As filed with the Securities and Exchange Commission on November 25, 1997
Registration No. 333-33569
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
ON FORM S-3
TO REGISTRATION STATEMENT
ON FORM SB-2
UNDER THE SECURITIES ACT OF 1933
-----------------------------
PALATIN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4078884
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
214 CARNEGIE CENTER, SUITE 100
PRINCETON, NJ 08540
(609) 520-1911
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
COPY TO:
EDWARD J. QUILTY, CHAIRMAN OF THE BOARD, IRWIN M. ROSENTHAL, ESQ.
PRESIDENT AND CHIEF EXECUTIVE OFFICER RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
214 CARNEGIE CENTER, SUITE 100 30 ROCKEFELLER PLAZA, 29TH FLOOR
PRINCETON, NJ 08540 NEW YORK, NY 10112
(609) 520-1911 (212) 698-7700
(Name, address, including zip code,
and telephone number, including area
code, of agent for service)
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time to
time, following the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
<PAGE>
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 a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of each
class of Proposed Proposed maximum
securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per unit (1) price (1) registration fee
<S> <C> <C> <C> <C>
Common Stock 3,067,883 (2) $7.53125 $23,104,993.84 $7,001.51 (2)
<FN>
(1) Calculated pursuant to Rule 457(c) under the Securities Act of 1933 and
based on the average of the high and low prices of the registrant's
common stock reported on The Nasdaq SmallCap Market(sm) on November 24,
1997.
(2) On September 5, 1997, the Company effected a 1-for-4 reverse split of
the Common Stock. Accordingly, the 14,266,197 shares of Common Stock
included in the registration statement filed on August 13, 1997 became
3,566,549 shares of Common Stock effective September 5, 1997. A
registration fee of $7,565.41 relating to the registration of the
3,566,549 shares of Common Stock (on a post-reverse split basis) was
previously paid.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Subject to Completion, dated November 25, 1997
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.
PROSPECTUS
[GRAPHIC OMITTED]
PALATIN TECHNOLOGIES, INC.
6,634,432 SHARES OF COMMON STOCK
This Prospectus relates to the offering (the "Offering") of up to 6,634,432
shares (the "Registered Shares") of the common stock, $.01 par value per share
(the "Common Stock") of Palatin Technologies, Inc. (the "Company"), which may be
sold from time to time by the selling stockholders named in this Prospectus
(each, a "Selling Stockholder," together, the "Selling Stockholders"). The
Registered Shares consist of: (i) up to 2,777,739 shares of Common Stock
issuable on conversion of 137,780 shares of the Company's Series A Convertible
Preferred Stock, $.01 par value per share ("Series A Convertible Preferred
Stock"); (ii) up to 277,770 shares of Common Stock issuable on conversion of
13,778 shares of Series A Convertible Preferred Stock issuable on exercise of
Preferred Stock Placement Warrants issued to designees of Paramount Capital,
Inc. ("Paramount"); (iii) up to 3,055,509 shares of Common Stock issuable upon
adjustment in the conversion price of Series A Convertible Preferred Stock (the
"Contingent Shares") (see "Description of Securities"); (iv) up to 69,122 shares
of Common Stock issuable on exercise of Class C Warrants; (v) up to 177,788
shares of Common Stock issuable on exercise of Common Stock Placement Warrants
issued to designees of Paramount; (vi) up to 39,167 shares of Common Stock
issuable on exercise of Class B Warrants; (vii) up to 1,953 shares of Common
Stock issuable on exercise of Class B Placement Warrants issued to designees of
Paramount; (viii) up to 138,241 shares of Common Stock issued or issuable on
exercise of Class A Warrants, of which 55,296 shares of Common Stock are
outstanding as of the date of this Prospectus; (ix) up to 20,733 shares of
Common Stock issuable on exercise of Class A Placement Warrants issued to
designees of Paramount; (x) 63,910 shares of Common Stock issued to the designee
of the Company's largest creditor to pay accrued interest as of April 30, 1997;
and (xi) up to 12,500 shares of Common Stock issuable on exercise of Financial
Services Advisory Agreement Warrants issued to a designee of Paramount. The
resale of the Registered Shares is covered by this Prospectus.
The Common Stock is traded on The Nasdaq SmallCap Market(sm) (the "Nasdaq
SmallCap"), under the symbol "PLTN." No other security of the Company is listed
on any securities exchange or quoted in any over-the-counter market. On November
19, 1997, the last sale price of Common Stock as reported on the Nasdaq SmallCap
was $8.00.
Selling Stockholders may, without notice to the Company, sell the
Registered Shares from time to time directly to purchasers or through
underwriters, brokers, dealers or agents, on securities exchanges, in the
over-the-counter market, and/or in privately negotiated transactions. The price
of the Registered Shares to the public will, therefore, depend on the time and
nature of each sale. Each Selling Stockholder will pay all underwriting
discounts and selling commissions applicable to the sale of such Selling
Stockholder's Registered Shares. Underwriting discounts and selling commissions
will vary and may or may not apply to any given sale. The Company will receive
no proceeds from the sale of the Registered Shares. The Company will bear all
expenses, estimated at $105,000,
<PAGE>
incurred in connection with the registration of the Registered Shares under the
Securities Act of 1933, as amended (the "Securities Act") and qualification or
exemption of the Registered Shares under state securities laws, excluding fees
of legal counsel for any Selling Stockholder. See "Use of Proceeds" and "Plan of
Distribution."
-----------------------------
THE REGISTERED SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------------------
THE DATE OF THIS PROSPECTUS IS _______ __, 1997
<PAGE>
[INSIDE FRONT COVER PAGE OF PROSPECTUS ]
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and accordingly files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). All such reports, proxy statements and other
information may be inspected and copied at the Public Reference Section of the
Commission, Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, and at its
Regional Offices at Seven World Trade Center, 13th Floor, New York, NY 10048,
and at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL
60661-2511. The Company is an electronic filer, and the Commission maintains a
Web site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The Common Stock is listed on the Nasdaq
SmallCap, and 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.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 filed by the Company with the Commission under the Securities Act (together
with all amendments, schedules and exhibits thereto, the "Registration
Statement"). This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the securities offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-KSB for the year ended
June 30, 1997, as filed with the Commission on September 26,
1997;
2. The description of the Common Stock of the Company contained in
its Registration Statement under the Exchange Act on Form 8-A
filed on October 22, 1993; and
3. The Company's Quarterly Report on Form 10-QSB for the three
months ended September 30, 1997, as filed with the Commission on
November 14, 1997.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering to which this Prospectus relates shall be deemed to be incorporated by
reference into this Prospectus and to be part of this Prospectus from the date
of filing thereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement.
The Company will provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any of the information that was incorporated by reference in this Prospectus
(not including exhibits to the information that is incorporated by reference
unless the exhibits are themselves specifically incorporated by reference). The
address and telephone number to which such request is to be directed are:
Stephen T. Wills, Vice President, Palatin Technologies, Inc., 214 Carnegie
Center, Suite 100, Princeton, NJ 08540, telephone (609) 520-1911.
<PAGE>
BUSINESS SUMMARY
The following summary should be read in conjunction with, and is
qualified in its entirety by, the more detailed information, including "Risk
Factors," and financial statements appearing elsewhere or incorporated by
reference in this Prospectus.
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: delays in product development; problems or delays with clinical
trials; failure to receive or delays in receiving regulatory approval; lack of
enforceability of patents and proprietary rights; lack of reimbursement; general
economic and business conditions; industry capacity; industry trends;
competition; material costs and availability; changes in business strategy or
development plans; quality of management; availability, terms and deployment of
capital; business abilities and judgment of personnel; availability of qualified
personnel; changes in, or the failure to comply with, government regulations;
and other factors referenced in this Prospectus. When used in this Prospectus,
statements that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"anticipates," "plans," "intends," "expects" and similar expressions are
intended to identify such forward-looking statements. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date of this Prospectus. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
THE COMPANY
The Company is a development-stage biopharmaceutical company dedicated
to developing and commercializing products and technologies for diagnostic
imaging, cancer therapy and ethical drug development utilizing peptide,
monoclonal antibody and radiopharmaceutical technologies. The Company
concentrates its activities in two technology areas, each of which the Company
believes may be used to develop products with potential diagnostic and
therapeutic applications. These technologies involve the Company's (i)
patent-pending Metal Ion-induced Distinctive Array of Structures ("MIDAS(TM)")
metallopeptide technology ("MIDAS technology") and (ii) patented and
patent-pending direct radiolabeling technology.
The Company believes that the MIDAS technology represents a platform
technology which may enable the design and synthesis of novel peptide analogs or
mimics. Further, the Company believes that its MIDAS technology may provide the
Company with the flexibility to generate its own pharmaceutical products, and
the ability to target and complement existing product portfolios and
technological bases of other companies. The Company intends to seek to enter
into collaborative arrangements to assist in development, manufacturing and
marketing of certain proposed products utilizing the MIDAS technology. The
Company has entered into a license option agreement as to certain proposed
products based on MIDAS technology.
The Company is developing two proposed products incorporating its direct
radiolabeling technology, (i) LeuTech(TM), an infection and inflammation imaging
product, and (ii) PT-5, a radiotherapeutic peptide somatostatin analog for
cancer therapy. The Company is devoting substantial efforts and resources to the
development of LeuTech, which the Company believes will be its first proposed
product to enter Ccompany-sponsored clinical trials. The Company anticipates
seeking one or more marketing partners for LeuTech prior to product approval.
The Company is at an early stage of development and has not yet
completed the development of any products based on either its MIDAS technology
or its direct radiolabeling technology. Accordingly, the Company has not begun
to market or generate revenues from the commercialization of any such products.
It will be a number of years, if ever, before the Company will recognize
significant revenues from product sales or royalties. The Company's technologies
and products under development will require significant time-consuming and
costly research, development, pre-clinical studies, clinical testing, regulatory
approval and significant additional investment prior to their commercialization,
which may never occur. There can be no assurance that the Company's research and
1
<PAGE>
development programs will be successful, that its products will exhibit the
expected biological results in humans, will prove to be safe and efficacious in
clinical trials or will obtain the required regulatory approvals or that the
Company or its collaborators will be successful in obtaining market acceptance
of any of the Company's products. There can be no assurance that the Company
will be successful in entering into strategic alliances or collaborative
arrangements on commercially reasonable terms, if at all, or that such
arrangements will be successful, or that the parties with which the Company will
establish arrangements will perform their obligations under such arrangements.
The Company or its collaborators may encounter problems and delays relating to
research and development, regulatory approval, manufacturing and marketing. The
failure by the Company to address successfully such problems and delays would
have a material adverse effect on the Company. In addition, no assurance can be
given that proprietary rights of third parties will not preclude the Company
from marketing its proposed products or that third parties will not market
superior or equivalent products.
MIDAS TECHNOLOGY
Role and Function of Peptides. Peptides, short chains of amino acids,
play important roles in regulating a variety of biological functions. Natural
peptides function by conforming or bending to fit specific molecules on cell
surfaces, called receptors, thereby signaling the cell to initiate a biological
activity. Some important biological functions that are affected in this manner
include overall growth and behavior, inflammatory responses, immune responses
and wound healing.
In order to effectively regulate cell signaling, a peptide must bind to
its target receptor with high affinity. The affinity of a peptide for its target
receptor is highly dependent on its three-dimensional shape or conformation.
Many naturally occurring peptides are flexible and can take on multiple
conformations, allowing them to interact with more than one type of cell
receptor, and to control multiple functions within the body. However, when such
peptides are used as drugs, this multiple reactivity is a disadvantage as it may
lead to side effects. The ability to construct high-affinity, receptor-specific
peptides offers a significant opportunity to develop potent receptor-specific
drugs.
Introduction to MIDAS Technology. The Company believes that its
patent-pending MIDAS technology can be used to rationally design and produce
receptor-specific drugs. Using MIDAS, highly stable metallopeptide complexes are
formed, in which the metal ion locks or constrains the peptide into a specific
conformation. By designing MIDAS peptides to mimic the conformation required for
a specific receptor, a stable, receptor-specific drug, with high affinity and
enhanced biological activity, can be made. Radiopharmaceutical products, which
may be diagnostic or therapeutic, may be developed using radioactive metal ions
in MIDAS peptides. Non-radioactive metal ions may be used in the development of
biopharmaceutical MIDAS peptides.
The Company is engaged in research and development on a number of
product opportunities for its MIDAS technology, including use as a thrombosis
imaging agent, an infection imaging agent and an immunostimulatory agent. No
prediction can be made, however, as to when or whether the areas in which there
are ongoing MIDAS technology research projects will yield scientific
discoveries, or whether such research projects will lead to commercial products
Other Potential Opportunities. The Company is evaluating a number of
product opportunities for its MIDAS technology, and believes that this
technology may have medical applications in a variety of areas, including immune
disorders, cancers and cardiology. The Company intends to expand research and
development of MIDAS technology applications primarily through strategic
alliances with other entities. No assurances can be made regarding the
establishment or the timing of such alliances, and the failure to establish such
alliances on a timely basis could limit the Company's ability to develop MIDAS
technology and could have a material adverse effect on the Company. The Company
expects to devote resources to expand research and development of MIDAS
technology to the extent funding is available.
Option Agreement with Nihon. The Company entered into a License Option
Agreement (the "Option Agreement") with Nihon Medi-Physics Ltd. ("Nihon"), a
Japanese developer and manufacturer of radiopharmaceutical drugs, and received
an initial payment of $1,000,000 before Japanese withholding taxes of $100,000.
Pursuant to the Option Agreement (i) Nihon has an option to exclusively license
certain jointly developed
2
<PAGE>
radiopharmaceutical diagnostic products based on the Company's MIDAS technology
and (ii) Nihon can maintain its option by making certain milestone payments
based on progress in product development. Nihon may exercise its right to
negotiate a license agreement at any time upon notice and payment of additional
monies to the Company. There can be no assurance that future payments provided
for in the Option Agreement will be made, that the Company and Nihon will ever
enter into a definitive license agreement, or that a definitive strategic
alliance between the Company and Nihon will result in the development or
commercialization of any product. In the event that Nihon gives notice of its
right to negotiate a license agreement, and the parties cannot agree on terms of
such license agreement, the Company may be required to repay $550,000 to Nihon.
Failure to enter into a definitive license agreement, or being required to repay
certain monies to Nihon, may have a material adverse effect on the Company.
DIRECT RADIOLABELING TECHNOLOGY
The Company has developed and patented radiolabeling technologies for
the direct radiolabeling of antibodies, peptides and other proteins with
diagnostic and therapeutic radioisotopes.
LeuTech Diagnostic Imaging Product. LeuTech, a proposed product under
development that utilizes direct radiolabeling technology, is a murine (or
mouse) monoclonal antibody-based product designed to be labeled with the
diagnostic radioisotope technetium-99m. When labeled with technetium-99m,
LeuTech is intended to be used for diagnosis of infections, occult abscesses,
sites of inflammatory disease and other conditions involving high concentrations
of white blood cells.
The Company believes that LeuTech can be used for the rapid diagnosis of
a variety of difficult to diagnose infections and occult abscesses. Occult
abscesses are hidden infections that are generally characterized as being highly
localized. Examples of typical occult abscesses include infections of the
intra-abdominal area, such as intestinal, spleen, liver or urinary tract
abscesses, as well as bone, prosthetic and other abscesses. In a typical
abscess, as in most infections, large numbers of white blood cells congregate at
the site of the infection. Thus, if the location of concentrations of white
blood cells is known, the site of the infection is also known. It is crucial in
the diagnosis and treatment of occult abscesses that the location of the
infection be determined, as location will frequently determine the type of
therapy which is appropriate.
The most specific procedure currently available for nuclear medicine
imaging of sites of infection involves removal of blood from the patient,
isolating white blood cells from the patient's blood, radiolabeling the white
blood cells and injecting the radiolabeled white blood cells back into the
patient. The radiolabeled white blood cells then localize at the site of the
infection, and can be detected using nuclear medicine diagnostic equipment. This
procedure is expensive, involves risks to patients and technicians associated
with blood handling, is difficult to perform and generally takes at least twelve
hours.
LeuTech has been formulated as a lyophilized, or freeze-dried, kit
containing the modified antibody and reagents required for the radiolabeling
process. Prior to use, LeuTech will be labeled with technetium-99m by a
radiopharmacy or by a hospital's nuclear medicine department. LeuTech is
designed to bind, in the body, to white blood cells already present at the site
of the infection or circulating in the blood stream. Therefore, LeuTech does not
require handling or processing of patient blood.
Preliminary clinical trials have been conducted under an Investigational
New Drug Application ("IND") submitted to the United States Food and Drug
Administration ("FDA") and held in the name of an investigator, using purified
antibody or kits provided by the Company. Forty patient studies have been
completed at UCLA/Harbor Medical Center in Los Angeles, with images obtained in
a variety of diseases, including acute and suspected appendicitis, pulmonary
infections and other abdominal infections. In seven cases satisfactory images
were not obtained, due primarily to labeling or product formulation failures
with early kit formulations. In some cases, diagnostic images have been obtained
within five minutes of administration of LeuTech, and in all cases in which a
definitive diagnosis could be made, diagnostic images have been obtained within
90 minutes. An additional seventeen patient studies were completed in Germany at
the University of Gottingen, using kits manufactured by a third party to the
Company's specifications, with images obtained in osteomyelitis and soft tissue
infections. The Company has
3
<PAGE>
filed an IND on LeuTech with the FDA in the Company's name, but has not yet
initiated clinical trials under that IND.
The Company has entered into an exclusive royalty-bearing license
agreement with The Wistar Institute of Anatomy and Biology ("Wistar Institute")
to use the antibody and cell line used for LeuTech for a defined field of use.
Failure to meet the performance criteria for any reason or any other event of
default under the license agreement leading to termination of the license
agreement with Wistar Institute would have a material adverse effect on the
Company. While the Company has negotiated a long-term contractual arrangement
for the manufacture of the purified antibody necessary for LeuTech, there can be
no assurance that such contractor will be able to successfully manufacture
purified antibody for LeuTech on a sustained basis, that such contractor will
remain in the contract manufacturing business for the time required by the
Company, or that the Company will be able to enter into such contractual
arrangements as to other steps and components required to manufacture LeuTech.
To date, the Company has only manufactured LeuTech in lots preparatory to
initiating clinical trial use, and has not determined whether commercial
quantities of LeuTech in conformity with these standards can be manufactured on
a sustained basis at an acceptable cost. Such manufacture must be done under
good manufacturing practices ("GMP") requirements prescribed by the FDA and
other agencies. Certain steps in the manufacture of LeuTech, including contract
manufacture of purified antibody, vialing and lyophilization, have been done
under GMP.
The Company has initiated clinical trials with LeuTech under its IND,
and intends to complete Phase III clinical trials and file regulatory
applications to market with the FDA in the second half of 1998. There can be no
assurance that the Company's LeuTech development program will be successful,
that the FDA will permit the Company's planned clinical trials to proceed, that
LeuTech will prove to be safe and efficacious in clinical trials, that LeuTech
can be manufactured in commercially required quantities on a sustained basis at
an acceptable price, that LeuTech will obtain the required regulatory approvals
or that the Company or its collaborators will be successful in obtaining market
acceptance of LeuTech. The Company or its collaborators may encounter problems
and delays relating to research and development, regulatory approval,
manufacturing and marketing of LeuTech.
PT-5 Cancer Therapeutic Product. PT-5 is a rhenium-labeled somatostatin
peptide analog being developed by the Company which is intended to treat cancers
by regional delivery of tumor cell-targeted radiotherapy. PT-5 binds to
somatostatin receptors. Somatostatin is a natural peptide hormone involved in
the regulation of cell growth and differentiation, and somatostatin receptors
are over-expressed on a wide variety of cancers. PT-5 is intended to target such
cancers and deliver a therapeutic dose of rhenium-188, a radioisotope which
emits high energy beta radiation, to the cancer.
The Company has developed a reproducible, easy to use, and high
efficiency direct radiolabeling method for PT-5; developed a lyophilized final
product formulation; conducted biodistribution studies of PT-5 in normal animals
using several different routes of administration, including intravenous and
intra-cavity administration; conducted biodistribution studies of PT-5 in
tumor-bearing animals; and demonstrated that PT-5 has a specific therapeutic
effect in animal models of three different human tumors -- lung, prostate and
breast cancers.
The Company believes PT-5 may have applications for local or regional
administration to any compartmentalized cancer which is somatostatin-receptor
positive. The cancer must be compartmentalized in order for local or regional
administration to work and must express somatostatin receptors in reasonably
high levels in order to obtain the targeting benefits of PT-5. Expression of
somatostatin receptors varies by type of cancer. However, until clinical trials
are completed, specific clinical utility and applications, if any, cannot be
determined.
The Company is working with researchers at the University of Bonn in
Germany to initiate clinical trials of patients with bronchial cancer metastatic
to the pleural cavity. PT-5 will be administered by infusion directly into the
pleural cavity. This trial is primarily designed to obtain safety and dose
response data, and secondarily to obtain evidence of efficacy, including tumor
stasis or regression and improvement in cancer-associated biological markers.
PT-5 requires a source of radioactive rhenium, preferably rhenium-188.
This isotope can be produced by a variety of methods, including a generator
system; however, clinical grade radioactive rhenium is not currently
4
<PAGE>
available in the United States. The Company is aware of an experimental
generator system developed in the United States by Oak Ridge National
Laboratory, and an additional experimental generator system available in Europe.
The Company does not intend to seek to commercialize any source of radioactive
rhenium, but is aware of other companies seeking to commercialize radioactive
rhenium. There can be no assurance that, regardless of the status of product
development by the Company, any acceptable form of radioactive rhenium will ever
be commercially available in the United States or other countries at acceptable
prices, if at all, in which event the Company may never be able to develop or
commercialize PT-5.
The Company is discussing entering into a collaborative arrangement with
a third party to use a specific somatostatin analog for PT-5, and both parties
are waiting to evaluate the results of preliminary clinical trials. There can be
no assurance that the Company will be able to conclude a collaborative
arrangement on acceptable terms, if at all. If the Company cannot conclude such
arrangement, the Company will either abandon PT-5 development or seek to develop
a substitute using MIDAS technology. There can be no assurance that the Company
will be able to enter into an arrangement with another party on acceptable terms
if at all, or will be able to develop a substitute using MIDAS technology in a
reasonable period of time, or at all. There can be no assurance that the
Company's PT-5 development program will be successful, that PT-5 will exhibit
the expected biological results in humans, that PT-5 will prove to be safe and
efficacious in clinical trials, that the Company will obtain the required
regulatory approvals for PT-5, or that the Company or its collaborators will be
successful in obtaining market acceptance of PT-5. The Company or its
collaborators may encounter problems and delays relating to research and
development, regulatory approval, manufacturing and marketing of PT-5.
EXECUTIVE OFFICES
The address of the Company's principal executive offices is Palatin
Technologies, Inc., 214 Carnegie Center, Suite 100, Princeton, NJ 08540, and the
telephone number is (609) 520-1911.
RISK FACTORS
AN INVESTMENT IN THE REGISTERED SHARES IS HIGHLY SPECULATIVE IN NATURE, INVOLVES
A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD A
LOSS OF THEIR ENTIRE INVESTMENT. EACH PROSPECTIVE INVESTOR SHOULD CONSIDER
CAREFULLY THE RISKS INHERENT IN AND AFFECTING BOTH THE BUSINESS OF THE COMPANY
AND THE VALUE OF THE COMMON STOCK AND SPECULATIVE FACTORS INCLUDING, WITHOUT
LIMITATION, THE FOLLOWING RISK FACTORS, AS WELL AS OTHER INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION.
EARLY STAGE OF DEVELOPMENT; UNCERTAINTY OF PRODUCT DEVELOPMENT;
TECHNOLOGICAL UNCERTAINTY. The Company is at an early stage of development and
has not yet completed the development of any products based on either its MIDAS
technology or its direct radiolabeling technology. Accordingly, the Company has
not begun to market or generate revenues from the commercialization of any such
products. It will be a number of years, if ever, before the Company will
recognize significant revenues from product sales or royalties. The Company's
technologies and products under development will require significant
time-consuming and costly research, development, preclinical studies, clinical
testing, regulatory approval and significant additional investment prior to
their commercialization, which may never occur. There can be no assurance that
the Company's research and development programs will be successful, that its
products will exhibit the expected biological results in humans, that its
products will prove to be safe and efficacious, that its products will obtain
the required regulatory approvals, demonstrate substantial therapeutic or
diagnostic benefit, be commercialized on a timely basis, experience no design or
manufacturing problems, be manufactured on a large scale, or be economical to
market, or that the Company or its collaborators will be successful in obtaining
market acceptance of any of the Company's products or generate sufficient
revenue to support research and development programs. There can be no assurance
that the Company will be successful in entering into strategic alliances or
collaborative arrangements on commercially reasonable terms, if at all, that
such arrangements will be successful, or that the parties with which the Company
will establish arrangements will perform their obligations under such
arrangements. The Company or its collaborators may encounter problems and delays
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relating to research and development, regulatory approval, manufacturing and
marketing. The failure by the Company to successfully address such problems and
delays would have a material adverse effect on the Company. In addition, no
assurance can be given that proprietary rights of third parties will not
preclude the Company from marketing its proposed products or that third parties
will not market superior or equivalent products.
HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT. The Company has
incurred net operating losses since its inception (January 28, 1986) and, as of
September 30, 1997, had an accumulated deficit of approximately $15.4 million,
which has increased to date. The Company anticipates incurring additional losses
over at least the next several years and such losses are expected to increase as
the Company expands its research and development activities relating to its
MIDAS technology and its direct radiolabeling technology. To achieve
profitability, the Company, alone or with others, must successfully develop its
technologies and products, conduct preclinical studies and clinical trials,
obtain required regulatory approvals and successfully manufacture, introduce and
market such technologies and products. The time required to reach profitability
is highly uncertain, and there can be no assurance that the Company will be able
to achieve profitability on a sustained basis, if at all.
NEED FOR ADDITIONAL FINANCING AND ACCESS TO CAPITAL. The Company has
incurred negative cash flow from operations since its inception. The Company has
expended, and will continue to expend in the future, if available, substantial
funds to continue its research and development programs, including preclinical
studies and clinical trials, to seek regulatory approval of its products, to
develop manufacturing and marketing capabilities, and to fund the growth that is
expected to occur if any of its proposed products are approved for marketing.
Further, the Company has significant long-term debt that is due and payable
during the fiscal years ending June 30, 1998 and 1999. The Company expects that
its existing capital resources will be adequate to make scheduled debt payments
and to fund its operations through June 1998. No assurance can be given that
there will be no events affecting the Company's operations that would deplete
available resources significantly before such time. The Company's future capital
requirements depend on many factors, including continued progress in its
research and development activities, progress with preclinical studies and
clinical trials, prosecuting and enforcing patent claims, technological and
market developments, the ability of the Company to establish product development
arrangements, the cost of manufacturing scale-up and effective marketing
activities and collaborative or other arrangements. The Company will seek to
obtain additional funds through public or private financings, including equity
or debt financings, collaborative or other arrangements with corporate partners
and others, and from other sources. No assurance can be given that additional
financing will be available when needed, if at all, or on terms acceptable to
the Company. If adequate additional funds are not available, the Company may be
required to delay, scale back or eliminate certain of its research or
development activities, its manufacturing and marketing efforts, or require the
Company to license to third parties certain products or technologies that the
Company would otherwise seek to commercialize itself. If adequate funds are not
available, there will be a material and adverse effect on the Company.
POTENTIAL VOLATILITY OF PRICE; LOW TRADING VOLUME. The market price of
the Common Stock, like that of many other development-stage public
pharmaceutical or biotechnology companies, has been highly volatile and may be
so in the future. Factors such as announcements of technological innovations or
new commercial products by the Company or its competitors, disclosure of results
of preclinical and clinical testing, adverse reactions to products, governmental
regulation and approvals, developments in patent or other proprietary rights,
public or regulatory agency concerns as to the safety of products developed by
the Company, litigation and general market conditions may have a significant
adverse effect on the market price of the Common Stock. In addition, in general,
the Common Stock has been thinly traded, which may affect the ability of the
Company's stockholders to sell shares of the Common Stock in the public market.
There can be no assurance that a more active trading market will develop in the
future. From June 26, 1996 (the business day following the merger of a
newly-formed, wholly-owned subsidiary of the Company with and into RhoMed
Incorporated, a New Mexico corporation ("RhoMed"), pursuant to which all of the
outstanding equity securities of RhoMed were exchanged for Common Stock of the
Company (the "Merger")) to November 19, 1997, the Company's Common Stock has
traded at per share prices between $55 and $5. There can be no assurance that
this high level of volatility will not persist in the future and that purchasers
of the Registered Shares will not be adversely affected. Further, the stock
market has from time to time experienced extreme price and
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volume fluctuations that may be unrelated to the operating performance of
particular companies. Such fluctuations may adversely affect the price of the
Common Stock.
PATENTS AND PROPRIETARY RIGHTS, NO ASSURANCE OF ENFORCEABILITY OR
SIGNIFICANT COMPETITIVE ADVANTAGE. In general, the patent positions of companies
relying upon biotechnology are highly uncertain and involve complex legal and
factual questions. To date, there has emerged no consistent policy regarding the
breadth of claims that are properly accorded to biotechnology patents. There can
be no assurance that patents will issue from the patent applications filed by
the Company or its licensors or that the scope of any claims granted in any
patent will provide meaningful proprietary protection or a competitive advantage
to the Company. There can be no assurance that the validity or enforceability of
patents issued or licensed to the Company will not be challenged by others or,
if challenged, will be upheld by a court. In addition, there can be no assurance
that competitors will not be able to circumvent any patents issued or licensed
to the Company. In the United States, patent applications are maintained in
secrecy until they issue as patents, and thus publications in the patent
literature lag behind actual discoveries. Scientific publications also generally
appear after a patent application, if any, is filed. As a result of delayed
publication, the Company cannot be certain that its scientists were the first to
make inventions covered by its patents and patent applications.
In the event another party has also filed a patent application relating
to an invention claimed in a Company patent application, the Company may be
required to participate in an interference proceeding adjudicated by the United
States Patent and Trademark Office to determine priority of invention. The
possibility of an interference proceeding could result in substantial
uncertainties and cost for the Company, even if the eventual outcome is
favorable to the Company. An adverse outcome could result in the Company losing
patent protection for the subject of the interference, subject the Company to
significant liabilities to third parties and require the Company to obtain
license rights from third parties at undetermined cost or to cease using the
technology.
While no valid patent that would be infringed by manufacture, use or
sale of the Company's proposed products has come to the attention of the
Company, the Company's proposed products are still in the development stage, and
neither their formulations nor their method of manufacture is finalized.
Moreover, patents the claims of which would be infringed by the Company's
commercial activities may not have issued as yet. There can thus be no assurance
that the manufacture, use or sale of the Company's proposed products will not
infringe patent rights of others. The Company may be unable to avoid
infringement of any such patents and may have to seek a license, defend an
infringement action, or challenge the validity of such patents in court. There
can be no assurance that a license will be available to the Company, if at all,
upon terms and conditions acceptable to the Company or that the Company will
prevail in any patent litigation. Patent litigation is costly and time
consuming, and there can be no assurance that the Company will have sufficient
resources to pursue such litigation. If the Company does not obtain a license
under any such patents, is found liable for infringement, or is not able to have
them declared invalid, the Company may be liable for significant money damages,
may encounter significant delays in bringing products to market, or may be
precluded from participating in the manufacture, use or sale of products or
methods of treatment covered by such patents.
The Company relies substantially in its product development activities
on certain technologies which are neither patentable nor proprietary and are
therefore potentially available to the Company's competitors. The Company also
relies on certain proprietary technologies (trade secrets and know-how) which
are not patentable. Although the Company has taken steps to protect its
unpatented trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
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
developed or discovered by competitors. If the Company's employees, scientific
consultants or collaborators develop inventions or processes independently that
may be applicable to the Company's product candidates, disputes may arise about
ownership of proprietary rights to those inventions and processes. Such
inventions and processes will not necessarily become the Company's property, but
may remain the property of those persons or their employers. Protracted and
costly
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litigation could be necessary to enforce and determine the scope of the
Company's proprietary rights. Failure to obtain or maintain patent and trade
secret protection, for any reason, could have a material adverse effect on the
Company.
Certain of the Company's patents are directed to inventions developed
with funds from United States government agencies or within academic
institutions from which the Company earlier acquired rights to such patents. As
a result of these arrangements, the United States government may have rights in
certain inventions developed during the course of the performance of federally
funded projects as required by law or agreements with the funding agency.
Several bills affecting patent rights have been introduced in the United
States Congress. These bills address various aspects of patent law, including
publication of pending patent applications, modification of the patent term,
re-examination, subject matter and enforceability. It is not certain whether any
of these bills will be enacted into law and whether, as enacted, they would
affect the scope, validity and enforceability of the Company's patents.
Accordingly, the effect of legislative change on the Company's intellectual
property estate is uncertain.
UNCERTAINTY OF DEVELOPMENT OF MIDAS TECHNOLOGY. The Company is engaged
in research and development on a number of product opportunities for its MIDAS
technology, including use as a thrombosis imaging agent, an infection imaging
agent and an immunostimulatory agent, and believes that MIDAS technology may
have medical applications in a variety of areas, including immune disorders,
cancers and cardiology. The Company intends to expand research and development
of MIDAS technology applications primarily through strategic alliances with
other entities. No assurances can be made regarding the establishment or the
timing of such alliances, and the failure to establish such alliances on a
timely basis could limit the Company's ability to develop MIDAS technology and
could have a material adverse effect on the Company. The Company expects to
devote resources to expand research and development of MIDAS technology to the
extent funding is available. No prediction can be made, however, as to when or
whether the areas in which there are ongoing MIDAS technology research projects
will yield scientific discoveries, or whether such research projects will lead
to commercial products.
While the Company has entered into the Option Agreement with Nihon,
pursuant to which Nihon has an option to exclusively license certain products
based on the Company's MIDAS technology, there can be no assurance that future
payments provided for in the Option Agreement will be made, that the Company and
Nihon will ever enter into a definitive license agreement, or that a definitive
strategic alliance between the Company and Nihon will result in the development
or commercialization of any product. In the event that Nihon gives notice of its
right to negotiate a license agreement, and the parties cannot agree on terms of
such license agreement, the Company will be required to repay certain monies to
Nihon. Failure to enter into a definitive license agreement, or being required
to repay certain monies to Nihon, may have a material adverse effect on the
Company.
UNCERTAINTY OF DEVELOPMENT OF LEUTECH.
The Company has entered into an
exclusive royalty-bearing license agreement with Wistar Institute for a defined
field of use for the antibody and cell line used for LeuTech, which license
agreement contains certain performance criteria and benchmark payments. Failure
to meet the performance criteria for any reason or any other event of default
under the license agreement leading to termination of the exclusive license
agreement with Wistar Institute would have a material adverse effect on the
Company. While the Company has negotiated a long-term contractual arrangement
for the manufacture of the purified antibody necessary for LeuTech, there can be
no assurance that such contractor will be able to successfully manufacture
purified antibody for LeuTech on a sustained basis, that such contractor will
remain in the contract manufacturing business for the time required by the
Company, or that the Company will be able to enter into such contractual
arrangements as to other steps and components required to manufacture LeuTech.
Such manufacture must be done under GMP requirements prescribed by the FDA and
other governmental agencies. To date, the Company has only manufactured LeuTech
in lots preparatory to initiating clinical trial use, with certain manufacturing
processes having been done under GMP, and has not determined whether commercial
quantities of LeuTech in conformity with these standards can be manufactured on
a sustained basis at an acceptable cost.
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While the Company has filed an IND on LeuTech with the FDA, and intends
to complete Phase III clinical trials and file regulatory applications to market
with the FDA in the second half of 1998, there can be no assurance that the
Company's LeuTech development program will be successful, that the FDA will
permit the Company's planned clinical trials to proceed, that LeuTech will prove
to be safe and efficacious in clinical trials, that LeuTech can be manufactured
in commercially required quantities on a sustained basis at an acceptable price,
that LeuTech will obtain the required regulatory approvals or that the Company
or its collaborators will be successful in obtaining market acceptance of
LeuTech. The Company or its collaborators may encounter problems and delays
relating to research and development, regulatory approval, manufacturing and
marketing of LeuTech. Failure to develop, obtain regulatory approval for,
manufacture and market LeuTech on a timely basis would have a material adverse
effect on the Company.
UNCERTAINTY OF DEVELOPMENT OF PT-5. The Company is discussing entering
into a collaborative arrangement with a third party to use a specific
somatostatin analog for PT-5. There can be no assurance that the Company will be
able to enter into a collaborative arrangement on acceptable terms, if at all.
If the Company cannot conclude such arrangement, the Company will either abandon
PT-5 development or seek to develop a substitute using MIDAS technology. There
can be no assurance that the Company will be able to enter into an arrangement
with another party on acceptable terms if at all, or will be able to develop a
substitute using MIDAS technology in a reasonable period of time, or at all.
There can be no assurance that the Company's PT-5 development program will be
successful, that PT-5 will exhibit the expected biological results in humans,
that PT-5 will prove to be safe and efficacious in clinical trials, that the
Company will obtain the required regulatory approvals for PT-5, or that the
Company or its collaborators will be successful in obtaining market acceptance
of PT-5. The Company or its collaborators may encounter problems and delays
relating to research and development, regulatory approval, manufacturing and
marketing of PT-5.
In addition, PT-5 requires a source of radioactive rhenium, preferably
rhenium-188. This isotope can be produced by a variety of methods, including a
generator system; however, clinical grade radioactive rhenium is not currently
available in the United States. The Company is aware of an experimental
generator system developed in the United States by Oak Ridge National
Laboratory, and an additional experimental generator system available in Europe.
The Company does not intend to seek to commercialize any source of radioactive
rhenium, but is aware of other companies seeking to commercialize radioactive
rhenium. There can be no assurance that, regardless of the status of product
development by the Company, any acceptable form of radioactive rhenium will ever
be commercially available in the United States or other countries at acceptable
prices, if at all, in which event the Company may never be able to develop or
commercialize PT-5.
GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL. Research,
development, testing, clinical trials, manufacture, distribution, advertising
and marketing, including distribution and sale, of pharmaceutical products are
subject to extensive regulation by governmental authorities in the United States
and other countries. Prior to marketing, proposed products developed by the
Company must undergo an extensive regulatory approval process required by the
FDA and by comparable agencies in other countries. This process, which includes
preclinical studies and clinical trials of each proposed product to establish
safety and effectiveness and confirmation by the FDA that good laboratory,
clinical and manufacturing practices were maintained during testing and
manufacturing, can take many years, requires the expenditure of substantial
resources and gives larger companies with greater financial resources a
competitive advantage over the Company. To date, no proposed product being
evaluated by the Company has been submitted for approval or approved by the FDA
or any other regulatory authority for marketing, and there can be no assurance
that any such product will ever be submitted or approved for marketing or that
the Company will be able to obtain the labeling claims desired for its products.
The Company is and will continue to be dependent upon the laboratories and
medical institutions conducting its preclinical studies and clinical trials to
maintain both good laboratory and good clinical practices. Data obtained from
preclinical studies and clinical trials are subject to varying interpretations
which could delay, limit or prevent FDA regulatory approval. Delays or
rejections may be encountered based upon changes in FDA policy for drug approval
during the period of development and FDA regulatory review. Similar delays also
may be encountered in foreign countries.
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There can be no assurance that FDA or other regulatory approval for any
products developed by the Company will be granted on a timely basis, if at all.
Delay in obtaining or failure to obtain such regulatory approvals will
materially adversely affect the introduction and marketing of any products which
may be developed by the Company as well as the Company's results of operations.
When and if approvals are granted, the Company, the approved drug, the
manufacture of such drug and the facilities in which such drug is manufactured
are subject to ongoing regulatory review. Subsequent discovery of previously
unknown problems may result in restriction on a product's use or withdrawal of
the product from the market. Adverse government regulation that might arise from
future legislative or administrative action, particularly as it relates to
health care reform and product pricing, cannot be predicted.
NO COMMERCIAL MANUFACTURING CAPABILITY OR EXPERIENCE. To be successful,
the Company's products must be manufactured in commercial quantities under GMP
requirements prescribed by the FDA and at acceptable costs. The Company has not
yet manufactured any pharmaceutical products in commercial quantities and
currently does not have the facilities to manufacture any products in commercial
quantities under GMP. In the event the Company determines to establish a
manufacturing facility, it will require substantial additional funds, the hiring
and retention of significant additional personnel and compliance with extensive
regulations applicable to such a facility. The Company has no experience in
commercial pharmaceutical manufacturing, and there can be no assurance that the
Company will be able to establish such a facility successfully and, if
established, that it will be able to manufacture products in commercial
quantities for sale at competitive prices. If the Company determines to rely on
collaborators, licensees or contract manufacturers for the commercial
manufacture of its products, the Company will be dependent on such corporate
partners or other entities for, and will have only limited control over, the
commercial manufacturing of its products. While the Company has entered into
manufacturing arrangements as to certain portions of the manufacture of LeuTech
under GMP, there can be no assurance that the contract manufacturer will perform
as agreed or will remain in the contract manufacturing business for the time
required by the Company, or that the Company will be able to enter into such
manufacturing arrangements as to remaining portions of the manufacture of
LeuTech. There can be no assurance that the Company will be able to enter into
any such manufacturing arrangements as to its other proposed products on
acceptable terms, if at all.
LIMITED CLINICAL TRIAL EXPERIENCE. Before obtaining required regulatory
approvals for the commercial sale of its proposed products, the Company must
demonstrate through clinical trials that such products are safe and efficacious
for use. The initiation and completion of clinical trials is dependent upon many
factors, including FDA acquiescence, the availability of qualified clinical
investigators and access to suitable patient populations. Delays in initiating
and completing clinical trials may result in increased trial costs and delays in
FDA submissions, which could have a material adverse effect on the Company. To
date, the Company has very limited experience in conducting clinical trials. The
Company will either need to rely on third parties to design and conduct any
required clinical trials or expend resources to hire additional personnel to
administer such clinical trials. There can be no assurance that the Company will
be able to find appropriate third parties to design and conduct clinical trials
or that it will have the resources to hire personnel to administer clinical
trials in-house.
A number of companies in the biotechnology and pharmaceutical industries
have suffered significant setbacks in clinical trials, even after showing
promising results in earlier studies or trials. There can be no assurance that
the Company will not encounter problems in its clinical trials that will cause
the Company to delay or suspend its clinical trials, that the clinical trials of
its proposed products will be completed at all, that such testing will
ultimately demonstrate the safety or efficacy of such proposed products or that
any proposed products will receive regulatory approval on a timely basis, if at
all. If any such problems occur, there would be a material adverse effect on the
Company.
LIMITED MARKETING, DISTRIBUTION OR SALES CAPABILITY AND EXPERIENCE. The
Company has limited experience in marketing pharmaceutical products, including
distribution and selling of pharmaceutical products, and will have to develop a
sales force and/or rely on collaborators or licensees or on arrangements with
others to provide for the marketing, distribution, and sales of its proposed
products. There can be no assurance that the Company will be able
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to establish marketing, distribution and sales capabilities or make arrangements
with third parties to perform such activities on acceptable terms, which may
result in the lack of control by the Company over the marketing, distribution
and sales of its proposed products. In addition, there can be no assurance that
the Company or any third party will be successful in marketing, distributing or
selling any products. Furthermore, the Company will compete with many other
companies that currently have extensive and well-funded marketing, distribution
and sales operations.
COMPETITION. The biopharmaceutical and radiopharmaceutical industries
are highly competitive. In the biopharmaceutical industry, there are a number of
companies developing peptide-based drugs, including companies exploring a number
of different approaches to making conformationally-constrained short peptides
for use as therapeutic drugs. In the radiopharmaceutical industry, there are
several companies devoted to development and commercialization of monoclonal
antibody-based products and peptide-based products. The Company is likely to
encounter significant competition with respect to its proposed products
currently under development. Many of the Company's competitors which are engaged
in the biopharmaceutical field, and in particular the development of
peptide-based products, have substantially greater financial and technological
resources and marketing capabilities than the Company, and have significantly
greater experience in research and development. Many of the Company's
competitors which are engaged in the radiopharmaceutical field, and in
particular the development of antibody- and peptide-based products, have greater
financial and technological resources and marketing capabilities than the
Company, and have significantly greater experience in research and development.
Accordingly, the Company's competitors may succeed in developing products and
underlying technologies more rapidly than the Company, and in developing
products that are more effective and useful and are less costly than any that
may be developed by the Company, and may also be more successful than the
Company in manufacturing and marketing such products. Academic institutions,
hospitals, governmental agencies and other public and private research
organizations are also conducting research and seeking patent protection and may
develop competing products or technologies on their own or through collaborative
arrangements.
The Company is aware of at least one company developing an
antibody-based product which may compete with LeuTech as to certain indications,
which product is marketed in certain European countries and for which regulatory
approval is pending in the United States. The Company is also aware of another
company developing a peptide-based product which may also compete with LeuTech
as to certain indications. The Company is aware of a number of companies
developing technologies relating to the use of peptides as drugs, including a
variety of different approaches to making conformationally-constrained short
peptides.
The Company is pursuing areas of product development in which there is
the potential for extensive technological innovation in relatively short periods
of time. Rapid technological change or developments by others may result in the
Company's proposed products becoming obsolete or non-competitive.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT. Successful sales of the
Company's proposed products in the United States and other countries will depend
on the availability of adequate reimbursement from third-party payors such as
governmental entities, managed care organizations and private insurance plans.
Reimbursement by a third-party payor may depend on a number of factors,
including the payor's determination that use of a product is safe and
efficacious, neither experimental nor investigational, medically necessary,
appropriate for the specific patient and cost effective. Since reimbursement
approval is required from each payor individually, seeking such approvals is a
time-consuming and costly process. Third-party payors routinely limit
reimbursement coverage and in many instances are exerting significant pressure
on medical suppliers to lower their prices. There is significant uncertainty
concerning third-party reimbursement for the use of any pharmaceutical product
incorporating new technology, and there is no assurance that third-party
reimbursement will be available for the Company's proposed products, or that
such reimbursement, if obtained, will be adequate. Less than full reimbursement
by governmental and other third-party payors for the Company's products would
adversely affect the market acceptance of these products and would also have a
material adverse effect on the Company. Further, health care reimbursement
systems vary from
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country to country, and there can be no assurance that third-party reimbursement
will be made available for the Company's proposed products under any other
reimbursement system.
HEALTH CARE REFORM. The health care industry is undergoing fundamental
change in the United States as a result of economic, political and regulatory
influences. There exists a powerful trend toward managed care that is motivated
by a desire to reduce costs and prices of health care. The Company anticipates
that the health care industry, particularly insurance companies and other
third-party payors, will continue to promote cost containment measures and
alternative health care delivery systems, and political debate of these issues
will most likely continue. The Company cannot predict which specific reforms
will be proposed or adopted by industry or government or the precise effect that
such proposals or adoption may have on the Company. There can be no assurance
that health care reform initiatives will not have a material adverse effect on
the Company.
CONDUCTING BUSINESS ABROAD. To the extent the Company conducts business
outside the United States, it may do so through licenses, joint ventures or
other contractual arrangements for the development, manufacturing and marketing
of its proposed products. No assurance can be given that the Company will be
able to establish suitable arrangements, that the necessary foreign regulatory
approvals for its proposed product will be obtained, that foreign patent
coverage will be available or that the development and marketing of its proposed
products through such licenses, joint ventures or other contractual arrangements
will be successful. The Company might also have greater difficulty obtaining
proprietary protection for its proposed products and technologies outside the
United States and enforcing its rights in foreign courts. Furthermore,
international operations and sales may be limited or disrupted by the imposition
of governmental controls regulation of medical products, export license
requirements, political instability, trade restrictions, changes in tariffs,
exchange rate fluctuations and difficulties in managing international
operations.
RISK OF LIABILITY; ADEQUACY OF INSURANCE COVERAGE; RISK OF PRODUCT
RECALL. The Company's business may be affected by potential product liability
risks which are inherent in the testing, manufacturing and marketing of proposed
pharmaceutical products to be developed by the Company. There can be no
assurance that product liability claims will not be asserted against the
Company, its collaborators or licensees. The use of proposed products developed
by the Company in clinical trials and the subsequent sale of such proposed
products is likely to cause the Company to bear all or a portion of those risks.
Such litigation claims could have a material adverse effect on the Company. The
Company has liability insurance providing up to $1,000,000 coverage per
occurrence and in the aggregate as to certain clinical trial risks, and will
seek to obtain additional product liability insurance before the
commercialization of its products. There can be no assurance, however, that
insurance will be available to the Company on acceptable terms, if at all, or
that such coverage once obtained would be adequate to protect the Company
against future claims or that a medical malpractice or other claim would not
materially and adversely affect the Company. Furthermore, there can be no
assurance that any collaborators or licensees of the Company will agree to
indemnify the Company, be sufficiently insured or have a net worth sufficient to
satisfy any such product liability claims. In addition, products such as those
proposed to be sold by the Company may be subject to recall for unforeseen
reasons. Such a recall could have a material adverse effect on the Company.
DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL; LIMITED PERSONNEL;
DEPENDENCE ON CONTRACTORS. The Company is highly dependent upon the efforts of
its management. The loss of the services of one or more members of management
could impede the achievement of development objectives. Due to the specialized
scientific nature of the Company's business, the Company is also highly
dependent upon its ability to attract and retain qualified scientific and
technical personnel. There is intense competition for qualified personnel in the
areas of the Company's activities and there can be no assurance that the Company
can presently, or will be able to continue to, attract and retain the qualified
personnel necessary for the development of its existing business and its
expansion into areas and activities requiring additional expertise. In addition,
the Company's intended or possible growth and expansion into areas requiring
additional skill and expertise, such as marketing, including sales and
distribution, will require the addition of new management personnel and the
development of additional expertise by existing
12
<PAGE>
management personnel. The loss of, or failure to recruit, scientific, technical
and marketing and managerial personnel could have a material adverse effect on
the Company.
The Company relies, in substantial part, and for the foreseeable future
will rely, on certain independent organizations, advisors and consultants to
provide certain services, including substantially all aspects of manufacturing,
regulatory approval and clinical management. There can be no assurance that the
services of independent organizations, advisors and consultants will continue to
be available to the Company on a timely basis when needed, or that the Company
could find qualified replacements. The Company's advisors and consultants
generally sign agreements that provide for confidentiality of the Company's
proprietary information. However, there can be no assurance that the Company
will be able to maintain the confidentiality of the Company's technology, the
dissemination of which could have a material adverse effect on the Company.
HAZARDOUS MATERIALS; COMPLIANCE WITH ENVIRONMENTAL REGULATIONS. 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 federal, state and local 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. In
addition, there can be no assurance that current or future environmental laws,
rules, regulations or policies will not have a material adverse effect on the
Company.
SHARES ELIGIBLE FOR FUTURE SALE; EFFECT ON ABILITY TO RAISE CAPITAL. Of
the 3,051,463 shares of Common Stock outstanding, 2,846,412 are freely tradable,
and are not subject to any restrictions, either under securities laws or under
lock-up or other agreements. Additional Common Stock, including shares issuable
upon exercise of options and the outstanding warrants, may become eligible for
sale in the public market from time to time in the future. Currently, warrants
to purchase 720,837 shares of Common Stock or securities convertible into Common
Stock, at prices ranging from $.22 to $282.00 per share, with an average
weighted price of $6.80 per share, are outstanding, and options to purchase
838,124 shares of Common Stock, at prices ranging from $.20 to $360.00 per
share, with an average weighted price of $8.00 per share, are outstanding. The
total number of the Registered Shares is 6,634,432 shares, of which 3,055,509
are Contingent Shares. Furthermore, the Company may file one or more
registration statements on Form S-8 to register shares of Common Stock available
for issuance under the Company's 1996 Stock Option Plan, and certain other
option grants and options assumed by the Company in the Merger. Many of the
foregoing options and warrants are likely to be exercised at a time when the
Company might be able to obtain additional equity capital on more favorable
terms. While those options and warrants are outstanding, they may adversely
affect the terms on which the Company could obtain capital. The Company cannot
predict the effect, if any, that market sales of Common Stock, the exercise of
options or warrants, or the availability of such Common Stock for sale will have
on the market price prevailing from time to time. Furthermore, certain holders
of the Company's securities have the right to cause the Company to register
their Common Stock under the Securities Act in the future, which could cause the
Company to incur substantial expense, could affect the Company's ability to
raise capital and also materially and adversely affect the prevailing market
price of the Company's Common Stock.
ANTI-TAKEOVER CONSIDERATIONS. The Company's Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), authorize the
issuance of up to 10,000,000 shares of preferred stock, par value $.01 per share
("Preferred Stock"), of which 264,000 are authorized for issuance as shares of
Series A Convertible Preferred Stock. See "Description of Securities." The
Company's Board of Directors has the authority, without action by the Company's
stockholders, to issue shares of preferred stock, and to fix the rights and
preferences of such preferred stock, except as limited in the Certificate of
Designation relating to the Series A Convertible Preferred Stock. Accordingly,
the Board of Directors is empowered, without stockholder approval, to issue a
new series of preferred stock with dividend, liquidation, conversion, voting or
other rights which could adversely affect the voting power or other rights of
the holders of Common Stock. Such authority, together with certain provisions of
Delaware
13
<PAGE>
law and of the Company's Certificate of Incorporation and bylaws, may have the
effect of delaying, deterring or preventing a change in control of the Company,
may discourage bids for the Company's Common Stock at a premium over the market
price and may adversely affect the market price, and the voting and other rights
of the holders, of the Common Stock. Although the Company has no present
intention to issue any additional shares of its preferred stock, other than
those already authorized for issuance upon exercise of the Preferred Stock
Placement Warrants, there can be no assurance that the Company will not do so in
the future.
NO DIVIDENDS. The Company has not paid cash dividends on its Common Stock
since its inception and does not intend to pay any dividends on its Common Stock
in the foreseeable future. The Series A Convertible Preferred Stock has a
dividend preference.
EQUITY DILUTION. Purchasers of the Registered Shares will experience
immediate and substantial dilution of their investment with respect to the net
tangible book value per share of Common Stock.
POTENTIAL CONVERSION PRICE RESET OF SERIES A CONVERTIBLE PREFERRED
STOCK. In 1997, the Company consummated an offering of units consisting of
shares of Series A Convertible Preferred Stock. The 137,780 shares of Series A
Convertible Preferred Stock sold in the offering, and the 13,778 shares issuable
upon exercise of the Preferred Stock Placement Warrants, are convertible, at the
option of the holders, into shares of Common Stock, at a conversion price of
$4.96 and stated value of $100 per share of Series A Convertible Preferred
Stock. The conversion price is subject to a reset upon the happening of certain
events. Any decrease in the conversion price applicable to the Series A
Convertible Preferred Stock would result in the issuance of additional shares of
Common Stock, including some or all of the Contingent Shares, and would have a
dilutive effect. The conversion price is also subject to adjustment under
certain circumstances. See "Description of Securities."
CERTAIN INTERLOCKING RELATIONSHIPS; POTENTIAL CONFLICTS OF INTEREST.
Certain of the directors of the Company are officers or directors of Paramount
or of Paramount Capital Investments, LLC ("Paramount Capital Investments").
Paramount Capital Investments is a merchant bank and venture capital firm
specializing in biotechnology and biopharmaceutical companies. In the regular
course of its business, Paramount Capital Investments identifies, evaluates and
pursues investment opportunities in biomedical and pharmaceutical products,
technologies and companies. Generally, Delaware corporate law requires that any
transactions between the Company and any of its affiliates be on terms that,
when taken as a whole, are substantially as favorable to the Company as those
then reasonably obtainable from a person who is not an affiliate in an
arms-length transaction. Nevertheless, neither Paramount Capital Investments nor
any other person is obligated pursuant to any agreement or understanding with
the Company to make any additional products or technologies available to the
Company, and there can be no assurance, and purchasers of the Common Stock
should not expect, that any biomedical or pharmaceutical product or technology
identified by Paramount Capital Investments or any other person in the future
will be made available to the Company. In addition, certain of the officers,
directors, consultants and advisors to the Company may from time to time serve
as officers, directors, consultants or advisors to other biopharmaceutical or
biotechnology companies. There can be no assurance that such other companies
will not in the future have interests in conflict with those of the Company.
CONTROL BY OFFICERS, DIRECTORS, AND EXISTING STOCKHOLDERS. The Company's
executive officers, directors, five percent (5%) stockholders and affiliated
entities together hold approximately 21.8% of the voting power based on stock
outstanding as of the date of this Prospectus, and hold options or warrants to
acquire a significant additional number of shares of Common Stock and Series A
Convertible Preferred Stock. As a result, these stockholders, acting together,
will be able to influence significantly most matters requiring approval by the
stockholders of the Company, including the election of directors. Such a
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company, including transactions in which stockholders
might otherwise receive a premium for their shares over then current market
prices. Such stockholders may influence corporate actions, including influencing
elections of directors and significant corporate events.
14
<PAGE>
RISK OF LOSS IN LAWSUIT. The Company and one of its subsidiaries,
Interfilm Technologies, Inc., are the plaintiffs in a lawsuit against Sony
Corporation of America and certain of its affiliates and subsidiaries
(collectively, "Sony") for breach of contract and breach of duty of good faith
and fair dealing (the "IT Litigation"). In November 1996, Sony asserted two
counterclaims in the IT Litigation. The complaint and counterclaims relate
solely to the business activities of the Company prior to the Merger. The IT
Litigation is under the control of and at the expense of an unaffiliated limited
liability partnership (the "Partnership"), and is solely for the benefit of the
Company's pre-Merger stockholders as of June 21, 1996. Based upon the opinion of
the Company's counsel of record in the IT Litigation, the Company believes that
the counterclaims are without merit. However, the Company may be liable in the
event that a judgment is rendered against the Company on the counterclaims, and
the assets of the Partnership may not be sufficient to provide full
indemnification.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Registered Shares.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 75,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock.
COMMON STOCK
As of the date of this Prospectus, there are 3,051,463 shares of Common
Stock outstanding, and a maximum of 4,297,017 shares of Common Stock issuable on
conversion or exercise of securities convertible into or exercisable for Common
Stock, and 3,055,509 Contingent Shares issuable on conversion of Series A
Convertible Preferred Stock assuming the maximum decrease, under certain assumed
circumstances, from the current conversion price. Holders of Common Stock have
one vote per share and have no preemption rights. Holders of Common Stock have
the right to participate ratably in all distributions, whether of dividends or
assets in liquidation, dissolution or winding up, subject to any superior rights
of holders of Preferred Stock outstanding at the time.
SERIES A CONVERTIBLE PREFERRED STOCK
One series of 264,000 shares of Preferred Stock has been established,
the Series A Convertible Preferred Stock, of which 137,780 shares are
outstanding and 13,778 shares are issuable upon exercise of the Preferred Stock
Placement Warrants.
Optional Conversion. Each share of Series A Convertible Preferred Stock
is convertible at any time, at the option of the holder, into the number of
shares of Common Stock equal to $100 divided by the "Conversion Price" (as
defined in the Certificate of Designations for the Series A Convertible
Preferred Stock). The current Conversion Price is $4.96, so each share of Series
A Convertible Preferred Stock is currently convertible into approximately 20.2
shares of Common Stock (fractional shares will be cashed out on conversion, and
do not vote). The Conversion Price is subject to adjustment as described below.
Mandatory Conversion. Commencing May 9, 1998, the Company may, at its
option, cause the conversion of the Series A Convertible Preferred Stock, in
whole or in part, on a pro rata basis, into Common Stock at the conversion rate
in effect at that time, if the closing bid price of the Common Stock has
exceeded 200% of the then applicable Conversion Price for at least twenty (20)
trading days in any thirty (30) consecutive trading day period ending three (3)
days prior to the date of conversion.
Adjustments to the Conversion Price. The Conversion Price is subject to
adjustment, under certain circumstances, upon the sale or issuance of Common
Stock for consideration per share less than either (i) the Conversion Price in
effect on the date of such sale or issuance, or (ii) the market price of the
Common Stock as of
15
<PAGE>
the date of such sale or issuance. The Conversion Price is also subject to
adjustment upon the occurrence of a merger, reorganization, consolidation,
reclassification, stock dividend or stock split which will result in an increase
or decrease in the number of shares of Common Stock outstanding.
Conversion Price Reset Event. The Conversion Price is subject to
adjustment on May 9, 1998 (the "Reset Date") if the average closing bid price of
the Common Stock for the thirty (30) consecutive trading days immediately
preceding the Reset Date (the "Reset Trading Price") is less than 130% of the
then applicable Conversion Price (a "Reset Event"). Upon a Reset Event, the
Conversion Price will be reduced to greater of (i) the Reset Trading Price
divided by 1.3 or (ii) 50% of the Conversion Price in effect before the Reset
Event. The 3,055,509 Contingent Shares included in the Registered Shares assumes
that the Conversion Price in effect before the Reset Event is $4.96 and that the
Reset Trading Price is less than $3.22.
SELLING STOCKHOLDERS
This Prospectus offers the Registered Shares for resale by Selling
Stockholders who have acquired or will acquire Common Stock issued: (i) on
conversion at the current Conversion Price of Series A Convertible Preferred
Stock; (ii) on conversion at the current Conversion Price of Series A
Convertible Preferred Stock acquired on exercise of Preferred Stock Placement
Warrants, which Preferred Stock Placement Warrants were issued to designees of
Paramount, are exercisable at $110 per share of Series A Convertible Preferred
Stock on November 9, 1997 or, as to certain designees, February 9, 1998, and
which expire November 9, 2002 and contain cashless exercise and anti-dilution
provisions; (iii) as Contingent Shares on conversion of Series A Convertible
Preferred Stock in the event of a Reset Event or other decrease in the
Conversion Price; (iv) on exercise of Class C Warrants issued by RhoMed in
connection with the Merger, exercisable at approximately $8.68 per share, and
which expire June 24, 2000 and contain call and anti-dilution provisions; (v) on
exercise of Common Stock Placement Warrants issued by RhoMed to designees of
Paramount, exercisable at approximately $6.51 per share of Common Stock, and
which expire June 25, 2006 and contain cashless exercise and anti-dilution
provisions; (vi) on exercise of Class B Warrants issued by RhoMed in
connection with a private offering, exercisable at approximately $2.71 per
share, and which expire at various dates between December 8, 2005 and February
15, 2006 and contain call and anti-dilution provisions; (vii) on exercise of
Class B Placement Warrants issued by RhoMed to designees of Paramount,
exercisable at approximately $6.51 per share, and which expire February 15, 2006
and contain cashless exercise and anti-dilution provisions; (viii) on exercise
of Class A Warrants issued by RhoMed in connection with a private offering,
exercisable at approximately $0.22 per share, and which expire at various dates
between August 10, 2005 and September 13, 2005 and contain anti-dilution
provisions; (ix) on exercise of Class A Placement Warrants issued by RhoMed to
designees of Paramount, exercisable at approximately $0.22 per share, and which
expire September 13, 2005 and contain cashless exercise and anti-dilution
provisions; (x) by the Company to pay accrued interest; or (xi) on exercise of
Financial Services Advisory Agreement Warrants issued to a designee of
Paramount, exercisable at $9.00 and $8.75 per share, and which expire May 9,
2002 and contain cashless exercise, redemption and anti-dilution provisions. As
of the date of this Prospectus, the Company has issued 55,296 shares of Common
Stock on exercise of Class A Warrants, and has issued no shares of Common Stock
on conversion of any Series A Convertible Preferred Stock or exercise of any
Preferred Stock Placement Warrant, Common Stock Placement Warrant, Class C
Warrant, Class B Warrant, Class B Placement Warrant, Class A Placement Warrant
or Financial Services Advisory Agreement Warrant.
Common Stock ownership information in the following table is based
solely upon (i) information furnished to the Company by Selling Stockholders,
(ii) reports furnished to the Company pursuant to the rules of the Commission
and (iii) as appears on the Company's stock ownership records.
The following table sets forth as of the date of this Prospectus (i) the
name of each Selling Stockholder, (ii) the number of shares of Common Stock
(including Common Stock issuable on conversion of Series A Convertible Preferred
Stock and on exercise of all warrants for Registered Shares) which each holder
owns or has the right to
16
<PAGE>
acquire before the Offering (excluding Contingent Shares), (iii) the number of
Contingent Shares issuable upon a decrease in the Conversion Price of Series A
Convertible Preferred Stock (see "Description of Securities"), (iv) the number
of shares of Common Stock included in this Registration Statement, (v) the
number of shares of Common Stock which each holder will own following the
completion of the Offering and (vi) the percentage of shares of Common Stock
which each holder will own following the completion of the Offering (assuming
the sale of all stock offered and no other dispositions or acquisitions of
Common Stock). Except as noted, no Selling Stockholder has had, within the past
three years, any position, office or other material relationship with the
Company or any of the Company's predecessors or affiliates. Due to lock-up
agreements, not all of the Common Stock listed below as being offered is
available for sale as of the date of this Prospectus. See "Plan of Distribution
- -- Lock-Up Agreements."
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
103336 Canada, Inc. 6,048 6,048 6,048 0 *
Abeshouse, Mark (1) 5,343 2,026 5,343 0 *
Adams, Leonard J. 10,080 10,080 10,080 0 *
Advanced Diagnostic Center PA 2,016 2,016 2,016 0 *
Profit Sharing Plan #1
Albanese, Sal & Lorraine 7,056 7,056 7,056 0 *
Amore Perpetuo, Inc. 10,080 10,080 10,080 0 *
Andrade Enterprises, LLC 20,161 20,161 20,161 0 *
Andrade, Michael L. and Sherry R. 5,040 5,040 5,040 0 *
Andrade, Co-TTees. of M&S
Andrade Rev. Tr.
Angelsastro, Philip J. 5,040 5,040 5,040 0 *
Appel, Marc 7,056 7,056 7,056 0 *
Aries Domestic Fund, L.P. (2) 190,394 77,620 97,205 93,189 1%
Aries Trust, The (2) 410,301 144,152 177,567 232,734 4%
Aristizabal, Mario 10,080 10,080 10,080 0 *
Armen Partners, L.P. 19,728 15,120 19,728 0 *
Armen Partners Offshore Fund, Ltd. 35,282 35,282 35,282 0 *
Arneson, Harriet E. 5,040 5,040 5,040 0 *
Ashton, Billington (3) 518 0 518 0 *
Austost Anstalt Schaan 50,403 50,403 50,403 0 *
Bahl, Rajiv 5,040 5,040 5,040 0 *
Berlinger, Michael A. & Martin, 5,040 5,040 5,040 0 *
Geraldine F.
Bernstein, Lawrence 2,016 2,016 2,016 0 *
Bioquest Venture Leasing Part. LP 106,768 0 63,910 42,858 *
(4)
Birbrower, Barry, P.C. Profit 5,040 5,040 5,040 0 *
Sharing Trust
Blake, Simon A. & Nadine 1,008 1,008 1,008 0 *
</TABLE>
- ------------------------------------
* indicates less than one percent
17
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
BlueStone Capital Partners L.P. 1,323 1,323 1,323 0 *
Boyle, Kevin E. 10,080 10,080 10,080 0 *
Brapo Associates 5,040 5,040 5,040 0 *
Bridgewater Partners, L.P. 10,080 10,080 10,080 0 *
C.S.L. Associates, L.P. 20,161 20,161 20,161 0 *
Cambrian Investments Limited 5,040 5,040 5,040 0 *
Partnership
Cass & Co. - Magnum Capital 20,161 20,161 20,161 0 *
Growth Fund
Cassidy, Thomas L., IRA Rollover 10,080 10,080 10,080 0 *
Chanin, Richard B., IRA f/b/o, 10,080 10,080 10,080 0 *
DLJSC as custodian
Chasanoff, Ted, IRA, Cowen & Co. 5,040 5,040 5,040 0 *
cust.
Childs, Richard L. 2,520 2,520 2,520 0 *
Cinco De Mayo, Ltd. (5) 4,608 0 4,608 0 *
Clarke, Kevin, Cowen & Co. Cust. 5,040 5,040 5,040 0 *
for IRA
Cohen, Alice & Arthur 5,040 5,040 5,040 0 *
Conrads, Robert J. 10,080 10,080 10,080 0 *
Cox, Jr., Archibald 40,322 40,322 40,322 0 *
Curran, John P. 5,040 5,040 5,040 0 *
Darienzo, Ralph A. & Lillian M. 5,040 5,040 5,040 0 *
Darling, Michael and Mary 10,080 10,080 10,080 0 *
Delaware Charter Guarantee & Trust 1,152 0 1,152 0 *
Company, TTEE FBO Jack Polak
Profit Sharing Plan
Dishal, Stephanie 2,016 2,016 2,016 0 *
Domaco Venture Capital Fund 6,192 5,040 6,192 0 *
Dulman, David 5,040 5,040 5,040 0 *
Dworetzky, Norma 10,080 10,080 10,080 0 *
Dworetzky, Edward 10,080 10,080 10,080 0 *
Ecker, Warren S. 5,040 5,040 5,040 0 *
Edelman, Joseph (3) 12,020 3,220 6,491 5,529 *
EDJ Limited 20,161 20,161 20,161 0 *
Essex Woodlands Health Ventures, 302,419 302,419 302,419 0 *
L.P. Fund III
Fabiani, Joseph A. and Theresa M. 3,456 0 3,456 0 *
Fabiani, JTWROS
- ------------------------------------
* indicates less than one percent
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Fairway Technology Inc. 10,080 10,080 10,080 0 *
Faisal Finance (Switzerland) S.A. 40,322 40,322 40,322 0 *
Farber, S. Edmond 1,899 1,323 1,899 0 *
Farber, S. Edmond "S" 5,040 5,040 5,040 0 *
Finke, Malcolm K., Trustee, 3,456 0 3,456 0 *
Malcolm K. Finke Trust Dated 8-9-
89
Fischer, Lauren (3) 1,167 1,167 1,167 0 *
Florin, Marc (3) 4,112 4,112 4,112 0 *
Fishbane, Jordan 1,728 0 1,728 0 *
Franzblau, William I. (6) 12,672 0 12,672 0 *
Fricke, F. G. 5,040 5,040 5,040 0 *
Fried, Jr., Albert 80,645 80,645 80,645 0 *
Garfinkel, Shelley 10,080 10,080 10,080 0 *
Gaynes, Davis & Barbara 5,040 5,040 5,040 0 *
Gehring III, Francis 10,080 10,080 10,080 0 *
Geiss, Dale M. 5,040 5,040 5,040 0 *
Gerace, Anthony J. 8,208 7,056 8,208 0 *
GHA Management 2,304 0 2,304 0 *
Giamanco, Joseph 10,080 10,080 10,080 0 *
Giant Trading Inc. 20,161 20,161 20,161 0 *
Gold, Laura 5,040 5,040 5,040 0 *
Goldberg, Arthur 3,024 3,024 3,024 0 *
Gomez, Ofelia Anton 5,040 5,040 5,040 0 *
Gonzalez M., Roberto 5,040 5,040 5,040 0 *
Goodman, Frank 2,016 2,016 2,016 0 *
Gordon, Michael J. 5,040 5,040 5,040 0 *
Gordon, Robert P. 10,080 10,080 10,080 0 *
Gross, John & Francine 5,040 5,040 5,040 0 *
Gross, Bernard (3) 9,068 8,366 9,068 0 *
Grossman, Andrew P., IRA, Cowen 5,040 5,040 5,040 0 *
& Co. cust.
Grossman Family Trust 5,040 5,040 5,040 0 *
Harari, Chaya & Sherri 5,040 5,040 5,040 0 *
Harrigan Family Trust 5,040 5,040 5,040 0 *
Heely, Laurence S. 2,016 2,016 2,016 0 *
Heiser, Thomas P. & Mary E. 6,192 5,040 6,192 0 *
Heymann, Jerry 5,040 5,040 5,040 0 *
Hickey, Joseph 6,048 6,048 6,048 0 *
Hight, Joan 1,152 0 1,152 0 *
</TABLE>
- ------------------------------------
* indicates less than one percent
19
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Hight, Norton F. 5,040 5,040 5,040 0 *
Hight, Randall W. 5,040 5,040 5,040 0 *
Hirschfield, Jack 2,520 2,520 2,520 0 *
Hughes, Mary Jo 15,120 15,120 15,120 0 *
J.F. Shea Co., Inc. as Nominee 100,806 100,806 100,806 0 *
1997-5
J.M. Hull Associates, LP 40,322 40,322 40,322 0 *
Jackson Hole Investment Acquisition 6,912 0 6,912 0 *
L.P.
JDK Partners, LP 20,161 20,161 20,161 0 *
Johnson, Christopher A. & Hilary L. 1,008 1,008 1,008 0 *
Joyce, Michael 5,040 5,040 5,040 0 *
Kane, Patrick M. 10,080 10,080 10,080 0 *
Kash, Peter (3) 19,272 5,110 19,272 0 *
Kass, Amram, P.C. Defined Benefit 20,621 20,161 20,621 0 *
Pension Plan
Katzmann, Scott (3) 40,560 24,407 40,560 0 *
Kelly, Edward Justin 11,232 10,080 11,232 0 *
Kendall, Jr., Donald R. 5,040 5,040 5,040 0 *
Kennedy, John R. 10,080 10,080 10,080 0 *
Kessel, Daniel, M.D. 3,456 0 3,456 0 *
Kessel, Lawrence J. 3,456 0 3,456 0 *
Keys Foundation, Curacao, 40,322 40,322 40,322 0 *
Netherlands Antilles
Knox, John (3) 3,849 2,981 3,499 350 *
Knox, James & Farideh 4,032 4,032 4,032 0 *
Kohut, Richard 5,040 5,040 5,040 0 *
Korniewicz, Frederick J. 5,040 5,040 5,040 0 *
Korovin, M.D., Gwen S. 5,040 5,040 5,040 0 *
Kotel, Ira L. 4,032 4,032 4,032 0 *
Kratchman, Martin S. (3) 2,167 2,167 2,167 0 *
Lamm, Steven, M.D., Retirement 5,040 5,040 5,040 0 *
Fund
Lanteri, Vincent J. and Susan E. 7,056 7,056 7,056 0 *
LaRosa, Joseph A. 5,040 5,040 5,040 0 *
Laser Trading Ltd 5,040 5,040 5,040 0 *
Laura Gold Galleries Ltd. Profit 5,040 5,040 5,040 0 *
Sharing Trust
Lavin, James F. 3,456 0 3,456 0 *
Lazar, Ronald, Cowen & Co. Cust. 5,040 5,040 5,040 0 *
for IRA
</TABLE>
- ------------------------------------
* indicates less than one percent
20
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Lazar, Ronald M. and Barbra A. 576 0 576 0 *
Lazar, JTWROS
Lazar, Ronald 1,323 1,323 1,323 0 *
Leaf, Robert J. 10,080 10,080 10,080 0 *
Lemer, Albert 5,040 5,040 5,040 0 *
Lenchner, Gregory S., M.D. 3,456 0 3,456 0 *
Lenz, Herman & Muriel Lenz, Co- 5,040 5,040 5,040 0 *
Ttee, The Lenz Family Trust
Levine, Jeffrey (3) 14,392 14,364 14,392 0 *
Levine, Jerry 5,040 5,040 5,040 0 *
Lieberman, Henry N. 5,040 5,040 5,040 0 *
Linton Lake, S.A. 6,912 0 6,912 0 *
Lipman, Donna and Lawrence 5,040 5,040 5,040 0 *
Lipton, Maria C. 2,016 2,016 2,016 0 *
Livas, Alfredo 5,645 5,645 5,645 0 *
Loeb, Jr., John L. 5,040 5,040 5,040 0 *
Loeser, Dennis C & Van Genen 5,040 5,040 5,040 0 *
Beheer B.V.
Lowrie Management Ltd. 5,040 5,040 5,040 0 *
Lydon, Jr., Harris R. L. 5,040 5,040 5,040 0 *
Mancinelli, Gene T. 20,161 20,161 20,161 0 *
Masada I Limited Partnership 10,080 10,080 10,080 0 *
MBS Investors 15,120 15,120 15,120 0 *
McCurdy, Stephen B. and Catherine 5,040 5,040 5,040 0 *
R.
McDermott, Stephen (1) 3,562 3,074 3,562 0 *
McInerney, Tim (3) 90,235 44,989 90,235 0 *
McManus, Kevin T. 5,040 5,040 5,040 0 *
McNiff, John P. 30,241 30,241 30,241 0 *
Metzger, William H., M.D. Inc. 5,040 5,040 5,040 0 *
Retirement Plan
Millman, Paul M. 5,040 5,040 5,040 0 *
Milstein, Albert 21,313 20,161 21,313 0 *
Model, Wolfe F., IRA, Cowen & Co. 5,040 5,040 5,040 0 *
custodian
Moonlight International Ltd 30,241 30,241 30,241 0 *
Morgan, Alfred D. 5,040 5,040 5,040 0 *
Moskowitz, Reed 5,040 5,040 5,040 0 *
Moslow, Morton & Rusty 2,016 2,016 2,016 0 *
Motschwiller, Donald and Amy 5,040 5,040 5,040 0 *
Mullen, Michael A. 5,040 5,040 5,040 0 *
</TABLE>
- ------------------------------------
* indicates less than one percent
21
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Nagle, Arthur J. 5,040 5,040 5,040 0 *
Natiello, Joseph A. 20,161 20,161 20,161 0 *
Nebenzahl, Mechie 6,048 6,048 6,048 0 *
Netter, Drew M. 5,040 5,040 5,040 0 *
Omicron Investment Corporation 20,161 20,161 20,161 0 *
Osterweis, John S., Trustee for the 5,040 5,040 5,040 0 *
Osterweis Revocable Trust
Ostrovsky, Steven N. 10,080 10,080 10,080 0 *
Ostrovsky, Paul D. & Rebecca L. 2,520 2,520 2,520 0 *
P. A. W. Offshore Fund, Ltd. 100,806 100,806 100,806 0 *
Palmetto Partners, Ltd. 40,322 40,322 40,322 0 *
Pashayan, Richard 5,040 5,040 5,040 0 *
Perkins, Pat O., Ttee, Perkins Family 5,040 5,040 5,040 0 *
Trust
Persky, Mr. & Mrs. Bill 5,040 5,040 5,040 0 *
Pesonen, Mark D. 10,080 10,080 10,080 0 *
Peterson, William & Catherine 5,040 5,040 5,040 0 *
Plancarte G.N., Carlos & Leonore P. 10,080 10,080 10,080 0 *
De Marvan
Polak, Anthony G. 2,475 1,323 2,475 0 *
Polak, Anthony G., "S" 1,152 0 1,152 0 *
Polak, Anthony G., IRA Ret. Acct., 5,040 5,040 5,040 0 *
Cowen & Co. cust.
Polak, Frederick B. "S" 5,040 5,040 5,040 0 *
Polak, Jack, Keogh Profit Sharing 5,040 5,040 5,040 0 *
Plan
Pollak, Richard 2,304 0 2,304 0 *
Pomper, Stuart & Ingrid 20,161 20,161 20,161 0 *
Pomper, Stanley 20,161 20,161 20,161 0 *
Pomper, Alexander 40,322 40,322 40,322 0 *
Porter Partners, L.P. 60,483 60,483 60,483 0 *
Prager, Tis 10,080 10,080 10,080 0 *
Ramirez, Elke R. De 3,168 2,016 3,168 0 *
Re, Charles, Cowen & Co. 5,040 5,040 5,040 0 *
Custodian, Keogh Profit Sharing
Plan
Rebecca 1969 Trust 27,649 0 27,649 0 *
REDLIW Corp. 13,824 0 13,824 0 *
Reinharz, Jehuda 5,040 5,040 5,040 0 *
Richmond, Michael 8,064 8,064 8,064 0 *
</TABLE>
- ------------------------------------
* indicates less than one percent
22
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
RL Capital Partners 17,424 15,120 17,424 0 *
Rodriguez Perez, Raimundo & 10,080 10,080 10,080 0 *
Anelies H. Huter de R.
Roffer, Marion 10,080 10,080 10,080 0 *
Rosenwald, Lindsay A. (7) 148,734 82,240 148,734 0 *
Rothschild, Jonathan E. 12,384 10,080 12,384 0 *
Rubin, Wayne L. (3) 26,379 15,203 26,379 0 *
Rudick, Joseph (3) 9,025 3,150 9,025 0 *
Rudolf, Richard G. 10,080 10,080 10,080 0 *
Ruggeberg, Karl (3) 7,426 7,403 7,426 0 *
Ruttenberg, David W. 5,040 5,040 5,040 0 *
Ruyan, Jerry L. 6,912 0 6,912 0 *
Saker, Wayne 10,080 10,080 10,080 0 *
Salvi, Emilio S. 5,040 5,040 5,040 0 *
Sanger Investments 4,032 4,032 4,032 0 *
Schaeffer, Harold & Bess 5,040 5,040 5,040 0 *
Schlotterbeck, Robert 5,040 5,040 5,040 0 *
Schneider, Joel & Jane 5,040 5,040 5,040 0 *
Schonzeit, Andrew W. 3,456 0 3,456 0 *
Schottenfeld Associates 10,080 10,080 10,080 0 *
Schwartz, Carl F. 5,040 5,040 5,040 0 *
Serbin, Richard and Kathe Serbin, 34,562 0 2,304 32,258 *
JTWROS
Shapiro, Robert & Sandra 5,040 5,040 5,040 0 *
Sherrill, H. Virgil 10,368 0 10,368 0 *
Siegel, Andrew J. 5,040 5,040 5,040 0 *
Slovin, Bruce 6,912 0 6,912 0 *
Smeriglio, Michael J. & Geraldine Z. 5,040 5,040 5,040 0 *
Smithson Ventures Money Purchase 10,080 10,080 10,080 0 *
Pension Plan, DLJ custodian
T. Soep #2 Trust FBO Catharina 5,040 5,040 5,040 0 *
Polak, Jack Polak, Trustee
Solano, Jr., James J. 5,040 5,040 5,040 0 *
Solloway, William J. 2,016 2,016 2,016 0 *
Solomon, Deborah (3) 1,864 1,864 1,864 0 *
Solomon, Philip 5,040 5,040 5,040 0 *
Spana, Carl A. (8) 5,040 5,040 5,040 0 *
Spint, Robert L., Trust UA DTD 5,040 5,040 5,040 0 *
10/19/89, Robert L. Spint, Trustee
Stadtmauer, Rabbi Murray & Clare 5,040 5,040 5,040 0 *
</TABLE>
- ------------------------------------
* indicates less than one percent
23
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Stern, Andrea 5,040 5,040 5,040 0 *
Stevens-Knox & Associates, Inc. 25,345 20,161 25,345 0 *
Strassman, Joseph & Barbara 70,564 70,564 70,564 0 *
Strassman, Richard 11,088 11,088 11,088 0 *
Suan Investments 13,824 0 13,824 0 *
Suppa, Enrico F. 5,040 5,040 5,040 0 *
Sutel, Saul, Ind. Ret Acct., Cowen & 5,040 5,040 5,040 0 *
Co. Cust.
Taub, Hindy 3,456 0 3,456 0 *
Teitelbaum, Menashe 2,520 2,520 2,520 0 *
Teitelbaum, M.D., Myron M. 5,040 5,040 5,040 0 *
Token House Trading Company 20,161 20,161 20,161 0 *
Limited
UFH Endowment Ltd. 50,403 50,403 50,403 0 *
Umbach, Joseph A. 10,080 10,080 10,080 0 *
Uram, Jack 5,040 5,040 5,040 0 *
Valori Associates, Inc. 5,040 5,040 5,040 0 *
Vinson, Donald E. & Virginia V., 5,040 5,040 5,040 0 *
Trust
Vitan Group, L.L.C. 5,040 5,040 5,040 0 *
Vitols, J. 10,080 10,080 10,080 0 *
Vivaldi, Ltd. (9) 54,719 0 38,018 16,701 *
Walko, Mark & Sally Lynn 5,040 5,040 5,040 0 *
Walko, Mark 691 0 691 0 *
Walner, David (3) 4,901 4,901 4,901 0 *
Waring, Saul 5,040 5,040 5,040 0 *
Weinberg, Matthew F. 5,040 5,040 5,040 0 *
Weiner, Arlene 5,040 5,040 5,040 0 *
Weinstein, Marshall 3,456 0 3,456 0 *
Weiss, Michael S. (10) 40,038 15,526 27,113 12,925 *
Wertheimer, Samuel P. and Pamela 3,456 0 3,456 0 *
B. Rosenthal, JTWROS
Whetten, Robert J. 30,241 30,241 30,241 0 *
Wiencek, John R. 4,032 4,032 4,032 0 *
Willett, William H. 10,080 10,080 10,080 0 *
Williamson, Robert and Caroline 10,080 10,080 10,080 0 *
Winans, Tim 2,016 2,016 2,016 0 *
Wrubel, Michael J. 5,040 5,040 5,040 0 *
Young, Jonathan M. 2,304 0 2,304 0 *
Young, Jonathan M. & Lyudmila 10,080 10,080 10,080 0 *
</TABLE>
- ------------------------------------
* indicates less than one percent
24
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE REGISTERED OWNED OWNED
OFFERING SHARES OR OR
(EXCLUDING CONTINGENT (EXCLUDING ISSUABLE ISSUABLE
CONTINGENT SHARES CONTINGENT AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) ISSUABLE SHARES) OFFERING OFFERING
- ----------------------------------- ------------ ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Yud, Yoseph 1,152 0 1,152 0 *
Zapco Holdings, Inc. Deferred 20,161 20,161 20,161 0 *
Compensation Plan Trust
Zuck, Alfred C. 5,040 5,040 5,040 0 *
Zuck, Vilma B., Irrevocable Trust 5,040 5,040 5,040 0 *
FBO Alfred Zuck & other persons,
Randall Zuck & Paul Millman
Ttees DTD 12/28/87
Zucker, Uzi 3,456 0 3,456 0 *
</TABLE>
- ------------------------------------
* indicates less than one percent
(1) Formerly employed by and/or associated with Paramount.
(2) Aries Domestic Fund, L.P. and The Aries Trust share voting and investment
power as to their shares with Lindsay A. Rosenwald, M.D. and Paramount
Capital Asset Management, Inc. Dr. Rosenwald is the President of
Paramount and is the President, Chairman of the Board and sole
shareholder of Paramount Capital Asset Management, Inc., the general
partner of Aries Domestic Fund, L.P. and the investment manager of The
Aries Trust. Paramount Capital Asset Management, Inc. and Dr. Rosenwald
disclaim beneficial ownership of the shares held by Aries Domestic Fund,
L.P. and The Aries Trust except to the extent of their pecuniary interest
therein, if any.
(3) Employees, salespersons or other affiliates of Paramount.
(4) Bioquest Venture Leasing Partnership L.P. is the designee of Aberlyn
Holding Co., Inc., which is, with its affiliates, the Company's largest
creditor.
(5) Robert G. Rehme, President of Cinco De Mayo, Ltd., was a director of the
Company before the Merger.
(6) William I. Franzblau was a director and chief executive officer of the
Company before the Merger.
(7) Lindsay A. Rosenwald, M.D. is the Chairman of the Board and President of
Paramount and is the President, Chairman of the Board and sole
shareholder of Paramount Capital Asset Management, Inc.
(8) Carl A. Spana is the grandfather of Carl Spana, Ph.D., a director and
Executive Vice President of the Company.
(9) Lawrence L. Kuppin, general partner of Vivaldi, Ltd., was a director of
the Company before the Merger.
(10) Michael S. Weiss is a director of the Company and a Senior Managing
Director of Paramount.
PLAN OF DISTRIBUTION
Selling Stockholders may, but are not required to, sell Registered Shares
from time to time directly to purchasers or through underwriters, brokers,
dealers or agents. Selling Stockholders will pay any underwriting discounts or
commissions applicable to the sale of the Registered Shares. Selling
25
<PAGE>
Stockholders may sell Registered Shares on a securities exchange, in the
over-the-counter market, in privately negotiated transactions, or in a
combination of these methods, without notice to the Company. If a Selling
Stockholder intends to sell Registered Shares by any other method or
transaction, the Selling Stockholder must give the Company notice at least five
business days in advance. Selling Stockholders must sell Registered Shares in
accordance with the Registration Statement and must comply with the prospectus
delivery requirements of the Securities Act. Selling Stockholders must
discontinue disposition of Registered Shares during certain limited periods when
(i) the Company is required to supplement or amend this Prospectus, (ii) the
Company is engaging in a primary underwritten offering, or (iii) the Company
determines that disclosure of material undisclosed information required in a
prospectus would have an adverse effect on the Company or is otherwise
inadvisable.
There can be no assurance that the Selling Stockholders will sell any or
all of the Registered Shares offered by them hereunder.
The Registered Shares which are issued on conversion of shares of Series A
Convertible Preferred Stock other than those issued on exercise of Preferred
Stock Placement Warrants (the "Lock-up Shares") are subject to a partial,
diminishing lock-up agreement for up to nine (9) months after the effective date
of the Registration Statement (the "Effective Date"). Without the prior written
consent of Paramount, holders of Lock-up Shares may not directly or indirectly
sell or otherwise dispose of the Lock-up Shares according to the following
schedule: 75% of Lock-up Shares are subject to lock-up until three (3) months
after the Effective Date; 50% of Lock-up Shares are subject to lock-up until six
(6) months after the Effective Date; 25% of Lock-up Shares are subject to
lock-up until nine (9) months after the Effective Date; and the remaining 25% of
the Lock-up Shares are not subject to any restriction.
The Company has registered the Registered Shares (the "Registration") under
the Securities Act on behalf of the Selling Stockholders, pursuant to
registration rights contained in the agreements by which each Selling
Stockholder acquired Registered Shares or securities convertible into or
exercisable for Registered Shares. The Company will pay all expenses of the
Registration, and of qualification or exemption of the Registered Shares under
state securities laws, excluding fees of legal counsel for Selling Stockholders.
The Company is obligated to use its best efforts to keep the Registration
effective until the Selling Stockholders have completed the distribution
described in this Prospectus. Whether or not the Selling Stockholders have
completed the described distribution, the Company may cease to keep the
Registration effective with respect to a Selling Stockholder's Registered Shares
at any time when such Selling Stockholder may sell all of such Selling
Stockholder's Registered Shares under Rule 144 under the Securities Act (or
other exemption from the registration requirements of the Securities Act
acceptable to the Company) in a three-month period.
Selling Stockholders and any broker-dealers that participate in the sale of
the Registered Shares may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act and any commission received by them and any
profit on the resale of the Registered Shares as principal may be deemed to be
underwriting discounts and commissions under the Securities Act. The Company
will inform the Selling Stockholders that terms and arrangements of any
underwritten offering must be filed with the National Association of Securities
Dealers, Inc. ("NASD") for its review pursuant to Section 2710 of the NASD's
Corporate Financing Rules.
The Company has, as of the date of this Prospectus, informed the Selling
Stockholders that the anti-manipulation provisions of Regulation M promulgated
under the Exchange Act may apply to the sales of Registered Shares. The Company
will also advise the Selling Stockholders of the requirement for delivery of
this Prospectus in connection with any sale of the Registered Shares.
Certain Selling Stockholders may from time to time purchase shares of
Common Stock in the open market. The Company has, as of the date of this
Prospectus, informed the Selling Stockholders that they should not commence any
distribution of the Registered Shares unless they have terminated their
purchasing of, bidding for and attempting
26
<PAGE>
to induce any other person to bid for or purchase Common Stock in the open
market as provided in applicable securities regulations, including Regulation M.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company has obtained a directors' and officers' liability insurance
policy which covers, among other things, certain liabilities arising under the
Securities Act.
In the agreements pursuant to which the Company has registered the
Registered Shares in the Registration Statement, the Company has agreed, to the
extent permitted by law, to indemnify each Selling Stockholder (with the
exception of Bioquest Venture Leasing Partnership L.P.), control persons of
Selling Stockholders and underwriters of the Registered Shares against
liabilities arising out of untrue statements or omissions of material facts in
the Registration Statement or this Prospectus, except to the extent that the
untrue statement or omission is based on written information provided by the
Selling Stockholder for inclusion in the Registration Statement or this
Prospectus. Each Selling Stockholder (with the exception of Bioquest Venture
Leasing Partnership L.P.) has agreed to indemnify the Company, its directors,
officers and control persons, and underwriters of the Registered Shares against
liabilities arising out of untrue statements or omissions of material facts in
the Registration Statement or this Prospectus, but only to the extent that the
untrue statement or omission is based on written information provided by the
Selling Stockholder for inclusion in the Registration Statement or this
Prospectus.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
LEGAL MATTERS
Certain legal matters relating to the Registered Shares offered hereby will
be passed upon for the Company by Rubin Baum Levin Constant & Friedman, New
York, New York, counsel to the Company. Members of Rubin Baum Levin Constant &
Friedman have been granted options under the 1996 Stock Option Plan to purchase
an aggregate of 12,500 shares of Common Stock at an exercise price of $8.00 per
share. The options are immediately exercisable and will expire on January 3,
2007.
EXPERTS
The audited financial statements incorporated by reference in this
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
27
<PAGE>
[OUTSIDE BACK COVER OF PROSPECTUS]
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION OR
TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------------------------------
TABLE OF CONTENTS
Item Page Number
Available Information.........................................Inside Front Cover
Documents Incorporated By Reference...........................Inside Front Cover
Business Summary.......................................................1
Risk Factors...........................................................5
Use of Proceeds.......................................................15
Description of Securities.............................................15
Selling Stockholders..................................................16
Plan of Distribution..................................................25
Indemnification for Securities Act Liabilities........................27
Legal Matters.........................................................27
Experts...............................................................27
Table of Contents.............................................Outside Back Cover
--------------------------------------------
6,634,432
COMMON STOCK
[GRAPHIC OMITTED]
PALATIN TECHNOLOGIES, INC.
--------------------------------------------
PROSPECTUS
--------------------------------------------
28
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company will bear all expenses, estimated at $105,000, incurred
in connection with the registration of the Registered Shares under the
Securities Act and qualification or exemption of the Registered Shares under
state securities laws, excluding fees of legal counsel for any Selling
Stockholder. Each Selling Stockholder will pay all underwriting discounts and
selling commissions applicable to the sale of the Selling Stockholder's
Registered Shares.
SEC registration fees.............. $14,567
Blue Sky fees and expenses*........ $15,000
Costs of printing and engraving*... $10,000
Legal fees and expenses*........... $50,000
Accounting fees and expenses*...... $5,000
Miscellaneous*..................... $10,433
-------
TOTAL............................. $105,000
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or serving at the request of the corporation in similar capacities,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of an action
or suit by or in the right of the corporation, no indemnification shall be made
with respect to any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the court having jurisdiction shall determine that such person is fairly and
reasonably entitled to indemnity.
Article V, Section 3 of the Company's Certificate of Incorporation
provides that to the fullest extent permitted by the Delaware General
Corporation Law, no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for breach of a fiduciary duty
as a director.
Article VI of the Company's Certificate of Incorporation provides
that the Company shall make the indemnification permitted under Section 145 of
the Delaware General Corporation Law, as summarized above, but only (unless
ordered by a court) upon a determination by a majority of a quorum of
disinterested directors, by independent legal counsel in a written opinion, or
by the stockholders, that the indemnified person has met the applicable standard
of conduct. Article VI further provides that the Company may advance expenses
for defending actions, suits or proceedings upon such terms and conditions as
the Company's Board of Directors deems appropriate, and that the Company may
purchase insurance on behalf of indemnified persons whether or not the
Part II - 1
<PAGE>
Company would have the power to indemnify such persons under Section 145 the
Delaware General Corporation Law.
The Company's Bylaws contain substantially the same indemnification
provisions as the Company's Certificate of Incorporation, summarized above.
The Company's employment agreement with Edward J. Quilty requires the
Company to indemnify and advance expenses to Edward J. Quilty, the Company's
Chairman of the Board, President and Chief Executive Officer, to the fullest
extent permitted under Section 145 of the Delaware General Corporation Law.
Each of the agreements pursuant to which Selling Stockholders
acquired Registered Shares from the Company provides that the Company will
indemnify each Selling Stockholder, and each Selling Stockholder will indemnify
the Company, and in some cases the Company's directors, officers and control
persons, against certain liabilities which might arise from the Offering. The
indemnifications may cover liabilities arising under the Securities Act. The
obligation of a Selling Stockholder to indemnify the Company or its affiliates
is (absent fraud) limited to liabilities based on written information which the
Selling Stockholder provides to the Company for inclusion in the Registration
Statement.
The Company has obtained a directors' and officers' liability
insurance policy which covers, among other things, certain liabilities arising
under the Securities Act.
ITEM 16. EXHIBITS.
EXHIBITS
The following exhibits are filed with this Registration Statement, or
incorporated by reference as noted:
2.1 Agreement and Plan of Reorganization dated as of April 12,
1996 by and between Interfilm, Inc., Interfilm Acquisition
Corp. and RhoMed Incorporated. (a)
2.2 Waiver and Consent dated as of June 24, 1996, between
Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed
Incorporated. (b)
4.1 Specimen Certificate for Common Stock. (c)
4.2 Patent Assignment and License Agreement dated as of July 15,
1993, between RhoMed Incorporated and Aberlyn Capital
Management Limited Partnership. (b)
4.3 Master Lease Agreement dated November 16, 1994, between
RhoMed Incorporated and Aberlyn Capital Management Limited
Partnership. (b)
4.4 Letter Agreement, dated as of April 28, 1995, between Aberlyn
Capital Management Limited Partnership and RhoMed
Incorporated. (b)
4.5 Stock Purchase and Modification Agreement, dated as of
June 24, 1996, between Aberlyn Capital Management Limited
Partnership, Aberlyn Holding Company, Inc. and RhoMed
Incorporated. (b)
4.6 Specimen Certificate for Series A Convertible Preferred
Stock. (d)
5.1 Opinion of Rubin Baum Levin Constant & Friedman, counsel to
the Company, re: legality.*
10.29 Form of Placement Agent Warrant for the Series A Convertible
Preferred Stock Offering.*
10.30 Form of Financial Advisory Services Agreement Warrant.*
Part II - 2
<PAGE>
23.1 Consent of Rubin Baum Levin Constant & Friedman.
(Included in Exhibit 5.1.)
23.2 Consent of Arthur Andersen LLP.*
24.1 Power of Attorney (included on the signature page hereof).
27 Financial Data Schedule. (e)
NOTES TO EXHIBITS
* Filed with this Registration Statement.
(a) Incorporated by reference to Exhibit 2.1 of the Company's
Form 8-K dated June 25, 1996, filed with the Commission on
July 10, 1996.
(b) Incorporated by reference and previously filed as an exhibit
to the Company's Form 10-KSB Annual Report for the period
ended June 30, 1996, filed with the Commission on September
27, 1996.
(c) Incorporated by Reference to Exhibit 4.1 of the Company's
Form 8-K dated July 19, 1996, filed with the Commission on
August 9, 1996.
(d) Incorporated by reference and previously filed as an exhibit
to the Company's Form 10-QSB/A Amendment No. 2 for the
quarter ended March 31, 1997, filed with the Commission on
July 17, 1997.
(e) Incorporated by reference and previously filed as an exhibit
to the Company's Form 10-QSB Quarterly Report for the quarter
ended September 30, 1997, filed with the Commission on
November 14, 1997.
ITEM 17. UNDERTAKINGS.
The Company will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering thereof.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Part II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Princeton, State of New Jersey, on November 25, 1997.
PALATIN TECHNOLOGIES, INC.
By: /s/ Edward J. Quilty
---------------------------
Edward J. Quilty
Chairman of the Board, President
and Chief Executive Officer
Part II - 4
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers and directors of Palatin Technologies, Inc.,
severally constitute Edward J. Quilty and Stephen T. Wills, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, the
Registration Statement on Form S-3 filed herewith and any and all subsequent
amendments to said registration statement, and generally to do all such things
in our names and behalf in our capacities as officers and directors to enable
Palatin Technologies, Inc. to comply with all requirements of the Securities and
Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLES DATE
<S> <C> <C>
/s/ Edward J. Quilty
- -------------------------- Chairman of the Board, President and Chief November 25, 1997
Edward J. Quilty Executive Officer (principal executive officer)
/s/ Carl Spana
- ------------------------- Executive Vice President and Director November 25, 1997
Carl Spana
/s/ Stephen T. Wills
- ------------------------- Vice President and Chief Financial Officer November 25, 1997
Stephen T. Wills (principal financial and accounting officer)
/s/ Michael S. Weiss
- ------------------------- Director November 25, 1997
Michael S. Weiss
/s/ James T. O'Brien
------------------------- Director November 25, 1997
James T. O'Brien
/s/ John K.A. Prendergast
------------------------- Director November 25, 1997
John K.A. Prendergast
</TABLE>
Part II - 5
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
------------------------------------
[LETTERHEAD]
November 25, 1997
Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, New Jersey 08540
We have acted as counsel for Palatin Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form SB-2 (the "Initial Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") on August 13,
1997, Registration No. 333-33569, as amended by Pre-Effective Amendment No. 1 on
Form S-3 to the Initial Registration Statement (the "Amendment") filed with the
Commission on November 24, 1997 (the Amendment and the Initial Registration
Statement are collectively referred to herein as the "Registration Statement"),
under the Securities Act of 1933, as amended (the "Act"), for registration under
the Act of the following securities of the Company:
1. Up to 2,777,739 shares of common stock, par value $.01 per share (the
"Common Stock"), issuable upon conversion of 137,780 shares of the Company's
Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A
Convertible Preferred Stock");
2. Up to 277,770 shares of Common Stock issuable upon conversion of 13,778
shares of Series A Convertible Preferred Stock issuable upon exercise of the
Company's Preferred Stock Placement Warrants ("Preferred Stock Placement
Warrants") issued to designees of Paramount Capital, Inc. (the "Placement
Agent") in connection with the issuance of the Series A Convertible Preferred
Stock;
<PAGE>
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
- ------------------------------------
Palatin Technologies, Inc.
November 25, 1997
Page 2
3. Up to 3,055,509 additional shares of Common Stock issuable upon an
adjustment in the conversion price of the Series A Convertible Preferred Stock;
4. Up to 69,122 shares of Common Stock issuable upon exercise of the
Company's Class C Warrants ("Class C Warrants") issued in connection with the
merger of a newly-formed wholly-owned subsidiary of the Company with and into
RhoMed Incorporated, a New Mexico corporation ("RhoMed"), pursuant to which all
of the equity securities of RhoMed were exchanged for Common Stock of the
Company (the "Merger");
5. Up to 177,788 shares of Common Stock issuable upon exercise of the
Company's Common Stock Placement Warrants ("Common Stock Placement Warrants")
issued by RhoMed to designees of the Placement Agent;
6. Up to 39,167 shares of Common Stock issuable upon exercise of the
Company's Class B Warrants ("Class B Warrants") which were by RhoMed
in connection with a private offering;
7. Up to 1,953 shares of Common Stock issuable upon exercise of the
Company's Class B Placement Warrants ("Class B Placement Warrants") issued by
RhoMed to designees of the Placement Agent;
8. Up to 138,241 shares of Common Stock issued or issuable upon exercise of
the Company's Class A Warrants ("Class A Warrants"), of which 55,296 shares of
Common Stock are outstanding as of the date hereof, which were issued by RhoMed
in connection with a private offering;
<PAGE>
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
- ------------------------------------
Palatin Technologies, Inc.
November 25, 1997
Page 3
9. Up to 20,733 shares of Common Stock issuable upon exercise of the
Company's Class A Placement Warrants ("Class A Placement Warrants") issued by
RhoMed to designees of the Placement Agent;
10. Up to 12,500 shares of Common Stock issued upon exercise of the
Company's Financial Services Advisory Agreement Warrants ("Advisory Agreement
Warrants") issued to a designee of the Placement Agent; and
11. 63,910 shares of Common Stock issued to the designee of the Company's
largest creditor to pay accrued interest as of April 30, 1997.
As counsel to the Company, we have examined such corporate records,
documents, agreements and such matters of law as we have considered necessary or
appropriate for the purpose of this opinion. Upon the basis of such examination,
we advise you that in our opinion:
1. Up to 2,777,739 shares of Common Stock issuable upon conversion of
currently outstanding shares of Series A Convertible Preferred Stock, if and
when paid for and issued upon conversion of the Series A Preferred Stock in
accordance with the terms thereof, will be legally issued, fully paid and
non-assessable.
2. Up to 277,770 shares of Common Stock issuable upon conversion of the
Series A Convertible Preferred Stock after exercise of the Preferred Stock
Placement Warrants, if and when paid for and issued upon conversion of the
Series A Convertible Preferred Stock and the exercise of Preferred Stock
Placement Warrants in accordance with the terms thereof, will be legally issued,
fully paid and non-assessable.
<PAGE>
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
- ------------------------------------
Palatin Technologies, Inc.
November 25, 1997
Page 4
3. Up to 3,055,509 shares of Common Stock issuable upon adjustment in the
conversion price of the Series A Convertible Preferred Stock, if and when paid
for and issued upon conversion of the Series A Convertible Preferred Stock in
accordance with the terms of the Series A Convertible Preferred Stock
Certificate of Designation, will be legally issued, fully paid and
non-assessable.
4. Up to 69,122 shares of Common Stock issuable upon exercise of Class C
Warrants, if and when paid for and issued upon conversion of Class C Warrants in
accordance with the terms thereof, will be legally issued, fully paid and
non-assessable.
5. Up to 177,788 shares of Common Stock issuable upon exercise of Common
Stock Placement Warrants, if and when paid for and issued upon conversion of
Common Stock Placement Warrants in accordance with the terms thereof, will be
will be legally issued, fully paid and non- assessable.
6. Up to 39,167 shares of Common Stock issuable upon exercise of Class B
Warrants, if and when paid for and issued upon conversion of Class B Warrants in
accordance with the terms thereof, will be legally issued, fully paid and
non-assessable.
7. Up to 1,953 shares of Common Stock issuable upon exercise of Class B
Placement Warrants, if and when paid for and issued upon conversion of Class B
Placement Warrants in accordance with the terms thereof, will be legally issued,
fully paid and non-assessable.
<PAGE>
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
- ------------------------------------
Palatin Technologies, Inc.
November 25, 1997
Page 5
8. Up to 138,241 shares of Common Stock issuable upon exercise of Class A
Warrants (48,404 of such shares of Common Stock have been legally issued and are
fully paid and non-assessable), if and when paid for and issued upon conversion
of Class A Warrants in accordance with the terms thereof, will be legally
issued, fully paid and non-assessable.
9. Up to 20,733 shares of Common Stock issuable upon exercise of Class A
Placement Warrants have been duly authorized for issuance, if and when paid for
and issued upon conversion of Class A Placement Warrants in accordance with the
terms thereof, will be legally issued, fully paid and non-assessable.
10. Up to 12,500 shares of Common Stock issuable upon exercise of Advisory
Agreement Warrants, if and when paid for and issued upon conversion of Advisory
Agreement Warrants in accordance with the terms thereof, will be legally issued,
fully paid and non-assessable.
11. The 63,910 shares of Common Stock issued to the designee of the
Company's largest creditor to pay accrued interest as of April 30, 1997, which
may be sold in accordance with the provisions of the Registration Statement,
have been legally issued and are fully paid and non-assessable.
We are members of the Bar of the State of New York, and the opinions
expressed herein are limited to questions arising under the laws of the State of
New York, the General Corporation Law of the State of Delaware and the Federal
<PAGE>
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
- ------------------------------------
Palatin Technologies, Inc.
November 25, 1997
Page 6
laws of the United States of America, and we disclaim any opinion whatsoever
with respect to matters governed by the laws of any other jurisdiction.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to this firm under the caption "Legal Matters"
in the Prospectus which is a part of the Registration Statement. Reference is
made to the section of the Registration Statement entitled "Legal Matters" for a
description of ownership of the Company's securities by certain attorneys of
this firm.
Very truly yours,
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
[FORM OF WARRANT]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
PALATIN TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
PREFERRED STOCK
No. __ ______ Shares
FOR VALUE RECEIVED, PALATIN TECHNOLOGIES, INC., a Delaware corporation (the
"COMPANY"), hereby certifies that [_________________], its designee or its
permitted assigns is entitled to purchase from the Company, at any time or from
time to time commencing on [NOVEMBER 9, 1997] [FEBRUARY 9, 1998] and prior to
5:00 P.M., New York City time, on MAY 9, 2002, [_________________] [(____)]
fully paid and non-assessable shares of the Series A Convertible Preferred
Stock, $.01 par value and $100.00 stated value per share, of the Company for an
aggregate purchase price of [_______________] [($__________)] (computed on the
basis of $110.00 per share). (Hereinafter, (i) said Series A Convertible
Preferred Stock, together with any other equity securities which may be issued
by the Company with respect thereto (other than on conversion thereof) or in
substitution therefor, is referred to as the "PREFERRED STOCK", (ii) the Common
Stock, $.01 par value, of the Company, into which the Preferred Stock is
convertible, is referred to as the "COMMON STOCK", (iii) the shares of the
Preferred Stock purchasable hereunder or under any other Warrant (as hereinafter
defined) are referred to as the "WARRANT SHARES", (iv) the shares of Common
Stock purchasable hereunder or under any other Warrant (as hereinafter defined)
following the conversion of all shares of Preferred Stock into Common Stock and
each share of Common Stock receivable upon the conversion of the Warrant Shares
receivable upon the exercise of this Warrant are referred to as the "CONVERSION
SHARES", (v) the aggregate purchase price payable for the Warrant Shares or the
Conversion Shares, as the case may be, hereunder is referred to as the
"AGGREGATE WARRANT PRICE", (vi) the price payable (initially $110.00 per share,
subject to adjustment) for each of the Warrant Shares or the Conversion Shares,
as the case may be, hereunder is referred to as the "PER SHARE WARRANT PRICE",
(vii) this Warrant, all similar Warrants issued on the date hereof and all
warrants hereafter issued in exchange or substitution for this Warrant or such
similar Warrants are referred to as the "WARRANTS", (viii) the holder of this
Warrant is referred to as the "HOLDER" and the holder of this Warrant and all
other Warrants, Warrant Shares and Conversion Shares are referred to as the
"HOLDERS" and Holders of more than fifty percent (50%) of the outstanding
Warrants, Warrant Shares and Conversion Shares are referred to as the "MAJORITY
OF THE HOLDERS") and (ix) the then Current Market Price per share (the
-1-
<PAGE>
"CURRENT MARKET PRICE") shall be deemed to be the last sale price of the Common
Stock on the trading day prior to such date or, in case no such reported sales
take place on such day, the average of the last reported bid and asked prices of
the Common Stock on such day, in either case on the principal national
securities exchange on which the Common Stock is admitted to trading or listed,
or if not listed or admitted to trading on any such exchange, the representative
closing sale price of the Common Stock as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ"), or other
similar organization if NASDAQ is no longer reporting such information, or, if
the Common Stock is not reported on NASDAQ, the high per share sale price for
the Common Stock in the over-the-counter market as reported by the National
Quotation Bureau or similar organization, or if not so available, the fair
market value of the Common Stock as determined in good faith by the Board of
Directors. The then "CURRENT MARKET PRICE PER SHARE OF PREFERRED STOCK" shall
equal the then Current Market Price multiplied by the then effective "conversion
rate" (as defined and used in the Certificate of Designation for the Preferred
Stock) or if the Current Market Price is not so available, the fair market value
of the Preferred Stock as determined in good faith by agreement among the
Majority of the Holders and the Company's Board of Directors. The Aggregate
Warrant Price is not subject to adjustment. The Per Share Warrant Price is
subject to adjustment as hereinafter provided; in the event of any such
adjustment, the number of Warrant Shares or Conversion Shares, as the case may
be, deliverable upon exercise of this Warrant shall be adjusted by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
This Warrant, together with options of like tenor, constituting in the
aggregate Warrants to purchase 137,780 shares of the Preferred Stock, was
originally issued pursuant to an agency agreement between the Company and
Paramount Capital, Inc., as placement agent (THE "PLACEMENT AGENT") in
connection with a private placement (THE "OFFERING") of 137.78 Units (THE
"OFFERING UNITS"), each Offering Unit consisting of one thousand (1,000) shares
of the Preferred Stock, for which the Placement Agent acted as Placement Agent.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised, in whole at any time or in part from time to
time, commencing on [November 9, 1997] [February 9, 1998] and prior to 5:00
P.M., New York City time, on May 9, 2002 by the Holder:
(i) by the surrender of this Warrant (with the subscription form at the
end hereof duly executed) at the address set forth in Section 9(a)
hereof, together with proper payment of the Aggregate Warrant Price,
or the proportionate part thereof if this Warrant is exercised in
part, with payment for Warrant Shares or Conversion Shares, as the
case may be, made by certified or official bank check payable to the
order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form at
the end hereof duly executed) (a "CASHLESS EXERCISE") at the address
set forth in Sec tion 9(a) hereof. Such presentation and surrender
shall be deemed a waiver of the
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<PAGE>
Holder's obligation to pay the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exercised in part. In
the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of Warrant Shares or Conversion Shares, as the
case may be, subject to such Cashless Exercise multiplied by a
fraction, the numerator of which shall be the difference between the
then Current Market Price Per Share of Preferred Stock (or the Current
Market Price if exercised after the Conversion Date (as defined
below)) and the Per Share Warrant Price, and the denominator of which
shall be the then Current Market Price Per Share of Preferred Stock
(or the Current Market Price if exercised after the Conversion Date
(as defined below)). For purposes of any computation under this
Section 1(a), the then Current Market Price shall be based on the
trading day prior to the Cashless Exercise.
(iii)by the surrender of this Warrant (with the subscription (promissory
note) form at the end hereof duly executed) at the address set forth
in Subsection 9(a) hereof, together with the presentation of a
promissory note made payable to the corporation, duly executed and in
the form at the end hereof. Such promissory note shall be secured by
the securities underlying this Warrant, which shall be held in
safe-keeping by the Company as collateral for such indebtedness.
(b) If this Warrant is exercised in part, this Warrant must be exercised for a
number of whole shares of the Preferred Stock, (or the Common Stock
following the Conversion Date) and the Holder is entitled to receive a new
Warrant covering the Warrant Shares or Conversion Shares, as the case may
be, which have not been exercised and setting forth the proportionate part
of the Aggregate Warrant Price applicable to such Warrant Shares or
Conversion Shares, as the case may be. Upon surrender of this Warrant, the
Company will (i) issue a certificate or certificates in the name of the
Holder for the largest number of whole shares of the Preferred Stock (or
the Common Stock following the Conversion Date) to which the Holder shall
be entitled and, if this Warrant is exercised in whole, in lieu of any
fractional share of the Preferred Stock (or the Common Stock following the
Conversion Date) to which the Holder shall be entitled, pay to the Holder
cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the
Company shall determine), and (ii) deliver the other securities and
properties receivable upon the exercise of this Warrant, or the
proportionate part thereof if this Warrant is exercised in part, pursuant
to the provisions of this Warrant; provided, however that if this Warrant
is exercised pursuant to paragraph 1(a)(iii), the Company will issue but
shall not deliver such shares until such time as the promissory note and
all accrued interest thereon shall have been paid in full.
(c) If this Warrant is exercised on or after the date on which all shares of
Preferred Stock have been converted into shares of Common Stock (the
"Conversion Date"), then this Warrant shall be exercisable only for
Conversion Shares at the then applicable Per Share Warrant Price (including
any adjustment pursuant to Section 3(f) below).
2. RESERVATION OF WARRANT SHARES AND CONVERSION SHARES; LISTING. The Company
agrees that, prior to the expiration of this Warrant, the Company shall at all
times (a) have authorized and in reserve, and shall keep available, solely for
issuance and delivery upon the exercise of this Warrant, the shares of the
Preferred Stock and other securities and properties as from time to time shall
be receivable upon the exercise of this
-3-
<PAGE>
Warrant, free and clear of all restrictions on sale or transfer, other than
under Federal or state securities laws, and free and clear of all preemptive
rights and rights of first refusal and (b) have authorized and in reserve, and
shall keep available, solely for issuance or delivery upon conversion of the
Warrant Shares or the exercise of this Warrant for Conversion Shares, the shares
of Common Stock and other securities and properties as from time to time shall
be receivable upon such conversion, free and clear of all restrictions on sale
or transfer, other than under Federal or state securities laws, and free and
clear of all preemptive rights and rights of first refusal; and (c) if the
Company hereafter lists its Common Stock on any national securities exchange,
the Nasdaq National Market or the Nasdaq SmallCap Market, use its best efforts
to keep the Conversion Shares authorized for listing on such exchange upon
notice of issuance.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date of this Warrant, the
Company shall issue or distribute to the holders of shares of Preferred
Stock evidence of its indebtedness, any other securities of the Company or
any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of
Preferred Stock, referred to in Section 3(b), and also excluding cash
dividends or cash distributions paid out of net profits legally available
therefor in the full amount thereof (any such non-excluded event being
herein called a "SPECIAL DIVIDEND")), the Per Share Warrant Price shall be
adjusted by multiplying the Per Share Warrant Price then in effect by a
fraction, the numerator of which shall be the then Current Market Price Per
Share of the Preferred Stock in effect on the record date of such issuance
or distribution less the fair market value (as determined in good faith by
the Company's Board of Directors) of the evidence of indebtedness, cash,
securities or property, or other assets issued or distributed in such
Special Dividend applicable to one share of Preferred Stock and the
denominator of which shall be the then Current Market Price Per Share of
the Preferred Stock in effect on the record date of such issuance or
distribution. An adjustment made pursuant to this Subsection 3(a) shall
become effective immediately after the record date of any such Special
Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Preferred Stock, (ii)
subdivide its outstanding shares of Preferred Stock into a greater number
of shares, (iii) combine its outstanding shares of Preferred Stock into a
smaller number of shares or (iv) issue by reclassification of its Preferred
Stock any shares of capital stock of the Company (other than the Conversion
Shares), the Per Share Warrant Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Warrant Price and
the denominator of which shall be the number of shares of Preferred Stock
or other capital stock of the Company which he would have owned immediately
following such action had such Warrant been exercised immediately prior
thereto. An adjustment made pursuant to this Subsection 3(b) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or reclassification.
(c) Except as provided in Subsections 3(a) and 3(d), in case the Company shall
hereafter issue or sell any Preferred Stock, any securities convertible
into Preferred Stock, any rights, options or warrants to purchase Preferred
Stock or any securities
-4-
<PAGE>
convertible into Preferred Stock, in each case for a price per share or
entitling the holders thereof to purchase Preferred Stock at a price per
share (determined by dividing (i) the total amount, if any, received or
receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company
upon exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the
number of additional shares of Preferred Stock issued, sold or issuable
upon exercise or conversion of such securities) which is less than either
the then Current Market Price Per Share of the Preferred Stock in effect on
the date of such issuance or sale or the Per Share Warrant Price, the Per
Share Warrant Price shall be adjusted as of the date of such issuance or
sale by multiplying the Per Share Warrant Price then in effect by a
fraction, the numerator of which shall be (x) the sum of (A) the number of
shares of Preferred Stock outstanding on the record date of such issuance
or sale plus (B) the Total Consideration divided by the Current Market
Price Per Share of the Preferred Stock or the current Per Share Warrant
Price, whichever is greater, and the denominator of which shall be (y) the
number of shares of Preferred Stock outstanding on the record date of such
issuance or sale plus the maximum number of additional shares of Preferred
Stock issued, sold or issuable upon exercise or conversion of such
securities.
(d) No adjustment in the Per Share Warrant Price shall be required in the case
of the issuance by the Company of Preferred Stock (i) pursuant to the
exercise of any Warrant or (ii) pursuant to the exercise of any stock
options or warrants currently outstanding or securities issued after the
date hereof pursuant to any Company benefit plan.
(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger
or consolidation in which the Company is the continuing corporation, or in
case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as a entirety, or in the case of
any statutory exchange of securities with another corporation (including
any exchange effected in connection with a merger of a third corporation
into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount
of securities, cash or other property which the Holder would have owned or
have been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or
conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section 3 with respect to the rights and
interests thereafter of the Holder of this Warrant to the end that the
provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares
of stock or other securities or property thereafter deliverable on the
exercise of this Warrant. The above provisions of this Section 3(e) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, statutory exchanges, sales or conveyances. The
Company shall require the issuer of any shares of stock or other securities
or property thereafter deliverable on the exercise of this Warrant to be
responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification,
consolidation, merger, statutory exchange, sale or conveyance and of said
provisions so proposed to be made, shall be mailed to the Holders of the
Warrants not less than thirty (30) days prior to such event. A sale of all
or
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<PAGE>
substantially all of the assets of the Company for a consideration
consisting primarily of securities shall be deemed a consolidation or
merger for the foregoing purposes.
(f) Upon the Conversion Date, the Per Share Warrant Price shall be adjusted to
be equal to a fraction, the numerator of which shall be the Aggregate
Warrant Price and the denominator of which shall be the number of shares of
Common Stock or other capital stock of the Company which the Holder would
have owned immediately following such conversion had this Warrant been
exercised for Preferred Stock (assuming a cash exercise) immediately prior
thereto.
(g) No adjustment in the Per Share Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least $0.05 per
share of Preferred Stock; provided, however, that any adjustments which by
reason of this Subsection 3(g) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided,
further, however, that adjustments shall be required and made in accordance
with the provisions of this Section 3 (other than this Subsection 3(g)) not
later than such time as may be required in order to preserve the tax-free
nature of a distribution to the Holder of this Warrant or Preferred Stock
issuable upon the exercise hereof. All calculations under this Section 3
shall be made to the nearest cent or to the nearest 1/100th of a share, as
the case may be. Anything in this Section 3 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in
the Per Share Warrant Price, in addition to those required by this Section
3, as it in its discretion shall deem to be advisable in order that any
stock dividend, subdivision of shares or distribution of rights to purchase
stock or securities convertible or exchangeable for stock hereafter made by
the Company to its stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly prepare a
brief statement of the facts requiring such adjustment or modification and
the manner of computing the same and cause copies of such certificate to be
mailed to the Holders of the Warrants. The Company may, but shall not be
obligated to unless requested by a Majority of the Holders, obtain, at its
expense, a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors (who may be the
regular auditors of the Company) setting forth the Per Share Warrant Price
and the number of Warrant Shares or Conversion Shares, as the case may be,
after such adjustment or the effect of such modification, a brief statement
of the facts requiring such adjustment or modification and the manner of
computing the same and cause copies of such certificate to be mailed to the
Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Preferred Stock or Common Stock
other than a cash distribution out of earned surplus, the Company shall
mail notice thereof to the Holders of the Warrants not less than ten (10)
days prior to the record date fixed for determining stock holders entitled
to participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant to this Section 3, the
Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or
shares of Preferred Stock and other capital stock of the Company, the Board
of Directors (whose determination shall be conclusive and
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<PAGE>
shall be described in a written notice to the Holder of any Warrant
promptly after such adjustment) shall determine the allocation of the
adjusted Per Share Warrant Price between or among shares or such classes of
capital stock or shares of Preferred Stock and other capital stock.
(k) For purposes of the anti-dilution protection contained in this Section 3,
at all times following the conversion of all shares of Preferred Stock into
shares of Common Stock, the term Preferred Stock shall be read to be Common
Stock, context permitting, so that the anti-dilution provisions will
continue to protect the purchase rights represented by this Warrant after
the conversion of all the Preferred Stock into the Common Stock in
accordance with the essential intent and principles of this Section 3 (it
being understood that prior to such conversion, the anti-dilution
provisions of the Preferred Stock shall protect the Holder from dilution of
the Common Stock).
(l) Upon the expiration of any rights, options, warrants or conversion
privileges, if such shall not have been exercised, the number of Warrant
Shares purchasable upon exercise of this Warrant, to the extent this
Warrant has not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had they
been originally adjusted (or had the original adjustment not been required,
as the case may be) on the basis of (A) the fact that Preferred Stock, if
any, actually issued or sold upon the exercise of such rights, options,
warrants or conversion privileges, and (B) the fact that such shares of
Preferred Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the consideration, if any,
actually received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion privileges whether or not
exercised; provided, however, that no such readjustment shall have the
effect of decreasing the number of Conversion Shares purchasable upon
exercise of this Warrant by an amount in excess of the amount of the
adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion privileges.
4. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the Preferred
Stock represented by each and every certificate for Warrant Shares delivered on
the exercise of this Warrant and the shares of Common Stock delivered upon the
conversion of the Warrant Shares or the exercise of this Warrant following the
conversion of all shares of Preferred Stock into Common Stock, shall at the time
of such delivery, be validly issued and outstanding, fully paid and
nonassessable, and not subject to preemptive rights or rights of first refusal,
and the Company will take all such actions as may be necessary to assure that
the par value or stated value, if any, per share of the Preferred Stock and the
Common Stock is at all times equal to or less than the then Per Share Warrant
Price. The Company further covenants and agrees that it will pay, when due and
payable, any and all Federal and state stamp, original issue or similar taxes
which may be payable in respect of the issue of any Warrant Share, Conversion
Share or any certificate thereof to the extent required because of the issuance
by the Company of such security.
5. REGISTRATION UNDER SECURITIES ACT OF 1933.
(a) The Holder shall with respect to the Conversion Shares only, have the right
to participate in the registration rights granted to purchasers of
Preferred Stock pursuant to Article 5 of the subscription agreement (the
"Subscription Agreement") between such purchasers and the Company that were
entered into at the time of the initial sale of the Preferred Stock. By
acceptance of this
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<PAGE>
Warrant, the Holder agrees to comply with the provisions in Article 5 of
the Subscription Agreement to same extent as if it were a party thereto.
(b) Until all Conversion Shares have been sold under a Registration Statement
or pursuant to Rule 144, the Company shall use its reasonable best efforts
to file with the Securities and Exchange Commission all current reports and
the information as may be necessary to enable the Holder to effect sales of
its shares in reliance upon Rule 144 promulgated under the Act.
6. INVESTMENT INTENT; LIMITED TRANSFERABILITY.
(a) The Holder represents, by accepting this Warrant, that it understands that
this Option and any securities obtainable upon exercise of this Warrant or
upon conversion of such securities have not been registered for sale under
Federal or state securities laws and are being offered and sold to the
Holder pursuant to one or more exemptions from the registration
requirements of such securities laws. In the absence of an effective
registration of such securities or an exemption therefrom, any certificates
for such securities shall bear the legend set forth on the first page
hereof. The Holder understands that it must bear the economic risk of its
investment in this Warrant and any securities obtainable upon exercise of
this Warrant or upon conversion of such securities for an indefinite period
of time, as this Warrant and such securities have not been registered under
Federal or state securities laws and therefore cannot be sold unless
subsequently registered under such laws, unless an exemption from such
registration is available.
(b) The Holder, by his acceptance of its Warrant, represents to the Company
that it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant for its own account for investment
and not with a view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act of 1933, as amended (the "Act").
The Holder agrees that this Warrant and any such securities will not be
sold or otherwise transferred unless (i) a registration statement with
respect to such transfer is effective under the Act and any applicable
state securities laws or (ii) such sale or transfer is made pursuant to one
or more exemptions from the Act.
(c) This Warrant may not be sold, transferred, assigned or hypothecated for six
months from the date hereof except (i) to any firm or corporation that
succeeds to all or substantially all of the business of Paramount Capital,
Inc., (ii) to any of the officers, employees, associates or affiliated
companies of Paramount Capital, Inc., or of any such successor firm, (iii)
to any NASD member participating in the Offering or any officer or employee
of any such NASD member or (iv) in the case of an individual, pursuant to
such individual's last will and testament or the laws of descent and
distribution, and is so transferable only upon the books of the Company
which it shall cause to be maintained for such purpose. The Company may
treat the registered Holder of this Warrant as he or it appears on the
Company's books at any time as the Holder for all purposes. The Company
shall permit any Holder of an Warrant or its duly authorized attorney, upon
written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrant. All
Warrants issued upon the transfer or
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<PAGE>
assignment of this Warrant will be dated the same date as this Warrant, and
all rights of the holder thereof shall be identical to those of the Holder.
7. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and of indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. WARRANT HOLDER NOT STOCKHOLDER. This Warrant does not confer upon the Holder
any right to vote or to consent to or receive notice as a stockholder of the
Company, as such, in respect of any matters whatsoever, or any other rights or
liabilities as a stockholder, prior to the exercise hereof; this Warrant does,
however, require certain notices to Holders as set forth herein.
9. COMMUNICATION. No notice or other communication under this Warrant shall be
effective unless, but any notice or other communication shall be effective and
shall be deemed to have been given if, the same is in writing and is mailed by
first-class mail, postage prepaid, addressed to:
(a) the Company at Palatin Technologies, Inc., 214 Carnegie Center, Suite 100
Princeton, New Jersey 08540, Attn: President or such other address as the
Company has designated in writing to the Holder, or
(b) the Holder at c/o Paramount Capital Incorporated, 787 Seventh Avenue, New
York, NY 10019 or other such address as the Holder has designated in
writing to the Company.
10. HEADINGS. The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
11. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
12. AMENDMENT, WAIVER, ETC. Except as expressly provided herein, neither this
Warrant nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that any provisions hereof may be amended, waived, discharged or
terminated upon the written consent of the Company and the Majority of the
Holders.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary this [ ]TH day of [ ], 1997.
Company
By:
----------------------------------
Name: Edward J. Quilty
Title: President, Chief Executive Officer and
Chairman of the Board of Directors
ATTEST:
- -----------------------------
Secretary
[Corporate Seal]
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<PAGE>
SUBSCRIPTION (CASH)
The undersigned, ___________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Preferred Stock, par value $.01 stated value
$100.00 per share, of Palatin Technologies, Inc. covered by said Warrant, and
makes payment therefor in full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
SUBSCRIPTION (PROMISSORY NOTE)
The undersigned, __________________________, pursuant to the provisions of
the foregoing Warrant, hereby agrees to subscribe for and purchase
________________ shares of the Preferred Stock, par value $.01 stated value
$100.00 per share, of Palatin Technologies, Inc. covered by said Warrant, and
makes payment therefor in full at the price per share provided by said Warrant
by delivery of the attached Promissory Note. The undersigned hereby confirms the
representations and warranties made by it in the Warrant and in the attached
Promissory Note.
Dated:_______________ Signature:______________________
Address:________________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the provisions of the
foregoing Warrant, hereby elects to exchange its Warrant for ___________________
shares of Preferred Stock, par value $.01 stated value $100.00 per share, of
Palatin Technologies, Inc. pursuant to the Cashless Exercise provisions of the
Warrant.
Dated:_______________ Signature:_____________________
Address:_______________________
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
____________________ the foregoing Warrant and all rights evidenced thereby, and
does irrevocably constitute and appoint _____________________, attorney, to
transfer said Warrant on the books of Palatin Technologies, Inc.
Dated:_______________ Signature:____________________
Address:______________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and transfers unto
____________________ the right to purchase _______ shares of the Preferred
Stock, par value $.01 stated value $100.00 per share, of Palatin Technologies,
Inc. covered by the foregoing Warrant, and a proportionate part of said Warrant
and the rights evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of Palatin Technologies, Inc.
Dated:_______________ Signature:____________________
Address:______________________
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<PAGE>
[FORM]
PROMISSORY NOTE
$[ ] NEW YORK, NEW YORK
[ ]
[WARRANTHOLDER] ("Borrower"), for value received, hereby promises to pay to
the order of Palatin Technologies, Inc. (together with any such subsequent
holder of the Note, the "Holder") the sum of [ ]($ ), or such lesser amount as
shall then equal the outstanding principal amount hereof. Such amount shall be
due and payable on [insert last date Warrant may be exercised] (the "Maturity
Date"), together with interest thereon at a rate per annum equal to the prime
rate as stated by Citibank, N.A. as of the date hereof, (the "Interest Rate"),
and which shall be calculated on the basis of a 360-day year for actual days
elapsed, on the terms and conditions set forth hereinafter. Payment for all
amounts due hereunder shall be made by certified check or wire transfer to the
Holder at c/o Palatin Technologies, Inc., 214 Carnegie Center, Suite 100
Princeton, New Jersey 08540, Attn: [President], or other such address as the
Holder may designate by notice to Borrower. If this Promissory Note is prepaid
in whole or in part by the tendering of shares pursuant to Paragraph 2 below,
the repayment date shall be the date on which the Borrower delivers a notice to
the Company in accordance with Paragraph 4 irrevocably stating the Borrower's
intention to repay the Promissory Note by tendering such shares. The Borrower is
delivering this Promissory Note as payment of the exercise price for the
purchase of the shares of [common/preferred] stock (the "Stock") underlying the
Warrant dated November 9, 1997 (the "Warrant") issued to the Borrower. The
Promissory Note shall be secured by the Stock which the Holder shall hold in
safe-keeping as collateral for the indebtedness represented by this Promissory
Note.
1. Prepayment; Repayment. The Borrower may at any time prepay in whole or
in part the principal sum, plus accrued interest to date of payment, of this
Note, without penalty or premium. All sums paid hereon shall be applied first to
accrued, unpaid interest on this Note and the balance, if any, to the reduction
of the principal hereof. This Note shall not be due and payable until the
Maturity Date. On the Maturity Date, the entire principal amount of, and all
accrued interest on, this Note shall automatically become immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Company.
2. Prepayment or Repayment by Tendering of Shares. Any prepayment or
repayment may be made by instructing the Company to withhold that number of
shares of Stock currently held by the Company as collateral for this Promissory
Note in accordance with Paragraph 1(a)(iii) of the Warrant and having a value,
based upon the Market Price (as defined in the introductory paragraph of the
Warrant) of the Common Stock, equal to the outstanding principal sum plus
accrued interest. The Company will deliver the balance of the shares not
withheld pursuant to the immediately preceding sentence of this Paragraph 2 to
the Borrower at the address set forth in Paragraph 3 below within five (5) days
of the date of such prepayment or repayment, as the case may be.
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<PAGE>
3. Events of Default. If any events specified in this Paragraph 3 shall
occur and continue uncured for a period of 90 days following notice from the
lender such event has occurred(herein individually referred to as an "Event of
Default"), the Holder of the Note may, so long as such condition exists, declare
the entire principal and unpaid accrued interest hereon immediately due and
payable, by notice in writing to Borrower:
3.1. Default in the payment of the principal and unpaid accrued
interest of the Note when due and payable; or
3.2. The institution by Borrower of proceedings to be adjudicated as
bankrupt or insolvent, or the consent by Borrower to institution of
bankruptcy or insolvency proceedings against Borrower or the filing by
Borrower of a petition or answer or consent seeking reorganization or
release under the federal Bankruptcy Act, or any other applicable federal
or state law, or the consent by Borrower to the filing of any such petition
or the appointment of a receiver, liquidator, assignee, trustee or other
similar official for all or any substantial part of its property, of the
taking of any action by Borrower in furtherance of any such action; or
3.3. If, within sixty (60) days after the commencement of an action
against Borrower (and service of process in connection therewith on
Borrower) seeking any bankruptcy, insolvency, reorganization, liquidation
or similar relief under any present or future statute, law of regulation,
such action shall not have been resolved in favor of Borrower of all orders
or proceedings thereunder affecting the property of Borrower stayed, or if
the stay of any such order or proceeding shall thereafter be set aside, or
if, within sixty (60) days after the appointment without the consent or
acquiescence of Borrower of any trustee or receiver for all or any
substantial part of the property of Borrower, such appointment shall not
have been vacated
4. Notices. Any notice required, desired or permitted to be given hereunder
shall be in writing and shall be delivered personally, sent certified or
registered United States mail, return receipt requested or sent by overnight
courier service addressed to:
If to the Holder:
c/o Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, New Jersey 08540
Attn: President
If to Borrower:
[name and address]
Such notices shall be deemed given (i) if delivered personally, upon delivery,
(ii) if mailed as aforesaid, two (2) business days after deposit in the United
States mail and (iii) if sent by overnight courier service one (1) business day
after deposit with the courier service. Any party may change its address by
notice to the other parties.
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<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be issued this [ ]
day of [ ] 199[ ].
BORROWER:
Name:
Address:
-15-
[FORM OF FINANCIAL ADVISORY SERVICES AGREEMENT WARRANT]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
PALATIN TECHNOLOGIES, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK
NO. [ ] [ ] SHARES
FOR VALUE RECEIVED, PALATIN TECHNOLOGIES, INC., a Delaware corporation (the
"COMPANY"), hereby certifies that[ ], or his permitted assigns, is entitled to
purchase from the Company, at any time or from time to time commencing on
SEPTEMBER 1, 1996, and prior to 5:00 P.M., New York City time, on SEPTEMBER 1,
2001 (the "TERMINATION DATE"), [ ] fully paid and non-assessable shares of the
Common Stock, $.01 par value per share, of the Company (the "Common Stock") at
an exercise price equal to $[ ]. (Hereinafter, (i) said Common Stock, together
with any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "COMMON STOCK", (ii)
the shares of the Common Stock purchasable hereunder or under any other Warrant
(as hereinafter defined) are referred to as the "WARRANT SHARES", (iii) the
aggregate purchase price payable for the Warrant Shares hereunder is referred to
as the "AGGREGATE WARRANT PRICE", (iv) the price payable for each of the Warrant
Shares hereunder is referred to as the "PER SHARE WARRANT PRICE", (v) this
Warrant, all similar Warrants issued on the date hereof and all warrants
hereafter issued in exchange or substitution for this Warrant or such similar
Warrants are referred to as the "WARRANTS" and (vi) the holder of this Warrant
is referred to as the "HOLDER" and the holder of this Warrant and all other
Warrants or Warrant Shares issued upon the exercise of any Warrant are referred
to as the "HOLDERS"). The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided; in
the event of any such
1
<PAGE>
adjustment, the number of Warrant Shares shall be adjusted by dividing the
Aggregate Warrant Price by the Per Share Warrant Price in effect immediately
after such adjustment.
1. EXERCISE OF WARRANT.
(a) This Warrant may be exercised by the Holder, in whole at any time or in
part from time to time, commencing on September 1, 1996 and prior to the
Termination Date:
(i) by the surrender of this Warrant (with the subscription form at
the end hereof duly executed) at the address set forth in Subsection 10(a)
hereof, together with proper payment of the Aggregate Warrant Price, or the
proportionate part thereof if this Warrant is exer cised in part, with
payment for Warrant Shares made by certified or official bank check payable
to the order of the Company; or
(ii) by the surrender of this Warrant (with the cashless exercise form
at the end hereof duly executed) (a "CASHLESS EXERCISE") at the address set
forth in Subsection 10(a) hereof. Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in
part. In the event of a Cashless Exercise, the Holder shall exchange its
Warrant for that number of Warrant Shares subject to such Cashless Exercise
multiplied by a fraction, the numerator of which shall be the difference
between the then current Market Price per share (as hereinafter defined) of
Common Stock and the Per Share Warrant Price, and the denominator of which
shall be the then current Market Price per share of Common Stock. The then
current market price per share of the Common Stock at any date (the "MARKET
PRICE") shall be deemed to be the last sale price of the Common Stock on
the business day prior to the date of the Cashless Exercise or, in case no
such reported sales take place on such day, the average of the last
reported bid and asked prices of the Common Stock on such day, in either
case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to
trading on any such exchange, the representative closing bid price of the
Common Stock as reported by the NASDAQ Bulletin Board ("NASDAQ"), or other
similar organization if NASDAQ is no longer reporting such information, or
if not so available, the
2
<PAGE>
fair market price of the Common Stock as determined in good faith by the
Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised
for a number of whole shares of the Common Stock and the Holder is entitled to
receive a new Warrant covering the Warrant Shares which have not been exercised
and setting forth the proportionate part of the Aggregate Warrant Price
applicable to such Warrant Shares. Upon surrender of this Warrant, the Company
will (i) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, if any, or the proportionate part
thereof if this Warrant is exercised in part, pursuant to the provisions of this
Warrant.
2. RESERVATION OF WARRANT SHARES; LISTING. The Company agrees that, prior
to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer, except for the restrictions on sale or transfer set forth in the
Securities Act of 1933, as amended (the "Act"), and restrictions created by or
on behalf of the Holder, and free and clear of all preemptive rights and rights
of first refusal and (b) when the Company prepares and files a registration
statement covering the shares of Common Stock issued or issuable upon exercise
of this Warrant with the Securities and Exchange Commission (the "SEC") which
registration statement is declared effective by the SEC under the Act and the
Company lists its Common Stock on any national securities exchange or other
quotation system, it will use its reasonable best efforts to cause the shares of
Common Stock subject to this Warrant to be listed on such exchange or quotation
system.
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<PAGE>
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date of issuance of this
Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidence of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(b), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor in the full
amount thereof, which together with the value of other dividends and
distributions made substantially concurrently therewith or pursuant to a plan
which includes payment thereof, is equivalent to not more than 5% of the
Company's net worth) (any such non-excluded event being herein called a "SPECIAL
DIVIDEND"), the Per Share Warrant Price shall be adjusted by multiplying the Per
Share Warrant Price then in effect by a fraction, the numerator of which shall
be the then current Market Price of the Common Stock less the fair market value
(as determined in good faith by the Company's Board of Directors) of the
evidence of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current Market Price of the
Common Stock. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date of any such Special Dividend.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock into a greater number of shares, (iii)
combine its outstanding shares of Common Stock into a smaller number of shares
or (iv) issue by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be adjusted to be equal
to a fraction, the numerator of which shall be the Aggregate Warrant Price and
the denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company which the Holder would have owned immediately
following such action had such Warrant been exercised immediately prior thereto.
An adjustment made pursuant to this Subsection 3(b) shall become effective
immediately after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
4
<PAGE>
(c) Except as provided in subsections 3(a) and 3(d), in case the Company
shall hereafter issue or sell any Common Stock, any securities convertible into
Common Stock or any rights, options or warrants to purchase Common Stock or
securities convertible into Common Stock, other than an offering of securities
for which Paramount Capital, Inc. serves as placement agent initiated within 180
days following September 1, 1996 (the "Private Placement"), in each case for a
price per share or entitling the holders thereof to purchase Common Stock at a
price per share (determined by dividing (i) the total amount, if any, received
or receivable by the Company in consideration of the issuance or sale of such
securities plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of
additional shares of Common Stock issued, sold or issuable upon exercise or
conversion of such securities) less than the then current Market Price of the
Common Stock or the current Per Share Warrant Price in effect on the date of
such issuance or sale, the Per Share Warrant Price shall be adjusted by
multiplying the Per Share Warrant Price then in effect by a fraction, the
numerator of which shall be (x) the sum of (A) the number of shares of Common
Stock outstanding on the record date of such issuance or sale plus (B) the Total
Consideration divided by either the current Market Price of the Common Stock or
the current Per Share Warrant Price, whichever is greater, and the denominator
of which shall be (y) the number of shares of Common Stock outstanding on the
record date of such issuance or sale plus the maximum number of additional
shares of Common Stock issued, sold or issuable upon exercise or conversion of
such securities.
(d) Except as otherwise provided herein, no adjustment in the Per Share
Warrant Price shall be required in the case of the issuance by the Company of
(i) Common Stock pursuant to the exercise or conversion of any Warrant or any
other options, warrants or any convertible securities currently outstanding or
outstanding as a result of securities hereafter issued; provided, that the
exercise price or conversion price at which such securities are exercised or
converted, as the case may be, is equal to the exercise price or conversion
price in effect as of the date of this Warrant or as of the date of issuance
with respect to securities hereafter issued (except for standard anti-dilution
adjustments) and (ii) shares of Common Stock issued or sold pursuant to stock
purchase or stock option plans or other similar arrangements that are approved
by the Company's Board of Directors.
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(e) In case of any capital reorganization or reclassification, or any
consolidation or merger to which the Company is a party other than a merger or
consolidation in which the Company is the continuing corporation, or in case of
any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter cor respondingly be made applicable, as nearly as may
reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the exercise of this Warrant. The above
provisions of this subsection 3(e) shall similarly apply to successive
reorganizations, reclassifica tions, consolidations, mergers, statutory
exchanges, sales or conveyances. The issuer of any shares of stock or other
securities or property thereafter deliverable on the exercise of this Warrant
shall be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Warrants not less
than 30 days prior to such event. A sale of all or substantially all of the
assets of the Company for a consideration consisting primarily of securities
shall be deemed a consolidation or merger for the foregoing purposes.
(f) In case any event shall occur as to which the other provisions of this
Section 3 are not strictly applicable but as to which the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles hereof then, in
each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent
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public accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
Holder of this Warrant and shall make the adjustments described therein. The
fees and expenses of such independent public accountants shall be borne by the
Company.
(g) No adjustment in the Per Share Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this Subsection 3(g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 3 shall be made to the nearest cent or to the nearest 1/100th of a
share, as the case may be. Anything in this Section 3 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Per Share Warrant Price, in addition to those required by this Section 3, as it
in its discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
stockholders shall not be taxable.
(h) Whenever the Per Share Warrant Price is adjusted as provided in this
Section 3 and upon any modifi cation of the rights of a Holder of Warrants in
accordance with this Section 3, the Chief Financial Officer of the Company shall
promptly prepare a certificate setting forth the Per Share Warrant Price and the
number of Warrant Shares after such adjustment or the effect of such
modification and a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holders of the Warrants.
(i) If the Board of Directors of the Company shall declare any dividend or
other distribution with respect to the Common Stock, the Company shall mail
notice thereof to the Holders of the Warrants not less than fifteen (15) days
prior to the record date fixed for determining stockholders entitled to
participate in such dividend or other distribution.
(j) If, as a result of an adjustment made pursuant
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to this Section 3, the Holder of any Warrant thereafter surrendered for exercise
shall become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Warrant Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. REDEMPTION. At any time after September 1, 1996, this Warrant shall be
redeemable at the Company's option upon forty five (45) days notice to the
Holder, for $.05 per Warrant Share, if the closing price of the Common Stock of
the Company shall exceed three hundred percent (300%) (as reported on the Nasdaq
Small Cap Market) of the Exercise Price of this Warrant for twenty (20)
consecutive trading days ending ten (10) days prior to the date of notice of
redemption.
5. FULLY PAID STOCK; TAXES. The Company agrees that the shares of the
Common Stock represented by each and every certificate of Warrant Shares
delivered on the exercise of this Warrant be validly issued and outstanding,
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or any certificate thereof.
6. REGISTRATION UNDER SECURITIES ACT OF 1933.
(a) The shares of Common Stock underlying the Warrants (the "Conversion
Shares") shall be included in the registration statement filed in connection
with the Private Placement or, if no such registration statement is filed or
becomes effective, in the next registration statement (the "Registration
Statement") filed by the Company in which these shares can legally be included
(i.e. excluding registrations on Form S-4, S-8 or any other limited purpose
form).
(b) Until all Warrant Shares have been sold under a Registration Statement
or pursuant to Rule 144, the Company
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shall use its reasonable best efforts to file with the Securities and Exchange
Commission all current reports and the information as may be necessary to enable
the Holder to effect sales of its shares in reliance upon Rule 144 promulgated
under the Act.
7. LIMITED TRANSFERABILITY. This Warrant may not be sold, transferred,
assigned or hypothecated by the Holder except in compliance with the provisions
of the Act and the applicable state securities "blue sky" laws. The Company may
treat the registered Holder of this Warrant as he or it appears on the Company's
books at any time as the Holder for all purposes. The Company shall permit any
Holder of a Warrant or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants. All warrants issued upon the
transfer or assignment of this Warrant will be dated the same date as this
Warrant, and all rights of the holder thereof shall be identical to those of the
Holder.
8. LOSS, ETC., OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
9. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a stockholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a stockholder, prior
to the exercise hereof.
10. MODIFICATION. This Agreement may not be modified, amended or waived in
any manner except by an instrument in writing signed by the Holder. The waiver
by either party of compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of such party of a provision
of this Agreement.
11. COMMUNICATION. No notice or other communi cation under this Warrant
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is
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mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 214 Carnegie Center, Suite 100, Princeton, N.J., 08540,
Attention: President or other address as the Company has designated in writing
to the Holder; or
(b) the Holder at c/o Paramount Capital, Inc., 787 Seventh Avenue, 48th
Floor, New York, NY, 10019, Attn: Timothy McInerney or other such address as the
Holder has designated in writing to the Company.
12. HEADINGS. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
13. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflicts of law thereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
President and its corporate seal to be hereunto affixed and attested by its
Secretary this 1ST day of SEPTEMBER, 1996.
PALATIN TECHNOLOGIES, INC.
By: _______________________________
Name: Edward J. Quilty
Title: President
ATTEST:
- -------------------------------
Secretary
[Corporate Seal]
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SUBSCRIPTION
The undersigned, ___________________, pursuant to the provisions
of the foregoing Warrant, hereby agrees to subscribe for and purchase
____________________ shares of the Common Stock, par value $.01 per share, of
Palatin Technologies, Inc. covered by said Warrant, and makes payment therefor
in full at the price per share provided by said Warrant.
Dated:_______________ Signature:____________________
Address:______________________
CASHLESS EXERCISE
The undersigned ___________________, pursuant to the provisions
of the foregoing Warrant, hereby elects to exchange its Warrant for
___________________ shares of Common Stock, par value $.01 per share, of Palatin
Technologies, Inc. pursuant to the Cashless Exercise provisions of the Warrant.
Dated:_______________ Signature:____________________
Address:______________________
ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby sells, assigns and
transfers unto ____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_____________________, attorney, to transfer said Warrant on the books of
Palatin Technologies, Inc.
Dated:_______________ Signature:____________________
Address:______________________
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PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________ hereby assigns and transfers
unto ____________________ the right to purchase _______ shares of the Common
Stock, par value $.01 per share, of Palatin Technologies, Inc. covered by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
____________________, attorney, to transfer that part of said Warrant on the
books of Palatin Technologies, Inc.
Dated:_______________ Signature:____________________
Address:______________________
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated August 20, 1997
included in Palatin Technologies, Inc.'s Form 10-KSB for the year ended June 30,
1997 and to all reference to our Firm included in this Registration Statement
File No. 333-33569.
Philadelphia, PA
November 24, 1997
