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Filed Pursuant to Rule 424(b)(3)
Registration No.333-32100
3,497,778 shares
AXYS PHARMACEUTICALS, INC.
Common Stock
The selling stockholders listed on pages 12 and 13 are offering up to
3,497,778 shares of Axys Pharmaceuticals, Inc. Common Stock. We sold the shares
to the selling stockholders on March 3, 2000 in a private transaction.
Our common stock is traded on the Nasdaq National Market under the symbol
"AXPH". On March 17, 2000, the last reported sale price for the Common Stock on
the Nasdaq National Market was $10.69 per share.
We will not be paying any underwriting discounts or commissions in this
offering.
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March 17, 2000
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TABLE OF CONTENTS
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About Axys.................................................. 1
Risk Factors................................................ 2
Cautionary Note Regarding Forward-Looking Statements........ 11
Where You Can Find More Information About Axys and This
Offering.................................................. 11
Use of Proceeds............................................. 12
Selling Stockholders........................................ 12
Plan of Distribution........................................ 13
Legal Matters............................................... 15
Experts..................................................... 15
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We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You should
not rely on any unauthorized information. This prospectus does not offer to sell
or buy any shares in any jurisdiction in which it is unlawful. The information
in this prospectus is current as of the date on the cover.
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ABOUT AXYS
Axys is a leader in the integration of life science technologies with a
focus on small molecule drug discovery. We seek to build shareholder value
through
- the discovery and development of our own drugs for the treatment of
cancer;
- a broad and diversified pipeline of drug discovery and development
programs for chronic diseases partnered with world-class pharmaceutical
companies; and
- the spin-out of affiliated businesses in combinatorial chemistry,
pharmacogenomics and agricultural biotechnology that utilize the
company's technologies. Our affiliated businesses are intended to provide
capital for Axys' drug discovery and development programs. Our subsidiary
AXYS ADVANCED TECHNOLOGIES, INC. conducts our combinatorial chemistry
business. Our subsidiary PPGX, INC.manages our pharmacogenomics business.
Our affiliate AKKADIX CORPORATION runs the agricultural biotechnology
business.
In recent years, the advent of new drug discovery technologies, including
functional genomics, bioinformatics, computational sciences, structure-based
drug design, combinatorial chemistry, high throughput screening and
pharmacogenomics, has offered great potential for streamlining the lengthy and
expensive process of drug discovery. Axys has assembled a premier platform for
drug discovery by combining and integrating these new technologies with the
traditional pharmaceutical sciences, including medicinal chemistry and
pharmacology. We are using these integrated technologies to identify more
quickly and efficiently both novel molecular targets associated with disease and
small molecule compounds, which are important for oral delivery, that can be
used as drugs against these targets.
We are a Delaware corporation. Our executive offices are located at 180
Kimball Way, South San Francisco, CA 94080 and our telephone number is (650)
829-1000. Our World Wide Web address is http://www.axyspharm.com. Information
contained on our World Wide Web site should not be considered to be part of this
prospectus. In this prospectus, "Axys", "we", "us", and "our" refer to Axys
Pharmaceuticals, Inc. unless the context requires otherwise.
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK OFFERED PURSUANT TO THIS PROSPECTUS
INVOLVES A HIGH DEGREE OF RISK. OUR COMMON STOCK SHOULD NOT BE PURCHASED IF YOU
CANNOT AFFORD THE LOSS OF YOUR ENTIRE INVESTMENT. PURCHASERS SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS IN CONJUNCTION WITH THE OTHER INFORMATION
INCLUDED AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE PURCHASING OR
OTHERWISE ACQUIRING OUR COMMON STOCK.
IF WE FAIL TO DISCOVER OR DEVELOP OR ARE DELAYED IN THE DEVELOPMENT OF
PHARMACEUTICALS, OUR BUSINESS AND RESULTS OF OPERATIONS WILL BE ADVERSELY
AFFECTED.
All of our potential pharmaceutical products are in various stages of
research and development and will require significant additional research and
development efforts before we can sell them. These efforts include extensive
preclinical and clinical testing and lengthy regulatory review and approval by
the FDA. The development of our new pharmaceutical products is highly uncertain
and subject to a number of significant risks. We do not expect any of our
pharmaceuticals to be commercially available for a number of years.
Pharmaceuticals that appear to be promising at early stages of development may
not reach the market for a number of reasons, including the following:
- We or our collaborators may not successfully complete any research and
development efforts;
- Any pharmaceuticals we develop may be found to be ineffective or to cause
harmful side effects during preclinical testing or clinical trials;
- We may fail to obtain required regulatory approvals for any products we
develop;
- We may be unable to manufacture enough of any potential products at an
acceptable cost and with appropriate quality;
- Our products may not be competitive with other existing or future
products; and
- Proprietary rights of third parties may prevent us from commercializing
our products.
IF WE FAIL TO OBTAIN ADDITIONAL FINANCING TO FUND OUR OPERATIONS, WE WILL BE
UNABLE TO COMPLETE OUR PRODUCT DEVELOPMENT EFFORTS.
The development of our potential drugs will require substantially more
money than we currently have. That means we will have to obtain commitments for
substantial funds in order to conduct the costly and time-consuming research and
preclinical and clinical testing activities necessary to develop our drugs. We
cannot be certain that any financing will be available when needed. If we fail
to secure additional financing, as we need it, we will have to delay or
terminate our drug development programs.
We plan to be able to meet some of our needs for money through the sale of
our interests in our affiliated businesses and we are actively pursuing several
alternatives. However, those businesses are still in relatively early stages of
development. We cannot be certain that these businesses will prove to be
financially successful or that we will be able to sell our interest in these
businesses for a substantial amount of money or at all.
Even if we are successful in obtaining financing from sale of our interests
in these affiliated businesses, we believe we will still need to pursue other
financing opportunities to fund our research and development. Our future
financing needs will depend on many factors, including the following:
- scientific progress in the research and development of drug development
programs;
- the size and complexity of these programs;
- the timing, range and results of preclinical studies and clinical trials;
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- our ability to establish new and maintain existing collaborations;
- our ability to achieve any milestones under such collaborations; and
- the time and costs involved in getting regulatory approvals or in filing,
enforcing or prosecuting patents.
In February, 2000, we entered into definitive purchase agreements for the
sale of an aggregate 3.5 million newly issued shares of Axys Pharmaceuticals,
Inc. common stock to selected institutional and other accredited investors for
$31.5 million in gross proceeds. We intend to use net proceeds from this private
placement for working capital and other general corporate purposes.
We expect that existing cash and investments, revenues from existing
collaborations, and the net proceeds from our recently completed private
placement, together with debt financing which we believe is available to us,
will enable us to maintain current and planned operations for 18-24 months. We
continue to actively pursue a variety of financing alternatives.
The drug development process is expensive and we are at an early stage of
development. Therefore, we expect that we will need to continue to raise money
for a number of years until we achieve substantial product or royalty revenues,
if ever. We expect that we will seek additional funding through new
collaborations, the extension of existing collaborations, through sale of our
interests in our affiliated businesses, or through public or private equity or
debt financings. We cannot be certain that additional funding will be available
or that the terms will be acceptable. Existing stockholders will experience
dilution of their investment if we raise additional funds by issuing equity. If
adequate funds are not available, we may delay, reduce or eliminate any of our
research or development programs. Furthermore, we may obtain funds through
arrangements with collaborative partners or others that require us to give up
rights to technologies or products that we would otherwise seek to develop or
commercialize ourselves.
IF WE CONTINUE TO INCUR OPERATING LOSSES FOR LONGER THAN EXPECTED, WE MAY BE
UNABLE TO CONTINUE OPERATIONS AND OUR STOCK PRICE MAY DECLINE.
We may never achieve and sustain profitability. We have experienced
significant operating losses since the company started. We have not generated
any pharmaceutical product sales revenue. For the year ended December 31, 1999,
we generated a net loss of approximately $48 million, and as of December 31,
1999, we had an accumulated deficit of approximately $277 million. We expect
that we will continue to incur significant operating losses over at least the
next several years as our research and development efforts and preclinical and
clinical testing activities continue. Our future profitability depends on our
ability to complete product development and obtain regulatory approval for our
drug candidates. If we fail to become profitable or are unable to sustain
profitability on a quarterly or annual basis, we may be unable to continue
operations and our stock price may decline.
IF WE FAIL TO MAINTAIN OUR EXISTING COLLABORATIVE RELATIONSHIPS AND ENTER INTO
NEW COLLABORATIVE RELATIONSHIPS, DEVELOPMENT OF OUR PRODUCTS COULD BE DELAYED OR
WE MAY NEED TO OBTAIN OTHER SOURCES OF REVENUE.
Our strategy for the development, clinical testing, manufacturing and
commercialization of most of our pharmaceuticals has included entering into
collaborations with corporate partners. We rely to a large extent on the
activities of our collaborators with respect to the development and
commercialization of our pharmaceuticals. All of our collaboration agreements
may be canceled under certain circumstances. In addition, the amount and timing
of resources to be devoted to research, development, eventual clinical trials
and commercialization activities by our collaborators are not within our
control. We cannot guarantee that our partners will perform their obligations as
expected. If any of our collaborators terminate or elect to cancel their
agreements or otherwise fail to
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conduct their collaborative activities in a timely manner, the development or
commercialization of pharmaceuticals may be delayed. For example, virtually all
of our genomics collaborations have been cancelled or terminated over time. If
in some cases we assume responsibilities for continuing unpartnered programs
after cancellation of a collaboration, we may be required to devote additional
resources to product development and commercialization or we may cancel certain
development programs.
A large portion of our revenues to date have resulted from these
collaborations. The research funding phase of most of our collaborations will
come to an end in the next few years unless continued or extended by agreement
with our collaborators. If our collaborations are not extended or we do not
enter into additional collaborative relationships, we will have to seek other
sources of revenue, including additional financing and/or sell interests in our
affiliated businesses. We cannot be certain that we will receive any additional
revenue from these arrangements beyond the minimum contractual commitments of
our partners.
We have active pharmaceutical product research and development
collaborations with several different partners, including Bayer, Merck and
Aventis (formerly Rhone-Poulenc Rorer), and Signal Pharmaceuticals.
IF WE FAIL TO SATISFY FDA SAFETY AND EFFICACY REQUIREMENTS IN OUR CLINICAL
TRIALS FOR ANY PHARMACEUTICAL, WE WILL BE UNABLE TO COMPLETE THE DEVELOPMENT AND
COMMERCIALIZATION OF THAT PHARMACEUTICAL PRODUCT.
Either we or our collaborators must show through preclinical studies and
clinical trials that each of our pharmaceuticals is safe and effective in humans
for each indication before obtaining regulatory clearance from the FDA for the
commercial sale of that pharmaceutical. If we fail to adequately show the safety
and effectiveness of a pharmaceutical, regulatory approval could be delayed or
denied. The results from preclinical studies and early clinical trials are often
different than the results that are obtained in large-scale testing. We cannot
be certain that we will show sufficient safety and effectiveness in our clinical
trials that would allow us to obtain the needed regulatory approval. A number of
companies in the pharmaceutical industry, including biotechnology companies,
have suffered significant setbacks in advanced clinical trials, even after
promising results in earlier trials.
Any drug is likely to produce some level of toxicity or undesirable side
effects in animals and in humans when administered at sufficiently high doses
and/or for a long period of time. Unacceptable toxicities or side effects may
occur in the course of toxicity studies or clinical trials. If we observe
unacceptable toxicities or side effects, we, our collaborators or regulatory
authorities may interrupt, limit, delay or halt the development of the drug. In
addition, these unacceptable toxicities or side effects could prevent approval
by the FDA or foreign regulatory authorities for any or all indications.
We currently have one compound, APC 2059, in clinical trials for
inflammatory bowel disease. We are performing clinical trials to determine the
safety and effectiveness of APC 2059 for the treatment of inflammatory bowel
disease. As these clinical trials are intended to establish proof-of-principle
in humans, we cannot be certain that we will be able to complete the clinical
trials successfully. Our collaboration partner Bayer is moving forward with
clinical development of a compound developed in our collaboration with them for
the treatment of asthma that would be taken as a pill. Phase I clinical trials
are being planned to commence in the first half of 2000 to establish the safety
and effectiveness of that compound in the treatment of asthma. We cannot be
certain that the clinical trials of this compound will be initiated or completed
successfully. Finally, we cannot be certain that any other drug candidates which
may enter clinical trials will successfully complete those trials or that we or
our collaborators will be able to show the safety and effectiveness of these
drug candidates.
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IF WE FAIL TO OBTAIN REGULATORY APPROVALS TO COMMERCIALLY MANUFACTURE OR SELL
ANY OF OUR PHARMACEUTICALS, OR IF APPROVAL IS DELAYED, WE WILL BE UNABLE TO
GENERATE REVENUE FROM THE SALE OF OUR PRODUCTS.
We must obtain regulatory approval before marketing or selling our future
drug products. In the United States, we must obtain FDA approval for each drug
that we intend to commercialize. The FDA approval process is lengthy and
expensive, and approval is never certain. Products distributed abroad are also
subject to foreign government regulation. The process of obtaining FDA and other
required regulatory approvals can vary a great deal based upon the type,
complexity and novelty of the products involved. Delays or rejections may be
encountered based upon additional government regulation from future legislation
or administrative action or changes in FDA policy during the period of clinical
trials and FDA regulatory review. Similar delays also may be encountered in
foreign countries.
None of our drug candidates has received regulatory approval. If we fail to
obtain this approval, we will be unable to commercially manufacture and sell our
drug products. We have several drugs in various stages of preclinical and
clinical development. These products are not expected to be available for
several more years. Because of the risks and uncertainties involved in
development of drug products, our drug candidates could take significantly
longer to gain approval than we expect or may never gain approval. If regulatory
approval is delayed, our management's credibility, the value of our company and
our operating results could be adversely affected. Even if regulatory approval
of a product is granted, we cannot be certain that we will be able to obtain the
labeling claims necessary or desirable for the successful promotion of those
products.
Even if we obtain regulatory approval, we may be required to continue
clinical studies even after we have started selling a pharmaceutical. In
addition, identification of certain side effects after a drug is on the market
or the occurrence of manufacturing problems could cause subsequent withdrawal of
approval, reformulation of the drug, additional preclinical testing or clinical
trials and changes in labeling of the product. This could delay or prevent us
from generating revenues from the sale of that drug or cause our revenues to
decline.
If regulatory approval is obtained, we will also be subject to ongoing
existing and future FDA regulations and guidelines and continued regulatory
review. In particular, we or any third party that we use to manufacturer the
drug or our collaborators will be required to adhere to regulations setting
forth current good manufacturing practices. The regulations require that we
manufacture our products and maintain our records in a particular way with
respect to manufacturing, testing and quality control activities. Furthermore,
we or our third party manufacturers or our collaborators must pass a
pre-approval inspection of our manufacturing facilities by the FDA before
obtaining marketing approval.
Failure to comply with the FDA or other relevant regulatory requirements
may subject us to administrative or legally imposed restrictions. These include:
warning letters, civil penalties, injunctions, product seizure or detention,
product recalls, total or partial suspension of production and FDA refusal to
approve pending New Drug Applications, called NDAs, or supplements to approved
NDAs.
IF WE ARE UNABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY, WE MAY NOT BE
ABLE TO COMPETE EFFECTIVELY.
Our success depends in large part on our ability to obtain patents,
maintain trade secrets and operate without infringing the rights of others, both
in the United States and in other countries.
Patents may not issue from any of our pending or future applications.
Patent applications in the United States are maintained in secrecy until the
patent issues. As a result, we cannot be certain that
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others have not filed patent applications for technology covered by our pending
patent applications or that we were the first to invent the technology. In
addition, an issued patent may be challenged, invalidated or maneuvered around
or it may otherwise not be sufficient to protect our technology. The patent
positions of biotechnology and pharmaceutical companies can be highly uncertain
and involve complex legal and factual questions. As a result, it is difficult to
predict the broadness of claims allowed in biotechnology and pharmaceutical
patents or their enforceability.
Our commercial success also depends, in part, on not infringing patents
issued to others and not breaching the technology licenses upon which any of our
potential products are based. Competitors may have filed applications for, or
may have received patents and may obtain additional patents and rights relating
to, genes, products or processes that block or compete with ours. A number of
third parties have filed patent applications or received patents in the areas of
our programs. Some of these applications or patents may limit or hinder our
patent applications, or conflict in certain ways with claims made under our
issued patents. Furthermore, in the past we have been, and we may from time to
time in the future be, notified of claims that we are infringing patents or
other intellectual property rights owned by third parties.
We may have to participate in interference proceedings declared by the U.S.
Patent and Trademark Office. These proceedings determine the priority of
invention and the right to a patent for the technology in the U.S. In addition,
lawsuits may be necessary to enforce any patents issued to us or to determine
the scope and validity of the rights of third parties. Lawsuits and interference
proceedings, even if they are successful, are expensive to pursue, and we could
use a substantial amount of our limited financial resources in either case. An
adverse outcome could subject us to significant liabilities to third parties and
require us to license disputed rights from third parties or to cease using such
technology.
It is also unclear whether our trade secrets will provide useful
protection. We protect our own technology and processes, in part, by
confidentiality agreements with our employees, consultants and certain
contractors. However, these agreements may be disregarded or breached, and we
may not have adequate remedies for any breach. In addition, it is possible that
our trade secrets will otherwise become known or be independently discovered by
competitors.
Disputes may arise in the future with regards to the ownership of rights to
any technology developed with collaborators. These and other possible
disagreements with collaborators could lead to delays in the achievement of
milestones or receipt of royalty payments or in research, development and
commercialization of our pharmaceuticals. In addition, these disputes could
require or result in lawsuits or arbitration. Lawsuits and arbitration are
time-consuming and expensive. Even if we win, the cost of these proceedings
could adversely affect our business, financial condition and results of
operations. Furthermore, these proceedings could adversely affect our stock
price or our business reputation and may make the process of entering into
additional collaborative relationships more difficult.
BECAUSE WE DO NOT HAVE MANUFACTURING FACILITIES FOR OUR PROPOSED DRUG PRODUCTS
OR COMMERCIAL MANUFACTURING EXPERIENCE, WE COULD EXPERIENCE MANUFACTURING DELAYS
OR PROBLEMS THAT HURT OUR PRODUCT SALES.
We have no manufacturing facilities for our proposed drug products, and our
potential products have never been commercially manufactured. We must currently
rely on our collaborators, such as Bayer, Merck, and Aventis, to manufacture
products created by our collaborations. We believe that our collaborators or
contract manufacturers or we will be able to manufacture our compounds at a cost
and in quantities necessary to make them commercially acceptable. However, we
cannot be certain that this will be the case. If we or our collaborators or
third party manufacturers are unable to
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manufacture or contract with others for a sufficient supply of our compounds on
acceptable terms, we may have to delay any of the following:
- our preclinical and clinical testing schedule;
- our submission of products for regulatory approval; or
- the market introduction and subsequent sales of products.
Any of these delays would adversely affect our financial condition and
results of operations.
In addition to us, our collaborators and contract manufacturers must adhere
to current Good Manufacturing Practices regulations enforced by the FDA through
its facilities inspection program. If these facilities cannot pass a
pre-approval plant inspection, FDA approval of our products will not be granted
or will be delayed.
With respect to our subsidiary, Axys Advanced Technologies, we are
developing new manufacturing processes to meet the expanding demand for our
combinatorial chemistry libraries. We have never had to manufacture the
quantities of libraries we are committed to delivering during this year. We have
experienced problems in manufacturing in the past that have delayed shipments of
libraries and we may experience manufacturing problems in the future as we
expand our manufacturing capabilities. Problems in manufacturing could delay
shipments of combinatorial chemistry compounds and this would have a material
adverse effect on our financial condition and results of operations.
IF WE ARE UNABLE TO ESTABLISH MARKETING AND DISTRIBUTION CAPABILITIES OR ENTER
INTO ARRANGEMENTS WITH THIRD PARTIES, OUR ABILITY TO GENERATE REVENUES WILL BE
HARMED.
We currently have no sales, marketing or distribution capability. We will
rely on our collaborative relationships, such as those with Bayer, Merck and
Aventis, to market some of our future drug products. In addition, we may enter
into future collaborations in which we rely on our collaborator to market our
drug products. Revenues received under existing and future collaborations will
depend on the success of our collaborator in marketing our drugs. We cannot be
certain that collaborators will devote sufficient resources to the marketing and
sale of our drugs or that the efforts of our collaborators will be successful.
We may also decide to market certain of our future pharmaceuticals by
ourselves. To market any pharmaceuticals ourselves, we must develop a marketing
and sales force with technical expertise and the necessary supporting
distribution capability. If we are unable to develop a marketing and sales
force, we may be unable to effectively sell any of our pharmaceuticals. We do
not know whether we will desire to or be able to establish our own sales and
distribution capabilities or whether we will be able to enter into the necessary
supporting relationships with third parties.
IF WE FAIL TO OBTAIN AN ADEQUATE LEVEL OF REIMBURSEMENT FOR OUR DRUGS, THERE MAY
BE NO COMMERCIALLY VIABLE MARKET FOR OUR PRODUCTS.
The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of outside parties, such
as government health administrators, private health insurance companies and HMOs
seeking to contain or reduce the cost of health care. In some foreign markets,
pricing or profitability of prescription pharmaceuticals is subject to
governmental control. In the United States, there have been, and we expect that
there will continue to be, a number of federal and state proposals to adopt
similar governmental control. In addition, an increasing emphasis on managed
care in the United States has and will continue to increase the pressure on
price of prescription drugs. Third-party payors are increasingly challenging the
price and cost-effectiveness of medical products and services. Significant
uncertainty exists as to the
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reimbursement status of newly approved health care products. We cannot be
certain that third parties will pay for the costs of our drugs. Even if we
obtain third party reimbursement, we cannot be certain that reimbursement rates
will allow us to profit from the sale of our drugs.
In addition, the announcement of cost containment proposals or efforts
could adversely affect our ability to raise capital and our stock price. In
addition, if these proposals or efforts adversely affect other pharmaceutical
companies that are prospective collaborators with Axys, our ability to establish
or maintain strategic alliances may be adversely affected.
IF PHYSICIANS, INSURERS AND PATIENTS DO NOT ACCEPT OUR PRODUCTS, WE MAY NOT
ACHIEVE SUFFICIENT REVENUE FROM SALE OF THOSE PRODUCTS.
Even if our pharmaceuticals are approved for sale, we are not certain that
physicians, health insurance companies or patients will accept them. If the
medical community and patients do not accept our products, sales of these
products will be adversely affected. The degree of market acceptance will depend
upon a number of factors, including obtaining regulatory approvals,
demonstrating proof in the medical community of the clinical effectiveness and
safety of our product candidates and their potential advantages over existing
treatment methods and reimbursement policies of government and third-party
payors.
IF WE FAIL TO COMPETE SUCCESSFULLY, OUR REVENUES AND OPERATING RESULTS WILL BE
ADVERSELY AFFECTED.
This is a highly competitive business and many of our competitors have
substantially greater resources than we have. In addition, some of these
companies have considerably more experience in preclinical testing, clinical
trials and other regulatory approval procedures than we have.
Our competitors (including our collaborators) may develop, manufacture and
market products that are more effective or less expensive than ours. They may
also receive regulatory approval for their drugs faster than we can obtain them,
or may commercialize their drugs more quickly than we can. Many of our
competitors have greater financial and management resources than we do, and many
of them have significantly more experience in bringing drugs to market. If our
competitors successfully commercialize drugs to treat the indications that we
are working on before we do, or if their products are less expensive or more
effective than ours, demand for our drugs may suffer and our revenues may be
reduced.
Additionally, certain colleges and universities, governmental agencies and
other research organizations are conducting research in the same areas in which
we are working. These institutions are becoming increasingly aware of the
commercial value of their findings and are becoming more active in seeking
patent protection and licensing arrangements to collect royalties for the use of
technology that they have developed. These institutions also may market
competitive commercial products on their own or through joint ventures.
Currently, they compete with us in recruiting highly qualified scientific
personnel.
IF WE FAIL TO RECRUIT AND RETAIN PROFESSIONAL STAFF, OUR PRODUCT DEVELOPMENT
PROGRAMS WILL BE DELAYED.
We are highly dependent on the senior members of our scientific and
management staff. Retaining and attracting qualified personnel, consultants and
advisors is critical to our success. If we fail to recruit and retain qualified
personnel, our product development efforts will be delayed. We face intense
competition for qualified individuals from numerous pharmaceutical and
biotechnology companies, universities and other research institutions. We are
currently seeking to hire additional qualified scientific personnel to perform
research and development. In addition, we expect that we will need to add
management personnel and develop additional expertise by existing management
personnel in order to expand product development and clinical testing. We cannot
be certain that we will be able to attract and retain such individuals on
acceptable terms or at all.
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In addition, our academic collaborators are not our employees. As a result,
we have limited control over their activities and can expect that only limited
amounts of their time will be dedicated to our activities. These academic
collaborators may also have relationships with other commercial entities, some
of whom may compete with Axys.
OUR STOCK MAY BE VOLATILE AND YOUR INVESTMENT COULD SUFFER A DECLINE IN VALUE.
Stock prices and trading volumes for biotechnology companies often
fluctuate widely for reasons which may be unrelated to their businesses. Our
stock price could decline as a result of many factors, including:
- announcements of technological innovations or new products by Axys or
other companies;
- developments or disputes concerning patents or other rights;
- publicity regarding actual or potential medical results from products
under development by Axys or other companies;
- regulatory developments in both the United States and foreign countries;
- public concern regarding the safety of biopharmaceutical products;
- any shortfall in our revenues or net income from that expected by
securities analysts;
- changes in analyst's estimates of our financial performance, the
financial performance or our competitors or the financial performance of
biotechnology companies in general;
- sales of large blocks of our common stock; or
- conditions in the financial markets or economy in general or the
biotechnology industry in particular.
In the past, following large price declines in the public market price of a
company's securities, securities litigation has often been initiated against
that company. Litigation of this type could result in substantial costs and
diversion of management's attention and resources. Any adverse determination in
litigation could subject us to substantial liabilities.
IF PRODUCT LIABILITY CLAIMS ARE BROUGHT AGAINST US, WE MAY INCUR SUBSTANTIAL
LIABILITIES.
We may be exposed to liability claims resulting from the use of our
products in clinical trials, or the manufacturing, marketing and sale of any
approved products. These claims may be made directly by consumers,
pharmaceutical companies or others. We maintain product liability insurance
coverage for claims arising from the use of our products which are still in the
developmental phase. However, this insurance coverage is becoming increasingly
expensive. We and our collaborative partners may not be able to obtain and
maintain commercially reasonable product liability insurance. Furthermore, even
if we maintain insurance, the amount may not be enough to protect us against
losses due to a lawsuit. A successful product liability claim against Axys or
series of claims in excess of our insurance could adversely affect our results
of operations and our need for additional financing.
ANTI-TAKEOVER PROVISIONS UNDER DELAWARE LAW AND IN OUR CHARTER DOCUMENTS AND OUR
STOCKHOLDER RIGHTS PLAN COULD MAKE AN ACQUISITION OF AXYS MORE DIFFICULT.
In 1998, we adopted a stockholder rights plan, which may have the effect of
delaying or preventing an unsolicited takeover of the company. Our certificate
of incorporation and bylaws state that any action taken by stockholders must be
conducted at an annual or special meeting of stockholders and may not be
conducted by written consent. Only the board of directors, the Chairman of the
Board or the President may call special meetings of the stockholders. In
addition,
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our board of directors has the authority to issue additional shares of preferred
stock and to determine the rights of those shares without any further action by
the stockholders. Those rights could be senior to those of the common
stockholders. The issuance of preferred stock may make it more difficult for a
third party to acquire Axys. These and other charter provisions may discourage
certain types of transactions involving an actual or potential change in control
of Axys. In fact, these provisions may discourage transactions in which the
stockholders might otherwise receive a premium for their shares over then
current prices, and may limit the stockholders' ability to approve transactions
that they think are in their best interests.
Delaware law also prohibits corporations from engaging in a business
combination with any holders of 15% or more of their capital stock until the
holder has held the stock for three years unless, among other things, the board
approves the transaction. Also, under Delaware law, our board of directors may
adopt additional anti-takeover measures in the future.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and the documents incorporated by
reference are forward-looking statements. These statements are based on our
current expectations, assumptions, estimates and projections about our business
and industry and involve known and unknown risks, uncertainties and other
factors that may cause our results, levels of activity, performance or
achievement to be materially different from any future results, levels of
activity, performance or achievements expressed or implied in or contemplated by
the forward-looking statements.
In some cases, you can identify forward-looking statements by words such as
"believe", "anticipate", "expect", "intend", "plan", "will", "may", "should",
"estimate", "predict", "potential", "continue", or the negative of such terms or
other similar expressions. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance, or achievements. Our actual results could differ
materially from those anticipated in such forward-looking statements as a result
of several factors more fully described under the caption "Risk Factors" and the
documents incorporated by reference. You are cautioned not to place undue
reliance on these forward-looking statements.
The forward-looking statements made in this prospectus relate only to
events as of the date on which the statements are made. We do not intend to
update publicly any of the forward-looking statements for any reason, even if
new information becomes available or other events occur in the future.
WHERE YOU CAN FIND MORE INFORMATION ABOUT AXYS AND THIS OFFERING
We have filed with the SEC a registration statement on Form S-3 to register
the common stock offered by this prospectus. However, this prospectus does not
contain all of the information contained in the registration statement and the
exhibits and schedules to the registration statement. We strongly encourage you
to carefully read the registration statement and the exhibits and schedules to
the registration statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. You can request copies of these documents by contacting the
SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
which we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below:
1. Our Annual Report on Form 10-K for the year ended December 31, 1999,
filed with the Commission on March 7, 2000;
2. Our Current Report of Form 8-K filed with the Commission on February 22,
2000;
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<PAGE> 14
3. Our Definitive Proxy Statement filed with the Commission on April 23,
1999 in connection with our 1999 Annual Meeting of Stockholders;
4. The description of the common stock contained in our Registration
Statement on Form 8-A filed under the Securities Exchange Act of 1934,
as amended, including any amendment or report filed for the purpose of
updating such description.
In addition, we incorporate by reference any future filings we will make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at:
Axys Pharmaceuticals, Inc.
Investor Relations
180 Kimball Way
South San Francisco, CA 94080
(650) 829-1000
USE OF PROCEEDS
The proceeds from the sale of the common stock offered pursuant to this
prospectus are solely for the account of the selling stockholders. We will not
receive any proceeds from the sale of these shares of common stock.
SELLING STOCKHOLDERS
We are registering the shares covered by this prospectus on behalf of the
selling stockholders named in the table below. We issued all of the shares to
the selling stockholders in a private placement transaction. We have registered
the shares to permit the selling stockholders and their pledgees, donees,
transferees or other successors-in-interest that receive their shares from a
selling stockholder as a gift, partnership distribution or other non-sale
related transfer after the date of this prospectus to resell the shares.
The following table sets forth the name of each selling stockholder, the
number of shares owned by each selling stockholder, the number of shares that
may be offered under this prospectus and the number of shares of our common
stock owned by each selling stockholder after this offering is completed. Except
as set forth in the table below, none of the selling stockholders has had a
material relationship with us within the past three years. The number of shares
in the column "Number of Shares Being Offered" represent all of the shares that
each selling stockholder may offer under this prospectus. The selling
stockholders may sell some, all or none of their shares. We do not know how long
the selling stockholders will hold the shares before selling them and we
currently have no agreements, arrangements or understandings with any of the
selling stockholders regarding the sale of any of the shares. The shares offered
by this prospectus may be offered from time to time by the selling stockholders.
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The percentages of shares owned prior to the offering are based on
34,946,051 shares of our common stock outstanding, after giving effect to the
sale of 3,497,778 shares to the selling stockholders in the Company's February
2000 private placement.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF OWNED AFTER
OFFERING SHARES OFFERING**
------------------- BEING -------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
---- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Deutsche Vermogensbildungsgesellschaft m.b.H.
(DVG)...................................... 600,000 1.72% 600,000 0 *
Franklin Biotechnology Discovery Fund........ 600,000 1.72% 600,000 0 *
Deutsche Asset Management (NAVAP)............ 300,000 * 300,000 0 *
Chelsey Capital.............................. 250,000 * 250,000 0 *
ProQuest Investments, L.P.................... 219,378 * 219,378 0 *
KMF Partners, L.P............................ 200,000 * 200,000 0 *
Special Situations Private Equity Fund,
L.P........................................ 166,667 * 166,667 0 *
The Aries Master Fund........................ 128,759 * 128,759 0 *
Delta Opportunity Fund, Ltd.................. 123,555 * 123,555 0 *
Activest Management SA....................... 120,000 * 120,000 0 *
Merlin BioMed Int'l Ltd...................... 120,000 * 120,000 0 *
Deutsche Asset Management (Dirfonds-AP)...... 100,000 * 100,000 0 *
Merlin BioMed L.P............................ 100,000 * 100,000 0 *
Aeolus Capital............................... 100,000 * 100,000 0 *
Delta Opportunity Fund (Institutional),
LLC........................................ 98,667 * 98,667 0 *
Activest American Performance LTD............ 80,000 * 80,000 0 *
Aries Domestic Fund, L.P..................... 60,964 * 60,964 0 *
Bradley N. Rotter............................ 50,000 * 50,000 0 *
Lodestone Capital Fund, LLC.................. 50,000 * 50,000 0 *
Douglas and Laurie Moore, Trustees FBO
The Moore '89 Family Trust dtd 3-9-89...... 16,667 * 16,667 0 *
Aries Domestic Fund II, L.P.................. 10,277 * 10,277 0 *
ProQuest Companion Fund, L.P................. 2,844 * 2,844 0 *
</TABLE>
- -------------------------
* Represents less than 1%.
** Assuming the sale of all the offered shares
PLAN OF DISTRIBUTION
The selling stockholders may sell the shares from time to time. The selling
stockholders will act independently of us in making decisions regarding the
timing, manner and size of each sale. The sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and at terms
then prevailing or at prices related to the then current market price, or in
privately negotiated transactions. The selling stockholders may effect these
transactions by selling the shares to or through broker-dealers. The selling
stockholders may sell their shares in one or more of, or a combination of:
- a block trade in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction,
- purchases by a broker-dealer as principal and resale by a broker-dealer
for its account under this prospectus,
- an exchange distribution in accordance with the rules of an exchange,
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<PAGE> 16
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers, and
- privately negotiated transactions.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution. If the plan of
distribution involves an arrangement with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, the amendment or supplement
will disclose:
- the name of each selling stockholder and of the participating
broker-dealer(s),
- the number of shares involved,
- the price at which the shares were sold,
- the commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable,
- that a broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus, and
- other facts material to the transaction.
From time to time, a selling stockholder may transfer, pledge, donate or
assign its shares of common stock to lenders or others and each of such persons
will be deemed to be a "selling stockholder" for purposes of this prospectus.
The number of shares of common stock beneficially owned by the selling
stockholder will decrease as and when it takes such actions. The plan of
distribution for the selling stockholders' shares of common stock sold under
this prospectus will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be selling stockholders hereunder.
Upon being notified by a selling stockholder that a donee or pledgee intends to
sell more than 500 shares, we will file a supplement to this prospectus.
The selling stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of the shares in
the course of hedging the positions they assume with selling stockholders. The
selling stockholders also may sell shares short and redeliver the shares to
close out short positions. The selling stockholders may enter into option or
other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer the shares under this prospectus. The selling stockholders also may
loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
loaned shares, or upon a default the broker-dealer may sell the pledged shares
under this prospectus.
In effecting sales, broker-dealers engaged by the selling stockholders may
arrange for other broker-dealers to participate in the resales. Broker-dealers
or agents may receive compensation in the form of commissions, discounts or
concessions from selling stockholders. Broker-dealers or agents may also receive
compensation from the purchasers of the shares for whom they act as agents or to
whom they sell as principals, or both. Compensation as to a particular
broker-dealer might be in excess of customary commissions and will be in amounts
to be negotiated in connection with the sale. Broker-dealers or agents and any
other participating broker-dealers or the selling stockholders may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act of
1933, as amended, in connection with sales of the shares. Accordingly, any
commission, discount or concession received by them and any profit on the resale
of the shares purchased by them may be deemed to be underwriting discounts or
commissions under the Securities Act. Because selling stockholders may be deemed
to be "underwriters" within the meaning of Section 2(11) of the Securities Act,
the selling stockholders will be subject to the prospectus delivery requirements
of the Securities Act. In addition,
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any securities covered by this prospectus that qualify for sale under Rule 144
promulgated under the Securities Act may be sold under Rule 144 rather than
under this prospectus. The selling stockholders have advised that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of shares by the selling stockholders.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in some
states the shares may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities Exchange Act of
1934, as amended, any person engaged in the distribution of the shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of the
distribution. In addition, each selling stockholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of purchases and sales of shares of our common stock by the
selling stockholders.
We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver copies of this
prospectus to purchasers at or prior to the time of any sale of the shares.
We will bear all costs, expenses and fees in connection with the
registration of the shares. The selling stockholders will bear all commissions
and discounts, if any, attributable to the sales of the shares. The selling
stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against specific liabilities,
including liabilities arising under the Securities Act. The selling stockholders
have agreed to indemnify specific persons, including broker-dealers and agents,
against specific liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act.
We have agreed to maintain the effectiveness of this registration statement
until each selling stockholder can sell all of the shares it holds under Rule
144(k) promulgated under the Securities Act. The selling stockholders may sell
all, some or none of the shares offered by this prospectus.
LEGAL MATTERS
The legality of the shares of common stock offered hereby is being passed
upon by Cooley Godward LLP, Palo Alto, California. Cooley Godward LLP and
attorneys in the firm own an aggregate of approximately 5,000 shares of the
Axys' common stock. Alan C. Mendelson, a partner at Cooley Godward LLP, is a
director of Axys and also owns approximately 18,329 shares of Axys' common
stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
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