As filed with the Securities and Exchange Commission on October 10, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SUGEN, INC.
(Exact name of Registrant as specified in its charter)
Delaware 2836 13-3629196
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification
organization) Code Number)
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351 Galveston Drive
Redwood City, California 94063
(650) 306-7700
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------
Stephen Evans-Freke
Chairman of the Board
SUGEN, Inc.
351 Galveston Drive
Redwood City, California 94063
(650) 306-7700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Brian C. Cunningham, Esq. Brian W. Pusch, Esq.
Cooley Godward LLP Law Offices of Brian W Pusch
Five Palo Alto Square Penthouse Suite
3000 El Camino Real 29 West 57th Street
Palo Alto, California 94306-2155 New York, NY 10019
(650) 843-5000 (212) 980-0408
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is filed in a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement of the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered(1) Offering Price Per Share(2) Aggregate Offering Price(2) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value
per share 1,780,000 shares $19.781 $35,210,180 $10,670
====================================================================================================================================
<FN>
(1) Includes (i) up to 1,258,500 shares of Common Stock to be issued upon
conversion of the Company's 5% Senior Custom Convertible Notes due 2000
(the "Notes"), (ii) up to 189,000 shares of Common Stock to be issued and
paid in lieu of cash, at the Company's option, as interest on the Notes,
(iii) up to 262,500 shares of Common Stock to be issued upon exercise of
Common Stock Purchase Warrants (the "Warrants"), (iv) up to 70,000 shares
of Common Stock to be issued upon exercise of warrants issued in connection
with placement agent fees, and (v) an indeterminate number of additional
shares of Common Stock as may from time to time become issuable upon
conversion of the Notes by reason of stock splits, stock dividends and
other similar transactions, which shares are registered hereunder pursuant
to Rule 416 under the Securities Act.
(2) The price of $19.781 per share, which was the average of the high and low
prices of the Common Stock reported by the Nasdaq Stock Market on October
6, 1997, is set forth solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933, as amended.
</FN>
</TABLE>
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 10, 1997
PROSPECTUS
1,780,000 Shares
SUGEN, INC.
Common Stock
This Prospectus relates to the offer and sale by certain persons listed
herein under "Selling Stockholders" (collectively, the "Selling Stockholders")
of (i) a maximum of 1,780,000 shares (collectively, together with the shares
referred to in clause (ii) of this sentence, the "Shares") of Common Stock, par
value $0.01 per share (the "Common Stock"), of SUGEN, Inc. (the "Company")
consisting of: (a) up to 1,258,500 shares of Common Stock to be issued from time
to time to the Selling Stockholders upon conversion of the Company's 5% Senior
Custom Convertible Notes due 2000 (the "Notes"), (b) up to 189,000 shares of
Common Stock to be issued and paid in lieu of cash, at the Company's option, as
interest on the Notes, (c) up to 262,500 shares of Common Stock to be issued
upon exercise of Common Stock Purchase Warrants (the "Warrants"), (d) up to
70,000 shares of Common Stock to be issued upon exercise of warrants issued in
connection with placement agent fees (the "Placement Fee Warrants"), and (ii) in
accordance with Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), such presently indeterminate number of additional shares as
may be issuable upon conversion of the Notes or payment of interest on the
Notes, based upon fluctuations in the conversion price of the Notes. All of the
Shares may be offered by the Selling Stockholders or by pledgees, donees,
transferees or other successors in interest that receive such Shares as a gift,
partnership distribution or other non-sale related transfer. The Notes, the
Warrants, the Placement Fee Warrants and the Common Stock issuable upon
conversion or exercise thereof or in payment of interest on the Notes have been
and will be issued in transactions exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof. See "Recent Developments,"
"Selling Stockholders" and "Plan of Distribution." The Shares are being
registered by the Company pursuant to registration rights granted to the Selling
Stockholders.
The Selling Stockholders have not advised the Company of any specific
plans for the distribution of the Shares covered by this Prospectus. It is
anticipated, however, that the Shares will be offered and sold by the Selling
Stockholders from time to time in transactions on the Nasdaq National Market, in
privately negotiated transactions, or by a combination of such methods of sale,
at such fixed prices as may be negotiated from time to time, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders 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 Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Shares being
offered by the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain liabilities, including liabilities under
the Securities Act.
The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "SUGN." On October 9, 1997, the last sale price for the Common
Stock as quoted on the Nasdaq National Market was $20.75 per share.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
herein for a description of agreements by the Company to indemnify the Selling
Stockholders against certain liabilities.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 4.
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.
THE DATE OF THIS PROSPECTUS IS OCTOBER __, 1997
<PAGE>
No dealer, salesperson 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 information or representations must not
be relied upon as having been authorized by the Company, any Selling
Stockholders or by any other person. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities other than the
shares of Common Stock offered hereby, nor does it constitute an offer to sell
or a solicitation of an offer to buy any of the shares offered hereby to any
person in any jurisdiction in which such offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall under any circumstances create any implication that the information
contained herein is correct as of any date subsequent to the date hereof.
AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement
on Form S-3 (the "Registration Statement") filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), omits certain of the information set
forth in the Registration Statement. For further information with respect to the
Company and the Common Stock offered hereby, reference is hereby made to such
Registration Statement, exhibits and schedules. Statements contained in this
Prospectus regarding the contents of any contract or other document are not
necessarily complete; with respect to each such contract or document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. A copy of the
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities of the Commission
described below, and copies of such material may be obtained from such office
upon payment of the fees prescribed by the Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed by
the Company with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of prescribed rates. Furthermore, the Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
Such Web site is located at http://www.sec.gov. The Company's Common Stock is
quoted on the Nasdaq National Market. Reports, proxy statements 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
hereby incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997;
3. The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997;
4. The Company's Definitive Proxy Statement dated April 9, 1997,
filed in connection with the Company's 1997 Annual Meeting of
Stockholders;
5. The Company's Current Report on Form 8-K filed on September
18, 1997; and
6. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission
on September 13, 1994, including any amendments or reports
filed for the purpose of updating such description.
<PAGE>
All reports and other documents subsequently 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 filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities remaining unsold, shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
reports and documents. Any statement contained in a document incorporated by
reference herein shall be deemed modified or superseded for purposes of this
Prospectus to the extent that a statement contained or incorporated by reference
herein modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been or may be incorporated by reference
in this Prospectus, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to SUGEN, Inc., 351 Galveston Drive, Redwood City, California
94063, telephone (650) 306-7700, Attn: Corporate Communications and Investor
Relations.
<PAGE>
The following information is qualified in its entirety by the more
detailed information and financial data, including "Risk Factors," appearing
elsewhere in this Prospectus, and in the documents incorporated herein by
reference. In addition to historical information contained herein, this
Prospectus contains words such as "intends," "believes," "anticipates," "plans,"
"expects" and similar expressions which are intended to identify forward-looking
statements that involve risks and uncertainties. Readers are cautioned not to
place undue reliance on these forwardlooking statements, which speak only as of
the date hereof. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in "Risk
Factors."
THE COMPANY
SUGEN is a biopharmaceutical company focused on the discovery and
development of small molecule drugs which target specific cellular signal
transduction pathways. Signal transduction is the process by which a signal from
the exterior of a cell is transmitted to the cell nucleus, resulting in the
activation or suppression of specific genes. Dysfunctional signal transduction
pathways have been implicated in disease areas such as cancer and diabetes as
well as dermatology, ophthalmology and in disorders of the cardiovascular,
immune and neurological systems. The main focus of SUGEN's research and drug
development programs is on specific signalling pathways regulated by tyrosine
kinases ("TKs"), tyrosine phosphatases ("TPs") and serine-threonine kinases
("STKs"). TKs, TPs and STKs can take the form of cell-surface receptors or
intra-cellular signalling molecules. Cell surface receptor TKs, receptor TPs and
receptor STKs are three of the largest known families of receptors in the body
and are key regulators of critical cellular functions including growth,
maturation, migration, metabolism and survival. Aberrant signalling of TKs, TPs
and STKs has been shown to result in a variety of chronic and acute pathological
disorders. SUGEN's founding scientists, Dr. Axel Ullrich of the
Max-Planck-Institut fur Biochemie ("MPI") and Dr. Joseph Schlessinger of New
York University Medical Center ("NYU"), are pioneers in the discovery and
characterization of TKs, TPs and their signalling pathways.
SUGEN is pursuing two separate business models for commercialization of
its products and technologies, one for oncology and one for applications outside
of cancer. In the cancer field, SUGEN is committed to building a vertically
integrated oncology business in North America, with the objective of bringing to
market a family of target-specific signal transduction inhibitors that are
proprietary to SUGEN. In cancer, the Company believes that it will become
standard practice to classify tumors by their molecular trigger, thereby
enabling physicians to prescribe the appropriate signal transduction inhibitor
drug as part of a treatment regimen. SUGEN believes it is a leader in the
research and discovery of novel signal transduction targets for cancer drug
development.
In December 1994, the Company filed its first Investigational New Drug
("IND") application with the U.S. Food and Drug Administration ("FDA") for
SU101, a platelet-derived growth factor receptor ("PDGF TK") signalling
antagonist. Imbalances in the PDGF TK signalling pathway have been implicated by
SUGEN and others in subsets of several cancers including brain, ovarian,
prostate, lung and melanoma. The Company currently is sponsoring several Phase
I/II and Phase II clinical trials. As of September 30, 1997 over 140 patients
have been treated with SU101.
In June 1997, the Company filed its second IND in cancer for SU5416, a
drug developed from the Company's Flk-1 TK angiogenesis inhibitor program that
addresses patients with solid tumors and may also have applications as an
anti-metastasis agent. Clinical trials were initiated in September 1997. SUGEN
currently is pursuing five additional proprietary cancer-related drug
development programs. These include GRB-2, Raf and orally available PDGF TK
inhibitor programs, in which lead compounds are now undergoing in vivo
pharmacology studies.
SUGEN's cancer drug development strategy is designed to facilitate the
rapid progression from Phase I clinical studies to FDA approval and product
launch, and thus the Company is targeting fast track entry indications for
clinical development even where these constitute a relatively small subset of
the potentially addressable patient population. Once a product has been
introduced to the clinic, SUGEN expects to work with the oncology community on
additional clinical studies to extend the labeling of the drug to other
applications. In order to market its products effectively, the Company intends
to build a U.S. sales force of approximately 50 representatives who would target
the major cancer treatment centers. The Company also expects to seek to
in-license and market additional late-stage cancer assets that serve to
complement SUGEN products, and intends to work with a partner to develop
genomic-based cancer diagnostics.
SUGEN is committed to pursuing in parallel the clinical development of
a number of target-specific cancer drugs in North America, concentrating each
clinical development program on entry indications in which patients have very
poor prognoses and no satisfactory alternative therapies. For each of its cancer
development programs,
1.
<PAGE>
the Company seeks to find partners for European and Asian territories in order
to share development costs. This strategy is exemplified by the collaboration
with ASTA Medica Aktiengesellschaft ("ASTA Medica") with respect to the Pan-Her
and Raf inhibitor programs, in which ASTA Medica is the Company's collaboration
partner in Europe and South America.
Separate from this strategy, the Company is funding a portion of its
ongoing cancer research through a collaboration with Zeneca Limited ("Zeneca"),
a major international pharmaceutical company. Zeneca is the Company's
collaboration partner and worldwide licensee with respect to five undisclosed
cancer drug discovery and development programs, on which SUGEN will receive
milestone payments and royalties on worldwide sales and will also have the
opportunity to earn profit participation in the North American market by
contributing to clinical development costs.
SUGEN is also applying its drug discovery platform to areas outside
oncology, including diabetes, dermatology, ophthalmology, neurological disorders
and immunology. In December 1996, the Company filed an IND application with the
FDA for SU5271, an epidermal growth factor receptor ("EGF TK") signalling
antagonist. SU5271 is a synthetic small molecule signal transduction inhibitor
that blocks keratinocyte growth. Hyperproliferating keratinocytes are a major
constituent of psoriatic lesions which can be blocked by selectively inhibiting
signalling of the EGF TK. The Company is currently conducting Phase I clinical
trials on SU5271.
In the areas outside cancer, SUGEN intends to pursue the
commercialization of its technology through joint ventures or collaborations in
which SUGEN contributes validated targets, screening technologies and drug leads
while the partner provides the disease and clinical expertise as well as funding
to bring potential products to market. This strategy is exemplified by the
October 1996 collaboration agreement with Vision Pharmaceuticals L.P., an
affiliate of Allergan, Inc., and Allergan, Inc. (collectively, "Allergan").
Through this collaboration, Allergan became SUGEN's exclusive corporate partner
in the ophthalmic neovascularization field, with the aim of utilizing SUGEN's
proprietary small molecule signal transduction inhibition technology to develop
novel therapies for the treatment of such major ophthalmic diseases as macular
degeneration and diabetic retinopathy.
SUGEN, Inc. was incorporated in Delaware in 1991. The Company's
executive offices are located at 351 Galveston Drive, Redwood City, California
94063, and its telephone number is (650) 306-7700. "SUGEN" is a trademark of the
Company. This Prospectus also contains trademarks of companies other than the
Company.
Recent Developments
The Shares being registered represent shares underlying $17,500,000 of
the Notes issued on September 12, 1997 by the Company to the Selling
Stockholders pursuant to and in connection with the several Note Purchase
Agreements dated as of September 8, 1997. The Notes were sold at par, mature on
September 12, 2000 and bear interest at a rate of 5% per annum. Interest on the
Notes, which is payable in arrears on the fifteenth day of each November,
February, May and August, may be paid in Common Stock or in cash at the option
of the Company. The Notes, which will not be convertible for 90 days from their
issuance date, can thereafter be converted, together with accrued and unpaid
interest and subject to certain limitations, into shares of Common Stock at a
conversion price equal to the average of the two lowest trade prices of the
Common Stock as reported on Nasdaq for the 20 trading days immediately preceding
the conversion date (the "Conversion Price "). Starting January 19, 1998 (the
"Fixed Conversion Date"), the Conversion Price may not exceed 115% of the
average closing bid price of the Common Stock for the 20 trading days
immediately preceding the Fixed Conversion Date. A Selling Stockholder will not
be permitted at anytime to convert in excess of the principal amount of Notes or
exercise Warrants or Placement Fee Warrants which would result in such Selling
Stockholder owning more than 4.9% of the then outstanding Common Stock.
In connection with the private placement of the Notes, the Selling
Stockholders were granted the Warrants to purchase up to 262,500 shares of
Common Stock at an exercise price of $16.74 per share.
Diaz & Altschul Capital, LLC of New York City was placement agent in
the transaction. In consideration for its services as placement agent, the
Company paid Diaz & Altschul Capital, LLC a fee of $875,000 and issued to its
designee,
2.
<PAGE>
Diaz & Altschul Group, LLC, the Placement Fee Warrants to acquire 70,000 shares
of Common Stock at an exercise price of $16.74 per share.
3.
<PAGE>
RISK FACTORS
The shares offered hereby involve a high degree of risk. The following
risk factors, inherent in and affecting the business of the Company, in addition
to the information contained elsewhere in this Prospectus and incorporated
herein by reference, should carefully be considered before purchasing the shares
of Common Stock offered hereby. In addition to historical information contained
herein, this Prospectus contains words such as "intends," "believes,"
"anticipates," "plans," "expects" and similar expressions which are intended to
identify forward-looking statements that involve risks and uncertainties.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but are not
limited to, those discussed below.
Early Stage of Development; Technological Change
SUGEN is at an early stage of development and must be evaluated in
light of the uncertainties and complications present in a biotechnology company.
The Company has only been in existence since 1991 and to date three drug
candidates have entered human clinical testing. To achieve profitable operations
on a continuing basis, the Company, alone or with collaborative partners, must
successfully develop, manufacture, introduce and market its proposed products.
There can be no assurance that the Company will be able to discover any
additional lead compounds or develop any commercial products. The time necessary
to achieve market success for any individual product is long and uncertain.
Products, if any, resulting from the Company's research and development programs
are not expected to be commercially available for a number of years even if they
are successfully developed and proven to be safe and effective. There can be no
assurance that any of the Company's product development efforts or those of its
collaborative partners will be successfully completed, that regulatory
clearances will be obtained or will be as broad as sought, that the Company's
products will be capable of being produced in commercial quantities at
reasonable cost or that any products, if introduced, will achieve market
acceptance.
Drug discovery and development methods based upon TKs, TPs and STKs and
their signalling pathways are relatively new, and there can be no assurance that
these methods will lead to the discovery or development of lead compounds or
commercial products or that the Company will be able to employ these methods of
drug discovery or development successfully. Three of the Company's compounds
have been approved for clinical testing, but there can be no assurance that any
other of the Company's current or proposed compounds will be submitted or
accepted for clinical testing. In addition, safety or efficacy of the Company's
compounds has not been demonstrated. As the Company's additional potential lead
compounds are identified, they will require significant additional development,
preclinical and clinical testing, regulatory clearance and additional investment
prior to their commercialization, and there can be no assurance that any of
these efforts will be successful.
Future Capital Needs; Uncertainty of Additional Funding
The operations of the Company to date have consumed substantial amounts
of cash, and substantial additional funds will be necessary in order to conduct
the costly and time consuming research and preclinical and clinical testing
required to develop its proposed products and to establish manufacturing and
marketing capabilities. The Company's future capital requirements will depend on
many factors, including, among others, continued scientific progress of its
research and development programs, the ability of the Company to establish
collaborative arrangements, progress with preclinical and clinical trials of its
product candidates, the time and costs involved in obtaining regulatory
clearance, the costs involved in preparing, filing, prosecuting, maintaining and
enforcing patent claims, competing technological and market developments,
changes in its existing research relationships and commercialization activities
and arrangements. The Company estimates that its existing capital resources,
together with facility and equipment financing, expected revenues from its
current collaborations and net income from investment activities, will be
sufficient to fund its planned operations into approximately mid 1999. The
Company anticipates that the funds from future collaborations will extend this
time period. However, there can be no assurance that the Company will enter into
any such collaboration. Additionally, there can be no assurance that the
underlying assumed levels of revenue and expense will prove accurate. The
Company intends to seek additional funding through collaborative arrangements,
public or private equity or debt financings and capital lease transactions;
however, there can be no assurance that additional financing will be available
on acceptable terms or at all. If
4.
<PAGE>
additional funds are raised by issuing equity securities, further dilution to
stockholders may result. In addition, in the event that additional funds are
obtained through arrangements with collaborative partners, such arrangements 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 itself. 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, which would have a material adverse effect on the
Company.
History of Operating Losses and Accumulated Deficit
The Company has experienced significant operating losses since its
inception in 1991. As of June 30, 1997, the Company had an accumulated deficit
of approximately $74 million. The Company expects to continue to incur
significant additional operating losses over the next several years and expects
cumulative losses to increase substantially as the Company's research and
development efforts, including preclinical and clinical testing, are expanded.
The Company's ability to achieve profitability is dependent on its ability,
alone or with others, to complete successfully the development of its proposed
products, obtain the required regulatory clearances and manufacture and market
its proposed products. There can be no assurance if or when the Company will
achieve profitability.
Dependence on Collaborative Relationships
The Company's strategy for the discovery, development, clinical
testing, manufacturing and commercialization of its proposed products includes
entering into various collaborations with corporate partners, licensors,
licensees and others, and is dependent upon the subsequent success of these
outside partners in performing their responsibilities. Currently, the Company
has corporate collaborations with Zeneca, ASTA Medica and Vision
Pharmaceuticals, L.P., an affiliate of Allergan, Inc., and Allergan, Inc.
(collectively "Allergan"). Although the Company believes that Zeneca, ASTA
Medica, Allergan and any future corporate partners have or will have an economic
motivation to perform their contractual responsibilities, the amount and timing
of resources to be devoted to these activities by corporate partners are not
within the control of the Company. There can be no assurance that such partners
will perform their obligations as expected or that the Company will derive any
additional revenue from such arrangements over and above the contractual payment
amounts. Moreover, there can be no assurance that SUGEN will succeed in
identifying lead compounds or developing commercial products from either current
or future collaborations.
The term of the Zeneca collaboration expires in January 2000, unless
the parties elect to extend such term. The collaborations with Zeneca, ASTA
Medica and Allergan may be terminated under certain circumstances including, in
the case of the Zeneca collaboration, a change in control of the Company.
Termination of these collaborations could result in the Company relinquishing
rights to certain technology or products jointly developed with the respective
party. In addition, the collaborations may be terminated for material breach.
The termination or material reduction in the scope of the collaborations could
have a material adverse effect on the Company.
In December 1995, the Company received, among other things, a
technology set-up fee of $4 million in connection with the ASTA Medica
agreement. As of January 1996, the Company received a wind-down fee of $4.3
million in connection with the termination of the Amgen collaboration. Through
December 31, 1996, the set-up and wind-down fees from the ASTA Medica and Amgen
collaborations, respectively, had been fully recognized as revenue. Going
forward, the Company will not recognize any additional revenue under the Amgen
collaboration, and will recognize additional revenue under the ASTA Medica
collaboration only upon achievement of specified milestones and for contract
services for non-collaboration work. In conjunction with the Allergan
collaboration, the Company received a $2 million initial payment for past
research services, will receive annual research funding and expects to receive
additional fees upon the achievement of specified milestones and royalties on
any product sales. In addition to the Allergan collaboration, the Company will
be required to enter into new collaborations in order to replace the revenues
recognized under these collaborations in 1996. No assurances can be given as to
the ability of the Company to enter such collaborations on a timely basis or at
all.
There can be no assurance that Zeneca, ASTA Medica and Allergan or any
other future collaborator will not pursue their existing or alternative
technologies in preference to those being developed in collaboration with the
Company. Furthermore, there can be no assurance that the Company will be able to
negotiate additional
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collaborative arrangements on acceptable terms, if at all, or that such
collaborations will be successful. To the extent that the Company chooses not to
or is unable to establish such arrangements, it would require substantially
greater capital to undertake research, development and marketing of its proposed
products at its own expense. In addition, the Company may encounter significant
delays in introducing its proposed products into certain markets or find that
the development, manufacture or sale of its proposed products in such markets is
adversely affected by the absence of such collaborative agreements.
To complement its internal research capabilities, the Company works
closely with Dr. Joseph Schlessinger's laboratory within the Department of
Pharmacology at New York University Medical Center ("NYU"), Dr. Axel Ullrich's
Department of Molecular Biology at Max-Planck-Institut fur Biochemie ("MPI") and
Dr. Werner Risau's laboratory at the Max-Planck-Institut fur Physiologische and
Klinische Forschung ("MPP") (MPI and MPP are collectively referred to herein as
"Max-Planck Society" or "MPS"). While NYU and MPS have made certain contractual
commitments to the Company, they are independent entities and are not under the
control of the Company or its officers or directors. Furthermore, the contracts
between the Company and NYU and MPS (collectively, the "Research Contracts") do
not obligate these institutions to devote any specified level of resources to
the research related to potential products for the Company, nor do the Research
Contracts require the principal researchers, or any member of their respective
research teams, to continue to conduct research related to potential products
for the Company. In addition, under the Research Contracts, NYU and MPS retain
freedom to select the methods to be used by them in pursuing their research.
There can be no assurance that NYU or MPS will continue to conduct research
related to potential products for SUGEN or that they will select research
targets, or the means to address them, in a manner consistent with the Company's
best interests.
The Company's contracts with NYU and MPP expire in September 2001 and
October 1999, respectively, while the Company's contract with MPI expired in
August 1997, but it is expected to be renewed in modified form. There can be no
assurance that these contracts will be renewed, or that any renewal will be made
on terms as favorable to the Company as those contained in the existing
contracts. The termination or expiration of any of the Research Contracts, or
the failure by NYU or MPS to continue to conduct research related to the
Company's potential products under the Research Contracts, could have a material
adverse effect on the Company. See "Business--Corporate and Clinical Development
Collaborations."
Uncertainty of Protection of Patents and Proprietary Rights;
Possible Patent Litigation
The Company's success will depend in part on its ability to obtain
patents, maintain trade secrets and operate without infringing on the
proprietary rights of others, both in the United States and in other countries.
Patent matters in biotechnology, and in particular with respect to receptors as
screening tools and/or the DNA encoding them, are highly uncertain and involve
complex legal and factual questions. Accordingly, the availability of and
breadth of claims allowed in biotechnology and pharmaceutical patents cannot be
predicted. As of September 30, 1997, SUGEN held exclusive rights to at least 12
issued U.S. patents and had filed and/or held exclusive licenses to
approximately 150 United States patent applications, as well as related foreign
patent applications. In addition, the Company has received notices of allowance
for two applications containing claims relating to the use of SU101 in treating
certain PDGFR related cancers and tumors. There can be no assurance that the
Company will develop products or processes that are patentable, that patents
will issue from any of the pending applications, or that claims allowed will be
sufficient to protect the Company's technology. There can be no assurance that
the Company's patents, if issued, will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection or competitive advantages to the Company. Competitors have been
issued patents, may have filed applications or may obtain additional patents and
proprietary rights relating to products or processes competitive with those of
the Company or which could block the Company's efforts to obtain patents.
A number of pharmaceutical companies, biotechnology companies,
universities and research institutions have filed patent applications or
received patents in the field of TKs, TPs and STKs and related downstream
signalling molecules. The commercial success of the Company will depend in part
on SUGEN not infringing patents issued to competitors and not breaching the
technology licenses upon which any Company products are based. The Company in
the past has been, and from time to time in the future may be, notified of
claims that the Company may be infringing patents or other intellectual property
rights owned by third parties. Certain patent applications or patents of the
Company's competitors may conflict with the Company's patents and patent
applications, and SUGEN is aware that other companies have filed patent
applications and have been granted patents in the United States and
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other countries claiming subject matter potentially useful or necessary to the
Company. Such conflicts could result in a significant reduction in the scope of
the coverage of the Company's issued or licensed patents. In addition, if
patents are issued to other companies which contain competitive or conflicting
claims and such claims are ultimately determined to be valid, the Company may be
required to obtain licenses to these patents or to develop or obtain alternative
technology. If any licenses are required, there can be no assurance that the
Company will be able to obtain any such license on commercially favorable terms,
if at all, and if these licenses are not obtained, the Company might be
prevented from pursuing the development of certain of its potential products.
The Company's breach of an existing license or failure to obtain a license to
any technology that it may require to commercialize its products may have a
material adverse impact on the Company. Litigation, which could result in
substantial costs to the Company, may also be necessary to enforce any patents
issued or licensed to the Company or to determine the scope and validity of
third party proprietary rights. There can be no assurance that the Company's
issued or licensed patents would be held valid by a court of competent
jurisdiction. Even if the outcome of such litigation is favorable, the cost of
such litigation and the diversion of the Company's resources during such
litigation could have a material adverse effect on the Company. An adverse
outcome could subject the Company to significant liabilities to third parties,
require disputed rights to be licensed from third parties or require the Company
to cease using such technology, any of which could have a material adverse
effect on the Company. If competitors of the Company prepare and file patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the Patent and Trademark Office to determine priority of invention,
which could result in substantial cost to the Company, even if the eventual
outcome is favorable to the Company. When patents issue in certain areas such as
Japan and the European community, third parties can oppose such issuance. Should
the relevant patent office institute a proceeding termed an opposition, the
Company may decide to defend its patent. There can be no assurance that the
Company will be successful or that the patent office will not revoke the patent
or alter the scope of protection previously granted.
SU101, a compound generally known by the name leflunomide, is a member
of the isoxazole family of compounds. Leflunomide was discovered more than 15
years ago. A large pharmaceutical company holds a number of United States and
foreign patents and has filed applications in the United States and abroad
covering compositions of matter and pharmaceutical uses of leflunomide and
structurally related compounds. While the Company believes at this time that it
will receive method of use patent protection on SU101, there can be no assurance
that any such patent protection will be issued. SUGEN believes its research and
development and its clinical trials with SU101 in the United States are
protected from claims of infringement of the United States patents because such
activities are being conducted solely for uses reasonably related to development
and submission of information to the FDA for regulatory approval. Although the
Company cannot predict whether or when SU101 will be approved by the FDA for
marketing in the United States, it believes that certain of the pharmaceutical
company's patents in the United States may have expired when marketing does
begin and that the remaining United States patents are either invalid or will
not be infringed by the manufacture and sale of SU101. However, the Company has
learned that additional patents have issued in the United States to the
pharmaceutical company covering the use of leflunomide and structurally related
compounds for the treatment of named cancers. The Company presently does not
know if commercialization of SU101 will infringe these additional patents but
believes that the additional patents may be subject to claims of invalidity as
they relate to SU101. If the additional patents were determined to be valid with
respect to SU101, the Company may be required to obtain a license from the
pharmaceutical company in order to manufacture and sell SU101 in the United
States. The Company presently does not intend to commercialize SU101 outside the
United States. There can be no assurance that SU101 will not infringe the
recently issued patents, that the term of the pharmaceutical company's other
existing patents will not be extended, that the claims of the pharmaceutical
company's pending patent applications will not be modified prior to issuance so
as to enhance their validity or scope, or that a court will agree with the
Company's beliefs regarding invalidity and non-infringement of the patents. To
date, the pharmaceutical company has not threatened or commenced legal
proceedings against the Company concerning possible patent infringement. There
can be no assurance that the pharmaceutical company in the future will not
assert claims against SUGEN or that the Company could reach agreement with the
pharmaceutical company for a license for SU101 upon favorable terms or at all,
if required. The inability of the Company to resolve this matter on favorable
terms or at all could have a material adverse effect on the Company. In any
event, the assertion of such claims, even if resolved favorably to the Company,
could result in substantial costs to the Company.
SUGEN also relies on trade secrets to protect technology, especially
where patent protection is not believed to be appropriate or obtainable. SUGEN
attempts to protect its proprietary technology and processes in part by
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confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors. To the extent that the Company or its consultants or
research collaborators use intellectual property owned by others in their work
for the Company, disputes may also arise as to the rights in related or
resulting know-how and inventions.
Uncertainties Related to Clinical Trials and Product Development
Before obtaining regulatory clearance for the commercial sale of any of
its products under development, the Company must demonstrate through preclinical
studies and clinical trials that the potential product is safe and efficacious
for use in humans for each target indication. The results from preclinical
studies and early clinical trials may not be predictive of results that will be
obtained in large-scale testing, and there can be no assurance that the
Company's clinical trials will demonstrate sufficient safety and efficacy
necessary to obtain the requisite regulatory approvals or will result in
marketable products. A number of companies in the pharmaceutical industry,
including biotechnology companies, have suffered significant setbacks in
advanced clinical trials, even after promising results in earlier trials. The
failure to adequately demonstrate the safety and efficacy of a product under
development could delay or prevent regulatory clearance of the potential product
and would have a material adverse effect on the Company.
Any drug is likely to produce some toxicities or undesirable side
effects in animals and in humans when administered at sufficiently high doses
and/or for sufficiently long periods of time. There can be no assurance that
unacceptable toxicities or side effects will not occur at any dose level at any
time in the course of toxicological studies or of human clinical trials of the
Company's potential products. The appearance of any such unacceptable toxicities
or side effects in toxicology studies or in clinical trials could cause the
Company or regulatory authorities to interrupt, limit, delay or abort the
development of any of the Company's product candidates and could ultimately
prevent their clearance by the FDA or foreign regulatory authorities for any or
all targeted indications. Even after being cleared by the FDA or foreign
regulatory authorities, a product may later be shown to be unsafe or to not have
its purported effect, thereby preventing its widespread use or requiring
withdrawal from the market. There can be no assurance that any products under
development by the Company will be safe when administered to patients.
The rate of completion of the Company's clinical trials is dependent
upon, among other factors, the rate of patient enrollment. Patient enrollment is
a function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the study. Delays in planned patient enrollment may
result in increased costs, delays or termination of clinical trials, which could
have a material adverse effect on the Company. In addition, the Company has a
limited clinical staff and, as a result, will rely on third parties to assist
the Company in overseeing and monitoring the clinical trials, which may result
in delays in completing clinical trials, if at all, if such third parties fail
to perform under their agreements with the Company or fail to meet regulatory
standards in the performance of their obligations under such agreements. There
can be no assurance that the Company will be able to submit a new drug
application as scheduled if clinical trials are completed or that any such
application will be reviewed and cleared by the FDA in a timely manner or at
all.
The Company currently has three drug candidates in clinical trials.
There can be no assurance that the Company will be able to complete the clinical
trials successfully, or at all, that other drug candidates entering clinical
trials, if any, will successfully complete such trials, or that the Company will
be able to demonstrate the safety and efficacy of such drug candidates. Clinical
trial results that show insufficient safety or efficacy would have a material
adverse effect on the Company.
Government Regulation; No Assurance of Regulatory Clearance
The manufacturing and marketing of the Company's potential products and
its ongoing research and development activities are subject to extensive
regulation by numerous governmental authorities in the United States and other
countries. Failure to comply with applicable FDA or other applicable regulatory
requirements may result in criminal prosecution, civil penalties, recall or
seizure of products, total or partial suspension of production or injunction, as
well as other regulatory action against the Company or its potential products.
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Prior to marketing in the United States, any drug developed by the
Company must undergo rigorous preclinical and clinical testing and an extensive
regulatory clearance process implemented by the FDA under the federal Food, Drug
and Cosmetic Act. Satisfaction of such regulatory requirements, which includes
satisfying the FDA that the product is both safe and effective, typically takes
several years or more depending upon the type, complexity and novelty of the
product and requires the expenditure of substantial resources. Preclinical
studies must be conducted in conformance with the FDA's good laboratory practice
("GLP") regulations. Before commencing clinical investigations in humans, the
Company must submit to and receive approval from the FDA of an IND. There can be
no assurance that submission of an IND would result in FDA authorization to
commence clinical trials. Clinical testing must meet requirements for
institutional review board oversight, informed consent and good clinical
practice requirements and is subject to continuing FDA oversight. The Company
does not have extensive experience in conducting and managing the clinical
testing necessary to obtain regulatory approval. Clinical trials may require
large numbers of test subjects. Furthermore, the Company or the FDA may suspend
clinical trials at any time if they believe that the subjects participating in
such trials are being exposed to unacceptable health risks or if the FDA finds
deficiencies in the IND or the conduct of the trials.
Before receiving FDA clearance to market a product, the Company will
have to demonstrate that the product is safe and effective on the patient
population that will be treated. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations which could delay, limit
or prevent regulatory clearances. In addition, delays or rejections may be
encountered based upon additional government regulation from future legislation
or administrative action or changes in FDA policy during the period of product
development, clinical trials and FDA regulatory review. Similar delays also may
be encountered in foreign countries. There can be no assurance that even after
such time and expenditures, regulatory clearance will be obtained for any
products developed by the Company. If regulatory clearance of a product is
granted, such clearance will be limited to those disease states and conditions
for which the product is useful, as demonstrated through clinical studies.
Marketing or promoting a drug for an unapproved indication is prohibited.
Furthermore, clearance may entail ongoing requirements for postmarketing
studies. Even if such regulatory clearance is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections by the FDA. Discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on such
product or manufacturer, including costly recalls or even withdrawal of the
product from the market. There can be no assurance that any compound developed
by the Company alone or in conjunction with others will prove to be safe and
efficacious in clinical trials and will meet all of the applicable regulatory
requirements needed to receive marketing clearance.
Outside the United States, the Company's ability to market a product is
contingent upon receiving a marketing authorization from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary widely from
country to country. At present, foreign marketing authorizations are applied for
at a national level, although within the European Community ("EC") certain
registration procedures are available to companies wishing to market a product
in more than one EC member state. If the regulatory authority is satisfied that
adequate evidence of safety, quality and efficacy has been presented, a
marketing authorization will be granted. This foreign regulatory approval
process includes all of the risks associated with FDA clearance set forth above.
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Intense Competition; Rapid Technological Change
SUGEN is engaged in a rapidly changing field. Other products and
therapies that will compete directly with the products that the Company is
seeking to develop and market currently exist or are being developed.
Competition from fully integrated pharmaceutical companies and more established
biotechnology companies is intense and is expected to increase. Most of these
companies have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical and clinical testing,
obtaining regulatory approvals and marketing than the Company. Smaller companies
may also prove to be significant competitors, particularly through collaborative
arrangements with large pharmaceutical and established biotechnology companies.
Many of these competitors have significant products that have been approved or
are in development and operate large, well funded research and development
programs. Academic institutions, governmental agencies and other public and
private research organizations also conduct research, seek patent protection and
establish collaborative arrangements for products and clinical development and
marketing. These companies and institutions compete with the Company in
recruiting and retaining highly qualified scientific and management personnel.
In addition to the above factors, SUGEN will face competition based on product
efficacy and safety, the timing and scope of regulatory approvals, availability
of supply, marketing and sales capability, reimbursement coverage, price and
patent position. There is intense competition for access to libraries of
compounds to use for screening and any inability of the Company to maintain
access to sufficiently broad libraries of compounds for screening potential
targets would have a material adverse effect on the Company. There is no
assurance that the Company's competitors will not develop more effective or more
affordable products, or achieve earlier patent protection or product
commercialization than the Company. See "--Uncertainty of Protection of Patents
and Proprietary Rights; Possible Patent Litigation."
Need to Attract and Retain Key Officers, Employees and Consultants
The Company is highly dependent on key members of its scientific and
management staff, the loss of whose services might significantly delay or
prevent the achievement of research, development, or business objectives. The
Company does not maintain "key person" life insurance on the lives of any
officer, employee or consultant of the Company. In addition, the Company relies
on consultants and advisors, including the members of its Science Advisory Board
and Clinical Advisory Board, to assist the Company in formulating its research
and development strategy. Retaining and attracting qualified personnel,
consultants and advisors is critical to the Company's success. In order to
pursue its product development and marketing 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, manufacturing and marketing. These requirements are also expected to
demand the attention of management personnel and the development of additional
expertise by existing management personnel. The Company faces competition for
qualified individuals from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. There can be no assurance that the
Company will be able to attract and retain such individuals on acceptable terms,
if at all, and the failure to do so would have a material adverse effect on the
Company.
Potential Volatility of Stock Price
The Common Stock currently trades on the Nasdaq National Market. The
securities markets have from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market price of the Common Stock, like
that of the common stock of many other early stage biotechnology companies, has
been and can in the future be expected to be, highly volatile. Factors such as
the fluctuation in the Company's operating results, announcements of
technological innovations or new commercial products by the Company or its
competitors, progress with clinical trials, governmental regulation, changes in
reimbursement policies, developments in patent or other proprietary rights of
the Company or its competitors, including litigation, developments in the
Company's relationships with current or future collaborative partners, if any,
public concern as to the safety and efficacy of drugs developed by the Company
and its competitors and general market conditions may have a significant effect
on the market price of the Common Stock.
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Lack of Manufacturing Experience; Reliance on Contract Manufacturers
The Company has no manufacturing facilities and relies on other
manufacturers to produce its compounds for research and development, preclinical
and clinical purposes. The products under development by the Company have never
been manufactured on a commercial scale and there can be no assurance that such
products can be manufactured at a cost or in quantities necessary to make them
commercially viable. If the Company were unable to contract for a sufficient
supply of its compounds on acceptable terms, or if it should encounter delays or
difficulties in its relationships with manufacturers, the Company's preclinical
and clinical testing schedule would be delayed, resulting in a delay in the
submission of products for regulatory approval or the market introduction and
subsequent sales of such products, which could have a material adverse effect on
the Company. Moreover, contract manufacturers that the Company may use must
adhere to current Good Manufacturing Practices regulations enforced by the FDA
through its facilities inspection program. If these facilities cannot pass a
pre-approval plant inspection, the FDA pre-market approval of the products will
not be granted.
Lack of Marketing Experience; Dependence on Third Parties
The Company currently has no sales, marketing or distribution
capability. The Company intends to rely on relationships with one or more
pharmaceutical companies with established distribution systems and direct sales
forces to market certain of its proposed products and to market other products
directly. To market any of its products directly, the Company must develop a
marketing and sales force with technical expertise and with supporting
distribution capabilities. There can be no assurance that the Company will be
able to establish in-house sales and distribution capabilities or relationships
with third parties. To the extent that the Company enters into co-promotion or
other licensing arrangements, any revenues received by the Company will depend
upon the efforts of third parties, and there can be no assurance that such
efforts will be successful.
No Assurance of Market Acceptance
There can be no assurance that, if approved for marketing, any of the
Company's products under development will achieve market acceptance. The degree
of market acceptance will depend upon a number of factors, including the receipt
of regulatory approvals, the establishment and demonstration in the medical
community of the clinical efficacy and safety of the Company's product
candidates and their potential advantages over existing treatment methods,
pricing and reimbursement policies of government and third-party payors. There
is no assurance that physicians, patients, payors or the medical community in
general will accept and utilize any products that may be developed by the
Company.
Uncertainty of Pharmaceutical Pricing and Reimbursement
The business and financial condition of pharmaceutical and
biotechnology companies will continue to be affected by the efforts of
governmental and third-party payors to contain or reduce the cost of health
care. In certain foreign markets pricing or profitability of prescription
pharmaceuticals is subject to governmental control. In the United States there
have been, and the Company expects that there will continue to be, a number of
federal and state proposals to implement similar government control. In
addition, an increasing emphasis on managed care in the United States has
increased and will continue to increase the pressure on pharmaceutical pricing.
While the Company cannot predict whether any such legislative or regulatory
proposals will be adopted or the effect such proposals or managed care efforts
may have on its business, the announcement of such proposals or efforts could
have a material adverse effect on the Company's ability to raise capital, and
the adoption of such proposals or efforts could have a material adverse effect
on the Company's business and financial condition. Further, to the extent that
such proposals or efforts have a material adverse effect on other pharmaceutical
companies that are prospective corporate partners for the Company, the Company's
ability to establish a strategic collaboration may be adversely affected. In
addition, in both domestic and foreign markets, sales of the Company's proposed
products 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
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enable the Company to maintain price levels sufficient to realize an appropriate
return on its investment in product development.
Product Liability Exposure and Uncertain Availability of Insurance
The use of any of the Company's potential products in clinical trials,
and the sale of any approved products may expose the Company to liability claims
resulting from the use of its products. These claims might be made directly by
consumers, health care providers or by pharmaceutical companies or others
selling such products. SUGEN has obtained limited product liability insurance
coverage for its human clinical trials. However, insurance coverage is becoming
increasingly expensive and no assurance can be given that the Company will be
able to maintain insurance coverage at a reasonable cost or in sufficient
amounts to protect the Company against losses due to liability. There can also
be no assurance that the Company will be able to obtain commercially reasonable
product liability insurance for any product approved for marketing. A successful
product liability claim or series of claims against the Company could have a
material adverse effect on its business, financial condition or results of
operations.
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 if the Company develops manufacturing capacity.
Anti-takeover Provisions
The Company's Certificate of Incorporation and Bylaws require that any
action required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by written consent. Special meetings of the stockholders of the
Company may be called only by the Board of Directors, the Chairman of the Board
or the Chief Executive Officer of the Company. These and other charter
provisions may discourage certain types of transactions involving an actual or
potential change in control of the Company, including transactions in which the
stockholders might otherwise receive a premium for their shares over then
current prices, and may limit the ability of the stockholders to approve
transactions they may deem to be in their best interests. The Board of Directors
also has the authority, without action by the stockholders, to fix the rights
and preferences of and issue shares of Preferred Stock, which may have the
effect of delaying or preventing a change in control of the Company. In
addition, the Board of Directors has adopted a Preferred Share Purchase Rights
Plan (commonly known as a "poison pill"), and the Company's research
collaboration with Zeneca permits Zeneca to terminate the arrangement if a third
party acquires 35% or more of SUGEN's voting stock. These provisions also may
have the effect of delaying or preventing a change in control of the Company.
Shares Eligible for Future Sale
Substantially all of the Company's shares are eligible for sale in the
public market. The issuance of Common Stock upon the exercise of stock options
and warrants, as well as future sales of such Common Stock or of shares of
Common Stock by existing stockholders, or the perception that such sales could
occur, could adversely affect the market price of the Common Stock. In September
1997, the Company issued the Notes, which are convertible into Common Stock, and
the Warrants and the Placement Fee Warrants, which are exercisable for Common
Stock. The Common Stock issuable upon conversion of the Notes, payment of
interest on the Notes and exercise of the Warrants and the Placement Fee
Warrants are the Shares being registered hereunder. Conversion of the Notes,
payment of interest on the Notes in shares of Common Stock and exercise of the
Warrants and the Placement Fee Warrants could adversely affect the market price
of the Common Stock. See "The Company -- Recent Developments."
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BUSINESS
Overview
SUGEN is a biopharmaceutical company focused on the discovery and
development of small molecule drugs which target specific cellular signal
transduction pathways. Signal transduction is the process by which a signal from
the exterior of a cell is transmitted to the cell nucleus, resulting in the
activation or suppression of specific genes. Dysfunctional signal transduction
pathways have been implicated in disease areas such as cancer and diabetes as
well as dermatology, ophthalmology and in disorders of the cardiovascular,
immune and neurological systems. The main focus of SUGEN's research and drug
development programs is on specific signalling pathways regulated by tyrosine
kinases ("TKs"), tyrosine phosphatases ("TPs") and serine-threonine kinases
("STKs"). TKs, TPs and STKs can take the form of cell-surface receptors or
intra-cellular signalling molecules. Cell surface receptor TKs, receptor TPs and
receptor STKs are three of the largest known families of receptors in the body
and are key regulators of critical cellular functions including growth,
maturation, migration, metabolism and survival. Aberrant signalling of TKs, TPs
and STKs has been shown to result in a variety of chronic and acute pathological
disorders. SUGEN's founding scientists, Dr. Axel Ullrich of the
Max-Planck-Institut fur Biochemie ("MPI") and Dr. Joseph Schlessinger of New
York University Medical Center ("NYU"), are pioneers in the discovery and
characterization of TKs, TPs and their signalling pathways.
SUGEN is pursuing two separate business models for commercialization of
its products and technologies, one for oncology and one for applications outside
of cancer. In the cancer field, SUGEN is committed to building a vertically
integrated oncology business in North America, with the objective of bringing to
market a family of target-specific signal transduction inhibitors that are
proprietary to SUGEN. In cancer, the Company believes that it will become
standard practice eventually to classify tumors by their molecular trigger,
thereby enabling physicians to prescribe the appropriate signal transduction
inhibitor drug as part of a treatment regimen. SUGEN believes it is a leader in
the research and discovery of novel signal transduction targets for cancer drug
development.
In December 1994, the Company filed its first Investigational New Drug
("IND") application with the U.S. Food and Drug Administration ("FDA") for
SU101, a platelet-derived growth factor receptor ("PDGF TK") signalling
antagonist. Imbalances in the PDGF TK signalling pathway have been implicated by
SUGEN and others in subsets of several cancers including brain, ovarian,
prostate, lung and melanoma. The Company currently is sponsoring several Phase
I/II and Phase II clinical trials. As of September 30, 1997 over 140 patients
have been treated with SU101.
In June 1997, the Company filed its second IND in cancer for SU5416, a
drug developed from the Company's Flk-1 TK angiogenesis inhibitor program that
addresses patients with solid tumors and may also have applications as an
anti-metastasis agent. Clinical trials were initiated in September 1997. SUGEN
currently is pursuing five additional proprietary cancer-related drug
development programs. These include GRB-2, Raf and orally available PDGF TK
inhibitor programs, in which lead compounds are now undergoing in vivo
pharmacology studies.
SUGEN's cancer drug development strategy is designed to facilitate the
rapid progression from Phase I clinical studies to FDA approval and product
launch, and thus the Company is targeting fast track entry indications for
clinical development even where these constitute a relatively small subset of
the potentially addressable patient population. Once a product has been
introduced to the clinic, SUGEN expects to work with the oncology community on
additional clinical studies to extend the labeling of the drug to other
applications. In order to market its products effectively, the Company intends
to build a U.S. sales force of approximately 50 representatives who would target
the major cancer treatment centers. The Company also expects to seek to
in-license and market additional late-stage cancer assets that serve to
complement SUGEN products, and intends to work with a partner to develop
genomic-based cancer diagnostics.
SUGEN is committed to pursuing in parallel the clinical development of
a number of target-specific cancer drugs in North America, concentrating each
clinical development program on entry indications in which patients have very
poor prognoses and no satisfactory alternative therapies. For each of its cancer
development programs, the Company seeks to find partners for European and Asian
territories in order to share development costs. This strategy is exemplified by
the collaboration with ASTA Medica Aktiengesellschaft ("ASTA Medica") with
respect
13.
<PAGE>
to the Pan-Her and Raf inhibitor programs, in which ASTA Medica is the Company's
collaboration partner in Europe and South America.
Separate from this strategy, the Company is funding a portion of its
ongoing cancer research through a collaboration with Zeneca Limited ("Zeneca"),
a major international pharmaceutical company. Zeneca is the Company's
collaboration partner and worldwide licensee with respect to five undisclosed
cancer drug discovery and development programs, on which SUGEN will receive
milestone payments and royalties on worldwide sales and will also have the
opportunity to earn profit participation in the North American market by
contributing to clinical development costs.
SUGEN is also applying its drug discovery platform to areas outside
oncology, including diabetes, dermatology, ophthalmology, neurological disorders
and immunology. In December 1996, the Company filed an IND application with the
FDA for SU5271, an epidermal growth factor receptor ("EGF TK") signalling
antagonist. SU5271 is a synthetic small molecule signal transduction inhibitor
that blocks keratinocyte growth. Hyperproliferating keratinocytes are a major
constituent of psoriatic lesions which can be blocked by selectively inhibiting
signalling of the EGF TK. The Company is currently conducting Phase I clinical
trials on SU5271.
In the areas outside cancer, SUGEN intends to pursue the
commercialization of its technology through joint ventures or collaborations in
which SUGEN contributes validated targets, screening technologies and drug leads
while the partner provides the disease and clinical expertise as well as funding
to bring potential products to market. This strategy is exemplified by the
October 1996 collaboration agreement with Vision Pharmaceuticals L.P., an
affiliate of Allergan, Inc., and Allergan, Inc. (collectively, "Allergan").
Through this collaboration, Allergan became SUGEN's exclusive corporate partner
in the ophthalmic neovascularization field, with the aim of utilizing SUGEN's
proprietary small molecule signal transduction inhibition technology to develop
novel therapies for the treatment of such major ophthalmic diseases as macular
degeneration and diabetic retinopathy.
Overview of Cellular Signal Transduction Pathways
The last decade of research has led to an increased understanding of
how cells communicate with each other to coordinate the growth and maintenance
of the multitude of tissues within the human body. A key element of this
communication network is the transmission of a signal from the exterior of a
cell to its nucleus, which results in the activation or suppression of specific
genes. This process is called signal transduction. An integral part of signal
transduction is the interaction of ligands, receptors and intracellular signal
transduction molecules ("downstream signalling molecules").
Ligands are chemical messengers, usually released by one cell to
communicate with a target cell by binding to specific receptors on the target
cell's surface. A receptor generally takes the form of a protein that straddles
a cell's membrane, with its "ligand binding domain" protruding out of the cell
and its "intracellular domain" anchored inside the cell. When a ligand binds to
its receptor, the newly formed receptor/ligand complex triggers the activation
of a cascade of downstream signalling molecules, thereby transmitting the
message from the exterior of the cell to its nucleus. When the message is
received in the nucleus, it dictates the activation or suppression of specific
genes, resulting in the production of proteins that carry out a specific
biological response. Depending on the specific ligand, receptor and downstream
signalling molecules, the resulting signalling cascade controls diverse and
distinct cellular processes. For example, metabolic changes can be effected by a
ligand such as insulin which, after binding to the insulin receptor, activates a
specific set of downstream signalling molecules within the cell, ultimately
leading to the regulation of glucose uptake and other insulin-associated
functions.
Tyrosine Kinases, Tyrosine Phosphatases and Serine-Threonine
Kinases in Signal Transduction
TKs, TPs and STKs are classes of signalling molecules that are central
to the healthy functioning of all tissues. Some well known TKs include Her2,
PDGF TK, insulin receptor ("insulin TK"), EGF TK, macrophage colony stimulating
factor receptor and nerve growth factor receptor. At present, there are
approximately 100 known human TKs, all of which have been cloned over the last
twelve years. TPs were not discovered until 1988, and at present there are
approximately 50 known human TPs.
14.
<PAGE>
Generally, when a ligand binds to receptor TKs, the receptors must
dimerize (join in pairs at the cell surface) to become activated. This coupling
activates a specific enzyme activity which resides within the intracellular
domain of each TK. Upon activation, the TKs commence cross-phosphorylation, a
process whereby phosphates (highly charged particles) are enzymatically added to
specific sites on each of the TKs. These phosphates serve as attachment sites at
which specific downstream signalling molecules interact with the TKs. Many of
these downstream signalling molecules in turn become phosphorylated themselves,
enabling them to recruit their own substrates and thus pass on the signal.
Depending on the specific ligand and receptor, the resulting signalling cascade
leads to changes in gene expression or affects other cellular systems that
ultimately determine if the cell is to grow, mature, migrate, metabolize or
survive.
Complementing TKs are TPs, which were first characterized in detail by
Dr. Edmond H. Fisher, a 1992 Nobel Laureate, SUGEN collaborator and member of
SUGEN's Science Advisory Board. While the TKs phosphorylate target proteins to
exert their activity, the TPs remove phosphates ("dephosphorylate") from target
proteins, thereby regulating the activity of the TKs. Generally, when a receptor
TK is activated by its ligand, a given biologic response is triggered.
Conversely, when a TP is activated, there is usually down regulation of a given
biologic response. In this manner, TKs can be visualized as the "gas pedal" and
TPs as the "brake pedal" for numerous biological processes. Many cellular
responses are thus regulated by the balance between specific TKs and TPs.
The most abundant kinases in the cell are STKs which phosphorylate
serine and threonine residues. These enzymes control an array of processes in
the cell. Many STKs act downstream in signal transduction cascades initiated by
TKs, while others integrate signals originating from other classes of receptors
(e.g., G protein-coupled receptors). STKs are involved in controlling the cell
cycle, the response of the cell to environmental stress, the development of
certain cells and tissues, and other processes such as metabolism.
Diseases and Disorders Related to TK, TP and STK Signalling Pathways
TKs, TPs, STKs and their signalling pathways play key roles in a
variety of normal cellular functions involving virtually every cell type in the
body. Examples include the growth of epithelial cells (skin and lining tissues
of internal organs), angiogenesis, hematopoiesis, proliferation of connective
tissue cells (fibroblasts), survival and differentiation of nerve cells,
regeneration of tissues during wound healing and regulation of the energy
metabolism of all cells. While normal cellular function involves a balance
between kinase and phosphatase activity, imbalances between these molecules have
been shown to result in a variety of chronic and acute pathological conditions,
including cancer and diabetes as well as in dermatologic, ophthalmic, neurologic
and immunologic disorders.
The close association of TKs, TPs and STKs with disease, coupled with
structural characteristics of these molecules, make them attractive targets for
drug discovery and therapeutic intervention. The intracellular domains of these
receptors can be targeted with great selectivity by drugs that inhibit enzyme
activity or that prevent the binding of downstream signalling molecules to the
phosphorylated receptor. Critical points further downstream in the signalling
cascade may also be viable targets since selective intervention at these points
can prevent the message from reaching its final destination in the nucleus.
Cancer
Research over the past 20 years has reinforced the view that cancer is
a disease involving damage, loss or amplification of specific genes. Moreover,
of the numerous oncogenes identified to date, many appear to be abnormal
versions of TK and STK signalling pathway components, such as ligands, TKs or
STKs or downstream signalling molecules. These discoveries have led to the
realization that dysfunctional TK or STK signalling pathways play an integral
role in cancer. More recently, as TPs have been shown to counteract the activity
of TKs, TPs have been implicated as potential tumor suppressor genes.
In 1986, Dr. Ullrich and Dr. Dennis Slamon of the University of
California at Los Angeles Medical Center, a researcher, clinical oncologist and
member of SUGEN's Science Advisory Board, established the clinical relevance of
overexpression of a receptor TK known as Her2 in human breast and ovarian
cancers. In their study of approximately 200 patients it was found that almost
30% of breast and ovarian cancer patients overexpress Her2
15.
<PAGE>
and that high levels of Her2 in a patient's tumor correlated with reduced
survival time. Since that time, subsets of other types of human tumors have been
shown to express high levels of Her2, including gastric and lung cancers. Animal
data from several laboratories has demonstrated that the suppression of Her2
activity has a significant inhibitory effect on tumor growth, validating Her2 as
a target for cancer therapy in the subset of patients that overexpress this TK.
Similarly, aberrant PDGF TK signalling has been implicated in studies at SUGEN
and elsewhere in subsets of brain, ovarian and other solid tumors, and
overexpression of the EGF TK has been implicated in subsets of breast, brain,
head and neck, lung and gastric cancers.
As a result of the close linkage between TK, TP and STK aberrations and
cancer, SUGEN believes that certain cancers can be recategorized according to
specific TK, TP and STK signalling pathway defects rather than merely by
physical location in the body (e.g., breast, lung, brain). Several observations
support this approach. For example, TK overexpression is not a transient
phenomenon. Cancer cells that exhibit TK overexpression do so continuously. In
addition, in many cases a cancer cell exhibits heavy overexpression of only one
TK. For instance, when cancer cells metastasize from a Her2-dependent tumor and
establish themselves at a remote site in the body, the distal tumor has also
been observed to overexpress Her2. Furthermore, SUGEN has shown that certain
tumor cells that overexpress a TK are more sensitive to TK inhibitors than
normal cells, thus reducing the likelihood of a TK inhibitor affecting normal
cells and causing problematic side effects. The Company believes that these
observations are the basis for a new approach to cancer therapy which might
commence with a sample of biopsy material being sent to a pathology lab for gene
expression profiling in order to determine the nature of the cellular
abnormality, such as overexpression of a TK. This diagnosis could then be used
to select the appropriate target-specific signal transduction inhibitor for
treatment.
Angiogenesis
Studies conducted by SUGEN in mice have shown that small molecule drug
candidates targeting the Flk-1 pathway can block the formation of blood vessels
("angiogenesis") essential to the growth and spread of most solid tumors. Flk-1
TK receptors, present on endothelial cells which make up blood vessel walls, act
as regulators of cell growth and angiogenesis. Tumors secrete vascular
endothelial growth factor ("VEGF") which binds to Flk-1 TK receptors resulting
in the sprouting of capillaries from the blood vessel toward the tumor. Blocking
Flk-1 TK activity blocks the ability of most tumors to stimulate formation of
blood vessels and thus deprives the tumor of necessary nutrients. In preclinical
studies conducted by researchers at SUGEN and collaborating labs, small molecule
inhibitors of the Flk-1 receptor tyrosine kinase blocked VEGF-dependent
angiogenesis, as well as vascular permeability, and human endothelial cells were
prevented from undergoing cell division that is required for the formation of
new blood vessels. Other studies by the Company suggest that a tumor's ability
to form metastases depends on the degree of vascularization of the primary
tumor. A high degree of vascularization generally correlates with a poorer
prognosis. SUGEN has demonstrated that by blocking Flk-1 TK activity in a
metastasis model it can block the formation of metastases to the liver and also
prolong life in animals. Flk-1 TK inhibitors thus are potentially useful to
treat metastatic disease in defined patient populations.
Flk-1 TK may also be an effective therapeutic for treating other
diseases associated with angiogenesis. These include psoriasis, rheumatoid
arthritis and ocular neovascularization. Potential ophthalmic applications are
in diabetic retinopathy and macular degeneration.
Diabetes
SUGEN has determined that certain TPs appear to be the body's natural
down regulators of the insulin TK signalling pathway. A drug which selectively
blocks these TPs may restore signalling through the insulin TK pathway, thereby
increasing glucose uptake and metabolism, and may constitute a novel therapeutic
approach to both Type I and Type II diabetes. Such a drug may also offer the
advantage of being orally available.
Psoriasis
Hyperproliferation of keratinocytes contributes to psoriasis, and work
by SUGEN and its collaborators has demonstrated that EGF TK signalling is
required for the growth of keratinocytes. These studies suggest that a drug
which blocks the EGF TK may be useful in treating psoriasis. Psoriasis is a
chronic skin disorder that affects approximately four million people in the
United States, and annual treatment costs in this country are estimated at
16.
<PAGE>
over $1.5 billion. There are few currently available drugs for this disease that
offer satisfactory efficacy and safety. SUGEN's work in psoriasis is based in
part on research conducted at the Hebrew University of Jerusalem ("HUJ").
Neurobiology
TKs, TPs and their signalling pathways are known to play key roles in
the maintenance of the central and peripheral nervous systems. SUGEN has
identified novel TKs and TPs whose expression is restricted to the nervous
system and which may serve as therapeutic targets for intervention in
neurodegenerative diseases.
Immunology
The role of TKs and STKs in the generation and maintenance of the human
immune system has been well established by a number of research teams around the
world. Signal transduction molecules in the immune system represent potential
drug discovery targets for identifying novel immunosuppressive and
immuno-stimulative drugs.
SUGEN's Drug Discovery Technology
SUGEN's goal is to discover and develop drugs that target specific TKs,
TPs, STKs or related downstream signalling molecules. SUGEN's drug discovery
effort is focused primarily on the discovery of small molecule drugs derived
from synthetic compound libraries and collections of natural product extracts,
including microbes, fungi and plants. As compared to biologic pharmaceuticals
such as proteins, peptides and carbohydrates, small molecules often offer
advantages as potential drugs. Small molecules can more easily penetrate cell
membranes and the blood brain barrier, can often be delivered orally, and can be
less immunogenic. These molecules also tend to involve substantially lower
process development and manufacturing costs. Using inhibition of TK
phosphorylation in a whole cell environment as an initial screening criterion,
SUGEN has been able to identify lead compounds in a number of its programs that
penetrate the cell easily, show minimal cytotoxicity and demonstrate potent and
selective activity on given targets.
SUGEN's process of drug discovery includes the following steps,
regardless of disease area: (1) target identification; (2) target validation;
(3) assay design and screening of compounds for leads; and (4) lead
optimization, including crystallography and medicinal chemistry. The Company's
in-house research teams also work closely with NYU, MPI and Max-Planck-Institut
fur Physiologische und Klinische Forschung ("MPP") in target identification and
target validation. In this case, the remaining steps of this process are
conducted primarily by SUGEN or by its corporate partners.
Target Identification
SUGEN's genomics efforts are focused exclusively on certain families of
signal transduction genes, which make up approximately one percent of the entire
human genome. These families include the TKs, TPs, STKs, adaptor molecules and
certain other important molecules involved in cellular signalling. Within this
specific area of focus, SUGEN identifies and defines the function of novel genes
and their protein products, and in turn assesses their utility as targets for
therapeutic intervention against diseases of interest to the Company.
SUGEN believes that substantially the entire human genome will be
sequenced within a few years, and most of that sequence data will be available
on public databases. SUGEN's target identification effort, therefore, is focused
on determining the function of novel genes. In this regard, SUGEN has made a
strategic commitment to its bioinformatics platform, representing a bridge
between abundant gene sequence data and disease-relevant discoveries.
SUGEN's bioinformatics program starts with a physical repository of the
approximately 200 known signal transduction genes in addition to numerous other
genes discovered by SUGEN but not published to date. SUGEN also has a
proprietary panel of oligonucleotide primers capable of recognizing genes that
are minimally related to genes already in the SUGEN library. All of this
information is supported by an in-house massively parallel computer processing
platform capable of approximately 68,000 million instructions per second (mips)
throughput. Using sophisticated pattern recognition algorithms, SUGEN is able to
mine the public databases on a daily basis looking for new sequence material of
interest, for the complete sequences of gene fragments identified from cells of
interest,
17.
<PAGE>
for additional members of newly discovered families of signal transduction
genes, or for homologs of human genes in non-human genome databases that could
provide quick insights into the function of the new human gene.
SUGEN has used this bioinformatics platform to develop a proprietary
technology called transcript imaging, for which the Company has filed for patent
protection. This technology enables SUGEN researchers to take a small sample of
cells or tissue of interest and to obtain rapidly a systematic analysis of the
expression levels in the sample of every TK and TP in SUGEN's library.
Transcript imaging allows SUGEN to identify quickly the signalling pathways that
play key roles in specific cell types and, more importantly, to compare diseased
cells to healthy cells in order to determine where aberrant signalling may play
a causative role in a disease. For example, if a particular signal transduction
gene is heavily overexpressed in a significant proportion of samples of a
specific tumor type, that gene becomes a potential target for drug development.
If the gene can subsequently be validated as playing a causative role in these
tumors, it may be adopted as a target for drug discovery. SUGEN believes that
transcript imaging also has the potential to become an important diagnostic
tool, but SUGEN will seek to pursue this opportunity in partnership with an
established diagnostics company.
Target Validation
A primary challenge in SUGEN's target driven drug discovery is to
progress as efficiently as possible from identifying a potential new target to
verifying that a drug which specifically acts on that target could have a
significant therapeutic benefit in the treatment of a given disease. SUGEN terms
this process "target validation," and it is a crucial step before committing
resources to assay development and screening for target-specific drug leads. The
first step in validating a novel target usually involves developing a battery of
proprietary reagents, including truncated or point-mutated genes, anti-sense
constructs and antibodies. In the case of novel receptors, where the natural
ligands and signalling substrates initially may be unknown, the Company employs
a variety of advanced methods for identifying and cloning these molecules. Using
these reagents, the Company then engineers cell lines in which it has clearly
characterized the expression levels and activity of the target gene. These cell
lines can then be used to establish in vitro and in vivo whether down-regulating
the target will block the disease cascade.
If so, the target is considered validated.
Assay Design/Screening
From its inception, SUGEN has committed significant resources to
building a strong assay development capability, and the Company regards this
capability as an important component of its proprietary position in the
discovery and development of target specific signal transduction inhibitor
drugs. Assay quality is the most important determinant of any screening
program's productivity, and this becomes even more important in target driven
drug discovery. SUGEN primarily employs engineered whole cell assays rather than
biochemical assays. A majority of SUGEN's assays are designed for
high-throughput robotics screening, and its core assay technologies are broadly
applicable to TKs, TPs and STKs and related signalling molecule targets.
SUGEN's drug discovery process employs a battery of proprietary assays
and models engineered specifically to ensure that the target is present and
functional in a consistent fashion at each step of the screening cascade.
SUGEN's assays are designed to answer the following four questions:
Screen 1 Can a compound block the signalling of the target in
question, within the context of a living cell?
Screen 2 Is the compound sufficiently selective in blocking the
desired target's signalling (i.e., can it block the target
without blocking closely related targets)?
Screen 3 Does the compound exert the desired biological effect on a
living cell (e.g., block cell growth)?
Screen 4 Does the compound exert the desired biological effect within
the context of an in vivo disease model?
18.
<PAGE>
By employing this proprietary screening cascade, SUGEN hopes to
identify lead compounds which are active in a whole cell environment, are
sufficiently potent and specific to a given target, and are active in an in vivo
disease model which is driven by the given target.
Once targets are validated by SUGEN and the assays have been developed
and validated, diverse libraries of synthetic small molecules and natural
product extracts are screened in order to identify potential drug leads. SUGEN
currently has a number of targets moving through its screening assays, and as
new targets are validated SUGEN continues to add to its panels of assays. Each
additional assay enhances the Company's ability to determine the specificity of
lead compounds. Along with assay design and screening, SUGEN has devoted
significant resources to acquiring libraries of structurally diverse compounds
from a variety of sources around the world.
Chemical Compound Libraries. SUGEN has entered into a number of
agreements designed to obtain chemical compounds for screening. These agreements
cover a broad range of chemical entities from sources across the world. The
Company currently has over 25,000 chemical compounds available in-house for
screening and has access to a portion of Zeneca's and ASTA Medica's libraries
for collaboration targets.
Natural Product Sources. SUGEN has gained access to commercial and
non-commercial sources of natural products, including microbial, plant and
fungal extracts. These sources represent a worldwide collection network
providing substantial diversity of material, including extracts from Japan,
China, Europe and North America. The Company is currently negotiating to gain
access to additional sources of extracts from different parts of the world. The
Company currently has over 16,000 natural product extracts available in-house
for screening.
Lead Optimization
The objective of SUGEN's lead optimization program is to increase the
potency, specificity and pharmacologic properties of lead compounds by designing
and synthesizing analogs. Lead optimization uses an iterative process employing
panels of assays to test for TK activity, TK specificity, and in vivo
pharmacologic endpoints of lead molecules in order to derive compounds with
clinical utility. All results are entered into a database that allows for
determination of structure and activity relationships leading to synthetic
chemistry efforts that follow important parameters for drug development. This
growing database represents a proprietary source of information on relationships
between small molecules, their specific targets, and the pharmacologic
properties of the compounds which the Company believes will accelerate the
optimization of lead compounds in several SUGEN programs.
SUGEN has recently added crystallographic analysis and computational
chemistry to its drug discovery infrastructure. Work being done in Dr.
Schlessinger's lab at NYU, as well as with other collaborators, allows SUGEN
scientists to direct synthetic chemistry efforts in a manner that relies upon
information derived from models that use SUGEN compounds in association with the
catalytic core of TKs. With this information in hand, the Company believes that
the lead optimization process can be pursued in a more rational manner since
chemistry efforts are better directed. In this regard, in a collaboration with
ArQule, Inc. ("ArQule") SUGEN used combinatorial chemistry technology closely
coordinated with crystallography data to rapidly synthesize large numbers of
analog compounds around SUGEN's lead compounds. The crystallographic analysis
provides a rationale to identify novel chemical templates that may provide a
cache of novel compounds with broad application to the inhibition of TKs and
STKs.
The Company believes that its ability to improve potency and
specificity in the early stages of drug discovery process and pharmacologic
features in the later stages of lead optimization may reduce the incidence and
severity of side effects and thus may reduce the cost, time and risk associated
with bringing potential products to market.
Preclinical Development
Wherever possible, SUGEN's in vitro and animal models utilize cell
lines, reagents and techniques developed during target validation; therefore,
the appropriateness of the model system is already known prior to drug testing.
In addition, many other tools used during target validation are used again at
this stage of testing. Typically, additional cell lines and animal models will
need to be developed in order to enable the accurate assessment of a compound's
target-specific activity in an in vivo environment.
19.
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Product Development Programs
The breadth of involvement of TKs, TPs, STKs and their signalling
pathways in biological functions makes it impractical for the Company to
establish drug discovery programs in all disease areas in which opportunities
may emerge. SUGEN currently is focusing on disease areas that represent
significant market opportunities and where the underlying science is relatively
mature. Therefore, SUGEN concentrates its drug development resources on cancer,
diabetes and psoriasis, with additional focused efforts on cardiovascular,
immunologic and neurologic disorders. The Company believes that these disease
areas offer opportunities for the development of novel pharmaceuticals that will
represent major advances in efficacy and safety over currently available
therapies.
<TABLE>
The following table outlines SUGEN's research and development programs.
Certain of these programs are being pursued independently, while others are
being undertaken with SUGEN's collaborators.
<CAPTION>
======================================================================================================================
Program Indication Status (1) Rights
- ----------------------------------------------------------------------------------------------------------------------
Oncology
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SU101 Malignant glioma, prostate, Phase I/II, Phase SUGEN
PDGF TK Antagonist ovarian, non-small cell lung II
- ----------------------------------------------------------------------------------------------------------------------
SU5416 Angiogenesis inhibition Phase I SUGEN
Flk-1 TK Antagonist -Most solid tumor types
- ----------------------------------------------------------------------------------------------------------------------
GRB2 Antagonist Multiple TK-driven tumors Lead compounds SUGEN
- ----------------------------------------------------------------------------------------------------------------------
Pan-Her Antagonist (formerly Breast, ovarian, gastric, lung Lead compounds ASTA
Her2 Antagonist) head and neck, prostate Medica
cancers Europe and
South
America
SUGEN
United
States and
rest of
world
- ----------------------------------------------------------------------------------------------------------------------
Orally available PDGF TK Malignant glioma, prostate, Lead compounds SUGEN
Antagonists ovarian, non-small cell lung
- ----------------------------------------------------------------------------------------------------------------------
Raf Antagonist Pancreatic, bladder cancers Lead compounds ASTA
Medica
Europe and
South
America
SUGEN
United
States and
rest of
world
- ----------------------------------------------------------------------------------------------------------------------
Met TK Antagonist Stomach, colorectal and lung Screening SUGEN
cancers
- ----------------------------------------------------------------------------------------------------------------------
Five undisclosed cancer Certain major cancers Research and Zeneca
targets screening
- ----------------------------------------------------------------------------------------------------------------------
Other Programs
20.
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------
SU5271 Psoriasis Phase I SUGEN
EGF TK Antagonist
- ----------------------------------------------------------------------------------------------------------------------
Flk-1 TK Antagonist Angiogenesis inhibition in Preclinical Allergan
(ocular targets) Ophthalmology
- Diabetic Retinopathy
- Macular Degeneration
- ----------------------------------------------------------------------------------------------------------------------
F1k-1 TK Antagonist Rheumatoid Arthritis Preclinical SUGEN
(other targets)
- ----------------------------------------------------------------------------------------------------------------------
PDGF TK Antagonist Cardiovascular diseases Lead compounds SUGEN
(and other targets)
- ----------------------------------------------------------------------------------------------------------------------
Insulin TP Antagonist Diabetes Preclinical SUGEN
Type I/Type II
- ----------------------------------------------------------------------------------------------------------------------
Neurology targets Neurodegenerative diseases Research and SUGEN
screening
- ----------------------------------------------------------------------------------------------------------------------
Immunology targets Immune suppression, asthma Research and SUGEN
screening
======================================================================================================================
<FN>
- ---------------
(1) "Research" Cloning and characterization of novel TKs,
TPs, STKs and related downstream signalling
molecules (Target Identification) and vali-
dation of the role, if any, of those mole-
cules in a given disease (Target Valida-
tion).
"Screening" Screening to identify lead compounds.
"Lead Compounds" Evaluating drug leads and/or natural product
extracts in relevant in vitro cellular
models including genetically engineered cell
lines, as well as ex vivo human tissues and
in vivo animal models.
"Preclinical" Pharmacology and toxicology testing in
preclinical models, drug formulation and
manufacturing scale-up to gather necessary
data to comply with applicable regulatory
protocols prior to submission of an IND with
the FDA.
</FN>
</TABLE>
See "Risk Factors" for a discussion of certain risks related to the
development of potential products.
Cancer
Many of the cancers that SUGEN's programs are addressing have patient
subsets with extremely poor prognosis and no alternative for effective
treatment. For example, in certain cancers of the brain, breast, ovary and
pancreas, patient subsets can be defined in advance for which the average
survival time is short. By focusing on these patients initially, the Company
believes that it may be able to demonstrate statistically significant efficacy
with relatively small patient numbers and possibly shortened trial duration if
the compounds prove to be active.
SU101/PDGF TK Antagonist. SU101 is a small synthetic molecule which
inhibits the platelet-derived growth factor receptor ("PDGF TK") signalling
pathway. PDGF is a growth factor ligand that stimulates the growth of a variety
of cell types through binding to the PDGF TK. The PDGF TK was first cloned by a
group of collaborators led by Dr. Ullrich in 1983. Imbalances in the PDGF TK
signalling pathway have been implicated by SUGEN and others in subsets of
several cancers including brain, ovarian, prostate, lung and melanoma.
21.
<PAGE>
To expedite the commercialization of SU101, the Company is focusing its
initial development efforts on malignant glioma, a highly aggressive brain
tumor, and selected other solid tumor patient populations with very poor
prognosis. A subset of each of these cancers appears to be correlated with
aberrant PDGF TK signalling. Malignant glioma patients and refractory ovarian
patients have a mean survival time of approximately nine months and less than 12
months, respectively. Given the poor prognosis for these patients, the Company
believes that establishing clinical efficacy may not require large trials if the
compound is active. SUGEN believes SU101 may also have applications in other
cancers that involve aberrant PDGF TK signalling, including prostate and
non-small cell lung cancers.
In December 1994, the Company filed its first IND application with FDA
for SU101 and the Company currently is sponsoring several Phase I/II and Phase
II clinical trials. As of September 30, 1997 over 140 patients have been treated
with SU101.
The Company has filed patent applications in the United States and
abroad claiming the method of treating PDGR TK driven cancers with SU101. While
the Company believes at this time that it will receive method of use patent
protection on SU101, there can be no assurance that any such patent protection
will be issued. In March 1997, the U.S. patent office issued to SUGEN a patent
on the formulation of SU101. In addition, the Company has received notices of
allowance for two applications containing claims relating to the use of SU101 in
treating certain PDGFR related cancers and tumors. Patents have been issued in
the United States to a large pharmaceutical company covering the use of
leflunomide and structurally related compounds for the treatment of cancer. The
Company presently does not know if commercialization of SU101 will infringe
these patents but believes that these patents may be subject to claims of
invalidity as they relate to SU101. See "--Patents and Proprietary Technology."
SU5416/Flk-1 TK Antagonist. Formation of the body's network of blood
vessels, or angiogenesis, occurs throughout early human development. This
process generally stops once a person reaches adulthood. Exceptions could exist
during wound healing and the menstrual cycle. Angiogenesis is re-triggered in
adults, however, during certain pathological conditions including tumor
formation and metastasis, and in certain ophthalmic disorders, including
diabetic retinopathy and macular degeneration. The pharmaceutical industry has
long sought inhibitors of angiogenesis for cancer because, theoretically,
inhibiting angiogenesis would starve tumors with few side effects. The potential
markets for such a product include all patients with solid tumors where an
angiogenesis inhibitor could be an important adjunctive therapy, and in patients
with metastatic disease.
SUGEN and its collaborators have identified the Flk-1 TK as a receptor
VEGF and as a major regulator of angiogenesis. Experiments in mice have
confirmed that eliminating Flk-1 TK activity effectively disables the ability of
the majority of tumors to stimulate formation of blood vessels to nourish
themselves, resulting in inhibition of tumor growth. In June 1997, the Company
filed an IND in cancer for SU5416, a drug developed from the Company's Flk-1 TK
angiogenesis inhibitor program that addresses patients with solid tumors and may
also have application as an anti-metastasis agent. Clinical trials were
initiated in September 1997.
The Company has established an exclusive research and licensing
agreement with the MPP to support the work of Dr. Werner Risau, a SUGEN
consultant and a director of MPP, and his laboratory. Dr. Risau is one of the
leading researchers in the field of angiogenesis. In collaboration with the
laboratories of Dr. Risau and Dr. Ullrich, SUGEN is conducting further studies
into the mechanisms of angiogenesis, including the identification of additional
TK and TP related signalling pathways involved in angiogenesis.
GRB2 Antagonist. Growth factor receptor binding protein 2 ("GRB2"), a
downstream signalling adaptor molecule, was originally cloned by Dr.
Schlessinger's laboratory. GRB2 has been shown to be an essential element in the
signal transduction pathway of many TKs, particularly as a link between TKs and
Ras. (See "Raf Antagonist" below). SUGEN is investigating the role of GRB2 in
linking TK signalling to Ras activation in certain TK induced cancers, with the
belief that inhibition of GRB2 might be of therapeutic benefit for a broad range
of cancers typified by an activation of the TK-Ras pathway. In April 1997, the
U.S. patent office issued a patent on SUGEN's proprietary cancer target GRB2.
Other patent claims with respect to this target have also been filed. See
"--Patents and Proprietary Technology."
SUGEN has developed proprietary assays for high throughput screening
for GRB2 inhibitors and has now identified a novel class of signal transduction
inhibitors that act by blocking the function of the GRB2 adaptor
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protein. In vitro studies indicate that SUGEN's GRB2 inhibitors act as
cytostatic agents, causing cancerous cells to cease multiplying or enter
programmed cell death (apoptosis). Preliminary in vivo studies indicate efficacy
in tumor growth inhibition.
Pan-Her Antagonist (formerly Her2 Antagonist). Her2 is a TK, first
cloned by Dr. Ullrich, which is believed to play an important role in certain
aggressive breast, ovarian, gastric and lung cancers. Monoclonal antibodies
targeting Her2, including one developed by Dr. Ullrich, are currently in human
clinical trials by others for certain cancers. While the Company believes that
these trials may serve to validate the concept of targeting aberrant TKs in
cancer, SUGEN believes that a small molecule inhibitor of Her2 which also blocks
the closely related Her1 and Her4 receptors (thus, a Pan-Her Antagonist), has
the potential to be a more attractive therapy. SUGEN believes it has identified
a number of highly potent and specific small molecule inhibitors of Pan-Her. The
Company is currently testing several of these molecules in animal models. The
Company is pursuing its Pan-Her Antagonist program in collaboration with ASTA
Medica.
Orally active PDGF TK Antagonist. SUGEN is committed to developing an
orally active small molecule inhibitor of the PDGF TK signalling pathway. From a
commercialization standpoint, an orally active compound may be complementary to
SU101 in that it may be developed as a chronic oral dosage form. The Company
currently has several small molecule inhibitors of the PDGF TK signalling
pathway which in vivo animal studies appear to be orally available and may have
the potential to treat numerous PDGF TK driven proliferative disorders,
especially cancers. The PDGF TK also appears to be involved in both restenosis
of blood vessels after clearance by angioplasty, and more broadly in
atherosclerosis.
Raf Antagonist. Raf, an STK, is a downstream signalling molecule
through which numerous signalling pathways have been found to converge. Raf is
known to interact with the oncogene Ras, and is required in order for Ras to
relay its signals. The Ras oncogene has long been known to play an integral role
in certain cancers, and may be involved in over 20% of all tumors including
approximately 90% of pancreatic tumors. Moreover, Ras has drawn the attention of
the pharmaceutical industry for many years because of its frequent mutational
activation in tumor cells. However, since its biochemical activity and upstream
activators were not well defined, the search for Ras inhibitors has proved
difficult. In contrast, the Company believes that Raf is a more suitable target
for therapeutic intervention.
Dr. Ulf Rapp, Director of Molecular Biology at the University of
Wurzburg, Germany, a SUGEN consultant and the discoverer of Raf, has
demonstrated that inhibition of Raf blocks the tumor forming potential of Ras.
SUGEN has developed proprietary Raf-based assays and is screening for small
molecule inhibitors of Raf. The Company believes that drugs that inhibit Raf
signalling may arrest tumors driven by excessive Ras activity. The Company is
pursuing its Raf Antagonist program in collaboration with ASTA Medica.
Met TK Antagonist. Recent reports have shown that overexpression of Met
TK may be implicated in a significant portion of tumors of the lung, stomach and
colon. Moreover, Met TK may play a role in the metastasis of solid tumors. SUGEN
has recently completed target validation studies on Met TK and has commenced
screening against this target.
Psoriasis
Psoriasis is a chronic skin disorder that affects approximately four
million people in the United States, and annual treatment costs in this country
are estimated at over $1.5 billion. There are few currently available drugs for
this disease that offer satisfactory efficacy and safety. Hyperproliferation of
keratinocytes contributes to psoriasis, and work by SUGEN and others has
demonstrated that EGF TK signalling is required for the growth of keratinocytes.
SUGEN's work in psoriasis is based in part on research conducted at HUJ.
SU5271/EGF TK Antagonist. SU5271, a selective inhibitor of EGF-R
signalling, represents the first extension of SUGEN's drug discovery platform
into the field of dermatology. SUGEN received an exclusive, worldwide license
from Zeneca for the dermatologic uses of SU5271 and has also filed its own
method of treatment and other patent claims with respect to this compound.
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SUGEN filed an IND application in late 1996 with FDA for the clinical
testing of SU5271 in the treatment of psoriasis. SU5271 is a synthetic small
molecule signal transduction inhibitor that blocks keratinocyte growth.
Hyperproliferating keratinocytes are a major constituent of psoriatic lesions
which can be blocked by selectively inhibiting signalling of the EGF Receptor.
The Company is currently conducting Phase I studies to evaluate the safety of
the topical use of SU5271 in psoriatic patients at Mount Sinai Hospital in New
York, New York.
Angiogenesis Inhibition in Ophthalmology
A number of ophthalmological disorders involve neovascularization of
different regions of the eye. Since Flk-1 TK is known to be important in other
neovascularization processes (such as in tumors), it may also play a crucial
role in ocular neovascularization. Thus, Flk-1 TK inhibitors might be
therapeutically beneficial for treating ophthalmic disorders. In October 1996,
the Company signed a collaboration agreement with Allergan to identify, develop
and commercialize novel angiogenesis inhibitors for the treatment of ophthalmic
diseases. Flk-1 TK and other angiogenesis targets are currently under
evaluation.
Diabetes
Both Type I and Type II diabetes are characterized by pathologically
high levels of blood glucose due to lack of efficient cellular uptake and
metabolism of glucose. Type I diabetics produce low levels of insulin and is
thought to be caused by the autoimmune destruction of the pancreatic cells that
make insulin. In contrast, Type II diabetics often produce elevated levels of
insulin, although this insulin does not seem to have sufficient effect. All Type
I and some Type II diabetics are treated with insulin. The long-term side
effects of diabetes and of insulin therapy can be severe.
Dr. Ullrich was the first to clone both insulin and the TK receptor to
which insulin binds. In a normal state, the body secretes insulin which in turn
binds to the insulin TK. These events activate the insulin TK signalling
pathway, resulting in cellular uptake of glucose and glucose metabolism. In Type
I and Type II diabetes, the TK signalling mechanism is impaired. Certain TPs
appear to be involved in down regulating (dephosphorylating) the insulin TK
signalling pathway. SUGEN believes that a small molecule which specifically
inhibits these TPs may increase insulin TK signalling, thereby increasing
glucose uptake and metabolism.
The Company achieved reproducible proof of principle with its lead
phosphatase inhibitor compounds in animal models of Type II diabetes. SUGEN's
animal studies have demonstrated the ability of its initial lead compounds to
lower blood glucose levels with efficacy comparable to currently available
drugs. These compounds will serve as the starting point for medicinal chemistry
and drug development with the aim of producing an optimized drug candidate to go
forward into clinical development. Based on the mechanism of action of these
compounds and their oral availability, the Company believes that it now has the
opportunity to develop drug candidates for the treatment of both Type II
(non-insulin dependent) and Type I (insulin dependent) diabetes.
Neurology
TKs, TPs and their signalling pathways are known to play key roles in
the maintenance of the central and peripheral nervous systems. Several known
neurotrophic factors bind to TKs, and thereby regulate differentiation and
survival of neurons. SUGEN has identified novel TKs and TPs whose expression is
restricted to the nervous system and which may serve as therapeutic targets for
intervention in neurological diseases. SUGEN has also identified lead compounds
that act as selective TP inhibitors and are able to stimulate neuron
differentiation in vitro models.
Immunology
The role of TKs in the generation and maintenance of the human immune
system has been clearly established by a number of researchers in different
laboratories around the world. SUGEN has developed a number of immunology
related assays which it is screening against its library of compounds and
extracts. For example, ZAP-70, an intracellular TK, appears to be a primary
regulator of the generation and function of the T-lymphocyte cell population of
the immune system. This TK and other signal transduction molecules in the immune
system represent potential drug discovery targets for identifying novel
immunosuppressive and immuno-modulating drugs.
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The primary clinical indications that the Company is focusing on in immunology
are immune suppression and asthma.
Corporate and Clinical Development Collaborations
The Company's approach to corporate partnering is different in cancer
than it is in other disease areas. Since the Company's goal is to build a
vertically integrated cancer business in North America, it seeks to retain
market rights to its proprietary cancer programs with respect to the core North
American cancer market concentrated in the major cancer centers, but to find
European and Asian partners willing to contribute substantially to the
development effort in these programs as part of a geographical licensing
arrangement. The Company's collaboration with Zeneca in cancer (see below) is
the exception in that Zeneca gained world-wide rights to certain early stage
programs in return for significant funding of SUGEN's cancer research efforts.
Outside cancer, the Company aims to establish global collaborations focused on
specific disease areas with partners that have strong preclinical and clinical
development capabilities in the relevant disease area, in addition to the
ability to fund the programs.
Zeneca Limited
In January 1995, the Company established a research collaboration with
Zeneca. In this collaboration, Zeneca and the Company seek to discover and
develop novel small molecule signal transduction inhibitors that address certain
substantial oncology markets. The collaboration covers five undisclosed cancer
programs, but excludes all programs upon which the Company is currently building
its own cancer business. The two companies have agreed upon specific programs to
be included initially in the collaboration, with Zeneca supporting SUGEN's work
on these programs for an initial term of five years. SUGEN performs target
identification, target validation, assay development and screening for initial
leads, while Zeneca scientists will concentrate on lead identification and
optimization and preclinical and clinical development activities. Zeneca will
market collaboration products worldwide. SUGEN has also granted Zeneca a right
of first negotiation to expand this collaboration in order to encompass
additional SUGEN cancer research projects, but has specifically excluded the
cancer related projects that SUGEN already has in development.
Under the terms of the agreement, Zeneca purchased 789,141 shares of
Common Stock at a price of $15.84 per share. This $12.5 million equity
investment, combined with Zeneca's $7.5 million participation in SUGEN's October
1994 initial public offering, increased Zeneca's ownership in the Company to
approximately 20%. Zeneca has committed not to increase its holdings above this
level without the approval of SUGEN's Board of Directors. Zeneca participated in
the Company's September 1995 and October 1996 financings, purchasing an
additional 281,875 and 509,000 shares, respectively, of Common Stock in order to
maintain its ownership position. To date, Zeneca has invested approximately
$29.5 million in the Company's Common Stock.
In addition to its equity purchases and annual research funding, Zeneca
paid a $5 million technology set-up fee to SUGEN, and will make milestone
payments (which may be offset against royalties over time) tied to the progress
of compounds in the collaboration, and royalties on worldwide sales of any
collaboration products. SUGEN will also have the right to contribute to clinical
development costs on each program, thereby earning participation in the North
American profits from successful products coming out of such programs over and
above its royalty entitlement. Apart from this option, Zeneca will be
responsible for all development expenses. If a third party acquires 35% or more
of SUGEN's voting stock, Zeneca may terminate the collaboration agreement but
retain exclusive royalty-bearing license rights to any collaboration products
for which IND filing preparations are complete and a separate license agreement
has been executed. There can be no assurance that this collaboration will result
in any milestones being achieved or any products being successfully developed.
The agreement provides for SUGEN to be granted access to Zeneca's large
proprietary collection of characterized chemical structures for screening
against SUGEN's signal transduction targets, both within and outside this
collaboration, subject to certain restrictions and a right of first licensing
negotiation on Zeneca's part. Zeneca has granted to SUGEN the right of first
negotiation to license from Zeneca oncology products (other than those
specifically excluded under the agreement) which Zeneca decides to license to a
third party.
In January 1996, SUGEN licensed a small molecule inhibitor of the EGF
TK from Zeneca. The compound, SU5271, was licensed from Zeneca as an extension
of the original collaboration agreement SUGEN signed with
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Zeneca. Under the terms of this license agreement, Zeneca granted to SUGEN an
exclusive, worldwide license, with right to sublicense the compound, in exchange
for milestone and royalty payments. The agreement provides that SUGEN shall have
overall control and responsibility for the preclinical and clinical development,
regulatory strategy, process development and commercialization of SU5271.
National Cancer Institute
In April 1996, the Company entered into a Collaborative Research and
Development Agreement ("CRADA") with the National Cancer Institute (the "NCI")
for the application of SUGEN's proprietary transcript imaging technology in
order to identify the differences in expression patterns of signal transduction
genes that characterize each of the sixty tumor cell lines which constitute the
NCI's screening panel. Following this transcript imaging analysis of the panel,
the results will be correlated to the data generated over several decades at the
NCI from the screening each year of many thousands of compounds and natural
extracts against the panel. Interesting lead compounds from the NCI's open
repository collection will be tested in SUGEN's target-specific signal
transduction assays, and lead compounds from SUGEN will also be tested against
the NCI panel. SUGEN will have the option to license discoveries made through
this process for adoption into SUGEN's drug discovery programs.
ASTA Medica Aktiengesellschaft
In December 1995, SUGEN and ASTA Medica entered into a collaboration to
research, develop, manufacture, market and distribute potential oncology
products based upon the Company's Pan-Her Antagonist and Raf Antagonist
programs. Under the terms of the collaboration, ASTA Medica will undertake the
medicinal chemistry and pharmaceutical development work on SUGEN's drug
candidates, and will perform preclinical and clinical development in Europe in
accordance with FDA standards. ASTA Medica paid SUGEN a $4 million technology
set-up fee and is providing additional consideration in the form of contract
services for non-collaboration work. Additionally, ASTA Medica purchased $9
million of Common Stock at a price of $20.88 per share. In due course, SUGEN may
receive milestone payments in the two programs if they are successful. The
agreement provides for ASTA Medica to receive exclusive marketing rights to
collaboration products in Greater Europe (including countries and territories
located in the former Soviet Union) and South America, subject to an obligation
to pay royalties on net sales in such territories to SUGEN. ASTA Medica also has
the right of first offer to manufacture for SUGEN territories. SUGEN retains
market rights in the rest of the world, subject to a royalty payable to ASTA
Medica in most circumstances.
ASTA Medica is an international pharmaceutical company headquartered in
Germany. The Company's research and development is focused on cancer,
respiratory diseases/allergies, pain, inflammation and disorders of the central
nervous system/epilepsy. The company is owned by Degussa, a German manufacturer
of fine chemicals and precious metals.
Allergan
In October 1996, SUGEN entered into a collaboration with Allergan to
identify, develop and commercialize novel angiogenesis inhibitors for the
treatment of ophthalmic diseases. The collaboration will also establish a
comprehensive effort to identify and validate signal transduction targets for
choroidal and retinal neovascularization. Allergan will be the exclusive
corporate partner for SUGEN in ocular diseases of neovascularization and will
have exclusive rights to all ophthalmic uses of collaboration products and
collaboration know-how worldwide. In return, Allergan paid SUGEN a $2 million
initial fee for past research services and will fund collaboration research and
drug discovery at SUGEN for at least three years. Allergan initially purchased
$4 million of Common Stock at $20.88 per share and purchased an additional
250,000 shares of Common Stock at $12.00 per share in SUGEN's October 1996
follow-on offering. SUGEN will also receive payments upon achievement of certain
milestones and royalties with respect to worldwide sales of collaboration
products. In addition, SUGEN will have the right to contribute to clinical
development costs on each program, thereby earning participation in the North
American and European profits from successful products coming out of such
programs over and above its royalty entitlement. Apart from this option,
Allergan will be responsible for all development expenses.
Research Collaborations
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SUGEN's scientific founders are Dr. Joseph Schlessinger, Chairman of
the Department of Pharmacology at NYU, and Dr. Axel Ullrich, Director of the
Department of Molecular Biology at MPI in Martinsried, Germany. In the fall of
1991, the Company entered into research collaboration agreements with both
institutions. More recently the Company has established additional research
collaborations in the target relating to TPs, TKs and STKs identification and
screening areas.
New York University Medical Center
In September 1991, SUGEN entered into a research and license agreement
with NYU granting the Company an exclusive worldwide license to the commercial
uses of TK, TP and STK technology being developed at NYU under the leadership of
Dr. Schlessinger. The research program being conducted at NYU centers on an
investigation of the mechanisms underlying the action of TKs, TPs and STKs and
their physiological role, as well as identifying, isolating and cloning new TKs,
TPs and STKs and the components of the signal transduction pathways emanating
from these proteins. The research program is scheduled to expire in 2001.
SUGEN's license to technology developed before or during the research program
will survive indefinitely unless NYU terminates the agreement upon insolvency of
the Company or due to a material breach by the Company. Upon such termination of
the agreement, NYU will continue to own the rights to the technology it has
developed under the agreement. The Company is obligated to pay royalties to NYU
on sales of any SUGEN products for which an IND is filed within four years of
the end of the NYU research period except for certain in-licensed products. As
part of this arrangement, NYU purchased 200,000 shares of SUGEN Common Stock at
the Company's formation.
Max-Planck Society
SUGEN has formed research collaborations with two institutes of the
Max-Planck Society ("MPS") in Germany. These collaborations include licenses
from Garching Innovation GmbH ("Garching"), the licensing arm of MPS.
Max-Planck-Institut fur Biochemie ("MPI"). The Company entered into a
research and license agreement with MPI and Garching which expired in August
1997 but is expected to be extended in modified form. This agreement grants
SUGEN an exclusive worldwide license to the commercial uses of TK and TP
technology being developed at MPI under the leadership of Dr. Ullrich. The scope
of the research program includes identification, isolation and cloning of novel
receptor TKs and TPs, characterization of signal transduction pathway components
and investigation of the normal biological role of these proteins as well as
their role in disease. SUGEN's license to technology developed before or during
the research program will survive indefinitely unless MPI terminates the
agreement upon insolvency of the Company or due to a material breach by the
Company. Upon such termination of the agreement, MPI will continue to own the
rights to the technology it has developed under the agreement. The Company is
obligated to pay royalties on sales of any products using this technology. As
part of this arrangement, MPS currently owns 200,000 shares of SUGEN Common
Stock purchased at the Company's formation.
Max-Planck-Institut fur Physiologische und Klinische Forschung ("MPP").
In October 1993, SUGEN entered into an agreement with MPP and Garching to
support the work of Dr. Werner Risau, a leading researcher in the area of
angiogenesis. This agreement grants SUGEN the exclusive worldwide right to
commercialize Dr. Risau's research on the inhibition of angiogenesis,
vasculogenesis, vascular permeability, chemotaxis and neurite outgrowth. This
research collaboration will terminate in October 1999. SUGEN's license to
technology developed before or during the research program will survive
indefinitely unless MPP terminates the agreement upon insolvency of the Company
or due to a material breach by the Company. Upon termination of the agreement,
MPP will own the rights to the technology it has developed under the agreement.
The Company is obligated to pay royalties on sales of any products embodying
this technology.
ArQule
In September 1996, SUGEN entered into a collaboration agreement with
ArQule to develop a proprietary collection of compounds designed to target
binding sites common to many signal transduction molecules found in
cell-signalling pathways. SUGEN provided lead chemical structures and new
chemical structure scaffolds which enabled ArQule to use its Directed ArrayTM
combinatorial synthesis technologies to build a novel collection of compounds
with potentially broad applications for the pharmaceutical industry. The
research program expired in
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September 1997. SUGEN retains exclusive rights to this collection with respect
to TK and STK targets, subject to certain payments and royalties to ArQule.
ArQule retains responsibility for commercializing the collection for targets in
other areas, subject to royalty-sharing arrangements with SUGEN.
Other Sources of Materials for Screening
The Company has entered into a number of agreements designed to obtain
novel biochemical and biological compounds and extracts for screening in its
proprietary assay systems. These agreements cover a broad range of chemical
entities from sources across the world. SUGEN also has an agreement with
Panlabs, Inc. of Bothell, Washington for the supply of microbial and fungal
extracts and the isolation and identification of active components from these
extracts. The original agreement was entered into in March 1993, and is
renewable for successive one year periods. The agreement most recently was
amended in early 1997, under which Panlabs will supply the Company with a
significant number of extracts from which the Company can select a portion to be
designated as "selected organisms." SUGEN will own all rights to the selected
organisms and the active compounds produced by them, including any derivatives.
Panlabs is supplying other companies with similar extracts under similar
conditions. In June 1995, SUGEN and Toyama Prefectural University of Tokyo
initiated a collaboration to discover new drugs for the treatment of cancer and
other diseases by inhibiting TKs and TPs and related molecules. A research team
headed by Professor Toshikazu Oki in the University's Biotechnology Research
Center is providing to SUGEN compounds from Toyama's microbial strain libraries
for testing of potential biological activity. In July 1996, SUGEN and the
Institutes of Botany and Microbiology of the Chinese Academy of Sciences
initiated exclusive collaborations to discover novel signal transduction
inhibitor candidates and pharmacophores. The Institute of Botany and the
Institute of Microbiology have provided to SUGEN extracts from the Institutes'
plant and microbial collections for testing of potential biological activity
against SUGEN's signal transduction targets. Other SUGEN compound sources
include natural product libraries from around the globe, including microbial,
fungal and plant extracts, as well as additional sources of small organic
compounds.
Patents and Proprietary Technology
The Company's success will depend in part on its ability to obtain
patents, maintain trade secrets and operate without infringing on the
proprietary rights of others, both in the United States and in other countries.
Patent matters in biotechnology, and in particular with respect to receptors as
screening tools and/or the DNA encoding them, are highly uncertain and involve
complex legal and factual questions. Accordingly, the availability of and
breadth of claims allowed in biotechnology and pharmaceutical patents cannot be
predicted. As of September 30, 1997, SUGEN held exclusive rights to at least 12
issued U.S. patents and had filed and/or held exclusive licenses to
approximately 148 United States patent applications, as well as related foreign
patent applications. In addition, the Company has received notices of allowance
for two applications containing claims relating to the use of SU101 in treating
certain PDGFR related cancers and tumors. There can be no assurance that the
Company will develop products or processes that are patentable, that patents
will issue from any of the pending applications, or that claims allowed will be
sufficient to protect the Company's technology. There can be no assurance that
the Company's patents, if issued, will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide proprietary
protection or competitive advantages to the Company. Competitors have been
issued patents, may have filed applications or may obtain additional patents and
proprietary rights relating to products or processes competitive with those of
the Company or which could block the Company's efforts to obtain patents.
A number of pharmaceutical companies, biotechnology companies,
universities and research institutions have filed patent applications or
received patents in the field of TKs, TPs and STKs and related downstream
signalling molecules. The commercial success of the Company will depend in part
on SUGEN not infringing patents issued to competitors and not breaching the
technology licenses upon which any Company products are based. The Company in
the past has been, and from time to time in the future may be, notified of
claims that the Company may be infringing patents or other intellectual property
rights owned by third parties. Certain patent applications or patents of the
Company's competitors may conflict with the Company's patents and patent
applications, and SUGEN is aware that other companies have filed patent
applications and have been granted patents in the United States and other
countries claiming subject matter potentially useful or necessary to the
Company. Such conflicts could result in a significant reduction in the scope of
the coverage of the Company's issued or licensed patents. In addition, if
patents are issued to other companies which contain competitive or conflicting
claims and such claims are ultimately determined to be valid, the Company may be
required to obtain licenses to these patents or to develop or obtain
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alternative technology. If any licenses are required, there can be no assurance
that the Company will be able to obtain any such license on commercially
favorable terms, if at all, and if these licenses are not obtained, the Company
might be prevented from pursuing the development of certain of its potential
products. The Company's breach of an existing license or failure to obtain a
license to any technology that it may require to commercialize its products may
have a material adverse impact on the Company. Litigation, which could result in
substantial costs to the Company, may also be necessary to enforce any patents
issued or licensed to the Company or to determine the scope and validity of
third party proprietary rights. There can be no assurance that the Company's
issued or licensed patents would be held valid by a court of competent
jurisdiction. Even if the outcome of such litigation is favorable, the cost of
such litigation and the diversion of the Company's resources during such
litigation could have a material adverse effect on the Company. An adverse
outcome could subject the Company to significant liabilities to third parties,
require disputed rights to be licensed from third parties or require the Company
to cease using such technology, any of which could have a material adverse
effect on the Company. If competitors of the Company prepare and file patent
applications in the United States that claim technology also claimed by the
Company, the Company may have to participate in interference proceedings
declared by the Patent and Trademark Office to determine priority of invention,
which could result in substantial cost to the Company, even if the eventual
outcome is favorable to the Company. When patents issue in certain areas such as
Japan and the European community, third parties can oppose such issuance. Should
the relevant patent office institute a proceeding termed an opposition, the
Company may decide to defend its patent. There can be no assurance that the
Company will be successful or that the patent office will not revoke the patent
or alter the scope of protection previously granted.
SU101, a compound generally known by the name leflunomide, is a member
of the isoxazole family of compounds. Leflunomide was discovered more than 15
years ago. A large pharmaceutical company holds a number of United States and
foreign patents and has filed applications in the United States and abroad
covering compositions of matter and pharmaceutical uses of leflunomide and
structurally related compounds. While the Company believes at this time that it
will receive method of use patent protection on SU101, there can be no assurance
that any such patent protection will be issued. SUGEN believes its research and
development and its clinical trials with SU101 in the United States are
protected from claims of infringement of the United States patents because such
activities are being conducted solely for uses reasonably related to development
and submission of information to the FDA for regulatory approval. Although the
Company cannot predict whether or when SU101 will be approved by the FDA for
marketing in the United States, it believes that certain of the pharmaceutical
company's patents in the United States may have expired when marketing does
begin and that the remaining United States patents are either invalid or will
not be infringed by the manufacture and sale of SU101. However, the Company has
learned that additional patents have issued in the United States to the
pharmaceutical company covering the use of leflunomide and structurally related
compounds for the treatment of named cancers. The Company presently does not
know if commercialization of SU101 will infringe these additional patents but
believes that the additional patents may be subject to claims of invalidity as
they relate to SU101. If the additional patents were determined to be valid with
respect to SU101, the Company may be required to obtain a license from the
pharmaceutical company in order to manufacture and sell SU101 in the United
States. The Company presently does not intend to commercialize SU101 outside the
United States. There can be no assurance that SU101 will not infringe the
recently issued patents, that the term of the pharmaceutical company's other
existing patents will not be extended, that the claims of the pharmaceutical
company's pending patent applications will not be modified prior to issuance so
as to enhance their validity or scope, or that a court will agree with the
Company's beliefs regarding invalidity and non-infringement of the patents. To
date, the pharmaceutical company has not threatened or commenced legal
proceedings against the Company concerning possible patent infringement. There
can be no assurance that the pharmaceutical company in the future will not
assert claims against SUGEN or that the Company could reach agreement with the
pharmaceutical company for a license for SU101 upon favorable terms or at all,
if required. The inability of the Company to resolve this matter on favorable
terms or at all could have a material adverse effect on the Company. In any
event, the assertion of such claims, even if resolved favorably to the Company,
could result in substantial costs to the Company.
SUGEN also relies on trade secrets to protect technology, especially
where patent protection is not believed to be appropriate or obtainable. SUGEN
attempts to protect its proprietary technology and processes in part by
confidentiality agreements with its employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors. To the
29.
<PAGE>
extent that the Company or its consultants or research collaborators use
intellectual property owned by others in their work for the Company, disputes
may also arise as to the rights in related or resulting know-how and inventions.
Competition
SUGEN is engaged in a rapidly changing field. Other products and
therapies that will compete directly with the products that the Company is
seeking to develop and market currently exist or are being developed.
Competition from fully integrated pharmaceutical companies and more established
biotechnology companies is intense and is expected to increase. Most of these
companies have significantly greater financial resources and expertise in
research and development, manufacturing, preclinical and clinical testing,
obtaining regulatory approvals and marketing than the Company. Smaller companies
may also prove to be significant competitors, particularly through collaborative
arrangements with large pharmaceutical and established biotechnology companies.
Many of these competitors have significant products that have been approved or
are in development and operate large, well funded research and development
programs. Academic institutions, governmental agencies and other public and
private research organizations also conduct research, seek patent protection and
establish collaborative arrangements for products and clinical development and
marketing. These companies and institutions compete with the Company in
recruiting and retaining highly qualified scientific and management personnel.
In addition to the above factors, SUGEN will face competition based on product
efficacy and safety, the timing and scope of regulatory approvals, availability
of supply, marketing and sales capability, reimbursement coverage, price and
patent position. There is intense competition for access to libraries of
compounds to use for screening and any inability of the Company to maintain
access to sufficiently broad libraries of compounds for screening potential
targets would have a material adverse effect on the Company. There is no
assurance that the Company's competitors will not develop more effective or more
affordable products, or achieve earlier patent protection or product
commercialization than the Company.
Government Regulation
The manufacturing and marketing of the Company's potential products and
its ongoing research and development activities are subject to extensive
regulation by numerous governmental authorities in the United States and other
countries. Failure to comply with applicable FDA or other applicable regulatory
requirements may result in criminal prosecution, civil penalties, recall or
seizure of products, total or partial suspension of production or injunction, as
well as other regulatory action against the Company or its potential products.
Prior to marketing in the United States, any drug developed by the
Company must undergo rigorous preclinical and clinical testing and an extensive
regulatory clearance process implemented by the FDA under the federal Food, Drug
and Cosmetic Act. Satisfaction of such regulatory requirements, which includes
satisfying the FDA that the product is both safe and effective, typically takes
several years or more depending upon the type, complexity and novelty of the
product and requires the expenditure of substantial resources. Preclinical
studies must be conducted in conformance with the FDA's good laboratory practice
("GLP") regulations. Before commencing clinical investigations in humans, the
Company must submit to and receive approval from the FDA of an IND. There can be
no assurance that submission of an IND would result in FDA authorization to
commence clinical trials. Clinical testing must meet requirements for
institutional review board oversight, informed consent and good clinical
practice requirements and is subject to continuing FDA oversight. The Company
does not have extensive experience in conducting and managing the clinical
testing necessary to obtain regulatory approval. Clinical trials may require
large numbers of test subjects. Furthermore, the Company or the FDA may suspend
clinical trials at any time if they believe that the subjects participating in
such trials are being exposed to unacceptable health risks or if the FDA finds
deficiencies in the IND or the conduct of the trials.
Before receiving FDA clearance to market a product, the Company will
have to demonstrate that the product is safe and effective on the patient
population that will be treated. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations which could delay, limit
or prevent regulatory clearances. In addition, delays or rejections may be
encountered based upon additional government regulation from future legislation
or administrative action or changes in FDA policy during the period of product
development, clinical trials and FDA regulatory review. Similar delays also may
be encountered in foreign countries. There can be no assurance that even after
such time and expenditures, regulatory clearance will be obtained for any
products developed by the Company. If regulatory clearance of a product is
granted, such clearance will be limited to those disease states and conditions
for which the product is useful, as demonstrated through clinical studies.
Marketing
30.
<PAGE>
or promoting a drug for an unapproved indication is prohibited. Furthermore,
clearance may entail ongoing requirements for postmarketing studies. Even if
such regulatory clearance is obtained, a marketed product, its manufacturer and
its manufacturing facilities are subject to continual review and periodic
inspections by the FDA. Discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on such product or
manufacturer, including costly recalls or even withdrawal of the product from
the market. There can be no assurance that any compound developed by the Company
alone or in conjunction with others will prove to be safe and efficacious in
clinical trials and will meet all of the applicable regulatory requirements
needed to receive marketing clearance.
Outside the United States, the Company's ability to market a product is
contingent upon receiving a marketing authorization from the appropriate
regulatory authorities. The requirements governing the conduct of clinical
trials, marketing authorization, pricing and reimbursement vary widely from
country to country. At present, foreign marketing authorizations are applied for
at a national level, although within the European Community ("EC") certain
registration procedures are available to companies wishing to market a product
in more than one EC member state. If the regulatory authority is satisfied that
adequate evidence of safety, quality and efficacy has been presented, a
marketing authorization will be granted. This foreign regulatory approval
process includes all of the risks associated with FDA clearance set forth above.
Manufacturing
The Company has no manufacturing facilities and relies on other
manufacturers to produce its compounds for research and development, preclinical
and clinical purposes. The products under development by the Company have never
been manufactured on a commercial scale and there can be no assurance that such
products can be manufactured at a cost or in quantities necessary to make them
commercially viable. If the Company were unable to contract for a sufficient
supply of its compounds on acceptable terms, or if it should encounter delays or
difficulties in its relationships with manufacturers, the Company's preclinical
and clinical testing schedule would be delayed, resulting in delay in the
submission of products for regulatory approval or the market introduction and
subsequent sales of such products, which could have a material adverse effect on
the Company. Moreover, contract manufacturers that the Company may use must
adhere to current Good Manufacturing Practices regulations enforced by the FDA
through its facilities inspection program. If these facilities cannot pass a
pre-approval plant inspection, the FDA pre-market approval of the products will
not be granted.
Facilities
SUGEN currently leases approximately 60,000 square feet of laboratory
and office space in Redwood City, California. The Company leases this space
under operating leases which last through November and December 1998.
Approximately 48,000 square feet of the laboratory and office space currently
under lease have three and five year renewal options at the end of the leases.
In June 1997, the Company entered into a build-to-suit facility lease
agreement. Construction of the new facility is targeted for completion during
the fourth quarter of 1998, which coincides with the expiration of the Company's
current facility leases. Although the Company has not expended significant
amounts to date, the Company expects to invest in facility improvements and
incur move-related costs during 1998 as it approaches building completion.
The Company believes that the build-to-suit facility, in addition to
its options for additional space at the business park, will be sufficient to
meet its needs for the next several years. There can be no assurances, however,
that such space will be available on favorable terms, if at all.
Employees
As of September 30, 1997, the Company had 180 full-time employees,
including a technical scientific staff of 134. The Company places an emphasis on
obtaining the highest available quality of staff. The Company has selected and
assembled a group of experienced scientists and managers with skills in a wide
variety of disciplines, including molecular biology, medicinal chemistry and
pharmaceutical development. None of the Company's
31.
<PAGE>
employees are covered by collective bargaining arrangements and management
considers relations with its employees to be good.
32.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information, as of the date
hereof, with respect to the number of shares of Common Stock beneficially owned
by each of the Selling Stockholders and as adjusted to give effect to the sale
of the Shares offered hereby. The Shares are being registered to permit public
secondary trading of the Shares, and the Selling Stockholders may offer the
Shares for resale from time to time. See "Plan of Distribution."
The Shares being offered hereby by the Selling Stockholders may be
acquired, from time to time, upon (i) the conversion of $17,500,000 aggregate
principal amount of the Notes and exercise of the Warrants and the Placement Fee
Warrants, which were acquired by them from the Company in a private placement
transaction pursuant to those certain Note Purchase Agreements, dated as of
September 8, 1997 (the "Agreements"), and pursuant to an Engagement Agreement,
dated August 20, 1997, between the Company and Diaz & Altschul Capital, LLC, as
placement agent, and (ii) the payment by the Company of interest on the Notes in
the form of Common Stock in lieu of cash, at the Company's option. This
Prospectus covers the resale by the Selling Stockholders of up to approximately
1,780,000 Shares, plus, in accordance with Rule 416 under the Securities Act,
such presently indeterminate number of additional Shares as may be issuable upon
conversion of the Notes or payment of interest on the Notes, based upon
fluctuations in the conversion price of the Notes. See "The Company-Recent
Developments."
In accordance with registration rights granted to the Selling Stockholders, the
Company has filed with the Commission, under the Securities Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time on the Nasdaq National 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 such Registration Statement effective until the Shares are no longer
required to be registered for the sale thereof by the Selling Stockholders.
The Company has agreed to register a specified number of Shares for
resale by the Selling Stockholders. The number of Shares shown in the following
table as being offered by the Selling Stockholders does not include such
presently indeterminate number of shares of Common Stock as may be issuable upon
conversion of the Notes and payment of interest on the Notes pursuant to the
provisions thereof regarding determination of the applicable conversion price
but which shares are, in accordance with Rule 416 under the Securities Act,
included in the Registration Statement of which this Prospectus forms as part.
<TABLE>
The Shares covered by this Prospectus may be offered from time to time
by the Selling Stockholders named below:
<CAPTION>
Ownership After
Offering(1)
---------------------------
Number of Shares Number of
Names of Selling Owned Prior to Shares Being Number of
Stockholders Offering (1)(2) Offered (3) Shares Percent
- ----------------------------------------------- ---------------------- ---------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ACI/DA Investors I, LLC (4)(7)................. 166,084 166,084 0 0%
Delta Opportunity Fund, Ltd. (5)(7)............ 488,483 488,483 0 0%
Diaz & Altschul Group, LLC (5)(7)(9)........... 70,000 70,000 0 0%
Nelson Partners (6)............................ 211,025 211,025 0 0%
Olympus Securities, Ltd. (6)................... 257,919 257,919 0 0%
Omicron Partners, LP .......................... 468,944 468,944 0 0%
OTATO Limited Partnership (7).................. 97,697 97,697 0 0%
Overbrook Fund I, LLC (7)(8)................... 19,539 19,539 0 0%
<FN>
- --------------
33.
<PAGE>
(1) Pursuant to the terms of the Notes, the Warrants and the Placement Fee
Warrants, no Selling Stockholder can convert any portion of such
Selling Stockholder's Notes if such conversion would increase such
Selling Stockholder's beneficial ownership of the Common Stock (other
than shares so owned through ownership of the Notes, the Warrants and
the Placement Fee Warrants) to in excess of 4.9%. Except as indicated
in the footnotes to this table and pursuant to applicable community
property laws, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
beneficially owned.
(2) Represents (i) the number of shares of Common Stock issuable upon
conversion of the Notes calculated using an assumed conversion price
of $13.906 with respect to the face value of the Notes, based upon
certain conversion provisions of the Notes (which price could
fluctuate from time to time on and after October 10, 1997 based on
changes in the market price of the Common Stock), (ii) the number of
shares of Common Stock which may be issued and paid in lieu of cash,
at the Company's option, as interest on the Notes calculated using an
assumed per share price of $13.906 (which price could fluctuate from
time to time on and after October 10, 1997 based on changes in the
market price of the Common Stock) and (iii) the number of shares of
Common Stock issuable upon exercise of the Warrants and the Placement
Fee Warrants at an exercise price of $16.74.
(3) Represents (i) the number of shares of Common Stock issuable upon
conversion of the Notes calculated using an assumed conversion price
of $13.906 with respect to the face value of the Notes, based upon
certain conversion provisions of the Notes (which price could
fluctuate from time to time on and after October 10, 1997 based on
changes in the market price of the Common Stock), (ii) the number of
shares of Common Stock which may be issued and paid in lieu of cash,
at the Company's option, as interest on the Notes calculated using an
assumed per share price of $13.906 (which price could fluctuate from
time to time on and after October 10, 1997 based on changes in the
market price of the Common Stock) and (iii) the number of shares of
Common Stock issuable upon exercise of the Warrants and the Placement
Fee Warrants at an exercise price of $16.74. This Prospectus also
covers the resale of such presently indeterminate number of additional
Shares as may be issuable upon conversion of the Notes or payment of
interest on the Notes, based upon fluctuations in the conversion price
of the Notes.
(4) Diaz & Altschul Advisors, LLC, a New York limited liability company
("D&A Advisors), is an advisor to ACI/DA Investors I, LLC ("ACI/DA")
and may be deemed to share beneficial ownership of the Shares
beneficially owned by ACI/DA. D&A Advisors disclaims such beneficial
ownership.
(5) D&A Advisors serves as investment advisor to Delta Opportunity Fund,
Ltd. ("Delta") and may be deemed to share beneficial ownership of the
Shares beneficially owned by Delta by reason of shared power to
dispose of the Shares beneficially owned by Delta. D&A Advisors is
controlled by Diaz & Altschul Group, LLC ("D&A Group"). D&A Advisors
and D&A Group disclaim beneficial ownership of the Shares beneficially
owned by Delta.
(6) Citadel Limited Partnership is the managing general partner of Nelson
Partners ("Nelson"), and the trading manager of Olympus Securities,
Ltd. ("Olympus") and consequently has voting control and investment
discretion over securities held by both Nelson and Olympus. The
ownership information for Nelson does not include the Shares owned by
Olympus and the ownership information for Olympus does not include the
Shares owned by Nelson.
(7) An affiliate of OTATO Limited Partnership serves as a trading
consultant to ACI/DA, Delta, Overbrook Fund I, LLC ("Overbrook") and
D&A Group and may be deemed to share beneficial ownership of the Shares
beneficially owned by such Selling Stockholders by reason of shared
power to dispose of the Shares
34.
<PAGE>
beneficially owned by such Selling Stockholders. Such affiliate
disclaims beneficial ownership of such Shares.
(8) Mr. Arthur G. Altschul, Jr., a managing member of D&A Group, also
serves as the managing member of Overbrook. Mr. Altschul may be deemed
to share beneficial ownership of all Shares beneficially owned by
Overbrook by reason of the power to dispose of the Shares beneficially
owned by Overbrook. Mr. Altschul disclaims such beneficial ownership.
(9) Mr. Arthur G. Altschul, Jr., a managing member of D&A Group, served as
Senior Director of Corporate Affairs of the Company until April 1996
and has served as a Consultant to the Company since May 1996.
</FN>
</TABLE>
35.
<PAGE>
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Stockholders or by pledgees, donees,
transferees or other successors in interest that receive such shares as a gift,
partnership distribution or other non-sale related transfer. The Shares may be
sold from time to time in transactions on the Nasdaq National Market, in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices or
at negotiated prices. The Selling Stockholders may effect such transactions by
selling the Shares to or through broker-dealers, including block trades in which
brokers or dealers will attempt to sell the Shares as agent but may position and
resell the block as principal to facilitate the transaction, or in one or more
underwritten offerings on a firm commitment or best effort basis. Sales of
Selling Stockholders' Shares may also be made pursuant to Rule 144 under the
Securities Act, where applicable.
To the extent required under the Securities Act, the aggregate amount
of Selling Stockholders' Shares being offered and the terms of the offering, the
names of any such agents, brokers, dealers or underwriters and any applicable
commission with respect to a particular offer will be set forth in an
accompanying Prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the Shares may receive compensation in the
form of underwriting discounts, concessions, commissions or fees from a Selling
Stockholder and/or purchasers of Selling Stockholders' Shares, for whom they may
act (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the Shares owned by
them, and the pledgees, secured parties or persons to whom such securities have
been hypothecated shall, upon foreclosure in the event of default, be deemed to
be Selling Stockholders hereunder. In addition, a Selling Stockholder may, from
time to time, sell short the Common Stock of the Company, and in such instances,
this Prospectus may be delivered in connection with such short sales and the
Shares offered hereby may be used to cover such short sales.
From time to time one or more of the Selling Stockholders may transfer,
pledge, donate or assign such Selling Stockholders' Shares to lenders or others
and each of such persons will be deemed to be a "Selling Stockholder" for
purposes of this Prospectus. The number of Selling Stockholders' Shares
beneficially owned by those Selling Stockholders who so transfer, pledge, donate
or assign Selling Stockholders' Shares will decrease as and when they take such
actions. The plan of distribution for Selling Stockholders' Shares sold
hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be Selling Stockholders hereunder.
A Selling Stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Common
Stock in the course of hedging the positions they assume with such Selling
Stockholder, including, without limitation, in connection with distributions of
the Common Stock by such broker-dealers. A Selling Stockholder may also enter
into option or other transactions with broker-dealers that involve the delivery
of the Common Stock to the broker-dealers, who may then resell or otherwise
transfer such Common Stock. A Selling Stockholder may also loan or pledge the
Common Stock to a broker-dealer and the broker-dealer may sell the Common Stock
so loaned or upon a default may sell or otherwise transfer the pledged Common
Stock.
In order to comply with the securities laws of certain states, if
applicable, the Shares will 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 they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not bid for or purchase
shares of Common Stock during a period which commences one business
36.
<PAGE>
day (5 business days, if the Company's public float is less than $25 million or
its average daily trading volume is less than $100,000) prior to such person's
participation in the distribution, subject to exceptions for certain passive
market making activities. In addition and without limiting the foregoing, each
Selling Stockholder will be subject to applicable provisions of the Exchange Act
and the rules and regulations thereunder, including, without limitation,
Regulation M which provisions may limit the timing of purchases and sales of
shares of the Company's Common Stock by such Selling Stockholder.
The Shares were originally issued to the Selling Stockholders pursuant
to an exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereof. The Company agreed to register the Shares
under the Securities Act and to indemnify and hold the Selling Stockholders
harmless against certain liabilities under the Securities Act that could arise
in connection with the sale by the Selling Stockholders of the Shares. The
Company has agreed to pay all reasonable fees and expenses incident to the
filing of this Registration Statement.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
the Company by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The financial statements of the Company appearing in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, 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 are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
37.
<PAGE>
================================================================================
NO DEALER, SALESPERSON 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 INFORMATION OR REPRESENTATIONS 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 TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
-----------------
TABLE OF CONTENTS
Page
Available Information...................................................... 1
Incorporation of Certain Documents by
Reference................................................................ 1
The Company................................................................ 1
Risk Factors............................................................... 4
Business................................................................... 13
Selling Stockholders....................................................... 33
Plan of Distribution....................................................... 36
Legal Matters.............................................................. 37
Experts.................................................................... 37
================================================================================
================================================================================
1,780,000 Shares
SUGEN, Inc.
Common Stock
-----------------
PROSPECTUS
-----------------
OCTOBER ___, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the variousCexpensesoexpected to be
incurred by the Registrant in connection with the sale and distribution of the
securities being registered hereby. All amounts are estimated except the
Securities and Exchange Commission registration fee and the Nasdaq National
Market listing fee.
SEC Registration Fee .................................................. $10,670
Nasdaq National Market Listing Fee .................................... 17,500
Accounting Fees and Expenses .......................................... 10,000
Legal Fees and Expenses ............................................... 40,000
Miscellaneous Fees and Expenses........................................ 10,000
---------
Total $88,170
=========
Item 15. Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law, the
Registrant has broad powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Bylaws also provide that the Registrant shall indemnify its directors and
officers and may indemnify its other employees and other agents to the fullest
extent not prohibited by Delaware law.
The Registrant's Certificate of Incorporation provides for the
elimination of liability of monetary damages for breach of the directors'
fiduciary duty of care to the Registrant and its stockholders. These provisions
do not eliminate the directors' duty of care and, in appropriate circumstances,
equitable remedies such an injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any dividends or approval of
stock repurchases or redemption that are unlawful under Delaware law. The
provision does not affect a director's responsibilities under any other laws,
such as the federal securities laws or state of federal environmental laws.
The Registrant has entered into agreements with its directors and
executive officers that require the Registrant to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonable incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director of
officer of the Registrant or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonable believed to be
in or not opposed to the best interests of the Registrant and, with respect to
any criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The indemnification agreement also set forth certain procedures
that will apply in the event of a claim for indemnification thereunder.
Item 16. Exhibits and Financial Statement Schedules
The exhibits listed in the Exhibit Index as filed as part of this
Registration Statement.
(a) Exhibits
II-1
<PAGE>
Exhibit
Number Exhibit
3.1 Restated Certificate of Incorporation, filed February 23,
1995. (2)
3(ii).2 Bylaws of the Registrant. (1)
3.3 Certificate of Designation of Series A Junior Participating
Preferred Stock of the Registrant. (3)
4.1 Reference is made to Exhibits 3.1 through 3(ii).2.
4.2 Specimen Stock Certificate. (1)
4.3 Form of 5% Senior Custom Convertible Note due 2000. (4)
4.4 Form of Common Stock Purchase Warrant. (4)
5.1 Opinion of Cooley Godward LLP.
10.67 Form of Note Purchase Agreement, dated as of September 8,
1997, by and between the Company and the investor named
therein. (4)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP, reference is made to Exhibit
5.1.
- --------------
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16 "Exhibits" of the Company's Registration Statement
on Form S-1, as amended (File Number 33-77074), which became effective
October 4, 1994.
(2) Incorporated by reference to identically numbered exhibits filed in
response to Item 14 "Exhibits" of the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
(3) Filed as an exhibit to the Form 8-K Current Report dated July 26, 1995
and incorporated herein by reference.
(4) Filed as an exhibit to the Form 8-K Current Report dated September 18,
1997 and incorporated herein by reference.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a) (3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (i) and (ii)
do not apply if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i) and
(ii) is contained in periodic reports filed with or furnished to the Commission
by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Redwood City, State of California, on the 9th day of
October, 1997.
SUGEN, INC.
By: /s/ Stephen Evans-Freke
---------------------------
Stephen Evans-Freke
Chief Executive Officer and
Chairman of the Board
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the persons whose signatures
appear below, which persons have signed such Registration Statement in the
capacities and on the dates indicated:
Signature Title Date
---------- ----- ------
/s/ Stephen Evans-Freke Chief Executive Officer and October 9, 1997
- ---------------------------- Chairman of the Board
Stephen Evans-Freke (Principal Executive Officer)
/s/ Christine E. Gray-Smith Vice President, Finance October 9, 1997
- --------------------------- (Principal Financial and
Christine E. Gray-Smith Accounting Officer)
/s/ Axel Ullrich Director October 9, 1997
- --------------------------
Axel Ullrich
/s/ Richard D. Spizzirri Director and Secretary October 9, 1997
- --------------------------
Richard D. Spizzirri
/s/ Jeremy L. Curnock Cook Director October 9, 1997
- --------------------------
Jeremy L. Curnock Cook
/s/ Charles M. Hartman Director October 9, 1997
- --------------------------
Charles M. Hartman
/s/ Heinrich Kuhn Director October 9, 1997
- --------------------------
Heinrich Kuhn
/s/ Donald E. Nickelson Director October 9, 1997
- --------------------------
Donald E. Nickelson
/s/ Bruce R. Ross Director October 9, 1997
- --------------------------
Bruce R. Ross
II-4
<PAGE>
/s/ Glenn S. Utt, Jr. Director October 9, 1997
- -------------------------
Glenn S. Utt, Jr.
Director October , 1997
- -------------------------
Michael A. Wall
II-5
EXHIBIT 5.1
October 10, 1997
SUGEN, Inc.
351 Galveston Drive BRIAN C. CUNNINGHAM
Redwood City, CA 94063-4720 650 843-5076
[email protected]
Ladies and Gentleman:
You have requested our opinion with respect to certain matters in connection
with the filing by SUGEN, Inc., a Delaware corporation (the "Company"), of a
Registration Statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission") on October 10, 1997,
covering the offering of a total of up to 1,780,000 shares of the Company's
Common Stock with a par value of $0.01 (the "Shares"). All of the Shares are to
be sold by certain stockholders as described in the Registration Statement.
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus included therein, the Company's
Restated Certificate of Incorporation and Bylaws, and the originals or copies
certified to our satisfaction of such records, documents, certificates,
memoranda and other instruments as in our judgment are necessary or appropriate
to enable us to render the opinion expressed below. We have assumed the
genuineness and authenticity of all documents submitted to us as originals, and
the conformity to originals of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold in accordance with the Registration Statement, will
be validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Brian C. Cunningham
-----------------------
Brian C. Cunningham
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and the related Prospectus of SUGEN, Inc. for
the registration of 1,780,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 7, 1997, with
respect to the financial statements of SUGEN, Inc. included in its Annual Report
on Form 10-K for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
October 8, 1997
