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Filed Pursuant to Rule 424(b)(3)
File No. 333-44668
PROSPECTUS
959,678
Aksys, Ltd.
Common Stock
This prospectus relates to 959,678 shares of common stock of Aksys, Ltd.
which may be sold from time to time by the selling stockholders named herein, or
their transferees, pledgees, donees or successors. These stockholders acquired
the shares directly from our company in a private placement completed on August
16, 2000. We will not receive any of the proceeds from the sale of these shares,
although we have paid the expenses of preparing this prospectus and the related
registration statement.
The shares are being registered to permit the selling stockholders to sell
the shares from time to time in the public market. The selling stockholders may
sell this common stock through ordinary brokerage transactions, directly to
market makers of our shares or through any other means described in the section
entitled "Plan of Distribution" beginning on page 11.
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Before purchasing any of the shares covered by this prospectus, carefully
read and consider the risk factors in the section entitled "Risk Factors"
beginning on page 1.
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Our common stock is traded on the Nasdaq National Market under the symbol
"AKSY." On August 30, 2000, the last reported sale price of our common stock on
Nasdaq was $9.625 per share.
Our principal executive offices are located at Two Marriott Drive,
Lincolnshire, Illinois 60669 and our telephone number is (847) 229-2020.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved the sale of the common stock or determined that the
information in this prospectus is accurate or complete. It is illegal for any
person to tell you otherwise.
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The date of this prospectus is September 1, 2000.
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You should rely only on the information contained in, or incorporated by
reference in, this prospectus and in any accompanying prospectus supplement. We
have not authorized anyone to provide you with information different from that
contained in, or incorporated by reference in, this prospectus. The common stock
is not being offered in any jurisdiction where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of the
documents.
TABLE OF CONTENTS
Page
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Risk Factors.......................................................... 1
Forward-Looking Statements............................................10
Use of Proceeds.......................................................10
Selling Stockholders..................................................11
Plan of Distribution..................................................11
Legal Matters.........................................................13
Experts...............................................................13
Where You Can Find More Information...................................13
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RISK FACTORS
Before purchasing any of the shares covered by this prospectus, you should
carefully read and consider the risk factors set forth below. You should be
prepared to accept the occurrence of any and all of the risks associated with
purchasing the shares, including a loss of all of your investment.
Risks Related to Our Business
We have a history of operating losses and a significant accumulated deficit, and
we may not achieve or maintain revenue or profitability in the future.
We have not been profitable since our inception in January 1991. As of
June 30, 2000, we had an accumulated deficit of approximately $65.3 million.
We expect to continue to incur additional losses for the foreseeable future as a
result of a high level of operating expenses, significant up-front expenditures
in connection with our clinical trial, production and marketing activities and
no revenue from our core business. We may never realize significant revenues
from our core business or be profitable. Factors that will influence the timing
and amount of our growth and profitability include:
. the completion of the now ongoing clinical trial for and the
commercialization of the Aksys PHDTM Personal Hemodialysis System (the
"PHD System");
. obtaining the necessary regulatory clearance or approvals; and
. our ability to manufacture, market and distribute our PHD System.
We face significant challenges in shifting from the development stage to
the commercialization of our PHD System. Our prospects must be considered in
light of the risks, expenses and difficulties frequently encountered in such
transition, and there can be no assurance that we will have any or significant
revenues or that we will ever achieve profitable operations. Our business will
fail if we do not obtain certain critical regulatory approvals.
Until we are able to commercialize our sole product, the PHD System, we will not
have revenues from our core business.
Since our inception, we have devoted substantially all of our efforts to
the development of our PHD System. We expect to be dependent for the foreseeable
future on sales of, and services relating to, such system for revenues. Our
ability to commercialize our PHD System is dependent on receiving proper
regulatory approval which will not be obtained until our clinical trial is
complete. We began the clinical trial of our PHD System in September 1999 on
twenty four patients. We expect to finish the trial by October 31, 2000, but
this cannot be assured. Even if we succeed in our clinical trial, obtaining the
proper regulatory approval, and developing our PHD System commercially, a
number of factors may affect future sales of our product. These factors
include:
. whether reimbursement for the cost of our PHD System is available;
. whether the system will be safe or effective or that it will be cost-
effective relative to other dialysis treatment alternatives;
. whether daily hemodialysis will be shown to be more clinically effective
than alternative dialysis modalities;
. whether patients will be reluctant to administer and monitor the PHD
System with limited supervision; and
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. whether there are unexpected side effects, complications or other safety
issues associated with daily hemodialysis that may adversely affect the
market for our products and services.
If we are unable to commercialize our PHD System, we do not have any other
products from which to derive revenue.
Acceptance of our PHD System in the marketplace is uncertain, and failure to
achieve market acceptance will limit our ability to generate revenue and become
profitable.
The success of our PHD System is dependent on many variables, including its
safety, effectiveness and cost-effectiveness as an alternative dialysis
modality. The failure to conclusively demonstrate each of these factors could
significantly hinder market acceptance of our PHD System, and the failure of our
PHD System to achieve sustained commercial viability or market acceptance would
have a material adverse effect on us. Moreover, our future growth and
profitability will depend upon, among other things, market acceptance of the
efficacy of daily hemodialysis. This will require substantial marketing efforts
and the expenditure of significant funds by us to inform nephrologists, dialysis
clinics, other healthcare providers and dialysis patients of the benefits of
daily hemodialysis and thus the benefits of our PHD System.
In marketing our PHD system, we will encounter significant clinical and
market resistance:
. to using our PHD System;
. to home hemodialysis, which is currently employed by a small percentage
of patients suffering from end-stage renal disease ("ESRD"); and
. to daily hemodialysis, which to our knowledge has never been a widely
accepted dialysis alternative.
There can be no assurance that our efforts will be successful or that our
PHD System and our services will ever achieve market acceptance. In addition,
our PHD System is a personal system, designed for use by a single patient, and
requires several hours after a dialysis treatment to prepare itself for the next
treatment session. As such, it is very likely to be used in the prevailing
method of outpatient hemodialysis, which generally involves treating patients
three times per week for treatment sessions lasting between three and four
hours. In this prevailing method of hemodialysis, patients receiving treatment
on a given day are treated in shifts, with patients on succeeding shifts using
dialysis machines employed during prior shifts.
If we are not able to demonstrate the efficacy of our PHD System in our clinical
trial, or if our clinical trial is not conducted is accordance with regulatory
requirements, we may not be able to obtain regulatory clearance to market our
PHD System in the United States or abroad on a timely basis, or at all.
Our products, including the PHD System, are subject to stringent government
regulation in the United States and other countries. In the United States, our
PHD System is regulated as a medical device by the FDA. Consequently, our PHD
System requires either (1) FDA clearance of a pre-market notification under
510(k) of the Federal Food, Drug, and Cosmetic Act (the "FDC Act") or (2) filing
of a pre-market approval application (a "PMA") under Section 515 of the FDC Act
and FDA approval of such application prior to commercialization in the United
States. We submitted a pre-market notification under Section 510(k) of the FDC
Act for clearance of our PHD System with the FDA on March 5, 1996. The FDA has
twice declined to accept for filing the 510(k) application, has placed the
application on administrative hold and has requested clinical data derived from
our PHD System. We intend to submit a new 510(k) application after the
completion of our clinical trial, which we expect will be completed by October
31, 2000. The process of trying to obtain a 510(k) clearance is lengthy and
expensive and the issuance of such clearance remains uncertain. Although we have
been informed by the
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FDA that a PMA is not required, there can be no assurance that submission and
approval of a PMA will not be later required before commercialization of our PHD
System. The PMA approval process entails considerably greater time and expense
than does the 510(k) process. There can be no assurance that we will be able to
obtain such clearance or approval in a timely manner or at all. Furthermore, FDA
clearance of a 510(k) or approval of a PMA is subject to continual review, and
later discovery of previously unknown problems may result in restrictions on a
product's marketing or withdrawal of the product from the market.
Clinical trials must be conducted in accordance with the FDA's Good
Clinical Practices and are subject to oversight by the FDA and institutional
review boards at the medical institutions where the clinical trials are
conducted. In addition, clinical trials must be conducted with product
candidates produced under the FDA's current Good Manufacturing Practices, and
may require large numbers of test subjects. Clinical trials may be suspended by
us or the FDA at any time if it is believed that the subjects participating in
these trials are being exposed to unacceptable health risks or if the FDA finds
deficiencies in the conduct of these trials.
Even if we achieve positive interim results in our clinical trial, these
results do not necessarily predict final results, and acceptable results in
early trials may not be repeated in later trials. Negative or inconclusive
results or adverse medical events during our clinical trial could cause our
clinical trial to be repeated or terminated.
We are subject to extensive government regulation which can be costly, time
consuming and subject us to unanticipated delays.
Additional government regulations may be established or imposed, or the
interpretation or enforcement of such regulations may change, which could
prevent or delay regulatory clearance or approval of our products. In addition,
failure to comply with applicable regulatory requirements following clearance or
approval can, among other things, result in recall or seizure of products, total
or partial suspension of production and withdrawal of existing product approval
or clearances. The FDC Act and other statutes and regulations also govern the
testing, labeling, storage, record keeping, distribution, sale, marketing,
advertising and promotion of our products. Failure to comply with applicable
requirements can result in fines, recall or seizure of products, total or
partial suspension of production, withdrawal of existing product approvals or
clearances, refusal to approve or clear new applications or notices and criminal
prosecution.
The manufacture of our PHD System must also comply or ensure compliance
with current Quality System Requirements ("QSR") regulations promulgated by the
FDA. We may be required to expend time, resources and effort in product
manufacturing and quality control to ensure compliance even if our PHD System is
manufactured by an independent contractor as is currently contemplated. If
violations of the applicable regulations are noted during FDA inspections of
manufacturing facilities, the continued marketing of our products may be
materially adversely affected.
Our failure to obtain regulatory approvals in foreign jurisdictions will prevent
us from marketing our PHD System abroad.
Our international operations will be affected by the need to obtain
regulatory clearances or approvals. Requirements for the sale of devices such
as our PHD System vary widely from country to country, ranging from no health
regulations to detailed submissions such as those required by the FDA. We have
not obtained any regulatory clearances or approvals to market our PHD System in
any country, and there is no assurance that any such approvals or clearances
will be issued in a timely manner or at all. Any change in existing foreign
laws or regulations, or in the interpretation or enforcement thereof, or the
promulgation of any additional laws or regulations could have a material adverse
effect on our business, results of operations and financial condition.
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Risks associated with international sales and operations could adversely affect
our business.
We intend to establish marketing and regulatory resources in Europe, Japan
and elsewhere outside of the United States in an effort to prepare for marketing
our products and services internationally. To the extent we generate significant
sales outside the United States, we will be subject to risks generally
associated with international operations. In particular, fluctuations in
exchange rates of the United States dollar against foreign currencies could
adversely affect our results of operations. In addition, the collection cycle
for our international accounts receivable might be somewhat longer than for our
domestic accounts receivable. International sales and operations may also be
limited or disrupted by government controls, export license requirements,
political instability, price controls, trade restrictions, changes in tariffs or
difficulties in staffing and managing such operations.
Our future sales could be adversely affected due to our limited marketing
experience.
We expect to market our products and services primarily through our own
sales force. We have limited experience in sales, marketing or distribution and
have no established sales force or significant marketing or distribution
resources. We intend to develop a marketing staff and sales force. There can be
no assurance that we will be able to build an adequate marketing staff or sales
force or that the cost of such will not be prohibitive or that our direct sales
and marketing efforts will be successful.
If we can not develop distribution, customer service and technical support
networks, we may not be able to market and distribute our PHD System
effectively.
Our strategy involves contracting with dialysis providers to have us supply
to dialysis patients our PHD System, dialysate and other consumables, patient
training, customer service and maintenance and other technical service. To
provide these services, we will be required to develop networks of employees or
independent contractors in each of the areas in which we intend to operate.
There can be no assurance that we will be able to organize these networks on a
cost effective basis, or at all. The failure to establish these networks would
materially adversely affect us.
We may not be able to protect our intellectual property rights and, as a result,
we could lose competitive advantages which could adversely affect our operating
results.
Our success depends, in part, on our and our licensors' ability to obtain,
assert and defend patent rights, protect trade secrets and operate without
infringing the proprietary rights of others. We currently own or have rights to
33 U.S. patents and 15 foreign patents. There can be no assurance, however,
that:
. we will be able to obtain additional licenses to patents of others or
that we will be able to develop additional patentable technology of our
own;
. any patents issued to us will provide us with competitive advantages or
that the patents or proprietary rights of others will not have an
adverse effect on our ability to do business;
. others will not independently develop similar products;
. others will not design around or infringe such patents or proprietary
rights owned by or licensed to us; and
. any patent obtained or licensed by us will be held to be valid and
enforceable if challenged by another party.
We are aware that numerous patents have been issued relating to methods of
dialysis. In addition, such patents may have been issued to our competitors or
others of which we are not aware, and such patents may be
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issued in the future. There can be no assurance that such patents will not
conflict with our or our licensors' patent rights. Such conflicts could result
in a rejection of our or our licensors' patent applications or the invalidation
of patents, which could have a material adverse effect on our competitive
position. In the event of such conflicts, or in the event we believe that
competitive products infringe patents to which we hold rights, we may pursue
patent infringement litigation or interference proceedings against, or may be
required to defend against such litigation or proceedings involving, holders of
such conflicting patents or competing products. Such litigation or proceedings
may materially adversely affect our competitive position, and there can be no
assurance that we will be successful in any such litigation or proceeding.
Litigation and other proceedings relating to patent matters, whether initiated
by us or a third party, can be expensive and time consuming, regardless of
whether the outcome is favorable to us, and can result in the diversion of
substantial financial, managerial and other resources. An adverse outcome could
subject us to significant liabilities to third parties or require us to cease
any related development or commercialization activities. In addition, if patents
that contain dominating or conflicting claims have been or are subsequently
issued to others and such claims are ultimately determined to be valid, we may
be required to obtain licenses under patents or other proprietary rights of
others. No assurance can be given that any licenses required under any such
patents or proprietary rights would be made available on terms acceptable to us,
if at all. If we do not obtain such licenses, we could encounter delays or could
find that the development, manufacture or sale of products requiring such
licenses is foreclosed.
We rely on proprietary know-how and confidential information and employ
various methods, such as entering into confidentiality and noncompete agreements
with our current employees and with certain third parties to whom we have
divulged proprietary information, to protect the processes, concepts, ideas and
documentation associated with our technologies. Such methods may not afford
significant protection to us, and there can be no assurance that we will be able
to protect adequately our trade secrets or that other companies will not acquire
information which we consider to be proprietary.
We rely on independent contract manufacturers for the manufacture of our PHD
System. Our inability to manufacture our PHD System, and our dependence on
independent contractors, may delay or impair our ability to generate revenues,
or adversely affect our profitability.
To be successful, our PHD System must be manufactured in commercial
quantities and at acceptable cost. Production of this product, especially in
commercial quantities, will create technical as well as financial challenges for
us. Other than the units manufactured for our clinical trial, only prototype
units of our PHD System have been produced to date. We may encounter unexpected
delays or costs in the scale-up of manufacturing operations. Further, no
assurance can be given that manufacturing or quality control problems will not
arise as we increase production of this product or as additional manufacturing
capacity is required in the future, or that we will ultimately be able to
successfully arrange for the manufacturing of our PHD System.
We intend to rely on contract manufacturers to manufacture several of the
major components of our PHD System and produce the final product. As with any
independent contractors, such contractors are not employed or otherwise
controlled by us and are generally free to conduct their business at their own
discretion. Although certain of our contract manufacturers have entered into
contracts with us to manufacture components of our PHD System, such contracts
can be terminated at any time under certain circumstances by us or the
contractors and can be breached at any time. Further, work stoppages and the
slowing of production at a single independent contractor would have a material
adverse effect on us. There are also other risks inherent in using single
sources of supply. We have not made alternative arrangements for the manufacture
of major components of our PHD System and there can be no assurance that
acceptable alternative arrangements could be made on a timely basis, or at all.
It is likely that a significant interruption in supply would result if we
utilize or were required to utilize a different manufacturing contractor for any
of the major components of our PHD System. The loss of the services of any of
our contract manufacturers would have a material adverse effect on us. In
addition, no assurance can be given that we or our manufacturers will be able to
obtain on a timely basis components or other supplies necessary to manufacture
or use our PHD System.
We may be required to expend time, resources and effort in product
manufacturing and quality control
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to ensure compliance with QSR's even if our PHD System is manufactured by an
independent contractor as is currently contemplated. If violations of the
applicable regulations are noted during FDA inspections of the manufacturing
facilities of an independent contractor, the continued manufacturing of our
products by such independent contractor could be suspended.
Competitors could cause us to lose current or future business opportunities and
harm our results of operations and ability to grow.
The dialysis industry is characterized by competition for financing,
executive talent, intellectual property and product sales. Most of our
competitors have substantially greater financial, scientific and technical
resources, research and development capabilities, manufacturing and marketing
resources and experience than us and greater experience in developing products,
providing services and obtaining regulatory approvals. Our competitors may
succeed in developing products that are more effective or less costly than any
that may be developed by us or that gain regulatory approval prior to our
products. We also expect that the number of our competitors and potential
competitors will increase. There can be no assurance that we will be able to
compete successfully against any existing or potential competitors. In order to
compete effectively, we will need to, among other things, demonstrate the
clinical and cost effectiveness of daily home hemodialysis using our PHD System.
Our ability to successfully market our products and services could be adversely
impacted by pharmacological and technological advances in preventing the
progression of end-stage renal disease in high-risk patients such as those with
diabetes and hypertension, technological developments by others, development of
new medications designed to reduce the incidence of kidney transplant rejection
and progress in using kidneys harvested from genetically-engineered animals as a
source of transplants.
We may need additional capital which, if not available to us, may alter our
business plan or limit our ability to achieve growth and which, if raised, may
dilute your ownership interest in us.
Our capital requirements have been and will continue to be significant. To
date, we have been dependent primarily on the net proceeds of public and private
sales of our equity securities, aggregating approximately $91 million. We
currently have no committed sources of, or other arrangements with respect to,
additional financing. There can be no assurance that our existing capital
resources, together with future operating cash flows, will be sufficient to fund
our future operations. Our capital requirements will depend on many factors,
including:
. the results of clinical studies;
. the timing and costs associated with obtaining FDA clearance and other
regulatory approvals;
. continued progress in research and development;
. manufacturing scale-up and associated costs;
. the cost involved in protecting our proprietary rights; and
. establishing marketing, distribution, patient training and technical and
patient support networks.
In the event that our plans change, our assumptions change or prove inaccurate
or we are unable to obtain production financing on commercially reasonable
terms, we could be required to seek additional financing sooner than currently
anticipated. Any necessary additional equity financing may involve substantial
dilution to our then existing stockholders and debt financing could result in
the imposition of significant financial and operational restrictions on us.
Generally, we expect U.S. customers to purchase our PHD Systems and enter
into contracts to provide all products and services related to our PHD System
for a single monthly price, which would include all
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consumables, service and product support. As an alternative, U.S. customers may
enter into lease agreements for our PHD Systems, under which the single monthly
price would also include a lease payment. Our present commercialization plan for
markets outside the United States is to develop a partnership in those markets
to distribute our PHD System and related consumables and service. Financing
production of our PHD System in quantities necessary for commercialization will
require a significant investment in working capital. This need for working
capital will increase to the extent that demand for our PHD System increases. We
would, therefore, have to rely on sources of capital beyond cash generated from
operations to finance production of our PHD System even if we are successful in
marketing our products and services. We currently intend to finance the working
capital requirements associated with these arrangements through equipment and
receivable financing with a commercial lender. If we are unable to obtain such
equipment financing, we would need to seek other forms of financing, through the
sale of equity securities or otherwise, to achieve our business objectives. We
have not yet obtained a commitment for such equipment financing, and there can
be no assurance that we will be able to obtain equipment financing or
alternative financing on acceptable terms or at all.
Uncertainty of third-party reimbursement could affect our profitability.
A substantial portion of the cost of dialysis treatment in the United
States is currently reimbursed by the Medicare program at prescribed rates. The
amount of Medicare reimbursement for dialysis is likely to significantly impact
decisions of nephrologists, dialysis clinics and other health care providers
regarding treatment modalities. The Medicare reimbursement rate for outpatient
hemodialysis has not increased significantly since 1983. There can be no
assurance that the current limitations or requirements on Medicare reimbursement
for dialysis will not materially adversely affect the market for our PHD System,
that health administration authorities outside of the United States will provide
reimbursement at acceptable levels or at all or that any such reimbursement will
be continued at rates sufficient to enable us to maintain prices at levels
sufficient to realize profitability.
If we become subject to product liability claims, they may reduce demand for the
our PHD System or result in damages that exceed our insurance limitation.
Our business exposes us to potential product liability risks which are
inherent in the production, marketing and sale of dialysis products. There can
be no assurance that we will be able to avoid significant product liability
exposure. We currently maintain product liability insurance with a coverage
limit of $10 million. There can be no assurance that the insurance policy will
provide adequate protection against potential claims. Furthermore, our
agreements with contract manufacturers require us to maintain product liability
insurance, and the failure to obtain such insurance could materially and
adversely affect our ability to produce our PHD System. A successful claim
brought against us in excess of any insurance coverage obtained by us could have
a material adverse effect upon our business, financial condition and results of
operations. In addition, we have agreed to indemnify certain of our contract
manufacturers against certain liabilities resulting from the use of our PHD
System.
Our business is likely to be hurt if we are unable to keep our senior executive
officers and key scientific personnel.
We are dependent upon the services of our senior executives, such as
William C. Dow, our President and Chief Executive Officer, and key scientific
personnel. We do not maintain key-man life insurance on our senior executives.
In addition, we do not have employment agreements, other than certain severance,
confidentiality and non-competition agreements, with any of our personnel. The
loss of the services of Mr. Dow or any other senior executive or key employee
could have a material adverse impact on us. Also, our ability to transition from
development stage to commercial operations will depend upon, among other things,
the successful recruiting and retention of highly skilled managerial and
marketing personnel with experience in business activities such as those
contemplated by us. Competition for the type of highly skilled individuals
sought by us is intense. There can be no assurance that the we will be able to
retain existing employees or that
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we will be able to find, attract and retain skilled personnel on acceptable
terms.
The holdings of our insiders may limit your ability to influence the outcome of
director elections and other matters subject to stockholder vote and may
conflict with our interests or the interests of our other stockholders.
Our current executive officers and directors, together with certain of
their affiliates, own approximately 26% of our common stock. These affiliates
include Coral Partners II, L.P. and Coral Partners IV, L.P., which beneficially
own approximately 24% of our common stock as of the date of this prospectus. In
the event that such stockholders were to act in concert with respect to us, they
would have the ability to substantially influence all matters submitted to our
stockholders for approval, including the election and removal of directors and
any merger, consolidation or sale of all or substantially all of our assets.
These persons would also have the ability to control our management and affairs.
In addition, Mr. Peter H. McNerney, a director of Aksys, serves as general
partner of the general partner of the Coral Partners entities described above.
There can be no assurance that conflicts of interest will not arise with respect
to the foregoing director or that such conflicts will be resolved in a manner
favorable to Aksys.
Risks Related to our Stock and this Offering
The sale of a substantial number of shares of our common stock in the public
market could adversely affect their market price, negatively impacting your
investment.
Future sales of substantial amounts of our common stock in the public
market and the existence of a substantial number of authorized but unissued
shares of our common stock could adversely affect market prices of our common
stock prevailing from time to time and could impair our ability to raise
additional capital through the sale of our equity securities. As of August 21,
2000, we had 18,115,430 shares of common stock outstanding. The shares of
common stock sold in this offering will be freely tradeable by persons other
than our "affiliates," as that term is defined under the Securities Act, without
restrictions or further registration under the Securities Act. In addition,
under our Certificate of Incorporation, there are currently approximately
31,884,570 shares of common stock (excluding shares reserved for issuance
pursuant to outstanding stock options and stock award and purchase plans) and
1,000,000 shares of preferred stock available for future issuance without
stockholder approval.
Our stock price may be highly volatile, and you may not be able to resell your
shares at or above the price you initially paid for the shares.
Since our initial public offering on May 16, 1996, our common stock has
traded between $3.50 and $23.50 and we have generally experienced relatively low
daily trading volumes in relation to the aggregate number of shares outstanding.
Factors that may have a significant impact on the market price or the
liquidity of our common stock include:
. actual or potential clinical trial results relating to our PHD System
under development by us;
. delays in our testing, clinical trial or development schedules;
. regulatory developments in both the United States and foreign countries;
. FDA or other regulatory agency approval, delay or denial of our PHD
System or similar products of our competitors;
. announcements of technological innovations or new products by us or our
competitors;
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. developments or disputes concerning patents or proprietary rights;
. events or announcements relating to our relationships with others;
. reports by official or unofficial health or medical authorities or the
general media regarding the potential benefits or detriments of our PHD
System or of similar products distributed by other companies or of daily
dialysis;
. economic and other factors, as well as period-to-period fluctuations in
our financial results; and
. market conditions for the dialysis industry generally.
External factors may also adversely affect the market price for our common
stock. Our common stock currently trades on the Nasdaq National Market. The
price and liquidity of our common stock may be significantly affected by the
overall trading activity and market factors on the Nasdaq National Market.
We may issue additional shares and dilute your ownership percentage.
Certain events over which you have no control could result in the issuance
of additional shares of our common stock, which would dilute your ownership
percentage in Aksys. We may issue additional shares of common stock or preferred
stock:
. to raise additional capital for our clinical trial, commercialization,
production and marketing activities;
. upon the exercise or conversion of outstanding options and warrants; and
. in lieu of cash payment of dividends.
As of August 21, 2000, there were outstanding warrants and options to
acquire up to approximately 1,800,000 additional shares of common stock at
prices ranging from $0.1067 to $15.25 per share. If exercised, these securities
will dilute your percentage ownership of our common stock.
Our charter documents could make it more difficult for a third party to acquire
us.
Provisions of our certificate of incorporation and bylaws may make it
difficult for a third party to acquire control of us, even if a change in
control would be beneficial to our stockholders. These provisions provide for:
. a classified board of directors;
. a "fair price" provision;
. a prohibition on stockholder action through written consents;
. a requirement that special meetings of stockholders be called only by
our board or our chief executive officer;
. advance notice requirements for stockholder proposals and nominations;
. limitations on the ability of stockholders to amend, alter or repeal our
bylaws and certificate of incorporation; and
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. the authority of our Board to issue, without stockholder approval,
preferred stock with such terms as the Board may determine.
We are also afforded the protections of a stockholder rights plan, which was
adopted by our Board in October 1996, and of Section 203 of the Delaware General
Corporation Law, which could have similar anti-takeover effects as the
provisions described above.
FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus, including in the documents
incorporated herein by reference, contain "forward-looking" information as that
term is defined by the federal securities laws. Forward-looking statements may
be identified by use of the terms "may," "will," "expect," "anticipate,"
"believe," "estimate," and similar words, although some forward-looking
statements are expressed differently. You should be aware that our actual
results could differ materially from those contained in the forward-looking
statements due to a number of factors, some of which are beyond our control.
Factors that could materially and adversely affect our results and cause them to
differ from those contained in, or incorporated in, this prospectus include, but
are not limited to:
. risks related to the regulatory approval process;
. our failure to meet development and manufacturing milestones on a timely
basis;
. the uncertainty regarding the effectiveness and ultimate market
acceptance of our only product in development -- the PHD System; and
. the capital requirements necessary to fund the development and
commercialization of the our products and services and effectively
compete with our competitors.
You should consider carefully the statements under "Risk Factors" and other
sections of this prospectus which address additional factors that could cause
our actual results to differ from those set forth in this prospectus.
The forward-looking statements made in this prospectus relate only to
events as of the date on which the statements are made. We undertake no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events.
USE OF PROCEEDS
The selling stockholders will receive all of the proceeds from the sale of
the common stock offered under this prospectus.
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SELLING STOCKHOLDERS
We are registering all 959,678 shares covered by this prospectus on
behalf of the selling stockholders named in the table below. We issued all of
these shares to the selling stockholders in a private placement transaction. We
are registering the shares in order to permit the selling stockholders to offer
these shares for resale from time to time. The selling stockholders may sell
all, some or none of the shares covered by this prospectus. See "Plan of
Distribution." None of the selling stockholders has had any material
relationship with us within the past three years other than as a result of the
ownership of these shares or other securities of Aksys.
The table below lists the selling stockholders and other information
regarding the ownership of common stock by each of the selling stockholders.
<TABLE>
<CAPTION>
Number of Number of Shares
Shares Shares Owned After Offering (1)
Owned Prior to Being ---------------------------
Selling Stockholder Offering Offered Number Percent (2)
------------------- -------- ------- --------- -----------
<S> <C> <C> <C> <C>
RF Nominees, Ltd. 493,600 493,600 0 0%
RF Nominees, Ltd. 216,078 216,078 0 0%
Western United Life Assurance Co. 114,600 50,000 64,600 0.4%
SAFECO Common Stock Trust 830,000 150,000 680,000 3.8%
SAFECO Resource Series Trust 370,000 50,000 320,000 1.8%
======= ======= ========= ====
TOTAL 2,024,278 959,678 1,064,600 5.9%
</TABLE>
___________________
(1) Assumes that the selling stockholders dispose of all the shares of common
stock covered by this prospectus and do not acquire any additional shares of
common stock.
(2) The percentage of common stock beneficially owned is based on the 18,115,930
shares of common stock outstanding on August 30, 2000.
PLAN OF DISTRIBUTION
The selling stockholders (or, subject to applicable law, their pledgees,
donees, distributees, transferees, or successors in interest) are offering
shares of our common stock that they acquired from us in a private placement
transaction. This prospectus covers the selling stockholders' resale of up to
959,678 shares of our common stock.
In connection with our issuance to the selling stockholders of the common
stock, we are filing a Registration Statement on Form S-3 with the Securities
and Exchange Commission. The registration statement
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covers the resale of the common stock from time to time as indicated in this
prospectus. This prospectus forms a part of that registration statement. We have
also agreed to prepare and file any amendments and supplements to the
registration statement as may be necessary to keep it effective for a period not
to exceed two years and to indemnify and hold the selling stockholders harmless
against certain liabilities under the Securities Act of 1933 that could arise in
connection with the selling stockholders' sale of the shares covered by this
prospectus. We have agreed to pay all reasonable fees and expenses incident to
the filing of the registration statement, but the selling stockholders will pay
any brokerage commissions, discounts or other expenses relating to the sale of
the common stock.
The selling stockholders may sell the shares of common stock described in
this prospectus directly or through underwriters, broker-dealers or agents. The
selling stockholders may also transfer, devise or gift these shares by other
means not described in this prospectus. As a result, pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer may offer shares of
the common stock covered by this prospectus. In addition, if any shares covered
by this prospectus qualify for sale pursuant to Rule 144 under the Securities
Act of 1933, the selling stockholders may sell such shares under Rule 144 rather
than pursuant to this prospectus.
The selling stockholders may sell shares of common stock from time to time
in one or more transactions:
. at fixed prices that may be changed;
. at market prices prevailing at the time of sale; or
. at prices related to such prevailing market prices or at negotiated
prices.
The selling stockholders may offer their shares of common stock in one or
more of the following transactions:
. on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Market;
. in the over-the-counter market;
. in privately negotiated transactions;
. through options;
. by pledge to secure debts and other obligations;
. by a combination of the above methods of sale; or
. to cover short sales made pursuant to this prospectus.
In effecting sales, broker or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate in the resales. The
selling stockholders may enter into hedging transactions with broker-dealers,
and in connection with those transactions, broker-dealers may engage in short
sales of the shares. The selling stockholders also may sell shares short and
deliver the shares to close out such short positions, provided that the short
sale is made after the registration statement has been declared effective and a
copy of this prospectus is delivered in connection with the short sale. The
selling stockholders also may enter into option or other transactions with
broker-dealers that require the delivery to the broker-dealer of the shares,
which the broker-dealer may resell pursuant to this prospectus. The selling
stockholders also may pledge the
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shares to a broker or dealer, and upon a default, the broker or dealer may
effect sales of the pledged shares pursuant to this prospectus.
The Commission may deem the selling stockholders and any underwriters,
broker-dealers or agents that participate in the distribution of the shares of
common stock to be "underwriters" within the meaning of the Securities Act. The
Commission may deem any profits on the resale of the shares of common stock and
any compensation received by any underwriter, broker-dealer or agent to be
underwriting discounts and commissions under the Securities Act. Each selling
stockholder has purchased the common stock in the ordinary course of its
business, and at the time the selling stockholder purchased the common stock, it
was not a party to any agreement or other understanding to distribute the
securities, directly or indirectly.
Under the Securities Exchange Act of 1934, any person engaged in the
distribution of the shares of common stock may not simultaneously engage in
market-making activities with respect to the common stock for five business days
prior to the start of the distribution. In addition, each selling and any other
person participating in a distribution will be subject to the Securities
Exchange Act of 1934, which may limit the timing of purchases and sales of
common stock by the selling or any such other person.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
for Aksys, Ltd. by Kirkland & Ellis (a partnership that includes professional
corporations), Chicago, Illinois.
EXPERTS
The financial statements of Aksys, Ltd. as of December 31, 1999 and 1998,
and for each of the years in the three-year period ended December 31, 1999
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, given on the authority of said firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Government Filings: We file annual, quarterly and special reports and
other information with the Securities and Exchange Commission. You may read and
copy any document that we file:
. at the Commission's Public Reference Room, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549;
. at the Commission's regional offices located at 7 World Trade Center,
13th Floor, New York, New York 10048, and at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and
. at the Commission's web site at http://www.sec.gov.
Some locations may charge prescribed or modest fees for copies. You may obtain
information on the operation of the Public Reference Room by calling 1-800-SEC-
0330.
Stock Market: Our common stock is listed on the Nasdaq National Market and
similar information can be inspected and copied at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
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Registration Statement: We have filed a registration statement under the
Securities Act of 1933 with the Commission with respect to the common stock
offered under this prospectus. This prospectus is a part of the registration
statement. However, it does not contain all of the information contained in the
registration statement and its exhibits. You should refer to the registration
statement and its exhibits for further information about us and the common stock
offered under this prospectus.
Information Incorporated By Reference: The Commission allows us to
"incorporate by reference" the information we file with it, which means that we
can disclose important information to you by referring you to those documents.
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 have filed the following
documents with the Commission and they are incorporated by reference into this
prospectus:
. our Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
. our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
. our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
. our Current Report on Form 8-K, filed on April 19, 2000;
. our Current Report on Form 8-K, filed on August 21, 2000; and
. the description of our capital stock contained in our Registration
Statement on Form 8-A, including all amendments or reports filed for the
purpose of updating the description.
Please note that all other documents and reports filed under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 following the date of
this prospectus and prior to the termination of the sale of the shares offered
hereby will be deemed to be incorporated by reference into this prospectus and
to be made a part of it from the date of the filing of our reports and
documents. You may request free copies of these filings by writing or
telephoning us at the following address:
Investor Relations
Aksys, Ltd.
Two Marriott Drive
Lincolnshire, Illinois 60069
(847) 229-2020
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