the extent described below under
"--Repurchase at Option of Holders."
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CONVERSION OF THE NOTES
Any registered holder of notes may, at any time prior to close of business
on the business day prior to the date of repurchase, redemption or final
maturity of the notes, as appropriate, convert the principal amount of any notes
or portions thereof, in denominations of $1,000 or integral multiples of $1,000,
into common stock of Alexion, at $106.425 per share, subject to adjustment as
described below. Except as described below, no payment or other adjustment will
be made on conversion of any notes for interest accrued thereon or for dividends
on any common stock issued upon conversion. If any notes not called for
redemption are converted between a record date and the next interest payment
date, those notes must be accompanied by funds equal to the interest payable on
the next interest payment date on the principal amount so converted. Alexion is
not required to issue fractional shares of common stock upon conversion of the
notes and, instead, will pay a cash adjustment based upon the market price of
common stock on the last trading day prior to the date of conversion. In the
case of notes called for redemption or tendered for repurchase, conversion
rights will expire at the close of business on the business day preceding the
day fixed for redemption or repurchase unless Alexion defaults in the payment of
the redemption or repurchase price. A note which the holder has elected to be
repurchased may be converted only if the holder withdraws its election to have
its notes repurchased in accordance with the terms of the indenture before the
close of business on the business day prior to the repurchase date.
The initial conversion price is subject to adjustment upon specified events,
including:
(1) the issuance of common stock of Alexion as a dividend or distribution on
the common stock;
(2) the issuance to all holders of common stock of rights or warrants to
purchase common stock;
(3) specified subdivisions and combinations of the common stock;
(4) the distribution to all holders of common stock of capital stock, other
than common stock, or evidences of indebtedness of Alexion or of assets,
including securities, but excluding those rights, warrants, dividends and
distributions referred to above or paid in cash;
(5) a dividend or distribution consisting exclusively of cash to all holders
of common stock if the aggregate amount of these distributions combined
together with (A) all other all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made plus
(B) any cash and the fair market value of other consideration payable in
any tender offers by Alexion or any of its subsidiaries for common stock
concluded within the preceding 12 months in respect for which no
adjustment has been made, exceeds 10% of Alexion's market capitalization,
being the product of the then current market price of the common stock
multiplied by the number of shares of common stock then outstanding;
(6) the purchase of common stock pursuant to a tender offer made by Alexion
or any of its subsidiaries involves an aggregate consideration that,
together with (A) any cash and the fair market value of any other
consideration payable in any other tender offer by Alexion or any of its
subsidiaries for common stock expiring within the 12 months preceding
such tender offer plus (B) the aggregate amount of any such all-cash
distributions referred to in (5) above to all holders of common stock
within the 12 months preceding the expiration of the tender offer for
which no adjustment has been made, exceeds 10% of Alexion's market
capitalization on the expiration of such tender offer, or
(7) payment on tender offers or exchange offers by a third party other than
Alexion or any of its subsidiaries if, as of the closing date of the
offer, Alexion's board of directors does not recommend rejection of the
offer. This adjustment will be made if a tender offer increases the
person's ownership to more than 25% of Alexion's outstanding common stock
and the payment per share is greater than the current market price of the
common stock. This adjustment
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will not be made if the tender offer is a merger or transaction described
below under "-Consolidation, Merger and Sale of Assets."
In the case of:
- any reclassification or change of the outstanding shares of the common
stock, or
- a consolidation, merger or combination involving Alexion or a sale or
conveyance to another person of the property and assets of Alexion as an
entirety or substantially as an entirety, in each case as a result of
which holders of common stock will be entitled to receive stock, other
securities, other property or assets, including cash, with respect to or
in exchange for all shares of common stock,
then the holders of the notes then outstanding will generally be entitled
thereafter to convert the notes into the kind and amount of shares of stock and
other securities or other property or assets, including cash, which they would
have owned or been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had the notes been
converted into common stock immediately prior to that reclassification, change,
consolidation, merger, combination, sale or conveyance assuming that a holder of
notes would not have exercised any rights of election as to the stock, other
securities or other property or assets, including cash, receivable in connection
with that transaction.
If Alexion makes a taxable distribution to holders of common stock or in
specified other circumstances requiring an adjustment to the conversion price,
the holders of notes may, in some circumstances, be deemed to have received a
distribution subject to U.S. income tax as a dividend. In some other
circumstances, the absence of an adjustment to the conversion price may result
in a taxable dividend to the holders of common stock. See "--United States
Federal Income Tax Consequences."
Alexion may from time to time, to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 days, in which case
Alexion will give at least 15 days' notice of the reduction. Alexion may, at its
option, make reductions in the conversion price, in addition to those described
above, as Alexion's board of directors deems advisable to avoid or diminish any
income tax to holders of common stock resulting from any dividend or
distribution of stock, or rights to acquire stock, or from any event treated as
dividends or distributions of, or rights to acquire, stock for income tax
purposes. See "--United States Federal Income Tax Consequences."
No adjustment in the conversion price will be required unless that
adjustment would require an increase or decrease of at least 1% in the
conversion price then in effect; however, any adjustment that would otherwise be
required to be made will be carried forward and taken into account in any
subsequent adjustment. Except as stated above, the conversion price will not be
adjusted for the issuance of common stock or any securities convertible into or
exchangeable for common stock or carrying the right to purchase any of the
foregoing.
OPTIONAL REDEMPTION BY ALEXION
The notes are not entitled to any sinking fund. At any time on or after
March 20, 2003, Alexion may redeem the notes on at least 30 days' notice as a
whole or, from time to time, in part at the following prices, expressed as a
percentage of the principal amount, together with accrued interest to, but
excluding, the date fixed for redemption:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
Beginning March 20, 2003 and ending on March 14, 2004....... 103.286%
Beginning March 15, 2004 and ending on March 14, 2005....... 102.464%
Beginning March 15, 2005 and ending on March 14, 2006....... 101.643%
Beginning March 15, 2006 and ending on March 14, 2007....... 100.822%
</TABLE>
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and 100% on March 15, 2007. Any accrued interest becoming due on the date fixed
for redemption will be payable to the holders of record on the relevant record
date of the notes being redeemed.
If less than all of the outstanding notes are to be redeemed, the trustee
will select the notes to be redeemed in principal amounts of $1,000 or integral
multiples of $1,000 by lot, pro rata or by another method the trustee considers
fair and appropriate. If a portion of a holder's notes is selected for partial
redemption and that holder converts a portion of that holder's notes, the
converted portion will be deemed to be of the portion selected for redemption.
REPURCHASE AT OPTION OF HOLDERS
Within 15 days after a repurchase event occurs, we are required to give
notice of the repurchase event to the holders of notes. Registered holders of
our notes will have the right, at their option, to require us to repurchase all
or any portion of your notes 40 days after the notice of repurchase event is
mailed.
The repurchase price will be 105% of the principal amount of the notes
submitted for repurchase, plus accrued and unpaid interest to, but excluding,
the repurchase date. If a repurchase date is an interest payment date, then the
interest payable on that date will be paid to the holder of record on the
preceding record date.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in common stock, valued at 95% of the average of the
closing prices for the five trading days immediately before and including the
third trading day preceding the repurchase date. The repurchase price may be
paid in shares of common stock only if the following conditions are satisfied:
- such shares have been registered under the Securities Act or are freely
transferable without such registration;
- the issuance of such common stock does not require registration with or
approval of any governmental authority under any state law or any other
federal law, which registration or approval has not been made or obtained;
- such shares have been approved for quotation on the Nasdaq National Market
or listing on a national securities exchange; and
- such shares will be issued out of our authorized but unissued common stock
and, upon issuance, will be duly and validly issued and fully paid and
non-assessable and free of any preemptive rights.
A repurchase event will be considered to have occurred if:
(1) our common stock or other common stock into which the notes are
convertible is neither listed for trading on a United States national
securities exchange nor approved for trading on an established automated
over-the-counter trading market in the United States, or
(2) one of the following "change in control" events occurs:
- any person or group is or becomes the beneficial owner of more than 50%
of the voting power of our outstanding securities entitled to generally
vote for directors;
- our stockholders approve any plan or proposal for our liquidation,
dissolution or winding up;
- we consolidate with or merge into any other person or any other person
merges into Alexion and, as a result, our outstanding common stock is
changed or exchanged for other assets or securities unless our
stockholders immediately before the transaction own, directly or
indirectly, immediately following the transaction more than 50% of the
combined voting
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power of the person resulting from the transaction in substantially the
same proportion as their ownership of our voting stock immediately
before the transaction;
- we convey, transfer or lease all or substantially all of our assets to
any person other than our subsidiaries; or
- the continuing directors do not constitute a majority of our board of
directors at any time.
However, a change in control will not be deemed to have occurred if:
- the last sale price of our common stock for any five trading days during
the 10 trading days immediately before the change in control is equal to
at least 105% of the conversion price, or
- all of the consideration, excluding cash payments for fractional shares in
the transaction constituting the change in control, consists of common
stock traded on a United States national securities exchange or quoted on
the Nasdaq National Market, and as a result of the transaction the notes
become convertible solely into that common stock.
The term "continuing director" means at any date a member of our board of
directors:
- who is a member of our board of directors on the date hereof; or
- who was nominated or elected by at least a majority of the directors who
were continuing directors at the time of the nomination or election or
whose election to our board of directors was recommended by at least a
majority of the directors who were continuing directors at the time of the
nomination or election or by a nominating committee approved by our
continuing directors.
Under the above definition of continuing director, if the current board of
directors approved a new director or directors and then resigned, no change in
control would occur.
We will be required to mail registered holders of our notes a notice within
15 days after the occurrence of a repurchase event. The notice must describe,
among other things, the repurchase event, their right to elect repurchase of the
notes and the repurchase date. We must deliver a copy of the notice to the
trustee and cause a copy, or a summary of the notice, to be published in a
newspaper of general circulation in New York, New York. Registered holders of
our notes may exercise their repurchase rights by delivering written notice to
us and the trustee. The notice must be accompanied by the notes duly endorsed
for transfer to Alexion. Registered holders of our notes must deliver the
exercise notice on or before the close of business on the thirty-fifth calendar
day after the repurchase notice is delivered.
The interpretation of the phrase "all or substantially all" used in the
definition of change in control would likely depend on the facts and
circumstances existing at such time. As a result, there may be uncertainty as to
whether or not a sale or transfer of "all or substantially all" assets has
occurred.
We may not have sufficient cash funds to repurchase the notes upon a
repurchase event. We may elect, subject to certain conditions, to pay the
repurchase price in common stock. Although there are currently no restrictions
on our ability to pay the purchase price, future debt agreements may prohibit us
from repaying the repurchase price in either cash or common stock. If we are
prohibited from repurchasing the notes, we could seek consent from our lenders
to repurchase the notes. If we are unable to obtain their consent, we could
attempt to refinance the notes. If we were unable to obtain a consent or
refinance, we would be prohibited from repurchasing the notes. If we were unable
to repurchase the notes upon a repurchase event, it would result in an event of
default under the indenture. An event of default under the indenture could
result in a further event of default under our other then-existing debt. In
addition, the occurrence of the repurchase event may be an event of default
under our other debt. As a result, we would be prohibited from paying amounts
due on the notes under the subordination provisions of the indenture.
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The change in control feature may not necessarily afford registered holders
of our notes protection in the event of a highly leveraged transaction, a change
in control or similar transactions involving Alexion. We could, in the future,
enter into transactions, including recapitalizations, that would not constitute
a change in control but that would increase the amount of our senior
indebtedness or other debt. We are not prohibited from incurring senior
indebtedness or debt under the indenture. If we incur significant amounts of
additional debt, this could have an adverse effect on our ability to make
payments on the notes. In addition, our management could undertake leveraged
transactions that could constitute a change in control. The board of directors
does not have the right under the indenture to limit or waive the repurchase
right in the event of these types of leveraged transaction.
The requirement to repurchase notes upon a repurchase event could delay,
defer or prevent a change of control. As a result, the repurchase right may
discourage:
- a merger, consolidation or tender offer;
- the assumption of control by a holder of a large block of our shares; and
- the removal of incumbent management.
The repurchase feature was a result of negotiations between Alexion and the
selling securityholders. The repurchase feature is not the result of any
specific effort to accumulate shares of common stock or to obtain control of
Alexion by means of a merger, tender offer or solicitation, or part of a plan by
Alexion to adopt a series of anti-takeover provisions. We have no present
intention to engage in a transaction involving a change of control, although it
is possible that it would decide to do so in the future.
The Securities Exchange Act of 1934 and the rules thereunder require the
distribution of specific types of information to security holders in the event
of issuer tender offers. These rules may apply in the event of a repurchase. We
will comply with these rules to the extent applicable.
SUBORDINATION OF THE NOTES
The indebtedness evidenced by the notes is subordinated to the extent
provided in the indenture to the prior payment in full in cash or other payment
satisfactory to holders of existing and future senior indebtedness of all senior
indebtedness. Upon any distribution of our assets, upon any dissolution, winding
up, liquidation or reorganization, payments on the notes will be subordinated in
right of payment to the prior payment of senior indebtedness in full in cash or
other payment satisfactory to holders of senior indebtedness.
In the event of any acceleration of the notes because of an event of
default, holders of any senior indebtedness would be entitled to payment in full
in cash or other payment satisfactory to holders of senior indebtedness of all
senior indebtedness before the holders of the notes are entitled to receive any
payment or distribution.
We are required to promptly notify holders of designated senior indebtedness
if payment of the notes is accelerated because of an event of default.
As a result of these subordination provisions, in the event of our
bankruptcy, dissolution or reorganization, holders of senior indebtedness may
receive more, ratably, and holders of the notes may receive less, ratably, than
our other creditors.
We also may not make payment on the notes if:
- a default in the payment of senior indebtedness occurs and is continuing
beyond any grace period,
- any other default occurs and is continuing with respect to designated
senior indebtedness that permits holders or their representatives of
designated senior indebtedness to accelerate its
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maturity, and the trustee receives a payment blockage notice from us or
some other person permitted to give the notice under the indenture, or
- any judicial proceeding shall be pending with respect to any payment
default or non-payment default.
We may and shall resume payments on the notes:
- in case of a payment default, the date on which the default is cured or
waived or ceases to exist, and
- in case of a nonpayment default, the earlier of the date on which the
default is cured or waived or ceases to exist or 179 days after the
receipt of the payment blockage notice.
Any number of additional payment blockage periods may be commenced during an
existing payment blockage period; PROVIDED, HOWEVER, that no such additional
payment blockage period shall extend beyond the initial payment blockage period.
Notwithstanding anything in the subordination provisions of the indenture or the
notes to the contrary, (x) in no event will a payment blockage period extend
beyond 179 days from the date of the payment blockage notice in respect thereof
was given and (y) there shall be a period of at least 181 consecutive days in
each 360-day period when no payment blockage period is in effect. No nonpayment
default that existed or was continuing on the date of delivery of any payment
blockage notice to the trustee shall be the basis for a subsequent payment
blockage notice.
The subordination provisions will not prevent the occurrence of any event of
default under the notes.
If the trustee, any paying agent or any holder receives any payment or
distribution of assets in contravention of these subordination provisions before
all senior indebtedness is paid in full in cash or other payment satisfactory to
holders of senior indebtedness, then such payment or distribution will be held
in trust for the holders of senior indebtedness to the extent necessary to make
payment in full in cash or payment satisfactory to the holders of senior
indebtedness of all unpaid senior indebtedness.
A holder of notes by its acceptance of notes agrees to be bound by the
subordination provisions in the indenture and authorizes and expressly directs
the trustee, on its behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the indenture and
appoints the trustee its attorney-in-fact for this purpose.
DEFINITIONS
"DESIGNATED SENIOR INDEBTEDNESS" means any senior indebtedness that
expressly provides that it is "designated senior indebtedness."
"INDEBTEDNESS" with respect to any person means:
(1) all obligations
- for borrowed money,
- evidenced by a note, debenture, bond or written instrument,
- in respect of leases required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease
obligations on the balance sheet,
- all obligations and other liabilities under any lease or related
document in connection with the lease of real property which provides
that such person is contractually obligated to purchase or cause a
third party to purchase the leased property and as a result guarantee a
minimum residual value of the leased property to the lessor and the
obligations of such
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<PAGE>
person under such lease or related document to purchase or to cause a
third party to purchase such leased property, or
- in respect of letters of credit, local guarantees or bankers'
acceptances;
(2) all obligation of others of the type described in clause (1) above or
clause (3), (4) or (5) below assumed by or guaranteed or in effect
guaranteed by such person;
(3) all obligations secured by a mortgage, pledge or similar arrangement
encumbering property or assets;
(4) all obligations under interest rate and currency swap agreements, cap,
floor and collar agreements, spot and forward contracts and similar
agreements and arrangements; and
(5) all obligations under deferrals or renewals of (1) through (4) above.
"SENIOR INDEBTEDNESS" means the principal, premium, if any, and interest,
including bankruptcy interest and fees, and rent payable on all our
indebtedness, whether outstanding on the date of the indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by us, including
all renewals or extensions.
However, senior indebtedness shall not include:
- indebtedness evidenced by the notes,
- indebtedness to any of our subsidiaries, except if it is pledged as
security for any senior indebtedness,
- our accounts payable to trade creditors arising in the ordinary course of
business, and
- any indebtedness that expressly provides that it shall not be senior in
right of payment to, or on the same basis with, or is subordinated or
junior to, the notes.
As of July 31, 2000, we had approximately $4.3 million of indebtedness
outstanding that would have constituted senior indebtedness. The indenture will
not limit the amount of additional indebtedness, including senior indebtedness,
which we can create, incur, assume or guarantee, nor will the indenture limit
the amount of indebtedness or other liabilities that any subsidiary can create,
incur, assume or guarantee. We are obligated to pay compensation to the trustee
and to indemnify the trustee against certain losses, liabilities or expenses
incurred by it in connection with its duties relating to the notes. The
trustee's claims for such payments will generally be senior to those of the
holders of the notes in respect to all funds collected and held by the trustee.
SATISFACTION AND DISCHARGE
We may be discharged from our obligations on the notes if they mature within
six months or will be redeemed within one year and we deposit with the trustee
enough cash and/or U.S. government obligations to pay all the principal,
premium, if any, and interest due to the stated maturity date or redemption date
of the notes.
DEFEASANCE
The indenture also contains a provision that permits us to elect:
- to be discharged from all of our obligations, subject to limited
exceptions, with respect to the notes then outstanding; and/or
- to be released from our obligations under the covenants relating to the
required offer to repurchase upon a repurchase event, maintenance of our
corporate existence and reports to holders.
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To make either of the above elections, we must deposit in trust with the
trustee enough money to pay in full the principal, premium, if any, and interest
on the notes. This amount may be made in cash and/or U.S. government
obligations. As a condition to either of the above elections, we must deliver to
the trustee an opinion of counsel that the holders of the notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
the action. If we elect to be discharged from all of our obligations as outlined
above in the first bullet point in this section, the holders of the notes will
not be entitled to the benefits of the indenture, except for registration of
transfer and exchange of notes and replacement of lost, stolen or mutilated
notes.
EXCHANGE AND TRANSFER
Notes may be transferred or exchanged at the office of the security
registrar or at the office of any transfer agent designated by us. We will not
impose a service charge for any transfer or exchange, but we may require holders
to pay any tax or other governmental charges associated with any transfer or
exchange. In the event of any potential redemption of the notes, we will not be
required to:
- issue, authenticate or register the transfer of or exchange any note
during a period beginning at the opening of business 15 days before the
mailing of a notice of redemption and ending at the close of business on
the day of the mailing, or
- register the transfer of or exchange any note selected for redemption, in
whole or in part, except the unredeemed portion of notes being redeemed in
part.
We have initially appointed the trustee as the security registrar and
transfer agent. We may designate additional transfer agents or change transfer
agents or change the office of the transfer agent. However, we will be required
to maintain a transfer agent in the place of payment for the notes.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person, in a transaction
in which we are not the surviving corporation, or convey, transfer or lease our
properties and assets substantially as an entirety to, any person, unless:
- the successor, if any, is a U.S. corporation, limited liability company,
partnership, trust or other business entity,
- the successor assumes our obligations under the notes, the indenture and
the registration rights agreement,
- immediately after giving effect to the transaction, no default or event of
default shall have occurred and be continuing, and
- certain other conditions are met.
EVENTS OF DEFAULT
The indenture defines an event of default with respect to the notes as one
or more of the following events:
(1) our failure to pay principal of or any premium on the notes when due,
(2) our failure to pay any interest on the notes for 30 days when due,
(3) our failure to perform any other covenant in the indenture continued for
90 days after being given the notice required in the indenture, and
(4) our bankruptcy, insolvency or reorganization.
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If an event of default, other than an event of default described in clause
(4) above, occurs and continues, either the trustee or the holders of at least
25% in aggregate principal amount of the outstanding notes may declare the
principal amount including any accrued and unpaid interest on the notes to be
due and payable immediately. If an event of default described in clause
(4) above occurs, the principal amount of all the notes will automatically
become immediately due and payable. Any payment by us on the notes following any
acceleration will be subject to the subordination provisions described above
under "-Subordination of the Notes."
After acceleration but before a judgment or decree of the money due in
respect of the notes has been obtained, the holders of a majority in aggregate
principal amount of the outstanding notes may rescind such acceleration and its
consequences if all events of default, other than the non-payment of accelerated
principal, or other specified amount, have been cured or waived.
Other than the duty to act with the required care during an event of
default, the trustee will not be obligated to exercise any of its rights or
powers at the request of the holders unless the holders offer the trustee
reasonable indemnity. Generally, the holders of a majority in aggregate
principal amount of the notes will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on the trustee.
A holder will have the right to begin a proceeding under the indenture, or
for the appointment of a receiver or a trustee, or for any other remedy under
the indenture only if:
(1) the holder gives to the trustee written notice of a continuing event of
default,
(2) holders of at least 25% in aggregate principal amount of notes then
outstanding made a written request to the trustee to pursue the remedy,
(3) such holder or holders offer to the trustee indemnity satisfactory to
the trustee against any loss, liability or expense,
(4) the trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity, and
(5) during such 60-day period the holders of a majority in aggregate
principal amount of the notes then outstanding do not give the trustee a
direction inconsistent with the request.
Holders may, however, sue to enforce the payment of principal, premium or
interest on or after the due date or their right to convert without following
the procedures listed in (1) through (4) above.
We will furnish the trustee an annual statement by our officers as to
whether or not we are in default in the performance of the indenture and, if so,
specifying all known defaults.
MODIFICATION AND WAIVER
We and the trustee may make modifications and amendments to the indenture
with the consent of the holders of a majority in aggregate principal amount of
the outstanding notes affected by the modification or amendment. However,
neither we nor the trustee may make any modification or amendment without the
consent of the holder of each outstanding note affected by the modification or
amendment if such modification or amendment would:
- change the stated maturity of the notes,
- reduce the principal, premium, if any, or interest on the notes,
- change the place of payment from New York, New York or the currency in
which the notes are payable,
- waive a default in payment of the principal of or interest on any note,
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- impair the right to sue for any payment after the stated maturity or
redemption date,
- modify the subordination provisions in a materially adverse manner to the
holders,
- adversely affect the right to convert the notes, or
- change the provisions in the indenture that relate to modifying or
amending the indenture.
NOTICES
Notices to holders will be given by mail to the addresses of the holders in
the security register.
GOVERNING LAW
The indenture and the notes will be governed by, and construed under, the
law of the State of New York, without regard to conflicts of laws principles.
REGARDING THE TRUSTEE
The indenture limits the right of the trustee, should it become a creditor
of Alexion, to obtain payment of claims or secure its claims. The trustee is
permitted to engage in certain other transactions. However, if the trustee
acquires any conflicting interest, and there is a default under the notes, the
trustee must eliminate the conflict or resign.
REGISTRATION RIGHTS
The following summary of the registration rights provided in the
registration rights agreement is not complete. You should refer to the
registration rights agreement for a full description of the registration rights
that apply to the notes and common stock into which the notes are convertible.
Pursuant to a registration rights agreement dated March 8, 2000 between
Alexion and the initial purchasers of the notes, we filed a shelf registration
statement, of which this prospectus is a part, with the Securities and Exchange
Commission to register resales of the notes and the shares of common stock into
which the notes are convertible (referred to as registrable securities). We will
use our reasonable best efforts to have this shelf registration statement
declared effective as soon as practicable and, in any event, by September 4,
2000, and to keep it effective until the earliest of (1) March 8, 2002, (2) the
date when all registrable securities shall have been registered under the
Securities Act of 1933 and disposed of, and (3) the date on which all
registrable securities are eligible to be sold to the public pursuant to Rule
144(k) under the Securities Act of 1933 (such shortest time period referred to
as the effectiveness period). A holder of registrable securities that sells
registrable securities pursuant to the shelf registration statement generally
will be required to provide information about itself and the specifics of the
sale, be named as a selling security holder in the related prospectus and
deliver a prospectus to purchasers, be subject to relevant civil liability
provisions under the Securities Act of 1933 in connection with such sales and be
bound by the provisions of the registration rights agreement which are
applicable to such holder (including certain indemnification obligations).
If we fail to comply with the above provisions of the registration rights
agreement, liquidated damages will become payable in respect of the registrable
securities as follows:
(1) if the shelf registration statement is not declared effective by the SEC
on or prior to September 4, 2000, then commencing on day after such date,
liquidated damages shall accrue on the registrable securities at a rate
of 0.50% per annum on the amount of registrable securities for the first
90 days immediately following, such liquidated damages increasing by an
additional 0.50% per annum at the beginning of each subsequent 90-day
period; and
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(2) if the shelf registration statement has been declared effective and the
shelf registration ceases to be effective at any time during the
effectiveness period (other than for permitted suspension, as described
below), then liquidated damages shall accrue on the registrable
securities at a rate of 0.50% per annum on the amount of registrable
securities for the first 90 days commencing on the day the shelf
registration ceases to be effective, such liquidated damages increasing
by an additional 0.50% per annum at the beginning of each such subsequent
90-day period;
PROVIDED, HOWEVER, that liquidated damages on the registrable securities may not
accrue under more than one of the foregoing clauses (1) or (2) at any one time
and at no time shall the aggregate amount of liquidated damages accruing exceed
in the aggregate 1.0% per annum of the amount of registrable securities;
PROVIDED, FURTHER, HOWEVER, that (a) upon the effectiveness of the shelf
registration as required hereunder (in the case of clause (1) above), or (b)
upon the effectiveness of a shelf registration which had ceased to remain
effective (in the case of (2) above), liquidated damages on the registrable
securities as a result of such clause (or the relevant subclause thereof), as
the case may be, shall cease to accrue. It is understood and agreed that,
notwithstanding any provision to the contrary, so long as any registrable
security is then covered by an effective shelf registration statement, no
liquidated damages shall accrue on such registrable security.
"AMOUNT OF REGISTRABLE SECURITIES" means (a) with respect to the notes, the
aggregate principal amount of all such notes outstanding, (b) with respect to
the shares of common stock into which the notes are convertible, the aggregate
number of such shares of common stock outstanding multiplied by the conversion
price (as defined in the indenture relating to the notes) or, if no notes are
then outstanding, the last conversion price that was in effect under such
indenture when any such notes were last outstanding, and (c) with respect to
combinations thereof, the sum of (a) and (b) for the relevant registrable
securities.
We shall have the right to suspend the effectiveness of the shelf
registration statement for up to 30 consecutive days in any 90 day period, and
for up to a total of 60 days in any 365 day period, without being required to
pay liquidated damages.
Any amounts of liquidated damages due pursuant to clause (1), (2) or
(3) above will be payable in cash on the same dates as the original interest
payment dates as the notes.
RATIO OF EARNINGS TO FIXED CHARGES
Our deficiency in earnings to cover fixed charges for each of the periods
indicated is as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30, YEAR ENDED JULY 31,
----------------------------------------- --------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$(15,174) $(2,265) $(6,426) $(7,893) $(7,278) $(5,459) $(7,148)
</TABLE>
The ratio of earnings to fixed charges is computed by dividing (a) income
before interest expense, income taxes and other fixed charges by (b) fixed
charges including interest expense, amortization of debt issuance costs and the
portion of rent expense which represents interest. For each of the periods
indicated above, earnings were insufficient to cover fixed charges by the
amounts noted above. The deficiency in earnings to cover fixed charges is
computed by adding net loss to the portion of rent expense which represents
interest for all periods presented.
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UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material US federal income tax
consequences relating to the purchase, ownership, and disposition of the notes
and of common stock into which notes may be converted, but does not purport to
be a complete analysis of all the potential tax consequences that may be
material to an investor based on his or her particular tax situation (such as
the alternative minimum tax provisions of the Code). This summary is based on
the provisions of the Internal Revenue Code of 1986, as amended, or the Code,
the applicable Treasury Regulations, promulgated or proposed thereunder, or
Treasury Regulations, judicial authority and current administrative rulings and
practice, all of which are subject to change, possibly on a retroactive basis.
This summary deals only with the initial beneficial owner of a note or common
stock that will hold notes and common stock into which notes may be converted as
"capital assets," within the meaning of Section 1221 of the Code, and does not
address tax consequences applicable to US Holders that may be subject to special
tax rules, such as financial institutions, tax-exempt organizations,
expatriates, pension funds, insurance companies, dealers in securities or
foreign currencies, persons that will hold notes as a position in a hedging
transaction, "straddle," "conversion transaction" or other risk reduction
transaction for tax purposes, persons who hold notes through a partnership or
other pass through entity, or persons that have a "functional currency" other
than the US dollar (except as disclosed below under "Non-US Holders"). This
summary discusses the tax consequences applicable to the holders who purchase
the notes at their "issue price" as defined in Section 1273 of the Code (i.e.,
the first price at which a substantial portion of the notes is sold to the
public) and generally does not discuss the tax consequences applicable to
subsequent purchasers of the notes. Alexion has not sought any ruling from the
Internal Revenue Service, or IRS, with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance that
the IRS will agree with such statements and conclusions. Moreover, this
discussion does not address the effect of any applicable state, local or foreign
tax laws. INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE US FEDERAL INCOME AND ESTATE
TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING
UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
As used herein, the term "US Holder" means a holder of a note or common
stock that is for US federal income tax purposes, (i) a citizen or resident of
the US, (ii) a corporation created or organized in or under the laws of the US
or any political subdivision thereof, (iii) an estate, the income of which is
subject to US federal income taxation regardless of its source, or (iv) (a) a
trust, the administration or which is subject to the primary supervision of a
court within the US and which has one or more US persons with authority to
control all substantial decisions, or (b) a trust in existence on August 20,
1996 and has elected to continue to be treated as a US trust. As used herein,
the term "Non-US Holder" means a holder of a note or common stock that is not a
US Holder.
US HOLDERS
The following is a summary of the principal US federal income tax
consequences resulting from the ownership and disposition of the notes and
common stock by US Holders.
PAYMENT OF INTEREST
Interest on a note generally will be includable in the income of a US Holder
as ordinary income at the time such interest is received or accrued, in
accordance with such US Holder's method of accounting for US federal income tax
purposes.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a note, a US Holder generally will
realize and recognize capital gain or loss equal to the difference between the
amount realized on the sale, exchange or
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redemption and the US Holder's tax basis in such note. For these purposes, the
amount realized on the sale, exchange or redemption of the notes does not
include any amount attributable to accrued but unpaid interest, which will be
taxable as such unless previously taken into account. A US Holder's tax basis in
a note generally will be the US dollar value of the purchase price of such note
on the date of purchase. Gain or loss so recognized will generally be capital
gain or loss and will be long-term capital gain or loss if, at the time of the
sale, exchange or redemption, the note was held for more than one year.
In regard to a note purchased with "market discount" (as defined below), a
US Holder's tax basis in a note generally will equal the purchase price paid
therefor, increased by market discount previously included in income by such US
Holder and decreased by any amortized premium applied to reduce interest and any
principal payments on the note. Upon the sale, exchange or retirement, including
redemption, of a note, a US Holder of a note generally will recognize gain or
loss equal to the difference between the amount of cash and the fair market
value of other property received from the sale, exchange or retirement of the
note (other than in respect of accrued and paid interest on the note) and the
adjusted tax basis in the note. Such gain or loss generally will be capital gain
or loss, except to the extent of any accrued market discount, which will be
taxed as ordinary income. Amounts received attributable to accrued but unpaid
interest will be treated as ordinary interest income.
CONSTRUCTIVE DIVIDENDS ON NOTES
The conversion price of the notes is subject to adjustment under certain
circumstances. Section 305 of the Code treats as a distribution taxable as a
dividend (to the extent of the Company's current or accumulated earnings and
profits) certain actual or constructive distributions of stock with respect to
stock or convertible securities. Under Treasury regulations, an adjustment of
conversion price may, under certain circumstances, be treated as a constructive
dividend to the extent it increases the proportional interest of a US Holder of
a note in our fully diluted common stock, whether or not the holder ever
converts the notes into our common stock. Generally, a holder's tax basis in a
note will be increased by the amount of any such constructive dividend.
Similarly, a failure to adjust the conversion price of the notes to reflect a
stock dividend or similar event could in some circumstances give rise to
constructive dividend income to US Holders of common stock.
CONVERSION OF THE NOTES
A US Holder generally will not recognize any income, gain or loss upon
conversion of a note into common stock, except with respect to cash received in
lieu of a fractional share of common stock, and except to the extent that the
common stock issued upon conversion is treated as attributable to accrued
interest on the note. A US Holder's tax basis in the common stock received on
conversion of a note will be the same as such US Holder's adjusted tax basis in
the note at the time of conversion reduced by any basis allocable to a
fractional share. The holding period for the common stock received on conversion
will generally include the holding period of the note converted. However, a
holder's tax basis in shares of common stock attributable to accrued interest
generally will equal the amount of such interest included in income and the
holding period will begin on the day following the date of conversion.
Cash received in lieu of a fractional share of common stock upon conversion
will be treated as a payment in exchange for the fractional share of common
stock. Accordingly, the receipt of cash in lieu of a fractional share of common
stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the US Holder's adjusted
tax basis in the fractional share). The fair market value of the shares of
common stock received which is attributable to accrued interest will be taxable
as ordinary interest income.
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<PAGE>
A US Holder of a note with market discount will not recognize income on the
conversion of the note with respect to such market discount that has accrued but
has not been taken into account. Market discount not recognized on such
conversion will carry over to the common stock so acquired and will be
recognized as ordinary income to the extent of gain recognized upon the
disposition of such common stock, including any deemed disposition of fractional
shares of common stock for cash at the time of conversion.
DIVIDENDS ON COMMON STOCK
Generally, distributions will be treated as a dividend, subject to tax as
ordinary income, to the extent of Alexion's current or accumulated earnings and
profits as of the year of distribution, then as a tax-free return of capital to
the extent of the US Holder's tax basis in the common stock and thereafter as
gain from the sale of exchange of such stock.
In general, a dividend distribution to a corporate US Holder may qualify for
the 70% dividends received deduction if the US Holder owns less than 20% of the
voting power and value of our stock (other than any non-voting, non-convertible,
non-participating preferred stock). A corporate US Holder that owns 20% or more
of the voting power and value of our stock (other than any nonvoting, non-
convertible, non-participating preferred stock) generally will qualify for an
80% dividends received deduction.
SALE OF COMMON STOCK
Upon the sale or exchange of common stock, a US Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) such US Holder's adjusted tax basis in the common stock. Such
capital gain or loss will be long-term if the US Holder's holding period is more
than one year and will be short-term if the holding period is equal to or less
than one year. In the case of certain noncorporate taxpayers, including
individuals, long-term capital gains are taxed at a maximum rate of 20% and
short-term capital gains are taxed at a maximum rate of 39.6%. A US Holder's
basis and holding period in common stock received upon conversion of a note are
determined as discussed above under "Description of Notes--Conversion of the
Notes." Corporate taxpayers are subject to a maximum regular tax rate of 35% on
all capital gains and ordinary income.
MARKET DISCOUNT
If a US Holder purchases a note for an amount that is less than its "stated
redemption price at maturity" (which is the stated principal amount), the amount
of the difference will be treated as "market discount" for federal income tax
purposes unless such difference is less than a specified DE MINIMIS amount.
Under the DE MINIMIS exception, a note is considered to have no market discount
if the excess of the stated redemption price at maturity of the note over the US
Holder's tax basis in such note immediately after its acquisition is less than
0.25% of the stated redemption price at maturity of the note multiplied by the
number of complete years to the maturity date of the note after the acquisition
date.
Under the market discount rules, a US Holder of a note that does have market
discount is required to treat any principal payment on, or any gain from the
sale, exchange, retirement or other disposition of a note as ordinary income to
the extent of the accrued market discount not previously included in income at
the time of such payment or disposition. In addition, such a US Holder may be
required to defer until maturity of the note or its earlier disposition in a
taxable transaction the deduction of all or a portion of the interest expense on
any indebtedness incurred or continued to purchase or carry such note.
31
<PAGE>
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the US
Holder elects to accrue the market discount on a constant interest method. A US
Holder of a note may elect to include market discount in income currently as it
accrues (on either a ratable or constant interest method), in which case the
rule described above regarding deferral of interest deductions will not apply.
This election to include market discount in income currently, once made, applies
to all market discount obligation acquired on or after the first taxable year to
which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
In its fiscal year 2000 budget proposal, the Clinton Administration recently
proposed altering the taxation of market discount. Under the proposal, subject
to certain limitations, accrual basis US Holders would be required to include
market discount in income as it accrues. The proposal would affect US Holders of
debt instruments, such as the notes, acquired on or after the date of enactment.
BOND PREMIUM
A US Holder who purchases a note for an amount in excess of its stated
redemption price at maturity will be considered to have purchased the note with
"amortizable bond premium" equal to the amount of such excess. A US Holder
generally may elect to amortize the premium on the constant yield to maturity
method. The amount amortized in any year under such method will be treated as a
reduction of the US Holder's interest income from the note during such year and
will reduce the US Holder's adjusted tax basis in the note by such amount. A US
Holder of a note that does not make the election to amortize the premium will
not reduce its tax basis in the note, and thus effectively will realize a
smaller gain, or a larger loss, on a taxable disposition of the note than it
would have realized had the election been made. The election to amortize the
premium on a constant yield to maturity method, once made, applies to all debt
obligations held or acquired by the electing US Holder on or after the first day
of the first taxable year to which the election applies and may not be revoked
without the consent of the Internal Revenue Service.
NON-US HOLDERS
The following discussions is a summary of the principal US federal income
and estate tax consequences resulting from the ownership of the notes or common
stock by Non-US Holders.
PAYMENT OF INTEREST
Subject to the discussion below of backup withholding, interest paid on the
notes to a Non-US Holder generally will not be subject to US federal income tax
if:
(1) such interest is not effectively connected with the conduct of a trade
or business within the US by such Non-US Holder;
(2) the Non-US Holder does not actually or constructively own 10% or more of
the total voting power of all classes of our stock entitled to vote;
(3) the Non-US Holder is not a controlled foreign corporation that is
related to us through stock ownership (for this purpose, the holder of
notes would be deemed to own constructively the common stock into which
it could be converted);
(4) the Non-US Holder, under penalty or perjury, certifies that the owner is
not a US person and provides the owner's name and address; and
(5) the Non-US Holder is not a bank receiving interest pursuant to a loan
agreement entered into in the ordinary course of its trade or business.
32
<PAGE>
If certain requirements are satisfied, the certification described in item 4
above may be provided by a securities clearing organization, a bank, or other
financial institution that holds customers' securities in the ordinary course of
its trade or business.
Under Treasury Regulations, which generally are effective for payments made
after December 31, 2000, subject to certain transition rules, the certification
described in clause 4 above may also be provided by a qualified intermediary on
behalf of one or more beneficial owners (or other intermediaries), provided that
such intermediary has entered into a withholding agreement with the IRS and
certain other conditions are met.
A US Holder that is not exempt from tax under these rules will be subject to
US federal income tax withholding at a rate of 30% on payments of interest,
unless the interest is effectively connected with the conduct of a US trade or
business of the holder or a lower treaty rate applies and, in either case, the
Non-US Holder provides us with proper certification as to the holder's exemption
from withholding. If the interest is effectively connected to the conduct of a
US trade or business, it will be subject to the US federal income tax on net
income that applies to US persons generally (and, with respect to corporate
holders and under certain circumstances, the branch profits tax). Non-US Holders
should consult applicable income tax treaties, which may provide different
rules.
CONVERSION OF THE NOTES
A Non-US Holder generally will not be subject to US federal income tax on
the conversion of a note into shares of common stock. To the extent a Non-US
Holder receives cash in lieu of a fractional share on conversion, such cash may
give rise to gain that would be subject to the rules described below with
respect to the sale or exchange of a note or common stock.
DIVIDENDS
Subject to the discussion below of backup withholding, dividends, if any,
paid on the common stock to a Non-US Holder generally will be subject to a 30%
US federal withholding tax, subject to reduction for Non-US Holders eligible for
the benefits of certain income tax treaties. Dividends for this purpose may
include stock distributions treated as deemed dividends as discussed in "US
Holders-Constructive Dividends on Notes" above. Currently, for purposes of
determining whether tax is to be withheld at the 30% rate or at a reduced treaty
rate, we will ordinarily presume that dividends paid to an address in a foreign
country are paid to a resident of such country absent knowledge that such
presumption is not warranted. Under Treasury Regulations effective for payments
after December 31, 2000, holders will be required to satisfy certain
certification requirements to claim treaty benefits.
Except to the extent otherwise provided under an applicable tax treaty, a
Non-US Holder generally will be taxed in the same manner as a US Holder on
dividends paid (or deemed paid) that are effectively connected with the conduct
of a trade or business in the US by the Non-US Holder. If such Non-US Holder is
a foreign corporation, it may also be subject to a US branch profits tax on such
effectively connected income at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
GAIN ON DISPOSITION OF THE NOTES AND COMMON STOCK
A Non-US Holder generally will not be subject to US federal income tax on
gain realized on the sale, exchange or redemption of a note including any gain
representing accrued market discount, or the sale or exchange of common stock,
unless:
(i) in the case of an individual Non-US Holder, such holder is present in
the US for 183 days or more in the year of such sale, exchange or
redemption and certain other requirements are met;
33
<PAGE>
(ii) the Non-US Holder is subject to tax pursuant to the provisions of US
tax law applicable to certain US expatriates; or
(iii) the gain is effectively connected with the conduct of a US trade or
business of the Non-US Holder.
US FEDERAL ESTATE TAX
A note held by an individual who at the time of death is not a citizen or
resident of the US (as specially defined for US federal estate tax purposes)
will not be subject to US federal estate tax if the individual did not actually
or constructively own 10% or more of the total combined voting power of all
classes of stock of Alexion and, at the time of the individual's death, payments
with respect to such note would not have been effectively connected with the
conduct by such individual of a trade or business in the US. Common stock held
by an individual who at the time of death is not a citizen or resident of the US
(as specially defined for US federal estate tax purposes) will be included in
such individual's estate for US federal estate tax purposes, and the rate of tax
applies thereto may be reduced or eliminated if an applicable estate tax treaty
otherwise applies.
BACKUP WITHHOLDING AND INFORMATION REPORTING
US HOLDERS
A US Holder of notes or common stock may be subject to "backup withholding"
at a rate of 31% with respect to certain "reportable payments," including
interest payments, dividend payments and, under certain circumstances, principal
payments on the notes. These backup withholding rules apply if the US Holder,
among other things, (i) fails to furnish a social security number or other
taxpayer identification number ("TIN") certified under penalties of perjury
within a reasonable time after the request therefor, (ii) furnishes an incorrect
TIN, (iii) fails to report properly interest or dividends or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN furnished is the correct number and that such US Holder is
not subject to backup withholding. A US Holder who does not provide Alexion with
its correct TIN may also be subject to penalties imposed by the IRS. Any amount
withheld from a payment to a holder under the backup withholding rules is
creditable against the US Holder's federal income tax liability. Backup
withholding will not apply, however, with respect to payments made to certain US
Holders, including corporations and tax-exempt organizations, provided their
exemption from backup withholdings is properly established. We will report to US
Holders of notes and common stock and to the IRS the amount of any "reportable
payments" for each calendar year and the amount of tax withheld, if any, with
respect to such payments.
NON-US HOLDERS
We must report annually to the IRS and to each Non-US Holder the amount of
any dividends paid to, and tax withheld with respect to, such holder, regardless
of whether any tax was actually withheld on such payments.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non-US Holder resides.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments of interest or principal of the notes by us
or our agent to a Non-US Holder if the Non-US Holder certifies as to its Non-US
Holder status under penalties of perjury or otherwise establishes an exemption
(provided that neither we nor our agent has actual knowledge that the holder is
a US person or that the conditions of any other exemptions are not in fact
satisfied). The payment of the proceeds on the disposition of notes or share of
common stock to or through the US office of a US or
34
<PAGE>
foreign broker will be subject to information reporting and backup withholding
unless the owner provides the certification described above or otherwise
establishes an exemption. The proceeds of the disposition by a Non-US Holder of
notes or shares of common stock to or through a foreign office of a broker
generally will not be subject to backup withholding or information reporting.
However, if such broker is a US person, a controlled foreign corporation for US
tax purposes, or a foreign person, 50% or more of whose gross income from all
sources for certain periods is from activities that are effectively connected
with a US trade or business, information reporting requirements, but not backup
withholding, will apply unless such broker has documentary evidence in its files
of the holder's Non-US status and has no actual knowledge to the contrary or
unless the Non-US Holder otherwise establishes an exemption.
New Treasury Regulations, which we refer to as the New Regulations, would
modify the application of information reporting requirements and the backup
withholding tax requirements applicable to Non-US Holders for reportable
payments made after December 31, 2000. In general, the New Regulations do not
significantly alter the current substantive withholding and information
reporting requirements but unify current certification procedures and forms and
clarify reliance standards. Under the New Regulations, special rules apply which
permit the shifting of primary responsibility for withholding to certain
financial intermediaries acting on behalf of beneficial owners. A Non-US Holder
of a note or common stock that is received upon the conversion of a note should
consult with its tax advisor regarding the application of the backup withholding
rule to its particular situation, the availability of an exemption therefrom,
the procedure for obtaining such an exemption, if available, and the impact of
the New Regulations on payments made with respect to the notes or shares of
common stock received upon the conversion of the notes after December 31, 2000.
35
<PAGE>
PLAN OF DISTRIBUTION
The notes and the underlying common stock are being registered to permit
public secondary trading of the notes and the underlying common stock by the
holders thereof from time to time after the date of this prospectus. We have
agreed, among other things, to bear all expenses, including the reasonable fees
and disbursements of one counsel for the noteholders, other than underwriting
discounts, selling commissions and fees and expenses of other advisors to
holders of the notes and the underlying common stock, in connection with the
registration and sale of the notes and the underlying common stock covered by
this prospectus.
We will not receive any of the proceeds from the offering of notes and the
shares of common stock issuable upon conversion thereof by the selling
securityholders. We have been advised by the selling securityholders that the
selling securityholders (and their donees and pledgees) may sell all or a
portion of the notes and shares of common stock beneficially owned by them and
offered hereby from time to time on any exchange on which the securities are
listed on terms to be determined at the times of such sales. The selling
securityholders may also make private sales directly or through a broker or
brokers. Alternatively, any of the selling securityholders may from time to time
offer the notes or shares of common stock beneficially owned by them through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, commissions or concessions from the selling
securityholders and the purchasers of the notes or shares of common stock for
whom they may act as agent. The aggregate proceeds to the selling
securityholders from the sale of the notes or shares of common stock offered by
them hereby will be the purchase price of such notes or shares of common stock
less discounts and commissions, if any.
Our outstanding common stock is listed for trading on the Nasdaq National
Market. We do not intend to list the notes for trading on any national
securities exchange or on the Nasdaq National Market. We cannot assure you that
a trading market for the notes will develop. If a trading market for the notes
fails to develop, the trading price of the notes may decline.
The notes and the shares of common stock may be sold from time to time in
one or more transactions at fixed offering prices, which may be changed, or at
varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the holders of such securities or by agreement
between such holders and underwriters or dealers who may receive fees or
commissions in connection therewith.
In order to comply with the securities laws of certain states, if
applicable, the notes and shares of common stock will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the notes and shares of common stock may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirement is available
and is complied with.
The notes were originally sold by us to the initial purchasers in
March 2000 in a private placement. We agreed to indemnify and hold the initial
purchasers harmless against certain liabilities under the Securities Act that
could arise in connection with the sale of the notes by the initial purchasers.
The Registration Rights Agreement provides for us and the initial purchasers or
selling securityholders to indemnify each other against certain liabilities
arising under the Securities Act.
The selling securityholders and any broker-dealers, agents or underwriters
that participate with the selling securityholders in the distribution of the
notes or shares of common stock may be deemed to be "underwriters" within the
meaning of the Securities Act, in which event any commissions received by such
broker-dealers, agents or underwriters and any profit on the resale of the notes
or shares of common stock purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
36
<PAGE>
LEGAL MATTERS
Fulbright & Jaworski L.L.P., New York, New York, will pass upon the validity
of the securities offered hereby and some other legal matters on behalf of
Alexion.
EXPERTS
The audited consolidated financial statements, incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their report
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information filed by us at the Commission's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048, and 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can be also
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference rooms in New
York, New York and Chicago, Illinois, at prescribed rates. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Copies of such information may also be inspected at the reading room of
the library of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006. Our filings with the Commission are also
available to the public from commercial document retrieval services and at the
Commission's web site at "http:// www.sec.gov."
We "incorporate by reference" the information we file with the Commission
(File No. 0-27756), which means that we can disclose important information to
you by referring you to another document we filed with the Commission. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the Commission will automatically update
and supersede this information. We incorporate by reference the documents listed
below and any filings made with the Commission under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended, after the date of
this prospectus but before the end of any offering made under this prospectus:
- our proxy statement, filed on January 10, 2000;
- our current reports on Form 8-K, filed on December 3, 1999, January 18,
2000 and February 25, 2000;
- our quarterly report on Form 10-Q for the quarterly periods ended
October 31, 1999, January 31, 2000 and April 30, 2000; filed on December
13, 1999, March 15, 2000 and June 13, 2000, respectively;
- our annual report on Form 10-K for the fiscal year ended July 31, 1999, as
amended on Form 10-K/A, filed on November 29, 1999;
- our registration statement on Form 8-A, filed on February 21, 1997; and
- our registration statement on Form 8-A, filed on February 12, 1996.
You should read the information relating to us in this prospectus together
with the information in the documents incorporated by reference.
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<PAGE>
Any statement contained in a document incorporated by reference herein,
unless otherwise indicated therein, speaks as of the date of the document.
Statements contained in this prospectus may modify or replace statements
contained in the documents incorporated by reference.
We will furnish without charge to you, upon written or oral request, a copy
of any or all of the documents described above, except for exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
such documents. Requests should be addressed to: Alexion Pharmaceuticals, Inc.,
25 Science Park, New Haven, Connecticut 06511, (203) 776-1790, Attention:
David W. Keiser, Executive Vice President and Chief Operating Officer.
38
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ALEXION PHARMACEUTICALS, INC.
$120,000,000 5 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2007
1,127,555 SHARES COMMON STOCK
[LOGO]
---------------------
PROSPECTUS
---------------------
August , 2000
<PAGE>
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth Alexion Pharmaceuticals, Inc. (the "Company")
estimates (other than the SEC registration fee) of the expenses in connection
with the issuance and distribution of the shares of common stock being
registered. None of the following expenses are being paid by the selling
stockholders.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 31,680
Legal fees and expenses..................................... $141,500
Accounting fees and expenses................................ $ 54,400
Miscellaneous expenses...................................... $133,420
--------
Total:.................................................. $361,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending such action, provided that the director or officer undertakes to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation. A corporation may indemnify such person
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses (including attorneys fees) which he actually and reasonably
incurred in connection therewith. The indemnification provided is not deemed to
be exclusive of any other rights to which an officer or director may be entitled
under any corporation's by-law, agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, Section EIGHTH of the Company's
Certificate of Incorporation, as amended (the "Certificate") provides that the
Company shall indemnify each person who is or was a director, officer, employee
or agent of the Company (including the heirs, executors, administrators or
estate of such person) or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to the fullest extent permitted. The
indemnification provided by the Certificate shall not be deemed exclusive of any
other rights to which any of those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding
II-1
<PAGE>
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. Expenses (including attorneys'
fees) incurred in defending a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the indemnified person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company. Section NINTH of the Certificate provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<S> <C>
4.1 Indenture under which Notes were issued.*
4.2 Forms of Note.*
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding legality.*
10.1 Form of Agreement of Lease, between We Knotter, L.L.C. and
Alexion Pharmaceuticals, Inc.*
10.2 Registration Rights Agreement by and among Alexion
Pharmaceuticals, Inc., J.P. Morgan Securities Inc., U.S.
Bancorp Piper Jaffray Inc., Chase Securities Inc. and
Warburg Dillon Read LLC.+
23.1 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit
5.1).*
23.2 Consent of Arthur Andersen LLP.+
24.1 Power of Attorney (included on signature page).
25.1 Statement of Eligibility of the Trustee on Form T-1.*
</TABLE>
------------------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-3 filed on May 10, 2000 with the Securities and Exchange Commission.
+ Filed herewith.
(b) Financial Statement Schedules.
None.
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 of this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-2
<PAGE>
(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; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement of
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 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 of 1933, 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.
(4) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report, to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or
Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the latest quarterly
report that is specifically incorporated by reference in the prospectus to
provide such interim financial information.
(5) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 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.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy expressed in the 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 Act and
will be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New Haven
and State of Connecticut on the 9th day of August, 2000.
<TABLE>
<S> <C> <C>
ALEXION PHARMACEUTICALS, INC.
By: /s/ LEONARD BELL
-----------------------------------------
Leonard Bell, M.D.
President, Chief Executive Officer,
SECRETARY AND TREASURER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints LEONARD BELL, M.D. and DAVID W. KEISER, or either
of them, 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 all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or any of
them, or their or his substitute or substitutes, 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>
<S> <C> <C> <C>
*By: /s/ LEONARD BELL President, Chief Executive
--------------------------------- Officer, Secretary, Treasurer
Leonard Bell, M.D. and Director (principal
executive officer) August 9, 2000
* Executive Vice President and Chief
--------------------------------- Operating Officer (principal
David W. Keiser financial officer) August 9, 2000
* Vice President of Finance and
--------------------------------- Administration (principal
Barry P. Luke accounting officer) August 9, 2000
*
--------------------------------- Chairman of the Board of Directors
John H. Fried, Ph.D. August 9, 2000
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C> <C>
*
--------------------------------- Director
Jerry T. Jackson August 9, 2000
*
--------------------------------- Director
Max Link, Ph.D. August 9, 2000
*
--------------------------------- Director
Joseph A. Madri, Ph.D., M.D. August 9, 2000
*
--------------------------------- Director
Leonard Marks, Jr., Ph.D. August 9, 2000
*
--------------------------------- Director
R. Douglas Norby August 9, 2000
*
--------------------------------- Director
Alvin S. Parven August 9, 2000
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
--------------------- ------------------------------------------------------------
<S> <C>
4.1 Indenture under which Notes were issued.*
4.2 Forms of Note.*
5.1 Opinion of Fulbright & Jaworski L.L.P. regarding legality.*
10.1 Form of Agreement of Lease, between We Knotter, L.L.C. and
Alexion Pharmaceuticals, Inc.*
10.2 Registration Rights Agreement by and among Alexion
Pharmaceuticals, Inc., J.P. Morgan Securities Inc., U.S.
Bancorp Piper Jaffray Inc., Chase Securities Inc. and
Warburg Dillon Read LLC.+
23.1 Consent of Fulbright & Jaworski L.L.P. (included in Exhibit
5.1).*
23.2 Consent of Arthur Andersen LLP.+
24.1 Power of Attorney (included on signature page).
25.1 Statement of Eligibility of the Trustee on Form T-1.*
</TABLE>
------------------------
* Incorporated by reference to the Registrant's Registration Statement on
Form S-3 filed on May 10, 2000 with the Securities and Exchange Commission.
+ Filed herewith.
II-6
