Pursuant to Rule 424(b)(3)
File No. 333-33569
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, 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."
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THE REGISTERED SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
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CONTINUATION OF FRONT COVER
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.
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THE DATE OF THIS PROSPECTUS IS DECEMBER 12, 1997
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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 Quarterly Report on Form 10-QSB for the three
months ended September 30, 1997, as filed with the Commission on
November 14, 1997;
2. 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; and
3. 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.
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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.
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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 is the Company's first proposed product to enter
Company-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
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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
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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
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to the Company's specifications, with images obtained in osteomyelitis and soft
tissue infections. The Company has filed an IND on LeuTech with the FDA in the
Company's name and has 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 clinical trials to proceed as planned,
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, and has initiated 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.
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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
commercially 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
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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 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
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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 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
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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 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
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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.
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 clinical trials to proceed as planned, 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
commercially 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
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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.
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.
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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 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
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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 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
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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
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
1,007,124 shares of Common Stock, are outstanding, at prices ranging from $.20
to $360.00 per share, with an average weighted price of $8.00 per share as to
options outstanding at June 30, 1997. 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
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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 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 as of
the date of this Prospectus 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 will result in the
issuance of additional shares of Common Stock, including some or all of the
Contingent Shares, and will 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. On December 9, 1997, the
parties entered into a stipulated judgment awarding the plaintiffs $250,000 and
dismissing the counterclaims. The judgment is conditioned upon the affirmance by
the appellate division of a ruling adverse to the plaintiffs by the trial court.
In the event of a reversal of that ruling the case will proceed to trial on both
the claims and counterclaims. 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.
On December 4, 1997, the Board of Directors of the Company approved the
granting of stock options to purchase an aggregate of 148,392 shares of Common
Stock at an exercise price of $1.00 per share (the "New Options") in replacement
of existing options, which New Options are subject to stockholder approval at
the next annual meeting of stockholders. If approved by the stockholders, the
granting of the New Options would result in anti-dilution adjustment of certain
warrants and a decrease in the conversion price of the Series A Convertible
Preferred Stock.
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
15
<PAGE>
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 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 of
Common Stock, 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 of Common Stock, 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 of Common Stock, 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
of Common Stock, 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 of Common Stock, 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 of Common Stock, and which expire May
9, 2002 and contain cashless exercise, redemption and anti-dilution provisions.
As of the date of this
16
<PAGE>
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) 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 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 Profit 2,016 2,016 2,016 0 *
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.
Angelastro, 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 *
</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>
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 (4) 106,768 0 63,910 42,858 *
Birbrower, Barry, P.C. Profit Sharing 5,040 5,040 5,040 0 *
Trust
Blake, Simon A. & Nadine 1,008 1,008 1,008 0 *
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 Growth 20,161 20,161 20,161 0 *
Fund
Cassidy, Thomas L., IRA Rollover 10,080 10,080 10,080 0 *
Chanin, Richard B., IRA f/b/o, DLJSC 10,080 10,080 10,080 0 *
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. for 5,040 5,040 5,040 0 *
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 *
</TABLE>
- ------------------------------------
* indicates less than one percent
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>
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, L.P. 302,419 302,419 302,419 0 *
Fund III
Fabiani, Joseph A. and Theresa M. 3,456 0 3,456 0 *
Fabiani, JTWROS
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, Malcolm 3,456 0 3,456 0 *
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 *
</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>
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 *
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, Netherlands 40,322 40,322 40,322 0 *
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 Fund 5,040 5,040 5,040 0 *
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 *
</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>
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. for 5,040 5,040 5,040 0 *
IRA
Lazar, Ronald M. and Barbra A. Lazar, 576 0 576 0 *
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-Ttee, 5,040 5,040 5,040 0 *
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 Beheer 5,040 5,040 5,040 0 *
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 R. 5,040 5,040 5,040 0 *
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 *
</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>
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 *
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 Plan 5,040 5,040 5,040 0 *
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. Custodian, 5,040 5,040 5,040 0 *
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 *
</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>
Richmond, Michael 8,064 8,064 8,064 0 *
RL Capital Partners 17,424 15,120 17,424 0 *
Rodriguez Perez, Raimundo & Anelies 10,080 10,080 10,080 0 *
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 Polak, 5,040 5,040 5,040 0 *
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 Limited 20,161 20,161 20,161 0 *
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., Trust 5,040 5,040 5,040 0 *
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 B. 3,456 0 3,456 0 *
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 *
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 *
</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>
Zuck, Vilma B., Irrevocable Trust FBO 5,040 5,040 5,040 0 *
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 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
25
<PAGE>
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 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.
26
<PAGE>
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>
- --------------------------------------------------------------------------------
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.........................26
Legal Matters..........................................................27
Experts................................................................27
Table of Contents.............................................Outside Back Cover
--------------------------------------------
6,634,432
COMMON STOCK
[GRAPHIC OMITTED]
PALATIN TECHNOLOGIES, INC.
--------------------------------------------
PROSPECTUS
--------------------------------------------
