As filed with the Securities and Exchange Commission on June 11, 1998
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PALATIN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4078884
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
214 CARNEGIE CENTER, SUITE 100
PRINCETON, NJ 08540
(609) 520-1911
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
COPY TO:
EDWARD J. QUILTY, CHAIRMAN OF THE BOARD, FAITH L. CHARLES
PRESIDENT AND CHIEF EXECUTIVE OFFICER RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
214 CARNEGIE CENTER, SUITE 100 30 ROCKEFELLER PLAZA, 29TH FLOOR
PRINCETON, NJ 08540 NEW YORK, NY 10112
(609) 520-1911 (212) 698-7700
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
-----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time to
time, following the effective date of this registration statement.
<PAGE>
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each
class of Proposed Proposed maximum
securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per share (1) price (1) registration fee
---------------- ------------ ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Common Stock 686,362 Shares $6.46875 $4,439,904 $1,309.77
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, and based on
the average of the high and low prices of the registrant's common stock
reported on The Nasdaq SmallCap Market(sm) on June 8, 1998.
Also includes an indeterminate number of shares of Common Stock that may become
issuable to prevent dilution resulting from stock splits, stock dividends and
conversion price or exercise price adjustments, which are included pursuant to
Rule 416 under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Subject to Completion, dated June 11, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
[GRAPHIC OMITTED]
PALATIN TECHNOLOGIES, INC.
686,362 SHARES OF COMMON STOCK
This Prospectus relates to the offering (the "Offering") of up to
686,362 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 343,180 shares of
Common Stock issuable on conversion of 18,875 shares of the Company's Series B
Convertible Preferred Stock, $.01 par value per share ("Series B Convertible
Preferred Stock") at the current conversion price of Series B Convertible
Preferred Stock; and (ii) up to 343,182 shares of Common Stock issuable upon
adjustment in the conversion price of Series B Convertible Preferred Stock (the
"Contingent Shares") (see "Description of Securities"). 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
June 8, 1998, the last sale price of Common Stock as reported on the Nasdaq
SmallCap was $6.5625.
Selling Stockholders may, without limitation or 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. The Company will receive no proceeds from the sale of the
Registered Shares. 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 bear all expenses,
estimated at $55,000, relating to this registration of the Registered Shares
including, without limitation, registration and filing fees, printing expenses,
fees and expenses of counsel for the Company, qualification or exemption of the
Registered Shares under state securities laws, and up to $5,000 in fees and
expenses for one law firm acting as counsel to the Selling Stockholders.
See "Use of Proceeds" and "Plan of Distribution."
-----------------------------
THE REGISTERED SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
<PAGE>
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------------------
THE DATE OF THIS PROSPECTUS IS _______ __, 1998
<PAGE>
[INSIDE FRONT COVER PAGE OF PROSPECTUS ]
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
accordingly files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). All such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington D.C. 20549, and at its Regional Offices at Seven World Trade Center,
13th Floor, New York, NY 10048, and at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, IL 60661-2511. The Company is an electronic filer,
and the Commission maintains a Web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The Common Stock
is listed on the Nasdaq SmallCap, and reports, proxy statements and other
information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc. at 1735 K Street, N.W., Washington D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 filed by the Company with the Commission under the Securities Act of 1933,
as amended (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 nine months
ended March 31, 1998, as filed with the Commission on May 14,
1998;
2. The Company's Report on Form 8-K dated April 28, 1998, as filed
with the Commission on May 8, 1998;
3. The Company's Quarterly Report on Form 10-QSB for the six months
ended December 31, 1997, as filed with the Commission on February
13, 1998;
4. 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;
5. 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
6. 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.
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
<PAGE>
or replaces such statement. Any statement so modified or superseded shall not be
deemed, in its unmodified form, to constitute a part of this Prospectus or such
Registration Statement.
The Company will provide without charge to each person to whom a
Prospectus is delivered, upon written or oral request of such person, a copy of
any of the information that was incorporated by reference in this Prospectus
(not including exhibits to the information that is incorporated by reference
unless the exhibits are themselves specifically incorporated by reference). The
address and telephone number to which such request is to be directed are:
Stephen T. Wills, Vice President, Palatin Technologies, Inc., 214 Carnegie
Center, Suite 100, Princeton, NJ 08540, telephone (609) 520-1911.
-----------------------------
<PAGE>
BUSINESS SUMMARY
The following summary should be read in conjunction with, and is
qualified in its entirety by, the more detailed information, including "Risk
Factors," and financial statements appearing elsewhere or incorporated by
reference in this Prospectus.
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: delays in product development; problems or delays with clinical
trials; failure to receive or delays in receiving regulatory approval; lack of
enforceability of patents and proprietary rights; lack of reimbursement; general
economic and business conditions; industry capacity; industry trends;
competition; material costs and availability; changes in business strategy or
development plans; quality of management; availability, terms and deployment of
capital; business abilities and judgment of personnel; availability of qualified
personnel; changes in, or the failure to comply with, government regulations;
and other factors referenced in this Prospectus. When used in this Prospectus,
statements that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"anticipates," "plans," "intends," "expects" and similar expressions are
intended to identify such forward-looking statements. Readers are cautioned not
to place undue reliance on these forward-looking statements, which speak only as
of the date of this Prospectus. The Company undertakes no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
THE COMPANY
The Company is a development-stage biopharmaceutical company dedicated
to developing and commercializing products and technologies for diagnostic
imaging and ethical drug development utilizing peptide, monoclonal antibody and
radiopharmaceutical technologies. The Company is concentrating on the following
products and technologies: (i) LeuTech(TM), an infection and inflammation
imaging product, (ii) PT-14, a peptide hormone product for the treatment of
sexual dysfunction, and (iii) its patent-pending Metal Ion-induced Distinctive
Array of Structures ("MIDAS(TM)") metallopeptide technology.
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 intends to
devote substantial efforts and resources to the development of PT-14.
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 at an early stage of development and has not yet
completed the development of any products. Accordingly, the Company has not
begun to market or generate revenues from the commercialization of any 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
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
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<PAGE>
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.
PRODUCTS IN DEVELOPMENT
LeuTech Diagnostic Imaging Product. LeuTech, a proposed product under
development that utilizes the Company's 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.
The Company has submitted an Investigational New Drug Application
("IND") to the United States Food and Drug Administration ("FDA") on LeuTech,
and has completed a Phase I clinical trial of ten normal volunteers testing
safety of the drug and has completed enrollment for a Phase II clinical trial
for diagnosis of equivocal appendicitis. Additional clinical trials were
conducted under an IND submitted to the FDA and held in the name of an
investigator, using purified antibody or kits provided by the Company. Images
have been obtained in a variety of diseases, including acute and suspected
appendicitis, pulmonary infections and other abdominal infections. 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.
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
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<PAGE>
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 intends to complete Phase III clinical trials in early 1999
and file regulatory applications to market thereafter. 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-14 Male Erectile Dysfunction Product. PT-14, a stabilized peptide
analog of the natural hormone alpha-MSH, is a proposed product being developed
by the Company for the treatment of male erectile dysfunction ("MED"). PT-14 is
believed to activate specific receptors found in the brain, resulting in
stimulation of normal sexual arousal. This mechanism of action is believed to be
different than that of other products currently being marketed for the treatment
of MED. In addition to its potential use for treatment of MED, the Company
believes PT-14 may also be useful for the treatment of female sexual
dysfunction.
In a recent study, the National Institutes of Health estimated that
greater than 20,000,000 men in the United States may be afflicted with some form
of MED. Because of the large number of men believed to be afflicted with MED,
the market for treatment of MED is believed to be in excess of several billion
dollars per year. There is tremendous competition to develop and market drugs
for treatment of MED.
Limited clinical trials were conducted using PT-14 under an IND
submitted to the FDA and held in the name of an investigator at the University
of Arizona. In a double-blind clinical trial, eight out of ten men achieved
clinically significant erectile response on administration of PT-14.
PT-14 is currently administered as a non-penile subcutaneous injection.
The Company has initiated development efforts on an oral delivery formulation of
PT-14, and has entered into an agreement with TheraTech, Inc. ("TheraTech"),
including a license to certain patents owned by TheraTech, to collaboratively
develop an oral transmucosal delivery system for PT-14. There can be no
assurance that the Company and TheraTech will be able to develop an acceptable
oral transmucosal delivery system for PT-14, or any alternative oral delivery
system, in any reasonable period of time or at acceptable costs, if at all. If
an acceptable delivery system is developed, failure to meet performance criteria
or any other event of default under the license agreement leading to termination
of the license with TheraTech may have a material adverse effect on the Company.
The Company has entered into an exclusive royalty-bearing license
agreement with Competitive Technologies, Inc. ("Competitive Technologies") to
develop and market PT-14. 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 Competitive Technologies may have a
material adverse effect on the Company.
There can be no assurance that the Company's PT-14 development program
will be successful, that PT-14 will prove to be safe and efficacious in clinical
trials, or that PT-14 will obtain required regulatory approvals. There can be no
assurance that, even if the Company is successful in receiving FDA market
approval for PT-14, the Company or its collaborators will be able to
successfully compete in the MED market. In addition, the Company or its
collaborators may encounter problems and delays relating to research and
development, regulatory approval, manufacturing and marketing of PT-14.
Research on Other Products. The Company is engaged in limited research
and development work on other products, including PT-5, a rhenium-labeled
somatostatin peptide analog intended to treat cancers by regional delivery
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<PAGE>
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 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. 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. No prediction can be made as to when or
whether the PT-5 research project, or other research projects of the Company,
will lead to commercial 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 an infection
imaging agent and therapeutic agent for eating disorders. 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
intends 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 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
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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.
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. Accordingly, the Company
has not begun to market or generate revenues from the commercialization of any
products. It will be a number of years, if ever, before the Company will
recognize significant revenues from product sales or royalties. The Company's
technologies and products under development will require significant
time-consuming and costly research, development, preclinical studies, clinical
testing, regulatory approval and significant additional investment prior to
their commercialization, which may never occur. There can be no assurance that
the Company's research and development programs will be successful, that its
products will exhibit the expected biological results in humans, that its
products will prove to be safe and efficacious, that its products will obtain
the required regulatory approvals, demonstrate substantial therapeutic or
diagnostic benefit, be commercialized on a timely basis, experience no design or
manufacturing problems, be manufactured on a large scale, or be economical to
market, or that the Company or its collaborators will be successful in obtaining
market acceptance of any of the Company's products or generate sufficient
revenue to support research and development programs. There can be no assurance
that the Company will be successful in entering into strategic alliances or
collaborative arrangements on commercially reasonable terms, if at all, that
such arrangements will be successful, or that the parties with which the Company
will establish arrangements will perform their obligations under such
arrangements. The Company or its collaborators may encounter problems and delays
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
March 31, 1998, had an accumulated deficit of approximately $20.0 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 manufacturing efforts and clinical trials on its LeuTech
product, initiates its PT-14 development program and continues its efforts to
develop its MIDAS 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.
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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
through May 1999. The Company expects that its existing capital resources will
be adequate to make scheduled debt payments and to fund its operations through
September 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. 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
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of the interference, subject the Company to significant liabilities to third
parties and require the Company to obtain license rights from third parties at
undetermined cost or to cease using the technology.
While no valid patent that would be infringed by manufacture, use or
sale of the Company's proposed products has come to the attention of the
Company, the Company's proposed products are still in the development stage, and
neither their formulations nor their method of manufacture is finalized.
Moreover, patents the claims of which would be infringed by the Company's
commercial activities may not have issued as yet. There can thus be no assurance
that the manufacture, use or sale of the Company's proposed products will not
infringe patent rights of others. The Company may be unable to avoid
infringement of any such patents and may have to seek a license, defend an
infringement action, or challenge the validity of such patents in court. There
can be no assurance that a license will be available to the Company, if at all,
upon terms and conditions acceptable to the Company or that the Company will
prevail in any patent litigation. Patent litigation is costly and time
consuming, and there can be no assurance that the Company will have sufficient
resources to pursue such litigation. If the Company does not obtain a license
under any such patents, is found liable for infringement, or is not able to have
them declared invalid, the Company may be liable for significant money damages,
may encounter significant delays in bringing products to market, or may be
precluded from participating in the manufacture, use or sale of products or
methods of treatment covered by such patents.
The Company relies substantially in its product development activities
on certain technologies which are neither patentable nor proprietary and are
therefore potentially available to the Company's competitors. The Company also
relies on certain proprietary technologies (trade secrets and know-how) which
are not patentable. Although the Company has taken steps to protect its
unpatented trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
contractors, there can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed or discovered by competitors. If the Company's employees, scientific
consultants or collaborators develop inventions or processes independently that
may be applicable to the Company's product candidates, disputes may arise about
ownership of proprietary rights to those inventions and processes. Such
inventions and processes will not necessarily become the Company's property, but
may remain the property of those persons or their employers. Protracted and
costly 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 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
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arrangements as to other steps and components required to manufacture LeuTech.
Such manufacture must be done under GMP requirements prescribed by the FDA and
other governmental agencies. To date, the Company has only manufactured LeuTech
in lots preparatory to initiating clinical trial use, with certain manufacturing
processes having been done under GMP, and has not determined whether commercial
quantities of LeuTech in conformity with these standards can be manufactured on
a sustained basis at an acceptable cost.
While the Company has filed an IND on LeuTech with the FDA, and intends
to complete Phase III clinical trials in early 1999 and file regulatory
applications to market with the FDA thereafter, 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-14. The Company has entered into an
exclusive royalty-bearing license agreement with Competitive Technologies to
develop and market PT-14. 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 Competitive Technologies may have a
material adverse effect on the Company. The Company has entered into an
agreement with TheraTech, including a license to certain patents owned by
TheraTech, to collaboratively develop an oral transmucosal delivery system for
PT-14. There can be no assurance that the Company and TheraTech will be able to
develop an acceptable oral transmucosal delivery system for PT-14, or any
alternative delivery system, in any reasonable period of time or for acceptable
costs, if at all.
There can be no assurance that the Company's PT-14 development program
will be successful, that PT-14 will prove to be safe and efficacious in clinical
trials, that PT-14 will obtain required regulatory approvals or that the Company
or its collaborators will be successful in obtaining market acceptance of PT-14.
In addition, the Company or its collaborators may encounter problems and delays
relating to research and development, regulatory approval, manufacturing and
marketing of PT-14.
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 an infection imaging agent and a therapeutic agent
for eating disorders, 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.
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GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL. Research,
development, testing, clinical trials, manufacture, distribution, advertising
and marketing, including distribution and sale, of pharmaceutical products are
subject to extensive regulation by governmental authorities in the United States
and other countries. Prior to marketing, proposed products developed by the
Company must undergo an extensive regulatory approval process required by the
FDA and by comparable agencies in other countries. This process, which includes
preclinical studies and clinical trials of each proposed product to establish
safety and effectiveness and confirmation by the FDA that good laboratory,
clinical and manufacturing practices were maintained during testing and
manufacturing, can take many years, requires the expenditure of substantial
resources and gives larger companies with greater financial resources a
competitive advantage over the Company. To date, no proposed product being
evaluated by the Company has been submitted for approval or approved by the FDA
or any other regulatory authority for marketing, and there can be no assurance
that any such product will ever be submitted or approved for marketing or that
the Company will be able to obtain the labeling claims desired for its products.
The Company is and will continue to be dependent upon the laboratories and
medical institutions conducting its preclinical studies and clinical trials to
maintain both good laboratory and good clinical practices. Data obtained from
preclinical studies and clinical trials are subject to varying interpretations
which could delay, limit or prevent FDA regulatory approval. Delays or
rejections may be encountered based upon changes in FDA policy for drug approval
during the period of development and FDA regulatory review. Similar delays also
may be encountered in foreign countries.
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 limited experience in conducting
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clinical trials. The Company relies, in part, on third parties for preparation
of regulatory filings and the design of clinical trials. There can be no
assurance that the Company will be able to find appropriate third parties to
provide services relating to clinical trials.
A number of companies in the biotechnology and pharmaceutical industries
have suffered significant setbacks in clinical trials, even after showing
promising results in earlier studies or trials. There can be no assurance that
the Company will not encounter problems in its clinical trials that will cause
the Company to delay or suspend its clinical trials, that the clinical trials of
its proposed products will be completed at all, that such testing will
ultimately demonstrate the safety or efficacy of such proposed products or that
any proposed products will receive regulatory approval on a timely basis, if at
all. If any such problems occur, there would be a material adverse effect on the
Company.
LIMITED MARKETING, DISTRIBUTION OR SALES CAPABILITY AND EXPERIENCE. The
Company has limited experience in marketing pharmaceutical products, including
distribution and selling of pharmaceutical products, and will have to develop a
sales force and/or rely on collaborators or licensees or on arrangements with
others to provide for the marketing, distribution, and sales of its proposed
products. There can be no assurance that the Company will be able 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. In the development of
products to treat MED, there are many companies that are commercializing such
products or that have programs to develop products to treat MED. The Company is
likely to encounter significant competition with respect to its proposed
products currently under development. Many of the Company's competitors,
including those developing antibody- and peptide-based radiopharmaceutical
products, peptide-based therapeutic products and products for the treatment of
MED, have substantially 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 at least three products
developed by other companies for the treatment of MED that have obtained FDA
marketing approval, and is aware of additional products that are at a later
stage of development than PT-14. There can be no assurance that, even if the
Company is successful in receiving FDA market approval for PT-14, the Company or
its collaborators will be able to successfully compete in the MED market. The
Company is also 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.
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The Company is pursuing areas of product development in which there is
the potential for extensive technological innovation in relatively short periods
of time. Rapid technological change or developments by others may result in the
Company's proposed products becoming obsolete or non-competitive.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT. Successful sales of the
Company's proposed products in the United States and other countries will depend
on the availability of adequate reimbursement from third-party payors such as
governmental entities, managed care organizations and private insurance plans.
Reimbursement by a third-party payor may depend on a number of factors,
including the payor's determination that use of a product is safe and
efficacious, neither experimental nor investigational, medically necessary,
appropriate for the specific patient and cost effective. Since reimbursement
approval is required from each payor individually, seeking such approvals is a
time-consuming and costly process. Third-party payors routinely limit
reimbursement coverage and in many instances are exerting significant pressure
on medical suppliers to lower their prices. There is significant uncertainty
concerning third-party reimbursement for the use of any pharmaceutical product
incorporating new technology, and there is no assurance that third-party
reimbursement will be available for the Company's proposed products, or that
such reimbursement, if obtained, will be adequate. Less than full reimbursement
by governmental and other third-party payors for the Company's products would
adversely affect the market acceptance of these products and would also have a
material adverse effect on the Company. Further, health care reimbursement
systems vary from 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 $5,000,000 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
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to indemnify the Company, be sufficiently insured or have a net worth sufficient
to satisfy any such product liability claims. In addition, products such as
those proposed to be sold by the Company may be subject to recall for unforeseen
reasons. Such a recall could have a material adverse effect on the Company.
DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL; LIMITED PERSONNEL;
DEPENDENCE ON CONTRACTORS. The Company is highly dependent upon the efforts of
its management. The loss of the services of one or more members of management
could impede the achievement of development objectives. Due to the specialized
scientific nature of the Company's business, the Company is also highly
dependent upon its ability to attract and retain qualified scientific and
technical personnel. There is intense competition for qualified personnel in the
areas of the Company's activities and there can be no assurance that the Company
can presently, or will be able to continue to, attract and retain the qualified
personnel necessary for the development of its existing business and its
expansion into areas and activities requiring additional expertise. In addition,
the Company's intended or possible growth and expansion into areas requiring
additional skill and expertise, such as marketing, including sales and
distribution, will require the addition of new management personnel and the
development of additional expertise by existing 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 3,696,916 shares of Common Stock outstanding, 3,413,321 are freely tradable,
and are not subject to any restrictions, either under securities laws or under
lock-up or other agreements. 107,465 shares of Series A Convertible Preferred
Stock are outstanding and are currently convertible into 2,215,773 shares of
Common Stock at a conversion rate which is subject to adjustment under certain
circumstances. Additional Common Stock, including up to 1,843,364 shares
obtainable on the exercise of outstanding options and warrants, may become
eligible for sale in the public market from time to time in the future. The
Company has filed a registration statement on Form S-3 to register up to
6,634,432 shares of Common Stock, including Common Stock obtainable on
conversion of Series A Convertible Preferred Stock and exercise of certain
warrants, and intends to file a registration statement on Form S-8 to register
approximately 1,272,000 shares of Common Stock available for issuance under
certain option grants, including the Company's 1996 Stock Option Plan, in the
near future. Many of the 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
12
<PAGE>
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 18,856 are authorized for issuance as shares of
Series B Convertible Preferred Stock and 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
Certificates of Designations relating to the Series B Convertible Preferred
Stock and the Series A Convertible Preferred Stock. Accordingly, the Board of
Directors is empowered, without stockholder approval, to issue a new series of
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
Common Stock. Such authority, together with certain provisions of Delaware 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 certain Series A
Convertible 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 B Convertible Preferred Stock and
the Series A Convertible Preferred Stock have dividend preferences.
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 B CONVERTIBLE PREFERRED
STOCK. The 18,875 shares of Series B Convertible Preferred Stock outstanding 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 $5.50 and stated value of
$100 per share of Series B 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 B 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. One
of the directors of the Company is an officer of Paramount Capital, Inc. and 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 do and may from time to time serve as officers,
directors, consultants or advisors to other pharmaceutical or biotechnology
companies, or to investment banking, venture capital or similar firms. There can
be no assurance that such other companies or firms 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 21.7% 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.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Registered Shares.
13
<PAGE>
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 3,696,916 shares of Common
Stock outstanding, a maximum of 4,402,318 shares of Common Stock issuable on
conversion or exercise of securities convertible into or exercisable for Common
Stock at conversion and exercise rates effective as of the date of this
Prospectus, including shares of Common Stock issuable on conversion of all
Preferred Stock, and 343,182 Contingent Shares issuable on conversion of Series
B Convertible Preferred Stock assuming the maximum decrease 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.
PREFERRED STOCK
Two series of Preferred Stock have been established, 264,000 shares of
Series A Convertible Preferred Stock, of which 107,465 shares are outstanding
and 13,778 shares are issuable upon exercise of the Series A Convertible
Preferred Stock Placement Warrants, and 18,875 shares of Series B Convertible
Preferred Stock, of which all 18,875 shares are outstanding.
Series B Convertible Preferred Stock. Each share of Series B Convertible
Preferred Stock is convertible at the option of the holder, at any time, into
the number of shares of Common Stock determined by multiplying each share of
Series B Convertible Preferred Stock by $100 and dividing the result by $5.50
(the "Conversion Price"), subject to adjustment as described below. Each share
of Series B Convertible Preferred Stock is currently convertible into
approximately 18.2 shares of Common Stock (fractional shares will be cashed out
on conversion).
The Conversion Price is subject to adjustment upon the occurrence,
without limitation, 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. The Conversion
Price is also subject to adjustment on August 26, 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 $6.05 (a "Reset Event"). Upon a Reset Event, the
Conversion Price will be reduced to greater of (i) the Reset Trading Price
divided by 1.1 or (ii) $2.75.
SELLING STOCKHOLDERS
This Prospectus offers the Registered Shares for resale by Selling
Stockholders who have acquired or will acquire Common Stock issued on conversion
at the current Conversion Price of Series B Convertible Preferred Stock. As of
the date of this Prospectus, the Company has issued no shares of Common Stock on
conversion of any Series B Convertible Preferred Stock.
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
which each holder owns or are issuable before the Offering, including upon
conversion of the Series B Convertible Preferred Stock, but excluding Contingent
Shares, (iii) the number of Contingent Shares issuable upon a decrease in the
Conversion Price of Series B 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
Selling Stockholder will own or are issuable following the completion of the
Offering (assuming the sale of all stock offered and no other dispositions or
acquisitions of Common Stock) and (vi) the percentage of shares of Common Stock
which each Selling
14
<PAGE>
Stockholder will own or are issuable following the completion of the Offering
(assuming the sale of all stock offered and no other dispositions or
acquisitions of Common Stock). 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.
<TABLE>
<CAPTION>
SHARES OF
COMMON SHARES PERCENT
STOCK OF OF
OWNED OR COMMON COMMON
ISSUABLE STOCK STOCK
BEFORE OWNED OWNED
OFFERING OR OR
(EXCLUDING CONTINGENT ISSUABLE ISSUABLE
CONTINGENT SHARES REGISTERED AFTER AFTER
NAME OF SELLING STOCKHOLDER SHARES) (1) ISSUABLE SHARES (2) OFFERING (3) OFFERING
- ----------------------------------- ------------ ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
JNC Opportunity Fund Ltd. (4) 290,909 290,909 581,818 0 *
Leaf, Robert (5) 19,399 9,091 18,181 10,309 *
Schwartz, Carl F. (5) 11,972 6,818 13,636 5,154 *
Strassman, Joseph and Barbara (5) 108,527 36,364 72,727 72,164 1.8%
</TABLE>
- -----------------------------------
* indicates less than one percent
(1) Includes shares of Common Stock issuable upon conversion of Series B
Convertible Preferred Stock at the current Conversion Price of $5.50,
but does not include any Contingent Shares issuable upon adjustment of
the Conversion Price.
(2) Includes Common Stock issuable upon conversion of Series B Convertible
Preferred Stock at the current Conversion Price of $5.50 and Contingent
Shares.
(3) Assumes sale of all Registered Shares offered hereby.
(4) JNC Opportunity Fund Ltd. has contractually agreed to restrict its
ability to convert Series B Convertible Preferred Stock to the extent
that the number of shares of Common Stock held by it and its affiliates
after such conversion exceeds 4.999% of the total number of shares of
issued and outstanding Common Stock.
(5) Includes shares of Common Stock issuable upon conversion of Series A
Convertible Preferred Stock at the current conversion price applicable
to the Series A Convertible Preferred Stock of $4.85, but does not
include any additional shares issuable in the event of a decrease in the
conversion price applicable to the Series A Convertible Preferred Stock.
PLAN OF DISTRIBUTION
The Selling Stockholders, and their pledgees, donees, transferees, or
other successors-in-interest, may, from time to time, sell all or a portion of
the Registered Shares on the Nasdaq SmallCap, in privately negotiated
transactions or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such market prices or at
negotiated prices. The Registered Shares may be sold by the Selling Stockholders
by one or more of the following methods, without limitation: (a) block trades in
which the broker or dealer so engaged will attempt to sell the Registered Shares
as agent but may position and resell a portion of the block as principal to
facilitate the transaction, (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus, (c)
an exchange distribution in accordance with the rules of such exchange, (d)
ordinary brokerage transactions and transaction in which the broker solicits
purchasers, (e) privately negotiated transactions, (f) short sales and (g)
combinations of any such methods of sale. In effecting sales, brokers and
dealers engaged by the Selling Stockholders may arrange for other brokers or
dealers to participate. Brokers or dealers may receive commissions or discounts
from the Selling Stockholders (or, if any such broker-dealer acts as agent for
the purchaser of such shares, from such purchaser) in amounts to be negotiated
which are not expected to exceed those
15
<PAGE>
customary in the types of transactions involved. Broker-dealers may agree with
the Selling Stockholders to sell a specified number of such Registered Shares at
a stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a Selling Stockholder, to purchase as principal any
unsold Registered Shares at the price required to fulfill the broker-dealer
commitment to the Selling Stockholder. Broker-dealers who acquire Registered
Shares as principal may thereafter resell such Registered Shares from time to
time in transactions (which may involve block transactions and sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market or otherwise at prices and on terms then
prevailing at the time of sale, at prices then related to the then-current
market price or in negotiated transactions and, in connection with such resales,
may pay to or receive from the purchasers of such Registered Shares commissions
as described above. The Selling Stockholders may also sell the Registered Shares
in accordance with Rule 144 under the Securities Act, rather than pursuant to
this Prospectus.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the sale of the Registered Shares
may be deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales. In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of the Registered Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
From time to time the Selling Stockholders may engage in short sales,
short sales against the box, puts and calls and other transactions in securities
of the Company or derivatives thereof, and may sell and deliver the Registered
Shares in connection therewith or in settlement of securities loans. If the
Selling Stockholders engage in such transactions, the Conversion Price may be
affected. From time to time the Selling Stockholders may pledge their Registered
Shares pursuant to the margin provisions of its customer agreements with its
brokers. Upon a default by the Selling Stockholders, the broker may offer and
sell the pledged Registered Shares from time to time.
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
has also advised 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.
The Company is required to pay all fees and expenses incident to the
registration of the Registered Shares, including fees and disbursements (not to
exceed an aggregate of $5,000) of counsel to the Selling Stockholders. The
Company has agreed to indemnify the Selling Stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company has obtained a directors' and officers' liability insurance
policy which covers, among other things, certain liabilities arising under the
Securities Act.
In the agreement 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 (including
control persons, officers, directors, agents, underwriters retained by such
Selling Stockholder in connection with the offer and sale of Registered Shares,
brokers, investment advisors and employees of such Selling Stockholder) 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 has agreed to indemnify the Company, its
directors, officers, agents, employees and control persons against liabilities
16
<PAGE>
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, and only in an amount no greater than the net proceeds received by
such Selling Stockholder upon the sale of the Registered Shares giving rise to
the indemnification obligation.
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
informed 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, and 5,000 shares of Common Stock at an exercise price of $6.00 per share.
The options are immediately exercisable and expire on dates ranging from January
3, 2007 to January 21, 2008.
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.
17
<PAGE>
[OUTSIDE BACK COVER OF PROSPECTUS]
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION OR
TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------------------------------------
TABLE OF CONTENTS
Item Page Number
------------ -------------
Available Information.........................................Inside Front Cover
Documents Incorporated By Reference...........................Inside Front Cover
Business Summary.....................................................1
Risk Factors.........................................................5
Use of Proceeds.....................................................13
Description of Securities...........................................14
Selling Stockholders................................................14
Plan of Distribution................................................15
Indemnification for Securities Act Liabilities......................16
Legal Matters.......................................................17
Experts.............................................................17
Table of Contents.............................................Outside Back Cover
--------------------------------------------
686,362
COMMON STOCK
[GRAPHIC OMITTED]
PALATIN TECHNOLOGIES, INC.
--------------------------------------------
PROSPECTUS
--------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company will bear all expenses, estimated at $55,000, incurred in
connection with the registration of the Registered Shares under the Securities
Act and qualification or exemption of the Registered Shares under state
securities laws, excluding fees of legal counsel for any Selling Stockholder.
Each Selling Stockholder will pay all underwriting discounts and selling
commissions applicable to the sale of the Selling Stockholder's Registered
Shares.
SEC registration fees.............. $1,310
Blue Sky fees and expenses*........ $15,000
Costs of printing and engraving*... $2,500
Legal fees and expenses*........... $25,000
Accounting fees and expenses*...... $5,000
Miscellaneous*..................... $6,190
------
TOTAL............................. $55,000
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or serving at the request of the corporation in similar capacities,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of an action
or suit by or in the right of the corporation, no indemnification shall be made
with respect to any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the court having jurisdiction shall determine that such person is fairly and
reasonably entitled to indemnity.
Article V, Section 3 of the Company's Certificate of Incorporation
provides that to the fullest extent permitted by the Delaware General
Corporation Law, no director of the Company shall be personally liable to the
Company or its stockholders for monetary damages for breach of a fiduciary duty
as a director.
Article VI of the Company's Certificate of Incorporation provides
that the Company shall make the indemnification permitted under Section 145 of
the Delaware General Corporation Law, as summarized above, but only (unless
ordered by a court) upon a determination by a majority of a quorum of
disinterested directors, by independent legal counsel in a written opinion, or
by the stockholders, that the indemnified person has met the applicable standard
of conduct. Article VI further provides that the Company may advance expenses
for defending actions, suits or proceedings upon such terms and conditions as
the Company's Board of Directors deems appropriate, and that the Company may
purchase insurance on behalf of indemnified persons whether or not the Company
would have the power to indemnify such persons under Section 145 the Delaware
General Corporation Law.
Part II - 1
<PAGE>
The Company's Bylaws contain substantially the same indemnification
provisions as the Company's Certificate of Incorporation, summarized above.
The Company's employment agreement with Edward J. Quilty requires the
Company to indemnify and advance expenses to Edward J. Quilty, the Company's
Chairman of the Board, President and Chief Executive Officer, to the fullest
extent permitted under Section 145 of the Delaware General Corporation Law.
The agreement pursuant to which the Company has registered the
Registered Shares in the Registration Statement provides that the Company will
indemnify each Selling Stockholder (including control persons, officers,
directors, agents, underwriters retained by such Selling Stockholder in
connection with the offer and sale of Registered Shares, brokers, investment
advisors and employees of such Selling Stockholder), and each Selling
Stockholder will indemnify the Company, and in some cases the Company's
directors, officers, agents, employees and control persons, against certain
liabilities which might arise from the Offering. The indemnifications may cover
liabilities arising under the Securities Act. The obligation of a Selling
Stockholder to indemnify the Company or its affiliates is (absent fraud) limited
to liabilities based on written information which the Selling Stockholder
provides to the Company for inclusion in the Registration Statement, and is
limited to an amount no greater than the net proceeds received by such Selling
Stockholder upon the sale of the Registered Shares giving rise to the
indemnification obligation.
The Company has obtained a directors' and officers' liability
insurance policy which covers, among other things, certain liabilities arising
under the Securities Act.
ITEM 16. EXHIBITS.
EXHIBITS
The following exhibits are filed with this Registration Statement, or
incorporated by reference as noted:
2.1 Agreement and Plan of Reorganization dated as of April 12,
1996 by and between Interfilm, Inc., Interfilm Acquisition
Corp. and RhoMed Incorporated; incorporated by reference to
Exhibit 2.1 of the Company's Form 8-K dated June 25, 1996,
filed with the Commission on July 10, 1996.
2.2 Waiver and Consent dated as of June 24, 1996, between
Interfilm, Inc., Interfilm Acquisition Corp. and RhoMed
Incorporated; incorporated by reference to Exhibit 2.2 of the
Company's Form 10-KSB Annual Report for the period ended June
30, 1996, filed with the Commission on September 27, 1996.
4.1 Specimen Certificate for Common Stock; incorporated by
reference to Exhibit 4.1 of the Company's Form 8-K dated July
19, 1996, filed with the Commission on August 9, 1996.
4.2 Specimen Certificate for Series B Convertible Preferred Stock;
incorporated by reference to Exhibit 4.7 of the Company's Form
8-K dated April 28, 1998, filed with the Commission on May 8,
1998.
5.1 Opinion of Rubin Baum Levin Constant & Friedman, counsel to
the Company, re: legality.
23.1 Consent of Rubin Baum Levin Constant & Friedman. (Included in
Exhibit 5.1.)
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on the signature page hereof).
27 Financial Data Schedule; incorporated by reference and
previously filed as an exhibit to the Company's Form 10-QSB
Quarterly Report for the quarter ended March 31, 1998, filed
with the Commission on May 14, 1998.
Part II - 2
<PAGE>
ITEM 17. UNDERTAKINGS.
The Company will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) include any additional or changed material information on the
plan of distribution;
provided, however, that paragraphs (1)(i) and (1)(ii) will not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of such securities at that time to be the initial bona
fide offering thereof.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Part II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Princeton, State of New Jersey, on June 11, 1998.
PALATIN TECHNOLOGIES, INC.
By: /s/ Edward J. Quilty
---------------------------
Edward J. Quilty
Chairman of the Board, President
and Chief Executive Officer
Part II - 4
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers and directors of Palatin Technologies, Inc.,
severally constitute Edward J. Quilty and Stephen T. Wills, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, the
Registration Statement on Form S-3 filed herewith and any and all subsequent
amendments to said registration statement, and generally to do all such things
in our names and behalf in our capacities as officers and directors to enable
Palatin Technologies, Inc. to comply with all requirements of the Securities and
Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLES DATE
/s/ Edward J. Quilty
- ----------------------- Chairman of the Board, President and June 11, 1998
Edward J. Quilty Chief Executive Officer (principal
executive officer)
/s/ Carl Spana
- ----------------------- Executive Vice President and Director June 11, 1998
Carl Spana
/s/ Stephen T. Wills
- ----------------------- Vice President and Chief Financial June 11, 1998
Stephen T. Wills Officer (principal financial and
accounting officer)
/s/ Michael S. Weiss
- ----------------------- Director June 11, 1998
Michael S. Weiss
/s/ James T. O'Brien
- ----------------------- Director June 11, 1998
James T. O'Brien
/s/ John K.A. Prendergast
- ----------------------- Director June 11, 1998
John K.A. Prendergast
/s/ Robert G. Moussa
- ----------------------- Director June 11, 1998
Robert G. Moussa
Part II - 5
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
------------------------------------
[LETTERHEAD]
June 11, 1998
Palatin Technologies, Inc.
214 Carnegie Center, Suite 100
Princeton, New Jersey 08540
We have acted as counsel for Palatin Technologies, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of the
Registration Statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") on June 11, 1998, under
the Securities Act of 1933, as amended (the "Act"), for registration under the
Act of the following securities of the Company:
1. Up to 343,180 shares of common stock, par value $.01 per share (the
"Common Stock"), issuable upon conversion of 18,875 shares of the Company's
Series B Convertible Preferred Stock, par value $0.01 per share (the "Series B
Convertible Preferred Stock"); and
2. Up to 343,182 additional shares of Common Stock issuable upon an
adjustment in the conversion price of the Series B Convertible Preferred Stock.
As counsel to the Company, we have examined such corporate records,
documents, agreements and such matters of law as we have considered necessary or
appropriate for the purpose of this opinion. Upon the basis of such examination,
we advise you that in our opinion:
<PAGE>
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
- ------------------------------------
Palatin Technologies, Inc.
June 11, 1998
Page 2
1. Up to 343,180 shares of Common Stock issuable upon conversion of
currently outstanding shares of Series B Convertible Preferred Stock, if and
when paid for and issued upon conversion of the Series B Preferred Stock in
accordance with the terms of the Series B Convertible Preferred Stock
Certificate of Designations, will be legally issued, fully paid and
non-assessable.
2. Up to 343,182 shares of Common Stock issuable upon adjustment in the
conversion price of the Series B Convertible Preferred Stock, if and when paid
for and issued upon conversion of the Series B Convertible Preferred Stock in
accordance with the terms of the Series B Convertible Preferred Stock
Certificate of Designations, will be legally issued, fully paid and
non-assessable.
We are members of the Bar of the State of New York, and the opinions
expressed herein are limited to questions arising under the laws of the State of
New York, the General Corporation Law of the State of Delaware and the Federal
laws of the United States of America, and we disclaim any opinion whatsoever
with respect to matters governed by the laws of any other jurisdiction.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the references to this firm under the caption "Legal Matters"
in the Prospectus which is a part of the Registration Statement. Reference is
made to the section of the Registration Statement entitled "Legal Matters" for a
description of ownership of the Company's securities by certain attorneys of
this firm.
Very truly yours,
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated August 20, 1997
included in Palatin Technologies, Inc.'s Form 10-KSB for the year ended June 30,
1997 and to all references to our Firm included in this registration statement.
Philadelphia, PA,
June 11, 1998
