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As filed with the Securities and Exchange Commission on July 10, 2000
Registration No. 333-35828
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AXYS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2969941
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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180 KIMBALL WAY
SOUTH SAN FRANCISCO, CA 94080
(650) 829-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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WILLIAM J. NEWELL, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
AXYS PHARMACEUTICALS, INC.
180 KIMBALL WAY
SOUTH SAN FRANCISCO, CA 94080
(650) 829-1000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
ALAN C. MENDELSON, ESQ.
LATHAM & WATKINS
135 Commonwealth Drive
Menlo Park, CA 94025
(650) 328-4600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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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
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TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE AMOUNT OF REGISTRATION FEE
TO BE REGISTERED OFFERING PRICE (1)
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Debt securities(2)(3) $35,000,000 $9,240.00(4)
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Warrants(2)
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(1) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(o) under the Securities Act of 1933.
(2) In addition to the securities that are being issued directly under this
registration statement, there are being registered hereunder an
indeterminate number of shares of common stock which may be issued upon
conversion or exchange of the securities issued hereunder.
(3) In addition to the securities that are being issued directly under this
Registration Statement, there are being registered hereunder an
indeterminate number of shares of common stock which may be issued in
payment of interest with respect to a particular issuance of debt
securities.
(4) Previously paid.
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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 SUCH SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED JULY 10, 2000
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
PROSPECTUS
AXYS PHARMACEUTICALS, INC.
$35,000,000
DEBT SECURITIES
WARRANTS TO PURCHASE COMMON STOCK
This prospectus will allow us to issue our debt securities and
warrants to purchase our common stock over time. This means:
- we may issue the debt securities and warrants offered in this
prospectus from time to time;
- we will provide a prospectus supplement each time we issue our
debt securities and warrants;
- the prospectus supplement will inform you about the specific
terms of that offering and also may add, update or change
information contained in this document; and
- you should read this document and any prospectus supplement
carefully before you invest.
Axys' common stock is traded on the Nasdaq National Market under
the symbol "AXPH". On July 7, 2000, the last reported sale price for
our common stock on the Nasdaq National Market was $7.6875 per share.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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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 July __, 2000
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TABLE OF CONTENTS
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PAGE
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ABOUT AXYS....................................................................................4
THE OFFERING..................................................................................4
RISK FACTORS..................................................................................5
FORWARD-LOOKING STATEMENTS....................................................................12
WHERE YOU CAN FIND MORE INFORMATION ABOUT AXYS AND THIS OFFERING..............................12
RATIO OF EARNINGS TO FIXED CHARGES............................................................13
DESCRIPTION OF DEBT SECURITIES................................................................13
DESCRIPTION OF WARRANTS.......................................................................19
DESCRIPTION OF COMMON STOCK...................................................................19
USE OF PROCEEDS...............................................................................20
PLAN OF DISTRIBUTION..........................................................................20
LEGAL MATTERS.................................................................................21
EXPERTS.......................................................................................21
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YOU SHOULD RELY ONLY ON THE INFORMATION OR REPRESENTATIONS PROVIDED OR
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS OR ANY RELATED PROSPECTUS
SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY DIFFERENT
INFORMATION OR TO MAKE ANY DIFFERENT REPRESENTATIONS IN CONNECTION WITH ANY
OFFERING MADE BY THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR SOLICITATION OF AN OFFER TO BUY, IN ANY STATE WHERE THE OFFER OR
SALE IS PROHIBITED. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR ANY SALE MADE
UNDER THIS PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION
IN THIS PROSPECTUS IS CORRECT AS OF ANY DATE AFTER THE DATE OF THIS PROSPECTUS.
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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 PPGX, INC. manages our pharmacogenomics business. Our
affiliate AKKADIX CORPORATION runs an agricultural biotechnology
business. In April 2000 we completed the previously announced
spin-out of our subsidiary AXYS ADVANCED TECHNOLOGIES, INC. which
conducted our combinatorial chemistry business. We merged Axys
Advanced Technologies, Inc. with a subsidiary of Discovery Partners
International, Inc. As a result of the merger, we received shares in
Discovery Partners International, Inc. in exchange for our shares of
Axys Advanced Technologies, Inc. and became a minority shareholder
of Discovery Partners International, Inc.
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.
THE OFFERING
Debt securities and warrants
to purchase common stock ...................... $35,000,000 in aggregate
amount
Common Stock outstanding....................... 35,281,749 shares
Use of proceeds................................ For operating costs, capital
expenditures and working
capital needs and other
general corporate purposes
Nasdaq National Market symbol................. AXPH
The number of shares of common stock outstanding is based on the number of
shares outstanding as of June 27, 2000, and excludes:
- 3,447,326 shares subject to options outstanding as of June 27,
2000, at a weighted average exercise price of $5.4469 per share;
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- 606,044 additional shares that we could issue under our stock
option plans;
- 488,094 additional shares that we could issue under our employee
stock purchase plan;
- 557,127 shares subject to warrants outstanding as of June 27,
2000, at a weighted average exercise price of $12.04; and
- shares which may be issued pursuant to the Company's shelf
registration filed on April 28, 2000 with respect to the issuance
of up to $50,000,000 aggregate amount of the Company's common
stock.
This prospectus provides you with a general description of the securities we may
offer. Each time we offer securities, we will provide you with a prospectus
supplement that will describe the specific amounts, prices and terms of the
securities we offer. The prospectus supplement also may add, update or change
information contained in this prospectus.
We may sell securities to or through underwriters, dealers or agents or directly
to purchasers. We and our agents reserve the sole right to accept and to reject
in whole or in part any proposed purchase of securities. The prospectus
supplement, which we will provide to you each time we offer securities, will set
forth the names of any underwriters, dealers or agents involved in the sale of
securities, and any applicable fee, commission or discount arrangements with
them. See "Plan of Distribution."
RISK FACTORS
AN INVESTMENT IN OUR SECURITIES OFFERED PURSUANT TO THIS PROSPECTUS INVOLVES
A HIGH DEGREE OF RISK. THE SECURITIES OFFERED PURSUANT TO THIS PROSPECTUS 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 SECURITIES OFFERED
PURSUANT TO THIS PROSPECTUS.
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.
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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;
- 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 March 2000 private placement,
together with the anticipated net proceeds of this offering and other 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 or 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
and the three month period ended March 31, 2000, we generated a net loss of
approximately $48 million and $8.5 million, respectively. As of December 31,
1999 and March 31, 2000, we had an accumulated deficit of approximately $277
million and 286 million, respectively. 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 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,
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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,
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. 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.
In addition, one of our collaboration partners Bayer AG, decided to
discontinue development of the compound known as BAY 44-3428 for asthma based on
its view that the toxicological properties of the compound precluded advancement
into clinical development. Bayer AG had previously selected BAY 44-3428 for
development as an oral treatment for asthma based on the demonstrated in vivo
efficacy of the compound in primate studies. Based on toxicological studies of a
tryptase inhibitor compound from a chemical class that is different from BAY
44-3428, we believe that the toxicological properties of BAY 44-3428 are not
related to tryptase inhibition. We cannot make any assurance that Bayer AG will
select any other compound for further development in lieu of BAY 44-3428 or that
Bayer AG will continue as one of our collaboration partners on the development
of any other drugs.
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,
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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 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.
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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 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.
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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 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, 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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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 securities 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" information 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
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. Further, all
filings we make under the Securities Exchange Act after the date of the initial
registration statement and prior to effectiveness of the registration statement
shall be deemed to be incorporated by reference into this prospectus. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15 (d) of the
Securities Exchange Act of 1934:
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 quarterly report on Form 10-Q for the quarter ended March 31, 2000
filed with the commission on May 12, 2000;
3. Our Current Reports of Form 8-K filed with the Commission on February
22, 2000 and May 15, 2000;
4. Our Definitive Proxy Statement filed with the Commission on April 25,
2000 in connection with our 2000 Annual Meeting of Stockholders;
5. 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.
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\We will provide to you at no cost a copy of any and all of the information
incorporated by reference into the registration statement of which this
prospectus is a part. You may make a request for copies of this information in
writing or by telephone. Requests should be directed to:
Axys Pharmaceuticals, Inc.
Attention: Investor Relations
180 Kimball Way
South San Francisco, CA 94080
(650) 829-1000
RATIO OF EARNINGS TO FIXED CHARGES
The following table presents our historical ratios of earnings to fixed
charges for the periods indicated (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Year Ended December 31,
March 31, 2000 1999 1998(1) 1997 1996 1995
-------------- ---- ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio........... * * * * * *
Deficiency...... 8,900 49,806 153,843 10,967 5,928 23,733
</TABLE>
* Earnings for the period indicated were insufficient to cover fixed charges.
(1) Deficiency includes charges resulting from acquired in-process research and
development costs.
For purposes of determining the ratio of earnings to fixed charges, earnings are
defined as net loss from continuing operations before adjustments for minority
interests in consolidated subsidiaries and income from equity investees, plus
fixed charges. Fixed charges consist of interest expense, and estimated interest
within rental expense.
DESCRIPTION OF DEBT SECURITIES
We may offer debt securities of our company. These securities may be secured
or unsecured general obligations of our company which could be senior or junior
to our other obligations. They may be secured by some or all of our assets,
cash, properties or ownership interests in our subsidiaries and affiliated
companies. These obligations may be convertible or exchangeable into our common
stock.
GENERAL TERMS
A prospectus supplement will describe the terms of any debt securities that
we propose to issue and the prices at which we will offer them. The description
of the debt securities will include:
- the title of the debt securities;
- any limit on the aggregate principal amount of such debt
securities;
- the person to whom any interest on any debt security will be paid;
- the date or dates on which we must pay the principal;
- the rate or rates at which the debt securities will bear interest,
the date or dates from which interest will accrue, and the dates
on which we must pay interest;
- if applicable, the conditions under which we may pay interest in
shares of our common stock;
- the place or places where we must pay the principal and any
premium or interest on the debt securities;
- the terms and conditions on which we may redeem any debt security,
if at all;
- any obligation to redeem or purchase any debt securities, and the
terms and conditions on which we must do so;
- the denominations in which we may issue the debt securities;
- the manner in which we will determine the amount of principal of
or any premium or interest on the debt securities;
- the currency in which we will pay the principal and any premium or
interest on the debt securities;
- the principal amount of the debt securities that we will pay upon
the declaration of acceleration (if ever) of their maturity;
- the amount that will be deemed to be the principal amount for any
purpose, including the principal amount that will be due and
payable upon any maturity or that will be deemed outstanding as of
any date;
- if applicable, the terms of any right to convert debt securities
into, or exchange debt securities for, shares of our common stock,
including whether such right is mandatory or permissive, how the
exchange or conversion would be calculated and, if applicable, any
antidilution provisions;
- the applicable events of default; and
- the applicable representations, warranties and covenants of our
company.
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EXCHANGE AND TRANSFER
Debt securities will be transferred or exchanged at the office of the
security registrar or at the office of any transfer agent designated by us.
We will not impose a service charge for any transfer or exchange, but
we may require holders to pay any tax or other governmental charges associated
with any transfer or exchange.
In the event of any potential redemption of debt securities of any
series, we will not be required to:
o issue, register the transfer of, or exchange, any debt security of
that series during the period specified in the applicable
prospectus supplement, or
o register the transfer of or exchange any debt security of that
series selected for redemption, in whole or in part, except the
unredeemed portion being redeemed in part.
We have initially appointed the trustee as the security registrar.
Any transfer agent, in addition to the security registrar, initially designated
by us will be named in the prospectus supplement. We may designate additional
transfer agents or change transfer agents or change the office of the transfer
agent. However, we will be required to maintain a transfer agent in each place
of payment for the debt securities of each series.
GLOBAL SECURITIES
The debt securities of any series may be represented, in whole or in
part, by one or more global securities. Each global security will:
o be registered in the name of a depositary that we will identify in
a prospectus supplement,
o be deposited with the depositary or nominee or custodian, and
o bear any required legends.
No global security may be exchanged in whole or in part for debt
securities registered in the name of any person other than the depositary or any
nominee unless:
o the depositary has notified us that it is unwilling or unable to
continue as depositary or has ceased to be qualified to act as
depositary,
o an event of default is continuing, or
o any other circumstances described in a prospectus supplement.
As long as the depositary, or its nominee, is the registered owner of
a global security, the depositary or nominee will be considered the sole owner
and holder of the debt securities represented by the global security for all
purposes under the indentures. Except in the above limited circumstances, owners
of beneficial interests in a global security:
o will not be entitled to have the debt securities registered in
their names,
o will not be entitled to physical delivery of certificated debt
securities, and
o will not be considered to be holders of those debt securities under
the indenture.
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Payments on a global security will be made to the depositary or its
nominee as the holder of the global security. Some jurisdictions have laws that
require that certain purchasers of securities take physical delivery of such
securities in definitive form. These laws may impair the ability to transfer
beneficial interests in a global security.
Institutions that have accounts with the depositary or its nominee
are referred to as "participants." Ownership of beneficial interests in a global
security will be limited to participants and to persons that may hold beneficial
interests through participants. The depositary will credit, on its book-entry
registration and transfer system, the respective principal amounts of debt
securities represented by the global security to the accounts of its
participants.
Ownership of beneficial interests in a global security will be shown
on and effected through records maintained by the depositary, with respect to
participants' interests, or any participant, with respect to interests of
persons held by participants on their behalf.
Payments, transfers and exchanges relating to beneficial interests in
a global security will be subject to policies and procedures of the depositary.
The depositary policies and procedures may change from time to time. Neither we
nor the trustee will have any responsibility or liability for the depositary's
or any participant's records with respect to beneficial interests in a global
security.
PAYMENT AND PAYING AGENTS
The provisions of this paragraph will apply to the debt securities
unless otherwise indicated in the prospectus supplement. Payment of interest on
a debt security on any interest payment date will be made to the person in whose
name the debt security is registered at the close of business on the regular
record date. Payment on debt securities of a particular series will be payable
at the office of a paying agent or paying agents designated by us. However, at
our option, we may pay interest by mailing a check to the record holder. The
corporate trust office will be designated as our sole paying agent.
We may also name any other paying agents in the prospectus
supplement. We may designate additional paying agents, change paying agents or
change the office of any paying agent. However, we will be required to maintain
a paying agent in each place of payment for the debt securities of a particular
series.
All moneys paid by us to a paying agent for payment on any debt
security which remain unclaimed for a period specified in the prospectus
supplement will be repaid to us. Thereafter, the holder may look only to us for
such payment.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not consolidate with or merge into any other person, in a
transaction in which we are not the surviving corporation, or convey, transfer
or lease its properties and assets substantially as an entirety to, any person,
unless:
o the successor, if any, is a U.S. corporation, limited liability
company, partnership, trust or other entity,
o the successor assumes Axys' obligations on the debt securities and
under the indentures,
o immediately after giving effect to the transaction, no default or
event of default shall have occurred and be continuing, and
o certain other conditions are met.
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EVENTS OF DEFAULT
The indenture defines an event of default with respect to any series
of debt securities as one or more of the following events:
(1) failure to pay principal of or any premium on any debt security
of that series when due,
(2) failure to pay any interest on any debt security of that series
for the period specified in the prospectus supplement,
(3) failure to deposit any sinking fund payment, if applicable, when
due,
(4) failure to perform any other covenant under the indenture that
applies to any debt security of that series and we do not cure
such failure within the period specified in the prospectus
supplement after being given the notice of such failure required
in the indenture,
(5) our bankruptcy, insolvency or reorganization, and
(6) any other event of default specified in the prospectus
supplement.
An event of default of one series of debt securities is not
necessarily an event of default for any other series of debt securities.
If an event of default, other than an event of default described in
clause (5) above, shall occur and be continuing, either the trustee or the
holders of a certain percentage of aggregate principal amount of the outstanding
debt securities of that series, as specified in the prospectus supplement, may
declare the principal amount of the debt securities of that series to be due and
payable immediately.
If an event of default described in clause (5) above shall occur, the
principal amount of all the debt securities of that series, will automatically
become immediately due and payable.
After acceleration the holders of a majority in aggregate principal
amount of the outstanding securities of that series may, under certain
circumstances, rescind and annul such acceleration if all events of default,
other than the non-payment of accelerated principal, or other specified amount,
have been cured or waived.
Other than the duty to act with the required care during an event of
default, the trustee will not be obligated to exercise any of its rights or
powers at the request of the holders unless the holders shall have offered to
the trustee reasonable indemnity. Generally, the holders of a majority in
aggregate principal amount of the outstanding debt securities of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee or exercising any trust or power
conferred on the trustee.
A holder will not have any right to institute any proceeding under
the indentures, or for the appointment of a receiver or a trustee, or for any
other remedy under the indentures, unless:
(1) the holder has previously given to the trustee written notice of
a continuing event of default with respect to the debt securities
of that series,
(2) the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made a written
request and have offered reasonable indemnity to the trustee to
institute the proceeding, and
(3) the trustee has failed to institute the proceeding and has not
received direction inconsistent with the original request from
the holders of a majority in aggregate principal amount of the
outstanding debt securities of that series within 60 days after
the original request.
Holders may, however, sue to enforce the payment of principal,
premium or interest on any debt security on or after the due date or to enforce
the right, if any, to convert any debt security without following the procedures
listed in (1) through (3) above.
We will furnish the trustee an annual statement by our officers as to
whether or not we are in default in the performance of the indenture and, if so,
specifying all known defaults.
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MODIFICATION AND WAIVER
Axys and the trustee may make modifications and amendments to the
indentures with the consent of the holders of a majority in aggregate principal
amount of the outstanding securities of each series affected by the modification
or amendment.
However, neither we nor the trustee will be allowed to make any
modification or amendment without the consent of the holder of each outstanding
security of that series affected by the modification or amendment if such
modification or amendment would:
o change the stated maturity of any debt security,
o reduce the principal, premium, if any, or interest on any debt
security,
o reduce the principal of an original issue discount security or any
other debt security payable on acceleration of maturity,
o change the place of payment or the currency in which any debt
security is payable,
o impair the right to enforce any payment after the stated maturity
or redemption date,
o if subordinated debt securities, modify the subordination
provisions in a materially adverse manner to the holders,
o if convertible debt securities, adversely affect the right to
convert any debt security, or
o change the provisions in the indenture that relate to modifying or
amending the indenture.
SATISFACTION AND DISCHARGE; DEFEASANCE
We may be discharged from our obligations on the debt securities of
any series if we deposit with the trustee enough cash to pay all the principal,
interest and any premium due to the stated maturity date or redemption date of
such debt securities.
The indenture contains a provision that permits us to elect:
o to be discharged from all of our obligations, subject to limited
exceptions, with respect to any series of debt securities then
outstanding, and/or
o to be released from our obligations under the following
covenants and from the consequences of an event of default
resulting from a breach of these covenants:
(1) the limitations on sale and leaseback transactions,
(2) the limitations on secured debt,
(3) if subordinated debt securities, the subordination
provisions, and
(4) covenants as to payment of taxes and maintenance of
properties.
To make either of the above elections, we will be required to deposit
in trust with the trustee enough money to pay in full the principal, interest
and premium on the debt securities. This amount may be made in cash and/or U.S.
government obligations. As a condition to either of the above elections, we will
be required to deliver to the trustee an opinion of counsel that the holders of
the debt securities will not recognize income, gain or loss for federal income
tax purposes as a result of the action.
If any of the above events occurs, the holders of the debt securities
of the series will not be entitled to the benefits of the indenture, except for
the rights of holders to receive payments on debt securities or the registration
of transfer and exchange of debt securities and replacement of lost, stolen or
mutilated debt securities.
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NOTICES
Notices to holders will be given by mail to the addresses of the
holders in the security register.
GOVERNING LAW
The indenture and the debt securities will be governed by, and
construed under, the law of the State of New York.
REGARDING THE TRUSTEE
The indenture will limit the right of the trustee, should it become a
creditor of Axys, to obtain payment of claims or secure its claims.
The trustee will be permitted to engage in certain other
transactions. However, if the trustee, acquires any conflicting interest, and
there is a default under the debt securities of any series for which they are
trustee, the trustee will be required to eliminate the conflict or resign.
DELAWARE GENERAL CORPORATION LAW SECTION 203
We are a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law, an anti-takeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
transaction with an "interested stockholder" for a period of three years after
the date the person became an interested stockholder, unless (with certain
exceptions) the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner, as
described below.
The Section 203 restrictions do not apply if:
(1) the business combination or transaction is approved by our Board
of Directors before the date the interested stockholder obtained
such status,
(2) upon consummation of the transaction which resulted in the
stockholder obtaining such status, the stockholder owned at
least 85% of the shares of stock entitled to vote generally in
the election of directors (the "voting stock") that are
outstanding at the time the transaction commenced. The 85%
calculation does not include those shares
o owned by directors who are also officers of the target
corporation, or
o held by employee stock plans which do not permit employees to
decide confidentially whether to accept a tender or exchange
offer, or
(3) if on or after the date the interested stockholder obtained such
status, the business combination is approved by our Board of
Directors and at a stockholder meeting by the affirmative vote
of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder.
Generally, a "business combination" includes a merger, asset sale, or
other transaction resulting in a financial benefit to the interested
stockholder. Generally, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock. Section 203 may prohibit or delay mergers or other
takeover or change in control attempts with respect to Axys. As a result,
Section 203 may discourage attempts to acquire us even though such transaction
may offer our stockholders the opportunity to sell their stock at a price above
the prevailing market price.
Notwithstanding anything contained herein the contrary, the
prospectus supplement with respect to any debt securities of any series may
contain terms and conditions different from or in addition to those terms and
conditions set forth above.
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DESCRIPTION OF WARRANTS
We may also issue warrants to purchase shares of our common stock in
connection with the issuance of our debt securities. A prospectus supplement
will describe the terms of any warrants that we propose to issue.
The description of the warrants to purchase our common stock will include:
- the offering price, if any:
- the number of shares of our common stock purchasable upon exercise
of one stock warrant and the initial price at which the shares may
be purchased upon exercise;
- the dates on which the right to exercise the stock warrants begin
and expire;
- U.S. federal income tax consequences;
- call provisions, if any;
- the currencies in which the offering price and the exercise price
are payable; and
- if applicable, the antidilution provisions of the stock warrants.
DESCRIPTION OF COMMON STOCK
Set forth below is certain information concerning our common stock
and a brief summary of the material provisions of our Bylaws.
GENERAL
Our authorized capital stock is:
50,000,000 shares of common stock, par value $.001 per share; and
10,000,000 shares of preferred stock, par value $.001 per share, of
which 500,000 shares are designated as Series A Junior Participating
Preferred Stock.
As of June 27, 2000, 35,281,749 shares of common stock were issued
and outstanding, no shares of Series A Junior Participating Preferred Stock were
issued and outstanding, 3,447,326 shares of common stock were reserved for
issuance upon the exercise of outstanding options and 557,127 shares of common
stock were reserved for issuance upon the exercise of outstanding warrants.
Our shares of common stock currently outstanding are traded on the
Nasdaq National Market under the symbol "AXPH." All shares of common stock
issued upon any conversion or exchange of any debt securities of any series or
any warrants will, when issued in accordance with the terms of the applicable
agreement be duly authorized, fully paid and nonassessable.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share
owned of record on all matters submitted to a vote of stockholders. Subject to
the preferential rights of any outstanding series of preferred stock and to any
restrictions on the payment of dividends imposed under the terms of our
indebtedness, the holders of common stock are entitled to receive such dividends
as may be declared from time to time by our board of directors out of funds
legally available therefor. We may not declare or pay dividends or distribution
on any share of our common stock, unless immediately after we declare a dividend
or distribution on the common stock, we declare a dividend or distribution on
the Series A Junior Participating Preferred Stock. Holders of common are
entitled, after payment of all prior claims, to receive pro rata all of our
assets upon a liquidation of the Company. Holders of common stock have no
preemptive rights.
19
<PAGE> 20
USE OF PROCEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering.
We intend to use the net proceeds of this offering, if any, together with
other available funds, for operating costs, capital expenditures and working
capital needs and other general corporate purposes. We have not identified
precisely the amounts we plan to spend on each of these areas or the timing of
such expenditures. Proceeds of this offering may also be used to acquire
companies or products that complement our business, although we are not planning
or negotiating any such transactions as of the date of this prospectus. The
amounts actually expended for each purpose may vary significantly depending upon
numerous factors, including the amount and timing of the proceeds from this
offering and progress with our research and development programs. In addition,
expenditures will also depend upon the establishment of collaborative
arrangements with other companies, the availability of other financing and other
factors.
We anticipate that we will be required to raise substantial additional
capital to continue to fund our research and the development of our product
candidates. Additional capital may be raised through additional public or
private financing, as well as collaborative relationships, borrowings and other
available sources.
PLAN OF DISTRIBUTION
We may sell the debt securities and warrants being offered pursuant to this
prospectus:
o directly to purchasers;
o to or through underwriters;
o through dealers, agents or institutional investors; or
o through a combination of such methods.
The prospectus supplement for the securities we sell will describe the
offering of such securities, including:
o the name or names of any underwriters, agents or dealers;
o the purchase price and the proceeds to us from such offering;
o any underwriting discounts and other items constituting
underwriters' compensation;
o any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers; and
o whether the securities will trade on any securities exchange or the
Nasdaq National Market.
In addition, a prospectus supplement will disclose, if applicable, the
conditions under which we may pay interest in shares of our common stock.
UNDERWRITERS
If any underwriters are utilized in the sale of our debt securities and
warrants in respect of which this Prospectus is delivered, we will enter into
an underwriting agreement with such underwriters and the terms of the
transaction will be set forth in the applicable Prospectus Supplement, which
will be used by the underwriters to resell the securities in respect of which
this Prospectus is delivered to the public. The underwriters will acquire such
securities for their own account and may resell the securities from time to
time, in one or more transactions, at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. If underwriters are
used in the sale of our securities, prior to the commencement of the
distribution of those underwritten securities (i) copies of all proposed
underwriting documents will be sent to the NASD for review and (ii) the maximum
compensation to be paid to the underwriters in connection with the offering of
those securities will be approved by the NASD. Underwriters may be deemed to
have received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from the purchasers of these debt
securities and warrants for whom they act as agent. Underwriters may also sell
these securities and warrants to or through dealers. These dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
20
<PAGE> 21
The debt securities and warrants may also be offered and sold, if so
indicated in any Prospectus Supplement, in connection with a remarketing upon
their purchase, in accordance with a redemption or repayment pursuant to their
terms, or otherwise, by one or more firms ("remarketing firms"), acting as
principals for their own accounts or as agents for us. Any remarketing firm
will be identified and the terms of its agreement, if any, with us and its
compensation will be described in the applicable Prospectus Supplement.
Remarketing firms may be deemed to be underwriters in connection with the debt
securities and warrants remarketed thereby.
If so indicated in any Prospectus Supplement, we will authorize agents and
underwriters or dealers to solicit offers by certain purchasers to purchase our
securities from us at the public offering price set forth in the Prospectus
Supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. Such contracts will be subject to
only those conditions set forth in the applicable Prospectus Supplement, and
such Prospectus Supplement will set forth the commission payable for
solicitation of such offers.
AGENTS
Offers to purchase our securities may be solicited by agents designated by
us from time to time. Any such agent, who may be deemed to be an underwriter as
that term is defined in the Securities Act, involved in the offer or sale of
our securities in respect of which this Prospectus is delivered will be named,
and any commissions payable by us to such agent set forth, in the Prospectus
Supplement. Unless otherwise indicated in the applicable Prospectus Supplement,
any such agent will be acting on a best efforts basis for the period of its
appointment. We may also sell our securities to an agent as principal.
DEALERS
If a dealer is utilized in the sale of our securities in respect of which
this Prospectus is delivered, we will sell such securities to the dealer, as
principal. The dealer may then resell such securities to the public at varying
prices to be determined by such dealer at the time of resale.
DIRECT SALES
We may sell any of our securities directly to purchasers. In the event we
sell directly to purchasers, we will not engage underwriters or agents in the
offer and sale of such securities.
INDEMNIFICATION
Underwriters, agents, dealers, and remarketing firms may be entitled under
agreements which may be entered into with us to indemnification by us against
certain liabilities, including liabilities under the Securities Act, and may be
customers of, engage in transactions with or perform services for us in the
ordinary course of business.
LEGAL MATTERS
The legality of the securities offered hereby is being passed upon by
Latham & Watkins, New York, New York. Alan C. Mendelson, a partner at Latham &
Watkins, is a director of Axys and also owns 18,329 shares of Axys' common stock
and has options to purchase an additional 35,000 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.
21
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee........................................ $ 9,275
--------
Accounting fees and expenses................................ 30,000
--------
Legal fees and expenses..................................... 150,000
--------
Trustee fees and expenses................................... 5,000
--------
Miscellaneous expenses...................................... 10,000
--------
Total 204,275
========
</TABLE>
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents and in agreements with its directors and
officers provisions expanding the scope of indemnification beyond that
specifically provided by the Delaware law. The Registrant's Bylaws provide that
the Registrant shall indemnify to the full extent authorized by law each of its
directors and officers against expenses (including attorney fees), judgments,
fines, settlements and other amounts actually and reasonable incurred in
connection with any proceeding arising by reason of the fact that such person is
or was an agent of the Registrant or any predecessor of the Registrant or serves
or served any other enterprise as a director or officer at the request of the
Registrant or a predecessor of the Registrant. The Registrant's Bylaws also
provide that the Registrant may similarly indemnify each of its employees or
agents. The Registrant has entered into indemnification agreements with each of
our directors and officers that provide for indemnification greater than that
provided in the Bylaws.
The Registrant maintains insurance on behalf of any person who is a director
or officer against any loss arising from any claim asserted against him or her
and incurred by him or her in any such capacity, subject to certain exclusions.
At present, there is no pending litigation or proceeding involving a director or
officer of the Registrant as to which indemnification is being sought nor is the
Registrant aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
See also the undertakings set out in response to Item 17 herein.
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
<S> <C>
1.1 Proposed form of Purchase Agreement
4.1 Form of Indenture
4.2 Form of Debt Security (included in Exhibit 4.1)
4.3 Form of Stock Warrant
5.1 Opinion of Latham & Watkins
12.1 Statement re: Computation of Ratios
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Latham & Watkins (included in Exhibit 5.1).
24.1 Power of Attorney (previously filed on April 28, 2000 with
Registrant's initial Registration Statement on Form S-3).
25.1 Statement of Eligibility and Qualification on Form T-1 of
trustee to act as trustee under indenture
</TABLE>
II-1
<PAGE> 23
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
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;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed 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) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. 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
Securities Exchange Act of 1934 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.
C. The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. 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 Securities and Exchange 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.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
II-2
<PAGE> 24
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
F. The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-3
<PAGE> 25
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 South San Francisco, State of California on July 10,
2000.
AXYS PHARMACEUTICALS, INC.
By: /s/ *
------------------------------------
John P. Walker
Chief Executive Officer and
Chairman of the Board
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------------------------- -------------------------------- -------------------
<S> <C> <C>
Chief Executive Officer,
Chairman of the Board, July 10, 2000
/s/ * Director (Principal
------------------------------------ Executive Officer and
John P. Walker Principal Financial Officer)
Director of Financial
Planning and Analysis & July 10, 2000
/s/ * Controller (Principal
------------------------------------ Accounting Officer)
Mark B. Lucky
/s/ * Director July 10, 2000
------------------------------------
Ann M. Arvin, MD.
/s/ * Director July 10, 2000
------------------------------------
Vaughn M. Kailian
/s/ * Director July 10, 2000
------------------------------------
Donald Kennedy, Ph.D.
/s/ * Director July 10, 2000
------------------------------------
Irwin Lerner
/s/ * Director July 10, 2000
------------------------------------
Alan C. Mendelson
/s/ * Director July 10, 2000
------------------------------------
J. Leighton Read, M.D.
</TABLE>
* /s/ William J-Newell
-------------------------
William J-Newell
Attorney-in-Fact
II-4
<PAGE> 26
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
1.1 Proposed Form of Purchase Agreement
4.1 Form of Indenture
4.2 Form of Debt Security (included in Exhibit 4.1)
4.3 Form of Stock Warrant
5.1 Opinion of Latham & Watkins
12.1 Statement re: Computation of Ratios
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Latham & Watkins (included in Exhibit 5.1).
24.1 Power of Attorney (previously filed on April 28, 2000 with
Registrant's initial Registration Statement on Form S-3).
25.1 Statement of Eligibility and Qualification on Form T-1 of
trustee to act as trustee under indenture
</TABLE>
