<PAGE>
FILED PURSUANT TO 424(B)(1)
REGISTRATION NO. 333-32576
P R O S P E C T U S
INHALE THERAPEUTIC SYSTEMS, INC.
180,099 SHARES
COMMON STOCK
----------------
The selling stockholder, Alliance Pharmaceutical Corp., a New York
Corporation, may sell up to 180,099 shares of common stock of Inhale Therapeutic
Systems, Inc., a Delaware corporation. The selling security holder may sell the
common stock described in this prospectus in a number of different ways and at
varying prices. We will not receive any proceeds from the sale of these shares
by Alliance.
------------------------
Our common stock is listed on the Nasdaq National Market under the symbol
"INHL".
------------------------
We will not be paying any underwriting commissions or discounts in the
offering of these shares.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March 27, 2000
<PAGE>
ABOUT OUR BUSINESS
THE FOLLOWING IS A SHORT SUMMARY OF OUR BUSINESS. YOU SHOULD CAREFULLY READ
THE "RISK FACTORS" SECTION OF THIS PROSPECTUS AND OUR ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED 1999 FOR MORE INFORMATION ON OUR BUSINESS AND THE RISKS
INVOLVED IN INVESTING IN OUR STOCK. IN ADDITION TO THE HISTORICAL INFORMATION
CONTAINED IN THIS PROSPECTUS, THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION
21E OF THE EXCHANGE ACT THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM OUR EXPECTATIONS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED IN "RISK FACTORS" BEGINNING AT PAGE
3 OF THIS PROSPECTUS AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" IN OUR ANNUAL REPORT.
We are creating a drug delivery system to easily and painlessly deliver a
wide range of drugs, including peptides, proteins, nucleic acids and other
molecules, by inhalation to the deep lung for treatment of systemic and
respiratory diseases. We are using this system principally to enable
non-invasive delivery of protein drugs currently administered by injection. Our
most advanced program, which is sponsored by Pfizer Inc., is inhaleable insulin.
Pfizer commenced dosing for its Phase III human clinical trials in June 1999. In
addition to its insulin program with Pfizer, we have development collaborations
with Biogen, Inc., Aventis Behring L.L.C. (formerly Centeon L.L.C., a joint
venture of Hoechst AG and Rhone-Poulenc S.A., which have now merged to form
Aventis S.A.), and Eli Lilly & Co. we also have early stage feasibility and
research collaborations with several other companies and has tested seven drugs
in human clinical trials.
Currently there are approximately 35 macromolecule drugs marketed in the
United States and about 120 other such drugs in clinical trials. Sales of the
top 15 genetically engineered protein drugs (a subset of macromolecule drugs)
were estimated at $14 billion worldwide in 1997. Most of these drugs are
currently delivered by injection. Injections are undesirable for numerous
reasons including patient discomfort, inconvenience and risk of infection. Poor
patient acceptance of, and compliance with, injectable therapies can lead to
increased incidence of medical complications and higher disease management
costs. Alternatives to injection such as oral, transdermal and nasal delivery
have to date been commercially unattractive due to low natural
bioavailability--the amount of drug absorbed from the delivery site into the
bloodstream relative to injection. As an alternative to the invasiveness of
injection, we believe a deep lung inhalation delivery system could expand the
market for protein drug therapies by increasing patient acceptance and improving
compliance and may enable new therapeutic uses of certain protein drugs.
We are creating a proprietary platform integrating customized formulation,
dry powder processing and packaging with a proprietary inhalation device to
enable efficient, reproducible delivery of drugs for systemic and local lung
indications. For specific drug products, we formulate and processes bulk drugs
supplied by collaborative partners into dry powders which are packaged into
individual dosing units referred to as blister packs. The blister packs are
designed to be loaded into our device, which patients then activate to inhale
the aerosolized drugs. We have developed an inhalation device that is being used
several times per day for several months in outpatient trials for insulin. In
addition, we have demonstrated room temperature stability of a year or more for
a number of protein drugs, and has scaled-up its powder processing and packaging
for late stage clinical trials and small scale production for certain drugs.
As an alternative to invasive delivery techniques, we believe that a deep
lung delivery system could potentially expand the market for protein drug
therapies by increasing patient acceptance and improving compliance, which in
turn could decrease medical complications and the associated costs of disease
management. Additionally, deep lung delivery may enable new therapeutic uses of
certain protein drugs. We are 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 clinical trials.
A cornerstone of our business strategy is to work with collaborative
partners to develop and commercialize drugs for deep lung delivery. In a typical
collaboration, our partner will support the application of our technology to a
particular drug by providing the drug, funding clinical development, and
1
<PAGE>
marketing the resulting commercial product. We typically will supply the
delivery system and receive research and development and progress payments
during development, and receive revenues from powder manufacturing, device
supply, and royalties from sales of any commercial products.
In addition to Pfizer's sponsorship of the inhaleable insulin program, we
have active development programs with several other corporate partners. Our most
recent collaboration is with Biogen for pulmonary delivery of
Interferon-Beta-1a, sold under the trade name AVONEX-Registered Trademark-, the
leading drug worldwide for the treatment of Multiple Sclerosis. We are also
engaged in development collaborations with Aventis Behring on alpha-1 proteinase
inhibitor for genetic emphysema, and with Lilly for an undisclosed protein drug.
We are also engaged in early stage feasibility and research programs with
respect to other compounds. We anticipate that any product that may be developed
would be commercialized with a collaborative partner and believe our partnering
strategy will enable us to reduce the investment required to develop a large and
diversified potential product portfolio.
2
<PAGE>
RISK FACTORS
ANY OF THE FOLLOWING RISKS COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS,
OPERATING RESULTS AND FINANCIAL CONDITION AND COULD RESULT IN A COMPLETE LOSS OF
YOUR INVESTMENT.
WE DO NOT KNOW IF OUR DEEP LUNG DRUG DELIVERY SYSTEM IS COMMERCIALLY FEASIBLE.
We are in an early stage of development. There is a risk that our deep lung
drug delivery technology will not be commercially feasible. Even if our deep
lung delivery technology is commercially feasible, it may not be commercially
accepted across a range of large and small molecule drugs. We have tested seven
deep lung delivery formulations in humans, but many of our potential
formulations have not been tested in humans.
Many of the underlying drug compounds contained in our deep lung
formulations have been tested in humans by other companies using alternative
delivery routes. Our potential products require extensive research, development
and pre-clinical (animal) and clinical (human) testing. Our potential products
also may involve lengthy regulatory review before they can be sold. We do not
know if and cannot assure you that, any of our potential products will prove to
be safe and effective or meet regulatory standards. There is a risk that any of
our potential products will not be able to be produced in commercial quantities
at acceptable cost or marketed successfully. Our failure to achieve commercial
feasibility, demonstrate safety, achieve clinical efficacy, obtain regulatory
approval or, together with partners, successfully market products will
negatively impact our revenues and results of operations.
WE DO NOT KNOW IF OUR DEEP LUNG DRUG DELIVERY SYSTEM IS EFFICIENT.
We may not be able to achieve the total system efficiency needed to be
competitive with alternative routes of delivery. Total system efficiency is
determined by the amount of drug loss during manufacture, in the delivery
device, in reaching the site of absorption, and during absorption from that site
into the bloodstream. Deep lung bioavailability is the percentage of a drug that
is absorbed into the bloodstream when that drug is delivered directly to the
lungs as compared to when the drug is delivered by injection. Bioavailability is
the initial screen for whether deep lung delivery of any systemic drug is
commercially feasible. We would not consider a drug to be a good candidate for
development and commercialization if its drug loss is excessive at any one stage
or cumulatively in the manufacturing and delivery process or if its deep lung
bioavailability is too low.
WE DO NOT KNOW IF OUR DEEP LUNG DRUG FORMULATIONS ARE STABLE.
We may not be able to identify and produce powdered versions of drugs that
retain the physical and chemical properties needed to work with our delivery
device. Formulation stability is the physical and chemical stability of the drug
over time and under various storage, shipping and usage conditions. Formulation
stability will vary with each deep lung formulation and the type and amount of
ingredients that are used in the formulation. Problems with powdered drug
stability would negatively impact our ability to develop and market our
potential products or obtain regulatory approval.
WE DO NOT KNOW IF OUR DEEP LUNG DRUG DELIVERY SYSTEM IS SAFE.
We may not be able to prove potential products to be safe. Our products
require lengthy laboratory, animal and human testing. Most of our products are
in preclinical testing or the early stage of human testing. If we find that any
product is not safe, we will not be able to commercialize the product. The
safety of our deep lung formulations will vary with each drug and the
ingredients used in its formulation.
3
<PAGE>
WE DO NOT KNOW IF OUR DEEP LUNG DRUG DELIVERY SYSTEM PROVIDES CONSISTENT DOSES
OF MEDICINE.
We may not be able to provide reproducible dosages of stable formulations
sufficient to achieve clinical success. Reproducible dosing is 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. Reproducible dosing
requires the development of:
- an inhalation device that consistently delivers predictable amounts of dry
powder formulations to the deep lung;
- accurate unit dose packaging of dry powder formulations; and
- moisture resistant packaging.
We may not be able to develop reproducible dosing of any potential product.
The failure to do so means that we would not consider it a good candidate for
development and commercialization.
WE DEPEND ON PARTNERS FOR REGULATORY APPROVALS AND COMMERCIALIZATION OF OUR
PRODUCTS.
Because we are in the business of developing technology for delivering drugs
to the lungs and licensing this technology to companies that make and sell
drugs, we do not have the people and other resources to do the following things:
- make bulk drugs to be used as medicines;
- design and carry out large scale clinical studies;
- prepare and file documents necessary to obtain government approval to sell
a given drug product; and
- market and sell our products when and if they are approved.
When we sign a collaborative development agreement or license agreement to
develop a product with a drug company, the drug company agrees to do some or all
of the things described above. If our partner fails to do any of these things,
we cannot complete the development of the product.
WE MAY NOT OBTAIN REGULATORY APPROVAL FOR OUR PRODUCTS ON A TIMELY BASIS, OR AT
ALL.
There is a risk that we will not obtain regulatory approval for our products
on a timely basis, or at all. Our product must undergo rigorous animal and human
testing and an extensive review process mandated by the United States Food and
Drug Administration ("FDA") and equivalent foreign authorities. This process
generally takes a number of years and requires the expenditure of substantial
resources; although the time required for completing such testing and obtaining
such approvals is uncertain. We have not submitted any of our products to the
FDA for marketing approval. We have no experience obtaining such regulatory
approval.
In addition, we may encounter delays or rejections based upon changes in FDA
policy, including policy relating to good manufacturing practice compliance,
during the period of product development. We may encounter similar delays in
other countries.
Even if regulatory approval of a product is granted, the approval may limit
the indicated uses for which we may market our product. In addition, our
marketed product, our manufacturing facilities and Inhale, as the manufacturer,
will be subject to continual review and periodic inspections. Later discovery
from such review and inspection of previously unknown problems may result in
restrictions on our product or on us, including withdrawal of our product from
the market. The failure to obtain timely regulatory
4
<PAGE>
approval of our products, any product marketing limitations or a product
withdrawal would negatively impact our revenues and results of operations.
WE DO NOT KNOW IF OUR TECHNOLOGIES CAN BE INTEGRATED SUCCESSFULLY TO BRING
PRODUCTS TO MARKET.
We may not be able to integrate all of the relevant technologies to provide
a deep lung drug delivery system. Our integrated approach to systems development
relies upon several different but related technologies:
- dry powder formulations;
- dry powder processing technology;
- dry powder packaging technology; and
- deep lung delivery devices.
At the same time we must:
- establish collaborations with partners;
- perform laboratory and clinical testing of potential products; and
- scale-up our manufacturing processes.
We must accomplish all of these steps without delaying any aspect of
technology development. Any delay in one component of product or business
development could delay our ability to develop, obtain approval of or market
therapeutic products using our deep lung delivery technology.
WE MAY NOT BE ABLE TO MANUFACTURE OUR PRODUCTS IN COMMERCIAL QUANTITIES.
POWDER PROCESSING. We have no experience manufacturing products for
commercial purposes. We have only performed powder processing on the small scale
needed for testing formulations and for early stage and larger clinical trials.
We may encounter manufacturing and control problems as we attempt to scale-up
powder processing facilities. We may not be able to achieve such scale-up in a
timely manner or at a commercially reasonable cost, if at all. Our failure to
solve any of these problems could delay or prevent late stage clinical testing
and commercialization of our products and could negatively impact our revenues
and results of operations.
To date, we have relied on one particular method of powder processing. There
is a risk that this technology will not work with all drugs or that the cost of
drug production will preclude the commercial viability of certain drugs.
Additionally, there is a risk that any alternative powder processing methods we
may pursue will not be commercially practical for aerosol drugs or that we will
not have, or be able to acquire the rights to use, such alternative methods.
POWDER PACKAGING. Our fine particle powders and small quantity packaging
require special handling. We have designed and qualified automated filling
equipment for small and moderate quantity packaging of fine powders. We face
significant technical challenges in scaling-up an automated filling system that
can handle the small dose and particle sizes of our powders in commercial
quantities. There is a risk that we will not be able to scale-up our 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 our products and would negatively impact our revenues and
results of operations.
INHALATION DEVICE. We face many technical challenges in further developing
our inhalation device to work with a broad range of drugs, to produce such a
device in sufficient quantities and to adapt the device to different powder
formulations. In addition, we are attempting to develop a smaller inhalation
device, which presents particular technical challenges. There is a risk that we
will not successfully achieve any of
5
<PAGE>
these challenges. Our failure to overcome any of these challenges would
negatively impact our revenues and results of operations.
For late stage clinical trials and initial commercial production, we intend
to use one or more contract manufacturers to produce our drug delivery device.
There is a risk that we will not be able to enter into or maintain arrangements
with any potential contract manufacturers or effectively scale-up production of
our drug delivery devices through contract manufacturers. Our failure to do so
would negatively impact our revenues and results of operations.
WE DEPEND ON SOLE OR EXCLUSIVE SUPPLIERS FOR OUR INHALATION DEVICE AND BULK
DRUGS.
We plan to subcontract the manufacture of our pulmonary delivery device
before commercial production of our first product. We have identified contract
manufacturers that we believe have the technical capabilities and production
capacity to manufacture our devices and which can meet the requirements of good
manufacturing practices. We cannot be assured that we will be able to obtain and
maintain satisfactory contract manufacturing on commercially acceptable terms,
if at all. Our dependence on third parties for the manufacture of our inhalation
device may negatively impact our cost of goods and our ability to develop and
commercialize products on a timely and competitive basis.
We obtain the bulk drugs we use to formulate and manufacture the dry powders
for our deep lung delivery system from sole or exclusive sources of supply. For
example, with respect to our source of bulk insulin, we have entered into a
collaborative agreement with Pfizer which has, in turn, entered into an
agreement with Aventis to manufacture biosynthetic recombinant insulin. Under
the terms of their agreement, Pfizer and Aventis agreed to construct a jointly
owned manufacturing plant in Frankfurt, Germany. Until its completion, Pfizer
will provide us with insulin from Aventis's existing plant. If our sole or
exclusive source suppliers fail to provide bulk drugs in sufficient quantities
when required, our revenues and results of operations will be negatively
impacted.
WE DO NOT KNOW IF THE MARKET WILL ACCEPT OUR DEEP LUNG DRUG DELIVERY SYSTEM.
The commercial success of our potential products depends upon market
acceptance by health care providers, third-party payors like health insurance
companies and Medicare, and patients. Our products under development use a new
method of drug delivery and there is a risk that our potential products will not
be accepted by the market. Market acceptance will depend on many factors,
including:
- the safety and efficacy of our clinical trials;
- favorable regulatory approval and product labeling;
- the frequency of product use;
- the availability of third-party reimbursement;
- the availability of alternative technologies; and
- the price of our products relative to alternative technologies.
There is a risk that health care providers, patients or third-party payors
will not accept our deep lung drug delivery system. If the market does not
accept our potential products, our revenues and results of operations would be
significantly and negatively impacted.
6
<PAGE>
IF OUR PRODUCTS ARE NOT COST EFFECTIVE, GOVERNMENT AND PRIVATE INSURANCE PLANS
MAY NOT PAY FOR OUR PRODUCTS.
In both domestic and foreign markets, sales of our products under
development will depend in part upon the availability of reimbursement from
third-party payors, such as government health administration authorities,
managed care providers, private health insurers and other organizations. In
addition, such 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.
Legislation and regulations affecting the pricing of pharmaceuticals may change
before our proposed products are approved for marketing. Adoption of such
legislation and regulations could further limit reimbursement for medical
products. A government or third-party payor decision to not provide adequate
coverage and reimbursements for our products would limit market acceptance of
such products.
WE EXPECT TO CONTINUE TO LOSE MONEY FOR THE NEXT SEVERAL YEARS.
We have never been profitable and, through December 31, 1999, we have an
accumulated deficit of approximately $94.5 million. We expect to continue to
incur substantial and increasing losses over at least the next several years as
we expand our research and development efforts, testing activities and
manufacturing operations, and as we further expand our late stage clinical and
early commercial production facility. All of our potential products are in
research or in the early stages of development except for our insulin
collaboration. We have generated no revenues from approved product sales. Our
revenues to date have consisted primarily of payments under short-term research
and feasibility agreements and development contracts. To achieve and sustain
profitable operations, we must, alone or with others, successfully develop,
obtain regulatory approval for, manufacture, introduce, market and sell products
using our deep lung drug delivery system. There is a risk that we will not
generate sufficient product or contract research revenue to become profitable or
to sustain profitability.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE.
We anticipate that our existing capital resources will enable us to maintain
currently planned operations through at least the next 24 months. However, this
expectation is based on our current operating plan, which is expected to change
as a result of many factors, and we may need additional funding sooner than
anticipated. In addition, we may choose to raise additional capital due to
market conditions or strategic considerations, even if we believe we have
sufficient funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or convertible debt
securities, the issuance of such securities could result in dilution to our
stockholders.
We have no credit facility or other committed sources of capital. To the
extent operating and capital resources are insufficient to meet future
requirements, we will have to raise additional funds to continue the development
and commercialization of our technologies. Such funds may not be available on
favorable terms, or at all. In particular, our substantial leverage may limit
our ability to obtain additional financing. If adequate funds are not available
on reasonable terms, we may be required to curtail operations significantly or
to obtain funds by entering into financing, supply or collaboration agreements
on unattractive terms. Our inability to raise capital could negatively impact
our business.
OUR PATENTS MAY NOT PROTECT OUR PRODUCTS AND OUR PRODUCTS MAY INFRINGE ON
THIRD-PARTY PATENT RIGHTS.
We have filed patent applications covering certain aspects of our device,
powder processing technology, and powder formulations and deep lung route of
delivery for certain molecules, and we plan to file additional patent
applications. We currently have 49 issued U.S. and foreign patents that cover
certain aspects of our technology and we have a number of patent applications
pending. There is a risk that many
7
<PAGE>
of the patents applied for will not issue, or that any patents that issue or
have issued will not be valid and enforceable. Enforcing our patent rights would
be time consuming and costly.
Our access or our partners' access to the drugs to be formulated will affect
our ability to develop and commercialize our technology. Many drugs, including
powder formulations of certain drugs that are presently under development by us,
are subject to issued and pending U.S. and foreign patents that may be owned by
our competitors. We know that there are issued patents and pending patent
applications relating to the deep lung delivery of large molecule drugs,
including several for which we are developing deep lung delivery formulations.
This situation is highly complex, and the ability of any one company, including
Inhale, to commercialize a particular drug is unpredictable.
We intend generally to rely on the ability of our partners to provide access
to the drugs that are to be formulated by us for deep lung delivery. There is a
risk that our partners will not be able to provide access to such drug
candidates. Even if such access is provided, there is a risk that our partners
or we will be accused of, or determined to be, infringing a third-party's patent
rights and will 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 to drug candidates or liability for damages would negatively impact our
revenues and results of operations.
OUR COMPETITORS MAY DEVELOP AND SELL BETTER DRUG DELIVERY SYSTEMS.
We are aware of other companies engaged in developing and commercializing
pulmonary drug delivery systems and enhanced injectable drug delivery systems.
Many of these companies have greater research and development capabilities,
experience, manufacturing, marketing, financial and managerial resources than we
do and represent significant competition for us. Acquisitions of or
collaborations with competing drug delivery companies by large pharmaceutical
companies could enhance our competitors' financial, marketing and other
resources. Accordingly, our competitors may succeed in developing competing
technologies, obtaining regulatory approval for products or gaining market
acceptance before us. Developments by others could make our products or
technologies uncompetitive or obsolete. Our competitors may introduce products
or processes competitive with or superior to ours.
INVESTORS SHOULD BE AWARE OF INDUSTRY-WIDE RISKS.
In addition to the risks associated specifically with Inhale described
above, investors should also be aware of general risks associated with drug
development and the pharmaceutical industry. These include, but are not limited
to:
- changes in and compliance with government regulations;
- handling of hazardous materials;
- hiring and retaining qualified people; and
- insuring against product liability claims.
WE EXPECT OUR STOCK PRICE TO REMAIN VOLATILE.
Our stock price is volatile. In the last twelve months, based on closing
prices on the Nasdaq National Market, our stock price ranged from $23.00 to
$126.62. We expect it to remain volatile. A variety of factors may have a
significant effect on the market price of our common stock, including:
- fluctuations in our operating results;
- announcements of technological innovations or new therapeutic products;
- announcement or termination of collaborative relationships by Inhale or
our competitors;
8
<PAGE>
- governmental regulation;
- clinical trial results or product development delays;
- developments in patent or other proprietary rights;
- public concern as to the safety of drug formulations developed by Inhale
or others; and
- general market conditions.
Any litigation brought against us as a result of this volatility could
result in substantial costs and a diversion of our management's attention and
resources, which could negatively impact our financial condition, revenues and
results of operations.
OUR OUTSTANDING INDEBTEDNESS HAS INCREASED SUBSTANTIALLY.
As of December 31, 1999, we had approximately $113.3 million in long-term
debt. Upon the closing of our sale of 5.0% convertible subordinated notes in
early 2000, we incurred additional long-term indebtedness of $230.0 million. In
early 2000, we entered into agreements with certain holders of the October 2006
debentures to reduce the principal amount of debentures outstanding by
approximately $94.2 million. Upon closing of the offering of the notes, our
long-term debt was approximately $249.2 million. This increased indebtedness has
and will continue to impact us by:
- significantly increasing our interest expense and related debt service
costs;
- making it more difficult to obtain additional financing; and
- constraining our ability to react quickly in an unfavorable economic
climate.
Currently, we are not generating sufficient cash flow to satisfy the annual
debt service payments that will be required as a result of the consummation of
sale of the notes. This may require us to use a portion of the proceeds from the
sales of the notes to pay interest or borrow additional funds or sell additional
equity to meet our debt service obligations. If we are unable to satisfy our
debt service requirements, substantial liquidity problems could result, which
would negatively impact our future prospects.
WHERE YOU CAN FIND MORE INFORMATION
Our principal executive offices are located at 150 Industrial Road, San
Carlos, CA 94070. Our telephone number is (650) 631-3100. We maintain an
Internet home page at www.Inhale.com The contents of our web page are not a part
of this prospectus.
We have filed with the SEC a registration statement on Form S-3 to register
the common stock offered by this prospectus. However, this prospectus does not
contain all of the information contained in the registration statement and the
exhibits and schedules to the registration statement. We strongly encourage you
to carefully read the registration statement and the exhibits and schedules to
the registration statement. We also file annual, quarterly and special reports,
proxy statements and other information with the SEC.
You may inspect and copy such material at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, as well as at the SEC's regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. You may also obtain copies of such material from the SEC
at prescribed rates by writing to the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
Website at www.sec.gov.
9
<PAGE>
The SEC allows us to "incorporate by reference" the information contained in
documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
that we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below and any future filings we will make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act :
1. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999, filed on March 10, 2000, including all material incorporated by
reference therein;
2. Our Current Report on Form 8-K, filed on February 1, 2000;
3. Our Current Report on Form 8-K, filed on February 9, 2000;
4. Our Current Report on Form 8-K, filed on February 24, 2000;
5. All other reports filed by us pursuant to Section 13(a) or 15(d) of the
Exchange Act since December 31, 1999, including all material incorporated
by reference therein; and
6. The description of the common stock contained in our Registration
Statement on Form 8-A as filed on May 2, 1994.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at:
Inhale Therapeutic Systems, Inc.
Attention: Investor Relations
150 Industrial Road, San Carlos, CA 94070
Telephone (650) 631-3100.
Our common stock is quoted on the Nasdaq National Market under the symbol
"INHL". The last reported sales price of the common stock on the Nasdaq National
Market ("Nasdaq") on March 13, 2000 was $114.0625 per share. You may inspect
reports and other information concerning us at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have authorized no one to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common stock
offered hereby.
DIVIDEND POLICY
We have never paid cash dividends. We currently intend to retain any
earnings for use in our business and do not anticipate paying any cash dividends
in the foreseeable future.
SELLING STOCKHOLDER
All of the shares of our common stock offered pursuant to this prospectus
are held by Alliance. The shares are being registered to permit public trading
of the shares, and Alliance may offer the shares for resale from time to time.
Alliance may sell the shares offered through this Prospectus from time to time
at prevailing prices in the over-the-counter market or in privately negotiated
transactions. We agreed to prepare and file such amendments and supplements to
the Registration Statement as may be necessary to keep the Registration
Statement effective until the earlier of November 4, 2000 or the date on which
such
10
<PAGE>
shares are no longer, by reason of Rule 144 under the Securities Act or any
rule of similar effect, required to be registered for the sale thereof by
Alliance.
The following table sets forth the number of shares of common stock owned
beneficially by Alliance as of the date of this Prospectus and the number of
shares that may be offered pursuant to this Prospectus. This information is
based upon information provided to us by Alliance. Applicable percentage of
ownership is based on 20,588,388 shares of common stock outstanding on March 1,
2000. There are currently no agreements, arrangements or understandings with
respect to the sale of any of the shares. Because Alliance may offer all or some
portion of the common stock, no estimate can be given as to the amount of common
stock that will be held by Alliance upon termination of any sales.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED MAXIMUM SHARES BENEFICIALLY
PRIOR TO THE NUMBER OWNED
OFFERING OF SHARES AFTER THE OFFERING
------------------- BEING --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
- ---- -------- -------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Alliance Pharmaceutical Corp................ 180,099 0.87% 180,099 -- --
</TABLE>
Neither Alliance nor any of its affiliates, officers, directors or principal
equity holders has held any position or office or has had any material
relationship with us within the past three years. Alliance acquired the common
stock from us in a private transaction on November 4, 1999. All of the shares of
common stock purchased by Alliance were "restricted securities" under the
Securities Act prior to this registration.
PLAN OF DISTRIBUTION
The shares offered hereunder may be sold from time to time by Alliance in
one or more transactions at fixed prices, at market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices.
Alliance may offer their shares of common stock in one more of the following
transactions:
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Stock Market;
- in the over-the-counter market;
- in private transactions;
- by pledge to secure debts and other obligations; or
- a combination of any of the above transactions.
Under the Securities Exchange Act, any person engaged in the distribution of
the shares may not simultaneously engage in market making activities with
respect to our common stock for a period of two business days prior to the
commencement of such distribution. In addition, Alliance will be subject to
applicable provisions of the Securities Exchange Act, which provisions may limit
the timing of purchases and sales of shares of common stock by Alliance
Pharmaceutical Corp. or any other such person.
If Alliance notifies Inhale of any material arrangement that it has entered
into with a broker or dealer for selling shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker or dealer, Inhale will file a supplemental prospectus, if required,
pursuant to Rule 424 (c) under the Securities Act. In that supplemental
prospectus, Inhale will disclose:
- the name of each such broker-dealer;
- the number of shares involved;
- the price at which such shares were sold;
11
<PAGE>
- the commissions paid of discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, as
supplemented; and
- any other facts material to the transaction.
Alliance may from time to time offer shares of common stock to or through
underwriters, broker/ dealers or agents. Alliance and any underwriters,
broker/dealers or agents that participate in the distribution of the shares of
common stock may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933. Any profits on the resale of shares of common stock and
any compensation received by any underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any or all of the sales or other transactions involving the shares described
above, whether effected by Alliance, 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.
To comply with the securities laws of certain jurisdictions, if applicable,
the common stock must be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the common stock may not be sold unless it has been registered or qualified for
sale or an exemption is available and is complied with.
We will pay substantially all of the expenses incurred by Alliance incident
to the preparation and filing with the SEC of the registration statement.
Alliance will bear essentially all of the expenses incurred incident to the sale
of the common stock.
We entered into a registration rights agreement for the benefit of Alliance
to register its common stock under applicable federal and state securities laws
under specific circumstances and at specific times. The registration rights
agreement provides for cross-indemnification of the Alliance and us and their
and our respective directors, officers and controlling persons against specific
liabilities in connection with the offer and sale of the common stock, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for us
by Cooley Godward LLP, Menlo Park, California.
ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in this registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
12
<PAGE>
WE HAVE AUTHORIZED NO ONE TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS THAT ARE NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD RELY ONLY
ON THE INFORMATION PROVIDED IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE
THEREIN. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY SHARES OF COMMON STOCK IN
ANY JURISDICTION WHERE IT IS UNLAWFUL. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THE DOCUMENT.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
About Our Business.......................................... 1
Risk Factors................................................ 3
Where You Can Find More Information......................... 9
Use of Proceeds............................................. 10
Dividend Policy............................................. 10
Selling Stockholder......................................... 10
Plan of Distribution........................................ 11
Legal Matters............................................... 12
Ernst & Young LLP, independent auditors..................... 12
</TABLE>
------------------------
[LOGO]
180,099 SHARES
OF COMMON STOCK
