<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
Epoch Pharmaceuticals, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Epoch Pharmaceuticals, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Statement)
Redeemable Common Stock Purchase Warrants
- --------------------------------------------------------------------------------
(Title of Class of Securities)
294273-11-5
- --------------------------------------------------------------------------------
(CUSIP Number of Class of Securities)
Fred Craves, Ph.D.
Chief Executive Officer
Epoch Pharmaceuticals, Inc.
1725 220th Street, S.E. No. 104
Bothell, Washington 98021
(206) 485-8566
with a copy to:
Lawrence B. Cohn, Esq.
Stradling, Yocca, Carlson & Rauth
A Professional Corporation
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660-6441
(714) 725-4000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
March , 1997
- --------------------------------------------------------------------------------
(Date Tender Offer First Published,
Sent or Given to Security Holders)
<PAGE> 2
Calculation of Filing Fee
<TABLE>
<CAPTION>
- ------------------------------------- ----------------------------------
Transaction
Valuation* Amount of Filing Fee
<S> <C>
$494,500 $100
- ------------------------------------- ----------------------------------
</TABLE>
* Calculated pursuant to Rule 0-11(b)(2) based upon the market value of the
Public Warrants proposed to be acquired by Epoch Pharmaceuticals, Inc. as of
March 10, 1997, which, based upon the average of the bid and ask prices as of
March 10, 1997, was $.172 per Public Warrant.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid:
----------------------------------------------------
Form or Registration No.:
---------------------------------------------------
Filing Party:
---------------------------------------------------------------
Date Filed:
---------------------------------------------------------------
ITEM 1. SECURITY AND ISSUER
(a) The name of the Issuer is Epoch Pharmaceuticals, Inc., a Delaware
corporation (the "Company"). The principal executive office of the Company is
1725 220th Street, No. 104, Bothell, Washington 98021.
(b) The exact title and amount of the class of securities being sought
are any or all Redeemable Common Stock Purchase Warrants of the Company, which
were issued by the Company in its initial public offering on September 29, 1993
(the "Public Warrants"). As of March 3, 1997, there were 2,875,000 Public
Warrants outstanding held by 22 record holders. Each Public Warrant entitles the
holder to purchase one share of the Company's common stock, par value $.01 per
share (the "Common Stock"), until September 29, 1998, at an exercise price equal
to $6.50 per share of Common Stock, subject to certain adjustments. The Public
Warrants are redeemable, in whole but not in part, for $.05 per Public Warrant,
at the option of the Company, upon 30 days' written notice at any time after the
current market price of the Company's Common Stock has been at least 140% of the
then effective exercise price of the Public Warrants for 30 consecutive business
days ending within 15 days of the date of the notice of redemption.
The Company offers to exchange for every two Public Warrants one new
warrant to purchase one share of the Company's Common Stock until June 20, 2001,
at an exercise price of $2.50 per share of Common Stock, subject to certain
adjustments (the "Exchange Warrants"). The Exchange Warrants are redeemable for
$.05 per Exchange Warrant, at the option of the Company, upon 30 days' written
notice, at any time after the last sale price of the Company's Common Stock
2
<PAGE> 3
has been at least 150% of the then effective exercise price of the Exchange
Warrants for 20 consecutive business days ending within 15 days of the notice of
redemption.
The following officers, directors and affiliates of the Company own
Public Warrants:
<TABLE>
Number of Public Warrants
Name and Title Beneficially Held
- -------------- --------------------------
<S> <C>
Biotechnology Investment Group L.L.C. (1) 966,400
</TABLE>
(1) Biotechnology Investment Group, L.L.C. ("BIG") is a limited liability
company which invests in and otherwise deals with securities of biotechnology
and other companies. The members of BIG are (i) the managing member, Collinson
Howe Venture Partners, Inc. ("CHVP"), an investment management firm of which
Jeffrey J. Collinson is President, sole director and majority stockholder and
Timothy F. Howe is a Vice President and a stockholder, (ii) The Edward Blech
Trust ("EBT"), a trust for the benefit of the minor child of David Blech, a
financial advisor to the Company, and (iii) Wilmington Trust Company ("WTC"), as
voting trustee under a voting trust agreement (the "Voting Trust Agreement"),
among WTC, BIG and BIO Holdings, L.L.C. ("Holdings"). The managing member of BIG
is CHVP. Each of Citibank, N.A. ("Citibank") and Holdings has the right pursuant
to the Voting Trust Agreement to direct the actions of WTC as a member of BIG.
WTC, as the member holding a majority interest in Holdings, has the right to
direct the actions of Holdings under the Voting Trust Agreement. Citibank,
pursuant to a separate voting trust agreement among WTC, David Blech and
Holdings, has the right to direct the actions of WTC as a member of Holdings
with respect to the rights of Holdings under the Voting Trust Agreement. By
virtue of their status as members of BIG, each of CHVP and EBT may be deemed the
beneficial owner of all shares held of record by BIG (the "Biotechnology Group
Shares"). By virtue of his status as the majority owner and controlling person
of CHVP, Jeffrey J. Collinson may also be deemed the beneficial owner of the
Biotechnology Group Shares. Each of CHVP, EBT and Jeffrey J. Collinson disclaims
beneficial ownership of any Biotechnology Group Shares except to the extent, if
any, of such person's actual pecuniary interest therein.
(c) Trading activity with respect to the Company's Public Warrants has
been limited and sporadic and would not constitute an "established trading
market."
From September 29, 1993 until September 30, 1994, the Company's Public
Warrants traded on the Nasdaq National Market and, since September 30, 1994,
have been quoted on the OTC Bulletin Board. The following table presents
quarterly information on the high and low sale prices of the Public Warrants
based on closing transactions until September 30, 1994 as reported by the Nasdaq
National Market, and the high and low bid prices of the Public Warrants quoted
on the OTC Bulletin Board since that date during each specified period:
<TABLE>
<CAPTION>
1996 Prices 1995 Prices 1994 Prices
----------- ----------- -----------
High Low High Low High Low
---------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter 0.1 0.09 0.015625 0.015625 1.75 0.075
Second Quarter 0.5 0.125 0.03125 0.03125 1.3125 0.75
Third Quarter 0.25 0.125 0.046875 0.03125 1.00 0.375
Fourth Quarter 0.21875 0.125 0.03125 0.03125 0.078125 0.015625
</TABLE>
(d) Not applicable.
3
<PAGE> 4
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The consideration offered by the Company upon the exchange of each two
Public Warrants is one Exchange Warrant. In the event an odd number of Public
Warrants is surrendered for exchange by the holders thereof, cash in an amount
equal to the fair market value of one Public Warrant will be issued in lieu of a
fractional Exchange Warrant.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
The purpose of the Company's offer to exchange the Public Warrants for
the Exchange Warrants is to provide the holders of the outstanding Public
Warrants with an opportunity to profit from the purchase thereof. The exercise
price of the Exchange Warrants reflects more closely the current market value of
the Company's Common Stock. Accordingly, the Company believes that holders of
the Exchange Warrants will have a better opportunity to exercise their warrant
rights. The exchange also increases the likelihood that the Company will realize
cash proceeds from the exercise of warrants for use in the Company's operations.
To the extent that any Public Warrants are exchanged by the Company at the
option of the holders thereof, the Public Warrants will be retired.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
To the Company's knowledge, there have been no transactions involving
the Public Warrants effected during the past 40 business days by the Company,
any executive officer or director of the Company or any other person in control,
directly or indirectly, of the Company.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES
None.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company has not retained any person to make solicitations or
recommendations in connection with the exchange of the Public Warrants by the
holders thereof.
ITEM 7. FINANCIAL INFORMATION
(a) Reference is hereby made to the financial information of the
Company in its Annual Report on Form 10-KSB for the fiscal year ended December
31, 1995, filed with the Commission on April 11, 1996, and its Quarterly
Reports on Form 10-QSB for the fiscal quarter ended March 31, 1996, filed with
the Commission on May 10, 1996, for the fiscal quarter ended June 30, 1996,
filed with the Commission on August 13, 1996 and for the fiscal quarter ended
September 30, 1996, filed with the Commission on November 14, 1996, all of
which are incorporated by reference herein.
(b) Not applicable.
4
<PAGE> 5
ITEM 8. ADDITIONAL INFORMATION
(a) None.
(b) There are no applicable regulatory requirements which must be
complied with or approvals which must be obtained in connection with the
possible exchange by the Company of the Exchange Warrants for the Public
Warrants other than compliance with Section 13(e)(1) of the Securities Exchange
Act of 1934 and Rules 13e-1 and 13e-4 promulgated thereunder and applicable
state securities laws.
(c) Not applicable.
(d) None.
(e) None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(99.1) Notice of Optional Exchange to Holders of Public
Warrants.
(99.2) Letter of Transmittal.
(99.3) Prospectus dated December 9, 1996 relating to the
Common Stock into which the Public Warrants are
exercisable, which was filed with the Commission in
connection with the Company's Post-Effective
Amendment No. 2 on Form S-3 to Form SB-2,
Registration No. 33-66742, declared effective by the
Commission on December 10, 1996.
(99.4)* The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1995, filed with the
Commission on April 11, 1996.
(99.5)* The Company's Quarterly Reports on Form 10-QSB for
the quarter ended March 31, 1996, filed with the
Commission on May 10, 1996, for the quarter ended
June 30, 1996, filed with the Commission on August
13, 1996 and for the quarter ended September 30,
1996, filed with the Commission on November 14, 1996.
----------
* Previously filed.
5
<PAGE> 6
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: March 12, 1997 EPOCH PHARMACEUTICALS, INC.
By: /s/ SANFORD S. ZWEIFACH
---------------------------------------------
Sanford S. Zweifach, President and
Chief Financial Officer
<PAGE> 7
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
(99.1) Notice of Optional Exchange to Holders of Public Warrants.
(99.2) Letter of Transmittal.
(99.3) Prospectus dated December 9, 1996 relating to the Common Stock
into which the Public Warrants are exercisable, which was filed
with the Commission in connection with the Company's
Post-Effective Amendment No. 2 on Form S-3 to Form SB-2,
Registration No. 33-66742, declared effective by the Commission
on December 10, 1996.
(99.4)* The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995, filed with the Commission on April 11,
1996.
(99.5)* The Company's Quarterly Reports on Form 10-QSB for the quarter
ended March 31, 1996, filed with the Commission on May 10, 1996,
for the quarter ended June 30, 1996, filed with the Commission
on August 13, 1996 and for the quarter ended September 30, 1996,
filed with the Commission on November 14, 1996.
- ----------
* Previously filed.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
NOTICE OF OPTIONAL EXCHANGE TO ALL REGISTERED
HOLDERS OF REDEEMABLE COMMON STOCK PURCHASE
WARRANTS OF EPOCH PHARMACEUTICALS, INC.
MARCH __, 1997
Notice is hereby given that EPOCH PHARMACEUTICALS, INC. (the "Company")
(formerly "MicroProbe Corporation") hereby offers to exchange for every two
Redeemable Common Stock Purchase Warrants (the "Public Warrants") (CUSIP No.
294273-11-5) one new warrant to purchase one share of the Company's common
stock, par value $.01 per share (the "Common Stock"), until June 20, 2001, at an
exercise price of $2.50 per share of Common Stock (the "Exchange Warrants"). The
Company's offer to exchange the Exchange Warrants for the Public Warrants
constitutes an issuer tender offer. Accordingly, this notice also serves as
notice to the holders of the Company's Public Warrants that the Company has
commenced a tender offer for all of its outstanding Public Warrants.
Enclosed is a Prospectus relating to the Common Stock into which the
Public Warrants are exercisable. On December 10, 1996, the Registration
Statement registering the securities issuable upon exercise of the Public
Warrants was declared effective by the United States Securities and Exchange
Commission.
For the 60 day period following the date hereof, ending on May __, 1997
(the "Election Period"), holders of Public Warrants may elect to receive one
Exchange Warrant for every two Public Warrants. In the event an odd number of
Public Warrants are surrendered for exchange by the holders thereof, cash in an
amount equal to the fair market value of one Public Warrant will be issued in
lieu of a fractional Exchange Warrant. IF YOU WISH TO HAVE YOUR PUBLIC WARRANTS
EXCHANGED, IN WHOLE OR IN PART, YOU MUST COMPLETE THE ENCLOSED LETTER OF
TRANSMITTAL AND FORWARD IT TO THE COMPANY'S TRANSFER AGENT, AMERICAN STOCK
TRANSFER & TRUST COMPANY, IN ACCORDANCE WITH THE INSTRUCTIONS ON THE LETTER OF
TRANSMITTAL. ANY REQUEST FOR EXCHANGE MUST BE RECEIVED BY THE TRANSFER AGENT ON
OR BEFORE MAY __, 1997. Holders who elect to have Public Warrants exchanged
during the Election Period may withdraw their election at any time during the
Election Period by giving written notice by mail to the Company at the address
set forth herein.
This exchange offer will be applicable only to holders of Public Warrants
who reside in states where there is an available registration exemption. This
offer is void where prohibited.
The Company has not retained any person to make solicitations or
recommendations in connection with the optional exchange of the Public Warrants
by the holders thereof.
INFORMATION ABOUT THE PUBLIC WARRANTS AND EXCHANGE WARRANTS
The Public Warrants were issued by the Company in its initial public
offering on September 29, 1993. As of March 3, 1997, there were 2,875,000
Public Warrants outstanding held by 22 record holders. Each Public Warrant
entitles the holder to purchase one share of the Company's Common Stock until
September 29, 1998, at an exercise price equal to $6.50 per share of Common
Stock, subject to certain adjustments. The Public Warrants are redeemable, in
whole but not in part, for $.05 per Public Warrant, at the option of the
Company, upon 30 days' written notice at any time after the current market price
of the Company's Common Stock has been at least 140% of the then effective
exercise price of the Public Warrants for 30
<PAGE> 2
consecutive business days ending within 15 days of the date of the notice of
redemption. Each Exchange Warrant entitles the holder to purchase one share of
the Company's Common Stock until June 20, 2001, at an exercise price of $2.50
per share of Common Stock, subject to certain adjustments. The Exchange Warrants
are redeemable for $.05 per Exchange Warrant, at the option of the Company, upon
30 days' written notice, at any time after the last sale price of the Company's
Common Stock has been at least 150% of the then effective exercise price of the
Exchange Warrants for 20 consecutive business days ending within 15 days of the
notice of redemption.
From September 29, 1993 until September 30, 1994, the Public Warrants
traded on the Nasdaq National Market under the symbol MPROW. Since September 30,
1994 , the Public Warrants have been quoted on the OTC Bulletin Board under the
symbol EPPHW. The following table presents quarterly information on the high and
low sale prices of the Public Warrants based on closing transactions until
September 30, 1994 as reported by the Nasdaq National Market, and bid prices of
the Public Warrants since that date as quoted on the OTC Bulletin Board during
each specified period:
<TABLE>
<CAPTION>
1996 Prices 1995 Prices 1994 Prices
----------- ----------- -----------
High Low High Low High Low
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter 0.1 0.09 0.015625 0.015625 1.75 0.075
Second Quarter 0.5 0.125 0.03125 0.03125 1.3125 0.75
Third Quarter 0.25 0.125 0.046875 0.03125 1.00 0.375
Fourth Quarter 0.21875 0.125 0.03125 0.03125 0.078125 0.015625
</TABLE>
To the Company's knowledge, there have been no transactions involving the
Public Warrants effected during the past 40 business days by the Company, any
executive officer or director of the Company or any other person in control,
directly or indirectly, of the Company.
PURPOSE OF THE EXCHANGE OFFER
The purpose of the Company's offer to exchange the Public Warrants for the
Exchange Warrants is to provide the holders of the outstanding Public Warrants
with an opportunity to profit from the purchase thereof. The exercise price of
the Exchange Warrants reflects more closely the current market value of the
Company's Common Stock. Accordingly, the Company believes that holders of
Exchange Warrants will have a better opportunity to exercise their warrant
rights. The exchange also increases the likelihood that the Company will realize
cash proceeds from the exercise of warrants for use in the Company's operations.
To the extent that any Public Warrants are exchanged by the Company at the
option of the holders thereof, such Public Warrants will be retired.
FINANCIAL INFORMATION ABOUT THE COMPANY
Reference is hereby made to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995, filed with the Commission on April 11, 1996,
and the Company's Quarterly Reports on Form 10-QSB for the quarter ended March
31, 1996, filed with the Commission on May 10, 1996, for the quarter ended
June 30, 1996, filed with the Commission on August 13, 1996 and for the fiscal
quarter ended September 30, 1996, filed with the Commission on November 14,
1996, all of which are incorporated by reference herein.
2
<PAGE> 3
ADDITIONAL INFORMATION
There are no applicable regulatory requirements which must be complied
with or approvals which must be obtained in connection with the possible
exchange by the Company for Public Warrants other than compliance with Section
13(e)(1) of the Securities Exchange Act of 1934, as amended, and Rules 13e-1 and
13e-4 promulgated thereunder and applicable state securities laws.
The Company will provide, without charge, to each person to whom a copy
of this notice 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 herein (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Such requests,
including a request for any additional information regarding this notice or the
exchange procedures described herein, should be directed to Sanford S.
Zweifach, President and Chief Financial Officer of the Company, 1725 220th
Street, S.E. No. 104, Bothell, Washington 98021, (206) 485-8566.
<PAGE> 1
EXHIBIT 99.2
LETTER OF TRANSMITTAL
TO EXCHANGE REDEEMABLE PURCHASE COMMON STOCK WARRANTS OF
EPOCH PHARMACEUTICALS, INC.
PURSUANT TO THE NOTICE OF OPTIONAL EXCHANGE
MARCH __, 1997
TO: AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NEW YORK 10005
(718) 921-8200
THE ELECTION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
EASTERN TIME, ON MAY __, 1997
Ladies and Gentlemen:
The undersigned hereby delivers to Epoch Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), the Redeemable Purchase Common Stock Warrants (the
"Public Warrants") to be exchanged by the Company for new warrants to purchase
one share of the common stock, par value $.01 per share (the "Common Stock"), of
the Company until June 20, 2001, at an exercise price of $2.50 per share of
Common Stock (the "Exchange Warrants"), in accordance with the terms and subject
to the conditions of the Company's Notice of Optional Exchange dated March __,
1997 (the "Notice"), receipt of which is hereby acknowledged.
The undersigned hereby requests that the Company exchange the Public
Warrants included herewith. The undersigned hereby represents and warrants to
the Company that (a) it has full power and authority to elect to exchange the
Public Warrants; and (b) it has read and understood the Notice.
Unless otherwise indicated herein under Item B, please issue certificates
for the Exchange Warrants (and certificates for Public Warrants not being
exchanged) in the name(s) of the registered holder(s) appearing under Item A
below. Similarly, unless otherwise indicated under Item C, please mail the
certificate(s) for the Exchange Warrants (and certificate(s) for Public Warrants
not being exchanged) to the address(es) of the registered holder(s) appearing
under Item A.
ITEM A. DESCRIPTION OF PUBLIC WARRANTS SURRENDERED FOR EXCHANGE
Please fill in the following information. The information below must match
the information on the certificate(s) exactly.
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
PUBLIC WARRRANTS PUBLIC WARRANTS
CERTIFICATE REPRESENTED TO BE
NO(S). BY CERTIFICATE(S) EXCHANGED*
----------- ------------------ ----------------
<S> <C> <C> <C>
----------- ------------------ ----------------
----------- ------------------ ----------------
----------- ------------------ ----------------
----------- ------------------ ----------------
----------- ------------------ ----------------
</TABLE>
* If you desire to have fewer than all Public Warrants exchanged by any
Certificates listed above, please indicate in this column the number of
Public Warrants you wish to have exchanged. Otherwise, all Public Warrants
evidenced by such certificates will be exchanged.
<PAGE> 2
ITEM B. SPECIAL PAYMENT INSTRUCTIONS
To be completed ONLY if certificates for Public Warrants not exchanged are to be
issued in a name other than as indicated in Item A above.
Issue Certificate(s) to:
Name
-------------------------------------
(Please Type or Print)
Address
-----------------------------------
- -------------------------------------------
- -------------------------------------------
- -------------------------------------------
(Include Zip Code)
ITEM C. SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the Certificates for Public Warrants not exchanged are
to be MAILED to an address other than as indicated in Item A above.
Mail Certificate(s) to:
Name
-------------------------------------
(Please Type or Print)
Address
-----------------------------------
- -------------------------------------------
- -------------------------------------------
- -------------------------------------------
(Include Zip Code)
ITEM D. REQUIRES SIGNATURE(S) IMPORTANT - SIGN HERE
The signature(s) on this Letter of Transmittal must correspond with the name(s)
of the registered owner(s) of the certificate(s) surrendered for exchange or
appropriate stock powers must be provided.
Signature
----------------------------------
Signature
----------------------------------
Name(s)
----------------------------------
(Please Type or Print)
Capacity
----------------------------------
(Full Title)
Dated
-------------------------------------
Daytime Telephone
-------------------------
- -------------------------------------------
(Tax I.D. or Social Security Number)
ITEM E. SIGNATURE GUARANTEE (IF APPLICABLE)
No signature guarantee is required if this Letter of Transmittal is signed by
the registered holder, unless the holder has completed either Item B or C.
Authorized Signature
-----------------------
Name
--------------------------------------
(Please Type or Print)
Title
--------------------------------------
Name of Firm
-------------------------------
Address
------------------------------------
Daytime Telephone
--------------------------
2
<PAGE> 3
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FOR SURRENDERING PUBLIC WARRANTS IN EXCHANGE
FOR THE EXCHANGE WARRANTS
1. GENERAL. In accordance with the Notice of Optional Exchange dated March
__, 1997 (the "Notice"), the Company is offering to exchange for every two
Public Warrants one Exchange Warrant as more fully described in the Notice. The
Letter of Transmittal, or a copy thereof, properly completed and signed, must be
used in connection with all exchanges of Public Warrants for Exchange Warrants.
THE METHOD OF DELIVERY OF CERTIFICATES FOR THE PUBLIC WARRANTS (THE "PUBLIC
WARRANT CERTIFICATE(S)") AND ANY OTHER DOCUMENTS (SEE BELOW) IS AT THE ELECTION
AND RISK OF SURRENDERING HOLDERS, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, BE USED. Transmit your Public Warrant
Certificate(s) and other required documents to the address set forth on the
Letter of Transmittal. Delivery will be deemed effective only when actually
received at the office of the Exchange Agent. Delivery of the Letter of
Transmittal to an address other than that set forth on the Letter of Transmittal
will not constitute a valid delivery.
2. SIGNATURES. The signature (or signatures, in the case of any Public
Warrants owned by two or more joint holders) on the Letter of Transmittal should
correspond exactly with the name(s) of the registered owner(s) as written on the
face of the Public Warrant Certificate(s) unless such Public Warrant
Certificate(s) has (have) been transferred by the registered owner(s), in which
event the Letter of Transmittal should be signed in exactly the same form as the
name of the last transferee indicated on the transfers attached to or endorsed
on the Public Warrant Certificate(s).
When signing as agent, attorney, administrator, executor, guardian,
trustee, or in any other fiduciary or representative capacity, or as an officer
of a corporation on behalf of the corporation, give full title as such. If the
Public Warrant Certificate(s) has (have) been transferred or assigned and (a)
new certificate(s) has (have) not yet been received in the name of the
transferee or assignee, the Letter of Transmittal must be signed by the
transferee or assignor.
The Public Warrant Certificate(s), if registered in the name(s) of the
person(s) signing the Letter of Transmittal, need not be endorsed or accompanied
by any instrument of assignment or transfer other than the Letter of
Transmittal.
3. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. If any Public
Warrant Certificate(s) has (have) been mutilated, lost, stolen or destroyed, you
should contact the Exchange Agent at (718) 921-8200 for further instructions.
This Letter of Transmittal cannot be processed and you will not receive
certificates for Exchange Warrants (the "Exchange Warrant Certificate(s)")
unless you submit either (i) the Public Warrant Certificate(s) or (ii) a surety
bond in form satisfactory to the Exchange Agent and the Company, indemnifying
the Exchange Agent and the Company against any liabilities that may arise from
delivering the Exchange Warrant Certificate(s) without the actual surrender of
Public Warrant Certificate(s). The Exchange Agent will send you further
instructions as to obtaining any surety bond which may be required to be posted.
THE INSTRUCTIONS IN ITEMS 4 AND 5 BELOW NEED ONLY BE FOLLOWED IF THE
REGISTERED OWNER DESIRES TO MAKE A CHANGE OF OWNERSHIP OR A CORRECTION OF OR
CHANGE IN THE NAME.
4. TRANSFER INSTRUCTIONS.
(a) Change of Ownership. If the Exchange Warrants Certificate(s)
are to be issued in the name of someone other than the registered owner(s) of
the Public Warrants being surrendered, please complete the Special Issuance
Instructions in Box B on the Letter of Transmittal and be guided by the
following:
(i) Endorsement. The Public Warrant Certificate(s) being
surrendered must be properly endorsed (or accompanied by appropriate stock
powers properly executed) by the registered owner(s) of such Public Warrants to
the person who is to receive the Exchange Warrant Certificate(s). The signature
of the registered owner(s) on the endorsement or stock powers must correspond
exactly with the name as written upon the face of the Public Warrant
Certificate(s) being surrendered and must be guaranteed as described in
Instruction 5.
(ii) Transfer Taxes. In the event that any transfer or other
taxes may become payable by reason of the issuance of any Exchange Warrants
Certificate(s) in any name other than that of the registered owner(s) of the
Public Warrants being surrendered, the transferee or assignee must pay such tax
to the Exchange Agent or must establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not payable.
(b) Correction of or Change in Name. For a correction of name or
for a change in name which does not involve a change of ownership, please
complete the Special Issuance Instructions in Box B on the Letter of Transmittal
and proceed as follows: for a change in name by marriage, etc., the Public
Warrant Certificate(s) being surrendered should be endorsed, e.g., "Mary Doe,
now by marriage Mary Jones," with the endorsement signature guaranteed
3
<PAGE> 4
as described in Instruction 5. For a correction in name, the Public Warrant
Certificate(s) being surrendered should be endorsed, e.g., "Samuel J. Snow,
incorrectly inscribed as S.J. Snow," with the endorsement signature guaranteed
as described in Instruction 5.
5. SIGNATURE GUARANTEE. If the Exchange Warrant Certificate(s) are to be
issued in a name different from that appearing on the face of the surrendered
Public Warrant Certificate(s), the Public Warrant Certificate(s) must be
properly endorsed by the registered owner(s) thereof or accompanied by
appropriate stock powers properly executed, and the signature(s) to the
endorsement or on the stock power must be guaranteed by an eligible institution
such as a bank, credit union or broker which is a member of or a participant in
a signature medallion program.
6. SUPPORTING EVIDENCE. If the Letter of Transmittal, an endorsement of
the surrendered Public Warrant Certificate(s) or a stock power is executed by a
person (other than the registered owner) as an agent, attorney, administrator,
executor, guardian, trustee, or in any other fiduciary or representative
capacity, or by an officer of a corporation on behalf of the corporation, there
must be submitted with the Letter of Transmittal the Public Warrant
Certificate(s) being surrendered and any stock powers and documentary evidence
of appointment and authority to act in such capacity (including court orders
where necessary), as well as evidence of the authority of the person making such
execution to assign, sell or transfer such Public Warrants. Such documentary
evidence of authority must be in form satisfactory to the Exchange Agent.
7. SPECIAL MAILING INSTRUCTIONS. Unless instructions to the contrary are
given in the Special Mailing Instructions in Box C on the Letter of Transmittal,
any Exchange Warrant Certificate(s) to be issued upon surrender of Public
Warrant Certificate(s) in accordance with the Letter of Transmittal will be
mailed to the address shown in Box A.
8. ADDITIONAL COPIES. Additional copies of the Letter of
Transmittal may be obtained from the Exchange Agent.
9. INQUIRIES. All inquiries with respect to the surrender of
Public Warrant Certificate(s) should be made directly to the Exchange Agent
at the addresses or telephone numbers on the first page.
4
<PAGE> 1
EXHIBIT 99.3
PROSPECTUS
EPOCH PHARMACEUTICALS, INC.
2,875,000 SHARES OF COMMON STOCK
This Prospectus relates to the sale of up to 2,875,000 shares (the
"Shares") of the common stock par value $.01 per share (the "Common Stock"), by
Epoch Pharmaceuticals, Inc. ("Epoch" or the "Company") to holders of warrants
issued by the Company in its initial public offering on September 29, 1993 (the
"Public Warrants"). Each Public Warrant entitles the holder to purchase one
share of Common Stock until September 29, 1998, at an exercise price equal to
$6.50 per share of Common Stock, subject to certain adjustments. The Public
Warrants are redeemable, in whole but not in part, for $.05 per Public Warrant,
at the option of the Company, upon 30 days' written notice at any time after
the market price of the Company's Common Stock has been at least 140% of the
then effective exercise price of the Public Warrants for 30 consecutive
business days ending within 15 days of the date of the notice of redemption.
The Company intends to offer to exchange one new warrant to purchase one share
of Common Stock until September 29, 2001, at an exercise price of $2.50 per
share of Common Stock (the "Exchange Warrants") for every two Public Warrants.
The Exchange Warrants will be redeemable, at $.05 per warrant, at the option of
the Company, upon 30 days' written notice at any time after 18 months from the
date that they are issued, provided that the market price of the Company's
Common Stock has been at least 140% of the then effective exercise price of
the Exchange Warrants for 20 consecutive business days ending within 15 days
of the notice of redemption. See "Description of Securities - Warrants."
The Common Stock and the Public Warrants of the Company trade on the
OTC Bulletin Board under the symbols EPPH and EPPHW, respectively. The Company
anticipates that the Exchange Warrants will trade on the OTC Bulletin Board.
On November 27, 1996, as reported by the OTC Bulletin Board, the closing bid
price of a share of Common Stock of the Company was $0.94 and, on December 4,
1996, the closing bid price of a Public Warrant was $.16.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS."
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.
<TABLE>
<CAPTION>
======================================================================================================
Price to Warrant Warrant Solicitation Proceeds to the
Holder Fee (1) Company (2)(3)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$6.50 $0.325 $6.175
Total (3) ----------------------------------------------------------------
$18,687,500 $934,375 $17,753,125
======================================================================================================
</TABLE>
(1) The Company has agreed to pay a fee of 5% at the exercise price to
NASD members who solicit the exercise of a Warrant. (See "Plan of
Distribution")
(2) Before deducting estimated expenses payable by the Company of
$55,000.
(3) To the extent Public Warrant holders exchange such warrants for
Exchange Warrants, the proceeds to the Company on exercise will be
lower. There is no assurance that any of the Warrants will be
exercised and that the Company will receive any proceeds.
The date of this Prospectus is December 9, 1996.
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Determination of Offering Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Description of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Limitation on Liability and Disclosure of Commission Position on Indemnification For
Securities Act Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus, in connection with the offering described herein, and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or any underwriters, brokers or agents.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, nor shall there be any sale of these securities by any person in
any jurisdiction in which it is unlawful for such person to make such offer,
solicitation or sale. Neither the delivery of this Prospectus nor any sale
made hereunder shall under any circumstances create an implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act of 1934 and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can
be inspected and copied at the public reference facilities maintained by
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 500 West Madison Street, Chicago,
Illinois 60606 and 7 World Trade Center, New York, New York 10048. Copies of
such material can also be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a Web
site at http:www.sec.gov containing reports, proxy and information statements
and other information regarding registrants, such as the Company, that file
electronically with the Commission.
This Prospectus does not contain all of the information set forth in
the Registration Statement of which this Prospectus is a part and which the
Company has filed with the Commission. For further information with respect to
the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits filed as a part thereof, copies
of which can be inspected at, or obtained at prescribed rates from, the Public
Reference Section of the Commission at the address set forth above. Additional
updating information with respect to the Company may be provided in the future
by means of appendices or supplements to this Prospectus.
2
<PAGE> 3
THE COMPANY
The Company was incorporated in Delaware on August 14, 1985, under the
name MicroProbe Corporation and changed its name in December 1995 to Epoch
Pharmaceuticals, Inc. Its principal office is located at 1725 220th Street,
No. 104, Bothell, Washington 98021. Its telephone number is (206) 485-8566.
RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. An investment in
the Common Stock offered hereby is speculative in nature and involves a high
degree of risk. No investment in the Common Stock should be made by any person
who is not in a position to lose the entire amount of such investment.
The statements contained in this Prospectus that are not purely
historical are forward looking statements, including statements regarding the
Company's expectations or intentions regarding the future. Actual results
could differ materially from those discussed in the forward-looking statements.
Among the factors that could cause actual results to differ materially are
those discussed below.
LIMITED OPERATING HISTORY, EXPECTATION OF FUTURE LOSSES AND WORKING CAPITAL
DEFICIT
The Company was organized in 1985 and to date has generated limited
revenues from the sale of diagnostic products and from research and development
grants and has realized no revenues from sales of therapeutic products. The
Company has sold substantially all of its diagnostic products assets. From its
inception through September 30, 1996, the Company has incurred a cumulative
deficit of approximately $47.4 million. The Company expects to incur additional
losses as it expands its research and development efforts, and there can be no
assurance that the Company will ever achieve profitability. As of September 30,
1996, the Company had working capital of $4.5 million and will need additional
funding to continue its research and development activities. See "Future
Capital Needs and Uncertainty of Additional Funding." There also can be no
assurance that the Company will not encounter substantial delays and unexpected
expenses related to research, development, production and marketing or other
unforeseen difficulties.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company has expended, and will continue to expend in the future,
substantial funds to complete the research and development of its therapeutic
products, all of which are in the discovery or early development stage. Based
on its currently planned programs, the Company anticipates that its financial
resources should be adequate to satisfy its capital and operating requirements
for 15 months from September 30, 1996. The Company anticipates that it will
seek additional funding through public or private sales of its securities,
including equity securities, and through collaborative or other arrangements
with corporate partners. Adequate funds, whether through financial markets or
collaborative or other arrangements with corporate partners or from other
sources, may not be available when needed or on terms acceptable to the Company.
Insufficient funds may require the Company to delay, scale back or eliminate
certain or all of its research and development programs or to license third
parties to commercialize products or technologies that the Company would
otherwise seek to develop itself.
TECHNOLOGICAL UNCERTAINTY AND EARLY STAGE OF PRODUCT DEVELOPMENT
The science and technology of oligonucleotide-based products is
rapidly evolving. The Company's proposed therapeutic products are in the
discovery or early development stage. The proposed therapeutic products will
require significant further research, development, testing and regulatory
clearances and are subject to the risks of failure inherent in the development
of products based on
3
<PAGE> 4
innovative technologies. These risks include the possibility that any or all
of the proposed products are found to be ineffective or unsafe, or otherwise
fail to receive necessary regulatory clearances, that the proposed products,
although effective, are uneconomical to market, that third parties hold
proprietary rights that preclude the Company from marketing them, or that third
parties market a superior or equivalent product. Accordingly, the Company is
unable to predict whether its research and development activities will result
in any additional commercially viable products.
DEPENDENCE ON THIRD PARTIES FOR CLINICAL TESTING, MANUFACTURING AND MARKETING
The Company does not have the resources, and does not presently
intend, to conduct human clinical trials or manufacture any of its proposed
products. The Company is seeking corporate partners to conduct such activities
for its proposed products. There is no assurance that the Company will be able
to enter into any such arrangements on this or any other basis. In the event
the Company is unable to arrange third party clinical testing, manufacturing
and distribution for proposed products, it may not be able to commercialize it
products.
PATENT AND PROPRIETARY TECHNOLOGY DISPUTES
The patent position of a biomedical company may involve complex legal
and factual issues. As of September 30, 1996, the Company has three issued U.S.
patents, one allowed U.S. patent and ten pending U.S. patent applications.
There are international patent applications corresponding to many of the U.S.
patents and patent applications. The Company also has an exclusive worldwide
license from Yale University for one application owned jointly by the Company
and Yale University. The Company has an exclusive, worldwide license for one
issued U.S. patent owned by Virginia Mason Research Center ("VMRC"), Seattle
Washington. There can be no assurance that issued patents will provide
significant proprietary protection, that pending patents will be issued, or
that products incorporating the technology in issued patents or pending
applications will be free of challenge from competitors.
The biomedical industry has been characterized by extensive litigation
regarding patents and other intellectual property rights. The Company was a
defendant in one such action which has been settled. Although patent and
intellectual property disputes in the biomedical area have often been settled
through licensing or similar arrangements, costs associated with such
arrangements may be substantial and there can be no assurance that necessary
licenses would be available to the Company on satisfactory terms or at all.
Accordingly, an adverse determination in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent the Company
from manufacturing and selling its products, which would have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION AND TECHNOLOGICAL CHANGE
Many companies are engaged in research and development on gene therapy
and oligonucleotide-based therapeutic products, including many which are
substantially more advanced in their development activities. Many of these
companies have substantially greater capital resources, larger research and
development and marketing staffs and facilities and greater experience in
developing products, conducting clinical trials and obtaining regulatory
approval than the Company. Furthermore, the field in which the Company
operates is subject to significant and rapid technological change.
Accordingly, even if the Company's products or proposed products can be
successfully introduced, there can be no assurance that the Company's
technologies will not be replaced by new technologies or that products or
proposed products of the Company will not be rendered obsolete or
non-competitive.
LIMITED MANUFACTURING AND MARKETING CAPABILITY
The Company has no experience in manufacturing and marketing
therapeutic products and expects that it will require one or more corporate
partners with significantly greater resources and experience to market such
therapeutic products. There is no assurance that the Company will be able to
enter into such arrangements on favorable terms or at all.
4
<PAGE> 5
UNCERTAIN MARKET ACCEPTANCE
The Company's therapeutics research program is in a very early stage
and is not expected to develop commercial products for many years, if at all.
There can be no assurance that the Company's therapeutic products will be
accepted by the market at that time.
GOVERNMENT REGULATION
The development, testing, manufacturing and marketing of the Company's
products in the United States are regulated by the U.S. Food and Drug
Administration ("FDA"), which generally requires governmental clearance of such
products before they are marketed. The process of obtaining FDA and other
required regulatory approvals is lengthy, expensive and uncertain. Moreover,
regulatory approval, if granted, may include significant limitations on the
indicated uses for which a product may be marketed. Failure to comply with
applicable regulatory requirements can result in, among other things, fines,
suspensions of approvals, product seizures, injunctions, recalls of products,
operating restrictions and criminal prosecutions. The Company's proposed
therapeutic products will be subject to a lengthy regulatory process, including
pre-clinical studies, clinical trials and extensive FDA review, which generally
takes many years and requires the expenditure of substantial resources. Delays
in receipt of or failure to receive clearances to commence clinical studies or
to market products, or loss of previously received clearances, would adversely
affect the marketing of the Company's proposed products and the results of
future operations. Commercial distribution in most foreign countries also is
subject to varying government regulations. In addition, federal, state and
international government regulations regarding the manufacture and sale of
health care products and are subject to future change, and additional
regulations may be adopted which may prevent the Company from obtaining, or
affect the timing of, future regulatory clearances and may adversely affect the
Company.
TERMINABLE LICENSE AND COLLABORATIVE AGREEMENTS
Certain of the Company's licenses are terminable if the Company does
not make certain minimum annual payments, meet certain milestones or diligently
seek to commercialize the underlying technology. In addition, the Company's
related collaborative and consulting agreements are generally terminable upon
30 to 60 days written notice.
LACK OF FULL-TIME CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER
Fred Craves currently serves as the Company's Chief Executive Officer,
and Sanford S. Zweifach currently serves as the Company's President and Chief
Financial Officer. Such officers, however, currently serve in their respective
positions on a part-time basis. Although they devote a substantial portion of
their time to the Company, they also devote substantial portions of their time
to their positions at other entities.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon its key management and technical
personnel and consultants, and its future success will depend partially upon
its ability to retain these persons and to recruit additional qualified
personnel. The Company must compete with other companies, universities,
research entities and other organizations in order to attract and retain highly
qualified personnel. Although the Company has entered into employment
agreements with its key executive officers, there can be no assurance that the
Company will be able to retain such highly qualified personnel or hire
additional qualified personnel. The Company currently does not maintain key
man insurance on any of its management or technical personnel.
NO EXCHANGE OR NASDAQ LISTING; PENNY STOCK RESTRICTIONS
The Company's Common Stock is not listed on any exchange or Nasdaq
System. The Company's Common Stock is reported on the OTC Bulletin Board.
Because the Company's shares are not listed on the Nasdaq System, they are
subject to the regulations regarding trading in penny stocks (i.e.
5
<PAGE> 6
those securities trading for less than $5.00 per share). The following is a
list of the restrictions on the sale of penny stocks.
1. Prior to the sale of a penny stock by a broker-dealer to a new
purchaser, the broker-dealer must make a determination as to
whether the purchaser is suitable to invest in penny stocks.
To make that determination, a broker-dealer must obtain, from
a prospective investor, information regarding the purchaser's
financial condition and investment experience and objectives.
Subsequently, the broker-dealer must furnish the purchaser
with a written statement setting forth the basis of the
suitability finding.
2. A broker-dealer must obtain from the purchaser a written
agreement to purchase the security. This agreement must be
obtained for every purchase until the purchaser becomes an
"established customer."
3. The Securities Exchange Act requires that prior to effecting
any transaction in any penny stock, a broker-dealer must
provide the purchaser with a "risk disclosure document" that
contains, among other things, a description of the penny stock
market and how it functions and the risks associated with such
investments. These disclosure rules are applicable to both
purchases and sales by investors.
4. A dealer that has sold a customer a penny stock security must
send that customer within ten days after the end of each
calendar month a written account statement including
prescribed information relating to the security.
As a result of the lack of listing of the Company's securities on an
exchange or the Nasdaq System and the rules regarding transactions in penny
stocks, the liquidity and salability of the Company's securities may be
substantially impaired. There is no assurance that the Company's current
market-makers will continue to make a market in the Company's securities, or
that any market for the Company's securities will continue.
FEDERAL AND STATE REGISTRATION REQUIREMENTS; POSSIBLE INABILITY TO EXERCISE
WARRANTS
Holders of Public Warrants will have the right to exercise the Public
Warrants only if a Registration Statement relating to the shares underlying the
Public Warrants is then in effect and only if such shares are qualified for sale
under applicable state securities laws of the states in which the various
holders of the Public Warrants reside. There can be no assurance that the
Company will be able to keep the Registration Statement of which this Prospectus
forms a part or any other registration statement covering such shares effective.
There can also be no assurance that such shares will be registered in the states
in which holders of the Public Warrants reside. See "Description of Securities
- - Warrants."
POSSIBLE REDEMPTION OF PUBLIC WARRANTS
The Public Warrants may be redeemed by the Company, in whole but not
in part, under certain circumstances upon 30 days' prior written notice at a
price of $.05 per warrant. Although the holders of Public Warrants have the
right to exercise their Public Warrants during the 30 days prior to the date of
redemption set by the Company, a holder may be unable (for financial or other
reasons) to exercise the Public Warrants at the time such holder received notice
of redemption. The Public Warrants will have no value except for the redemption
price upon the close of business on the date of redemption. See "Description of
Securities - Warrants."
NO DIVIDENDS AND NONE ANTICIPATED
The Company has not paid any dividends on its Common Stock since its
inception and does not contemplate or anticipate paying any dividends upon its
Common Stock in the foreseeable future. It is currently anticipated that
earnings, if any, will be used to finance the development and expansion of the
Company's business.
6
<PAGE> 7
MARKET VOLATILITY
The market price of the Company's Common Stock may be highly volatile.
The securities of biotechnology companies have experienced extreme price and
volume fluctuations, which have often been unrelated to the companies'
operating performance. Announcements of technological innovations for new
commercial products by the Company or its competitors, developments concerning
proprietary rights or governmental regulation or general conditions in the
biotechnology industry may have a significant effect on the Company's business
and on the market price of the Company's securities. Sales of a substantial
number of shares of Common Stock by existing security holders could also have
an adverse effect on the market price of the Company's securities.
SHARES AVAILABLE FOR RESALE; REGISTRATION RIGHTS; POSSIBLE DILUTIVE EFFECT OF
OUTSTANDING OPTIONS AND WARRANTS
Sales of substantial numbers of the Company's Common Stock in the
public market could adversely effect the market price of the Common Stock. As
of November 4, 1996, the Company had 14,723,856 shares of Common Stock
outstanding, 8,600,023 shares of stock issuable upon exercise of outstanding
warrants and an additional 1,305,139 shares of stock issuable upon exercise of
outstanding options. Of the outstanding shares and shares issuable upon
exercise of warrants and options, substantially all are freely tradable without
restriction under the Securities Act of 1933, as amended (the "Securities Act")
or registered for resale under a registration statement filed by the Company on
September 25, 1996. Such registration statement covered the resale of 5,000,000
shares sold by the Company in a private placement in June 1996 and an additional
2,500,000 shares issuable upon exercise of warrants sold in that private
placement. Upon effectiveness of such registration statement, those 7,500,000
shares shall also be freely tradable. In addition, holders of shares of
outstanding Common Stock and Warrants to purchase other shares of Common Stock
who are eligible have requested inclusion in such registration statement. Shares
issued upon the exercise of stock options under the Company's stock option plans
are also generally freely tradable without restriction. As a result,
substantially all of the Company's Common Stock outstanding and issuable upon
the exercise of warrants and options will be freely tradable by the holders
thereof. To the extent the Public Warrants are exchanged for Exchange Warrants,
fewer shares of Common Stock would be freely tradeable. If holders cause a
large number of shares to be sold in the public market, such sales may have a
material adverse effect on the market price of the Common Stock.
USE OF PROCEEDS
Holders of the Public Warrants are not obligated to exercise their
Public Warrants, and there can be no assurance that the Public Warrant holders
will choose to exercise all or any of the Public Warrants. In the event all of
the outstanding Public Warrants are exercised, the net proceeds to the Company
would be $17,753,125, after deducting the warrant solicitation fee and excluding
other expenses associated with the offering. To the extent that holders
exchange the Public Warrants for Exchange Warrants, and such Exchange Warrants
are exercised, the Company will receive approximately $3,500,000 in proceeds.
The Company anticipates any proceeds received upon exercise of the Public
Warrants or Exchange Warrants will be used to fund research and development
activities related to the Company's oligonucleotide therapeutic compounds.
DETERMINATION OF OFFERING PRICE
The exercise price of the Public Warrants was established by the
Company and its underwriters at the time of public offering of the Public
Warrants in September 1993. The exercise price of the Exchange Warrants was
established by the Company in order to make them equivalent with the warrants
that were issued in the June 1996 private offering of Units where the exercise
price is $2.50 per share.
7
<PAGE> 8
DESCRIPTION OF SECURITIES
GENERAL
The Company's authorized capital stock consists of 30,000,000 shares
of Common Stock, $.01 par value per share and 10,000,000 shares of Preferred
Stock with such rights as the Board may determine. As of November 4, 1996,
there were 14,723,856 shares of Common Stock outstanding held of record by 233
stockholders and 2,875,000 Public Warrants, held of record by 233 Public Warrant
holders.
COMMON STOCK
The holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as the Board of Directors may, from time to time, determine. Each
stockholder is entitled to one vote for each share of Common Stock held and
there is no cumulative voting in the election of directors. The Common Stock
is not entitled to preemptive rights and is not subject to redemption or
conversion. Upon liquidation, dissolution or winding-up of the Company, the
assets legally available for distribution to stockholders are distributable
ratably among the holders of the Common Stock after payment of other claims of
creditors. All outstanding shares of Common Stock are, and the shares of
Common Stock to be issued pursuant to this offering will be, validly issued,
fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors will have authority to issue up to 10,000,000
shares of Preferred Stock, $0.01 par value, and to fix the rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any future vote or action by the stockholders. The rights of the holders of the
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of the
Company, thereby delaying, deferring or preventing a change in control of the
Company. Furthermore, such Preferred Stock may have other rights, including
economic rights senior to the Common Stock, and, as a result, the issuance
thereof could have a material adverse effect on the market value of the Common
Stock. The Company has no present plans to issue shares of Preferred Stock.
PUBLIC WARRANTS
The Public Warrants were issued pursuant to an agreement, dated as of
September 29, 1993, and amended June 21, 1996 (the "Warrant Agreement"), between
the Company and American Stock Transfer & Trust Company, as warrant agent (the
"Warrant Agent"). The following discussion of the material terms and provisions
of the Public Warrants is qualified in its entirety by reference to the detailed
provisions of the Warrant Agreement, the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each Public Warrant entitles the holder to purchase at any time until
September 29, 1998, one share of Common Stock at an exercise price of $6.50,
subject to certain adjustments. In June 1996, the Company announced that it
intends to exchange for every two Public Warrants, one Exchange Warrant. The
exercise price of the Public Warrants and the number of shares of Common Stock
underlying such Public Warrants are subject to adjustment for stock splits,
stock dividends and similar events. The Public Warrants do not contain
anti-dilution provisions relating to issuances or sales of
8
<PAGE> 9
Common Stock at prices below the exercise price or the then prevailing market
price of the Common Stock. The Public Warrants may be exercised in whole or
in part.
The Company may redeem the Public Warrants, in whole but not in part,
at the option of the Company upon not less than 30 days' nor more than 60 days'
notice at a price of $.05 per warrant, providing the market price of the
Company's Common Stock has been at least 140% of the then effective exercise
price of the Public Warrants for 30 consecutive business days ending within 15
days of the date of the notice of redemption. For purposes of redemption of the
Public Warrants, the market price of a share of Common Stock on any date is the
last sale price (or highest reported bid price if the stock is not traded on a
national securities exchange or the Nasdaq National Market) on such date.
The Company presently anticipates that the Exchange Warrants would be
redeemable, in whole but not in part, at the option of the Company upon not less
than 30 days' nor more than 60 days' notice at any time after 18 months from the
date that they are issued, at a price of $.05 per warrant, providing the market
price of the Company's Common Stock would have been at least 140% of the then
effective exercise price of the Exchange Warrants for 20 consecutive business
days ending within 15 days of the date of the notice of redemption. For
purposes of redemption of the Exchange Warrants, the market price of a share of
Common Stock on any date is the last sale price (or highest reported bid price
if the stock is not traded on a national securities exchange or the Nasdaq
National Market) on such date.
The Company presently anticipates that, in the event the Company
exercises its right to redeem the Exchange Warrants, such Exchange Warrants will
be exercisable until the close of business on the date fixed for redemption in
such notice. If any Exchange Warrant called for redemption is not exercised by
such time, it would cease to be exercisable and the holder thereof will be
entitled only to the redemption price.
For a holder to exercise the Public Warrants or the Exchange Warrants,
there must be a current registration statement in effect with the Commission and
qualification with or approval from various state securities agencies with
respect to the shares or other securities underlying the Public Warrants or the
Exchange Warrants, or an opinion of counsel for the Company that there is an
exemption from registration or qualification. As long as the Public Warrants or
the Exchange Warrants remain outstanding and exercisable, the Company is
required to maintain an effective registration statement with respect to the
shares issuable on exercise of such warrants. There can be no assurance,
however, that such registration statement can be kept current. If a
registration statement covering such shares of Common Stock is not kept current
for any reason, or if the shares underlying the warrants are not registered in
the state in which a holder resides, the warrants will not be exercisable and
the value thereof will be impaired.
OTHER WARRANTS
As of September 30, 1996, there were other warrants outstanding to
purchase an aggregate of 4,825,023 shares of Common Stock at exercise prices
ranging from $0.30 to $10.40 per share.
REGISTRATION RIGHTS
The Company is obligated to keep the Registration Statement, of which
this Prospectus is a part, effective during the period of the exercisability of
the Public Warrants, or until September 29, 1998. The Company is also obligated
to file and maintain the effectiveness of a Registration Statement on Form SB-2
covering an aggregate of 10,428,365 shares of Common Stock, including shares
issuable upon exercise of warrants until September 21, 1999 or the date on which
all shares may be sold without volume limitations under Rule 144.
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These registration rights could result in substantial future expense
to the Company and could adversely affect any future equity or debt financing.
Furthermore, the registration and sale of Common Stock of the Company held by
or issuable to the holders of registration rights, or even the potential of
such sales, could have an adverse effect on the market price of the securities
offered hereby.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The stock transfer agent, registrar and warrant agent for the Common
Stock and the Company's Public Warrants is American Stock Transfer & Trust
Company.
PLAN OF DISTRIBUTION
The Common Stock offered hereby will be issued to the holders of the
Public Warrants and/or the Exchange Warrants upon exercise of the Warrants at
the option of the holders thereof, in accordance with the terms of such
warrants. See "Description of Securities."
Upon the exercise of any warrant, to the extent not inconsistent with
the guidelines of the NASD and the rules and regulations of the Commission, the
Company has agreed to pay to any NASD member who solicits the exercise of any
of the warrants a fee of 5% of the exercise price of such warrant if (i) the
market price of the Company's Common Stock is greater than the exercise price
of such warrant on the date of exercise; (ii) such warrant is not held in a
discretionary account; and (iii) the solicitation of such warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of 1934,
as amended.
EXPERTS
The financial statements of Epoch Pharmaceuticals, Inc. as of
December 31, 1995 and for each of the years in the two-year period ended
December 31, 1995 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP refers to a change in the method
of accounting for marketable debt and equity securities effective January 1,
1994.
The report of KPMG Peat Marwick LLP dated February 29, 1996 contains
an explanatory paragraph that states that the Company has suffered recurring
losses from continuing operations which raises substantial doubt about its
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of that uncertainty.
LIMITATION ON LIABILITY AND DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The by-laws of the Company provide for indemnification of the
Company's directors and officers to the fullest extent permitted by law.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Company pursuant
to the Company's Certificate of Incorporation, as amended, by-laws and the
Delaware General Corporation Law (the "DGCL"), the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in such Act and is therefore unenforceable.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Exchange Act and are incorporated by reference herein:
a. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995, filed with the Commission on April
11, 1996.
b. The Company's Quarterly Reports on Form 10-QSB for the quarter
ended March 31, 1996, filed with the Commission on May 10,
1996, for the quarter ended June 30, 1996, filed with the
Commission on August 13, 1996 and for the quarter ended
September 30, 1996, filed with the Commission on November 14,
1996.
c. The Company's Current Reports on Form 8-K filed July 5, 1996.
d. The Company's Proxy Statement and Supplement to Proxy
Statement for its Annual Meeting filed August 30, 1996, and
September 16, 1996, respectively.
e. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed under the
Exchange Act, including any amendment or report filed for the
purpose of updating such description.
f. All other reports filed by the Company pursuant to Section
13(a) or 15(d) of the Exchange Act since the end of the
Company's fiscal year ended December 31, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein, or in any other subsequently filed document that also is or is deemed
to be 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 a
copy of 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 herein (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Such requests should be directed to Epoch Pharmaceuticals, Inc., Attention:
Sanford S. Zweifach, 1725 220th Street, S.E., No. 104, Bothell, Washington
98021, telephone number (206) 485-8566.
The Company is not required to deliver an annual report to its
stockholders; however, prior to the Company's 1996 annual meeting of
stockholders, the Company distributed its Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, including audited financial statements,
to its stockholders.
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2,875,000 SHARES
EPOCH PHARMACEUTICALS, INC.
COMMON STOCK
__________________
PROSPECTUS
__________________
December 9, 1996
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