As filed with the Securities and Exchange Commission on January 19, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NEUROCRINE BIOSCIENCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0525145
(State of incorporation) (I.R.S. Employer Identification No.)
10555 Science Center Drive
San Diego, California 92121
(858) 658-7600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Gary A. Lyons
President, Chief Executive Officer and Director
Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, California 92121
(858) 658-7600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
John M. Newell
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
(213) 485-1234
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be 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, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered Share (1) Price (1) Registration Fee
- ----------------------------------------- --------------- ----------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share 2,327,777 $28.50 $66,341,645 $18,443
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<FN>
(1) Estimated solely for the purpose of computing the registration fee required
by Section 6(b) of the Securities Act and computed pursuant to Rule 457(c)
under the Securities Act based upon the average of the high and low prices
of the Common Stock on January 14, 2000, as reported on the Nasdaq National
Market.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
The information contained in this prospectus is not complete and may
be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell nor does it seek an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.
PROSPECTUS
(Subject to completion, dated January 19, 2000)
NEUROCRINE BIOSCIENCES, INC.
2,327,777 Shares of Common Stock
The selling shareholders identified in this prospectus may sell up to 2,327,777
shares of common stock of Neurocrine Biosciences, Inc., a Delaware corporation.
The selling shareholders may offer and sell their shares of common stock from
time to time: on terms to be determined at the time of a sale; in transactions
on the Nasdaq National Market; in privately negotiated transactions; or in a
combination of these methods of sale.
Neurocrine's Common Stock is listed on the Nasdaq National Market under the
symbol "NBIX." On January 14, 2000 the average of the high and low price of the
Common Stock was $28.50 per share.
The shares offered in this Prospectus involve a high degree of risk. You should
carefully consider certain "Risk Factors" in determining whether to buy any
Neurocrine Common Stock. See page 7.
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 January__, 2000
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TABLE OF CONTENTS
Page
Summary ............................................................... 3
Risk Factors .......................................................... 7
Business .............................................................. 15
Use of Proceeds ....................................................... 15
Selling Stockholders .................................................. 15
Plan of Distribution .................................................. 16
Legal Matters ......................................................... 17
Experts................................................................ 17
Where You Can Find More Information ................................... 17
Information Incorporated by Reference ................................. 18
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SUMMARY
Neurocrine is a leading neuroscience company focused on the discovery
and development of novel therapeutics for neuropsychiatric, neuroinflammatory
and neurodegenerative diseases and disorders. Our neuroscience, endocrine and
immunology disciplines provide us a unique biological understanding of the
molecular interaction between central nervous, immune and endocrine systems for
the development of therapeutic interventions for anxiety/ depression, insomnia,
glioblastoma, diabetes, multiple sclerosis, endometriosis, Alzheimer's disease,
Stroke and Obesity.
Strategic Alliances
We leverage our resources through strategic alliances and other
financing mechanisms to build internal product development and commercialization
capabilities. We currently have three strategic alliances:
o Janssen Pharmaceutica, N.V. ("Janssen"), a subsidiary of Johnson &
Johnson Development Corporation, focused on corticotropin releasing
factor receptor antagonists for the treatment of anxiety, depression
and substance abuse.
o American Home Products acting through Wyeth-Ayerst Laboratories
Division ("Wyeth-Ayerst") focused on modulation of excitatory amino
acid transporters ("EAATs") for neurodegenerative diseases and
psychiatric disorders.
o Eli Lilly and Co. ("Lilly") focused on corticotropin releasing factor
binding protein antagonists and agonists of corticotropin releasing
factor receptor 2 for the treatment of central nervous system
disorders including obesity and dementias such as Alzheimer's Disease.
Clinical Development
The following table summarizes Neurocrine's products in clinical
development.
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Program Indication Status Commercial Rights
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CRF Receptor Antagonist Anxiety/Depression Phase II Janssen/Neurocrine
GABA Receptor Subtype Agonist Insomnia Phase II Neurocrine
IL-4 Fusion Toxin Glioblastoma Phase I/II Neurocrine
Altered Peptide Ligand Multiple Sclerosis Phase II Neurocrine
Altered Peptide Ligand Type I Diabetes Phase I Neurocrine
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"Phase I" indicates that Neurocrine or its collaborative partner is
conducting clinical trials to determine safety, the maximally tolerated dose
and pharmacokinetics of the compound in human volunteers.
"Phase II" indicates that the Company or its collaborative partner are
conducting clinical trials to evaluate one of the Company's products in
humans to determine safety and efficacy in an expanded patient population.
Corticotropin releasing factor ("CRF") is the central
regulator of the body's overall response to stress. Neurocrine is developing a
new class of therapeutics that target stress-induced anxiety by acting as CRF
receptor antagonists. Our CRF receptor antagonist project is currently in Phase
II clinical development with our partner, Janssen Pharmaceutica, for
anxiety/depression.
According to a Gallup Survey conducted on behalf of the
National Sleep Foundation, 49% of all Americans say they have trouble sleeping.
In the recent past the majority of patients treated for insomnia have utilized
non-benzodiazepine compounds which, while preferable in side effect profile to
the benzodiazepine class compounds, still exhibit certain unfavorable side
effects. We have completed a Phase II clinical trial in insomnia with NBI-34060,
a GABA receptor subtype agonist, NBI-34060. A preliminary analysis of the safety
data indicates that NBI-34060 is well tolerated, and has an incidence of adverse
effects similar to placebo group. Statistical significance was reached for the
primary clinical endpoint (Latency to Persistent Sleep). We are completing data
analysis and we have planned additional Phase II studies.
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Multiple sclerosis is a chronic immune mediated disease
characterized by recurrent attacks of neurologic dysfunction due to damage to
the central nervous system. With our partner, Novartis Pharma A.G. ("Novartis"
as successor in rights of Ciba-Geigy, Limited), we complete a second Phase II
clinical trial with NBI-5788/MSP771, our Altered Peptide Ligand (APL) compound
in patients with multiple sclerosis. On July 7, 1999, Novartis exercised its
right to terminate our collaboration effective January 7, 2000. As a result, we
reacquired the worldwide rights to our multiple sclerosis compound,
NBI-5788/MSP771. On July 20, 1999, the Data and Safety Monitoring Board for our
NBI-5788/MSP771 Phase II trials recommended that the administration of the drug
be stopped due to a number of patients reporting hypersensitivity-type
reactions. As defined in the protocol, all patients treated with NBI-5788/MSP771
will be followed to establish a complete safety and efficacy database. We expect
that the analysis of the results of the trial will be completed in the first
quarter of 2000.
Immunotoxins are a novel form of cancer therapy which combine
a moiety which targets a cancer cell and a toxin which, when delivered to the
cancer cell, will lead to cell death. NBI-3001 is an IL-4 fusion toxin that
combines an IL-4 moiety which targets IL-4 receptors highly expressed in
malignant brain tumors with a Pseudomonas exotoxin. We are conducting a Phase
I/II trial with for NBI-3001, for glioblastoma (malignant brain tumors). In the
pre-clinical setting, NBI-3001 has been found to be highly cytotoxic to brain
tumor cell lines and exhibits anti-tumor activity in in vivo models of brain
cancer.
Type I Diabetes is one of the most prevalent chronic
conditions in North America. We believe that our proprietary altered peptide
ligand specific for autoimmune T cells involved in diabetes may stop or delay
the destruction of insulin secreting cells. We recently commenced a Phase I
safety and dose escalating clinical study with NBI-6024, our APL compound for
Type I Diabetic patients.
Research
The following table summarizes our most advanced research programs:
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Program Indication Status Commercial
Rights
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CRF Receptor Antagonist Anxiety/Depression;
Stroke Development Neurocrine
Gonadotropin Releasing
Hormone Factor Endometriosis Development Neurocrine
Excitatory Amino Neurodegenerative/
Acid Transporters Psychiatric disorder Research Wyeth-Ayerst/
Neurocrine
Melanocortin Receptor Agonist Obesity Research Neurocrine
Orexin Antagonist/ Agonist Sleep Disorders Research Neurocrine
Chemokine Antagonist Inflammatory Disorders Research Neurocrine
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"Research" indicates identification and evaluation of compounds in in vitro
and animal models.
"Development" indicates that lead compounds have been discovered that meets
certain in vitro and in vivo criteria. These compounds may undergo
structural modification and more extensive evaluation prior to selection for
preclinical development.
In addition to our CRF antagonist program which is partnered
with Janssen, we are conducting an independent program directed to the research
and development of novel CRF receptor antagonist compounds for use in anxiety/
depression, stroke and sleep disorder. Our novel CRF antagonist compounds have
shown efficacy in preliminary experiments in animal models.
Gonadotrophin-Releasing Hormone ("GnRH") is a hypothalmic decapeptide
that stimulates the secretion of the pituitary gonatrophins, luteinizing hormone
and follicle stimulating hormone. GnRH receptor antagonists and super-agonists
have been shown to shutdown the reproductive endocrine axis and have utility in
the treatment of hormone dependent proliferative diseases such an endometriosis,
prostate carcinoma and breast cancer. We have screened small molecule libraries
and identified novel GnRH receptor antagonist compounds.
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Excitatory Amino Acid Transporters ("EAATs") modulate the levels of
glutamate in the brain and are novel targets for the development of drugs. We
are collaborating with Wyeth-Ayerst in the research and development of compounds
that modulate EAATs for the treatment of neurodegenerative and psychiatric
disorders.
Melanocortin receptors are involved in the control of endocrine,
autonomic and central nervous system. Our consultants and scientists have cloned
several melancortin receptors and we are conducting research to identify avenues
for the discovery of effective therapies for the treatment of endocrine
functions modulated by these receptors such as obesity.
In humans narcolepsy is characterized by excessive daytime sleepiness
and abnormal REM sleep and affects 0.02% to 0.06% of the population in the
United States and Western Europe. As a possible therapy for the human disease we
are looking at the development of an orexin receptor agonist. The orexins
consist of two small peptides (28 and 33 amino acids) that are expressed in the
brain and have been linked to a variety of activities including, the control of
feeding, cardiovascular regulation, water intake and sleep. There are two
closely related receptors (1 and 2) for the orexin peptides that are expressed
in different areas of the brain and most likely mediate different functions of
the orexin peptides. Both orexin receptor agonists (narcolepsy) and antagonists
(insomnia) may have potential value for drug development. We have recently
screened a small molecule library to identify antagonists for the orexin
receptor. A small number of low affinity molecules resulted from the screen and
these compounds are now being used to further characterize the orexin system.
Chemokines are immune/inflammatory mediators that may have a
role in central nervous system inflammation and leukocyte invasion. We are
engaged in small molecule library screening and structure activity studies to
identify compounds that act as antagonists of these mediators.
Business Strategy
Our strategy is to utilize our understanding of the biology of the
central nervous, immune and endocrine systems to identify and develop novel
therapeutics. There are five key elements to our business strategy:
Target Multiple Product Platforms. We believe that certain central nervous
system drug targets, such as CRF, EAATs and MCH represent significant market
opportunities in psychiatric, neurologic and metabolic disorders. Immunological
targets, such as altered peptide ligands, offer therapeutic strategies related
to autoimmune diseases. Chemokines and GnRH allow us to combine our endocrine
and immunology expertise with new drug discovery technologies to identify novel
product opportunities.
Identify Novel Neuroscience and Immunology Drug Targets for the Development
of Therapeutics Which Address Large Unmet Market Opportunities. We employ
molecular biology as an enabling discipline to identify novel drug targets such
as receptors, genes and gene-related products. We also use advanced
technologies, including combinatorial chemistry, high-throughput screening, gene
sequencing and bioinformatics, to discover and develop novel small molecule
therapeutics.
Leverage Strategic Alliances to Enhance Development and Commercialization
Capabilities. We intend to leverage the development, regulatory and
commercialization expertise of our corporate partners to accelerate the
development of our potential products, while we retain commercial or
co-promotion rights in North America.
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Outsource Capital Intensive and Non-Strategic Activities. We intend to
focus our resources on research and development activities by outsourcing our
requirements for manufacturing, preclinical testing and clinical monitoring
activities.
Acquire Complementary Research and Development Drug Candidates. We plan to
continue to selectively acquire rights to products in various stages of research
and clinical development in the fields of neurology and immunology to take
advantage of the development and future commercialization capabilities we are
developing in cooperation with our strategic partners.
Recent Developments
On November 29, 1999, Neurocrine announced results from a Phase II
clinical trial demonstrating that NBI-34060 is a robust sedative hypnotic as
demonstrated by a highly statistically significant and clinically relevant
effect in inducing sleep when compared to placebo. These data confirm that
NBI-34060 is safe and effective in helping subjects with transient insomnia
achieve rapid sleep induction without next day residual effects associated with
most currently marketed sleep hypnotics.
The results indicate statistical significance was reached for the
primary clinical endpoint (Latency to Persistent Sleep-LPS), the required
regulatory endpoint for approval. In this study, which enrolled 228 transient
insomnia subjects, those subjects receiving NBI-34060 the mean time to LPS was
16 minutes compared to 34 minutes in the placebo group (p less than .001). In
addition, the data indicated that a majority of subjects in the treated group
fell asleep within 9 minutes as indicated by the median time to LPS as compared
to 23 minutes in the placebo group.
The Phase II clinical trial was a randomized-double blinded placebo
controlled, multi-center Phase II clinical trial of NBI-34060 in 228 subjects
with transient insomnia. The study was conducted in a sleep laboratory setting
employing objective polysomnographic assessments. The safety findings indicate
that NBI-34060 was safe and well tolerated at doses up to 30 mg. There were no
serious adverse events reported in this clinical trial. Overall there was a low
incidence of adverse effects, which was comparable to that observed in the
placebo group with no residual next day hangover effects.
Neurocrine is moving rapidly to expand clinical development of
NBI-34060 and plans to initiate a dose-response, randomized-placebo controlled,
multi-center Phase II study in over 550 subjects in the 2nd Quarter 2000. These
studies will be conducted in subjects with chronic insomnia and will include
other subject sub-groups. Neurocrine is also designing a large scale pivotal
Phase III program in more than 1500 subjects scheduled to begin in late 2000.
In addition at an investor conference in early December,
Florian Holsboer, M.D., Ph.D. of the Max Planck Institute for Psychiatry in
Germany presented preliminary safety and efficacy results on 20 subjects in an
open-label Phase II study with a CRF receptor antagonist (R121919/NBI-30775).
Neurocrine and Janssen Pharmaceutica are developing this compound for
anxiety/depression. Results suggests an improvement in widely accepted measures
of anxiety and depression. Comprehensive findings from this trial will be
finalized in early 2000.
On December 21, 1999, the Company signed a definitive agreement with
Paladin Labs Inc. (Vancouver: PLB) for the sale of exclusive worldwide rights to
Neurocrine's neurosteroid program as well as the sale of its Canadian affiliate,
Neuroscience Pharma, Inc. Under the terms of the Agreement, Neurocrine will
receive approximately $2.0 million and will receive royalties on worldwide
product sales.
On December 25, 1999 Neurocrine Biosciences, Inc. signed an exclusive
agreement with Taisho Pharmaceutical Co. LTD providing Taisho an option to
obtain European and Asian commercialization rights for Neurocrine's altered
peptide ligand (APL) for diabetes (NBI-6024). Neurocrine would retain all rights
in the rest of the world, including North America. The resulting collaboration
could be valued at up to $45 million; consisting of licensing and option fees,
payments for certain development and regulatory milestones, and reimbursement of
50% of the worldwide development expenses. In addition, Neurocrine would receive
royalties on product sales in Europe and Japan.
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RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
the forward-looking statements, including those set forth below and elsewhere in
this Prospectus. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions or variations of such
words are intended to identify forward-looking statements, but are not the
exclusive means of identifying forward-looking statements. Additionally,
statements concerning future matters such as the development of new services,
technology enhancements, possible changes in legislation and other statements
regarding matters that are not historical are forward-looking statements.
Although forward-looking statements herein reflect the good faith judgment of
the Company's management, such statements can only be based on facts and factors
currently known by the Company. Consequently, forward-looking statements are
inherently subject to risks and uncertainties, and actual results and outcomes
may differ materially from results and outcomes discussed in the forward-looking
statements. Factors that could cause or contribute to such differences in result
and outcomes include without limitation those discussed below as well as those
discussed elsewhere herein. Readers are urged not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
Propectus. The Company's business, results of operations, and financial
condition are, and will continue to be, subject to the following risks:
All of the Company's Product Candidates are at an Early Stage of
Development. All of our product candidates are in research or development. We
have not requested or received regulatory approval to commercialize any product
from the United States Food and Drug Administration ("FDA") or any other
regulatory body. Any products which may result from our research and development
programs are not expected to be commercially available for the foreseeable
future, if at all.
The development of new pharmaceutical products is highly uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Such reasons include the possibilities that the potential products
will:
o be found ineffective or cause harmful side effects during preclinical
testing or clinical trials
o fail to receive necessary regulatory approvals
o be difficult to manufacture on a large scale
o be uneconomical or fail to achieve market acceptance
o be precluded from commercialization by proprietary rights of third parties
Our product candidates require significant additional research and
development efforts. We cannot guarantee that:
o regulatory authorities will approve the continued development of the our
development candidates
o clinical development of any of our development candidates will successfully
proceed through clinical trials
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o later stage clinical trials of our development candidates will show that
they are effective in treatment humans
o required regulatory approvals will be obtained on a timely basis, if at all
o any products for which approval is obtained will be approved for the
indications requested or be commercially successful
If any of these potential problems occurs, our business would be materially
affected and the price of our stock could decline.
The Company is Dependence on Strategic Alliances. We are dependent upon
our corporate partners to provide adequate funding for certain of our programs.
Under these arrangements, the our corporate partners are responsible for (i)
selecting compounds for subsequent development as drug candidates, (ii)
conducting preclinical testing and clinical trials and obtaining required
regulatory approvals for such drug candidates, and/or (iii) manufacturing and
commercializing any resulting drugs. Failure of our partners to select a
compound we have discovered for subsequent development into marketable products,
gain the requisite regulatory approvals or successfully commercialize products
would have a material adverse effect on our business, financial condition and
results of operations. Our strategy for development and commercialization of
certain of our products is dependent upon entering into additional arrangements
with research collaborators, corporate partners and others, and upon the
subsequent success of these third parties in performing their obligations. There
can be no assurance that we will be able to enter into additional strategic
alliances on favorable terms, or at all. If we fail to enter into additional
strategic alliances, it would have a material adverse effect on our business,
financial condition and results of operations.
We cannot control the amount and timing of resources that our corporate
partners devote to our partnered programs or potential products. If any of our
corporate partners breach or terminate their agreements with us or otherwise
fail to conduct their collaborative activities in a timely manner, the
preclinical testing, clinical development or commercialization of product
candidates will be delayed, and we will be required to devote additional
resources to product development and commercialization, or terminate certain
development programs. Our strategic alliances with Janssen, Lilly, and
Wyeth-Ayerst are subject to termination by Janssen, Lilly, or Wyeth-Ayerst,
respectively. There can be no assurance that Janssen, Lilly, or Wyeth-Ayerst
will not elect to terminate its strategic alliance with us prior to its
scheduled expiration. In addition, if our corporate partners effect a merger
with a third party, there can be no assurance that the strategic alliances will
not be terminated or otherwise materially adversely affected. The termination of
any current or future strategic alliances could have a material adverse effect
on our business, financial condition and results of operations. Our corporate
partners may develop, either alone or with others, products that compete with
the development and marketing of our products. Competing products, either
developed by our corporate partners or to which our corporate partners have
rights, may result in their withdrawal of support with respect to all or a
portion of the our technology, which would have a material adverse effect on our
business, financial condition and results of operations. There can be no
assurance that disputes will not arise in the future with respect to the
ownership of rights to any products or technology developed with corporate
partners. These and other possible disagreements with our corporate partners
could lead to delays in the collaborative research, development or
commercialization of certain of our product candidates or could require or
result in litigation or arbitration, which would be time-consuming and
expensive, and would have a material adverse effect on our business, financial
condition and results of operations.
The Company has no Manufacturing Capabilities and Relies on Third Party
Contractors. We have in the past utilized, and intend to continue to utilize,
third party manufacturing for the production of material for use in our clinical
trials and for the potential commercialization of our future products. We have
no experience in manufacturing products for commercial purposes and do not have
any manufacturing facilities. Consequently, we are solely dependent on contract
manufacturers for all production of products for development and commercial
purposes. In the event that we are unable to obtain or retain third-party
manufacturing, we will not be able to commercialize our products as planned. The
manufacture of our products for clinical trials and commercial purposes is
subject to cGMP regulations promulgated by the FDA. No assurance can be given
that our third-party manufacturers will comply with cGMP regulations or other
regulatory requirements now or in the future. Our current dependence upon third
parties for the manufacture of our products may adversely affect our profit
margin, if any, on the sale of our future products and our ability to develop
and deliver products on a timely and competitive basis.
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The Company has no Marketing or Sales Force; The Company's Products
will be Subject to Sales and Pharmaceutical Pricing Controls. We have retained
certain marketing or co-promotion rights in North America to our products under
development, and we plan to establish its own North American marketing and sales
organization. We currently have no experience in marketing or selling
pharmaceutical products and we do not have a marketing and sales staff. In order
to achieve commercial success for any product candidate approved by the FDA, we
must either develop a marketing and sales force or enter into arrangements with
third parties to market and sell our products. There can be no assurance that we
will successfully develop such experience or that we will be able to enter into
marketing and sales agreements with others on acceptable terms, if at all. If we
develop our own marketing and sales capabilities, we will compete with other
companies that currently have experienced and well funded marketing and sales
operations. To the extent that we enter into co-promotion or other marketing and
sales arrangements with other companies, any revenues we receive will be
dependent on the efforts of others, and there can be no assurance that such
efforts will be successful.
Our business may be materially adversely affected by the continuing efforts
of government and third party payers to contain or reduce the costs of health
care through various means. For example, in certain foreign markets, pricing or
profitability of prescription pharmaceuticals is subject to government 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 implement similar government
control in such jurisdictions. In addition, an increasing emphasis on managed
care in the United States has put, and will continue to put, pressure on
pharmaceutical pricing. Such initiatives and proposals, if adopted, could
decrease the price that we receive for any products we may develop and sell in
the future, and thereby have a material adverse effect on our business,
financial condition and results of operations. Further, to the extent that such
proposals or initiatives have a material adverse effect on other pharmaceutical
companies that may be corporate partners or prospective corporate partners for
certain our potential products, our ability to commercialize our potential
products may be materially adversely affected.
Our ability to commercialize pharmaceutical products may depend in part on
the extent to which reimbursement for the costs of such products and related
treatments will be available from government health administration authorities,
private health insurers and other third-party payers. Significant uncertainty
exists as to the reimbursement status of newly approved health care products,
and third-party payers are increasingly challenging the prices charged for
medical products and services. There can be no assurance that any third-party
insurance coverage will be available to patients for any products we develop.
Government and other third-party payors are increasingly attempting to contain
health care costs by limiting both coverage and the level of reimbursement for
new therapeutic products, and by refusing, in some cases, to provide coverage
for uses of approved products for disease indications for which the FDA has not
granted marketing approval. If government and third party payors do not provide
adequate coverage and reimbursement levels for our products, the market
acceptance of our products would be materially adversely affected.
The Company Faces Intense Competition. The biotechnology and
pharmaceutical industries are subject to rapid and intense technological change.
We face, and will continue to face, competition in the development and marketing
of its product candidates from academic institutions, government agencies,
research institutions and biotechnology and pharmaceutical companies.
Competition may arise from other drug development technologies, methods of
preventing or reducing the incidence of disease, including vaccines, and new
small molecule or other classes of therapeutic agents. There can be no assurance
that developments by others will not render our product candidates or
technologies obsolete or noncompetitive.
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We are developing products for the treatment of anxiety disorders, which
will compete with well-established products in the benzodiazepine class,
including Valium, marketed by Hoffman-La Roche, Inc., and depression, which will
compete with well-established products in the anti-depressant class, including
Prozac, marketed by Eli Lilly & Co., Zoloft marketed by Pfizer and Paxil
marketed by Smith Kline Beecham. Certain technologies under development by other
pharmaceutical companies could result in treatments for these and other diseases
and disorders. In addition, a number of companies are conducting research on
molecules to block CRF to treat anxiety and depression.
We are also developing a non-benzodiazepine GABA-A agonist for the
treatment of Insomnia. Ambien (Zolpidem) and Sonata (Zaleplon) are
non-benzodiazepine GABA-A agonists currently marketed for the treatment of
Insomnia by Searle/Synthelabo and American Home Products, respectively.
Guilford Pharmaceuticals, Inc. has developed Gliadel which has been
approved for use as an adjunct to surgery to prolong survival in patients with
recurrent multiforme glioblastoma for whom surgical resection is indicated and
will compete with our IL-4 Fusion toxin product NBI-3001. Temozolomide marketed
by Schering Plough may also compete with NBI-3001.
Products that may be competitive with NBI-5788 APL for Multiple Sclerosis
include Betaseron and Avonex, similar forms of beta-interferon marketed by
Berlex BioSciences and Biogen, Inc., respectively. Copaxone, a peptide polymer
marketed by Teva, has also been approved for the marketing in the United States
and certain other countries for the treatment of relapsing remitting multiple
sclerosis.
There are a number of competitors to products in our research pipeline.
Tacrine, marketed by Warner-Lambert Co., and Aricept, marketed by Pfizer Inc,
have been approved for the treatment of Alzheimer's dementia. Sales of these
drugs may reduce the available market for any product we develop for these
indications. Other biotechnology and pharmaceutical companies are developing
compounds to treat obesity. In the event that one or more of these products
and/or programs are successful, the market for our products may be reduced or
eliminated.
In addition, if we receive regulatory approvals for our products,
manufacturing efficiency and marketing capabilities are likely to be significant
competitive factors. At the present time, we have no commercial manufacturing
capability, sales force or marketing experience. In addition, many of our
competitors and potential competitors have substantially greater capital
resources, research and development resources, manufacturing and marketing
experience and production facilities than we do. Many of these competitors also
have significantly greater experience than we do in undertaking preclinical
testing and clinical trials of new pharmaceutical products and obtaining FDA and
other regulatory approvals.
The Company's Success is Dependent on Patents and Proprietary Rights.
Our success will depend on our ability to obtain patent protection for our
products, preserve our trade secrets, prevent third parties from infringing upon
our proprietary rights, and operate without infringing upon the proprietary
rights of others, both in the United States and internationally. Because of the
substantial length of time and expense associated with bringing new products
through the development and regulatory approval processes in order to reach the
marketplace, the pharmaceutical industry places considerable importance on
obtaining patent and trade secret protection for new technologies, products and
processes. Accordingly, we intend to seek patent protection for our proprietary
technology and compounds. There can be no assurance as to the success or
timeliness in obtaining any such patents, that the breadth of claims obtained,
if any, will provide adequate protection of our proprietary technology or
compounds, or that we will be able to adequately enforce any such claims to
protect its proprietary technology and compounds. Since patent applications in
the United States are confidential until the patents issue, and publication of
discoveries in the scientific or patent literature tend to lag behind actual
discoveries by several months, we cannot be certain that we were the first
creators of inventions covered by pending patent applications or that we were
the first to file patent applications for such inventions. Litigation, which
could result in substantial cost, may be necessary to enforce our patent and
license rights.
-10-
<PAGE>
The degree of patent protection afforded to pharmaceutical inventions
is uncertain and any patents that may issue with regard to our potential
products will be subject to this uncertainty. There can be no assurance that
competitors will not develop competitive products outside the protection that
may be afforded by the claims of our patents. Other potential products that we
may develop may be novel and therefore would not be covered by composition of
matter patent claims. In addition, we are aware of a number of patent
applications, both domestic and European, relating to neurological compounds,
and in particular CRF receptor antagonist potential therapeutics, that have been
filed by or are controlled by other entities, including our competitors and
potential competitors. There can be no assurance that our potential products can
be commercialized without a license to any patents which may issue from such
applications.
We may be required to obtain licenses to patents or proprietary rights
of others. As the biotechnology industry expands and more patents are issued,
the risk increases that our potential product may require licenses of third
party technologies. No assurance can be given that any licenses required under
any patents or proprietary rights of third parties would be made available on
acceptable terms, or at all. If we do not obtain such licenses, we could
encounter delays in product introductions while we attempts to design around
such patents, or we could find that the development, manufacture or sale of
products requiring such licenses could be foreclosed. Litigation may be
necessary to defend against or assert such claims of infringement to enforce our
issued patents and to protect our trade secrets or know-how, or to determine the
scope and validity of the proprietary rights of others. In addition,
interference proceedings declared by the United States Patent and Trademark
Office may be necessary to determine the priority of inventions with respect to
our patent applications or those of our licensors. Litigation or interference
proceedings could result in substantial costs to and diversion of effort by, and
may have a material adverse impact on, us. In addition, there can be no
assurance that our efforts would be successful.
We also rely upon unpatented trade secrets and improvements, unpatented
know-how and continuing technological innovation to develop and maintain our
competitive position, which we seek to protect, in part, by confidentiality
agreements with our commercial partners, collaborators, employees and
consultants. We also have invention or patent assignment agreements with our
employees and certain, but not all, commercial partners and consultants. There
can be no assurance that a person not bound by an invention assignment agreement
will not develop relevant inventions. There can be no assurance that binding
agreements will not be breached, that we will have adequate remedies for any
breach, or that our trade secrets will not otherwise become known or be
independently discovered by competitors.
As is commonplace in the biotechnology industry, we employ individuals
who were previously employed at other biotechnology or pharmaceutical companies,
including our competitors or potential competitors. To the extent our employees
are involved in research areas at the Company which are similar to those areas
in which they were involved at their former employer, we may be subject to
claims that such employees and/or the Company have inadvertently or otherwise
used or disclosed the alleged trade secrets or other proprietary information of
the former employers. Litigation may be necessary to defend against such claims,
which could result in substantial costs and be a distraction to management, and
which may have a material adverse effect on the Company, even if we are
successful in defending such claims.
The Company and its Products are Subject to Strict Government
Regulation. Regulation by government authorities in the United States and
foreign countries is a significant factor in the development, manufacture and
marketing of our proposed products and in our ongoing research and product
development activities. All of our products will require regulatory approval by
government agencies prior to commercialization. In particular, human therapeutic
products are subject to rigorous preclinical testing and clinical trials and
other approval procedures of the FDA and similar regulatory authorities in
foreign countries. Various federal and state statutes and regulations also
govern or influence testing, manufacturing, safety, labeling, storage and
record-keeping related to such products and their marketing. The process of
obtaining these approvals and the subsequent substantial compliance with
appropriate federal and state statutes and regulations require the expenditure
of substantial time and financial resources. If we fail or our collaborators or
licensees fail to obtain, or encounter delays in obtaining or maintaining,
regulatory approvals it could adversely affect the marketing of any products we
develop, our ability to receive product or royalty revenues and our liquidity
and capital resources.
-11-
<PAGE>
Preclinical testing is generally conducted in laboratory animals to
evaluate the potential safety and the efficacy of a product. The results of
these studies are submitted to the FDA as a part of an IND, which must be
approved before clinical trials in humans can begin. Typically, clinical
evaluation involves a time consuming and costly three-phase process.
Phase I Clinical trials are conducted with a small
number of subjects to determine the early safety
profile, the pattern of drug distribution and
metabolism.
Phase II Clinical trials are conducted with groups of
patients afflicted with a specific disease in
order to determine preliminary efficacy, optimal
dosages and expanded evidence of safety.
Phase III Large-scale, multi-center, comparative
trials are conducted with patients afflicted
with a target disease in order to provide enough
data to demonstrate with substantial evidence
the efficacy and safety required by the FDA.
The FDA closely monitors the progress of each of the three phases of
clinical trials and may, at its discretion, re-evaluate, alter, suspend or
terminate the testing based upon the data which have been accumulated to that
point and its assessment of the risk/benefit ratio to the patient.
The results of preclinical testing and clinical trials are submitted to
the FDA in the form of an NDA or BLA for approval to commence commercial sales.
In responding to an NDA or BLA, the FDA may grant marketing approval, request
additional information or deny the application if the FDA determines that the
application does not satisfy its regulatory approval criteria. There can be no
assurance that approvals will be granted on a timely basis (or at all). If
approved, there can be no assurance that such approval will include acceptable
labeling to adequately commercialize the product. Similar regulatory procedures
must also be complied with in countries outside the United States.
The results from preclinical testing and early clinical trials may not
be predictive of results obtained in later clinical trials. As a result, there
can be no assurance that clinical trials we conduct or our corporate partners
conduct will demonstrate sufficient safety and efficacy to obtain the requisite
regulatory approvals or will result in marketable products or marketable
indications. In addition, late stage clinical trials are often conducted with
patients having the most advanced stages of disease. During the course of
treatment, these patients can die or suffer other adverse medical effects for
reasons that may not be related to the pharmaceutical agent being tested but
which can nevertheless adversely affect clinical trial results. A number of
companies in the biotechnology and pharmaceutical industries have suffered
significant setbacks in advanced clinical trials, even after promising results
in earlier trials. If the our drug candidates are not shown to be safe and
effective in clinical trials, the resulting delays in developing other compounds
and conducting related preclinical testing and clinical trials, as well as the
potential need for additional financing, would have a material adverse effect on
our business, financial condition and results of operations.
The rate of completion of clinical trials we or our corporate partners
conduct may be delayed by many factors, including slower than expected patient
recruitment or unforeseen safety issues. Any delays in, or termination of, the
clinical trials for our products would have a material adverse effect on our
business, financial condition and results of operations. There can be no
assurance that we or our corporate partners will be permitted by regulatory
authorities to undertake clinical trials for our products or, if such trials are
conducted, that any of our product candidates will prove to be safe and
efficacious or will receive regulatory approvals.
-12-
<PAGE>
There Can Be No Assurance that the Company's Products will Achieve
Market Acceptance. The commercial success of our products that are approved for
marketing will depend upon their acceptance by the medical community as safe and
effective. Factors we believe will materially affect the market acceptance of
our products are timing of receipt of marketing approvals, safety and efficacy
of the product, emergence of equivalent or superior products and cost
effectiveness of the product
The Company will Require Additional Funding. We will require
substantial additional funding in order to continue our research and product
development programs, including preclinical testing and clinical trials of our
product candidates, for operating expenses, and for the pursuit of regulatory
approvals for product candidates. We may require additional funding for
establishing manufacturing and marketing capabilities in the future. We believe
that our existing capital resources, together with interest income and future
payments due under strategic alliances, will be sufficient to satisfy our
current and projected funding requirements through ---. However, such resources
might be insufficient to conduct research and development programs as planned.
Our future capital requirements will depend on many factors, including:
o continued scientific progress in its research and development programs, o
the magnitude of our R&D programs,
o progress with preclinical testing and clinical trials,
o the time and costs involved in obtaining regulatory approvals,
o the costs involved in filing and prosecuting patent applications and
enforcing patent claims,
o competing technological and market developments,
o the establishment of additional strategic alliances,
o the cost of manufacturing facilities and of commercialization activities
and arrangements, and
o the cost of product in-licensing and any possible acquisitions.
Our cash reserves and other liquid assets together with funding that
may be received under our strategic alliances, and interest income earned
thereon, might be inadequate to satisfy our capital and operating requirements.
We intend to seek additional funding through strategic alliances, and
may seek additional funding through public or private sales of our securities,
including equity securities. In addition, we have obtained equipment leases and
may continue to pursue opportunities to obtain additional debt financing in the
future. However, additional equity or debt financing might not be available on
reasonable terms, if at all. Any additional equity financings would be dilutive
to our stockholders. If adequate funds are not available, we may be required to
curtail significantly one or more of our research and development programs
and/or obtain funds through arrangements with corporate partners or others that
may require us to relinquish rights to certain of our technologies or product
candidates.
The Company Depends on Key Management and Employees. We are highly
dependent on the principal members of our management and scientific staff. The
loss of any of these people could impede the achievement of our development
objectives. Furthermore, recruiting and retaining qualified scientific personnel
to perform research and development work in the future will also be critical to
the our success. We might be unable to attract and retain personnel on
acceptable terms given the competition among biotechnology, pharmaceutical and
health care companies, universities and non-profit research institutions for
experienced scientists. In addition, we rely on members of our Scientific
Advisory Board and a significant number of consultants to assist us in
formulating our research and development strategy. All of the our consultants
and members of the Scientific Advisory Board are employed by employers other
than Neurocrine. They may have commitments to, or advisory or consulting
agreements with, other entities that may limit their availability to us.
-13-
<PAGE>
Potential Product Liability Exposure and Limited Insurance Coverage.
The use of any of our potential products in clinical trials, and the sale of any
approved products, may expose us to liability claims. These claims might be made
directly by consumers, health care providers, pharmaceutical companies or others
selling such products. We have obtained limited product liability insurance
coverage for our clinical trials in the amount of $5 million per occurrence and
$5 million in the aggregate. We intend to expand or insurance coverage to
include the sale of commercial products if marketing approval is obtained for
products in development. However, insurance coverage is becoming increasingly
expensive, and we might not be able to maintain insurance coverage at a
reasonable cost or in sufficient amounts to protect us against losses due to
liability. We may be unable to obtain commercially reasonable product liability
insurance for any products approved for marketing. A successful product
liability claim or series of claims brought against us could have a material
adverse effect on our business and cause our stock price to fall.
The Company's Activities Involve Hazardous Materials. Our research
activities involve the controlled use of hazardous materials. We can not
eliminate the risk of accidental contamination or injury from these materials.
In the event of an accident, we may be held liable for any resulting damages
which may materially and adversely affect our financial condition and results of
operations.
The Price of the Company's Common Stock is Volatile. The market prices
for securities of biotechnology and pharmaceutical companies have historically
been highly volatile, and the market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. The following factors may have an adverse
effect on our stock price:
o fluctuations in operating results,
o announcements of technological innovations or new therapeutic products by
us or others,
o clinical trial results,
o developments concerning strategic alliance agreements,
o government regulation,
o developments in patent or other proprietary rights,
o public concern as to the safety of our drugs,
o future sales of substantial amounts of our Common Stock by existing
stockholders,
o comments by securities analysts and general market conditions.
The realization of any of the risks described in these "Risk Factors"
could cause our stock price to fall dramatically.
Potential Adverse Effect of Anti-takeover Provisions. Our Certificate
of Incorporation provides for staggered terms for the members of our Board of
Directors and does not provide for cumulative voting in the election of
directors. In addition, our Board of Directors has the authority, without
further action by the stockholders, to fix the rights and preferences of, and
issue shares of, Preferred Stock. In April 1997, we adopted a Stockholder Rights
Plan, commonly referred to as a "Poison Pill". Further, we are subject to
Section 203 of the Delaware General Corporation Law which, subject to certain
exceptions, restricts certain transactions and business combinations between a
corporation and a stockholder owning 15% of more of the corporation's
outstanding voting stock for a period of three years from the date the
stockholder becomes an interested stockholder. The Stockholder Rights Plan,
staggered board terms, lack of cumulative voting, Preferred Stock provisions and
other provisions of the our charter and Delaware corporate law may discourage
certain types of transactions involving an actual or potential change in control
of the Company.
-14-
<PAGE>
Impact of Year 2000. The Year 2000 Issue is the result of computer
programs being written using two digits rather than four to define the
applicable year. Any of our computer programs or hardware that have
date-sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Lack of Liquidity. Until registered under the Registration Statement,
the Shares will be restricted securities under federal and applicable state
securities laws and, as such, may not be transferred, sold or otherwise disposed
of, except as permitted under federal and applicable state securities laws,
pursuant to registration thereunder or exemption therefrom. Prospective
investors should be prepared to hold, and bear the economic risk of an
investment in, the Shares for an indefinite period. In addition, an Investor
should be able to withstand a total loss of its investment. The rights of
Investors to register the Common Stock is subject and subordinate to certain
registration rights previously granted by the Company to other parties. As a
result, under certain circumstances, the ability of Investors to register the
Common Stock may be delayed.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of common stock
by the selling shareholder in this offering.
SELLING SHAREHOLDERS
On December 22, 1999, the Company agreed to sell 2,327,777 shares of
Common Stock of the Company upon meeting certain closing conditions. In
connection with this sale, we agreed to file a registration statement with the
SEC covering the resale of the shares issued to each selling shareholder and
agreed to indemnify each selling shareholder against claims made against them
arising out of, among other things, statements made in this registration
statement. We have agreed to cause this registration statement to remain
effective until (a) all the common stock has been re-sold or (b) two years after
the closing of the transactions contemplated in the common stock purchase
agreements, whichever is earlier.
The following table provides certain information with respect
to shares of common stock held and to be offered under this prospectus from time
to time by each selling shareholder. Because the selling shareholders may sell
all or part of their common stock pursuant to this prospectus, and this offering
is not being underwritten on a firm commitment basis, only an estimate can be
given as to the number and percentage of shares of common stock that will be
held by each selling shareholder upon termination of this offering. See "Plan of
Distribution."
The Company is unaware of any material relationship between any of the
selling shareholders and us in the past three years other than as a result of
the ownership of the shares of common stock.
-15-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Shares owned Shares sold Shares and
before the in the percentage owned
Name Offering Offering after the Offering
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Biotech Target S.A. 750,000 500,000 250,000 (1.2%)
Deutsche Vermogensbildungsgesellschaft mbH 600,000 600,000 - ( * )
Deutsche Asset Mangement Investmentgesellschaft mbH 300,000 300,000 - ( * )
SEB Lakemedelsfund 490,000 385,000 105,000 ( * )
SEB Private Bank S.A., Luxmeborg 85,000 65,000 20,000 ( * )
Activest Management SA 327,000 277,777 50,000 ( * )
DWS Investment GmbH 435,000 200,000 235,000 (1.1%)
- ------------------
<FN>
o Less than 1.00% *
o There were 21,586,717 shares outstanding after the offering.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Company is registering the shares of common stock offered by the
selling shareholders pursuant to contractual registration rights contained in
the common stock purchase agreements. The selling shareholders may sell their
shares on the Nasdaq National Market, in private transactions or in a
combination of such methods of sale. The selling shareholders may sell their
shares at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated or at fixed prices. For their
shares, the selling shareholders will receive the purchase price of the shares
sold less any agents' commissions or underwriters' discounts and other related
expenses. If the selling shareholders sell shares to or through brokers or
dealers, they may pay the brokers or dealers compensation in the form of
discounts, concessions or commissions. We will not receive any proceeds from the
sale of shares by the selling shareholders.
The selling shareholders and any persons who participate in the sale of
the shares may be deemed to be "underwriters" as defined in the Securities Act,
and any discounts, commissions or concessions received by them and any provided
pursuant to the sales of shares by them might be deemed underwriting discounts
and commissions under the Securities Act.
In order to comply with the securities laws of certain states, if
applicable, the common stock may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
We have agreed in the common stock purchase agreements to register the
shares of our common stock received by the selling shareholders pursuant to the
common stock purchase agreements under applicable federal and state securities
laws under certain circumstances and at certain times. Pursuant to the common
stock purchase agreements, we have filed a registration statement related to the
shares offered hereby and have agreed to keep such registration statement
effective until (a) all the common stock has been re-sold or (b) two years after
the closing of the transactions contemplated in the Common Stock Purchase
Agreement, whichever is earlier.
We will pay for the expenses incurred in this offering.
-16-
<PAGE>
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon by Latham
& Watkins, counsel to the Company.
EXPERTS
The Company's financial statements appearing in its Annual Report on
Form 10-K for the year ended December 31, 1998, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, we file
annual, quarterly and special reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). You may read and copy
any document that we have filed at the SEC's public reference rooms in
Washington, D.C., New York, New York, and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. You can
obtain copies of our SEC filings at prescribed rates from the SEC Public
Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549. Our SEC
filings are also available to you free of charge at the SEC's web site at
http://www.sec.gov.
Shares of our common stock are traded as "National Market Securities"
on the Nasdaq National Market. Documents we have filed can be inspected at the
offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
You can read and print press releases and additional information about
us, free of charge, at our web site at http://www.neurocrine.com.
This Prospectus is a part of a Registration Statement on Form S-3
(together with all amendments and exhibits, referred to as the "Registration
Statement") filed by us with the SEC under the Securities Act of 1993, as
amended. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the SEC. For further information with respect
to Neurocrine and the shares of common stock offered hereby, please refer to the
Registration Statement. The Registration Statement may be inspected at the
public reference facilities maintained by the SEC at the addresses set forth
above. Statements in this Prospectus about any document filed as an exhibit are
not necessarily complete and, in each instance, you should refer to the copy of
such document filed with the SEC. Each such statement is qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information filed
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus, and information that we have filed
later with the SEC will automatically update and supersede previously filed
information, including information contained in this Prospectus.
The Company incorporates by reference the documents listed below and
any future filings it will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act until this offering has been completed:
-17-
<PAGE>
(1) Annual Report on Form 10-K for the fiscal year ended December 31,1998
(File No. 000-22705)
(2) Quarterly Report on Form 10-Q for the quarters ended March 31, 1999,
June 30, 1999 and September 30, 1999;
(3) Proxy Statement for the Annual Meeting of Stockholders held on May 21,
1999, filed with the SEC on April 23, 1999; and
(4) The description of our Common Stock contained in the Registration
Statement on Form S-1, (Registration No. 333-03172), as amended, which
was declared effective by the SEC on May 22, 1996.
You may request a free copy of these documents by writing to Investor
Relations, Neurocrine Biosciences, Inc., 10555 Science Center Drive, San Diego,
CA 92121, or by calling Neurocrine's Investor Relations department at (858)
658-7600.
You should rely only on the information incorporated by reference or
provided in this Prospectus or a prospectus supplement or amendment. The Company
has not authorized anyone to provide you with different information. The Company
is not making an offer of these securities in any state where the offer is not
permitted. Also, this Prospectus does not offer to sell any securities other
than the securities covered by this Prospectus. You should not assume that the
information in this Prospectus or a prospectus supplement or amendment is
accurate as of any date other than the date on the front of the document.
-18-
<PAGE>
<TABLE>
<CAPTION>
======================================================= ====================================================
<S> <C>
The Company has not authorized any person NEUROCRINE BIOSCIENCES, INC.
to give any information or to make any
representations that differs from what is in this
Prospectus. If any person does make a statement
that differs from what is in this Prospectus, you
should not rely on it. This Prospectus is not an
offer to sell, nor is it seeking an offer to buy, 2,327,777 Shares
any security other than the Shares offered hereby.
This Prospectus is not an offer to sell, nor is it of
seeking an offer to buy, these Shares in any
jurisdiction in which the offer or sale is Common Stock
prohibited. The information in this Prospectus is
complete and accurate as of its date, but the
information may change after that date.
TABLE OF CONTENTS PROSPECTUS
Page
Summary........................................ 3
Risk Factors................................... 4
Business....................................... 15
Use of Proceeds................................ 15
Selling Stockholders........................... 15
Plan of Distribution........................... 16
Legal Matters.................................. 17
Experts........................................ 17
Where You Can Find More Information............ 17
Information Incorporated by Reference.......... 18 January __, 2000
======================================================= ====================================================
</TABLE>
-19-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The Company and Selling Shareholders will pay all expenses incident to
the offering and sale to the public of the shares being registered other than
any commissions and discounts of underwriters, dealers or agents and any
transfer taxes. Such expenses are set forth in the following table. All of the
amounts shown are estimates except the SEC registration fee and the Nasdaq
National Market listing fee.
SEC registration fee..........................................$ 18,443
NASDAQ National Market listing fee..............................17,500
Legal fees and expenses.........................................75,000
Accounting fees and expenses....................................10,000
Miscellaneous expenses..........................................25,000
Total..............................................$ 145,943
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation has the power to indemnify a director, officer,
employee or agent of the corporation and certain other persons serving at the
request of the corporation in related capacities against amounts paid and
expenses incurred in connection with an action or proceeding to which he or she
is or is threatened to be made a party by reason of such position, if such
person has acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and, in any
criminal proceeding, if such person had no reasonable cause to believe his or
her conduct was unlawful; provided that, in the case of actions brought by or in
the right of the corporation, no indemnification may be made with respect to any
matter as to which such person has been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
The Registrant's Certificate of Incorporation provides that no director
will be personally liable to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for authorizing the
payment of a dividend or repurchase of stock or (iv) for any transaction in
which the director derived an improper personal benefit.
The Registrant's by-laws provide that the Registrant must indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Registrant) by reason of the fact that he or she is or was a
director or officer of the Registrant, or that such director or officer is or
was serving at the request of the Registrant as a director, officer, employee or
agent of another corporation, partnership, joint venture trust or other
enterprise (collectively "Agent"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the Registrant, which approval may not be unreasonably withheld)
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, will not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interests of the
Registrant, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Page II-1
<PAGE>
The Registrant's by-laws provide further that the Registrant must
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Registrant to procure a judgment in its favor by reason of the fact that he or
she is or was an Agent against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Registrant, provided that no indemnification may be made in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
the Registrant unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court deems proper.
Pursuant to its by-laws, the Registrant has the power to purchase and
maintain a directors and officers liability policy to insure its officers and
directors against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Item 16. Exhibits.
Please see Index of Exhibits on Page 24 below.
Item 17. Undertakings.
A. Undertaking Pursuant to Rule 415.
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) 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 SEC 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;
Page II-2
<PAGE>
(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(l)(i) and A(l)(ii) do not
apply if the Registration Statement is on Form S-3 or Form S-8,
and 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 (the "Exchange Act") 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 this offering.
B. Undertaking Regarding Filings Incorporating Subsequent
Exchange Act Documents by Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Undertaking in Respect of Indemnification.
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 SEC 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.
Page II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, California, on this 5th day of January,
2000.
NEUROCRINE BIOSCIENCES, INC.
By: /s/ Paul W. Hawran
Paul W. Hawran,
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Paul
W. Hawran and Gary A. Lyons, jointly and severally, as attorneys-in-fact, each
with the power of substitution, for him or her in any and all capacities, to
sign any amendment to this Registration Statement and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting to said attorneys-in-fact, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ GARY A. LYONS President, Chief Executive
- ---------------------- Officer and Director January 19, 2000
Gary A. Lyons (Principal Executive Officer)
/s/ PAUL W. HAWRAN Chief Financial Officer
- ---------------------- (Principal Financial January 19, 2000
Paul W. Hawran and Accounting Officer)
/s/ JOSEPH A. MOLLICA Chairman of the January 19, 2000
- ---------------------- Board of Directors
Joseph A. Mollica
/s/ STEPHEN A. SHERWIN Director January 19, 2000
- ----------------------
Stephen A. Sherwin
/s/ RICHARD F. POPS Director January 19, 2000
- ----------------------
Richard F. Pops
/s/ WYLIE W. VALE Director January 19, 2000
- -------------------------
Wylie W. Vale
Page II-4
<PAGE>
INDEX OF EXHIBITS
Exhibit
Number Description
- ------------------ -------------------------------------------------------------
4.1 Stock Purchase Agreement dated December 20 through 23, 1999,
between Neurocrine Biosciences, Inc. and each of the
Purchasers named therin.
5.1 Opinion of Latham & Watkins.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (included on page II-5).
Page II-5
<PAGE>
EXHIBIT 4.1
STOCK PURCHASE AGREEMENT
Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, CA 92121
Ladies & Gentlemen:
The undersigned, _________________________________(the "Investor"),
hereby confirms its agreement with you as follows:
1. This Stock Purchase Agreement (the "Agreement") is made as of December 20,
1999 between Neurocrine Biosciences, Inc., a Delaware corporation (the
"Company"), and the Investor.
2. The Company has authorized the sale and issuance of up to 3,000,000 shares
(the "Shares") of common stock of the Company, $0.001 par value per share (the
"Common Stock"), subject to adjustment by the Company's Board of Directors, to
certain investors in a private placement (the "Offering").
3. The Company and the Investor agree that the Investor will purchase from the
Company and the Company will issue and sell to the Investor ___________ Shares,
for a purchase price of $18.00 per share, or an aggregate purchase price of
$_______________, pursuant to the Terms and Conditions for Purchase of Shares
attached hereto as Annex I and incorporated herein by reference as if fully set
forth herein. Unless otherwise requested by the Investor, certificates
representing the Shares purchased by the Investor will be registered in the
Investor's name and address as set forth below.
4. The Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three years with
the Company or its affiliates, (b) neither it, nor any group of which it is a
member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any NASD member.
Exceptions:
----------------------------------------------------------------------------
----------------------------------------------------------------------------.
(if no exceptions, write "none." If left blank,
response will be deemed to be "none.")
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
AGREED AND ACCEPTED:
NEUROCRINE BIOSCIENCES, INC.
By: /s/ Paul W. Hawran
Title: Senior Vice President and CFO
Page II-6
<PAGE>
INVESTOR SIGNATURE PAGE
BIOTECH TARGET S.A.
By: /s/ A. Hove and /s/HJ Graf
Title Signing Authorities
Address: Swiss Bank Tower, Panama 1, Republic of Panama
Date: December 22, 1999
Purchase: 500,000 shares for $9,000,000
DEUTSCHE VERMOGENSBILDUNGSGESELLSCHAFT MBH
By: /s/ Daniel Eudonhat
Title Fund Manager
Address: Feldbergsrasse 22, 60323 Frankfurt, Germany
Date: December 21, 1999
Purchase: 600,000 shares for $10,800,000
DEUTSCHE ASSET MANGEMENT INVESTMENTGESELLSCHAFT MBH
By: /s/
Title Fund Manager
Address: Mainzer Landstra(beta)e 16, 60325 Frankfurt, Germany
Date: December 20, 1999
Purchase: 300,000 shares for $5,400,000
SEB LAKEMEDELSFUND
By: /s/ William AF Sanderberg
Title Head of SEB Investment Management
Address: ST 56, 10640, Stockholm, Sweeden
Date: December 20, 1999
Purchase: 385,000 shares for $6,930,000
SEB PRIVATE BANK S.A., LUXMEBORG
By: /s/ J. Hellers
Title Senior Manager
Address: 16, Boulevard Royal PO Box 487, L-2014 Luxembourg
Date: December 23, 1999
Purchase: 65,000 shares for $1,170,000
ACTIVEST MANAGEMENT SA
By: /s/ S. Aeschbacher and /s/ A. Sierro
Title Managing Director Executive Director
Address: 12, Rue Cearo, Geneva, Switzeland 1204
Date: December 22, 1999
Purchase: 277,777 shares for $4,999,986
DWS INVESTMENT GMB
By: /s/ Michael Sistenich
Title Senior Fund Manager
Address: Gruneburgweg 113-115, Frankfurt Am Main 60323, Germany
Date: December 22, 1999
Purchase: 200,000 shares for $3,600,000
Page II-7
<PAGE>
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. Authorization and Sale of the Shares. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of up to
3,000,000 Shares. The Company reserves the right to increase or decrease this
number.
2. Agreement to Sell and Purchase the Shares; Subscription Date.
2.1 At the Closing (as defined in Section 3), the Company will
sell to the Investor, and the Investor will purchase from the Company, upon the
terms and conditions hereinafter set forth, the number of Shares set forth on
the signature page hereto at the purchase price set forth on such signature
page.
2.2 The Company may enter into this same form of Stock
Purchase Agreement with certain other investors (the "Other Investors") and
expects to complete sales of Shares to them. (The Investor and the Other
Investors are hereinafter sometimes collectively referred to as the "Investors,"
and this Agreement and the Stock Purchase Agreements executed by the Other
Investors are hereinafter sometimes collectively referred to as the
"Agreements.") The Company will accept executed Agreements from Investors for
the purchase of Shares commencing upon the date on which the Company provides
the Investors with the proposed purchase price per Share and concluding upon the
date (the "Subscription Date") on which the Company has (i) executed Agreements
with Investors for the purchase of at least 2,327,777 Shares, and (ii) notified
the Investors in writing that it is no longer accepting Agreements from
Investors for the purchase of Shares. The Company may not enter into any
Agreements after the Subscription Date.
3. Delivery of the Shares at Closing. The completion of the purchase
and sale of the Shares (the "Closing") shall occur (the "Closing Date") on
December 22, 1999, at the offices of the Company's counsel. At the Closing, the
Company shall deliver to the Investor one or more stock certificates
representing the number of Shares set forth on the signature page hereto, each
such certificate to be registered in the name of the Investor or, if so
indicated on the signature page hereto, in the name of a nominee designated by
the Investor.
The Company's obligation to issue the Shares to the Investor shall be
subject to the following conditions, any one or more of which may be waived by
the Company: (a) receipt by the Company of a certified or official bank check or
wire transfer of funds in the full amount of the purchase price for the Shares
being purchased hereunder as set forth on the signature page hereto; (b)
completion of the purchases and sales under the Agreements with the Other
Investors; and (c) the accuracy of the representations and warranties made by
the Investors and the fulfillment of those undertakings of the Investors to be
fulfilled prior to the Closing.
The Investor's obligation to purchase the Shares shall be subject to
the following conditions, any one or more of which may be waived by the
Investor: (a) Investors shall have executed Agreements for the purchase of at
least 2,327,777 Shares, and (b) the representations and warranties of the
Company set forth herein shall be true and correct in all material respects.
4. Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants to, and covenants with, the Investor, as
follows:
4.1 Organization. The Company is duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization. Each of the Company and its Subsidiaries (as defined in Rule 405
under the Securities Act of 1933, as amended (the "Securities Act")) has full
power and authority to own, operate and occupy its properties and to conduct its
business as presently conducted and as described in the confidential offering
memorandum, dated December 17, 1999 distributed in connection with the sale of
the Shares (including the documents incorporated by reference therein, the
"Placement Memorandum") and is registered or qualified to do business and in
good standing in each jurisdiction in which it owns or leases property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the business, financial condition, properties or
operations of the Company and its Subsidiaries, considered as one enterprise,
and no proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
Page II-8
<PAGE>
4.2 Due Authorization. The Company has all requisite power and
authority to execute, deliver and perform its obligations under the Agreements,
and the Agreements have been duly authorized and validly executed and delivered
by the Company and constitute legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, except as rights
to indemnity and contribution may be limited by state or federal securities laws
or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 Non-Contravention. The execution and delivery of the
Agreements, the issuance and sale of the Shares to be sold by the Company under
the Agreements, the fulfillment of the terms of the Agreements and the
consummation of the transactions contemplated thereby will not (A) conflict with
or constitute a violation of, or default (with the passage of time or otherwise)
under, (i) any material bond, debenture, note or other evidence of indebtedness,
or under any material lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the Company
or any Subsidiary is a party or by which it or any of its Subsidiaries or their
respective properties are bound, (ii) the charter, by-laws or other
organizational documents of the Company or any Subsidiary, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or any
Subsidiary or their respective properties, or (B) result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction
whatsoever upon any of the material properties or assets of the Company or any
Subsidiary or an acceleration of indebtedness pursuant to any obligation,
agreement or condition contained in any material bond, debenture, note or any
other evidence of indebtedness or any material indenture, mortgage, deed of
trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them is bound or to which any of the
property or assets of the Company or any Subsidiary is subject. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body in the United States is required for the execution and delivery of the
Agreements and the valid issuance and sale of the Shares to be sold pursuant to
the Agreements, other than such as have been made or obtained, and except for
any securities filings required to be made under federal or state securities
laws.
4.4 Capitalization. The capitalization of the Company as of
September 30, 1999 is as set forth in the Placement Memorandum (excluding
unvested options and treasury shares). The Company has not issued any capital
stock since that date other than pursuant to (i) employee benefit plans
disclosed in the Placement Memorandum, or (ii) outstanding warrants or options
disclosed in the Placement Memorandum. The Shares to be sold pursuant to the
Agreements have been duly authorized, and when issued and paid for in accordance
with the terms of the Agreements will be duly and validly issued, fully paid and
nonassessable. The outstanding shares of capital stock of the Company have been
duly and validly issued and are fully paid and nonassessable, have been issued
in compliance with all federal and state securities laws, and were not issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. Except as set forth in or contemplated by the Placement
Memorandum, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or other equity
interest in the Company or any Subsidiary, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the Company is a
party or of which the Company has knowledge and relating to the issuance or sale
of any capital stock of the Company or any Subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing, no preemptive right, co-sale right, right of first
refusal, registration right, or other similar right exists with respect to the
Shares or the issuance and sale thereof. No further approval or authorization of
any stockholder, the Board of Directors of the Company or others is required for
the issuance and sale of the Shares. The Company owns the entire equity interest
in each of its Subsidiaries, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than as described in
the Placement Memorandum. Except as disclosed in the Placement Memorandum, there
are no stockholders agreements, voting agreements or other similar agreements
with respect to the Common Stock to which the Company is a party or, to the
knowledge of the Company, between or among any of the Company's stockholders.
4.5 Legal Proceedings. There is no material legal or
governmental proceeding pending or, to the knowledge of the Company, threatened
to which the Company or any Subsidiary is or may be a party or of which the
business or property of the Company or any Subsidiary is subject that is not
disclosed in the Placement Memorandum.
Page II-9
<PAGE>
4.6 No Violations. Neither the Company nor any Subsidiary is
in violation of its charter, bylaws, or other organizational document, or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the business or financial
condition of the Company and its Subsidiaries, considered as one enterprise, or
is in default (and there exists no condition which, with the passage of time or
otherwise, would constitute a default) in any material respect in the
performance of any bond, debenture, note or any other evidence of indebtedness
in any indenture, mortgage, deed of trust or any other material agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound or by which the properties of the Company or
any Subsidiary are bound, which would be reasonably likely to have a material
adverse effect upon the business or financial condition of the Company and its
Subsidiaries, considered as one enterprise.
4.7 Governmental Permits, Etc. With the exception of the
matters which are dealt with separately in Section 4.1, 4.12, 4.13, and 4.14,
each of the Company and its Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department, or body that are currently
necessary for the operation of the business of the Company and its Subsidiaries
as currently conducted and as described in the Placement Memorandum except where
the failure to currently possess could not reasonably be expected to have a
material adverse effect.
4.8 Intellectual Property. Subject to the matters discussed
under "Risk Factors" in the Placement Memorandum (i) each of the Company and its
Subsidiaries owns or possesses sufficient rights to use all material patents,
patent rights, trademarks, copyrights, licenses, inventions, trade secrets,
trade names and know-how (collectively, "Intellectual Property") described or
referred to in the Placement Memorandum as owned by it or that are necessary for
the conduct of its business as now conducted or as proposed to be conducted as
described in the Placement Memorandum except where the failure to currently own
or possess would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company and its Subsidiaries considered as one enterprise, (ii) neither the
Company nor any of its Subsidiaries has received any notice of, or has any
knowledge of, any infringement of asserted rights of a third party with respect
to any Intellectual Property that, individually or in the aggregate, would have
a material adverse effect on the financial condition or business of the Company
and its Subsidiaries considered as one enterprise and (iii) neither the Company
nor any of its Subsidiaries has received any notice of any infringement of
rights of a third party with respect to any Intellectual Property that,
individually or in the aggregate, would have a material adverse effect upon the
business or financial condition of the Company and its Subsidiaries, considered
as one enterprise.
4.9 Financial Statements. The financial statements of the
Company and the related notes contained in the Placement Memorandum present
fairly, in accordance with generally accepted accounting principles, the
financial position of the Company and its Subsidiaries as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified. Such financial statements (including the related notes) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods therein specified, except
as disclosed in the Placement Memorandum. The other financial information
contained in the Placement Memorandum has been prepared on a basis consistent
with the financial statements of the Company.
4.10 No Material Adverse Change. Except as disclosed in the
Placement Memorandum, since September 30, 1999, there has not been (i) any
material adverse change in the financial condition or earnings of the Company
and its Subsidiaries considered as one enterprise nor has any material adverse
event occurred to the Company or its Subsidiaries, (ii) any material adverse
event affecting the Company, (iii) any obligation, direct or contingent, that is
material to the Company and its Subsidiaries considered as one enterprise,
incurred by the Company, except obligations incurred in the ordinary course of
business, (iv) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company or any of its Subsidiaries, or (v) any loss
or damage (whether or not insured) to the physical property of the Company or
any of its Subsidiaries which has been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its Subsidiaries considered as one
enterprise.
4.11 Disclosure. The information contained in the Placement
Memorandum as of the date hereof and as of the Closing Date, did not and shall
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Page II-10
<PAGE>
4.12 NASDAQ Compliance. The Company's Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is listed on The
Nasdaq Stock Market, Inc. National Market (the "Nasdaq National Market"), and
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
de-listing the Common Stock from the Nasdaq National Market, nor has the Company
received any notification that the Securities and Exchange Commission (the
"SEC") or the National Association of Securities Dealers, Inc. ("NASD") is
contemplating terminating such registration or listing.
4.13 Reporting Status. The Company has filed in a timely
manner all documents that the Company was required to file under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") during the 12 months
preceding the date of this Agreement. The following documents complied in all
material respects with the SEC's requirements as of their respective filing
dates, and the information contained therein as of the date thereof did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under where they were made not misleading:
(a) The Company's Annual Report on Form 10-K for
the year ended December 31, 1998 (the "10-K"); and
(b) All other documents, if any, filed by the
Company with the SEC since December 31, 1998
pursuant to the reporting requirements of the
Exchange Act.
4.14 Listing. The Company shall comply with all requirements
of the National Association of Securities Dealers, Inc. with respect to the
issuance of the Shares and the listing thereof on the Nasdaq National Market.
4.15 Year 2000 Compliance. The information set forth in the
Placement Memorandum with respect to the Company's efforts regarding Year 2000
matters (i) conforms in all material respects to the guidelines set forth in SEC
Release No. 33-7558 and (ii) accurately describes the status of the Company's
efforts regarding Year 2000 matters. To the Company's knowledge, the costs
associated with ensuring that the Company is Year 2000 compliant will not a
material adverse effect on the operations or business of the Company and its
Subsidiaries considered as one enterprise.
4.16 No Manipulation of Stock. The Company has not taken and
will not, in violation of applicable law, take, any action designed to or that
might reasonably be expected to cause or result in stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of the Shares.
5. Representations, Warranties and Covenants of the Investor.
5.1 The Investor represents and warrants to, and covenants
with, the Company that: (i) the Investor is an "accredited investor" as defined
in Regulation D under the Securities Act and the Investor is also knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions with
respect to investments in shares presenting an investment decision like that
involved in the purchase of the Shares, including investments in securities
issued by the Company and investments in comparable companies, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares; (ii) the Investor is
acquiring the number of Shares set forth on the signature page hereto in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Shares or any arrangement
or understanding with any other persons regarding the distribution of such
Shares; (iii) the Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder; (iv) the Investor has answered all
questions on the signature page hereto for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company immediately of any change in any of such
information until such time as the Investor has sold all of its Shares or until
the Company is no longer required to keep the Registration Statement effective;
and (vi) the Investor has, in connection with its decision to purchase the
number of Shares set forth on the signature page hereto, relied only upon the
Placement Memorandum and the representations and warranties of the Company
contained herein. Investor understands that its acquisition of the Shares has
not been registered under the Securities Act or registered or qualified under
any state securities law in reliance on specific exemptions therefrom, which
exemptions may depend upon, among other things, the bona fide nature of the
Investor's investment intent as expressed herein. Investor has completed or
caused to be completed and delivered to the Company the Investor Questionnaire
attached as Exhibit B to the Placement Memorandum, which questionnaire is true
and correct in all material respects.
Page II-11
<PAGE>
5.2 The Investor acknowledges, represents and agrees that no
action has been or will be taken in any jurisdiction outside the United States
by the Company that would permit an offering of the Shares, or possession or
distribution of offering materials in connection with the issue of the Shares,
in any jurisdiction outside the United States where action for that purpose is
required. Each Investor outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Shares or has in its possession or
distributes any offering material, in all cases at its own expense.
5.3 The Investor hereby covenants with the Company not to make
any sale of the Shares without complying with the provisions of this Agreement,
including Section 7.2 hereof, and without effectively causing the prospectus
delivery requirement under the Securities Act to be satisfied, and the Investor
acknowledges that the certificates evidencing the Shares will be imprinted with
a legend that prohibits their transfer except in accordance therewith. The
Investor acknowledges that there may occasionally be times when the Company
determines that it must suspend the use of the Prospectus forming a part of the
Registration Statement, as set forth in Section 7.2(c).
5.4 The Investor further represents and warrants to, and
covenants with, the Company that (i) the Investor has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, and (ii) this
Agreement constitutes a valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreements of the Investors
herein may be legally unenforceable.
5.5 Investor will not use any of the restricted Shares
acquired pursuant to this Agreement to cover any short position in the Common
Stock of the Company if doing so would be in violation of applicable securities
laws.
5.6 The Investor understands that nothing in the Placement
Memorandum, this Agreement or any other materials presented to the Investor in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. The Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of Shares.
6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Investor herein shall survive the execution of this Agreement, the delivery
to the Investor of the Shares being purchased and the payment therefor.
7. Registration of the Shares; Compliance with the Securities Act.
7.1 Registration Procedures and Expenses. The Company shall:
(a) subject to receipt of necessary information from the
Investors, use its reasonable efforts to prepare and file
with the SEC, within 10 days after the Closing Date, a
registration statement (the "Registration Statement") to
enable the resale of the Shares by the Investors from time
to time through the automated quotation system of the Nasdaq
National Market or in privately-negotiated transactions;
(b) use its reasonable efforts, subject to receipt of necessary
information from the Investors, to cause the Registration
Statement to become effective within 90 days after the
Registration Statement is filed by the Company;
(c) use its reasonable efforts to prepare and file with the SEC
such amendments and supplements to the Registration
Statement and the Prospectus used in connection therewith as
may be necessary to keep the Registration Statement current
and effective for a period not exceeding, with respect to
each Investor's Shares purchased hereunder, the earlier of
(i) the second anniversary of the Closing Date, (ii) the
date on which the Investor may sell all Shares then held by
the Investor without restriction by the volume limitations
of Rule 144(e) of the Securities Act, or (iii) such time as
all Shares purchased by such Investor in this Offering have
been sold pursuant to a registration statement.
Page II-12
<PAGE>
(d) furnish to the Investor with respect to the Shares
registered under the Registration Statement such number of
copies of the Registration Statement, Prospectuses and
Preliminary Prospectuses in conformity with the requirements
of the Securities Act and such other documents as the
Investor may reasonably request, in order to facilitate the
public sale or other disposition of all or any of the Shares
by the Investor, provided, however, that the obligation of
the Company to deliver copies of Prospectuses or Preliminary
Prospectuses to the Investor shall be subject to the receipt
by the Company of reasonable assurances from the Investor
that the Investor will comply with the applicable provisions
of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with any use of
such Prospectuses or Preliminary Prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Investor,
provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in
any jurisdiction in which it is not now so qualified or has
not so consented;
(f) bear all expenses in connection with the procedures in
paragraph (a) through (e) of this Section 7.1 and the
registration of the Shares pursuant to the Registration
Statement; and
(g) advise the Investors, promptly after it shall receive notice
or obtain knowledge of the issuance of any stop order by the
SEC delaying or suspending the effectiveness of the
Registration Statement or of the initiation or threat of any
proceeding for that purpose; and it will promptly use its
reasonable efforts to prevent the issuance of any stop order
or to obtain its withdrawal at the earliest possible moment
if such stop order should be issued.
The Company understands that the Investor disclaims being an
underwriter, but the Investor being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has hereunder, provided, however that
if the Company receives notification from the SEC that the Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (i) the 90th
day after such SEC notification, or (ii) 120 days after the initial filing of
the Registration Statement with the SEC.
7.2 Transfer of Shares After Registration; Suspension.
(a) The Investor agrees that it will not effect any Disposition
of the Shares or its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act
except as contemplated in the Registration Statement
referred to in Section 7.1 and as described below, and that
it will promptly notify the Company of any changes in the
information set forth in the Registration Statement
regarding the Investor or its plan of distribution.
(b) Except in the event that paragraph (c) below applies, the
Company shall (i) if deemed necessary by the Company,
prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a
supplement to the related Prospectus or a supplement or
amendment to any document incorporated therein by reference
or file any other required document so that such
Registration Statement will not contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading, and so that, as thereafter delivered
to purchasers of the Shares being sold thereunder, such
Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading; (ii) provide the Investor copies of
any documents filed pursuant to Section 7.2(b)(i); and (iii)
inform each Investor that the Company has complied with its
obligations in Section 7.2(b)(i) (or that, if the Company
has filed a post-effective amendment to the Registration
Statement which has not yet been declared effective, the
Company will notify the Investor to that effect, will use
its reasonable efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will
promptly notify the Investor pursuant to Section 7.2(b)(i)
hereof when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event (i) of any
request by the SEC or any other federal or state
governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to
a Registration Statement or related Prospectus or for
Page II-13
<PAGE>
additional information; (ii) of the issuance by the SEC or
any other federal or state governmental authority of any
stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that
purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (iv) of
any event or circumstance which, upon the advice of its
counsel, necessitates the making of any changes in the
Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a
material fact or any omission to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of
a material fact or any omission to state a material fact
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; then the Company shall
deliver a certificate in writing to the Investor (the
"Suspension Notice") to the effect of the foregoing and,
upon receipt of such Suspension Notice, the Investor will
refrain from selling any Shares pursuant to the Registration
Statement (a "Suspension") until the Investor's receipt of
copies of a supplemented or amended Prospectus prepared and
filed by the Company, or until it is advised in writing by
the Company that the current Prospectus may be used, and has
received copies of any additional or supplemental filings
that are incorporated or deemed incorporated by reference in
any such Prospectus. In the event of any Suspension, the
Company will use its reasonable efforts to cause the use of
the Prospectus so suspended to be resumed as soon as
reasonably practicable within 20 business days after the
delivery of a Suspension Notice to the Investor. In addition
to and without limiting any other remedies (including,
without limitation, at law or at equity) available to the
Investor, the Investor shall be entitled to specific
performance in the event that the Company fails to comply
with the provisions of this Section 7.2(c).
(d) Notwithstanding the foregoing paragraphs of this Section
7.2, the Investor shall not be prohibited from selling
Shares under the Registration Statement as a result of
Suspensions on more than three occasions of not more than 30
days each in any twelve month period, unless, in the good
faith judgment of the Company's Board of Directors, upon
advice of counsel, the sale of Shares under the Registration
Statement in reliance on this paragraph 7.2(d) would be
reasonably likely to cause a violation of the Securities Act
or the Exchange Act and result in potential liability to the
Company.
(e) Provided that a Suspension is not then in effect the
Investor may sell Shares under the Registration Statement,
provided that it arranges for delivery of a current
Prospectus to the transferee of such Shares. Upon receipt of
a request therefor, the Company has agreed to provide an
adequate number of current Prospectuses to the Investor and
to supply copies to any other parties requiring such
Prospectuses.
(f) In the event of a sale of Shares by the Investor pursuant to
the Registration Statement, the Investor must also deliver
to the Company's transfer agent, with a copy to the Company,
a Certificate of Subsequent Sale substantially in the form
attached hereto as Exhibit A, so that the Shares may be
properly transferred.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Selling Stockholder" shall include the
Investor and any affiliate of such Investor;
(ii) the term "Registration Statement" shall include any
final Prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement
referred to in Section 7.1; and
(iii)the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission
or alleged omission to state in the Registration
Statement a material fact required to be stated therein
or necessary to make the statements therein, in the
light of the circumstances under which they were made,
not misleading.
(a) The Company agrees to indemnify and hold harmless each
Selling Stockholder from and against any losses, claims,
damages or liabilities to which such Selling Stockholder may
become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or
are based upon (i) any untrue statement of a material fact
contained in the Registration Statement, or (ii) any failure
by the Company to fulfill any undertaking included in the
Registration Statement, and the Company will reimburse such
Selling Stockholder for any reasonable legal or other
expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim, or
preparing to defend any such action, proceeding or claim,
provided, however, that the Company shall not be liable in
Page II-14
<PAGE>
any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue
statement made in such Registration Statement in reliance
upon and in conformity with written information furnished to
the Company by or on behalf of such Selling Stockholder
specifically for use in preparation of the Registration
Statement or the failure of such Selling Stockholder to
comply with its covenants and agreements contained in
Section 7.2 hereof respecting sale of the Shares or any
statement or omission in any Prospectus that is corrected in
any subsequent Prospectus that was delivered to the Investor
prior to the pertinent sale or sales by the Investor.
(b) The Investor agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act, each
officer of the Company who signs the Registration Statement
and each director of the Company) from and against any
losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may
become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of, or
are based upon, (i) any failure to comply with the covenants
and agreements contained in Section 7.2 hereof respecting
sale of the Shares, or (ii) any untrue statement of a
material fact contained in the Registration Statement if
such untrue statement was made in reliance upon and in
conformity with written information furnished by or on
behalf of the Investor specifically for use in preparation
of the Registration Statement, and the Investor will
reimburse the Company (or such officer, director or
controlling person), as the case may be, for any legal or
other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding
or claim; provided that the Investor's obligation to
indemnify the Company shall be limited to to the net amount
received by the Investor from the sale of the Shares..
(c) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of
which indemnity is to be sought against an indemnifying
person pursuant to this Section 7.3, such indemnified person
shall notify the indemnifying person in writing of such
claim or of the commencement of such action, but the
omission to so notify the indemnifying party will not
relieve it from any liability which it may have to any
indemnified party under this Section 7.3 (except to the
extent that such omission materially and adversely affects
the indemnifying party's ability to defend such action) or
from any liability otherwise than under this Section 7.3.
Subject to the provisions hereinafter stated, in case any
such action shall be brought against an indemnified person,
the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall elect by written
notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party,
shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person.
After notice from the indemnifying person to such
indemnified person of its election to assume the defense
thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the
defense thereof, provided, however, that if there exists or
shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified
person, for the same counsel to represent both the
indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall
be entitled to retain its own counsel at the expense of such
indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of
more than one separate counsel (together with appropriate
local counsel) for all indemnified parties. In no event
shall any indemnifying person be liable in respect of any
amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such
settlement; provided that such consent shall not be
unreasonably withheld. No indemnifying person shall, without
the prior written consent of the indemnified person, effect
any settlement of any pending or threatened proceeding in
respect of which any indemnified person is or could have
been a party and indemnification could have been sought
hereunder by such indemnified person, unless such settlement
includes an unconditional release of such indemnified person
from all liability on claims that are the subject matter of
such proceeding.
(d) If the indemnification provided for in this Section 7.3 is
unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above in
respect of any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on
the one hand and the Investors on the other in connection
with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case
of an untrue statement, whether the untrue statement relates
to information supplied by the Company on the one hand or an
Investor on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct
or prevent such untrue statement. The Company and the
Investors agree that it would not be just and equitable if
Page II-15
<PAGE>
contribution pursuant to this subsection (d) were determined
by pro rata allocation (even if the Investors were treated
as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d)
shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no
Investor shall be required to contribute any amount in
excess of the amount by which the net amount received by the
Investor from the sale of the Shares to which such loss
relates exceeds the amount of any damages which such
Investor has otherwise been required to pay by reason of
such untrue statement. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation. The Investors' obligations in this
subsection to contribute are several in proportion to their
sales of Shares to which such loss relates and not joint.
(e) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions
hereof including, without limitation, the provisions of this
Section 7.3, and are fully informed regarding said
provisions. They further acknowledge that the provisions of
this Section 7.3 fairly allocate the risks in light of the
ability of the parties to investigate the Company and its
business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Act and the
Exchange Act. The parties are advised that federal or state
public policy as interpreted by the courts in certain
jurisdictions may be contrary to certain of the provisions
of this Section 7.3, and the parties hereto hereby expressly
waive and relinquish any right or ability to assert such
public policy as a defense to a claim under this Section 7.3
and further agree not to attempt to assert any such defense.
7.4 Termination of Conditions and Obligations. The conditions
precedent imposed by Section 5 or this Section 7 upon the transferability of the
Shares shall cease and terminate as to any particular number of the Shares when
such Shares shall have been effectively registered under the Securities Act and
sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering such Shares or at
such time as an opinion of counsel satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act.
7.5 Information Available. So long as the Registration
Statement is effective covering the resale of Shares owned by the Investor, the
Company will furnish to the Investor:
(a) as soon as practicable after it is available, one copy of
(i) its Annual Report to Stockholders (which Annual Report
shall contain financial statements audited in accordance
with generally accepted accounting principles by a national
firm of certified public accountants), (ii) its Annual
Report on Form 10-K and (iii) its Quarterly Reports on Form
10-Q (the foregoing, in each case, excluding exhibits);
(b) upon the request of the Investor, all exhibits excluded by
the parenthetical to subparagraph (a) of this Section 7.5 as
filed with the SEC and all other information that is made
available to shareholders; and
(c) upon the reasonable request of the Investor, an adequate
number of copies of the Prospectuses to supply to any other
party requiring such Prospectuses; and the Company, upon the
reasonable request of the Investor, will meet with the
Investor or a representative thereof at the Company's
headquarters to discuss all information relevant for
disclosure in the Registration Statement covering the Shares
and will otherwise cooperate with any Investor conducting an
investigation for the purpose of reducing or eliminating
such Investor's exposure to liability under the Securities
Act, including the reasonable production of information at
the Company's headquarters; provided, that the Company shall
not be required to disclose any confidential information to
or meet at its headquarters with any Investor until and
unless the Investor shall have entered into a
confidentiality agreement in form and substance reasonably
satisfactory to the Company with the Company with respect
thereto.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (A) if within domestic United
States by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if delivered
from outside the United States, by International Federal Express or facsimile,
and shall be deemed given (i) if delivered by first-class registered or
certified mail domestic, three business days after so mailed, (ii) if delivered
by nationally recognized overnight carrier, one business day after so mailed,
Page II-16
<PAGE>
(iii) if delivered by International Federal Express, two business days after so
mailed, (iv) if delivered by facsimile, upon electric confirmation of receipt
and shall be delivered as addressed as follows:
(a) if to the Company, to:
Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, CA 92121
Attn: General Counsel
Phone: (619) 658-7670
Telecopy: (619) 658-7602
(b) with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071
Attn: John M. Newell, Esq.
Phone: (213) 485-1234
Telecopy: (213) 891-8763
(c) if to the Investor, at its address on the signature
page hereto, or at such other address or addresses as
may have been furnished to the Company in writing.
9. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Investor.
10. Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
11. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
12. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the State of California, without giving
effect to the principles of conflicts of law.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
14. Rule 144. The Company covenants that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any Investor holding Shares
purchased hereunder made after the second anniversary of the Closing Date, make
publicly available such information as necessary to permit sales pursuant to
Rule 144 under the Securities Act), and it will take such further action as any
such Investor may reasonably request, all to the extent required from time to
time to enable such Investor to sell Shares purchased hereunder without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of any such Investor, the Company will deliver to such
holder a written statement as to whether it has complied with such information
and requirements.
Page II-17
<PAGE>
INSTRUCTION SHEET FOR INVESTOR
(to be read in conjunction with the entire Stock Purchase Agreement)
A. Complete the following items in the Stock Purchase Agreement:
1. Provide the information regarding the Investor requested on the
signature page (page 1). The Agreement must be executed by an individual
authorized to bind the Investor.
2. Return the signed Stock Purchase Agreement to:
Neurocrine Biosciences, Inc. Robertson Stephens
10555 Science Center Drive 555 California Street Suite 2600
San Diego, CA 92121 San Francisco, California 94104
Attn: General Counsel Attn: Richard Innenberg
Phone: (619) 658-7670 Phone: (415) 248-4553
Telecopy: (619) 658-7602 Telecopy: (415) 693-3393
An executed original Stock Purchase Agreement or a telecopy
thereof must be received by 5:00 p.m. California time on a date to be
determined and distributed to the Investor at a later date.
B. Instructions regarding the transfer of funds for the purchase of Shares
will be telecopied to the Investor by the Company at a later date.
C. To resell the Shares after the Registration Statement covering the
Shares is effective:
(i) Provided that a Suspension of the Registration Statement
is not then in effect pursuant to the terms of the Stock Purchase
Agreement, the Investor may sell Shares under the Registration
Statement, provided that it arranges for delivery of a current
Prospectus to the transferee. Upon receipt of a request therefor, the
Company has agreed to provide an adequate number of current
Prospectuses to each investor and to supply copies to any other parties
requiring such Prospectuses.
(ii) The Investor must also deliver to the Company's transfer
agent, with a copy to the Company, a Certificate of Subsequent Sale in
the form attached as Exhibit A to the Stock Purchase Agreement, so that
the Shares may be properly transferred.
Page II-18
<PAGE>
EXHIBIT 5.1
OPINION OF LATHAM & WATKINS
Latham & Watkins
633 West 5th Street, Suite 4000
Los Angeles, CA 90071
(213) 485-1234
January 19, 2000
Neurocrine Biosciences, Inc.
10555 Science Center Drive
San Diego, CA 92121
Ladies and Gentlemen:
We have acted as counsel to Neurocrine Biosciences, Inc., a Delaware corporation
(the "Company") in connection with the registration of up to 2,327,777 shares of
common stock of the Company, par value $0.001 per share (the "Shares"), under
the Securities Act of 1933, as amended (the "Act"), pursuant to a Registration
Statement on Form S-3 to be filed by you with the Securities and Exchange
Commission (the "Commission"), to be sold by certain selling stockholders.
As such counsel, we have examined such matters of fact and questions of law as
we have considered appropriate for purposes of rendering the opinions expressed
below. With your consent we have relied upon the foregoing and other
certificates of officers of the Company and of public officials with respect to
certain factual matters.We have not independently verified such factual matters.
We are opining herein as to the effect on the subject transaction only of the
General Corporation Law of the State of Delaware, and we express no opinion with
respect to the applicability thereto, or the effect thereon, of the laws of any
other jurisdiction or, in the case of Delaware, any other laws, or as to any
matters of municipal law or the laws of any local agencies within any state.
Subject to the foregoing and the other matters set forth herein, it is our
opinion that the Shares have been duly authorized, and are validly issued, fully
paid and non-assessable.
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "Legal
Matters."
Very truly yours,
Latham & Watkins
Page II-19
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG L.L.P., INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-3 and related Prospectus of Neurocrine
Biosciences, Inc. for the registration of shares of its common stock and to the
incorporation by reference therein of our report dated January 26, 1999 (except
for Note 13, as to which the date is March 2, 1999), with respect to the
consolidated financial statements of Neurocrine Biosciences, Inc. included in
its Annual Report on Form 10-K for the year ended December 31, 1998, filed with
the Securities and Exchange Commission.
ERNST & YOUNG, L.L.P.
San Diego, California
January 18, 2000
Page II-20
