<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 2000.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENZYME TRANSGENICS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-3186494
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
--------------------------
175 CROSSING BOULEVARD, SUITE 410, FRAMINGHAM, MASSACHUSETTS, 01702
(508) 620-9700
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
SANDRA NUSINOFF LEHRMAN
President and Chief Executive Officer
Genzyme Transgenics Corporation
175 Crossing Boulevard, Suite 410
Framingham, Massachusetts 01702
(508) 620-9700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
with copies to:
<TABLE>
<S> <C>
LYNNETTE C. FALLON, ESQ. WILLIAM T. WHELAN, ESQ.
Palmer & Dodge LLP Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Beacon Street One Financial Center
Boston, Massachusetts 02108-3190 Boston, Massachusetts 02111
(617) 573-0100 (617) 542-6000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
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. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO OFFERING PRICE AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2)
<S> <C> <C> <C>
Common Stock, $.01 par value.......... 4,025,000 shares $20.50 $82,512,500
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, $.01 par value.......... $13,146(3)
</TABLE>
(1) Includes a total of 525,000 shares that are subject to an over-allotment
option granted to the Underwriters.
(2) Estimated solely for the purpose of determining the registration fee and
computed pursuant to Rule 457(c), based upon the average of the high and low
sale prices on February 3, 2000, as reported by the Nasdaq National Market.
(3) Of this amount, $10,247 was paid on January 6, 2000 based upon (i) the last
reported sales price of the Common Stock on the Nasdaq National Market on
January 4, 2000 ($11.25 per share) and (ii) the registration of 3,450,000
shares. The additional fee of $2,899 for the additional 575,000 shares being
registered is based on the last reported sales price of the Common Stock on
the Nasdaq National Market on February 2, 2000 ($19.0938).
--------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Pursuant to Rule 424(a)
Registration No. 333-94187
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. 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 OR LEGAL.
<PAGE>
Preliminary Prospectus Subject to Completion, dated February 4, 2000
- --------------------------------------------------------------------------------
3,500,000 shares
[LOGO]
Common Stock
- ------------------------------------------------------------
<TABLE>
<CAPTION>
THE COMPANY: THE OFFERING:
<S> <C>
- - We have a biotechnology business engaged - We are offering all the shares.
in the application of transgenic - There is an existing trading market for
technology to the development and production these shares. The reported last sales price
of monoclonal antibodies and other on February 3, 2000 was $20.50 per share.
recombinant proteins for therapeutic - We plan to use the majority of our
purposes and a preclinical contract proceeds from the offering for general
research business. corporate purposes.
- - Genzyme Transgenics Corporation,
175 Crossing Boulevard, Suite 410
Framingham, Massachusetts 01702
(508) 620-9700
- - Nasdaq--NM Symbol: GZTC
</TABLE>
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 TO READ ABOUT CERTAIN RISKS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF
OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Public offering price....................................... $ $
- ----------------------------------------------------------------------------------------
Underwriting discounts and commission....................... $ $
- ----------------------------------------------------------------------------------------
Proceeds, before expenses, to us............................ $ $
- ----------------------------------------------------------------------------------------
</TABLE>
We have granted the underwriters a 30-day option to purchase up to an additional
525,000 shares of common stock to cover over-allotments at the public offering
price per share less the underwriting discounts and commissions. If the option
is exercised in full, the total underwriting discounts and commissions will be
$ and the total proceeds, before expenses, to us will be $ .
The underwriters expect to deliver the shares of common stock in New York, New
York on , 2000.
Warburg Dillon Read LLC Chase H&Q
The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 7
USE OF PROCEEDS............................................. 14
MARKET PRICE OF COMMON STOCK................................ 15
DIVIDEND POLICY............................................. 15
CAPITALIZATION.............................................. 16
SELECTED CONSOLIDATED FINANCIAL DATA........................ 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 19
BUSINESS.................................................... 24
MANAGEMENT.................................................. 37
UNDERWRITING................................................ 39
LEGAL MATTERS............................................... 41
EXPERTS..................................................... 41
WHERE YOU CAN FIND MORE INFORMATION......................... 41
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 41
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS ONLY A SUMMARY. YOU SHOULD CAREFULLY READ THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, AND THE FINANCIAL STATEMENTS
AND THE NOTES TO THE FINANCIAL STATEMENTS INCORPORATED HEREIN BY REFERENCE.
INVESTING IN OUR COMMON STOCK INVOLVES RISK. THEREFORE, CAREFULLY CONSIDER THE
INFORMATION PROVIDED ON PAGES 7-13 UNDER THE HEADING "RISK FACTORS." UNLESS
OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS' OVERALLOTMENT OPTION WILL NOT BE EXERCISED. WE URGE YOU TO READ
THE ENTIRE PROSPECTUS.
THE COMPANY
We are a leader in the application of transgenic technology to the
development and production of recombinant proteins for therapeutic and other
biomedical uses. To date, we have produced more than 60 such proteins, 45
through collaborations with various commercial and academic organizations and 15
independently. More than half of our transgenic proteins actively under
development are monoclonal antibodies/Ig fusion proteins. For our lead compound,
Antithrombin III, we have completed one of two identical Phase III clinical
studies for the treatment of heparin resistance in patients undergoing
cardiopulmonary bypass procedures. We also own and operate a leading preclinical
contract research organization, Primedica Corporation, which provides services
such as preclinical efficacy and safety testing, IN VITRO testing and
formulation development to pharmaceutical, biotechnology, medical device and
other companies.
Pharmaceutical and biotechnology companies are developing a growing number
of recombinant proteins for therapeutic and diagnostic applications. Many of
these proteins have proven difficult or expensive to produce in the quantities
required using traditional protein production systems, such as bacteria, yeast
or mammalian cell cultures. Moreover, bacteria and yeast systems cannot produce
many complex proteins. While mammalian cell cultures can produce most of these
complex proteins, these cells are generally more difficult and expensive to grow
and often produce lower volumes of protein, or the proteins may not be secreted
by the cells into the culture medium.
We produce recombinant proteins by inserting into the genetic material of an
animal embryo a specific DNA sequence that directs the production of a desired
protein in the milk of transgenic offspring. We believe that transgenic
production offers substantial economic and technological advantages in
comparison to traditional protein production systems. In the case of certain
complex proteins, including Ig fusion proteins, transgenic production may
represent the only technologically and economically feasible method of
commercial production. For proteins currently derived from pooled human plasma,
transgenic production provides an alternative source with reduced risk of
transmission of human viruses and other known adventitious agents. Of the 60
transgenic proteins produced to date, we have expressed 40 proteins at levels
greater than one gram per liter, which is substantially higher than those
typically achieved for comparable proteins in traditional protein production
systems.
Our primary focus is on using transgenic technology to produce monoclonal
antibodies. These therapeutics are likely to be required in relatively large and
repeated doses for chronic diseases such as rheumatoid arthritis, other
autoimmune diseases and cancer. The economic and technological advantages of
transgenic technology make it well suited to produce the large amount of
proteins anticipated for therapeutic use of monoclonal antibodies. By mid-1999,
14 monoclonal antibodies had been approved for use in the United States--nine
for use as human therapeutics and five for diagnostic uses. The projected 1999
revenues for the six highest selling therapeutic
antibodies--ReoPro-Registered Trademark-, Rituxan-Registered Trademark-,
Synagis-Registered Trademark-, Herceptin-Registered Trademark-,
Remicade-Registered Trademark- and Zenapax-Registered Trademark---are
$1.3 billion. More than 30 monoclonal antibody candidates are now in clinical
trials and over 200 are reported to be in preclinical development. We believe
that in many cases the yearly requirement for production of these potential
therapeutics will exceed 100 kilograms and may approach 300 to 1000 kilograms.
Transgenic production may provide the only commercially viable means to meet the
large projected volume requirements of these therapeutics.
3
<PAGE>
We have several partnerships with pharmaceutical and other biotechnology
companies to develop monoclonal antibodies/Ig fusion proteins transgenically.
Our corporate partners include Bristol-Myers Squibb, Elan, Centocor, Alexion and
BASF Knoll. To date, we have formed more than a dozen collaborations which
generally provide for transgenic production of limited quantities of targeted
proteins in exchange for development fees and milestone payments and, in some
cases, anticipate the payment of royalties on product sales upon
commercialization. Following demonstration of comparability of the transgenic
product to a version of the product produced in cell culture, we intend to
negotiate commercialization agreements that will allow us to participate in the
success of the product through equity, royalties and supply commitments.
Proteins traditionally sourced from human plasma provide other opportunities
for high volume transgenic protein production. We are developing a transgenic
version of ATIII, a protein normally found in human serum, in a joint venture
with Genzyme Corporation. We are also developing Human Serum Albumin, another
plasma protein, with Fresenius AG.
We believe that our current and future partners will elect to employ
transgenic technology for the production of recombinant proteins in cases where
transgenic technology offers economic and technological advantages over other
production systems. These advantages, any one of which may be critical to the
decision to proceed with a particular development project, include:
- lower capital investment;
- improved risk management of capital investment;
- predictability of production;
- lower cost of goods; and
- technological enablement.
Our other business, Primedica, focuses on enabling its clients to meet
regulatory testing and other product development needs quickly and effectively
by offering a fully integrated line of preclinical contract research
organization services. Primedica's laboratories provide high value,
scientifically differentiated services to clients, including preclinical
efficacy testing, experimental surgery, photobiology and reproductive toxicology
testing as well as formulation development. Our Primedica business uses its
technological capabilities to introduce new services that improve the ability of
its customers to develop their products successfully. Primedica's comprehensive
programs link its preclinical and manufacturing support services to reduce the
time and expense of bringing new therapeutics or other products to market.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered
by the Company.............. 3,500,000 shares
Common stock to be outstanding
after the offering.......... 25,947,663 shares(1)(2)
Use of proceeds............... We intend to use the net proceeds that we will receive from
the offering for general corporate purposes, including:
working capital, investment in new technologies, expansion
of existing operations and the redemption of some or all of
the $6.6 million of Series B convertible preferred stock at
cost plus accrued dividends. See "Use of Proceeds."
Nasdaq--NM Symbol............. GZTC
</TABLE>
- ------------------------
(1) Based on 22,447,663 shares outstanding as of December 16, 1999. Excludes
2,898,508 shares issuable upon exercise of options outstanding as of
December 16, 1999 and an additional 419,509 shares reserved for issuance
under our various equity plans.
(2) Excludes 1,048,021 shares of common stock issuable upon conversion of
Series B convertible preferred stock that we intend to redeem upon the
closing of this offering, assuming net proceeds from this offering are at
least $19.8 million. The shares of Series B convertible preferred stock are
currently convertible into common stock at a fixed price of $6.30 per share
and can be redeemed by the Company at the original cost plus accrued
dividends.
HOW TO CONTACT US
Our executive offices are located at 175 Crossing Boulevard, Suite 410,
Framingham, Massachusetts, 01702, and our telephone number is (508) 620-9700.
Our World Wide Web site is located at http://www.transgenics.com. Our web site
is not a part of this prospectus.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE FISCAL YEARS ENDED
-------------------------- ----------------------------------------------------------------------
OCTOBER 3, SEPTEMBER 27, JANUARY 3, DECEMBER 28, DECEMBER 29, DECEMBER 31, DECEMBER 31,
1999 1998 1999 1997 1996 1995 1994
---------- ------------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Services................ $ 41,934 $ 37,216 $ 50,816 $ 43,417 $ 38,496 $ 26,399 $ 4,465
Sponsored transgenic
research and
development........... 11,200 7,479 11,596 19,521 8,338 6,022 4,097
Products................ -- -- -- -- -- -- 909
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total revenue........... 53,134 44,695 62,412 62,938 46,834 32,421 9,471
Loss from continuing
operations.............. (13,399) (14,555) (19,590) (9,343) (7,746) (5,704) (5,466)
Net loss to common
shareholders............ (13,399) (15,711) (20,746) (9,343) (7,746) (4,133) (5,284)
Earnings per share:
Basic................... $ (0.69) $ (0.88) $ (1.15) $ (0.54) $ (0.52) $ (0.35) $ (0.80)
Diluted................. (0.69) (0.88) (1.15) (0.54) (0.52) (0.35) (0.80)
Shares used in computing
earnings per share:
Basic................... 19,356 17,857 17,979 17,253 14,802 11,789 6,599
Diluted................. 19,356 17,857 17,979 17,253 14,802 11,789 6,599
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 3, 1999
-------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(1)(2)
-------- ------------- ----------------
<S> <C> <C> <C>
Cash and cash equivalents and short-term investments........ $ 5,577 $11,165 $71,369
Working capital (deficit)................................... (14,706) (9,118) 51,086
Total assets................................................ 80,861 86,449 146,653
Long-term debt.............................................. 13,410 13,410 13,410
Total shareholders' equity.................................. 25,204 30,792 90,996
</TABLE>
- ------------------------------
(1) Adjusted to reflect the conversion of $5.3 million of Series A convertible
preferred stock into 901,808 shares of common stock and the redemption of
$5.7 million of Series A convertible preferred stock at cost plus 15% with
proceeds from the issuance of $6.6 million of Series B convertible preferred
stock in November 1999; in conjunction with the redemption of the Series A
convertible preferred stock and the issuance of the Series B convertible
preferred stock, the Company will record a dividend to preferred
shareholders of $1,414,000 million in the fourth quarter ended January 2,
2000. Additionally, adjusted to reflect the issuance of 685,545 shares of
common stock to two institutional investors in December 1999 at $8.00 per
share with net proceeds to the Company of approximately $5,428,000 million.
Also adjusted to reflect the exercise of 30,220 stock options at a weighted
average exercise price of $5.28 for total proceeds of $159,566 through
December 16, 1999.
(2) Reflects the sale of the 3,500,000 shares of common stock offered by us
hereby at an assumed public offering price of $20.50 per share and the
application of the net proceeds, including the redemption of all of the
outstanding Series B convertible preferred stock at cost plus accrued
dividends upon the closing of this offering, after deducting the estimated
offering expenses and underwriting discounts and commissions payable by us.
See "Use of Proceeds."
6
<PAGE>
RISK FACTORS
INVESTING IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF FINANCIAL
RISK. IN DECIDING WHETHER TO INVEST, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS AS WELL AS THE OTHER INFORMATION IN THIS PROSPECTUS. THE RISKS SET
OUT BELOW MAY NOT BE EXHAUSTIVE.
KEEP THESE RISK FACTORS IN MIND WHEN YOU READ "FORWARD LOOKING" STATEMENTS
ELSEWHERE IN THIS PROSPECTUS. FORWARD LOOKING STATEMENTS RELATE TO FUTURE EVENTS
AND TIME PERIODS OR OUR EXPECTATIONS. GENERALLY, THE WORDS "ANTICIPATE,"
"EXPECT," "INTEND" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD LOOKING STATEMENTS.
THESE STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, AND FUTURE EVENTS AND
CIRCUMSTANCES COULD DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED IN THE FORWARD
LOOKING STATEMENTS.
WE EXPECT TO INCUR FUTURE OPERATING LOSSES AND MAY NEVER BECOME PROFITABLE.
We have had operating losses since our inception, and we expect losses to
continue for the next several years. From our inception in 1993 to October 3,
1999, we have incurred cumulative losses of approximately $60.3 million. These
losses have resulted principally from the costs of our research activities and
expenses in excess of revenues from our contract research organization ("CRO")
services. Our primary sources of revenue have been our research and development
contracts and CRO services. To date, those revenues have not generated profits.
We expect to continue incurring significant operating losses until our product
sales and CRO service revenues sufficiently fund our operations. We cannot be
certain that we will become profitable.
WE FACE UNCERTAINTY IN RAISING ADDITIONAL FUNDS NECESSARY TO FUND OUR
OPERATIONS.
In order to develop and bring our transgenic products to market, we and our
partners must commit substantial resources to costly and time consuming
research, preclinical testing and clinical trials. If our businesses do not
become profitable before we exhaust existing resources, we will need to obtain
additional financing, through public or private sources, including debt or
equity financings, or through collaborative or other arrangements with corporate
partners. We may not be able to obtain adequate funds for our operations from
these sources when needed or on acceptable terms. If we raise additional capital
through the sale of equity, or securities convertible into equity, your
proportionate ownership in GTC may be diluted. If we cannot obtain additional
financing, we could be forced to delay, scale back or eliminate some of our
research and development programs. In order to conserve capital or reduce our
reliance on obtaining new capital, we may also elect to delay or forgo timely
expansion, improvement or investment in our CRO services or dispose of the
assets related to those services.
TRANSGENIC TECHNOLOGY IS IN A RELATIVELY EARLY STAGE.
Developing products based on transgenic technology is subject to significant
technological risks. Most of our transgenic proteins are in the early
development stage and will require time consuming and costly development,
testing and regulatory clearance. We have not, nor to our knowledge, has any
other entity completed human clinical trials necessary to receive marketing
authorization for any protein produced in the milk of transgenic animals. We
cannot be certain that we will be able to do so successfully, nor can we assure
that any transgenically produced protein will be safe or effective. In addition,
it is possible that research and discoveries by others will render our
transgenic technology obsolete or noncompetitive.
WE CANNOT MARKET AND SELL OUR TRANSGENIC PRODUCTS IN THE UNITED STATES OR IN
OTHER COUNTRIES IF WE FAIL TO OBTAIN THE NECESSARY REGULATORY APPROVALS.
Obtaining required regulatory approvals for our transgenically produced
products may take several years to complete and may consume substantial capital
resources. We cannot give any assurance that the FDA or any other regulatory
authority will act quickly or favorably on our requests for approval, or
7
<PAGE>
that the FDA or any other regulatory authority will not require us to provide
additional data that we do not currently anticipate in order to obtain
approvals. We cannot apply for FDA approval to market any of our products under
development until the product successfully completes its preclinical and
clinical trials. Several factors could prevent successful completion or cause
significant delays of these trials, including an inability to enroll the
required number of patients or failure to demonstrate adequately that the
product is safe and effective for use in humans. If safety concerns develop, the
FDA could stop our trials before completion. Moreover, to our knowledge, no
protein produced in the milk of a transgenic animal has reached the stage in the
regulatory process which would allow it to be submitted to the FDA for final
regulatory approval. Because transgenic products represent novel therapeutic
products, the process for regulatory approval is unproven. There may be
additional delays in regulatory approval due to issues arising from the breeding
of transgenic animals and the use of proteins derived from such animals. If we
are not able to obtain regulatory approvals for use of our products under
development, or if the patient populations for which they are approved are not
sufficiently broad, the commercial success of our products could be limited.
WE CANNOT ASSURE THE COMMERCIAL SUCCESS OF TRANSGENIC PRODUCTS.
Even if our transgenically produced products are successfully developed and
approved by the FDA and corresponding foreign regulatory agencies, they may not
enjoy commercial acceptance or success, which would adversely affect our
business and results of operations. Several factors could limit our success,
including:
- possible limited market acceptance among patients, physicians, medical
centers and third party payors;
- our inability to access a sales force capable of marketing the product;
- our inability to supply a sufficient amount of product to meet market
demand;
- the number and relative efficacy of competitive products that may
subsequently enter the market; and
- for a transgenic product designed to replace or supplement currently
marketed non-transgenic products, the relative risk-benefit profile and
cost-effectiveness of the transgenically produced product.
In addition, it is possible that we or our collaborative partners will be
unsuccessful in developing, marketing and implementing a commercialization
strategy for any transgenic products.
IF WE OBTAIN REGULATORY APPROVAL OF OUR TRANSGENIC PRODUCTS, THE PRODUCTS WILL
BE SUBJECT TO CONTINUING REVIEW AND EXTENSIVE REGULATORY REQUIREMENTS WHICH
COULD AFFECT THEIR MANUFACTURE AND MARKETING.
The FDA and foreign regulatory agencies continue to review products even
after they have received initial approval. If and when the FDA or other agency
approves any of our transgenic products under development, the manufacture and
marketing of these products will be subject to continuing regulation, including
compliance with current Quality Systems Regulations and Good Manufacturing
Practices, known as QSR/GMP, adverse event reporting requirements and
prohibitions on promoting a product for unapproved uses. We will also be
required to obtain additional approvals in the event we significantly alter the
product's labeling or manufacturing process. Enforcement actions resulting from
failure to comply with QSR/GMP requirements could result in fines, suspensions
of approvals, recalls of products, operating restrictions and criminal
prosecutions, and affect the manufacture and marketing of our transgenic
products. The FDA or other regulatory agencies could withdraw a previously
approved product from the market upon receipt of newly discovered information,
including a failure to comply with regulatory requirements, the occurrence of
unanticipated problems
8
<PAGE>
with products following approval, or for other reasons. Any of these withdrawals
could adversely affect our operating results.
WE DEPEND ON COLLABORATION AGREEMENTS FOR OUR REVENUE.
Our revenue stream and our business strategy depend largely on our entering
into transgenic development agreements with third parties. We may not be able to
establish these agreements, and we cannot guarantee that we will establish our
agreements on commercially acceptable terms. Our future agreements may not
ultimately be successful. Even if we enter into transgenic development
agreements, our partners could terminate these agreements or they could expire
before meaningful developmental milestones are reached. The termination or
expiration of any of these agreements could have a material adverse effect on
our business.
Much of the revenue that we may receive under these collaborations will
depend upon our partners' ability to successfully develop and commercially
introduce, market and sell new products derived from our transgenic production
systems. Our partners may develop competitive production technologies or
competitive products outside of their collaborations with us that could have a
material adverse effect on our business.
To date, the scope of our collaboration agreements have generally been
limited to transgenically producing limited quantities of targeted proteins. We
cannot be certain that these initial development projects will be successful or
lead to collaboration agreements to commercially produce any proteins. Depending
upon the terms of any future collaborations, our role in the collaboration will
often be limited to the production aspects of the proteins. As a result, we may
also be dependent on collaborators for other aspects of the development,
preclinical and clinical testing, regulatory approval, sales, marketing and
distribution of any transgenic product.
ASPECTS OF OUR OPERATIONS ARE DEPENDENT ON OUR RELATIONSHIP WITH GENZYME.
We are developing ATIII, our lead compound, in a joint venture in which
Genzyme Corporation ("Genzyme") provides substantial funding. If Genzyme does
not agree to continue that funding, we might not be able to fund ATIII on our
own or obtain funding from another partner on acceptable terms. As of
October 3, 1999, we owed $15.8 million to a commercial bank, which debt is
guaranteed by Genzyme. Genzyme has also established a $6.3 million revolving
line of credit in our favor, on which we do not currently have an outstanding
balance. This credit line will no longer be available if the net proceeds from
this offering equal or exceed $34.6 million. When Genzyme's line of credit or
guaranty expire, we might not be able to negotiate an extension or replacement
of those credit facilities on acceptable terms.
CONCENTRATION OF OWNERSHIP OF OUR STOCK COULD LEAD TO FAILURE TO MAXIMIZE STOCK
PRICE AND CONFLICTS OF INTEREST.
Genzyme is our largest single stockholder. After giving effect to this
offering, Genzyme will beneficially own 28.6% of our outstanding common stock.
In addition, Genzyme owns $6.6 million of Series B convertible preferred stock
that could be converted into an additional 1,048,021 shares of common stock and
warrants to acquire up to 518,324 shares of our common stock. We intend to
redeem the Series B shares upon consummation of this offering, assuming we
receive at least $19.8 million in net proceeds. If we do not redeem the
Series B convertible preferred stock and that stock is converted into shares of
our common stock by Genzyme and if Genzyme exercises its warrants, then Genzyme
would own 32.7% of our common stock after this offering. Genzyme's ownership
interest gives it significant influence over certain matters requiring our
stockholders' approval, including electing directors, adopting or amending
certain provisions of our articles of organization or by-laws and approving or
preventing certain mergers or other similar transactions, such as a sale of
9
<PAGE>
substantially all of our assets (including transactions that could give our
stockholders the opportunity to realize a premium over the then-prevailing price
for their shares).
Furthermore, Genzyme's ownership position may effectively discourage a third
party from making an acquisition proposal. Accordingly, this may inhibit a
change of control in circumstances that could give the holders of our common
stock the opportunity to realize a premium over the then-prevailing market
price, affect the market price of our common stock, or both. Our stockholders
other than Genzyme will be minority equity holders and will be unable to
significantly influence our management or business policies. Four of eight
members of our board of directors also serve as directors and/or executive
officers of Genzyme. The interests of Genzyme and GTC may differ from time to
time.
OUR BUSINESS MAY FAIL DUE TO INTENSE COMPETITION IN OUR INDUSTRY.
The industries in which we operate are highly competitive and may become
even more competitive. We will need to continue to devote substantial efforts
and expense to research and development in order to maintain a competitive
position. It is possible that developments by others will render our current and
proposed services, products or technologies obsolete. In addition, we may
encounter significant competition for protein development and production
contracts from other companies. Transgenic products may face significant
competition from biological products manufactured in cell culture or by other
traditional protein production methods. Our businesses will compete both against
other companies whose business is dedicated to offering transgenic production or
preclinical testing and development as a service, and with prospective customers
or collaborators who decide to pursue such transgenic production or preclinical
testing and development internally. Many of these competitors have greater
financial and human resources and more experience in research and development
than we have. Competitors that complete clinical trials, obtain regulatory
approvals and begin commercial sales of their products before us will enjoy a
significant competitive advantage. We anticipate that we will face increased
competition in the future as new companies enter the market and alternative
technologies become available.
THE PUBLIC MAY HAVE CONCERNS ABOUT GENETIC ENGINEERING IN ANIMALS AND ANIMAL
TESTING.
Many of our activities involve genetic engineering in animals and animal
testing. These types of activities have been the subject of controversy and
adverse publicity. Animal rights groups and various other organizations and
individuals have attempted to stop genetic engineering activities and animal
testing by pressing for legislation and regulation in these areas. To the extent
the activities of such groups are successful, they may adversely affect our
business.
THE SUCCESSFUL COMMERCIALIZATION OF OUR PRODUCTS WILL DEPEND ON OBTAINING
COVERAGE AND REIMBURSEMENT FOR USE OF THESE PRODUCTS FROM THIRD-PARTY PAYORS.
Sales of pharmaceutical products largely depend on the reimbursement of
patients' medical expenses by government health care programs and private health
insurers. Without the financial support of the government or third party
insurers, the market for transgenic products will be limited. We cannot be sure
that third party payors will reimburse sales of our transgenic products, or
enable us or our partners to sell them at profitable prices.
The federal government and private insurers have considered ways to change,
and have changed, the manner in which health care services are provided and paid
for in the United States. In particular, these third party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products. In the future, it
is possible that the government may institute price controls and further limits
on Medicare and Medicaid spending. These controls and limits could affect the
payments we collect from sales of our products. Internationally, medical
reimbursement systems vary significantly, with some medical centers having fixed
budgets, regardless of levels of patient treatment, and other countries
requiring application for,
10
<PAGE>
and approval of, government or third party reimbursement. Even if we or our
partners succeed in bringing transgenic products to market, uncertainties
regarding future health care policy, legislation and regulation, as well as
private market practices, could affect our ability to sell our products in
commercially acceptable quantities at profitable prices.
OUR BUSINESS EXPOSES US TO POTENTIAL SERVICE AND PRODUCT LIABILITY.
The nature of our business exposes us to potential product and professional
liability risks which are inherent in the testing, production, marketing and
sale of human therapeutic products. While we have obtained product and
professional liability insurance under an insurance policy arrangement with
Genzyme and Genzyme's affiliates, we cannot be certain that our insurance
coverage will be sufficient to cover any claim. Uninsured product or service
liability could have a material adverse effect on our financial results.
Additionally, it is possible that any insurance will not provide us with
adequate protection against potential liabilities. Potential liability may arise
from our handling of clinical samples containing human blood and tissues, which
may contain human pathogens. It is also possible that liability may arise from
handling animal blood and tissue which may contain zoonotic pathogens. Although
such products are used only in the laboratory, inadvertent human contact may
occur.
QUALIFIED MANAGERIAL AND SCIENTIFIC PERSONNEL ARE SCARCE IN OUR INDUSTRY.
We are highly dependent on the principal members of our scientific and
management staff. Our success will depend in part on our ability to identify,
attract and retain qualified managerial and scientific personnel. There is
intense competition for qualified personnel in our industry. We may not be able
to continue to attract and retain personnel with the advanced technical
qualifications or managerial expertise necessary for the development of our
business. If we fail to attract and retain key personnel, it could have a
material adverse effect on our business, financial condition and results of
operations.
OUR CRO BUSINESS IS DEPENDENT ON CURRENT GOVERNMENT REGULATORY REQUIREMENTS.
The market for our preclinical testing services depends on our maintaining
strict standards for the conduct of laboratory and clinical tests and related
procedures that are promulgated by governmental entities responsible for public
health and welfare, including the FDA and by regulatory authorities in other
countries. The process of obtaining these approvals varies according to the
nature and use of the product and routinely involves lengthy and detailed
laboratory and clinical testing and other costly and time-consuming procedures.
We offer customers of our preclinical testing and development services the
necessary expertise to comply with these complex regulations. If the regulatory
structure were to change in a way which reduced the need for such services, we
could be materially adversely affected.
WE DEPEND ON PATENTS AND PROPRIETARY RIGHTS THAT MAY FAIL TO PROTECT OUR
BUSINESS.
Our success will partly depend on our ability to obtain and maintain patent
or other proprietary protection for our technologies, products and processes
such as:
- compositions of matter or processes;
- processes developed by our employees; or
- uses of compositions of matter discovered through our technology.
We may not be able to obtain the necessary protection. Our success will also
depend on our ability to operate without infringing the proprietary rights of
other parties. Legal standards relating to the validity of patents covering
pharmaceutical and biotechnological inventions and the scope of claims made
under these patents are still developing. There is no consistent policy
regarding the breadth of
11
<PAGE>
claims allowed in biotechnology patents. The patent position of a biotechnology
firm is highly uncertain and involves complex legal and factual questions.
We have been issued six patents and currently have 20 provisional or regular
applications solely owned by us and two regular applications co-owned with
others pending in the United States. Where appropriate there are counterparts in
other countries. We may not receive any issued patents based on pending or
future applications. Our issued patents may not contain claims sufficiently
broad to protect us against competitors with similar technology. Additionally,
our patents, our partners' patents and patents for which we have license rights
may be challenged, narrowed, invalidated or circumvented. Furthermore, rights
granted under patents may not provide us with any competitive advantage.
We may have to initiate arbitration or litigation to enforce our patent and
license rights. If our competitors file patent applications that claim
technology also claimed by us, we may have to participate in interference or
opposition proceedings to determine the priority of invention. An adverse
outcome could subject us to significant liabilities to third parties and require
us to cease using the technology or to license the disputed rights from third
parties. We may not be able to obtain any required licenses on commercially
acceptable terms or at all.
The cost to us of any litigation or proceeding relating to patent rights,
even if resolved in our favor, could be substantial. Some of our competitors may
be able to sustain the costs of complex patent litigation more effectively than
we can because of their substantially greater resources. Uncertainties resulting
from the initiation and continuation of any pending patent or related litigation
could have a material adverse effect on our ability to compete in the
marketplace.
We rely on certain proprietary trade secrets and know-how that are not
patentable. We have taken measures to protect our unpatented trade secrets and
know-how, including having our employees, consultants and some contractors
execute confidentiality agreements. These agreements could be breached. If so,
it is possible that our remedies for a given breach might be inadequate. It is
also possible that competitors could independently develop or discover our trade
secrets or that the trade secrets could otherwise become known.
WE HAVE OBLIGATIONS TO ISSUE SHARES OF COMMON STOCK IN THE FUTURE WHICH WILL
DILUTE YOUR OWNERSHIP INTEREST AND MAY ADVERSELY AFFECT OUR STOCK PRICE.
Sales of substantial amounts of our common stock in the public market, or
the perception that such sales may occur, could adversely affect the prevailing
market price of the common stock. As of December 16, 1999, there were 22,447,663
shares of common stock outstanding. As of December 16, 1999, options to purchase
an aggregate of 2,898,508 shares of common stock at varying exercise prices were
outstanding; of such total, options for 1,709,402 shares were immediately
exercisable and such shares could be immediately resold into the public market.
All of the 7,428,365 shares of common stock held by Genzyme could be sold into
the public markets upon compliance with Rule 144. In addition, 1,048,021 shares
of common stock are issuable to Genzyme upon conversion of shares of Series B
convertible preferred stock, which shares are entitled to registration rights
and, if not redeemed, will be eligible for sale under Rule 144 in
November 2000. The 518,324 shares issuable to Genzyme upon exercise of
outstanding warrants are also entitled to registration rights, which could
expedite the resale of such shares into the public market. Another 478,000
shares of common stock are reserved for issuance upon exercise of outstanding
warrants, all of which are currently exercisable and 450,000 of which can be
sold into the public market under a currently effective registration statement.
OUR COMMON STOCK MAY HAVE A VOLATILE PUBLIC TRADING PRICE AND LOW TRADING
VOLUME.
The market price of our common stock has been highly volatile and the market
for our common stock has experienced significant price and volume fluctuations,
some of which are unrelated to our
12
<PAGE>
Company's operating performance. Many factors can have a significant adverse
effect on our common stock's market price, including:
- announcements by us or our competitors of technological innovations or new
commercial products;
- developments concerning our proprietary rights, including patent and
litigation matters;
- publicity regarding actual or potential results relating to our or our
partners' products or compounds under development;
- an unexpected termination of one of our partnerships;
- regulatory developments in the United States and other countries;
- general market conditions; and
- quarterly fluctuations in our revenues and other financial results.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BY-LAWS AND MASSACHUSETTS LAW MAY
ADVERSELY AFFECT OUR STOCK PRICE.
Our articles of organization, certain provisions of our by-laws and certain
provisions of Massachusetts law could delay or make more difficult a merger,
tender offer or proxy contest involving us. These provisions may have the effect
of delaying or preventing a change of control without action by the stockholders
and, therefore, could adversely affect the price of our common stock.
OUR MANAGEMENT WILL HAVE BROAD DISCRETION AS TO THE USE OF PROCEEDS OF THIS
OFFERING.
Our management will have broad discretion regarding how we use the net
proceeds of the offering. Investors will be relying on the judgment of
management regarding the application of the proceeds of the offering. The result
and effectiveness of our use of the proceeds are uncertain.
13
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale by the Company of the common stock offered
hereby, assuming a public offering price of $20.50 per share and after deducting
underwriting discounts and commissions and estimated offering expenses, will be
approximately $66.9 million ($77.1 million if the Underwriters' over-allotment
option is exercised in full). The Company anticipates that these funds will be
used for general corporate purposes, including working capital, investment in
new technologies, expansion of existing operations as well as for the redemption
of some or all of the outstanding Series B convertible preferred stock for up to
$6.6 million, plus accrued dividends. The Company has no present commitments,
agreements, or understandings and is not presently conducting negotiations with
respect to any acquisitions. The Company's management will have broad discretion
to allocate proceeds from this offering to uses that it believes are
appropriate. Pending such uses, the net proceeds of this offering will be
invested in short-term, investment grade, interest-bearing securities. The
principal purpose of this offering is to obtain additional working capital.
14
<PAGE>
MARKET PRICE OF COMMON STOCK
The common stock of GTC began trading in 1993 in the Nasdaq National Market
System under the symbol GZTC. Quarterly high and low sales prices for the common
stock as reported by the Nasdaq National Market System are shown below.
<TABLE>
<CAPTION>
HIGH LOW
-------- ------------
<S> <C> <C>
YEAR ENDED JANUARY 3, 1999:
First Quarter............................................. $13 1/2 $9
Second Quarter............................................ 12 1/4 7 11/16
Third Quarter............................................. 8 4
Fourth Quarter............................................ 7 1/4 2 1/16
YEAR ENDED JANUARY 2, 2000:
First Quarter............................................. $ 6 3/8 $3 3/4
Second Quarter............................................ 5 5/8 3 1/8
Third Quarter............................................. 8 1/2 4 1/2
Fourth Quarter............................................ 13 1/8 5 5/8
YEAR ENDED DECEMBER 31, 2000:
First Quarter (through February 3, 2000).................. $24.50 $10
</TABLE>
The closing price of the common stock on February 3, 2000, as reported on
Nasdaq, was $20.50 per share. As of December 16, 1999, there were 807 holders of
record of the Company's common stock.
DIVIDEND POLICY
The Company has never paid a cash dividend on its common stock and currently
expects that future earnings will be retained for use in its business.
15
<PAGE>
CAPITALIZATION
The following table sets forth, as of October 3, 1999, the actual
capitalization of the Company and the capitalization as adjusted for the sale of
the 3,500,000 shares of common stock offered hereby by the Company at an assumed
public offering price of $20.50 per share (the reported last sales price on
February 3, 2000) after deducting underwriting discounts and commissions and
estimated offering expenses. The following table should be read in conjunction
with the Consolidated Financial Statements and related Notes incorporated herein
by reference.
<TABLE>
<CAPTION>
AS OF OCTOBER 3, 1999
----------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA(1) ADJUSTED(1)(2)
-------- ------------ --------------
<S> <C> <C> <C>
Cash and cash equivalents and short term investments...... $ 5,577 $11,165 $ 71,369
------- ------- --------
Long term debt............................................ $13,410 $13,410 $ 13,410
Stockholders' equity:
Common stock, $.01; 40,000,000 shares authorized;
20,830,090 shares issued and outstanding (actual),
22,447,663 shares (pro forma) and 25,947,663 shares
(pro forma as adjusted)............................... 208 224 259
Preferred stock, $.01; 5,000,000 shares authorized:
Series A convertible preferred, of which 11,000 shares
issued and outstanding as of October 3, 1999, none
outstanding (pro forma)............................. -- -- --
Series B convertible preferred, 6,602.53558 shares
issued (pro forma), none outstanding (pro forma as
adjusted)........................................... -- -- --
Dividend on preferred stock............................. (1,156) (2,570) (2,709)
Capital in excess of par value.......................... 86,708 93,694 154,002
Accumulated deficit..................................... (60,263) (60,263) (60,263)
Other................................................... (293) (293) (293)
------- ------- --------
Total stockholders' equity............................ 25,204 30,792 90,996
------- ------- --------
Total capitalization...................................... $38,614 $44,202 $104,406
======= ======= ========
</TABLE>
- ------------------------
(1) Adjusted to reflect the conversion of $5.3 million of Series A convertible
preferred stock into 901,808 shares of common stock and the redemption of
$5.7 million of Series A convertible preferred stock at cost plus 15% with
proceeds from the issuance of $6.6 million of Series B convertible preferred
stock in November 1999; in conjunction with the redemption of the Series A
convertible preferred stock and the issuance of the Series B convertible
preferred stock, the Company will record a dividend to preferred
shareholders of $1,414,000 million in the fourth quarter ended January 2,
2000. Additionally, adjusted to reflect the issuance of 685,545 shares of
common stock to two institutional investors in December 1999 at $8.00 per
share with net proceeds to the Company of approximately $5,428,000 million.
Also adjusted to reflect the exercise of 30,220 stock options at a weighted
average exercise price of $5.28 for total proceeds of $159,566 through
December 16, 1999.
(2) Reflects the sale of the 3,500,000 shares of common stock offered by us
hereby at an assumed public offering price of $20.50 per share and the
application of the net proceeds, including the redemption of all of the
outstanding Series B convertible preferred stock at cost plus accrued
dividends upon the closing of this offering, after deducting the estimated
offering expenses and underwriting discounts and commissions payable by us.
See "Use of Proceeds."
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data set forth below as of January 3, 1999 and
December 28, 1997 and for each of the three fiscal years in the period ended
January 3, 1999, are derived from the Company's consolidated financial
statements incorporated by reference in this prospectus, which have been audited
by PricewaterhouseCoopers LLP, independent accountants. The selected financial
data set forth below as of December 29, 1996 and December 31, 1995 and 1994, and
for the two fiscal years in the period ended December 31, 1995 are derived from
audited consolidated financial statements not incorporated by reference in this
prospectus. The selected financial data set forth below as of October 3, 1999
and for the nine months ended October 3, 1999 and September 27, 1998 are derived
from unaudited consolidated financial statements incorporated by reference in
this prospectus. These unaudited financial statements have been prepared on the
same basis as the audited financial statements and, in the Company's opinion,
include all adjustments and reclassifications (consisting only of normal
recurring adjustments and reclassifications) necessary to present fairly the
financial condition and results of operations for the periods presented. The
results for the nine months ended October 3, 1999 are not necessarily indicative
of the results that may be expected for the full year.
This data should be read in conjunction with the Company's consolidated
financial statements and related notes thereto incorporated by reference in this
prospectus and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED FOR THE FISCAL YEARS ENDED
--------------------------- ------------------------------------------
OCTOBER 3, SEPTEMBER 27, JANUARY 3, DECEMBER 28, DECEMBER 29,
1999 1998 1999 1997 1996
---------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Services....................... $ 41,934 $ 37,216 $ 50,816 $ 43,417 $ 38,496
Sponsored transgenic research
and development.............. 11,200 7,479 11,596 19,521 8,338
Products....................... -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total revenue.................... 53,134 44,695 62,412 62,938 46,834
Costs and expenses:
Services....................... 35,472 31,751 43,668 36,989 33,356
Transgenic research and
development:
Sponsored.................... 7,805 7,115 10,486 12,558 7,856
Internal..................... 3,347 4,999 6,155 5,282 828
Products....................... -- -- -- -- --
Selling, general and
administrative............... 14,616 11,955 16,184 15,650 11,691
Facility consolidation
costs(1)..................... 1,245 -- -- -- --
Equity in loss of Joint
Venture...................... 2,696 2,717 4,285 811 356
Impairment of investment in
Joint Venture................ -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total expenses................... 65,181 58,537 80,778 71,290 54,087
---------- ---------- ---------- ---------- -----------
Loss from continuing
operations..................... (12,047) (13,842) (18,366) (8,352) (7,253)
Other income and (expenses):
Interest income................ 39 231 280 136 85
Interest expense............... (1,668) (1,054) (1,379) (1,129) (1,138)
Other income................... 484 100 100 50 587
---------- ---------- ---------- ---------- -----------
Loss from continuing operations
before income taxes............ (13,192) (14,565) (19,365) (9,295) (7,719)
Provision (benefit) for income
taxes........................ 207 (10) 225 48 27
---------- ---------- ---------- ---------- -----------
Loss from continuing
operations..................... $ (13,399) $ (14,555) $ (19,590) $ (9,343) $ (7,746)
Discontinued operations
Income from discontinued
clinical operations (less
applicable taxes of $239 and
$21)......................... -- -- -- -- --
Gain on disposal of clinical
operations (less applicable
income taxes of $3,401)...... -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Net loss......................... $ (13,399) $ (14,555) $ (19,590) $ (9,343) $ (7,746)
Dividends to preferred
shareholders(2)................ -- (1,156) (1,156) -- --
---------- ---------- ---------- ---------- -----------
Net loss to common
shareholders................... $ (13,399) $ (15,711) $ (20,746) $ (9,343) $ (7,746)
========== ========== ========== ========== ===========
Net loss to common shareholders
per weighted average number of
common shares (basic and
diluted):
From continuing operations..... $ (0.69) $ (0.88) $ (1.15) $ (0.54) $ (0.52)
========== ========== ========== ========== ===========
Net loss....................... $ (0.69) $ (0.88) $ (1.15) $ (0.54) $ (0.52)
========== ========== ========== ========== ===========
Weighted average number of shares
outstanding (basic and
diluted)....................... 19,355,861 17,857,278 17,978,677 17,253,292 14,801,725
<CAPTION>
FOR THE FISCAL YEARS ENDED
-----------------------------
DECEMBER 31, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Services....................... $ 26,399 $ 4,465
Sponsored transgenic research
and development.............. 6,022 4,097
Products....................... -- 909
---------- ----------
Total revenue.................... 32,421 9,471
Costs and expenses:
Services....................... 24,250 5,157
Transgenic research and
development:
Sponsored.................... 5,533 4,214
Internal..................... 861 457
Products....................... -- 841
Selling, general and
administrative............... 8,919 3,596
Facility consolidation
costs(1)..................... -- --
Equity in loss of Joint
Venture...................... 713 582
Impairment of investment in
Joint Venture................ -- 58
---------- ----------
Total expenses................... 40,276 14,905
---------- ----------
Loss from continuing
operations..................... (7,855) (5,434)
Other income and (expenses):
Interest income................ 32 238
Interest expense............... (1,007) (263)
Other income................... 780 --
---------- ----------
Loss from continuing operations
before income taxes............ (8,050) (5,459)
Provision (benefit) for income
taxes........................ (2,346) 7
---------- ----------
Loss from continuing
operations..................... $ (5,704) $ (5,466)
Discontinued operations
Income from discontinued
clinical operations (less
applicable taxes of $239 and
$21)......................... 412 182
Gain on disposal of clinical
operations (less applicable
income taxes of $3,401)...... 1,159 --
---------- ----------
Net loss......................... $ (4,133) $ (5,284)
Dividends to preferred
shareholders(2)................ -- --
---------- ----------
Net loss to common
shareholders................... $ (4,133) $ (5,284)
========== ==========
Net loss to common shareholders
per weighted average number of
common shares (basic and
diluted):
From continuing operations..... $ (0.48) $ (0.83)
========== ==========
Net loss....................... $ (0.35) $ (0.80)
========== ==========
Weighted average number of shares
outstanding (basic and
diluted)....................... 11,788,542 6,598,545
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 3, JANUARY 3, DECEMBER 28, DECEMBER 29, DECEMBER 31, DECEMBER 31,
1999 1999 1997 1996 1995 1994
---------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............. $ 5,577 $11,740 $6,383 $8,894 $5,825 816
Short-term investments.... -- -- -- -- -- 2,231
Working capital
(deficit)............... (14,706) (4,319) (8,423) (116) (7,011) (7,858)
Total assets.............. 80,861 83,337 70,980 66,704 58,042 47,993
Long-term liabilities..... 14,180 10,397 10,779 6,742 7,179 9,082
Stockholders' equity...... 25,204 36,204 27,378 35,204 27,288 19,424
</TABLE>
- ------------------------------
(1) During the third quarter of 1999, the Company recognized $1.2 million of
facility consolidation costs associated with the consolidation of
Primedica's Massachusetts operations into a single facility.
(2) In March 1998, the Company completed a private placement of $20 million of
Series A convertible preferred stock and warrants to three institutional
investors. Because of the immediate convertibility of the Series A
preferred stock, the warrants, valued at aproximately $1.2 million, were
recognized as a dividend payment to preferred shareholders during the first
quarter of 1998.
There were no cash dividends paid for any period presented.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
GTC is a leader in the application of transgenic technology to the
development and production of monoclonal antibodies and other recombinant
proteins for therapeutic and biomedical uses. To date, the Company has formed
more than a dozen collaboration agreements which generally provide for
transgenic production of limited quantities of targeted proteins in exchange for
development fees and milestone payments. Following demonstration of
comparability of the transgenic product to a product produced in cell cultures,
the Company intends to continue to negotiate commercialization agreements that
are designed to allow the Company to participate in the success of the product
through equity, royalties and supply commitments. GTC also owns and operates a
leading preclinical CRO, Primedica, which provides testing services to
pharmaceutical, biotechnology, medical device and other companies on a fee for
service basis.
RESULTS OF OPERATIONS
NINE MONTHS ENDED OCTOBER 3, 1999 AND SEPTEMBER 27, 1998
REVENUES. Total revenues for the nine-month period ended October 3, 1999
were $53.1 million, compared with $44.7 million in the comparable period of
1998, an increase of $8.4 million, or 19%. Service revenues increased to
$41.9 million during the first nine months of 1999 from $37.2 million in the
comparable period of 1998, an increase of $4.7 million, or 13%. Transgenic
research and development revenue increased to $11.2 million during the first
nine months of 1999 from $7.5 million in the comparable period of 1998, an
increase of $3.7 million, or 50%. The increase is primarily a result of a
$3.5 million milestone payment earned during the third quarter of 1999 in
association with progress on the HSA program.
COSTS AND EXPENSES. Cost of services during the first nine months of 1999
were $35.5 million compared to $31.8 million in the comparable period of 1998,
an increase of $3.7 million, or 12%, due to the increase in revenues. Sponsored
research and development expenses increased to $7.8 million in the first nine
months of 1999 from $7.1 million in the comparable period of 1998, an increase
of $700,000, or 10%. The increase in expense was due to increased activity on
sponsored research programs. Internal research and development expenses
decreased to $3.3 million in the first nine months of 1999 from $5.0 million in
the comparable period of 1998, a decrease of $1.7 million, or 33%. The decrease
is due primarily to reduced expenditures on the cancer vaccine program and a
shifting of resources to sponsored research and development.
GROSS PROFIT. Gross profit, defined as revenues less service costs and
research and development costs, for the first nine months of 1999 increased to
$6.5 million from $830,000 in the comparable period of 1998 due to higher
revenues and milestone payments and a decrease in internal research and
development costs. Gross profit on services for the first nine months of 1999
was $6.5 million, a gross margin of 15%, as compared to $5.5 million, a gross
margin of 15%, in the comparable period of 1998.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
("SG&A") expenses increased to $14.6 million in the first nine months of 1999
from $12.0 million in the comparable period of 1998, an increase of
$2.7 million, or 22%. The increase is primarily due to the increased marketing
effort in the Primedica business, the addition of administrative personnel
required to support the growth in transgenic research and development programs
as well as additional patent related expenditures.
FACILITY CONSOLIDATION COSTS. During the third quarter of 1999, the Company
recognized $1.2 million of facility consolidation and expansion costs associated
with the consolidation and
19
<PAGE>
expansion of Primedica's Massachusetts operations into a single facility. These
costs consisted of facility closure costs of $740,000 and severance and employee
related costs of $505,000. The facility closure costs included write-offs of
leasehold improvements of $415,000 and rental and lease termination costs to be
incurred after the consolidation of $325,000. The rental and lease termination
costs are expected to be paid through December of 2003. Severance costs were
related to the elimination of 12 laboratory positions, one finance position and
seven general and administrative positions. Severance will be paid through 2000.
The Company anticipates the consolidation to increase its ability to perform
higher margin CRO services, while at the same time reducing operating expenses.
OTHER INCOME AND EXPENSES. Interest income decreased to $39,000 in the
first nine months of 1999, from $231,000 in the comparable period of 1998, due
to lower funds available for investment. Interest expense increased to
$1.7 million in the first nine months of 1999 from $1.1 million in the
comparable period of 1998 due to increased borrowings in 1999. Other income
increased to $484,000 in the first nine months of 1999, from $100,000 in the
comparable period of 1998, due to the receipt in 1999 of an insurance
settlement.
EQUITY IN LOSS OF JOINT VENTURE. The Company recognized $2.7 million of
losses incurred on the joint venture between the Company and Genzyme (the "ATIII
LLC") during the first nine months of 1999 as well as during the comparable
period of 1998. The ATIII LLC was formed to develop transgenic Antithrombin III
("ATIII").
YEAR ENDED JANUARY 3, 1999 AS COMPARED TO YEAR ENDED DECEMBER 28, 1997
REVENUES. Total revenues for 1998 were $62.4 million, compared with
$62.9 million in 1997, a decrease of $500,000, or 1%. Service revenues increased
to $50.8 million in 1998 from $43.4 million in 1997, an increase of
$7.4 million, or 17%. Research and development revenues decreased to
$11.6 million in 1998 from $19.5 million in 1997, a decrease of $7.9 million, or
41%. The decrease reflects the impact on revenue of the establishment, in
January 1998, of the ATIII LLC for the development of transgenic ATIII with
Genzyme. Had the ATIII program been structured on the same basis during 1998 as
during 1997, research and development revenues for 1998 would have increased by
approximately $713,000, or 4%.
COSTS AND EXPENSES. Cost of services in 1998 were $43.7 million compared to
$37.0 million in 1997, an increase of 18%, due, primarily, to increased service
volumes. Sponsored research and development expenses decreased to $10.5 million
in 1998 from $12.6 million in 1997, a decrease of $2.1 million, or 16%. The
decrease was due to the impact of the formation of the ATIII LLC. In 1997, the
full cost of the ATIII development program, including subcontractor costs, was
reflected by the Company as sponsored research and development expense and, to
the extent that the program was funded, as sponsored research and development
revenue. With the formation of the ATIII LLC in 1998, all funding and
subcontractor costs were being recorded directly by the ATIII LLC. Costs
incurred by the Company for the ATIII development program were being funded by
the ATIII LLC and, therefore, only these costs were being recorded equally as
sponsored research and development revenue and sponsored research and
development expense. Had the ATIII development program been structured on the
same basis during 1998 as during 1997, the sponsored research and development
expenses would have increased by approximately $6.6 million over the 1997 rate.
Internal research and development expenses increased to $6.2 million in 1998
from $5.3 million in 1997, an increase of $900,000, or 17%. The increase was due
to increased work on the cancer vaccine program and increased activity on
internal research programs.
GROSS PROFIT. Gross profit in 1998 amounted to $2.1 million versus
$8.1 million in 1997. The decrease was primarily due to $4.4 million of
transgenic milestones from the joint venture with Sumitomo Metal
Industries, Ltd. (the "SMIG JV") recorded in 1997 in connection with the ATIII
program, as well as a $1.5 million milestone from Bristol-Myers Squibb in 1997.
Additionally, an
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increase of $900,000 in internal research and development was offset by an
increase of $700,000 in services gross profit. Gross profit on services for 1998
was $7.1 million, a gross margin of 14%, versus $6.4 million, a gross margin of
15% in 1997. The decrease in gross margin was due to increased revenue
recognized on contracts not signed until the first quarter of 1997 but for which
costs had previously been incurred and recognized, partially offset by improved
utilization in 1998 due to increased revenues.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to
$16.2 million in 1998 from $15.7 million in 1997, an increase of $500,000, or
3%. The increase was due to the increased marketing effort and additional costs
associated with the name change for Primedica as well as the addition of
administrative personnel required to support the growth in transgenic research
and development programs.
OTHER INCOME AND EXPENSES. Interest income increased to $280,000 in 1998,
from $136,000 in 1997, due to an increase in funds available for investment as a
result of proceeds received from the preferred stock offering in the first
quarter of 1998 and the sale of common stock in a registered direct offering in
the second quarter of 1998. Interest expense increased to $1.4 million in 1998,
from $1.1 million in 1997. Of the 1998 total, $1,144,000 represents interest
incurred by the testing service operations, $101,000 represents interest for the
financing of the transgenic production facility and $134,000 represents interest
incurred under the revolving line of credit with Genzyme ("Genzyme Credit
Line").
The Company recognized $100,000 of non-operating income in 1998 compared to
$50,000 in 1997. The 1998 amount represents an earnout payment in connection
with the sale in 1995 of TSI Center for Diagnostic Products Inc.
EQUITY IN LOSS OF JOINT VENTURE. The Company recognized $4.3 million of
joint venture losses incurred on the ATIII LLC during 1998. In 1997, the Company
incurred $811,000 of losses on the SMIG JV.
YEAR ENDED DECEMBER 28, 1997 AS COMPARED TO YEAR ENDED DECEMBER 29, 1996
REVENUES. Total revenues for 1997 were $62.9 million, compared with
$46.8 million in 1996, an increase of $16.1 million, or 34%. Service revenues
increased to $43.4 million in 1997 from $38.5 million in 1996, an increase of
$4.9 million, or 13%. Sponsored research and development revenues increased to
$19.5 million in 1997 from $8.3 million in 1996, an increase of $11.2 million,
or 134%, due primarily to an increase in activity and revenues related to the
funding received from Genzyme in the development of transgenic ATIII, the
achievement of $4.4 million in milestones from the SMIG JV, the achievement of a
$1.5 million milestone from Bristol-Myers Squibb as well as increased commercial
activity.
COSTS AND EXPENSES. Cost of services in 1997 was $37.0 million compared to
$33.4 million in 1996, an increase of $3.6 million, or 11%, due, primarily, to
the increased service volumes. Sponsored research and development expenses
increased to $12.6 million in 1997 from $7.9 million in 1996, an increase of
$4.7 million, or 60%. The increase is due to the operating costs of a new
manufacturing facility for the production of transgenic ATIII clinical trial
material and increased activity in commercial programs. Internal research and
development increased to $5.3 million in 1997 from $828,000 in 1996, an increase
of 538%. The increase was due to the initiation of the cancer vaccine program in
1997 and to increased internal research.
GROSS PROFIT. Gross profit in 1997 amounted to $8.1 million versus
$4.8 million in 1996. Gross profit on services in 1997 was $6.4 million, a gross
margin of 15%, versus $5.1 million, a gross margin of 13%, in 1996. The
improvement in the services margins was primarily due to increased services
revenues.
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SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased to
$15.7 million in 1997 from $11.7 million in 1996, an increase of $4.0 million or
34%. The increase was due to an increase in the sales and marketing effort and
to the addition of administrative personnel required to support the growth in
transgenic research and development programs, $434,000 of transaction costs on
uncompleted merger and acquisition activities as well as $326,000 in one-time
personnel-related charges.
OTHER INCOME AND EXPENSES. Interest income increased to $136,000 in 1997,
from $85,000 in 1996, due to the investment of funds from the Company's
secondary public offering and receipt of interest on funds that were held in
escrow in 1996. Interest expense was essentially unchanged year to year at
$1.1 million. Of the 1997 total, $962,000 represented interest incurred by the
testing service operations, $161,000 represented interest for the financing of
the transgenic production facility and $6,000 represented interest incurred
under the Genzyme Credit Line.
The Company recognized $50,000 of non-operating income in 1997 compared to
$587,000 in 1996, a decrease of $537,000 or 91%. Of the 1996 total, $538,000
represented the collection of the final payments of the promissory note received
in connection with the 1995 sale of the TSI Center for Diagnostic Products Inc.
EQUITY IN LOSS OF JOINT VENTURE. The Company recognized $811,000 of joint
venture losses in 1997 compared to $356,000 in 1996. The increase was due to
additional research by the SMIG JV including increased research funding to the
Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $5.6 million at October 3,
1999. In addition, the Company had approximately $6.3 million available under
the Genzyme Credit Line, $250,000 available under a line of credit with a
commercial bank, $3.2 million available under various capital lease lines and
$664,000 available under a term loan for the transgenic production facility
expansion. The Genzyme credit line will no longer be available if the net
proceeds from this offering equal or exceed $34.6 million.
During the first nine months of 1999, the Company had a $6.2 million net
decrease in cash: $6.7 million of cash used in operations (due primarily to the
net loss of $13.4 million and a decrease in non-cash working capital of
$749,000, offset by an increase in non-cash charges of $7.4 million),
$4.7 million was invested in capital equipment, further expansion of the
transgenic production facility and the expansion of the laboratory facilities,
and $1.9 million was used to pay down long-term debt. Sources of funds during
the period included $4.7 million in net borrowings under a commercial bank
revolving line of credit, $4.6 million of proceeds from issuance of long-term
debt and $820,000 of proceeds were received from the issuance of common stock
under various employee stock plans. The Company had a working capital deficit of
$14.7 million at October 3, 1999 compared to a deficit of $4.3 million at
January 3, 1999.
In November 1999, the Company redeemed all of its outstanding Series A
convertible preferred stock for a cash payment of approximately $6.6 million,
representing cost plus 15%. To fund the redemption, the Company issued
approximately $6.6 million of Series B convertible preferred stock to Genzyme.
The Series B convertible preferred stock carries an initial 11% dividend which
increases to 12% effective July 1, 2000 and is convertible by Genzyme into
common stock at any time at a fixed rate of $6.30 per share. All accrued and
unpaid dividends will be paid upon conversion, liquidation or redemption of the
Series B convertible preferred stock. The Company has the sole right to redeem
the Series B convertible preferred stock for cash at any time at its original
value plus accrued dividends. It is anticipated that the Series B convertible
preferred stock will be redeemed by the Company at cost plus accrued dividends
out of the proceeds of this offering. The Company also raised approximately
$5.4 million through the sale of 685,545 previously registered shares of common
stock at a price of $8.00 per share to two institutional investors in
December 1999.
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The proceeds of this offering, existing cash balances along with funds
available under the bank and lease lines are expected to be sufficient to fund
the Company's operations through at least 2001.
RECENT ACCOUNTING PRONOUNCEMENTS
SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements," issued in December 1999, summarizes certain of the Staff's views in
applying generally accepted accounting principles to revenue recognition in
financial statements. The statements in the staff accounting bulletins represent
interpretations and practices followed by the Division of Corporation Finance
and the Office of the Chief Accountant in administering the disclosure
requirements of the Federal securities laws.
SEC Staff Accounting Bulletin No. 100, "Restructuring and Impairment
Charges," issued in November 1999, expresses views of the Staff regarding the
accounting for and disclosure of certain expenses commonly reported in
connection with exit activities and business combinations. This includes accrual
of exit and employee termination costs pursuant to Emerging Issues Task Force
(EITF) Issues No. 94-3, LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION
BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED
IN A RESTRUCTURING), and No. 95-3, RECOGNITION OF LIABILITIES IN CONNECTION WITH
A PURCHASE BUSINESS COMBINATION, and the recognition of impairment charges
pursuant to Accounting Principles Board (APB) Opinion No. 17, INTANGIBLE ASSETS,
and Statement of Financial Accounting Standards (SFAS) No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.
The impact of these Staff Accounting Bulletins is currently being reviewed
by the Company.
FORWARD LOOKING STATEMENTS
Management's current expectations regarding the sufficiency of the Company's
cash resources are forward looking statements and the Company's cash
requirements may vary materially from such expectations. Such forward looking
statements are dependent on several factors, including the results of the
Company's CRO business, the ability of the Company to enter into any transgenic
research and development collaborations in the future and the terms of such
collaborations, the results of research and development and preclinical and
clinical testing, competitive and technological advances and regulatory
requirements. If the Company experiences increased losses, the Company may have
to seek additional financing through collaborative arrangements or from public
or private sales of its securities, including equity securities. There can be no
assurance that additional funding will be available on terms acceptable to the
Company, if at all. If additional financing cannot be obtained on acceptable
terms, to continue its operations the Company could be forced to delay, scale
back or eliminate certain of its research and development programs or to delay
or forgo timely expansion, improvement or investment in CRO services or to
dispose of the assets related to those services.
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BUSINESS
OVERVIEW
Genzyme Transgenics Corporation ("GTC" or the "Company") is a leader in the
application of transgenic technology to the development and production of
recombinant proteins for therapeutic and other biomedical uses. To date, GTC has
produced more than 60 such proteins, 45 through collaborations with various
commercial and academic organizations and 15 independently. More than half of
the transgenic proteins actively under development by the Company are monoclonal
antibodies/ Ig fusion proteins. For its lead compound, Antithrombin III
("ATIII"), the Company has completed one of two identical Phase III clinical
studies for the treatment of heparin resistance in patients undergoing
cardiopulmonary bypass ("CPB") procedures. GTC also owns and operates a leading
preclinical contract research organization ("CRO"), Primedica Corporation
("Primedica"), which provides services such as preclinical efficacy and safety
testing, IN VITRO testing and formulation development to pharmaceutical,
biotechnology, medical device and other companies.
GTC produces recombinant proteins by inserting into the genetic material of
an animal embryo a specific DNA sequence that directs the production of a
desired protein in the milk of transgenic offspring. The Company believes that
transgenic production offers substantial economic and technological advantages
in comparison to traditional protein production systems, such as cell culture
and microbial systems. These advantages include reduced capital expenditures,
greater flexibility in timing capital investment and lower direct production
cost per unit. In the case of certain complex proteins, including Ig fusion
proteins, transgenic production may represent the only technologically and
economically feasible method of commercial production. For proteins currently
derived from pooled human plasma, transgenic production provides an alternative
source with reduced risk of transmission of human viruses and other known
adventitious agents. Of the 60 transgenic proteins produced to date, GTC has
expressed 40 proteins at levels of one gram per liter or higher in mice, 11 of
which have also been expressed in goats at levels greater than one gram per
liter. These expression levels are substantially higher than those typically
achieved for comparable proteins in traditional protein production systems.
The Company's primary focus is on using transgenic technology to produce
monoclonal antibodies. These therapeutics are likely to be required in
relatively large and repeated doses for chronic diseases such as rheumatoid
arthritis, other autoimmune diseases and cancer. The economic and technological
advantages of transgenic technology make it well suited to produce the large
amount of proteins anticipated for therapeutic use of monoclonal antibodies. By
mid-1999, 14 monoclonal antibodies had been approved for use in the United
States--nine for use as human therapeutics and five for diagnostic uses. The
projected 1999 revenues for the six highest selling therapeutic
antibodies--ReoPro-Registered Trademark-, Rituxan-Registered Trademark-,
Synagis-Registered Trademark-, Herceptin-Registered Trademark-,
Remicade-Registered Trademark- and Zenapax-Registered Trademark---are
$1.3 billion. More than 30 monoclonal antibody candidates are now in clinical
trials and over 200 are reported to be in preclinical development. The Company
believes that in many cases the yearly requirement for production of these
potential therapeutics will exceed 100 kilograms and may approach 300 to 1000
kilograms. Transgenic production may provide the only commercially viable means
to meet the large projected volume requirements of these therapeutics.
The Company has several partnerships with pharmaceutical and other
biotechnology companies to develop monoclonal antibodies/Ig fusion proteins
transgenically. GTC's corporate partners include Bristol-Myers Squibb, Elan,
Centocor, Alexion and BASF Knoll. To date, the Company has formed more than a
dozen collaboration agreements which generally provide for transgenic production
of limited quantities of targeted proteins in exchange for development fees and
milestone payments and, in some cases, anticipate the payment of royalties on
product sales upon commercialization. Following demonstration of comparability
of the transgenic product to a version of the product produced in cell culture,
the Company intends to negotiate commercialization agreements that are designed
to allow the
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Company to participate in the success of the product through equity, royalties
and supply commitments. The Company has been granted several patents covering
the production of monoclonal and assembled antibodies in the milk of transgenic
mammals, which it believes establish a strong proprietary position in the field.
Proteins traditionally sourced from human plasma provide other opportunities
for high volume transgenic protein production. The Company is developing a
transgenic version of ATIII, a protein normally found in human serum, in a joint
venture with Genzyme Corporation ("Genzyme"). When bound to other blood proteins
that function to regulate clotting, ATIII acts as an anticoagulant. Worldwide
sales of plasma derived ATIII to treat hereditary and acquired ATIII deficiency
are approximately $230 million. The Company believes transgenic ATIII may
represent a more attractive product than plasma sourced ATIII in light of safety
considerations, the limited volume of ATIII available from plasma and the
impracticality of producing sufficient quantities of recombinant ATIII by cell
culture methods. The Company has developed a goat herd producing a transgenic
version of ATIII, which is now in clinical evaluation in two identical, double
blinded Phase III clinical trials. The first of these studies was completed in
late 1999, and the primary clinical endpoint was met. Patient enrollment in the
second study is expected to be completed in the first quarter of 2000. These
clinical trials have targeted treatment of heparin resistant heart disease
patients undergoing cardiopulmonary bypass surgeries, with a strategy of seeking
approvals for broader indications after receipt of initial marketing approval.
Another plasma protein under development by GTC is Human Serum Albumin
("HSA"), which is being developed with Fresenius AG. The therapeutic use of HSA
is indicated in situations of blood loss and decreased blood albumin levels
which can occur during shock, serious burns, pre- and post-operative conditions,
congestive heart failure and gastric, liver and intestinal malfunctions. HSA is
currently produced by human plasma fractionation, with current worldwide sales
of approximately $1.0 billion. During 1999, the Company achieved several
milestones under this collaboration, including demonstration of expression of
HSA in the milk of transgenic cattle at a concentration that is consistent with
making it a commercially viable product. The Company is also developing
transgenic production processes for other proteins, including a malaria
merozoite surface protein ("MSP-1") for use in a malaria vaccine.
GTC's other business, Primedica, is focused on enabling its clients to meet
regulatory testing and other product development needs quickly and effectively
by offering a fully integrated line of preclinical CRO services. Primedica's
laboratories provide high value, scientifically differentiated services to
clients, including preclinical efficacy testing, experimental surgery,
photobiology and reproductive toxicology testing as well as formulation
development. Primedica uses its technological capabilities to introduce new
services that improve the ability of its customers to develop their products
successfully. Primedica's comprehensive programs link its preclinical and
manufacturing support services to reduce the time and expense of bringing new
therapeutics or other products to market.
TRANSGENIC BUSINESS
OVERVIEW
A growing number of recombinant proteins are being developed by
pharmaceutical and biotechnology companies for therapeutic and diagnostic
applications. Many of these proteins have proven difficult or expensive to
produce in the quantities required using traditional protein production systems,
such as bacteria, yeast or mammalian cell cultures. Moreover, bacteria and yeast
systems cannot produce many complex proteins. While mammalian cell cultures can
produce most of these complex proteins, these cells are generally more difficult
and expensive to grow and often produce lower volumes of protein, or the
proteins may not be secreted by the cells into the culture medium, thereby
complicating recovery and purification. Proteins produced by the Company through
transgenic
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technology have been expressed at concentrations substantially higher than those
typically achieved using traditional production methods.
Transgenic technology uses IN VITRO microinjection or other techniques to
introduce a genetically engineered segment of exogenous DNA (an "expression
vector") into the genetic material of a fertilized egg or early stage animal
embryo. Two types of genetic instructions are incorporated into the expression
vector: the coding sequence and the promoter sequence. Coding sequences instruct
the cells of the animal to express a specified protein. Promoter sequences
direct the expression of proteins at appropriate times and by specific tissues
or cell types. GTC utilizes promoter sequences that direct the expression of
specific proteins in the mammary gland during lactation. After microinjection of
the exogenous DNA, the modified embryo is then transferred to a recipient
female. Transgenes are successfully integrated into the genetic makeup of only a
small percentage of the embryos that are microinjected; therefore multiple
microinjection candidates are required. If successful, the resulting animal,
when mature and lactating, will express the desired protein. Once established in
the first generation of transgenic animals, the transgene is transmitted like
other genetic traits to future generations through traditional breeding with
either non-transgenic or other transgenic animals. To date, the Company has
produced such proteins principally using goats, which offer an attractive
combination of large milk volumes, relatively short generational time periods
and ease of handling and milking.
GTC believes that for certain proteins required in extremely large amounts,
such as HSA, transgenic cows might be required. Due to the long gestation and
maturation periods of large dairy animals, microinjection is an inefficient
method to produce transgenic cows. Therefore, the Company believes that cloning
may accelerate transgenic biopharmaceutical development because cloning offers a
method of producing a large number of transgenic animals in one generation. GTC
has signed an exclusive, worldwide licensing agreement with Advanced Cell
Technologies, Inc. ("ACT") allowing GTC to utilize ACT's patented technology for
the development of biopharmaceuticals in the milk of all cloned transgenic
mammals. The Company believes ACT's proprietary technology, when coupled with
GTC's transgenic technology, will provide additional patentable approaches to
efficiently create cloned transgenic animals. To date, the Company together with
ACT has cloned eight cows.
ADVANTAGES OF TRANSGENIC TECHNOLOGY
The Company believes that its current and future partners will elect to
employ transgenic technology for the production of recombinant proteins in cases
where transgenic technology offers economic and technological advantages over
other production systems. These advantages, any one of which may be critical to
the decision to proceed with a particular development project, include:
- LOWER CAPITAL INVESTMENT. Creating a herd and providing appropriate dairy
facilities can be accomplished with substantially less cost than building
a cell culture bioreactor facility.
- IMPROVED RISK MANAGEMENT OF CAPITAL INVESTMENT. Transgenic herd production
offers capacity flexibility and relatively short lead times for scale up.
As a result, in contrast to the need for early commitment to bioreactor
production capacity, the Company's partners can delay those commitments
(and the corresponding capital investment) to later stages of the
development project when they may have more definitive product and market
information.
- PREDICTABILITY OF PRODUCTION. In contrast to cell culture production
systems, transgenic production systems exhibit greater predictability of
yield at large volume production. This offers GTC's partners greater
assurance of the ability to produce product quantities sufficient for
advanced clinical trials and product launch.
- LOWER COST OF GOODS. Economic factors unique to transgenic production
lower the ultimate cost of goods in most cases. High protein expression
levels in transgenic animals and efficiency in
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purification result in the cost of transgenically produced products, in
most cases, being substantially lower than that of a cell culture derived
product. As further improvements are made in the downstream purification
process, GTC anticipates that the cost of the transgenically produced
product will decline even further.
- TECHNOLOGICAL ENABLEMENT. Transgenic technology offers the ability to
produce certain biotherapeutics which cannot be made in a commercially
feasible manner in any other system. The suitability of transgenic
production for high-volume proteins requiring more than 100 kilograms per
year is widely acknowledged. In addition, GTC has achieved the same
consistent expression rates with complex molecules, which may not be
producible in cell cultures at all. This accomplishment, in conjunction
with the favorable economics of herd development, means that for some
complex proteins with low-volume demand, transgenics may be as viable a
production system as it is for other proteins that require 1000 kilograms
or more annually.
TRANSGENIC DEVELOPMENT PROCESS
GTC's development of a typical transgenic protein is designed to proceed in
a logical sequence of three major steps:
- FIRST STEP. Using the DNA provided by the partner, GTC develops founder
goats transgenic for a particular protein. The Company employs a standard
DNA microinjection process to produce a transgenic goat. The first animals
are born five months after microinjection.
- SECOND STEP. GTC and the partner collaborate on the development of a pilot
downstream process to purify the protein, after which GTC provides
preclinical and clinical samples. After GTC provides protein samples from
transgenic milk to the partner for initial purification and
characterization, GTC and the partner begin a collaborative effort to
establish commercially robust purification process techniques for the
protein. This enables substantial amounts of material to be delivered for
preclinical studies and initial human clinical studies. Next, GTC
initiates an initial scale up of the transgenic herd making 6 to 10
animals that are capable of producing sufficient product for use in
expanded clinical studies.
- THIRD STEP. GTC initiates herd scale up, with the manufacturing phase
following in sufficient time to fill the pipeline for product launch.
Concurrently with the production of initial quantities of product, GTC and
the partner develop cost and timing estimates for commercialization. The
partner will then make capital commitments to enable GTC to provide
certain facility capacities specifically for the partner's product. This
may include a barn or several barns for housing and scaling the herd with
attached facilities for the collection of milk and initial processing
steps. Simultaneously, GTC will begin the scale up of the production herd
to allow a sufficient number of animals to enter the production herd to
meet forecasted product requirements. GTC anticipates that its future
commercial supply agreements will provide for the transfer of intermediate
bulk to the customer or designated processor for further processing to
finished product.
DEVELOPMENT PROGRAMS
GTC's strategy is to commercially produce proteins using transgenic
technology primarily by entering into collaboration agreements with
biotechnology and pharmaceutical companies. To date, the Company has formed more
than a dozen collaboration agreements which generally provide for transgenic
production of limited quantities of targeted proteins in exchange for
development fees and milestone payments and, in some cases, anticipate the
payment of royalties on product sales upon commercialization. Following
demonstration of comparability of the transgenic product, the Company intends to
negotiate commercialization agreements that are designed to allow the Company to
participate in the success of the product through equity, royalties and supply
commitments.
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The products covered by these partnerships encompass a broad range of
indications and are currently in various stages of development. Many of GTC's
collaborators are marketing or engaging in clinical trials with product sourced
through traditional protein production systems and are considering transitioning
to a transgenically produced product. In most of these collaborations, GTC
benefits from the partner's preclinical development experience in working with a
particular protein, and in cases where a recombinant or plasma-derived product
is in clinical trials or on the market, the Company believes the regulatory
approval process for the transgenic product will be facilitated by the partner's
experience with the initial product.
MONOCLONAL ANTIBODIES
Monoclonal antibodies represent one of the biotechnology industry's greatest
successes. Medical researchers have now developed a better understanding of the
critical variables for specificity and binding of the antibody, targets likely
to affect disease progression and clinical conditions amenable to treatment with
systemic biologic intervention. As a result, the last several years have
witnessed the clinical success, regulatory approval and commercial launch of
several breakthrough monoclonal antibody therapies, including
ReoPro-Registered Trademark- for use in various acute cardiac conditions,
Rituxan-Registered Trademark- for B-cell non-Hodgkin's lymphoma,
Synagis-Registered Trademark- for treatment of viral respiratory disease in
premature babies, Herceptin-Registered Trademark- for breast cancer,
Remicade-Registered Trademark- for use in Crohn's disease and rheumatoid
arthritis and Zenapax-Registered Trademark- for acute transplant rejection.
These clinical successes, the availability of technologies for making fully
humanized molecules and drug discovery technologies that identify potential
antibody targets, will continue to drive the development of new antibody-based
therapeutics.
Therapeutic antibodies are typically administered in larger doses than other
protein therapeutics and in repeated doses to treat chronic illnesses. Their
continued success is driving the need for commercially feasible production
methods yielding significantly higher quantities than currently available using
traditional protein production methods. While the annual worldwide requirement
of a typical recombinant protein may approach 10 kilograms, the Company believes
that many antibodies will require supplies in excess of 100 kilograms annually.
Current cell culture methods (the only traditional method available for
producing monoclonal antibodies) generally cannot produce the requisite high
volumes needed for antibody therapeutics, are not economically feasible and
require significant capital investment. The Company believes that the high
expression levels which can be achieved using transgenic technology will enable
the pharmaceutical industry to meet these market demands.
GTC is actively participating in the field of monoclonal antibodies through
a number of collaborations. The Company is developing a transgenic version of
Remicade-Registered Trademark- in a collaboration with Centocor. Also, GTC is
developing transgenic versions of eight additional monoclonal antibodies/Ig
fusion molecules, the cell culture versions of which are currently in clinical
trials, including D2E7 and MAK195 for BASF, CTLA4Ig and an Ig fusion molecule
for Bristol-Myers Squibb, Antegren for Elan, BR96 for Seattle Genetics, PRO542
for Progenics and a therapeutic recombinant protein for Alexion. The indications
for these products include arthritis, HIV/AIDS, cancer and autoimmune diseases.
The status of the cell culture and transgenic versions of these products is
shown in the chart below. In these partnerships, the Company provides material
for the partners' clinical trials, while the partners retain the risk and
expense of conducting the trials.
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The following chart contains a summary of the Company's most active
monoclonal antibody/Ig fusion protein development programs:
<TABLE>
<CAPTION>
DEVELOPMENT STAGE
PRODUCT OF CELL CULTURE DEVELOPMENT STAGE OF
NAME PRODUCT TYPE INDICATION PRODUCT TRANSGENIC PRODUCT PARTNER
- ------- ------------------ ----------------------- ------------------ ----------------------- ---------------
<S> <C> <C> <C> <C> <C>
Remicade Monoclonal Crohn's Disease; Marketed Preclinical; Transgenic Centocor
- -Registered antibody Rheumatoid Arthritis goats in development
Trademark-
D2E7 Fully human Rheumatoid Arthritis Phase II clinicals Preclinical; Transgenic BASF/Knoll
monoclonal goats in development
antibody
Antegren Humanized Neurological Disorders Phase II clinicals Preclinical; Transgenic Elan
- -Registered monoclonal goats in development Pharmaceuticals
Trademark- antibody
CTLA4Ig Immunoglobulin Rheumatoid Arthritis Phase II clinicals Preclinical; Transgenic Bristol-Myers
fusion/soluble goats in development Squibb
receptor
Undisclosed Immunoglobulin Organ Transplant Phase II clinicals Preclinical; Transgenic Bristol-Myers
fusion protein Rejection; Autoimmune goats in development Squibb
Disorders
Undisclosed Monoclonal Undisclosed Undisclosed Preclinical; Transgenic Alexion
antibody goats in development
PRO542 CD4/Immunoglobulin HIV/AIDS Phase II clinicals Preclinical; Transgenic Progenics
fusion antibody mice in development
Undisclosed Monoclonal Undisclosed Research Research/partnership Millennium
antibodies and for development of Pharmaceuticals
therapeutic therapeutic drug
proteins targets
</TABLE>
PLASMA DERIVED PROTEINS
ANTITHROMBIN III. ATIII is a protein normally found in human serum, that
when bound to heparin, acts as an anticoagulant. Decreased levels of ATIII are
found in individuals who have either a hereditary or an acquired deficiency of
ATIII. The hereditary deficiency has an incidence rate of 1 in 2,000 to 1 in
20,000. Individuals with hereditary ATIII deficiency have an increased tendency
toward blood clots (thromboses) and are treated with ATIII replacement therapy
during periods when they are at high risk for clots, such as during surgery.
Acquired ATIII deficiency may occur if there is a decrease in the amount of
ATIII produced, an increase in the rate of ATIII consumption or an abnormal loss
of ATIII from the circulation. Examples of conditions in which acquired ATIII
deficiency may occur are acute liver failure, disseminated intravascular
coagulation, sepsis and septic shock, burns, multiple organ failure, bone marrow
or organ transplantation and hemodialysis.
GTC believes transgenic ATIII may represent a more attractive therapeutic
than the current plasma derived product in light of the risks of viral
transmission from pooled plasma products in general, the limited volume of ATIII
currently available from plasma and the impracticality of producing sufficient
quantities of ATIII in cell culture systems. The Company also believes that a
lower cost, higher volume alternative to plasma derived ATIII may further expand
the therapeutic use of ATIII.
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<PAGE>
The Company filed an Investigational New Drug application ("IND") with the
FDA and is evaluating use of transgenic ATIII as a potential treatment for ATIII
deficiency that occurs in certain patients with heart disease. Patients
undergoing cardiopulmonary bypass ("CPB") surgery require anticoagulation with
heparin to prevent clotting, which can occur when blood comes into contact with
the tubing of the heart-lung machine performing the heart's function during
surgery. Patients with heparin resistance generally do not respond adequately to
these heparin treatments. Treatments of these patients with fresh frozen plasma
is one option to restore heparin sensitivity and achieve adequate
anticoagulation to permit initiation of CPB. ATIII deficiency is a key factor in
heparin resistance because heparin requires ATIII for effective anticoagulation.
The Company has adopted a clinical strategy of initially targeting heparin
resistant patients undergoing CPB with the plan of seeking approvals for
transgenic ATIII in broader indications after initial marketing approval is
obtained. A Phase II clinical study was completed which confirmed the safety
profile of transgenic ATIII at all doses administered and supported its ability
to enhance anticoagulation in cardiopulmonary bypass surgery patients. The study
also demonstrated that transgenic ATIII at doses of 50 units per kilogram or
higher maintained ATIII activity at 100% or greater for the duration of CPB.
Two identical, double blinded, randomized placebo-controlled Phase III
clinical trials began in the second quarter of 1998. These studies, which
include 52 patients each, were designed to assess the activity of ATIII in
restoring heparin sensitivity among heparin-resistant patients undergoing
cardiac surgery requiring CPB. The first study, conducted at six medical centers
in Germany and the United Kingdom, has been completed, and the primary clinical
endpoint was met. Seventy-nine percent of the patients who received ATIII did
not require administration of fresh frozen plasma before undergoing CPB surgery
in comparison to only eight percent of the placebo group. In addition to
achieving statistical significance on the primary endpoint, the trial also
achieved statistical significance on two out of three secondary endpoints.
Secondary endpoints included maintenance of normal ATIII levels and changes in
two biochemical markers of coagulation: D-dimer and fibrin monomer. Moreover,
the drug was well tolerated by patients. Patient enrollment in the second study,
which is being conducted in the United States and Europe, is expected to be
completed in the first quarter of 2000.
GTC and Genzyme have established the ATIII LLC joint venture for the
marketing and distribution of transgenic ATIII in all territories other than
Asia (which is covered by a joint venture between GTC and Sumitomo Metal
Industries Ltd.). Under the terms of the joint venture agreement, Genzyme will
fund 70% of the development costs of transgenic ATIII up to a maximum of
$33 million. The Company will fund the remaining 30% of these costs. Development
costs in excess of these amounts will be funded equally by the partners. Each of
the Company and Genzyme will also make capital contributions to the ATIII LLC
sufficient to pay 50% each of all new facility costs to be incurred. In addition
to the funding, both partners will contribute manufacturing, marketing and other
resources to the ATIII LLC at cost. Genzyme and GTC each own 50% of the venture,
although Genzyme is obligated to make certain milestone payments to GTC if and
when transgenic ATIII has been approved by the FDA and certain sales levels have
been reached. Profits and losses are shared according to ownership percentages.
The agreement covers all territories other than Asia.
The ATIII LLC has initiated a collaboration with Genzyme Molecular Oncology,
a division of Genzyme, to jointly develop a form of transgenic ATIII for
potential application as an angiogenesis inhibitor in the field of oncology.
This research stage collaboration is based on a discovery by Dr. Judah Folkman
from Children's Hospital, Boston, Massachusetts that certain conformations of
ATIII, referred to as anti-angiogenic ATIII, inhibit angiogenesis IN VITRO and
inhibit tumor growth in mice. Potential anti-angiogenic applications of
transgenic ATIII, outside the field of oncology, may be developed by the ATIII
LLC.
ATIII LLC is developing transgenic ATIII under a royalty-bearing license
from Centeon, a wholly owned subsidiary of Aventis SA and the successor to
Behringwerke AG.
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<PAGE>
HUMAN SERUM ALBUMIN. HSA is the protein principally responsible for
maintaining oncotic pressure, plasma volume and the balance of fluids in blood.
It is critical to the transport of amino acids, fatty acids and hormones in the
blood stream. The therapeutic use of HSA is indicated in situations of blood
loss and decreased blood albumin levels which can occur during shock, serious
burns, pre- and post-operative conditions, congestive heart failure and gastric,
liver and intestinal malfunctions. HSA is currently produced by human plasma
fractionation, with current worldwide sales of approximately $1.0 billion.
GTC has expressed transgenic HSA in mice at levels equivalent to or greater
than 35 grams per liter and, in 1999, successfully produced transgenic cattle
expressing this protein in their milk at commercially feasible levels. An
individual cow is expected to produce 80 kilograms of albumin annually. GTC
believes that this level of production should provide the Company with the
ability to produce HSA at costs competitive with albumin sourced from human
blood, and in the amounts required to meet market demand. GTC has refined its
purification process for transgenic HSA and developed a detailed economic model
for its commercial production. The Company has entered into an agreement with
Fresenius AG of Bad Homburg, Germany, to further develop and commercialize
transgenic HSA.
OTHER DEVELOPMENT PROJECTS
MALARIA VACCINE. GTC's transgenic expression system has the potential to
express the correct, immunogenic protein for use as a malaria vaccine both
economically and on a large scale. Malaria is a disease that has an annual
incidence of more than 300 million people worldwide and results in several
million deaths annually. GTC is working with the National Institutes of Health
(the "NIH") and the Federal Malaria Vaccine Coordinating Committee to express a
malaria protein, which is considered a promising vaccine candidate and to
examine the options for commercializing the vaccine. The Company has entered
into a Collaborative Research and Development Agreement with the NIH and during
1998 achieved high level expression of the candidate vaccine malaria antigen,
MSP-1, in the milk of transgenic mice. Primate immunogenicity studies are
planned for early 2000.
SECOND GENERATION BIOPHARMACEUTICALS. GTC has a program to identify and
develop unique transgenic constructs which may represent line extensions for
recombinant biotherapeutics. Approved recombinant therapeutics, many of which
have established significant markets, may become vulnerable to competition from
novel versions which may be more cost effective and/or demonstrate improved
efficacy, allow more convenient routes of administration, or have extended
clinical applications. GTC is in discussions with both generic and proprietary
pharmaceutical and biotechnology companies with strategic and product-specific
interests in the second generation biopharmaceuticals program. In 1998, GTC
signed an initial collaboration agreement with Eli Lilly to evaluate a novel
second generation biotherapeutic for which GTC provided intellectual property
and know how. While good scientific progress has been achieved in the program,
Lilly has elected not to prioritize the project as a development candidate. The
project and the data derived from Lilly's evaluation have reverted to the
Company. GTC is in discussions with other parties to develop this candidate
product.
PRIMEDICA CORPORATION CRO SERVICES
GTC acquired its CRO capabilities through the acquisitions of TSI
Corporation in October 1994 and BioDevelopment Laboratories, Inc. in June 1995.
In February 1998, GTC reorganized its CRO businesses under its wholly owned
subsidiary, Primedica, to provide a unified identity and a dedicated structure
for further growth of its CRO business. Primedica conducts its CRO services
through four laboratories: Primedica Worcester (Massachusetts), Primedica
Redfield (Arkansas), Primedica Rockville (Maryland), as well as Primedica Argus
(Pennsylvania). This business currently employs more than 550 people.
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<PAGE>
Primedica believes that it has a broader set of value-added services than
any of its competitors and is differentiated by its ability to offer
comprehensive development programs. Primedica has the ability to perform
virtually all of the safety, efficacy and quality control testing, as well as to
provide the regulatory affairs expertise necessary to bring a client's early
research-stage product through preclinical testing. Fields in which Primedica
provides contract services include:
- PRODUCT SAFETY TESTING. Primedica conducts safety studies using
toxicological, pathological and specialty endpoints, such as physiologic,
pharmacologic and mechanistic evaluations and is a recognized world leader
in conducting and evaluating reproductive and developmental toxicology
studies.
- METABOLISM AND PHARMACOKINETICS. Primedica's metabolism group evaluates
the distribution and impact of a drug and its metabolites using
sophisticated sampling techniques, metabolite profiling and
identification, tissue distribution studies and other techniques to
determine tissue half-life, clearance rates and potential sites of drug
toxicity after systemic exposure.
- COMPREHENSIVE MANUFACTURING SERVICES. Primedica specializes in
biopharmaceutical process development and manufacturing for
small-to-moderate batch sizes. These services include early cell line
development and optimization, production, down stream processing and fill
and finish services.
- DELIVERY AND DEVELOPMENT TECHNOLOGY SERVICES. These services include
targeted and controlled drug delivery, feasibility and preformulation
support, as well as formulation development for various routes of
administration.
Primedica believes the key to sustaining superior performance in this field
will be in providing services in close, collaborative relationship in which
customers are able to receive scientific services from Primedica at levels equal
to or greater than that which they could receive from an in-house department.
Toward this end, Primedica has also made significant investments in people,
technology and programs since GTC's acquisition of the CRO services.
RELATIONSHIP WITH GENZYME
EQUITY POSITION. Genzyme is the largest single stockholder of the Company,
currently holding 7,428,365 shares of common stock, which will represent
approximately 28.6% of the outstanding GTC common stock after giving effect to
this offering. In addition, Genzyme also holds $6,602,536 of Series B
convertible preferred stock which carries an initial dividend of 11% and is
convertible into common stock at a fixed rate of $6.30 per share. It is
anticipated that the Series B Preferred stock will be redeemed by the Company at
cost plus accrued dividends out of the proceeds from this offering. Genzyme also
holds four common stock purchase warrants exercisable for 145,000, up to
288,000, 55,833 and 29,491 shares of GTC common stock at prices of $2.84, $4.88,
$6.30 and $6.30 per share, respectively, the market price of the common stock at
the time the respective Genzyme warrants were issued. All of the shares held by
Genzyme (including shares issuable on exercise of Genzyme warrants) are entitled
to certain registration rights.
TECHNOLOGY TRANSFER AGREEMENT. Under the Technology Transfer Agreement
dated May 1, 1993, Genzyme transferred substantially all of its transgenic
assets and liabilities to GTC, assigned its relevant contracts and licensed to
the Company technology owned or controlled by it and relating to the production
of recombinant proteins in the milk of transgenic animals (the "Field") and the
purification of proteins produced in that manner. The license is worldwide and
royalty free as to Genzyme, although GTC is obligated to Genzyme's licensors for
any royalties due them. As long as Genzyme owns less than 50% of GTC, Genzyme
may use the transferred technology, or any other technology it subsequently
acquires relating to the Field, for internal purposes only without any royalty
obligation to the Company.
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<PAGE>
R&D AGREEMENT. Pursuant to a Research and Development Agreement dated
May 1, 1993, Genzyme and GTC agreed to provide research and development services
to the other relating, in the case of GTC, to transgenic production of
recombinant proteins and, in the case of Genzyme, to the purification of such
proteins. Each company receives payments from the other equal to the performing
party's fully allocated cost of such services, which can be no less than 80% of
the annual budgets established by the parties under the agreement on a month to
month basis, plus, in most cases, a fee equal to 10% of such costs. The
agreement expired on December 31, 1998 and the parties are continuing under this
agreement on a month-to-month basis.
ATIII LLC. In January 1998, the Company entered into a collaboration
agreement for the development of transgenic ATIII with Genzyme forming the ATIII
LLC joint venture. Under the terms of the agreement, Genzyme will fund 70% of
the development costs of transgenic ATIII up to a maximum of $33 million. The
Company will fund the remaining 30% of these costs. Development costs in excess
of these amounts will be funded equally by the partners. The Company and Genzyme
will also make capital contributions to the ATIII LLC sufficient to pay 50% each
of all new facility costs to be incurred. In addition to the funding, both
partners will contribute manufacturing, marketing and other resources to the
ATIII LLC at cost. Genzyme and GTC each own 50% of the venture, although Genzyme
is obligated to make certain milestone payments to GTC if and when transgenic
ATIII has been approved by the FDA and certain sales levels have been reached.
Profits and losses are shared according to ownership percentages. The agreement
covers all territories other than Asia.
SERVICES AGREEMENT. Under a services agreement between GTC and Genzyme, GTC
pays Genzyme a fixed monthly fee for basic laboratory and administrative support
services. The monthly fee is adjusted annually, based on the services to be
provided and changes in Genzyme's cost of providing the services. The services
agreement is self-renewing annually and may be terminated upon 90 days notice by
either party.
CREDIT LINE GUARANTY, TERM LOAN GUARANTY AND LIEN. Genzyme guarantees a
credit line and term loan with a commercial bank up to $24.6 million, expiring
in December 2001. The Company has agreed to reimburse Genzyme for any liability
Genzyme may incur under such guaranty and has granted Genzyme a first lien on
all of the Company's assets to secure such obligation.
OTHER STRATEGIC COLLABORATIONS
LONZA LTD.
In May 1999, GTC entered into a letter of intent with Lonza Ltd. of Basel,
Switzerland to develop a commercial relationship whereby Lonza would provide to
GTC on a project by project basis, downstream purification capabilities
including process development and final product purification, thereby enabling
GTC to provide a complete package of services to its partners. Under the terms
of the letter of intent, once a GTC partner commits to production, Lonza will
provide the capital for purification facilities and equipment on commercial
terms typical for the biopharmaceutical manufacturing industry. GTC is currently
negotiating a definitive master agreement with Lonza which GTC anticipates will
incorporate the key business and financial terms contained in the letter of
intent including equity investments by Lonza in GTC upon the achievement of
certain milestones.
TUFTS UNIVERSITY SCHOOL OF VETERINARY MEDICINE
Pursuant to a cooperation and licensing agreement, Tufts University School
of Veterinary Medicine has agreed to work exclusively with GTC until
September 2000 in developing commercial applications of transgenic protein
production in milk. Tufts has also granted GTC a perpetual, non-exclusive
license to use certain proprietary microinjection technology and animal
husbandry techniques. Sales of products derived from transgenic goats produced
by Tufts, or from their offspring, are subject to
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<PAGE>
royalties payable to Tufts. The Company maintains a herd of approximately 100
goats at Tufts' facility in Massachusetts.
SMIG JV
GTC holds a 22% interest in a joint venture with Sumitomo Metal
Industries Ltd. (the "SMIG JV"). GTC has granted to the SMIG JV an exclusive
license in Asia to use GTC's transgenic technology to make, use and sell
transgenic products, including ATIII, until the later of 2008 or the expiration
of any applicable Japanese patent, subject to various reciprocal royalty
obligations.
PATENTS AND PROPRIETARY RIGHTS
GTC has filed 20 patent applications which cover relevant portions of its
transgenic technology, several of which are covered by cross-licensing
agreements. GTC holds exclusive and nonexclusive licenses from Genzyme to rights
under a number of patent applications on file in the United States and
corresponding foreign patent applications relating to certain aspects of its
technology. GTC has a broad patent issued by the European Patent Office which
covers a DNA construct and its use in the production of proteins in the milk of
non-human, transgenic mammals. Other GTC applications as to specific proteins,
classes of proteins, techniques to enhance expression and purification
technologies remain pending. During 1998, the U.S. Patent and Trademark Office
awarded GTC four patents, one covering the purification of proteins from the
milk of transgenic animals, two more relating to the production of monoclonal
and assembled antibodies at commercial levels in the milk of transgenic mammals
and one covering the production of ATIII in the milk of transgenic goats.
GTC has exclusive and nonexclusive licenses to technologies owned by other
parties, including DNX, Inc. as to microinjection, Stanford University as to
gene transfer and Centeon L.L.C., as the successor to Behringwerke AG, as to
ATIII, as well as promoter cross-licenses in place with PPL Therapeutics PLC
("PPL") and Pharming B.V. ("Pharming"). Certain of the licenses require GTC to
pay royalties on sales of products which may be derived from or produced using
the licensed technology. The licenses generally extend for the life of any
applicable patent.
The Company also relies upon trade secrets, know how and continuing
technological advances to develop and maintain its competitive position. In an
effort to maintain the confidentiality and ownership of trade secrets and
proprietary information, the Company requires employees, consultants and certain
collaborators to execute confidentiality and invention assignment agreements
upon commencement of a relationship with the Company.
COMPETITION
TRANSGENICS
Many companies, including biotechnology and pharmaceutical companies, are
actively engaged in seeking efficient methods of producing proteins for
therapeutic or diagnostic applications. Two other companies known to GTC are
extensively engaged in the application of transgenic technology for the
production of proteins for therapeutic use in humans: Pharming and PPL.
Pharming, based in the Netherlands, is primarily engaged in the development of
recombinant proteins in the milk of transgenic cows, which are most suitable for
extremely high volume protein production. PPL, based in Scotland, utilizes
primarily sheep for transgenic protein production.
CRO SERVICES
The worldwide markets for CRO services, manufacturing support services and
related development services are highly fragmented, involving several hundred
companies, as well as universities and governmental bodies. Competition in these
markets is based primarily on technological capabilities and
34
<PAGE>
reputation for quality of products and services offered and perceived financial
stability. In certain market segments, price is also a significant competitive
factor.
GOVERNMENT REGULATION
TRANSGENICS
The manufacturing and marketing of GTC's potential products and certain
areas of research related to them are subject to regulation by governmental
authorities in the United States, including the FDA, the U.S. Department of
Agriculture (the "USDA") and the Environmental Protection Agency (the "EPA").
Comparable authorities are involved in other countries.
To GTC's knowledge, no protein produced in the milk of a transgenic animal
has been submitted for final regulatory approval. However, the FDA issued its
Points to Consider in August 1995. Points to Consider, which are not regulations
or guidelines, are nonbinding published documents that represent the current
thinking of the FDA on a particular topic. Earlier in 1995, comparable
guidelines were issued by European regulatory authorities. GTC believes that its
programs satisfactorily address the issues raised by these documents and
generally views them as a very positive milestone in the acceptance of the
transgenic form of production. Based on discussions with the FDA and others, GTC
expects that the basic United States regulatory framework for the transgenic
production of recombinant proteins in animals will be similar to that described
in the Points to Consider.
The FDA licenses biological products under the authority of the Public
Health Service ("PHS") Act. With respect to therapeutic biological products,
generally, the standard FDA approval process includes preclinical laboratory and
animal testing, submission of an IND to the FDA and completion of appropriate
human clinical trials to establish safety and effectiveness. Prior to passage of
the FDA Modernization Act of 1997 ("FDAMA"), applicants for a license to market
a biological product filed both an establishment license application (an "ELA")
and a product license application (a "PLA"). Since the passage of FDAMA, the FDA
has taken actions to make the licensing process for biological products more
consistent with the process for the approval of new drugs. Accordingly, after
October 20, 2000, all manufacturers seeking a license to market a biological
product in interstate commerce must file a single Biological License Application
(a "BLA"). PLAs and ELAs filed in the interim will be administratively handled
by the FDA as a BLA. If a manufacturer successfully demonstrates that the
biological product meets PHS standards, that is, that the product is safe, pure
and potent and that the facility in which it is manufactured meets standards
designed to ensure that the product continues to be safe, pure and potent, the
manufacturer will receive a biological license to market the product in
interstate commerce. The Company has already submitted an IND for ATIII to the
FDA and it is continuing Phase III clinical trials in the United States and
Europe. GTC expects to submit a BLA for ATIII; however, the approval process for
other proteins may be undertaken either by the Company, by a collaborator for
which the Company is producing proteins, or jointly, depending upon the nature
of the relationship involved.
CRO SERVICES
Primedica and its customers are subject to a variety of regulatory
requirements intended to ensure the quality and integrity of their products and
services. The industry standard for conducting non-clinical testing is embodied
in regulations called Good Laboratory Practices ("GLPs"). GLPs have been adopted
by the EPA and the FDA and a number of foreign regulatory bodies. To help ensure
compliance, the Company maintains a strict quality assurance program at each
site to audit test data and conduct regular inspections of testing procedures
and facilities. Primedica also complies with FDA-established current GMPs.
Primedica also maintains certain licenses and permits issued by federal,
state and local authorities relating to the operation of its current laboratory
and testing facilities, including those required for
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<PAGE>
hazardous waste disposal, the purchase, use and disposal of radioactive isotopes
and the use of animals in testing and research. These licenses and permits
include licenses from the U.S. Nuclear Regulatory Commission for the purchase,
use and disposal of small amounts of short-lived radioactive isotopes for
research purposes. Primedica also has registered with the Massachusetts
Department of Environmental Protection and the EPA as a Small Quantity Hazardous
Waste Generator in connection with its disposal of certain organic hazardous
wastes used in connection with its molecular biology and biomedical research.
These wastes are disposed of through a licensed hazardous waste transporter. The
use and disposal of chemicals is regulated under the Toxic Substances Control
Act and other state and federal legislation.
Each of Primedica's laboratories is licensed by the USDA and state and local
authorities to house and use laboratory animals for biomedical research
purposes. The ability to continue using animals in testing and research is
dependent on continued compliance with the requirements of such licenses.
Primedica's Argus, Worcester and Rockville laboratories are also registered with
the U.S. Public Health Service to conduct biomedical research on laboratory
animals funded by the NIH and other federal agencies. Primedica's Argus,
Worcester and Redfield laboratories are also licensed by federal and state drug
enforcement agencies to procure and use controlled substances in research
programs involving laboratory animals.
The Company's operations are also subject to federal, state and local laws,
rules, regulations and policies governing the use, generation, manufacture,
storage, air emission, effluent discharge, handling and disposal of certain
materials and waste, including, but not limited to, animal waste and waste
water.
RESEARCH AND DEVELOPMENT COSTS
During its fiscal years ended January 3, 1999, December 29, 1997 and
December 29, 1996, GTC spent $16,641,000, $17,840,000 and $8,684,000,
respectively, on research and development. These costs include labor, materials
and supplies and overhead, the cost of operating the transgenics production
facility, as well as certain subcontracted research projects.
EMPLOYEES
As of December 16, 1999, GTC employed 707 people, of which 122 are in
transgenics and 585 are in Primedica. Of GTC's total employees, 478 were engaged
in operations, 57 were engaged in research and development and 172 were engaged
in marketing and general administration. Of GTC's employees, approximately 51
have Ph.D. degrees, 1 has an M.D. degree and 16 have D.V.M. degrees. None of
GTC's employees are covered by collective bargaining agreements. GTC believes
its employee relations are satisfactory.
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MANAGEMENT
The Company's executive officers and directors and their respective ages and
positions are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
James A. Geraghty......................... 45 Chairman of the Board
Sandra Nusinoff Lehrman, M.D.............. 52 President and Chief Executive Officer
John B. Green............................. 45 Vice President, Chief Financial Officer
and Treasurer
Harry M. Meade............................ 53 Vice President, Transgenics Research
Michael W. Young.......................... 48 Vice President, Commercial Development
Peter H. Glick............................ 36 President, Primedica Corporation
Henry E. Blair............................ 56 Director
Francis J. Bullock........................ 63 Director
Alan W. Tuck.............................. 51 Director
Alan E. Smith............................. 54 Director
Robert W. Baldridge....................... 65 Director
Henri A. Termeer.......................... 53 Director
</TABLE>
MR. GERAGHTY was the President and Chief Executive Officer of GTC from the
date of its incorporation in February 1993 until July 1998. Since that time,
Mr. Geraghty has served as President of Genzyme Europe. He has been a director
of GTC since February 1993 and has been Chairman of the Board since
January 1998. Mr. Geraghty joined Genzyme in September 1992, where he was a Vice
President for Corporate Development and the General Manager of the transgenics
business unit until the incorporation of the Company.
DR. LEHRMAN has been the President and Chief Executive Officer of GTC since
July 1998. Prior to joining GTC, from 1983 to 1994 Dr. Lehrman held several
positions at Wellcome PLC, the last being International Director, Biotechnology
and Vice President, General Manager of Burroughs Wellcome Mfg., Inc., a
biopharmaceutical production subsidiary. She also served as Vice President, Drug
Development for Triangle Pharmaceuticals, Inc., an antiviral development company
until July 1996 and President of CytoTherapeutics, Inc., a biotechnology
company, before joining GTC.
MR. GREEN has been the Vice President and Chief Financial Officer of GTC
since December 1994 and Treasurer since August 1997. He has also served as Vice
President and Treasurer of TSI, a wholly owned subsidiary of GTC, since
March 1993 and as its Chief Financial Officer since December 1994. Prior to
that, he was Vice President and Assistant Treasurer of TSI from December 1989.
DR. MEADE has been Vice President, Transgenics Research for GTC since
August 1994 and has served as Research Director of GTC since May 1993. Prior to
joining GTC, Dr. Meade was a Scientific Fellow at Genzyme, where he was
responsible for directing the transgenic molecular biology program. From 1981 to
March 1990, when he joined Genzyme, Dr. Meade was a Senior Scientist at
Biogen, Inc., a biotechnology company, where he worked on the technology
relating to the production of proteins in milk and was an inventor on the first
issued patent covering this process.
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MR. YOUNG has served as Vice President, Commercial Development since
November 1995 when he joined GTC. Prior to joining GTC, Mr. Young was Vice
President of Business Development for PerSeptive Biosystems from 1993 and Vice
President of Marketing of Verax Corporation from 1986 to 1993.
MR. GLICK has been President of Primedica Corporation, a wholly-owned
subsidiary of GTC, since February 1998 and served as Vice President, Marketing
and Corporate Development of GTC from June 1995 to February 1998. Prior to that
he was Vice President, Corporate Development of GTC from October 1994 and of TSI
from June 1993. From January 1994 to January 1996, he also served as President
of Primedica's Rockville Laboratories subsidiary. From November 1991 to
May 1993, he was Director, Corporate Development of TSI. Prior to joining TSI,
he was a strategy consultant at Bain & Company.
MR. BLAIR is President, Chief Executive Officer and Chairman of the Board of
Dyax Corp., a privately-held bioseparation, pharmaceutical discovery and
development company and a consultant to several companies, including Genzyme.
Prior to January 1990, Mr. Blair was Senior Vice President, Scientific Affairs
of Genzyme. Mr. Blair is also a director of Genzyme and Celtrix
Pharmaceuticals, Inc.
DR. BULLOCK has been a senior consultant with Arthur D. Little, Inc. since
September 1993, prior to which he was Senior Vice President, Research
Operations, of Schering-Plough Research Institute, a position he held from 1981
until August 1993.
MR. TUCK is Chief Strategic Officer of Organogenesis Inc., a tissue
engineering firm. From September 1996 until July 1997, Mr. Tuck was Executive
Vice President and Chief Strategic Officer of Biocode, Inc., a privately-held
biotechnology company focused on covert product marketing and, from
September 1996 until March 1997, was Chief Strategic Officer of Immulogic
Pharmaceutical Corporation, a publicly-held biotechnology company focused on
diseases of the immune system. From February 1992 though May 1996, Mr. Tuck was
President and Chief Executive Officer of T Cell Sciences, Inc. Mr. Tuck is also
a director of Apogee Technology, Inc., a high technology audio company.
DR. SMITH has been the Senior Vice President, Research of Genzyme since
August 1989 and its Chief Scientific Officer since September 1996.
MR. BALDRIDGE is Vice Chairman of the Board of Directors of the Company.
Mr. Baldridge served as a director of TSI Corporation from November 1990 until
its acquisition by the Company in October 1994 and was Chairman and Chief
Executive Officer of TSI from April 1993 to October 1994. Mr. Baldridge has
provided consulting services to the Company since October 1994 pursuant to a
Consulting Agreement and has served as an independent financial and management
consultant since June 1988.
MR. TERMEER has served as President of Genzyme since October 1983, Chief
Executive Officer of Genzyme since December 1985 and Chairman of the Board of
Genzyme since May 1988. Mr. Termeer is a director of Abiomed, Inc.,
AutoImmune Inc., Geltex Pharmaceuticals, Inc. and Diacrin, Inc., as well as
trustee of Hambrecht & Quist Healthcare Investors and Hambrecht & Quist
Healthcare Life Sciences Investors.
38
<PAGE>
UNDERWRITING
The Company has entered into an underwriting agreement with the underwriters
named below. Warburg Dillon Read LLC and Hambrecht & Quist LLC are acting as
representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
Warburg Dillon Read LLC.....................................
Hambrecht & Quist LLC.......................................
---------
Total................................................... 3,500,000
=========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other than
those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.
The representatives have advised GTC that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to certain securities dealers at such price less a concession
of $ per share to certain other dealers. The underwriters may also
allow to dealers, and such dealers may reallow, a concession not in excess of
$0.10 per share to certain other dealers. After the shares are released for sale
to the public, the representatives may change the offering price and other
selling terms at various times.
The Company has granted the underwriters an over-allotment option. This
option, which is exercisable for up to 30 days after the date of this
prospectus, permits the underwriters to purchase a maximum of 525,000 additional
shares of the common stock to cover over-allotments. If the underwriters
exercise all or part of this option, they will purchase shares covered by the
option at the public offering price that appears on the cover page of this
prospectus, less the underwriting discount. To the extent that the underwriters
exercise the over-allotment option in part and not in full, the underwriters
will purchase shares from GTC on a pro rata basis. If this option is exercised
in full, the total price to the public will be $82.5 million and the total
proceeds to the Company before offering expenses will be approximately
$77.6 million, at an assumed offering price of $20.50 per share. The
underwriters have severally agreed that, to the extent the overallotment option
is exercised, each of the underwriters will purchase a number of additional
shares proportionate to its initial amount reflected in the above table.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by the Company:
<TABLE>
<CAPTION>
NO EXERCISE OF FULL EXERCISE OF
OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
--------------------- ---------------------
<S> <C> <C>
Per Share.............................................. $ $
Total.................................................. $ $
</TABLE>
39
<PAGE>
The Company estimates that the total expenses of this offering, excluding
the underwriting discount, will be approximately $500,000.
The Company has agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company and its directors, executive officers and Genzyme have agreed
pursuant to certain "lock-up" agreements with the underwriters that, subject to
certain exceptions, they will not offer, sell, contract to sell, pledge, grant
any option to sell, or otherwise dispose of, directly or indirectly, any shares
of common stock or securities convertible into or exercisable or exchangeable
for common stock for a period of 90 days after the date of this prospectus
without the prior written consent of Warburg Dillon Read LLC. Warburg Dillon
Read LLC, in its sole discretion, may release the shares subject to the lock-up
agreements in whole or in part at any time with or without notice. However,
Warburg Dillon Read LLC has no current plan to do so.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. However, the underwriters may engage in the following activities
in accordance with the rules:
- STABILIZING TRANSACTIONS. The representatives may make bids for or
purchases of the shares for the purpose of pegging, fixing or maintaining
the price of the shares, so long as stabilizing bids do not exceed a
specified maximum.
- OVERALLOTMENTS AND SYNDICATE COVERING TRANSACTION. The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created
in connection with this offering, the representatives may engage in
syndicate covering transactions by purchasing shares in the open market.
The representatives may also elect to reduce any short position by
exercising all or part of the overallotment option.
- PENALTY BIDS. If the representatives purchase shares in the open market in
a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of these transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither GTC nor the underwriters make any representation or prediction as to
the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If these transactions are commenced, they may be discontinued without notice at
any time.
Warburg Dillon Read LLC provided financial advisory services to GTC in
connection with a potential transaction involving Primedica, a subsidiary of the
Company, in 1998 and 1999.
40
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for the Company by Palmer & Dodge LLP, Boston, Massachusetts. Lynnette C.
Fallon, a partner of Palmer & Dodge LLP, is the Clerk of the Company. Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts, will pass
upon certain legal matters in connection with this offering for the
underwriters.
EXPERTS
The financial statements of Genzyme Transgenics Corporation and ATIII LLC
incorporated in this prospectus by reference to the Annual Report on Form 10-K
for the year ended January 3, 1999, have been so incorporated in reliance on the
reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Reports, proxy and information statements filed
pursuant to Sections 14(a) and 14(c) of the Exchange Act and other information
filed with the Commission can be inspected and copied at the Commission's Public
Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. Information regarding the operation of the Public Reference Room may be
obtained by calling the Commission at 1-800-SEC-0330. In addition, the Company
is required to file electronic versions of such material with the Commission
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Copies of certain information filed by the Company with the
Commission are also available on the Company's Web Site at
http://www.transgenics.com. The Company's Web Site is not part of this
prospectus. Genzyme Transgenics Corporation common stock is listed on the Nasdaq
National Market. Reports and other information concerning the Company can be
inspected at the offices of the Nasdaq National Market.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 0-21794), pursuant to the Exchange Act, are incorporated herein by
reference:
- Annual Report on Form 10-K for the fiscal year ended January 3, 1999,
filed with the Commission on April 5, 1999.
- Quarterly Report on Form 10-Q for the quarter ended October 3, 1999, filed
with the Commission on November 17, 1999.
- Quarterly Report on Form 10-Q for the quarter ended July 4, 1999, filed
with the Commission on August 18, 1999.
- Quarterly Report on Form 10-Q for the quarter ended March 4, 1999, filed
with the Commission on May 19, 1999.
- Current Report on Form 8-K, filed with the Commission on December 9, 1999.
- Definitive Proxy Statement for the 1999 Annual Meeting of Stockholders,
filed with the Commission on April 28, 1999.
- The description of the GTC common stock contained in the Company's
Registration Statement on Form 8-A, filed on May 19, 1993, including any
amendment or reports filed for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of this offering of the
41
<PAGE>
securities offered hereby shall be deemed incorporated by reference into this
prospectus and to be a part hereof from the date of filing such documents. Any
statement contained in any document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded, for purposes of
this prospectus, to the extent that a statement contained herein (or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein) modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
The Company will provide, without charge, to each person to whom a copy of
this prospectus is delivered, upon written or oral request of any such person, a
copy of any or all of the documents which are incorporated herein by reference,
including exhibits. Requests should be directed to: Genzyme Transgenics
Corporation, 175 Crossing Boulevard, Framingham, MA 01702, Attn:
Brenda A. Martin, (508) 620-9700.
42
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF THE TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
3,500,000 Shares
[LOGO]
Common Stock
Warburg Dillon Read LLC
Chase H&Q
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be borne by the Company in connection with the securities
being registered are as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 13,146
NASD filing fee............................................. 4,382
Nasdaq listing fee.......................................... 17,500
Accounting fees and expenses................................ 100,000
Legal fees and expenses..................................... 250,000
Printing and photocopying expenses.......................... 75,000
Miscellaneous expenses...................................... 39,972
--------
Total..................................................... $500,000
========
</TABLE>
All of the above figures, except the SEC registration, NASD filing and
Nasdaq listing fees, are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of chapter 156B of the Massachusetts Business Corporation Law
grants the Company the power to indemnify any director, officer, employee, agent
or person who serves at its request in any capacity with respect to any employee
benefit plan to whatever extent permitted by the Company's Articles of
Organization, a bylaw adopted by the stockholders or a vote adopted by the
holders of a majority of the shares entitled to vote on the election of
directors unless such indemnitee has been adjudicated in any proceeding not to
have acted in good faith in the reasonable belief that his or her actions were
in the best interests of the corporation or, to the extent that the matter for
which indemnification is sought relates to service with respect to an employee
benefit plan, in the best interests of the participants or beneficiaries of such
employee benefit plan. Such indemnification may include payment by the Company
of expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he or she
shall be adjudicated to be not entitled to indemnification under the statute
without reference to the financial ability of such person to make repayment.
Article VI of the Company's Bylaws provides that the Company shall, to the
extent legally permissible, indemnify each person who may serve or who has
served at any time as a director or officer of the corporation or of any of its
subsidiaries, or who, at the request of the Company, may serve or at any time
has served as a director, officer or trustee of, or in a similar capacity with,
another organization or an employee benefit plan, against all expenses and
liabilities (including counsel fees, judgments, fines, excise taxes, penalties
and amounts payable in settlements) reasonably incurred by or imposed upon such
person in connection with any threatened, pending or completed action, suit or
other proceeding, whether civil, criminal, administrative or investigative, in
which he or she may become involved by reason of his or her serving or having
served in such capacity (other than a proceeding voluntarily initiated by such
person unless he or she is successful on the merits, the proceeding was
authorized by the corporation or the proceeding seeks a declaratory judgment
regarding his or her own conduct). No indemnification, however, shall be
provided for any such person with respect to any matter as to which he or she
shall have been finally adjudicated in any proceeding not to have acted in good
faith in the reasonable belief that his or her action was in the best interests
of the corporation or, to the extent such matter relates to service with respect
to any employee benefit
II-1
<PAGE>
plan, in the best interests of the participants or beneficiaries of such
employee benefit plan. Such indemnification shall include payment by the Company
of expenses incurred in defending a civil or criminal action or proceeding in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the person indemnified to repay such payment if he or she
shall be adjudicated to be not entitled to indemnification under Article VI,
which undertaking may be accepted without regard to the financial ability of
such person to make repayment.
The indemnification provided for in Article VI is a contract right inuring
to the benefit of the directors, officers and others entitled to
indemnification. In addition, the indemnification is expressly not exclusive of
any other rights to which such director, officer or other person may be entitled
by contract or otherwise under law and inures to the benefit of the heirs,
executors and administrators of such a person.
ITEM 16. EXHIBITS
See the Exhibit Index immediately following the signature page.
ITEM 17. UNDERTAKINGS
(a) The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant's annual
report pursuant to section 13(a) or section 15(d) of the Exchange Act that is
incorporated by reference in this 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as 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.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Framingham, Commonwealth
of Massachusetts, on February 4, 2000.
<TABLE>
<S> <C> <C>
GENZYME TRANSGENICS CORPORATION
BY: /S/ JOHN B. GREEN
-----------------------------------------
John B. Green
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND TREASURER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
JAMES A. GERAGHTY* Chairman of the Board
------------------------------------------- February 4, 2000
James A. Geraghty
President, Chief Executive
SANDRA NUSINOFF LEHRMAN* Officer (Principal
------------------------------------------- Executive Officer) and February 4, 2000
Sandra Nusinoff Lehrman Director
Vice President, Chief
Financial Officer and
/s/ JOHN B. GREEN Treasurer (Principal
------------------------------------------- Financial Officer and February 4, 2000
John B. Green Principal Accounting
Officer)
ROBERT W. BALDRIDGE* Director
------------------------------------------- February 4, 2000
Robert W. Baldridge
HENRY E. BLAIR* Director
------------------------------------------- February 4, 2000
Henry E. Blair
FRANCIS J. BULLOCK* Director
------------------------------------------- February 4, 2000
Francis J. Bullock
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director
-------------------------------------------
Alan E. Smith
HENRI A. TERMEER* Director
------------------------------------------- February 4, 2000
Henri A. Termeer
ALAN W. TUCK* Director
------------------------------------------- February 4, 2000
Alan W. Tuck
By: /s/ JOHN B. GREEN
-------------------------------------------
John B. Green
as Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement. Filed herewith.
4.1.1 Restated Articles of Organization of the Company, filed with
the Secretary of the Commonwealth of Massachusetts on
December 27, 1993. Filed as Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1993 and incorporated herein by reference.
4.1.2 Articles of Amendment to the Restated Articles of
Organization filed with the Secretary of the Commonwealth of
Massachusetts on October 3, 1994. Filed as Exhibit 3.1.2 to
the Company's Annual Report on Form 10-K for the year ended
December 28, 1997 and incorporated herein by reference.
4.1.3 Articles of Amendment to the Restated Articles of
Organization of the Company filed with the Secretary of the
Commonwealth of Massachusetts on June 26, 1997. Filed as
Exhibit 3 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 29, 1997 and incorporated herein by
reference.
4.1.4 Certificate of Vote of Directors Establishing a Series of a
Class of Stock (Series B Convertible Preferred Stock).
Previously filed with this Registration Statement.
4.2 By-Laws of the Company, as amended. Filed as Exhibit 3.1 to
the Company's Form 10-Q for the quarter ended July 4, 1999
and incorporated herein by reference.
4.3 Specimen Common Stock Certificate. Filed as Exhibit 4.1 to
the Company's Registration Statement on Form S-1, File No.
33-62782 and incorporated herein by reference.
4.4 Specimen Series B Convertible Preferred Stock Certificate.
Previously filed with this Registration Statement.
4.5 TSI Specimen Warrant Certificate. Filed as Exhibit 4.8 to
TSI Corporation's Registration Statement on Form S-3, File
No. 33-48107 and incorporated herein by reference.
4.6.1 TSI Common Stock Purchase Warrant No. G-1, dated September
27, 1994, issued to Financing for Science International,
Inc. ("FSI"). Filed as Exhibit 4.4 to the original filing of
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.
4.6.2 Form of Notice of Assumption by GTC of the TSI Common Stock
Purchase Warrants Nos. F-1 and G-1. Filed as Exhibit 4.5 to
the original filing of the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated
herein by reference.
4.7 Common Stock Purchase Warrant, dated June 30, 1995, issued
to FSI. Filed as Exhibit 10.9 to the Company's Quarterly
Report on Form 10-Q for the period ended July 2, 1995 and
incorporated herein by reference.
4.8 Common Stock Purchase Warrant, dated July 3, 1995, issued to
Genzyme. Filed as Exhibit 10.5 to the Company's Quarterly
Report on Form 10-Q for the period ended July 2, 1995 and
incorporated herein by reference.
4.9 Common Stock Purchase Warrant, dated March 13, 1996, issued
to FSI. Filed as Exhibit 4.8 to the Company's Quarterly
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------
<S> <C>
4.10 Common Stock Purchase Warrant, dated as of June 26, 1997,
issued to Government Land Bank d/b/a The MassDevelopment.
Filed as Exhibit 4 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 29, 1997 and incorporated
herein by reference.
4.11 Form of Common Stock Purchase Warrant issued to the
Purchasers of Series A Convertible Preferred Stock, dated as
of March 20, 1998, together with a schedule of holders.
Filed as Exhibit 4.9 to the Company's Annual Report on Form
10-K for the year ended December 28, 1997 and incorporated
herein by reference.
4.12 Form of Common Stock Purchase Warrant issued to Shoreline
Pacific Institutional Finance and affiliates, dated as of
March 20, 1998. Filed as Exhibit 4.10 to the Company's
Annual Report on Form 10-K for the year ended December 28,
1997 and incorporated herein by reference.
4.13 Common Stock Purchase Warrant, dated as of December 28,
1998, issued to Genzyme. Filed as Exhibit 4.11 to the
Company's Annual Report on Form 10-K for the fiscal year
ended January 3, 1999 and incorporated herein by reference.
4.14 Registration Rights Agreement between the Company and
certain Stockholders named therein. Filed as Exhibit 10.53
to the Company's Annual Report on Form 10-K for the year
ended December 28, 1997 and incorporated herein by
reference.
4.15 Warrant to Purchase Common Stock, dated November 12, 1999,
issued to Genzyme. Filed as Exhibit 8 to Genzyme's Amendment
No. 6 to Schedule 13D filed with the Commission on
November 24, 1999 and incorporated herein by reference.
4.16 Warrant to Purchase Common Stock, dated November 22, 1999,
issued to Genzyme. Filed as Exhibit 9 to Genzyme's Amendment
No. 6 to Schedule 13D filed with the Commission on
November 24, 1999 and incorporated herein by reference.
5 Opinion of Palmer & Dodge LLP. Filed herewith.
23.1 Consent of counsel (contained in opinion of Palmer & Dodge
LLP filed as Exhibit 5).
23.2 Consent of PricewaterhouseCoopers LLP. Filed herewith.
24 Power of Attorney. Previously filed with this Registration
Statement.
</TABLE>
II-6
<PAGE>
Exhibit 1. Form of Underwriting Agreement
3,500,000 Shares
Common Stock
$0.01 Par Value
UNDERWRITING AGREEMENT
February 1, 2000
<PAGE>
UNDERWRITING AGREEMENT
February __, 2000
WARBURG DILLON READ LLC
HAMBRECHT & QUIST LLC,
as Managing Underwriters
299 Park Avenue
New York, New York 10171-0026
Ladies and Gentlemen:
Genzyme Transgenics Corporation, a Massachusetts corporation
(the "Company"), proposes to issue and sell to the underwriters named in
Schedule A annexed hereto (the "Underwriters") an aggregate of 3,500,000 shares
(the "Firm Shares") of Common Stock, $0.01 par value (the "Common Stock"), of
the Company. In addition, solely for the purpose of covering over-allotments,
the Company proposes to grant to the Underwriters the option to purchase from
the Company up to an additional 525,000 shares of Common Stock (the "Additional
Shares"). The Firm Shares and the Additional Shares are hereinafter collectively
sometimes referred to as the "Shares." The Shares are described in the
Prospectus which is referred to below.
The Company has filed, in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively called the "Act"), with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3, (File No. 333-94187)
including a prospectus, relating to the Shares, which incorporates by reference
documents which the Company has filed or will file in accordance with the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively called the "Exchange Act"). The Company has
furnished to you, for use by the Underwriters and by dealers, copies of one or
more preliminary prospectuses and the documents incorporated by reference
therein (each thereof, including the documents incorporated therein by
reference, being herein called a "Preliminary Prospectus") relating to the
Shares. Except where the context otherwise requires, the registration statement,
as amended when it becomes effective, including all documents filed as a part
thereof or incorporated by reference therein, and including any information
contained in a prospectus subsequently filed with the Commission pursuant to
Rule 424(b) under the Act and deemed to be part of the registration statement at
the time of effectiveness pursuant to Rule 430(A) under the Act and also
including any registration statement filed pursuant to Rule 462(b) under the
Act, is herein called the Registration Statement, and the prospectus, including
all documents incorporated therein by reference, in the form filed by the
Company with the Commission pursuant to Rule 424(b) under the Act on or before
the second business day after the date hereof (or such earlier time as may be
required under the Act) or, if no such filing is required, the form of
<PAGE>
-2-
final prospectus included in the Registration Statement at the time it became
effective, is herein called the Prospectus.
The Company and the Underwriters agree as follows:
1. SALE AND PURCHASE. Upon the basis of the warranties and
representations and subject to the terms and conditions herein set forth, the
Company agrees to sell to the respective Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company
the respective number of Firm Shares set forth opposite the name of such
Underwriter in Schedule A annexed hereto at a purchase price of $ per
Share. The Company is advised by you that the Underwriters intend (i) to make
a public offering of their respective portions of the Firm Shares as soon
after the effective date of the Registration Statement as in your judgment is
advisable and (ii) initially to offer the Firm Shares upon the terms set
forth in the Prospectus. You may from time to time increase or decrease the
public offering price after the initial public offering to such extent as you
may determine.
In addition, the Company hereby grants to the several
Underwriters the option to purchase, and upon the basis of the warranties and
representations and subject to the terms and conditions herein set forth, the
Underwriters shall have the right to purchase, severally and not jointly, from
the Company, ratably in accordance with the number of Firm Shares to be
purchased by each of them (subject to such adjustment as you shall determine to
avoid fractional shares), all or a portion of the Additional Shares as may be
necessary to cover over-allotments made in connection with the offering of the
Firm Shares, at the same purchase price per share to be paid by the Underwriters
to the Company for the Firm Shares. This option may be exercised by you on
behalf of the several Underwriters at any time (but not more than once) on or
before the thirtieth day following the date hereof, by written notice to the
Company. Such notice shall set forth the aggregate number of Additional Shares
as to which the option is being exercised, and the date and time when the
Additional Shares are to be delivered (such date and time being herein referred
to as the additional time of purchase); PROVIDED, HOWEVER, that the additional
time of purchase shall not be earlier than the time of purchase (as defined
below) nor earlier than the second business day1 after the date on which the
option shall have been exercised nor later than the tenth business day after the
date on which the option shall have been exercised. The number of Additional
Shares to be sold to each Underwriter shall be the number which bears the same
proportion to the aggregate number of Additional Shares being purchased as the
number of Firm Shares set forth opposite the name of such Underwriter on
Schedule A hereto bears to the total number of Firm Shares (subject, in each
case, to such adjustment as you may determine to eliminate fractional shares).
- ------------------------------
1 As used herein "business day" shall mean a day on which the New York Stock
Exchange is open for trading.
<PAGE>
-3-
2. PAYMENT AND DELIVERY. Payment of the purchase price for the
Firm Shares shall be made to the Company by Federal Funds wire transfer, against
delivery of the certificates for the Firm Shares to you through the facilities
of the Depository Trust Company ("DTC") for the respective accounts of the
Underwriters. Such payment and delivery shall be made at 10:00 A.M., New York
City time, on February __, 2000 (unless another time shall be agreed to by you
and the Company or unless postponed in accordance with the provisions of Section
8 hereof). The time at which such payment and delivery are actually made is
hereinafter sometimes called the time of purchase. Certificates for the Firm
Shares shall be delivered to you in definitive form in such names and in such
denominations as you shall specify no later than the second business day
preceding the time of purchase. For the purpose of expediting the checking of
the certificates for the Firm Shares by you, the Company agrees to make such
certificates available to you for such purpose at least one full business day
preceding the time of purchase.
Payment of the purchase price for the Additional Shares shall
be made at the additional time of purchase in the same manner and at the same
office as the payment for the Firm Shares. Certificates for the Additional
Shares shall be delivered to you in definitive form in such names and in such
denominations as you shall specify no later than the second business day
preceding the additional time of purchase. For the purpose of expediting the
checking of the certificates for the Additional Shares by you, the Company
agrees to make such certificates available to you for such purpose at least one
full business day preceding the additional time of purchase.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Underwriters that:
(a) the Company has not received, and has no notice of, any order of
the Commission preventing or suspending the use of any Preliminary Prospectus,
or instituting proceedings for that purpose, and each Preliminary Prospectus, at
the time of filing thereof, conformed in all material respects to the
requirements of the Act when the Registration Statement becomes effective, the
Registration Statement and the Prospectus will fully comply in all material
respects with the provisions of the Act, and the Registration Statement will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement have
been so described or filed; PROVIDED, HOWEVER, that the Company makes no
warranty or representation with respect to any statement contained in the
Registration Statement or the Prospectus in reliance upon and in conformity with
information concerning the Underwriters and furnished in writing by or on behalf
of any Underwriter through you to the Company expressly for use in the
Registration Statement or the Prospectus; the documents incorporated by
reference in the Prospectus, at the time they were filed with the Commission,
complied in all material respects with the requirements of
<PAGE>
-4-
the Exchange Act, and do not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading and the Company has not distributed any offering material
in connection with the offering or sale of the Shares other than the
Registration Statement, the Preliminary Prospectus, the Prospectus or any other
materials, if any, permitted by the Act;
(b) as of the date of this Agreement, the Company has an authorized
capitalization as set forth in the line item "Stockholders' equity" in the
section of the Registration Statement and the Prospectus entitled
"Capitalization" and, as of the time of purchase and the additional time of
purchase, as the case may be, the Company shall have an authorized
capitalization as set forth under the heading entitled "As Adjusted" in the
section of the Registration Statement and the Prospectus entitled
"Capitalization"; all of the issued and outstanding shares of capital stock
including the Common Stock and Series B Convertible Preferred Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable, have been issued in compliance with all federal and state
securities laws and were not issued in violation of any preemptive right, resale
right, right of first refusal or similar right;
(c) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of The Commonwealth of
Massachusetts, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Registration Statement;
(d) the Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction where the ownership or leasing
of its properties or the conduct of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on the business, properties, financial condition or results of operation of the
Company and its Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect"). The Company has no subsidiaries (as defined in the
Rules and Regulations) other than Primedica Corporation, Genzyme Transgenics
Securities Corporation, GTC Cancer Vaccines, Inc. TSI Corporation, Transgenic
Investments, Inc., TSI Deutschland GmbH, Primedica Argus Research Laboratories,
Inc., Primedica Cambridge, Inc., Primedica Redfield, Inc., Primedica Rockville,
Inc., Primedica Worcester, Inc., Health and Science Research Incorporated and
International Drug Development Corporation (collectively, the "Wholly Owned
Subsidiaries"); the Company owns 50% of the outstanding membership interests of
ATIII LLC ("ATIII" and, together with the Wholly Owned Subsidiaries, the
"Subsidiaries") and 22% of the outstanding equity interests of SMI Genzyme Ltd.
("SMIG"); other than the Subsidiaries and SMIG, the Company does not own,
directly or indirectly, any shares of stock or any other equity or long-term
debt securities of any corporation or have any equity interest in any firm,
partnership, joint venture, association or other entity; complete and correct
copies of the certificates of incorporation and of the bylaws of the Company and
each of the Wholly Owned Subsidiaries and of the certificate of formation and
operating agreement of ATIII
<PAGE>
-5-
and, in each case, all amendments thereto have been delivered to you, and except
as set forth in the exhibits to the Registration Statement no changes therein
will be made subsequent to the date hereof and prior to the time of purchase or,
if later, the additional time of purchase; each of the Wholly Owned Subsidiaries
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement; ATIII has been
duly formed and is validly existing as a limited liability company in good
standing under the laws of the jurisdiction of its formation, with full power
and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement; each of the Subsidiaries is
duly qualified to do business as a foreign entity in good standing in each
jurisdiction where the ownership or leasing of the properties or the conduct of
its business requires such qualification, except where the failure to so qualify
would not have a Material Adverse Effect; all of the outstanding shares of
capital stock of each of the Wholly Owned Subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and (except as otherwise
described in this Section 3(d)) are owned by the Company subject to no security
interest, other encumbrance or adverse claims except in favor of Genzyme
Corporation; all of the membership interests of ATIII have been duly authorized
and validly issued and 50% of such interests are owned by each of Genzyme
Corporation and the Company subject to no security interest, other encumbrance
or adverse claims; no options, warrants or other rights to purchase, agreements
or other obligations to issue or other rights to convert any obligation into
shares of capital stock or ownership interests in any of the Subsidiaries are
outstanding.
(e) the Company and each of the Subsidiaries are in compliance in all
material respects with the laws, orders, rules, regulations and directives
issued or administered by each jurisdiction in which they conduct their
respective businesses;
(f) neither the Company nor any of the Subsidiaries is in breach of, or
in default under (nor has any event occurred which with notice, lapse of time,
or both would result in any breach of, or constitute a default under), its
respective charter or by-laws or certificate of formation or operating
agreement, as the case may be, or in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any lease, contract or other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which any of them or any of their properties is bound, and the execution,
delivery and performance of this Agreement, the issuance and sale of the Shares
and the consummation of the transactions contemplated hereby will not conflict
with, or result in any breach of or constitute a default under (nor constitute
any event which with notice, lapse of time, or both would result in any breach
of, or constitute a default under), any provisions of the charter or by-laws or
certificate of formation or operating agreement, as the case may be, of the
Company or any of the Subsidiaries or under any provision of any license,
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any lease, contract or other agreement or
instrument to which the Company or any of the
<PAGE>
-6-
Subsidiaries is a party or by which any of them or their respective properties
may be bound or affected, or under any federal, state, local or foreign law,
regulation or rule or any decree, judgment or order applicable to the Company or
any of the Subsidiaries;
(g) this Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the Company
enforceable in accordance with its terms;
(h) the capital stock of the Company, including the Shares, conforms in
all material respects to the description thereof contained in the Exchange Act
reports incorporated by reference into the Registration Statement and Prospectus
and the certificates for the Shares are in due and proper form and the holders
of the Shares will not be subject to personal liability by reason of being such
holders;
(i) the Shares have been duly and validly authorized and, when issued
and delivered against payment therefor as provided herein, will be duly and
validly issued and fully paid and non-assessable;
(j) no approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the issuance and sale of the
Shares or the consummation by the Company of the transaction as contemplated
hereby other than registration of the Shares under the Act and any necessary
qualification under the securities or blue sky laws of the various jurisdictions
in which the Shares are being offered by the Underwriters or under the rules and
regulations of the National Association of Securities Dealers, Inc. ("NASD");
(k) no person has the right, contractual or otherwise, to cause the
Company to issue to it, or register pursuant to the Act, any shares of capital
stock of the Company upon the issue and sale of the Shares to the Underwriters
hereunder, nor does any person have preemptive rights, co-sale rights, rights of
first refusal or other rights to purchase any of the Shares other than those
that have been expressly waived prior to the dates hereof;
(l) PricewaterhouseCoopers LLP, whose report on the consolidated
financial statements of the Company and the Wholly Owned Subsidiaries is filed
with the Commission as part of the Registration Statement and Prospectus, are
independent public accountants as required by the Act;
(m) each of the Company and its Subsidiaries holds or has applied for
all necessary licenses, authorizations, consents and approvals and has made all
necessary filings required under any federal, state, local or foreign law,
regulation or rule, and has obtained all necessary authorizations, consents and
approvals from other persons, in order to conduct its respective business,
except to the extent a failure to so hold, file or obtain would not have a
Material Adverse Effect;
<PAGE>
-7-
neither the Company nor any of its Subsidiaries is in violation of, or in
default under, any such license, authorization, consent or approval or any
federal, state, local or foreign law, regulation or rule or any decree, order or
judgment applicable to the Company or any of its Subsidiaries the effect of
which could have a Material Adverse Effect;
(n) all legal or governmental proceedings, contracts, leases or
documents of a character required to be described in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration Statement
have been so described or filed as required;
(o) there are no actions, suits, claims, investigations or proceedings
pending or threatened to which the Company or any of the Subsidiaries or any of
their respective officers is a party or of which any of their respective
properties is subject at law or in equity, or before or by any federal, state,
local or foreign governmental or regulatory commission, board, body, authority
or agency which is reasonably likely to result in a judgment, decree or order
having a Material Adverse Effect or prevent consummation of the transaction
contemplated hereby;
(p) the audited financial statements incorporated by reference into the
Registration Statement and the Prospectus present fairly the consolidated
financial position of the Company and the Wholly Owned Subsidiaries as of the
dates indicated and the consolidated results of operations and cash flows of the
Company and the Wholly Owned Subsidiaries for the periods specified; such
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis during the periods involved;
(q) subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been (i) any
material adverse change, or any development which, in the Company's reasonable
judgment, is likely to cause a material adverse change, in the business,
properties or assets described or referred to in the Registration Statement, or
the results of operations, condition (financial or otherwise), business or
operations of the Company and its Subsidiaries taken as a whole, (ii) any
transaction which is material to the Company or any of its Subsidiaries, except
transactions in the ordinary course of business, (iii) any obligation, direct or
contingent, which is material to the Company and its Subsidiaries taken as a
whole, incurred by the Company or any of its Subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of the Company or any of its Subsidiaries
except in the ordinary course of business or (v) any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company. Neither the
Company nor any of its Subsidiaries has any material contingent obligation which
is not disclosed in the Registration Statement;
(r) the Company has obtained the agreement of each of its directors and
executive officers and Genzyme Corporation not to sell, offer to sell, contract
to sell, hypothecate grant any option to sell or otherwise dispose of, directly
or indirectly, any shares of Common Stock or securities
<PAGE>
-8-
convertible into or exchangeable for Common Stock or warrants or other rights to
purchase Common Stock for a period of 90 days after the date of the Prospectus;
(s) the Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(t) the Company and each of the Subsidiaries own or possess sufficient
trademarks, trade names, service marks, patents, patent rights, copyrights,
licenses, approvals, inventions, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and intellectual property including
specifically, but without limitation, the patents listed on SCHEDULE B
(collectively, "Intellectual Property Rights") necessary to conduct their
businesses as now conducted. Except as otherwise disclosed in the Prospectus,
neither the Company nor any of the Subsidiaries has received any notice of
infringement or conflict with asserted rights of others with respect to any
Intellectual Property Rights or of any facts or circumstances which would render
any Intellectual Property Rights invalid or inadequate to protect the interests
of the Company or its Subsidiaries therein, and, which infringement or conflict,
if the subject of an unfavorable decision, would have a Material Adverse Effect.
Except for a lien granted to Genzyme Corporation, the Company has good and
marketable title to the patents and patent applications referenced as being
owned by the Company in the Prospectus. The Company and its Subsidiaries have
entered into valid and binding confidentiality, non-disclosure and assignment of
inventions agreements with all current and former employees. The Company has
also entered into confidentiality agreements with consultants, vendors and other
third parties with access to non-public information regarding the Company's or
its Subsidiaries' Intellectual Property Rights. To the knowledge of the Company,
there is no material unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property Rights of the Company or the
Subsidiaries, any trade secret material to the Company or any of the
Subsidiaries, or any Intellectual Property Rights of any third party to the
extent licensed by or through the Company or any of the Subsidiaries, by any
third party, including any employee, former employee, consultant or vendor of
the Company or any of the Subsidiaries;
(u) each of the Company and each of the Subsidiaries has good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 4(p) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or such Subsidiary. The real property, improvements, equipment and
personal property held under lease by the Company or the Subsidiaries are held
under valid and enforceable leases, with such exceptions as are not material to
the Company or the Subsidiaries, and neither the Company nor any of the
Subsidiaries has any
<PAGE>
-9-
notice of any claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any of the Subsidiaries under any of the leases or
subleases referred to above, or affecting or questioning the rights of the
Company or such Subsidiary to the continued possession of the leased or
subleased premises under any such lease or sublease, except for such notices or
claims as would not reasonably be expected to have a Material Adverse Effect;
(v) the Company and each of the Subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid all
taxes required to be paid by any of them and, if due and payable, any related or
similar assessment, fine or penalty levied against any of them. The Company has
made adequate charges, accruals and reserves in the applicable financial
statements referred to in Section 4(p) above in respect of all federal, state
and foreign income and franchise taxes for all periods as to which the tax
liability of the Company or any of the Subsidiaries has not been finally
determined;
(w) each of the Company and the Subsidiaries are insured by
institutions which the Company reasonably believes to be recognized, financially
sound and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for their businesses including, but not limited to, policies covering
real and personal property owned or leased by the Company and the Subsidiaries
against theft, damage, destruction, acts of vandalism and earthquakes. The
Company has no reason to believe that it or any Subsidiary will not be able (i)
to renew its existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a cost that would
not have a Material Adverse Effect. Neither of the Company nor any Subsidiary
has been denied any insurance coverage which it has sought or for which it has
applied;
(x) the Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares;
(y) there are no business relationships or related-party transactions
involving the Company, any of the Subsidiaries, Genzyme Corporation or any other
person required to be described in the Prospectus which have not been described
as required;
(z) neither the Company nor any of the Subsidiaries nor, to the best of
the Company's knowledge, any employee or agent of the Company or any Subsidiary,
has made any contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law or of the character
required to be disclosed in the Prospectus;
(aa) the Company maintains a system of accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
<PAGE>
-10-
statements in conformity with generally accepted accounting principles as
applied in the United States and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences;
(bb) except as would not, individually or in the aggregate, have a
Material Adverse Effect (i) neither the Company nor any of the Subsidiaries is
in violation of any federal, state, local or foreign law or regulation relating
to pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum and petroleum products (collectively, "Hazardous
Materials"), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws"), which violation includes, but is not
limited to, noncompliance with any permits or other governmental authorizations
required for the operation of the business of the Company or any of the
Subsidiaries under applicable Environmental Laws, or noncompliance with the
terms and conditions thereof, nor has the Company or any of the Subsidiaries
received any written communication, whether from a governmental authority,
citizens group, employee or otherwise, that alleges that the Company or any of
the Subsidiaries is in violation of any Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental authority,
no investigation with respect to which the Company has received written notice,
and no written notice by any person or entity alleging potential liability for
investigatory costs, cleanup costs, governmental responses costs, natural
resources damages, property damages, personal injuries, attorneys' fees or
penalties arising out of, based on or resulting from the presence, or release
into the environment, of any Hazardous Materials at any location owned, leased
or operated by the Company or any of the Subsidiaries, now or in the past
(collectively, "Environmental Claims"), pending or, to the best of the Company's
knowledge, threatened against the Company or any of the Subsidiaries or any
person or entity whose liability for any Environmental Claim the Company or any
of the Subsidiaries has retained or assumed either contractually or by operation
of law; (iii) the Company and the Subsidiaries have all permits, authorizations
and approvals required under any applicable Environmental Laws and are each in
compliance with their requirements; and (iv) to the best of the Company's
knowledge, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge, presence or disposal of any Hazardous Materials, that
reasonably could result in a violation of any Environmental Law or form the
basis of a potential Environmental Claim against the Company or any of the
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or its Subsidiary has retained or assumed either
contractually or by operation of law; and
<PAGE>
-11-
(cc) the Company and the Subsidiaries and any "employee benefit plan"
(as defined under the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, the
Subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or a Subsidiary, any member of any group of organizations described in
Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended,
and the regulations and published interpretations thereunder (the "Code") of
which the Company or such Subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the Company,
its Subsidiaries or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, the Subsidiaries or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfunded benefit liabilities" (as defined under ERISA). Neither the
Company, the Subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its Subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
4. CERTAIN COVENANTS OF THE COMPANY. The Company hereby
agrees:
(a) to furnish such information as may be required and otherwise to
cooperate in qualifying the Shares for offering and sale under the securities or
blue sky laws of such states as you may designate and to maintain such
qualifications in effect so long as required for the distribution of the Shares;
PROVIDED that the Company shall not be required to qualify as a foreign
corporation or to consent to the service of process under the laws of any such
state (except service of process with respect to the offering and sale of the
Shares); and to promptly advise you of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Shares
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose;
(b) to make available to the Underwriters in New York City, as soon as
practicable after the Registration Statement becomes effective, and thereafter
from time to time to furnish to the Underwriters, as many copies of the
Prospectus (or of the Prospectus as amended or supplemented if the Company shall
have made any amendments or supplements thereto after the effective date of the
Registration Statement) as the Underwriters may request for the purposes
contemplated by the Act; in case any Underwriter is required to deliver a
prospectus within the nine-month period referred to in Section 10(a)(3) of the
Act in connection with the sale of the Shares, the Company will prepare promptly
upon request, but at the expense of such Underwriter, such amendment or
amendments to the Registration Statement and such prospectuses as may be
necessary to permit compliance with the requirements of Section 10(a)(3) of the
Act;
<PAGE>
-12-
(c) to advise you promptly and (if requested by you) to confirm such
advice in writing, (i) when the Registration Statement has become effective and
when any post-effective amendment thereto becomes effective and (ii) if Rule
430A under the Act is used, when the Prospectus is filed with the Commission
pursuant to Rule 424(b) under the Act (which the Company agrees to file in a
timely manner under such Rules);
(d) to advise you promptly, confirming such advice in writing, of any
request by the Commission for amendments or supplements to the Registration
Statement or Prospectus or for additional information with respect thereto, or
of notice of institution of proceedings for, or the entry of a stop order
suspending the effectiveness of the Registration Statement and, if the
Commission should enter a stop order suspending the effectiveness of the
Registration Statement, to make every reasonable effort to obtain the lifting or
removal of such order as soon as possible; to advise you promptly of any
proposal to amend or supplement the Registration Statement or Prospectus
including by filing any documents that would be incorporated therein by
reference and to file no such amendment or supplement to which you shall object
in writing;
(e) to file promptly all reports and any definitive proxy or
information statement required to be filed by the Company with the Commission in
order to comply with the Exchange Act subsequent to the date of the Prospectus
and for so long as the delivery of a prospectus is required in connection with
the offering or sale of the shares, and to promptly notify you of such filing;
(f) if necessary or appropriate, to file a registration statement
pursuant to Rule 462(b) under the Act;
(g) to furnish to you and, upon request, to each of the other
Underwriters for a period of five years from the date of this Agreement (i)
copies of any reports or other communications which the Company shall send to
its stockholders or shall from time to time publish or publicly disseminate,
(ii) copies of all annual, quarterly and current reports filed with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar form as may be
designated by the Commission, (iii) copies of documents or reports filed with
any national securities exchange on which any class of securities of the Company
is listed, and (iv) such other information as you may reasonably request
regarding the Company or its Subsidiaries, in each case as soon as such
communications, documents or information becomes available;
(h) to advise the Underwriters promptly of the happening of any event
known to the Company within the time during which a Prospectus relating to the
Shares is required to be delivered under the Act which, in the judgment of the
Company, would require the making of any change in the Prospectus then being
used, or in the information incorporated therein by reference, so that the
Prospectus would not include an untrue statement of material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they are made, not misleading, and, during such
time, to prepare and furnish, at the Company's expense, to the Underwriters
promptly such amendments or supplements to such Prospectus as may be necessary
<PAGE>
-13-
to reflect any such change and to furnish you a copy of such proposed amendment
or supplement before filing any such amendment or supplement with the
Commission;
(i) to make generally available to its security holders, and to deliver
to you, an earnings statement of the Company (which will satisfy the provisions
of Section 11(a) of the Act) covering a period of twelve months beginning after
the effective date of the Registration Statement (as defined in Rule 158(c) of
the Act) as soon as is reasonably practicable after the termination of such
twelve-month period but not later than May 30, 2001;
(j) for so long as the Company is subject to the Exchange Act, to
furnish to its shareholders as soon as practicable after the end of each fiscal
year an annual report including a balance sheet and statements of income,
shareholders' equity and of cash flow of the Company for such fiscal year,
accompanied by a copy of the certificate or report thereon of nationally
recognized independent certified public accountants;
(k) to furnish to you three signed copies of the Registration
Statement, as initially filed with the Commission, and of all amendments thereto
(including all exhibits thereto and documents incorporated by reference therein)
and sufficient conformed copies of the foregoing (other than exhibits) for
distribution of a copy to each of the other Underwriters;
(l) to furnish to you as early as practicable prior to the time of
purchase and the additional time of purchase, as the case may be, but not later
than two business days prior thereto, a copy of the latest available unaudited
interim consolidated financial statements, if any, of the Company and its
Subsidiaries which have been read by the Company's independent certified public
accountants, as stated in their letter to be furnished pursuant to Section 8(c)
hereof;
(m) to apply the net proceeds from the sale of the Shares in the manner
set forth under the caption "Use of Proceeds" in the Prospectus;
(n) to furnish to you, before filing with the Commission subsequent to
the effective date of the Registration Statement and during the period referred
to in paragraph (f) above, a copy of any document proposed to be filed pursuant
to Section 13, 14 or 15(d) of the Exchange Act;
(o) not to sell, offer or agree to sell, contract to sell, grant any
option to sell or otherwise dispose of, directly or indirectly, any shares of
Common Stock or securities convertible into or exchangeable or exercisable for
Common Stock or warrants or other rights to purchase Common Stock or any other
Securities of the Company that are substantially similar to Common Stock or
permit the registration under the Act of any shares of Common Stock, except for
the registration of the Shares and the sales to the Underwriters pursuant to
this Agreement and except for issuances of Common Stock upon the exercise of
outstanding options, warrants and convertible preferred stock and routine
issuances of shares under the Company's Employee Stock Purchase Plan and routine
option grants under the Company's Equity Incentive Plan , for a period of 90
days after the
<PAGE>
-14-
date hereof, without the prior written consent of Warburg Dillon Read LLC
("WDR"), which consent shall not be unreasonably withheld;
(p) to use its best efforts to cause the Common Stock to be listed for
quotation on the National Association of Securities Dealers Automated Quotation
National Market System ("NASDAQ"); and
(q) to pay all expenses, fees and taxes (other than any transfer taxes
and fees and disbursements of counsel for the Underwriters except as set forth
under Section 5 hereof or (iii) or (iv) below) in connection with (i) the
preparation and filing of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and any amendments or supplements thereto, and the
printing and furnishing of copies of each thereof to the Underwriters and to
dealers (including costs of mailing and shipment), (ii) the issuance, sale and
delivery of the Shares by the Company, (iii) printing of this Agreement, any
Agreement Among Underwriters, any dealer agreements, any Statements of
Information if requested by you and the reproduction and/or printing and
furnishing of copies of each thereof to the Underwriters and to dealers
(including costs of mailing and shipment), (iv) the qualification of the Shares
for offering and sale under state laws and the determination of their
eligibility for investment under state law as aforesaid (including the legal
fees and filing fees and other disbursements of counsel to the Underwriters) and
the printing and furnishing of copies of any blue sky surveys or legal
investment surveys to the Underwriters and to dealers, (v) any listing of the
Shares on any securities exchange or qualification of the Shares for quotation
on NASDAQ and any registration thereof under the Exchange Act, (vi) the filing
for review of the public offering of the Shares by the NASD, and (vii) the
performance of the Company's other obligations hereunder.
5. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Shares are
not delivered for any reason other than the termination of this Agreement
pursuant to Section 7 hereof or the default by one or more of the Underwriters
in its or their respective obligations hereunder, the Company shall, in addition
to paying the amounts described in Section 4(q) hereof, reimburse the
Underwriters for all of their out-of-pocket expenses, including the fees and
disbursements of their counsel.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters hereunder are subject to the accuracy of the
representations and warranties on the part of the Company on the date hereof and
at the time of purchase (and the several obligations of the Underwriters at the
additional time of purchase are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the time of
purchase (unless previously waived) and at the additional time of purchase, as
the case may be), the performance by the Company of its obligations hereunder
and to the following additional conditions precedent:
(a) The Company shall furnish to you at the time of purchase and at the
additional time of purchase, as the case may be, an opinion of Palmer & Dodge,
LLP, counsel for the Company, addressed to the Underwriters, and dated the time
of purchase or the additional time of purchase, as the case may be, with
reproduced copies for each of the other Underwriters and in form
<PAGE>
-15-
reasonably satisfactory to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
("Mintz Levin"), counsel for the Underwriters, stating that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of The Commonwealth of
Massachusetts, with full corporate power and authority to own, lease and operate
its properties and conduct its business as described in the Registration
Statement and the Prospectus, to execute and deliver this Agreement and to
issue, sell and deliver the Shares as herein contemplated;
(ii) each of the Wholly Owned Subsidiaries which is organized under the
laws of a state in the United States other than Health and Science Research
Incorporated and International Drug Development Corporation, which are inactive,
(the "Domestic Subsidiaries") is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation with full corporate
power and authority to own, lease and operate its properties and to conduct its
business; ATIII is validly existing as a limited liability company in good
standing under the laws of the State of Delaware with full power and authority
to own, lease and operate its properties and to conduct its business;
(iii) this Agreement has been duly authorized, executed and delivered
by the Company;
(iv) the Shares have been duly authorized and, when issued and
delivered to and paid for by the Underwriters, will be duly and validly issued
and will be fully paid and non-assessable;
(v) the Company has an authorized capitalization as set forth in the
line item "Stockholders' equity" under the heading "Capitalization" in the
Registration Statement and the Prospectus; the outstanding shares of capital
stock of the Company have been duly and validly authorized and issued, and are
fully paid, nonassessable and free of statutory preemptive rights and
contractual preemptive rights known to us; the Shares when issued will be free
of statutory and, to the best of our knowledge, contractual preemptive rights,
rights of first refusal and similar rights created by the Company; the
certificates for the Shares are in due and proper form and the holders of the
Shares will not be subject to personal liability by reason of being such
holders;
(vi) to the best of our knowledge, other than the Subsidiaries, the
Company does not own or control, directly or indirectly, any corporation,
association or other entity; all of the outstanding shares of capital stock of
each of the Domestic Subsidiaries have been duly authorized and validly issued,
are fully paid and non-assessable (provided such counsel need express no opinion
with respect to Domestic Subsidiaries organized under jurisdictions other than
Massachusetts and Delaware) and, except as otherwise stated in the Registration
Statement and in Section 3(d) of this Agreement, are owned by the Company and,
to the best of our knowledge, are subject to no security interest, other
encumbrance or adverse claim except as disclosed in Section 3(d) above; all of
the outstanding membership interests of ATIII have been duly authorized and
validly issued and 50% of such membership interests are owned by each of the
Company and Genzyme Corporation, to the best of our knowledge subject to no
security interest, other encumbrance or adverse claim; to the best of such
counsel's knowledge, no options,
<PAGE>
-16-
warrants or other rights to purchase, agreements or other obligations to issue
or other rights to convert any obligation into shares of capital stock or
ownership interests in the Domestic Subsidiaries are outstanding;
(vii) the capital stock of the Company, including the Shares, conforms
to the description thereof incorporated by reference into the Registration
Statement and Prospectus;
(viii) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial and statistical data
contained or incorporated by reference therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act;
(ix) the Registration Statement has become effective under the Act and,
to the best of such counsel's knowledge, no stop order proceedings with respect
thereto are pending or threatened under the Act and any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424 under the Act has
been made in the manner and within the time period required by such Rule 424;
(x) no approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the issuance and sale of the
Shares and consummation by the Company of the transaction as contemplated hereby
other than registration of the Shares under the Act (except such counsel need
express no opinion as to any necessary qualification under the state securities
or blue sky laws of the various jurisdictions in which the Shares are being
offered by the Underwriters);
(xi) the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby do not and will not conflict with, or result in any breach of, or
constitute a default under (nor constitute any event which with notice, lapse of
time, or both, would result in any breach of or constitute a default under), any
provisions of the charter or by-laws of the Company or any of its Domestic
Subsidiaries (provided such counsel need express no opinion with respect to
Domestic Subsidiaries organized under jurisdictions other than Massachusetts and
Delaware) or under any provision of any license, indenture, mortgage, deed of
trust, bank loan, credit agreement or other evidence of indebtedness, or any
lease, contract or other agreement or instrument known to such counsel to which
the Company or any of its Domestic Subsidiaries is a party or by which any of
them or their respective properties may be bound or affected, or under any
federal, state, local or foreign law, regulation or rule or any decree, judgment
or order applicable to the Company or any of its Domestic Subsidiaries;
(xii) to the best of such counsel's knowledge, neither the Company nor
any of its Domestic Subsidiaries is in violation of its charter or by-laws or
certificate of formation or operating agreement, as the case may be, or is in
breach of, or in default under (nor has any event occurred which with notice,
lapse of time, or both would result in any breach of, or constitute a default
under), any license, indenture, mortgage, deed of trust, bank loan or any other
agreement or instrument known to such counsel to
<PAGE>
-17-
which the Company or any of its Domestic Subsidiaries is a party or by which any
of them or their respective properties may be bound or affected or under any
federal, state, local or foreign law, regulation or rule or any decree, judgment
or order applicable to the Company or any of its Domestic Subsidiaries;
(xiii) to the best of such counsel's knowledge, there are no contracts,
licenses, agreements, leases or documents of a character which are required to
be filed as exhibits to the Registration Statement or to be summarized or
described in the Prospectus which have not been so filed, summarized or
described;
(xiv) to the best of such counsel's knowledge, there are no actions,
suits, claims, investigations or proceedings pending, threatened or contemplated
to which the Company or any of its Domestic Subsidiaries is subject or of which
any of their respective properties, is subject at law or in equity or before or
by any federal, state, local or foreign governmental or regulatory commission,
board, body, authority or agency which are required to be described in the
Prospectus but are not so described;
(xv) the documents incorporated by reference in the Registration
Statement and Prospectus, when they were filed (or, if an amendment with respect
to any such document was filed when such amendment was filed) with the
Commission, complied as to form in all material respects with the Exchange Act
(except as to the financial statements and schedules and other financial and
statistical data contained or incorporated by reference therein as to which such
counsel need express no opinion); and
(xvi) the Company will not, upon consummation of the transactions
contemplated by this Agreement, be an "investment company," or a "promoter" or
"principal underwriter" for, a "registered investment company," as such terms
are defined in the Investment Company Act of 1940, as amended.
Such counsel shall also state that they have participated in
conferences with officers and other representatives of the Company,
representatives of the independent public accountants of the Company and
representatives of the Underwriters at which the contents of the Registration
Statement and Prospectus were discussed and, although such counsel is not
passing upon and does not assume responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration Statement or
Prospectus (except as and to the extent stated in subparagraphs (v) and (vii)
above), on the basis of the foregoing (relying as to materiality to a large
extent upon the opinions of officers and other representatives of the Company),
no facts have come to the attention of such counsel that causes them to believe
that the Registration Statement or any amendment thereto at the time such
Registration Statement or amendment became effective contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus or any supplement thereto at the date of such Prospectus or
such supplement, and at all times up to and including the time of purchase or
additional time of purchase, as the case may be, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no
<PAGE>
-18-
comment with respect to the financial statements and schedules and other
financial and statistical data included in the Registration Statement or
Prospectus).
(b) The Company shall furnish to you at the time of purchase and at the
additional time of purchase, as the case may be, an opinion of Fish &
Richardson, P.C., intellectual property counsel for the Company, addressed to
the Underwriters, and dated the time of purchase or the additional time of
purchase, as the case may be, with reproduced copies for each of the other
Underwriters and in form satisfactory to Mintz Levin, counsel for the
Underwriters in substantially the form of Exhibit A-1 attached hereto.
(c) You shall have received from PricewaterhouseCoopers LLP, letters
dated, respectively, the date of this Agreement and the time of purchase and
additional time of purchase, as the case may be, and addressed to the
Underwriters (with reproduced copies for each of the Underwriters) in the forms
heretofore approved by WDR.
(d) You shall have received at the time of purchase and at the
additional time of purchase, as the case may be, the favorable opinion of Mintz
Levin, counsel for the Underwriters, dated the time of purchase or the
additional time of purchase, as the case may be, as to the matters referred to
in subparagraphs (iii), (iv), (vii) (with respect to the Shares only), (viii)
and (ix) of paragraph (a) of this Section 6.
In addition, such counsel shall state that such counsel have
participated in conferences with officers and other representatives of the
Company, counsel for the Company, representatives of the independent public
accountants of the Company and representatives of the Underwriters at which the
contents of the Registration Statement and Prospectus and related matters were
discussed and, although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus (except as to matters
referred to with respect to the Shares under subparagraph (vii) of paragraph (a)
of this Section 6), on the basis of the foregoing (relying as to materiality to
a large extent upon the opinions of officers and other representatives of the
Company), no facts have come to the attention of such counsel which lead them to
believe that the Registration Statement or any amendment thereto at the time
such Registration Statement or amendment became effective contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus as of its date or any supplement thereto as of its date
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading (it
being understood that such counsel need express no comment with respect to the
financial statements and schedules and other financial and statistical data
included in the Registration Statement or Prospectus).
<PAGE>
-19-
(e) No amendment or supplement to the Registration Statement or
Prospectus, including documents deemed to be incorporated by reference therein,
shall be filed prior to the time the Registration Statement becomes effective to
which you object in writing.
(f) The Registration Statement shall become effective, or if Rule 430A
under the Act is used, the Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) under the Act, at or before 5:00 P.M., New York City
time, on the date of this Agreement, unless a later time (but not later than
5:00 P.M., New York City time, on the second full business day after the date of
this Agreement) shall be agreed to by the Company and you in writing or by
telephone, confirmed in writing; PROVIDED, HOWEVER, that the Company and you and
any group of Underwriters, including you, who have agreed hereunder to purchase
in the aggregate at least 50% of the Firm Shares may from time to time agree on
a later date.
(g) Prior to the time of purchase or the additional time of purchase,
as the case may be, (i) no stop order with respect to the effectiveness of the
Registration Statement shall have been issued under the Act or proceedings
initiated under Section 8(d) or 8(e) of the Act; (ii) the Registration Statement
and all amendments thereto, or modifications thereof, if any, shall not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading;
and (iii) the Prospectus and all amendments or supplements thereto, or
modifications thereof, if any, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading.
(h) Between the time of execution of this Agreement and the time of
purchase or the additional time of purchase, as the case may be, (i) no material
and unfavorable change, financial or otherwise (other than as referred to in the
Registration Statement and Prospectus), in the business, condition or prospects
of the Company and its Subsidiaries taken as a whole shall occur or become known
and (ii) no transaction which is material and unfavorable to the Company shall
have been entered into by the Company or any of its Subsidiaries.
(i) The Company will, at the time of purchase or additional time of
purchase, as the case may be, deliver to you a certificate of two of its
executive officers to the effect that the representations and warranties of the
Company as set forth in this Agreement are true and correct as of each such
date, that the Company shall perform such of its obligations under this
Agreement as are to be performed at or before the time of purchase and at or
before the additional time of purchase, as the case may be and the conditions
set forth in paragraphs (g) and (h) of this Section 6 have been met.
(j) You shall have received signed letters, dated the date of this
Agreement, from each of the directors and executive officers of the Company and
Genzyme Corporation to the effect that such persons shall not sell, offer or
agree to sell, contract to sell, grant any option to sell or
<PAGE>
-20-
otherwise dispose of, directly or indirectly, any shares of Common Stock of the
Company or securities convertible into or exchangeable or exercisable for Common
Stock or warrants or other rights to purchase Common Stock or any other
securities of the Company that are substantially similar to the Common Stock for
a period of 90 days after the date of the Prospectus without WDR's prior written
consent.
(k) The Company shall have furnished to you such other documents and
certificates as to the accuracy and completeness of any statement in the
Registration Statement and the Prospectus as of the time of purchase and the
additional time of purchase, as the case may be, as you may reasonably request.
(l) The Shares shall have been approved for listing for quotation on
NASDAQ, subject only to notice of issuance at or prior to the time of purchase
or the additional time of purchase, as the case may be.
(m) Between the time of execution of this Agreement and the time of
purchase or additional time of purchase, as the case may be, there shall not
have occurred any downgrading, nor shall any notice or announcement have been
given or made of (i) any intended or potential downgrading or (ii) any review or
possible change that does not indicate an improvement, in the rating accorded
any securities of or guaranteed by the Company or any Subsidiary by any
"nationally recognized statistical rating organization", as that term is defined
in Rule 436(g)(2) under the Act.
7. EFFECTIVE DATE OF AGREEMENT; TERMINATION. This Agreement
shall become effective (i) if Rule 430A under the Act is not used, when you
shall have received notification of the effectiveness of the Registration
Statement, or (ii) if Rule 430A under the Act is used, when the parties hereto
have executed and delivered this Agreement.
The obligations of the several Underwriters hereunder shall be
subject to termination in the absolute discretion of you or any group of
Underwriters (which may include you) which has agreed to purchase in the
aggregate at least 50% of the Firm Shares, if, since the time of execution of
this Agreement or the respective dates as of which information is given in the
Registration Statement and Prospectus, (a) there has been any material adverse
and unfavorable change, financial or otherwise (other than as referred to in the
Registration Statement and Prospectus), in the operations, business, condition
or prospects of the Company and its Subsidiaries taken as a whole, which would,
in your judgment or in the judgment of such group of Underwriters, make it
impracticable to market the Shares, or (b) there shall have occurred any
downgrading, or any notice shall have been given of (i) any intended or
potential downgrading or (ii) any review or possible change that does not
indicate an improvement, in the rating accorded any securities of or guaranteed
by the Company or any Subsidiary by any "nationally recognized statistical
rating organization", as that term is defined in Rule 436(g)(2) under the Act
or, (c) trading in securities on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ National Market shall have been suspended or limitations
or (d) minimum prices shall have been established on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ National Market or (e) a
<PAGE>
-21-
banking moratorium shall have been declared either by the United States or New
York State authorities, or (f) the United States shall have declared war in
accordance with its constitutional processes or there shall have occurred any
material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on the
financial markets of the United States as, in your judgment or in the judgment
of such group of Underwriters, to make it impracticable to market the Shares.
If you or any group of Underwriters elects to terminate this
Agreement as provided in this Section 7, the Company and each other Underwriter
shall be notified promptly by letter or telegram.
If the sale to the Underwriters of the Shares, as contemplated
by this Agreement, is not carried out by the Underwriters for any reason
permitted under this Agreement or if such sale is not carried out because the
Company shall be unable to comply with any of the terms of this Agreement, the
Company shall not be under any obligation or liability under this Agreement
(except to the extent provided in Sections 4(q), 5 and 9 hereof), and the
Underwriters shall be under no obligation or liability to the Company under this
Agreement (except to the extent provided in Section 9 hereof) or to one another
hereunder.
8. INCREASE IN UNDERWRITERS' COMMITMENTS. Subject to Sections
6 and 7, if any Underwriter shall default in its obligation to take up and pay
for the Firm Shares to be purchased by it hereunder (otherwise than for reasons
sufficient to justify the termination of this Agreement under the provisions of
Section 7 hereof) and if the number of Firm Shares which all Underwriters so
defaulting shall have agreed but failed to take up and pay for does not exceed
10% of the total number of Firm Shares, the non-defaulting Underwriters shall
take up and pay for (in addition to the number of Firm Shares they are obligated
to purchase pursuant to Section 1 hereof) the number of Firm Shares agreed to be
purchased by all such defaulting Underwriters, as hereinafter provided. Such
Shares shall be taken up and paid for by such non-defaulting Underwriter or
Underwriters in such amount or amounts as you may designate with the consent of
each Underwriter so designated or, in the event no such designation is made,
such Shares shall be taken up and paid for by all non-defaulting Underwriters
pro rata in proportion to the aggregate number of Firm Shares set opposite the
names of such non-defaulting Underwriters in Schedule A.
Without relieving any defaulting Underwriter from its
obligations hereunder, the Company agrees with the non-defaulting Underwriters
that they will not sell any Firm Shares hereunder unless all of the Firm Shares
are purchased by the Underwriters (or by substituted Underwriters selected by
you with the approval of the Company or selected by the Company with your
approval).
If a new Underwriter or Underwriters are substituted by the
Underwriters or by the Company for a defaulting Underwriter or Underwriters in
accordance with the foregoing provision, the Company or you shall have the right
to postpone the time of purchase for a period not exceeding five business days
in order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.
<PAGE>
-22-
The term Underwriter as used in this agreement shall refer to
and include any Underwriter substituted under this Section 8 with like effect as
if such substituted Underwriter had originally been named in Schedule A.
If the aggregate number of Shares which the defaulting
Underwriter or Underwriters agreed to purchase exceeds 10% of the total number
of Shares which all Underwriters agreed to purchase hereunder, and if neither
the non-defaulting Underwriters nor the Company shall make arrangements within
the five business day period stated above for the purchase of all the Shares
which the defaulting Underwriter or Underwriters agreed to purchase hereunder,
this Agreement shall be terminated without further act or deed and without any
liability on the part of the Company to any non-defaulting Underwriter and
without any liability on the part of any non-defaulting Underwriter to the
Company. Nothing in this paragraph, and no action taken hereunder, shall relieve
any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
9. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify, defend and hold harmless
each Underwriter, its partners, directors and officers, and any person who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, and the successors and assigns of all of the foregoing
persons from and against any loss, damage, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
any such Underwriter or any such person may incur under the Act, the Exchange
Act, the common law or otherwise, insofar as such loss, damage, expense,
liability or claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any post-effective
amendment thereof by the Company) or in a Prospectus (the term Prospectus for
the purpose of this Section 9 being deemed to include any Preliminary
Prospectus, the Prospectus and the Prospectus as amended or supplemented by the
Company), or arises out of or is based upon any omission or alleged omission to
state a material fact required to be stated in either such Registration
Statement or Prospectus or necessary to make the statements made therein not
misleading, except insofar as any such loss, damage, expense, liability or claim
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in and in conformity with information furnished in
writing by or on behalf of any Underwriter through you to the Company expressly
for use with reference to such Underwriter in such Registration Statement or
such Prospectus or arises out of or is based upon any omission or alleged
omission to state a material fact in connection with such information required
to be stated in either such Registration Statement or Prospectus or necessary to
make such information not misleading, PROVIDED, HOWEVER, that the indemnity
agreement contained in this subsection (a) with respect to any Preliminary
Prospectus or amended Preliminary Prospectus shall not inure to the benefit of
any Underwriter (or to the benefit of any person controlling such Underwriter)
from whom the person asserting any such loss, damage, expense, liability or
claim purchased the Shares which is the subject thereof if the Prospectus
corrected any such alleged untrue
<PAGE>
-23-
statement or omission and if such Underwriter failed to send or give a copy of
the Prospectus to such person at or prior to the written confirmation of the
sale of such Shares to such person.
If any action, suit or proceeding (together, a "Proceeding")
is brought against an Underwriter or any such person in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such Underwriter or such person shall promptly notify the Company in writing of
the institution of such Proceeding and the Company shall assume the defense of
such Proceeding, including the employment of counsel reasonably satisfactory to
such indemnified party and payment of all fees and expenses; PROVIDED, HOWEVER,
that the omission to so notify the Company shall not relieve the Company from
any liability which the Company may have to any Underwriter or any such person
or otherwise. Such Underwriter or such controlling person shall have the right
to employ its or their own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such Underwriter or of such person
unless the employment of such counsel shall have been authorized in writing by
the Company in connection with the defense of such Proceeding or the Company
shall not have, within a reasonable period of time in light of the
circumstances, employed counsel to have charge of the defense of such Proceeding
or such indemnified party or parties shall have reasonably concluded that there
may be defenses available to it or them which are different from, additional to
or in conflict with those available to the Company (in which case the Company
shall not have the right to direct the defense of such Proceeding on behalf of
the indemnified party or parties but the Company may employ counsel and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of the Company), in any of which events such fees and
expenses shall be borne by the Company, as the case may be, and paid as incurred
(it being understood, however, that the Company shall not be liable for the
expenses of more than one separate counsel (in addition to any local counsel) in
any one Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such Proceeding). The
Company shall not be liable for any settlement of any such Proceeding effected
without its written consent but if settled with the written consent of the
Company, the Company agrees to indemnify and hold harmless any Underwriter and
any such person from and against any loss or liability by reason of such
settlement. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
sentence of this paragraph, then the indemnifying party agrees that it shall be
liable for any settlement of any Proceeding effected without its written consent
if (i) such settlement is entered into more than 60 business days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement and (iii) such indemnified party
shall have given the indemnifying party at least 30 days' prior notice of its
intention to settle. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened Proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such Proceeding and does not include an admission of fault, culpability or a
failure to act, by or on behalf of such indemnified party.
<PAGE>
-24-
(b) Each Underwriter severally agrees to indemnify, defend and
hold harmless the Company, its directors and officers and any person who
controls the Company within the meaning of Section 15 of the Act, or Section 20
of the Exchange Act from and against any loss, damage, expense, liability or
claim (including the reasonable cost of investigation) which, jointly or
severally, the Company or any such person may incur under the Act, the Exchange
Act, or Common Law or otherwise, insofar as such loss, damage, expense,
liability or claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact contained in and in conformity with
information furnished in writing by or on behalf of such Underwriter through you
to the Company expressly for use with reference to such Underwriter in the
Registration Statement (or in the Registration Statement as amended by or on
behalf of any post-effective amendment thereof by the Company) or in a
Prospectus, or arises out of or is based upon any omission or alleged omission
to state a material fact in connection with such information required to be
stated in such Registration Statement or Prospectus or necessary to make such
information not misleading.
If any Proceeding is brought against the Company or any such
person in respect of which indemnity may be sought against any Underwriter
pursuant to the foregoing paragraph, the Company or such person shall promptly
notify such Underwriter in writing of the institution of such Proceeding and
such Underwriter shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses, PROVIDED, HOWEVER, that the omission to so
notify such Underwriter shall not relieve such Underwriter, from any liability
which such Underwriter may have to the Company or any such person or otherwise.
The Company or such person shall have the right to employ its own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
the Company or such person unless the employment of such counsel shall have been
authorized in writing by such Underwriter in connection with the defense of such
Proceeding or such Underwriter shall not have within a reasonable period in
light of the circumstances employed counsel to have charge of the defense of
such Proceeding or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are different
from or additional to or in conflict with those available to such Underwriter
(in which case such Underwriter shall not have the right to direct the defense
of such Proceeding on behalf of the indemnified party or parties, but such
Underwriter may employ counsel and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such Underwriter),
in any of which events such fees and expenses shall be borne by such Underwriter
and paid as incurred (it being understood, however, that such Underwriter shall
not be liable for the expenses of more than one separate counsel (in addition to
any local counsel) in any one Proceeding or series of related Proceedings in the
same jurisdiction representing the indemnified parties who are parties to such
Proceeding). No Underwriter shall be liable for any settlement of any such
Proceeding effected without the written consent of such Underwriter but if
settled with the written consent of such Underwriter, such Underwriter agrees to
indemnify and hold harmless the Company and any such person from and against any
loss or liability by reason of such settlement. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then the
indemnifying
<PAGE>
-25-
party agrees that it shall be liable for any settlement of any Proceeding
effected without its written consent if (i) such settlement is entered into more
than 60 business days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such settlement and
(iii) such indemnified party shall have given the indemnifying party at least 30
days' prior notice of its intention to settle. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened Proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such Proceeding and does not include an admission
of fault, culpability or a failure to act, by or on behalf of such indemnified
party.
(c) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under subsections (a) and (b) of this
Section 9 in respect of any losses, damage, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, damages, expenses,
liabilities or claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same respective proportion as the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, bear to the aggregate
public offering price of the Shares. The relative fault of the Company on the
one hand and of the Underwriters on the other shall be determined by reference
to, among other things, whether the untrue statement or alleged untrue statement
of a material fact or omission or alleged omission relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, damages, expenses, liabilities and claims referred to in this subsection
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating, preparing to defend or
defending any claim or Proceeding.
(d) The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 9 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in subsection (c) above.
<PAGE>
-26-
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by such Underwriter and distributed to
the public were offered to the public exceeds the amount of any damage which
such Underwriter has otherwise been required to pay by reason of such untrue
statement or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 9 are several in proportion to their respective
underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in
this Section 9 and the covenants, warranties and representations of the Company
contained in this Agreement shall remain in full force and effect regardless of
any investigation made by or on behalf of any Underwriter, its directors and
officers or any person (including each partner, officer or director of such
person) who controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, or by or on behalf of the Company, its
directors or officers or any person who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, and shall survive
any termination of this Agreement or the issuance and delivery of the Shares.
The Company and each Underwriter agree promptly to notify each other
commencement of any Proceeding against it and, in the case of the Company,
against any of the Company's officers or directors in connection with the
issuance and sale of the Shares, or in connection with the Registration
Statement or Prospectus.
10. NOTICES. Except as otherwise herein provided, all
statements, requests, notices and agreements shall be in writing or by telegram
and, if to the Underwriters, shall be sufficient in all respects if delivered or
sent to Warburg Dillon Read LLC, 299 Park Avenue, New York, N.Y. 10171-0026,
Attention: Syndicate Department, if to the Company, shall be sufficient in all
respects if delivered or sent to the Company at the offices of the Company at
175 Crossing Boulevard, Suite 410, Framingham, MA 01702, Attention: PRESIDENT .
11. GOVERNING LAW; CONSTRUCTION. This Agreement and any claim,
counterclaim or dispute of any kind or nature whatsoever arising out of or in
any way relating to this Agreement ("Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Section headings in this Agreement have been inserted as a matter of
convenience of reference and are not a part of this Agreement.
12. SUBMISSION TO JURISDICTION. Except as set forth below, no
Claim may be commenced, prosecuted or continued in any court other than the
courts of the State of New York located in the City and County of New York or in
the United States District Court for the Southern District of New York, which
courts shall have jurisdiction over the adjudication of such matters, and the
Company consents to the jurisdiction of such courts and personal service with
respect thereto. The Company hereby
<PAGE>
-27-
consents to personal jurisdiction, service and venue in any court in which any
Claim arising out of or in any way relating to this Agreement is brought by any
third party against Warburg Dillon Read LLC or any indemnified party. Each of
Warburg Dillon Read LLC and the Company (on its behalf and, to the extent
permitted by applicable law, on behalf of its stockholders and affiliates)
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based upon contract, tort or otherwise) in any way arising out of or
relating to this Agreement. The Company agrees that a final judgment in any such
action, proceeding or counterclaim brought in any such court shall be conclusive
and binding upon the Company and may be enforced in any other courts in the
jurisdiction of which the Company is or may be subject, by suit upon such
judgment.
13. PARTIES AT INTEREST. The Agreement herein set forth has
been and is made solely for the benefit of the Underwriters, the Company and to
the extent provided in Section 11 hereof the controlling persons, directors and
officers referred to in such Section, and their respective successors, assigns,
heirs, pursuant representatives and executors and administrators. No other
person, partnership, association or corporation (including a purchaser, as such
purchaser, from any of the Underwriters) shall acquire or have any right under
or by virtue of this Agreement.
14. COUNTERPARTS. This Agreement may be signed by the parties
in one or more counterparts which together shall constitute one and the same
agreement among the parties.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Underwriters and the Company and their successors and assigns and any
successor or assign of any substantial portion of the Company's and any of the
Underwriters' respective businesses and/or assets.
16. MISCELLANEOUS. Warburg Dillon Read LLC, an indirect,
wholly owned subsidiary of UBS AG, is not a bank and is separate from any
affiliated bank, including any U.S. branch or agency of Warburg Dillon Read LLC.
Because Warburg Dillon Read LLC is a separately incorporated entity, it is
solely responsible for its own contractual obligations and commitments,
including obligations with respect to sales and purchases of securities.
Securities sold, offered or recommended by Warburg Dillon Read LLC are not
deposits, are not insured by the Federal Deposit Insurance Corporation, are not
guaranteed by a branch or agency, and are not otherwise an obligation or
responsibility of a branch or agency.
A lending affiliate of Warburg Dillon Read LLC may have
lending relationships with issuers of securities underwritten or privately
placed by Warburg Dillon Read LLC. To the extent required under the securities
laws, prospectuses and other disclosure documents for securities underwritten or
privately placed by Warburg Dillon Read LLC will disclose the existence of any
such lending relationships and whether the proceeds of the issue will be used to
repay debts owed to affiliates of Warburg Dillon Read LLC.
<PAGE>
-28-
If the foregoing correctly sets forth the understanding among
the Company and the Underwriters, please so indicate in the space provided below
for the purpose, whereupon this letter and your acceptance shall constitute a
binding agreement among the Company and the Underwriters, severally.
Very truly yours,
GENZYME TRANSGENICS CORPORATION
By:__________________________________
Title:
Accepted and agreed to as of the date first
above written, on behalf of themselves and
the other several Underwriters named in
Schedule A
WARBURG DILLON READ LLC
HAMBRECHT & QUIST LLC
By: WARBURG DILLON READ LLC
By:
-----------------------------------
Title:
By:
-----------------------------------
Title:
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Underwriter Firm Shares
- ----------- -----------
<S> <C>
WARBURG DILLON READ LLC
HAMBRECHT & QUIST LLC
-----------
Total............................................ 3,500,000
===========
</TABLE>
<PAGE>
EXHIBIT A-1
FORM OF OPINION OF INTELLECTUAL PROPERTY COUNSEL FOR THE COMPANY
Form of Opinion of Fish & Richardson, intellectual property counsel ("Counsel"),
for the Company pursuant to Section 6(b) of the Underwriting Agreement.
1. For the purpose of this opinion, the terms "know," "known," or
"knowledge" refer to the actual knowledge of Counsel, as well as the knowledge
arising from Counsel's review of documents and materials relevant to the matters
addressed in such paragraphs, and the knowledge arising from Counsel's inquiry
of any employee or officer of the Company familiar with a matter to which
Counsel's opinion pertains.
2. All patents and pending patent applications ("Patents") that are
owned by or licensed to the Company and known to Counsel, and all contracts
known to Counsel pursuant to which the Company has, or has granted, rights to
any Patents, are listed in Schedule A. We have formed this opinion based on the
guidelines set out in 1. above and note that no searches have been conducted to
identify patents owned in whole or in part by the Company nor to determine
record title in the United States Patent and Trademark Office ("USPTO"). All
patents that are known to Counsel to have been licensed by the Company and which
are known to Counsel by Patent number are listed in Schedule A and if not known
to Counsel by Patent number are identified as Patents licensed under a contract
under the entry in Schedule A for that contract. Fish & Richardson is not
trademark counsel to the Company, has not conducted searches with regard to
trademarks, and knows of no trademarks or pending trademark applications
("Trademarks") that are owned by or licensed to the Company or contracts
pursuant to which the Company has, or has granted, rights to any Trademarks. We
are not aware of any registered domain names or pending domain name
registrations ("Domain Names") that are owned or licensed to the Company or
contracts pursuant to which the Company has, or has granted, rights to any
Domain Names. To the best of Counsel's knowledge, no searches having been done
with regard thereto, the Company has not applied for any copyright
registrations, and Counsel is not aware of any copyrights or pending copyright
applications ("Copyrights") that are owned by or licensed to the Company, nor of
any contracts pursuant to which the Company has, or has granted, rights to any
Copyrights.
3. Based upon Counsel's (a) inquiry of the Company's representatives
responsible for Patent and Domain Name matters and (b) review of our files, (i)
the Patents have been validly assigned in the United States to the Company (or
as indicated in Schedule A are under obligation to be assigned to the Company)
and (ii) except as provided in Schedule A , the Company is listed as the sole
holder of record in the United States of each of the Patents, and Counsel knows
of no claims of third parties to any ownership interest in, or to any lien with
respect to, any of the Patents. Except as provided in Schedule A, Counsel knows
of no actual or asserted nonjoined or misjoined inventorship interest in any of
the Patents. Counsel has no knowledge of any facts that would preclude the
Company from having
<PAGE>
-2-
clear title and unencumbered right to the Patents, so that
by virture of such valid assignment to it the Company has the right to enforce
each of the Patents. None of the Patents has been abandoned.
4. To the best of Counsel's knowledge, the Company has complied with
the USPTO duty of candor and disclosure for each of the United States Patents.
No fact has come to Counsel's attention that causes Counsel to question the
enforceability of any of the Patents, or to question the validity of any claim
of an issued patent listed in Schedule A, except as noted in Schedule B. Counsel
knows of no pending action, suit, proceeding or claim by others challenging the
validity or enforceability of any claim of the issued patents listed in Schedule
A, except as noted in Schedule B.
5. To the best of Counsel's knowledge, all legal or governmental
proceedings relating to the Company's Patent, Domain Name and trade secret
rights, other than an EX PARTE USPTO examination proceeding, are listed in
Schedule B, including but not limited to any pending or threatened interference,
opposition, public use, reexamination, reissue, or protest proceeding with
respect to any Patent or to any pending or threatened dispute with respect to
misappropriation of any trade secret by or from the Company, in the United
States or in a foreign jurisdiction.
6. To the best of Counsel's knowledge, the statements in the Prospectus
relating to patent, copyright, domain name, and licensing matters under the
captions "Risk Factors", "Business-Patents and Proprietary Rights" and any other
references in the Prospectus to patent, copyright, domain name, and licensing
matters, insofar as such statements constitute a summary of legal matters,
documents, or proceedings, are accurate and present fairly the matters set forth
therein, and, except as described in the Prospectus, to the best of Counsel's
knowledge there is no pending or threatened action, suit, proceeding or claim by
others that the Company is infringing any patent or any trademark which could
result in any material adverse effect on the Company.
7. Except as described in the Prospectus, Counsel is not aware of any
facts that would form a basis for the belief that the Company lacks any rights
or licenses to use all patents, trademarks, copyrights, domain names, know-how
and other intellectual property necessary to conduct the business now conducted
or proposed to be conducted and known to Counsel by the Company as described in
the Prospectus.
8. No facts have come to Counsel's attention which cause Counsel to
believe that the statements in the Prospectus relating to patent, trademark,
copyright, domain name, trade secret, and licensing matters under the captions
"Risk Factors", "Business-Patents and Proprietary Rights" and any other
references in the Prospectus to patent, trademark, copyright, domain name, trade
secret, and licensing matters, contain an untrue or misleading statement of
material fact, or omit a material fact necessary to make the statements therein
not misleading.
<PAGE>
EXHIBIT 5
PALMER & DODGE LLP
One Beacon Street, Boston, MA 02108-3190
TELEPHONE: (617) 573-0100 FACSIMILE: (617) 227-4420
February 4, 2000
Genzyme Transgenics Corporation
175 Crossing Boulevard, Suite 410
Framingham, Massachusetts 01702
We are rendering this opinion in connection with the Registration Statement
on Form S-3 (the "Registration Statement") filed by Genzyme Transgenics
Corporation (the "Company") with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Securities Act"), on or about
the date hereof. The Registration Statement relates to up to 4,025,000 shares
of the Company's Common Stock, $.01 par value per share (the "Shares"). We
understand that the Shares are to be offered and sold in the manner described
in the Registration Statement.
We have acted as your counsel in connection with the preparation of the
Registration Statement and are familiar with the proceedings taken by the
Company in connection with the authorization, issuance and sale of the Shares.
We have examined all such documents as we consider necessary to enable us to
render this opinion.
Based on the foregoing, we are of the opinion that upon the due execution
and delivery of the Underwriting Agreement by the Company and the
Underwriters and the due issuance and delivery of the Shares in accordance
with the Underwriting Agreement against payment therefor as contemplated by
the Registration Statement, the Shares will be valid, nonassessable and
fully-paid.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the prospectus filed as part thereof.
Very truly yours,
/s/ Palmer & Dodge LLP
--------------------------------
Palmer & Dodge LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Pre-Effective
Amendment No. 1 to this Registration Statement on Form S-3 (File
No. 333-94187) (the "Registration Statement") of our report dated February 25,
1999 relating to the financial statements, which appears in Genzyme
Transgenics Corporation's Annual Report on Form 10-K for the year ended
January 3, 1999 ("Form 10-K"). We also consent to the incorporation by
reference in such Registration Statement of our report dated March 22, 1999,
on our audit of the financial statements of ATIII LLC as of and for the year
ended December 31, 1998, which report also appears in the Form 10-K. We also
consent to the references to us under the headings "Experts" and "Selected
Consolidated Financial Data" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 4, 2000
