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PROSPECTUS
INHALE THERAPEUTIC SYSTEMS
1,800,000 SHARES
COMMON STOCK
___________________
This Prospectus relates to the public offering, which is not being
underwritten, of 1,800,000 shares of Common Stock, no par value (the
"Shares"), of Inhale Therapeutic Systems ("Inhale" or the "Company"). All
of these Shares are held and may be offered by certain shareholders of the
Company (the "Selling Shareholders") who acquired such Shares pursuant to an
exemption from the registration requirements of the Securities Act of 1933,
as amended (the "Securities Act") provided by Section 4(2) thereof. The
Shares are being registered by the Company pursuant to the terms of certain
Stock Purchase Agreements dated January 28, 1997 by and between the Company
and the individual Selling Shareholders (the "Purchase Agreements"). See
"Selling Shareholders" and "Plan of Distribution."
The sale of the Shares may be effected by the Selling Shareholders from
time to time in transactions on the Nasdaq National Market, in privately
negotiated transactions or in a combination of such methods of sale, at fixed
prices that may be changed, at market prices prevailing at the time of sale,
at prices related to such prevailing prices or at negotiated prices. The
Selling Shareholders may effect such transactions by selling the Shares to or
through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling
Shareholders and/or the purchasers of the Shares for whom such broker-dealers
may act as agents or to whom they may sell as principals or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions). See "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed, among
other things, to bear certain expenses (other than fees and expenses of
counsel and underwriting discounts and commission and brokerage commissions
and fees) in connection with the registration and sale of the Shares being
offered by the Selling Shareholders. See "Selling Shareholders."
The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "INHL." The last reported sales price of the Company's
Common Stock on the Nasdaq National Market on February 6, 1997 was $18.75 per
share.
The Selling Shareholders and any agents, broker-dealers or underwriters
that participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any
commission received by them and any profit on the resale of the Common Stock
purchased by them may be deemed to be underwriting discounts or commissions
under the Act. The Company will not receive any proceeds from the sale of
shares by the Selling Shareholders. The Company has agreed to indemnify the
Selling Shareholders and certain other persons against certain liabilities,
including liabilities under the Act. See "Selling Shareholders" and "Plan of
Distribution."
____________________
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
February 7, 1997
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS AT ANY
TIME NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and
copied at the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, as well as at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York 10048; and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Common Stock of the Company is quoted on the Nasdaq National Market.
Reports and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.
Washington, D.C. 20006.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Shares offered
hereby (the "Registration Statement") has been filed with the Commission
under the Act. This Prospectus does not contain all of the information
contained in such Registration Statement and the exhibits and schedules
thereto, certain portions of which have been omitted pursuant to the rules
and regulations of the Commission. For further information with respect to
the Company and the Shares offered hereby, reference is made to the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus regarding the contents of any contract or any
other documents are not necessarily complete and, in each instance, reference
is hereby made to the copy of such contract or document filed as an exhibit
to the Registration Statement. The Registration Statement, including
exhibits thereto, may be inspected without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part thereof
may be obtained from the Public Reference Section, Securities and Exchange
Commission, Washington, D.C., 20549, upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed or to be filed with the Commission under
the Exchange Act are hereby incorporated by reference into this Prospectus:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, including all material incorporated by reference therein;
and
(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, including all material incorporated by reference therein; and
(iii) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, including all material incorporated by reference therein; and
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(iv) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, including all material incorporated by reference therein;
(v) The Company's Current Report on Form 8-K, dated February 6, 1997;
and
(vi) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A as filed on May 2, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in this Prospectus or in a 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 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, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference herein (not including exhibits to such documents
unless such exhibits are specifically incorporated by reference herein or
into such documents). Such request may be directed to Inhale Therapeutic
Systems, Attention: Investor Relations, 1060 East Meadow Circle, Palo Alto,
California 94303, telephone (415) 354-0700.
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THE COMPANY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION INCLUDING "RISK FACTORS" APPEARING ELSEWHERE IN THIS PROSPECTUS
AND THE FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED IN THE COMPANY'S
ANNUAL REPORT (FORM 10-K) FOR THE YEAR ENDED DECEMBER 31, 1995, INCORPORATED
BY REFERENCE HEREIN (THE "ANNUAL REPORT"). EXCEPT FOR THE HISTORICAL
INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS" BEGINNING AT PAGE 5 OF THIS
PROSPECTUS AND THOSE DISCUSSED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" CONTAINED IN
THE ANNUAL REPORT, AS WELL THOSE DISCUSSED ELSEWHERE IN THE PROSPECTUS, THE
ANNUAL REPORT, AND ANY OTHER DOCUMENT INCORPORATED HEREIN PRIOR TO THE
TERMINATION OF THE OFFERING.
Inhale is developing a pulmonary drug delivery system applicable to a
wide range of peptides, proteins and other molecules currently delivered by
injection or by other routes including existing inhalation systems. As an
alternative to invasive delivery techniques, a pulmonary delivery system
potentially could expand the market for pharmaceutical drug therapies by
increasing patient acceptance and improving compliance, which in turn could
decrease medical complications and the associated costs of disease
management. Pulmonary delivery also may enable new therapeutic uses of
certain drugs. Inhale is focusing development efforts on applying its
pulmonary delivery system primarily to drugs for systemic and local lung
diseases that either have proven efficacy and are approved for delivery by
injection or are in late stage human clinical trials. In addition, the
Company is applying its delivery technology to selected other applications
where its approach may have significant advantages. Several Inhale projects
are in clinical trials, including insulin (currently in a Phase IIb clinical
trial) and numerous other projects are in various stages of research,
feasibility, formulation and preclinical development.
Medical science, health care providers and consumers have been searching
for alternatives to injection as a means of delivering drugs. To date, oral,
transdermal, and nasal routes of delivery have been shown to have low natural
bioavailability (the amount of drug absorbed from the delivery site into the
bloodstream) due to the large size of macromolecules, making these routes
commercially unattractive alternatives for the natural delivery of most
macromolecule drugs.
Inhale approaches pulmonary drug delivery with the objective of
maximizing overall system efficiency while addressing commercial requirements
for reproducibility, formulations stability, safety and convenience. Inhale
is designing its delivery system to integrate customized formulations and
proprietary fine dry powder processing and packaging technology with a
proprietary inhalation device for efficient, reproducible lung delivery of
macromolecule powders. To achieve this goal, Inhale is combining an
understanding of lung biology, aerosol science, chemical engineering,
mechanical engineering, and protein formulations in its system development
efforts. Inhale intends to take bulk drugs supplied by collaborative
pharmaceutical and biotechnology partners, formulate and process these drugs
into fine powders and fill and package the powders into individual dosing
units (blisters). The blisters are designed to be loaded into Inhale's
device, which patients then activate to inhale the aerosolized drugs.
Inhale's strategy is to work with collaborative partners to develop and
commercialize drugs for systemic and local lung indications using its
pulmonary delivery system. Inhale is engaged in early stage feasibility,
research or development collaborations with Pfizer Inc. ("Pfizer"), Baxter
Healthcare Corporation (a subsidiary of Baxter International) ("Baxter"),
Centeon (a company of Armour and Behring), Eli Lilly and Company ("Lilly"),
Immunex Corporation, Genzyme Corporation as well as other major international
pharmaceutical and biotechnology companies. In addition to its
collaborations, Inhale has initiated projects with several drugs (calcitonin,
heparin, Interferon-Alpha, Interferon-Beta and follicle stimulating hormone).
The Company anticipates that any product that might be developed would be
commercialized through a collaborative partner and believes its partnering
strategy will enable it to reduce its cash requirements while developing a
large and diversified potential product portfolio.
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The Company was incorporated in California in July 1990. The Company's
executive offices are located at 1060 East Meadow Circle, Palo Alto,
California 94303, and its telephone number is (415) 354-0700.
RISK FACTORS
THE FOLLOWING ARE SIGNIFICANT RISK FACTORS THAT SHOULD BE CONSIDERED
CAREFULLY IN EVALUATING THE COMMON STOCK OF INHALE. INVESTMENT IN THE COMMON
STOCK OF INHALE INVOLVES A HIGH DEGREE OF RISK.
EARLY STAGE COMPANY. Inhale is in an early stage of development. There
can be no assurance that the Company's pulmonary delivery technology will
prove to be technically feasible or commercially applicable to a range of
macromolecules and other drugs. Only four of the Company's pulmonary
delivery formulations, insulin, Interleukin-1 Receptor, salmon calcitonin and
a peptide for the treatment of osteoporosis have been subject to any human
clinical testing. Although many of the underlying drug compounds with which
the Company is working have been tested in humans by others using alternative
delivery routes, Inhale's potential products will require extensive research,
development, preclinical and clinical testing, and may involve lengthy
regulatory review. There can be no assurance that any of the Company's
potential products will prove safe and effective in clinical trials, meet
applicable regulatory standards, be capable of being produced in commercial
quantities at acceptable cost or be successfully marketed. Moreover, even if
the Company's products prove to be safe and effective and are approved for
marketing by the United States Food and Drug Administration ("FDA") and other
regulatory authorities, there can be no assurance that health care providers,
payors or patients will accept the Company's products. Any failure of the
Company to achieve technical feasibility, demonstrate safety, achieve
clinical efficacy, obtain regulatory approval or, together with partners,
successfully market products, would have a material adverse effect on the
Company. See "Risk Factors -- No Assurance of Successful Development or
Commercialization of Drugs for Pulmonary Delivery," "-- Government Regulation;
Uncertainty of Obtaining Regulatory Approval" and "-- Uncertainty Related to
Health Care Reform and Third-Party Reimbursement."
NO ASSURANCE OF SUCCESSFUL DEVELOPMENT OR COMMERCIALIZATION OF DRUGS FOR
PULMONARY DELIVERY. The commercial viability of Inhale's pulmonary drug
delivery system for any drugs will depend upon the Company achieving
sufficient system efficiency (measured by the percentage of bulk drug
entering the manufacturing process that eventually is absorbed into the
bloodstream relative to injection for systemic indications, or the amount of
drug delivered to the lung tissue for local lung indications), formulation
stability, safety and dosage reproducibility.
The initial screening determinant for the feasibility of pulmonary
delivery of any systemic drug is pulmonary bioavailability, which measures
the percentage of the drug absorbed into the bloodstream when delivered
directly to the lungs. In addition, a certain percentage of each drug dose
may be lost at various stages of the manufacturing and pulmonary delivery
process -- in drug formulation, dry powder processing, packaging, and in
moving the drug from a delivery device into the lungs. Too much drug loss at
any one stage or cumulatively in the manufacturing and delivery process could
render a drug commercially unfeasible for pulmonary delivery.
Formulation stability (the physical and chemical stability of the
formulated drug over time and under various storage conditions) and safety
will vary with each drug and the type and amount of excipients that are used
in the formulation. Reproducibility (the ability to deliver a consistent and
predictable amount of drug into the bloodstream over time both for a single
patient and across patient groups) will require, among other things, the
development of an inhalation device that consistently delivers predictable
amounts of dry powder formulations to the deep lung.
The Company's integrated approach to systems development relies upon
several different but related technologies, and its business strategy depends
upon collaborations with corporate partners. Development of powder
formulations, processing and packaging technology and the delivery device,
establishing collaborations with partners, laboratory and clinical testing,
and manufacturing scale-up must proceed contemporaneously so as not to delay
any aspect of systems development. Any delay in one component of product or
business development could cause consequential delays in the Company's
ability to develop, obtain approval of or market therapeutic
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products using its system. Further refinement of the Company's device
prototype, further scale-up of the powder processing system and automated
packaging system will need to be accomplished before initiation of later
stage clinical trials.
There can be no assurance that Inhale will be able to demonstrate
pulmonary bioavailability for the drug candidates it has identified or may
identify, will be able to achieve commercial viability of its pulmonary
delivery system or will achieve the total system efficiency needed to be
competitive with alternative routes of delivery. Further, there can be no
assurance that the Company's pulmonary delivery system will prove to be safe,
provide reproducible dosages of stable formulations sufficient to achieve
clinical efficacy, regulatory approval or market acceptance. In addition,
there can be no assurance that Inhale will advance the various aspects of
product and business development on a timely basis that does not cause delays
in overall product development. The failure to demonstrate pulmonary
bioavailability, achieve total system efficiency, provide safe, reproducible
dosages of stable formulations or advance timely the various aspects of
product and business development would have a material adverse effect on the
Company. See "Risk Factors -- Dependence Upon Partners" and "-- Government
Regulation; Uncertainty of Obtaining Regulatory Approval."
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. The
Company has not been profitable since inception and, through September 30,
1996, had incurred a cumulative deficit of approximately $24.4 million. The
Company expects to continue to incur substantial and increasing losses over
at least the next several years as the Company's research and development
efforts, preclinical and clinical testing activities and manufacturing
scale-up efforts expand and as the Company plans and builds its late stage
clinical and early commercial production facility. All of the Company's
potential products are in research or in the early stages of development, and
no revenues have been generated from approved product sales. The Company's
revenues to date have consisted primarily of payments under short-term
research and feasibility agreements and development contracts. To achieve
and sustain profitable operations, the Company, alone or with others, must
successfully develop, obtain regulatory approval for, manufacture, introduce,
market and sell products utilizing its pulmonary drug delivery system. There
can be no assurance that the Company can generate sufficient product or
contract research revenue to become profitable or to sustain profitability.
DEPENDENCE UPON PARTNERS. The Company currently does not possess the
resources necessary to develop, complete the FDA approval process for, or
commercialize any of its potential therapeutic products. The Company's
ability to apply its pulmonary delivery system to a broad range of drugs will
depend upon its ability to establish and maintain collaborative arrangements
since many of the drugs currently approved for sale or in clinical testing
are covered by third party patents. The Company has entered into
collaborative arrangements with certain of its partners to fund clinical
trials, assist in obtaining regulatory approval and commercialize certain
products. Inhale has also entered into agreements with partners to test the
feasibility of its pulmonary delivery system with certain of their
proprietary molecules. There can be no assurance that the Company will be
able to enter into additional collaborations or that its feasibility
agreements will lead to collaborations. There also can be no assurance that
the Company will be able to maintain any such collaborative arrangements or
feasibility agreements or that any such collaborative arrangements or
feasibility agreements will be successful. The failure of the Company to
enter into or maintain such collaborative arrangements and feasibility
agreements would have a material adverse effect on the Company. Moreover, the
inability of the Company to enter into a collaborative arrangement with the
owner of any patented drug may preclude the Company from working with such
drug.
The Company's existing partners have the rights to pursue parallel
development of other drug delivery systems which may compete with the
Company's pulmonary drug delivery system and to terminate their agreements
with the Company at any time without significant penalty. The Company
anticipates that any future partners would have similar rights. Although the
Company intends generally to formulate and manufacture powders for partners
and to supply inhalation devices for such powders, certain partners may
choose to formulate or manufacture their own powders, or to develop or supply
their own device, thereby limiting one or more potential sources of revenue
for Inhale. In addition, the Company anticipates that it may be precluded
from entering into arrangements with companies whose products compete with
products sold by its partners. The Company also will have limited or no
control over the resources that any partner may devote to the Company's
products, over partners' development efforts, including the design and
conduct of clinical trials, and over the pricing of any such
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products. The pharmaceutical and biotechnology industries are consolidating,
and acquisitions by, or of, the Company's existing or potential collaborative
partners may affect the initiation or continuation of any such
collaborations. There can be no assurances that any of the Company's present
or future collaborative partners will perform their obligations as expected,
will devote sufficient resources to the development, clinical testing or
marketing of the Company's potential products or will not terminate their
agreements with the Company prematurely. Any parallel development by a
partner of alternate drug delivery systems, development by a partner rather
than by Inhale of components of the delivery system, preclusion from entering
into competitive arrangements, failure to obtain timely regulatory approvals,
premature termination of an agreement, or failure by a partner to devote
sufficient resources to the development and commercialization of the
Company's products would have a material adverse effect on the Company. See
"Risk Factors -- Dependence Upon Proprietary Technology; Uncertainty of
Obtaining Licenses or Developing Technology."
LIMITED MANUFACTURING EXPERIENCE; RISK OF SCALE-UP. To achieve the
levels of production of Inhale's dry powder drug formulations necessary to
support late stage human clinical trials and for early commercialization of
any of such products, the Company will need to scale-up its current powder
processing facilities and automated filling, plan and build a late stage
clinical and early commercial production facility, and comply with the good
manufacturing practices ("GMP") prescribed by the FDA and other standards
prescribed by various federal, state and local regulatory agencies in the
United States and any other country of use.
The Company has no experience manufacturing products for large scale
clinical testing or commercial purposes. To date, the Company has performed
powder processing on the small scale needed for early stage trials and for
testing formulations of certain other potential therapeutic products and
scaled-up powder processing for larger clinical trials. There can be no
assurance that manufacturing and control problems will not arise as the
Company attempts to further scale-up its powder processing facilities or that
such scale-up can be achieved in a timely manner or at a commercially
reasonable cost. Any failure to surmount such problems could delay or
prevent late stage clinical testing and commercialization of the Company's
products and would have a material adverse effect on the Company. To date,
the Company has relied on a particular method of powder processing. There
can be no assurance that this technology will be applicable to all drugs or
that the drug losses in powder processing will not be too high for commercial
viability for certain drugs. In the event that the Company decides to pursue
alternative powder processing methods for some or all of its drugs, there can
be no assurance that these methods will prove commercially practical for
aerosol drugs or that the Company will have or be able to acquire rights to
use such alternative methods. See "Risk Factors -- Dependence Upon Proprietary
Technology; Uncertainty of Obtaining Licenses or Developing Technology."
Fine particle powders and small quantity packaging (such as those to be
used in the Company's delivery system) require special handling. The Company
has designed and qualified small scale automated filling equipment for small
quantity packaging of fine powders. The Company faces significant technical
challenges scaling-up an automated filling system that can accurately and
economically handle the small dose and particle sizes of its powders in
commercial quantities. There can be no assurances that the Company will be
able to scale-up its automated filling equipment in a timely manner or at
commercially reasonable costs. Any failure or delay in such scale-up would
delay product development or bar commercialization of the Company's products
and would have a material adverse effect on the Company.
The Company also faces technical challenges in further developing its
inhalation device to achieve the efficiency necessary to deliver a broad
range of drugs, to produce such a device in quantities sufficient for later
stage clinical trials and early commercialization, and to adapt the device as
may be required for different powder formulations. There can be no assurance
that Inhale will successfully achieve such efficiencies, will be able to
produce such quantities or will be able to adapt the device as required. The
failure of the Company to overcome any such challenges would have a material
adverse effect on the Company. For late stage clinical trials and initial
commercial production, the Company intends to use one or more contract
manufacturers to produce its device. There can be no assurance that Inhale
will be able to enter into or maintain such arrangements. The failure of the
Company to enter into and maintain such arrangements would have a material
adverse effect on the Company. See
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"Risk Factors -- No Assurance of Successful Development or Commercialization
of Drugs for Pulmonary Delivery."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. The Company's
operations to date have consumed substantial and increasing amounts of cash.
The negative cash flow from operations is expected to continue and to
accelerate in the foreseeable future. The development of the Company's
technology and proposed products will require a commitment of substantial
funds to conduct the costly and time-consuming research and preclinical and
clinical testing activities necessary to develop early commercial production
facility and to bring any such products to market. The Company's future
capital requirements will depend on many factors, including continued
progress in the research and development of the Company's technology and drug
delivery system, the ability of the Company to establish and maintain
collaborative arrangements with others and the terms thereof, payments
received from partners under research and development agreements, progress
with preclinical and clinical trials, the time and costs involved in
obtaining regulatory approvals, the cost of development and the rate of
scale-up of the Company's powder processing and packaging technologies, the
timing and costs of its late stage clinical and early commercial production
facility, the cost involved in preparing, filing, prosecuting, maintaining
and enforcing patent claims, the need to acquire licenses to new technology
and the status of competitive products.
The Company expects that its existing capital resources, contract
research revenues from collaborations and the net proceeds of this offering
and interest thereon, will enable the Company to maintain its current and
planned operations at least through 1998. Thereafter, the Company may need
to raise substantial additional capital to fund its operations. The Company
intends to seek such additional funding through collaborative or partnering
arrangements, the extension of existing arrangements, or through public or
private equity or debt financings. There can be no assurance that additional
financing will be available on acceptable terms or at all. If additional
funds are raised by issuing equity securities, further dilution to
shareholders may result. If adequate funds are not available, the Company
may be required to delay, reduce the scope of, or eliminate one or more of
its research or development programs or obtain funds through arrangements
with collaborative partners or others that may require the Company to
relinquish rights to certain of its technologies, product candidates or
products that the Company would otherwise seek to develop or commercialize.
DEPENDENCE UPON PROPRIETARY TECHNOLOGY; UNCERTAINTY OF OBTAINING
LICENSES OR DEVELOPING TECHNOLOGY. The Company's success will depend in part
upon protecting its proprietary technology from infringement,
misappropriation, duplication and discovery. The Company intends to rely
principally on a combination of patent law, trade secrets and contract law to
protect its proprietary technology in the United States and abroad. Inhale
has filed patent applications covering certain aspects of its device, powder
processing technology, and powder formulations and pulmonary route of
delivery for certain molecules, and plans to file additional patent
applications. On October 17, 1995 the United States Patent and Trademark
Office ("PTO") issued U.S. Patent No. 5,458,135 to Inhale covering the use of
its device as a method for delivering powder formulations of drugs to the
lung. There can be no assurance that any of the patents applied for by the
Company will issue, or that any patents that issue will be valid and
enforceable. Even if such patents are enforceable, the Company anticipates
that any attempt to enforce its patents could be time consuming and costly.
The patent positions of pharmaceutical, biotechnology and drug delivery
companies, including Inhale, are uncertain and involve complex legal and
factual issues. Additionally, the coverage claimed in a patent application
can be significantly reduced before the patent is issued. As a consequence,
the Company does not know whether any of its patent applications will result
in the issuance of patents or, if any patents issue, whether they will
provide significant proprietary protection or will be circumvented or
invalidated. Since patent applications in the United States are maintained in
secrecy until patents issue, and since publication of discoveries in the
scientific or patent literature often lag behind actual discoveries, the
Company cannot be certain that it was the first inventor of inventions
covered by its pending patent applications or that it was the first to file
patent applications for such inventions. Moreover, the Company may have to
participate in interference proceedings declared by the PTO to determine
priority of invention, which could result in substantial cost to the Company,
even if the eventual outcome is favorable to the Company. There can be no
assurance that the Company's patents, if issued, would be held valid by a
court of competent jurisdiction. An adverse outcome could subject the
Company to significant
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liabilities to third parties, require disputed rights to be licensed from or
to third parties or require the Company to cease using the technology in
dispute.
The Company is aware of numerous pending and issued United States and
foreign patent rights and other proprietary rights owned by third parties
that relate to aerosol devices and delivery, pharmaceutical formulations, dry
powder processing technology and the pulmonary route of delivery for certain
macromolecules. The Company cannot predict with any certainty which, if any,
patents and patent applications will be considered relevant to the Company's
technology by authorities in the various jurisdictions where such rights
exist, nor can the Company predict with certainty which, if any, of these
rights will or may be asserted against it by such third parties. The Company
is aware of an alternate dry powder processing technology which Inhale is not
using for its current products under development but may desire to use for
certain products in the future. The ownership of this powder processing
technology is unclear and the Company is aware that multiple parties,
including Inhale, claim patent, trade secret and other rights in the
technology. If the Company determines that this alternate powder processing
technology is relevant to the development of future products and further
determines that a license to this alternate powder processing technology is
needed, there can be no assurance that the Company can obtain a license from
the relevant party or parties on commercially reasonable terms, if at all.
There can be no assurance that the Company can obtain any license to any
technology that the Company determines it needs, on reasonable terms, if at
all, or that Inhale could develop or otherwise obtain alternate technology.
The failure of the Company to obtain licenses if needed would have a material
adverse effect on the Company.
Third parties from time to time have asserted and may assert that the
Company is employing technology that they believe is based on issued patents,
trade secrets or know-how of others. In addition, future patents may issue
to third parties which the Company's technology may infringe. The Company
could incur substantial costs in defending itself and its partners against
any such claims. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief which could effectively block the
Company's ability to further develop or commercialize some or all of its
products in the United States and abroad, and could result in the award of
substantial damages. In the event of a claim of infringement, the Company and
its partners may be required to obtain one or more licenses from third
parties. There can be no assurances that the Company or its partners will be
able to obtain such licenses at a reasonable cost, if at all. Defense of any
lawsuit or failure to obtain any such license could have a material adverse
effect on the Company.
The Company's ability to develop and commercialize its technology will
be affected by the Company's or its partners' access to the drugs which are
to be formulated. Many drugs, including powder formulations of certain drugs
which are presently under development by the Company, are subject to issued
and pending United States and foreign patent rights which may be owned by
competing entities. There are issued patents and pending patent applications
relating to the pulmonary delivery of macromolecule drugs, including several
for which the Company is developing pulmonary delivery formulations.
Specifically, a patent has been granted in Europe which is directed to
aerosol formulations of serine protease inhibitors, including alpha-1
antitrypsin, for the treatment of the lung. The resulting patent situation
is highly complex, and the ability of any one company to commercialize a
particular biopharmaceutical drug is highly unpredictable. The Company
intends generally to rely on the ability of its partners to provide access to
the drugs which are to be formulated for pulmonary delivery. There can be no
assurance that the Company's partners will be able to provide access to drug
candidates for formulation for pulmonary delivery or that, if such access is
provided, the Company or its partners will not be accused of, or determined
to be, infringing a third party's rights and will not be prohibited from
working with the drug or be found liable for damages that may not be subject
to indemnification. Any such restriction on access or liability for damages
would have a material adverse effect on the Company.
The Company also will rely on trade secrets and contract law to protect
certain of its proprietary technology. There can be no assurance that any
such contract will not be breached, or that if breached, the Company will
have adequate remedies. Furthermore, there can be no assurance that any of
the Company's trade secrets will not become known or independently discovered
by third parties.
The PTO has recently adopted changes to the United States patent law
which change the term of issued patents, subject to certain transition
periods, to 20 years from the date of filing rather than 17 years from date
of
9
<PAGE>
issuance. Beginning in June 1995, the patent term became 20 years from the
earliest effective filing date of the underlying patent application. Such
change may reduce the effective term of protection for patents that are
pending for more than three years in the PTO. In addition, as of January
1996, all inventors who work outside of the United States are able to
establish a date of invention on the same basis as those working in the
United States. Such change could adversely affect the ability of the Company
to prevail in a priority of invention dispute with a third party located or
doing work outside of the United States. While the Company cannot predict
the effect that such changes will have on its business, such changes could
have a material adverse effect on the Company's ability to protect its
proprietary information and sustain the commercial viability of its products.
Furthermore, the possibility of extensive delays in such process, could
effectively further reduce the term during which a marketed product could be
protected by patents. See "Risk Factors -- Dependence Upon Partners,"
"-- Government Regulation; Uncertainty of Obtaining Regulatory Approval."
DEPENDENCE UPON AND NEED TO ATTRACT KEY PERSONNEL. The Company is
highly dependent upon the principal members of its scientific and management
staff. The Company does not have employment contracts with its key employees,
nor does the Company have key man insurance policies on them. The Company
also relies on consultants and advisors to assist the Company in formulating
research and development strategy. To pursue its product development and
commercialization plans, the Company will be required to hire additional
qualified scientific personnel to perform research and development, as well
as personnel with expertise in clinical testing, government regulation and
manufacturing. Expansion in product development and manufacturing also is
expected to require the addition of management personnel and the development
of additional expertise by existing management personnel. Retaining and
attracting qualified personnel, consultants and advisors will be critical to
the Company's success. The Company faces competition for qualified
individuals from numerous pharmaceutical, biotechnology and drug delivery
companies, universities and other research institutions. There can be no
assurance that the Company will be able to retain its current key employees
or attract and retain qualified additional personnel and management when
needed and its failure to do so would have a material adverse effect on the
Company's ability to develop and commercialize products.
GOVERNMENT REGULATION; UNCERTAINTY OF OBTAINING REGULATORY APPROVAL.
The production and marketing of the Company's products and its ongoing
research and development activities are subject to regulation by numerous
governmental authorities in the United States and other countries. Prior to
marketing a new dosage form of any drug, including one developed for use with
the Company's pulmonary drug delivery system, whether or not such drug was
already approved for marketing in another dosage form, the product must
undergo rigorous preclinical and clinical testing and an extensive review
process mandated by the FDA and equivalent foreign authorities. These
processes generally take a number of years and require the expenditure of
substantial resources. None of the Company's proposed products has been
submitted to the FDA for marketing approval. The Company has no experiences
obtaining such regulatory approval, does not have the expertise or other
resources to do so and intends to rely on its partners to fund clinical
testing and to obtain product approvals. See "Risk Factors -- Dependence Upon
Partners."
The time required for completing such testing and obtaining such
approvals is uncertain. Further refinement of the device prototype, further
scale-up of the powder processing system and automated powder filling and
packaging system will need to be accomplished before initiation of later
stage clinical trials. Any delay in any of these components of product
development may delay testing. In addition, delays or rejections may be
encountered based upon changes in FDA policy during the period of product
development. Similar delays may also be encountered in other countries. If
regulatory approval of a product is granted, such approval may entail
limitations on the indicated uses for which the product may be marketed, and
the marketed product, its manufacturer, and its manufacturing facilities
remain subject to continual review and periodic inspections. Later discovery
of previously unknown problems with a product, manufacturer, or facility may
result in restrictions on such product or manufacturer, including withdrawal
of the product from the market. There can be no assurance that regulatory
approval will be obtained for any products developed by the Company on a
timely basis, or at all. The failure to obtain timely regulatory approval of
its products, any product marketing limitations or a product withdrawal would
have a material adverse effect on the Company.
10
<PAGE>
UNCERTAINTY RELATED TO HEALTH CARE REFORM AND THIRD-PARTY REIMBURSEMENT.
Political, economic and regulatory influences are subjecting the health care
industry in the United States to fundamental change. Although Congress has
failed to pass comprehensive health care reform legislation to date, the
Company anticipates that Congress, state legislatures and the private sector
will continue to review and assess alternative health care delivery and
payment systems. Potential approaches that have been considered include
mandated basic health care benefits, controls on health care spending, the
creation of large insurance purchasing groups, price controls on
pharmaceuticals and other fundamental changes to the health care delivery
system. Any such proposed or actual changes could cause Inhale's
collaborative partners or potential partners to limit or eliminate spending
on collaborative drug development projects. Legislative debate is expected to
continue in the future, market forces are expected to demand reduced costs
and Inhale cannot predict what impact the adoption of any federal or state
health care reform measures or future private sector reform may have on its
business.
In both domestic and foreign markets, sales of the Company's potential
products, if any, will depend in part on the availability of reimbursement
from third-party payors such as government health administration authorities,
private health insurers and other organizations. Third-party payors are
increasingly challenging the price and cost-effectiveness of medical products
and services. Significant uncertainty exists as to the reimbursement status
of newly approved health care products. There can be no assurance that the
Company's proposed products will be considered cost effective or that
adequate third-party reimbursement will be available to enable Inhale to
maintain price levels sufficient to realize an appropriate return on its
investment in product development. Legislation and regulations affecting the
pricing of pharmaceuticals may change before the Company's proposed products
are approved for marketing and any such changes could further limit
reimbursement for medical products and services.
HIGHLY COMPETITIVE INDUSTRY: RISK OF TECHNOLOGICAL OBSOLESCENCE. The
biotechnology and pharmaceutical industries are highly competitive and
rapidly evolving and significant developments are expected to continue at a
rapid pace. The Company's success depends upon maintaining a competitive
position in the development of products and technologies for pulmonary
delivery of pharmaceutical drugs. If a competing company were to develop or
acquire rights to a better dry powder pulmonary delivery device or fine
powder processing technology, a better system for efficiently and
reproducibly delivering drugs to the deep lung, a non-invasive drug delivery
system which is more attractive for the delivery of drugs than pulmonary
delivery, or an invasive delivery system which overcomes some of the
drawbacks of current invasive systems for chronic or subchronic indications
(such as a sustained release system), the Company's business would be
materially adversely affected.
The Company is in competition with pharmaceutical, biotechnology and
drug delivery companies, hospitals, research organizations, individual
scientists and nonprofit organizations engaged in the development of
alternative drug delivery systems or new drug research and testing, as well
as with entities producing and developing injectable drugs. The Company is
aware of a number of companies currently seeking to develop new products and
non-invasive alternatives to injectable drug delivery, including oral
delivery systems, intranasal delivery systems, transdermal systems and
colonic absorption systems. Several of these companies may have or be
developing dry powder devices that could be used for pulmonary delivery. The
Company is also aware of other companies currently engaged in the development
and commercialization of pulmonary drug delivery systems and enhanced
injectable drug delivery systems. Many of these companies and entities have
greater research and development capabilities, experience, manufacturing,
marketing, financial and managerial resources than the Company and represent
significant competition for the Company. Acquisitions of competing drug
delivery companies by large pharmaceutical companies could enhance
competitors' financial, marketing and other resources. Accordingly, the
Company's competitors may succeed in developing competing technologies,
obtaining FDA approval for products more rapidly than the Company and gaining
market acceptance. There can be no assurance that developments by others
will not render the Company's products or technologies uncompetitive or
obsolete.
PRODUCT LIABILITY; AVAILABILITY OF INSURANCE. The design, development
and manufacture of the Company's products involve an inherent risk of product
liability claims and associated adverse publicity. Although the Company
currently maintains general liability insurance, there can be no assurance
that the coverage limits of the
11
<PAGE>
Company's insurance policies will be adequate. The Company obtained clinical
trial product liability insurance of $3.0 million for certain clinical trials
and intends to obtain insurance for future clinical trials of insulin and
other products under development. However, there can be no assurance that
the Company will be able to obtain or maintain insurance for any future
clinical trials. Such insurance is expensive, difficult to obtain and may
not be available in the future on acceptable terms, or at all. A successful
claim brought against the Company in excess of the Company's insurance
coverage would have a material adverse effect upon the Company and its
financial condition.
HAZARDOUS MATERIALS. The Company's research and development involves
the controlled use of hazardous materials, chemicals and various radioactive
compounds. Although the Company believes that its safety procedures for
handling and disposing of such materials comply with the standards prescribed
by state and federal regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that
result and any such liability could exceed the resources of the Company. The
Company may incur substantial costs to comply with environmental regulations.
ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's Restated
Articles of Incorporation and the California General Corporation Law could
discourage a third party from attempting to acquire, or make it more
difficult for a third party to acquire control of the Company without
approval of the Company's Board of Directors. Such provisions could also
limit the price that certain investors might be willing to pay in the future
for shares of Common Stock. Certain of such provisions allow the Board of
Directors to authorize the issuance of Preferred Stock with rights superior
to those of the Common Stock. The Company also will be subject to the
provisions of Section 1203 of the California General Corporation Law which
requires a fairness opinion to be provided to the Company's shareholders in
connection with their consideration of any proposed "interested party"
reorganization transaction.
POTENTIAL VOLATILITY OF STOCK PRICE. The market prices for securities
of early stage technology companies have historically been highly volatile
and the market from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular
companies. Factors such as fluctuations in the Company's operating results,
announcements of technological innovations or new therapeutic products or the
announcement or termination of collaborative relationships by the Company or
its competitors, governmental regulation, clinical trial results,
developments in patent or other proprietary rights, public concern as to the
safety of drug formulations developed by the Company or others and general
market conditions may have a significant effect on the market price of the
Common Stock. The Company securities are subject to a high degree of risk
and volatility.
12
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Shareholders in the offering.
DIVIDEND POLICY
The Company has never paid cash dividends. The Company's Board of
Directors currently intends to retain any earnings for use in the Company's
business and does not anticipate paying any cash dividends in the foreseeable
future.
SELLING SHAREHOLDERS
The Shares covered by this Prospectus were acquired from the Company
pursuant to the Purchase Agreements for an aggregate purchase price of
$32,400,000 ($18.00 per share). The offer and sale by the Company of the
Common Stock to the Selling Shareholders pursuant to the Purchase Agreements
was made pursuant to an exemption from the registration requirements of the
Securities Act provided by Section 4(2) thereof. The Purchase Agreements
contain representations and warranties as to each Selling Shareholder's
status as an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act. Vector Securities International, Inc.,
the placement agent, was paid a fee equal to 5.5% of the aggregate purchase
price in connection with the sale of the Shares by the Company to the Selling
Shareholders pursuant to the Purchase Agreements. In addition, the Company
agreed to reimburse such placement agent for its travel and out-of-pocket
expenses incurred in connection with the sale of the Shares by the Company to
the Selling Shareholders pursuant to the Purchase Agreements up to a maximum
of $100,000.
Pursuant to the Purchase Agreements, each Selling Shareholder has
represented that he, she or it acquired the Shares for investment and with no
present intention of distributing the Shares. The Company agreed, in such
Purchase Agreements, to prepare and file a registration statement as soon as
practicable and to bear all expenses other than fees and expenses of counsel
for the Selling Shareholders and underwriting discounts and commissions and
brokerage commissions and fees. In addition, and in recognition of the fact
that the Selling Shareholders, even though purchasing the Shares without a
view to distribution, may wish to be legally permitted to sell the Shares
when each deems appropriate, the Company filed with the Commission a
Registration Statement on Form S-3, of which this Prospectus forms a part,
with respect to, among other things, the resale of the Shares from time to
time at prevailing prices in the over-the-counter market or in
privately-negotiated transactions and has agreed to prepare and file such
amendments and supplements to the Registration Statement as may be necessary
to keep the Registration Statement effective until all Shares offered hereby
have been sold pursuant thereto or until such Shares are no longer, by reason
of Rule 144 under the Securities Act or any other rule of similar effect,
required to be registered for the sale thereof by the Selling Shareholders.
None of the Selling Shareholders has had a material relationship with the
Company within the past three years except as a result of the ownership of
the Shares or other securities of the Company.
The following table sets forth the name of the Selling Shareholders, the
number of shares of Common Stock owned beneficially by the Selling
Shareholders as of Janaury 28, 1997 and the number of shares which may be
offered pursuant to this Prospectus. This information is based upon
information provided by the Selling Shareholders. There are currently no
agreements, arrangements or understandings with respect to the sale of any of
the Shares. The Shares are being registered to permit public secondary
trading of the Shares, and the Selling Shareholders may offer the Shares for
resale from time to time.
13
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM
NUMBER OF
NAME SHARES BENEFICIALLY SHARES SHARES BENEFICIALLY
---- OWNED PRIOR TO THE BEING OWNED AFTER
OFFERING OFFERED THE OFFERING
-------------------- -------- ------------------------
NUMBER PERCENT(1) NUMBER PERCENT(1)
------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
Franklin Global 215,000 1.6% 200,000 15,000 *
Health Care Fund
Franklin Small 168,000 1.2 168,000 0 --
Cap Growth Fund
Franklin Valuemark 32,000 * 32,000 0 --
Annuity - Small
Cap Growth Fund
The Global Health 108,550 * 108,550 0 --
Sciences Fund(2)
Invesco Strategic 216,450 1.6 216,450 0 --
Portfolios, Inc.-
Health Sciences(2)
Quantum Partners LDC(3) 750,000 5.5 750,000 0 --
T. Rowe Price New 543,750 4.0 243,750 300,000 2.2%
Horizons Fund, Inc.(4)
T. Rowe Price 81,250 * 81,250 0 --
Health Sciences Fund, Inc.(4)
TOTAL 2,115,000 1,800,000 315,000
</TABLE>
- ---------------------
* Less than 1%.
(1) Applicable percentage of ownership is based on 11,834,792 shares of Common
Stock outstanding on January 28, 1997, and assumes the sale and issuance of
1,800,000 shares of Common Stock pursuant to the Purchase Agreements.
(2) The above named entities are affiliated with the Invesco Trust Company,
which serves as investment advisor to these entities.
(3) The address for Quantum Partners LDC is: c/o Soros Fund Management LLC,
888 Seventh Avenue, 33rd Floor, New York, New York 10106, Attention:
Michael C. Neus, Esq.
(4) The address for the above named entities is: 100 East Pratt Street,
Baltimore, Maryland 21202. Certain entities affiliated with this Selling
Shareholder beneficially own additional securities of the Company. Such
shares are not included in the information set forth above.
14
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereunder may be sold from time to time by the
Selling Shareholders, or by pledgees, donees, transferees or other successors
in interest. Such sales may be made on the Nasdaq National Market or in the
over-the-counter market or otherwise, at prices and on terms then prevailing
or related to the then-current market price, or in negotiated transactions.
The Shares may be sold to or through one or more broker-dealers, acting as
agent or principal, in underwritten offerings, block trades, agency
placements, exchange distributions, brokerage transactions or otherwise, or
in any combination of transactions.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously
engage in market making activities with respect to the Company's Common Stock
for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, the Selling
Shareholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales
of shares of Common Stock by the Selling Shareholders.
At the time a particular offer of Shares is made, to the extent
required, a supplemental prospectus will be distributed which will set forth
the number of shares being offered and the terms of the offering including
the name or names of any underwriters, dealers or agents, the purchase price
paid by any underwriter for the Shares purchased from the Selling
Shareholders and any discounts, concessions or commissions allowed or
reallowed or paid to dealers.
In connection with any transaction involving the Shares, broker-dealers
or others may receive from the Selling Shareholders, and/or the purchasers of
the Shares for whom such broker-dealers act as agents or to whom they may
sell as principals or both, compensation in the form of discounts,
concessions or commissions in amounts to be negotiated at the time (which
compensation as to a particular broker-dealer might be in excess of customary
commissions). Broker-dealers and any other persons participating in a
distribution of the Shares may be deemed to be "underwriters" within the
meaning of the Act in connection with such distribution, and any such
discounts, concessions or commissions may be deemed to be underwriting
discounts or commissions under the Act.
Any or all of the sales or other transactions involving the Shares
described above, whether effected by the Selling Shareholders, any
broker-dealer or others, may be made pursuant to this Prospectus. In
addition, any Shares that qualify for sale pursuant to Rule 144 under the Act
may be sold under Rule 144 rather than pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
the Shares may not be sold unless the Shares have been registered or
qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
All costs associated with this offering, other than fees and expenses of
counsel for the Selling Shareholders and underwriting discounts and
commissions and brokerage commissions and fees, will be paid by the Company.
The Company has agreed to indemnify the Selling Shareholders against certain
liabilities in connection with any offering of the Shares pursuant to this
Prospectus, including liabilities arising under the Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Cooley Godward LLP, Menlo Park, California, ("Cooley
Godward"). Mark P. Tanoury, a partner of Cooley Godward, is Secretary of the
Company.
15
<PAGE>
EXPERTS
The financial statements Inhale Therapeutic Systems appearing
in Inhale Therapeutic Systems' Annual Report (Form 10-K) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statements and schedules are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
16
<PAGE>
No dealer, salesman or other 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 other information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any
state in which such offer or solicitation is not authorized, or in which the
person making such offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such offer or solicitation. The
delivery of this Prospectus at any time does not imply that the information
herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Incorporation of Certain
Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . .2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
- ------------------------------------------------------------------------------
1,800,000 Shares
Common Stock
INHALE THERAPEUTIC
SYSTEMS
- ------------------------------------------------------------------------------
Prospectus
- ------------------------------------------------------------------------------
February 7, 1997
