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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-96205
PROSPECTUS
1,700,000 SHARES
[LOGO] IGEN INTERNATIONAL, INC.
COMMON STOCK
This prospectus relates solely to the resale of up to an aggregate of
1,700,000 shares of common stock of IGEN International, Inc. that we may
issue to the selling stockholders listed on page 13 of this prospectus. The
selling stockholders may sell these shares from time to time in transactions
on The Nasdaq National Market, in the over-the-counter market, in negotiated
transactions, through put or call option transactions relating to the shares,
through short sales of shares or through a combination of these methods. They
may sell the shares at market prices prevailing at the time of sale or at
negotiated prices.
We will not receive any of the proceeds from the sale of the shares
being sold by the selling stockholders. We have agreed to bear the expenses
incurred in connection with the registration of these shares. The selling
stockholders will pay or assume brokerage commissions or similar charges
incurred in the sale of these shares of common stock.
Our common stock is traded on The Nasdaq National Market under the
symbol "IGEN." On February 22, 2000, the closing price for the common stock as
reported by Nasdaq was $24.125 per share.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF
FACTORS YOU SHOULD CONSIDER IN CONNECTION WITH THIS OFFERING.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
The date of this prospectus is February 23, 2000.
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TABLE OF CONTENTS
ABOUT IGEN........................................................2
RISK FACTORS......................................................3
USE OF PROCEEDS...................................................13
SELLING SECURITY HOLDERS..........................................13
PLAN OF DISTRIBUTION..............................................14
LEGAL MATTERS.....................................................15
EXPERTS...........................................................15
WHERE YOU CAN FIND MORE INFORMATION...............................16
INFORMATION INCORPORATED INTO THIS PROSPECTUS.....................16
ABOUT IGEN
We develop and market products that incorporate our proprietary ORIGEN
technology, which permits the detection and measurement of biological
substances. We believe that ORIGEN offers significant advantages over
competing detection methods by providing a unique combination of speed,
sensitivity, flexibility and throughput in a single technology platform.
ORIGEN is incorporated into instrument systems and related consumable
reagents, and we also offer assay development and other services used to
perform analytical testing. Products based on our ORIGEN technology have been
developed and sold for the life science, clinical testing and industrial
testing markets.
We and our corporate collaborators have commercialized five product
lines to serve these markets. Sales and placements have been made
predominantly through our license arrangement with Roche Diagnostics GmbH,
the world's leading provider of clinical diagnostic products.
In August 1999, we began selling the M-SERIES System, our new product
line for use by pharmaceutical and biotechnology companies in drug discovery
and development. The M-SERIES System is used in all phases of drug discovery,
including (1) validating targets identified through genomics, (2) high
throughput screening of large numbers of compounds generated through
combinatorial chemistry and (3) retesting and optimization of lead compounds.
We offer our customers the option of buying or renting M-SERIES
Systems. Under either option, our customers typically make commitments for
minimum purchases of proprietary reagents. This provides us with a recurring
revenue stream, which we expect will grow as we continue to sell and place
more M-SERIES Systems. We also provide custom assay development services. We
market the M-SERIES System through our sales, marketing and applications team
dedicated to the life science market.
We have also applied our ORIGEN technology to the rapidly growing
market for testing food and water for disease causing pathogens. We have
begun marketing our first product, the PATHIGEN E. Coli 0157 test, primarily
to food processors. We have a complementary panel of tests currently under
development to detect more accurately and efficiently other food and water
pathogens, including tests for salmonella, listeria, campylobacter and
cryptosporidium parvum.
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Our executive offices, laboratory and manufacturing operations are
located at 16020 Industrial Drive, Gaithersburg, Maryland 20877. The
telephone number is (301) 869-9800.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD
CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO INVEST IN OUR COMMON STOCK.
IF THE COMPANIES THAT LICENSE TECHNOLOGY FROM US DO NOT EFFECTIVELY
DEVELOP AND MARKET PRODUCTS BASED ON THAT TECHNOLOGY, OUR REVENUE WOULD BE
ADVERSELY AFFECTED.
The success of our business depends, in large part, on how effectively
the companies to which we have licensed our technology develop and market
that technology. If these companies do not effectively develop and market
products based on this technology, our revenues would decrease.
We have licensed our technology to Organon Teknika B.V., Eisai Co.,
Ltd., and Roche Diagnostics GmbH for selected markets and uses. Our license
agreements with each of these companies allow each company to develop
products using our technology and to manufacture and sell those products in
selected markets. In return for the right to use our technology, each of
these companies must pay royalties to us based on revenues they receive from
sales of products based on our technology. These royalties are a significant
part of our overall revenue. For example, they accounted for 63% of our
revenue in fiscal year 1999.
We believe that the companies licensing our technology have economic
incentives to continue marketing products using our technology. However, we
cannot be sure that these companies will diligently and effectively market
products that incorporate the technology we have licensed to them. In
addition, we have brought a lawsuit against Roche, one of our licensees, in
part because we believe Roche has not properly calculated and paid royalties
to us and because we believe Roche has not commercialized our technology as
diligently as our license agreement with Roche requires. See the risk factor
immediately below for a more detailed description of this litigation and the
risks it poses to us. We cannot predict whether similar or other problems
will arise with other companies to whom we license our technology.
WE ARE SUING THE LARGEST LICENSEE OF OUR TECHNOLOGY, AND THE OUTCOME OF THAT
LITIGATION COULD MATERIALLY ADVERSELY AFFECT OUR REVENUES AND FINANCIAL
CONDITION.
We have filed a lawsuit in Maryland federal court against Roche. Roche
is the largest licensee of our technology in terms of royalty income,
accounting for over 90% of our royalty income for fiscal 1999. The lawsuit
centers on disputes over our license agreement with Roche. We cannot predict
whether we will succeed in this litigation. If we do not succeed, our
business and revenues could be materially adversely affected.
Our license agreement with Roche gives Roche the exclusive right to
manufacture, market and sell immunodiagnostic products using our patented
ORIGEN technology to central hospital laboratories, clinical reference
laboratories and blood banks. The license restricts Roche's rights in the
Japanese clinical diagnostic market.
In the lawsuit, we claim that Roche has failed to perform a variety of
its obligations under the license agreement. This includes Roche's failure to
diligently commercialize the licensed technology and to properly compute and
pay the royalties owed to us. In addition, we have alleged that Roche has
improperly marketed and sold products to customers it was not permitted to
under the license agreement. Based on Roche's violations of the license
agreement, we have asked the court to (1) award us monetary damages, (2)
prohibit Roche from violating the license agreement in the future and (3)
determine that we are entitled to terminate the license agreement because of
Roche's material breaches of the agreement.
Roche has filed a counterclaim against us in the lawsuit, alleging,
among other things, that we breached the Roche license by permitting Eisai
Co., Ltd., another of our licensees, to market some ORIGEN-based products in
Japan.
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In addition, we recently received notice from Roche that it is reducing
royalty payments due to us through an additional deduction from sales on
which the royalty payment is based. Roche has also claimed that we owe it
$2.6 million in royalties previously paid to us as a result of a retroactive
application of this deduction back to 1997. Although we believe that the
deduction and its retroactive application are not in accordance with the
license agreement, we cannot assure you that we will be successful in
defending this claim. Roche has notified us that it does not intend to seek
to collect this retroactive deduction pending continuation of ongoing
settlement discussions between Roche and us. If Roche enforces this claim by
withholding future royalty payments from us, our results of operations will
be adversely affected for those quarters in which the royalty payments are
withheld.
We are vigorously pursuing this action against Roche, and we believe it
is well-founded. We cannot be certain, however, that we will win the lawsuit.
The risks involved in the litigation include:
- If the court determines that Roche has not miscalculated or
underpaid royalties, or that its underpayments were less than we
allege, our future royalty revenue from Roche could be materially
less than we believe we are entitled to. Also, we would not, or
may not, receive money damages for past underpayments that we
believe Roche has made.
- If the court determines that Roche can continue to market and sell
other Roche products that compete with its ORIGEN-based products,
we will not be able to collect from Roche royalty revenues that we
would have otherwise received if Roche had sold more ORIGEN-based
products instead of its other competing products.
- If the court determines that Roche may market products using our
technology to customers that we believe are not within the scope
of the license, such as to physicians' offices, our ability to
market our products to those customers would be weakened.
- If the court determines that Roche's counterclaim regarding our
license to Eisai is valid, then Eisai's right to market
ORIGEN-based products in Japan could be adversely affected. As a
result, our royalty income from Eisai could be reduced.
- Regardless of whether we win the lawsuit, Roche may divert its
attention from selling the licensed products and focus its
energies instead on finding alternative products to develop and
market, especially if Roche believes we may be successful in
obtaining the right to terminate the agreement.
- If the court were to decide that we may terminate the license
agreement with Roche and we did so, royalty revenues would suffer
unless and until we found one or more comparable replacements for
Roche. In addition, our overall income may significantly decrease.
Moreover, at this time we cannot be sure that we would be able to
find a suitable replacement.
- Regardless of whether we are successful in the litigation, we have
expended, and will continue to expend, a significant amount of
money and management time to pursue the lawsuit and to defend
against Roche's counterclaim. This time and money have been, and
will continue to be, unavailable for use in the development of our
business.
For a more detailed description of our relationship with Roche, as well
as our claims and Roche's counterclaims, see our Annual Report on Form 10-K
for the fiscal year ended March 31, 1999, our Quarterly Reports on Form 10-Q
for the fiscal quarters ended June 30, 1999, September 30, 1999 and
December 31, 1999 and our Current Report on Form 8-K filed January 27, 2000,
which are incorporated by reference into this prospectus as they may be
amended by future filings.
IF WE ARE NOT SUCCESSFUL IN OUR LITIGATION AGAINST HITACHI, OUR ROYALTY
INCOME COULD SUFFER.
We are suing Hitachi Ltd. in Japan. Hitachi develops and manufactures
diagnostic equipment based on ORIGEN technology for Roche, to whom we license
our technology. We believe that Hitachi's actions in Japan violate rights
that we originally granted to Eisai Co., Ltd. to develop, manufacture and
sell products using ORIGEN technology to the Japanese clinical diagnostic
market. We have asked the Japanese court to prohibit Hitachi from
manufacturing, using or selling in Japan the Elecsys 2010 Instrument, which
Hitachi developed for Roche based on our technology.
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If we lose our lawsuit against Hitachi and Hitachi continues Japanese
manufacturing of products covered by our license with Eisai, Eisai's ability
to sell products based on our technology in Japan could suffer, and the
royalty income we receive from Eisai could decrease as a result. If, on the
other hand, we win the lawsuit against Hitachi, Roche will either have to
find a new manufacturer to make equipment based on ORIGEN technology or make
arrangements for Hitachi to manufacture the equipment outside of Japan. Our
royalty income could suffer if Roche cannot effectively make alternate
arrangements.
FAILURE TO MEET OUR DEBT OBLIGATIONS COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATION AND FINANCIAL CONDITION; IN ADDITION, OUR DEBT SERVICE OBLIGATIONS
COULD IMPEDE OUR OPERATING FLEXIBILITY.
We have a substantial amount of indebtedness, and there is a
possibility that we may be unable to generate cash or arrange financing
sufficient to pay the principal of, interest on and other amounts due in
respect of our indebtedness when due, or in the event any of it is
accelerated. In addition, our substantial leverage may require that we
dedicate a substantial portion of our expected cash flow from operations to
service our indebtedness, which would reduce the amount of our expected cash
flow available for other purposes, including working capital and capital
expenditures.
In March 1999, we entered into a debt financing with John Hancock
Mutual Life Insurance Company under a note purchase agreement in which we
received $30 million, and we issued 8.5% senior secured notes due 2006. We
are required to make quarterly interest only payments on the notes of
$637,500 through September 2000. Beginning in December 2000, principal and
interest installments of $1.7 million will be due quarterly through March
2006. The notes are secured by, among other things, royalty payments and our
right to receive monies due under our license agreement with Roche and a
restricted cash balance account. If we are unable to meet our obligations
under the notes, the noteholders could exercise their rights as a secured
party and take possession of the pledged collateral. This would materially
adversely affect our results of operations and financial condition.
In January 2000, we sold $35,000,000 in aggregate principal amount of
5% subordinated convertible debentures due 2005. Unless and until holders of
the debentures convert their debentures into common stock, we are required to
make semi-annual interest payments of $875,000 beginning in June 2000. If we
are unable to meet our obligation under the convertible debentures, the
debenture holders could require us to repay the principal amount of and
accrued interest on the convertible debentures, and we may not have
sufficient financial resources or be able to arrange sufficient financing to
make those payments at that time.
In addition, covenants in the note purchase agreement for our 8.5%
senior secured notes require us to comply with annual and quarterly royalty
payment coverage ratios that are tied to royalty payments and debt service.
The note purchase agreement also contains covenants that limit our ability to
take specified actions, including incurring additional secured debt and
amending our license agreement with Roche. These restrictions may limit our
operating flexibility, as well as our ability to raise additional capital.
WE HAVE A HISTORY OF OPERATING LOSSES, EXPECT TO INCUR FUTURE LOSSES AND
CANNOT BE CERTAIN THAT WE WILL BECOME A PROFITABLE COMPANY.
We have experienced significant operating losses each year since our
inception, and we expect those losses to continue. We also have an
accumulated deficit and negative net worth. Our losses have resulted
principally from costs we have incurred in research and development and from
litigation costs, selling costs and other general and administrative costs.
We expect to incur additional operating losses as a result of increases
in expenses for manufacturing, marketing and sales capabilities, research and
product development and general and administrative costs. We cannot assure
you that we will ever achieve profitability in the future. Our ability to
become profitable in the future will depend, among other things, on our
ability to:
- expand the commercialization of our existing products;
- introduce new products into the market;
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- develop our marketing capabilities cost-effectively; and
- develop sales and distribution capabilities cost-effectively.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE
FLUCTUATIONS MAY CAUSE OUR STOCK PRICE TO FALL.
Our quarterly operating results depend upon:
- the volume and timing of orders for M-SERIES or other products;
- the timing of instrument deliveries and installations;
- variations in revenue recognized from royalties and other contract
revenues;
- our mix of products sold;
- whether our instruments or sold to or placed with customers;
- the timing of our introduction of new products;
- our competitors' introduction of new products;
- variations in expenses we incur in connection with the operation of our
business, including legal fees, research and development costs and
sales and marketing costs;
- our manufacturing capabilities; and
- the volume and timing of product returns and warranty claims.
These factors may cause our quarterly operating results to fluctuate
significantly, which, in turn, may cause our stock price to fall. In
addition, because our revenues and operating results are volatile and
difficult to predict, we believe that period-to-period comparisons of our
results of operation are not a good indication of our future performance.
WE MAY NOT BE ABLE TO RAISE SUFFICIENT ADDITIONAL CAPITAL TO SUCCESSFULLY
DEVELOP OUR BUSINESS.
We need substantial amounts of money to fund our operations. We
currently anticipate that our existing capital resources, together with
revenue from product sales, will be adequate to fund our operations through
fiscal 2002. Our access to funds could be negatively impacted by many
factors, including the results of pending litigation, the volatility of the
price of our common stock, continued losses from operations and other factors.
We may need to raise substantial amounts of money to fund a variety of
future activities integral to the development of our business, including the
following:
- for research and development in order to successfully develop our
technology;
- to obtain regulatory approval for some of our products;
- to file and prosecute patent applications in order to protect our
technology;
- to respond to innovations that our competitors develop;
- to retain qualified employees, particularly in light of intense
competition for qualified scientists and engineers;
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- to make new arrangements to market our technology, especially if we
terminate our license agreement with Roche;
- to manufacture products ourselves or through a third party; and
- to market different products to different markets, either through
building our own sales and distribution capabilities or relying on a
third party.
We cannot be certain that we will have access to enough funds to
successfully develop our business.
We may try to raise necessary additional capital by issuing additional
debt or equity securities. Holders of debt securities would have priority
over our equity holders to the proceeds from the sale of our assets in the
event of liquidation of our business, and any debt financings we obtain may
contain restrictive terms that limit our operating flexibility. If, on the
other hand, we raise additional capital by selling more common or preferred
stock, the holdings of existing stockholders would be diluted.
If we are unable to raise additional capital, we may have to scale
back, or even eliminate, some programs. Alternatively, we may have to
consider pursuing arrangements with other companies, such as granting
licenses or entering into joint ventures. These arrangements could require
that we give up some rights to technology or products.
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST MORE ESTABLISHED COMPANIES
AND INSTITUTIONS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
We are a relatively young company in a highly competitive industry. We
compete against established companies and research and academic institutions,
and we expect this competition to intensify. Many of these companies and
institutions have one or more competitive advantages over us, including:
- more money to invest;
- greater expertise and resources in developing, manufacturing, marketing
and selling products;
- a larger, more experienced workforce; and
- more experience in obtaining regulatory approval for clinical
diagnostic products.
As a result, products based on technologies that our competitors develop
could be more effective, less expensive or more effectively marketed or sold
than products based on our technology. This could have a material adverse
effect on our business, financial condition and revenue.
WE DEPEND ON HIGHLY TRAINED AND SKILLED EMPLOYEES AND MANAGEMENT, AND WE
CANNOT BE SURE THAT WE WILL BE ABLE TO ATTRACT AND RETAIN SUFFICIENT
PERSONNEL.
We need to hire additional staff and to retain existing staff, both of
which are difficult in today's competitive marketplace. Because we are a
technology company, we depend heavily on scientists and engineers to develop
products and to build a successful business. Research and development efforts
could suffer if we are not able to hire and retain enough qualified
scientists and engineers.
We cannot be sure that we will succeed in our hiring and retention
efforts. We compete with other technology companies and research and academic
institutions for experienced scientists. Many of these companies and
institutions have greater resources than we do and thus may be in a better
position to attract desirable candidates.
In addition to scientists, we will also need to hire managers as the
business grows. We will need managers who are able to address the need for
regulatory, manufacturing and marketing capabilities. If we are not able to
hire managers with these skills, or develop expertise in these areas, our
business prospects could suffer.
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WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR MATERIALS USED IN
MANUFACTURING OUR PRODUCTS, AND ANY INTERRUPTION IN THE SUPPLY OF THOSE
MATERIALS COULD HAMPER OUR ABILITY TO MANUFACTURE PRODUCTS AND MEET CUSTOMER
ORDERS.
We depend on vendors to supply key materials that we use in our
products. Some of these materials are available only from limited sources. In
the event of a reduction in, interruption of, or degradation in the quality
of the supply of any of our required materials, or an increase in the cost of
obtaining those materials, we would be forced to locate an alternative source
of supply. If no alternative source were available or if an alternative
source were not available on a timely basis or at a reasonable cost or
otherwise on acceptable terms, our ability to manufacture one or more of our
products would be delayed or halted, in which case we could lose sales as
well as customers, and our business would be significantly harmed as a result.
WE MUST OBTAIN FDA APPROVAL TO MARKET OUR CLINICAL DIAGNOSTIC PRODUCTS, WHICH
IS OFTEN COSTLY AND TIME CONSUMING, AND IF WE DO NOT OBTAIN THE NECESSARY
APPROVAL OUR BUSINESS PROSPECTS WOULD SUFFER.
The FDA regulates many areas in which we conduct research and in which
we develop, produce and market products. In particular, we must obtain FDA
approval before we can market clinical diagnostic products such as those we
are currently developing for the patient care market. The approval process is
often costly and time consuming. In addition, we cannot assure you that we
will be successful in obtaining FDA approval for any of our clinical
diagnostic products, which would materially adversely affect our future
prospects.
In order to obtain FDA approval in the United States, we, or the
companies with whom we work, will need to either obtain premarket application
approval or premarket notification clearance from the FDA. In order to obtain
premarket notification clearance, we must submit data from clinical trials
demonstrating that new clinical diagnostic systems are substantially
equivalent to diagnostic systems that the FDA has already approved. If a
product is subject to the substantial equivalence requirement, neither we nor
any of our licensees can sell that system for clinical use in the United
States until the FDA determines that a new ORIGEN-based system is
substantially equivalent to a previously-approved system. Typically, the FDA
review process takes 90 days, but the FDA's review could take longer. In
addition, we cannot be sure that we will be able to demonstrate substantial
equivalence for future diagnostic systems.
If we do not successfully demonstrate substantial equivalence, or if we
are required to obtain premarket application approval as an initial matter,
we will have to conduct extensive clinical testing of these products, which
could take years to complete. Extensive testing could involve substantial
additional costs and might delay bringing clinical diagnostic products to
market, weakening our competitive position. If we fail to obtain FDA approval
for new products altogether, we will be unable to market our ORIGEN-based
systems at all for clinical use in the United States.
WE ARE SUBJECT TO EXTENSIVE, ONGOING GOVERNMENT REGULATION, WHICH MAY INVOLVE
SIGNIFICANT COSTS AND MAY RESTRICT OUR ABILITY TO CONDUCT BUSINESS.
We expect that we may need to spend a substantial amount of money to
comply on an ongoing basis with the regulations of the FDA and other
government agencies. Government agencies, such as the FDA and the
Environmental Protection Agency, regulate manufacturers of diagnostic
products and the manufacturing process itself. The costs of complying with
governmental regulations and any restrictions that government agencies might
impose could have a significant impact on our business. As we increase our
manufacturing, these costs will increase.
Whether we manufacture products ourselves or contract with another
company to manufacture products based on our technology, the FDA will
continually review and periodically inspect the manufacturing process. If the
FDA were to discover a problem with our products, the manufacturing process
or the manufacturing facility, the FDA could place restrictions on these
products and on the manufacturer. For example, the FDA could require us to
recall, or even totally withdraw, a product from the market or close a
manufacturing facility. In addition to FDA regulations, the process of
manufacturing products is subject to a variety of environmental and safety
laws and regulations, including laws and regulations governing the use and
disposal of hazardous materials. If we fail to comply with these laws or
regulations, our business and financial condition could be materially
adversely affected.
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WE HAVE LIMITED MANUFACTURING AND MARKETING EXPERIENCE, WHICH PUTS US AT A
COMPETITIVE DISADVANTAGE.
We lack experience in large-scale manufacturing, which could hamper our
ability to manufacture existing products or new products that we develop. We
have two options to address this issue. First, we could expand our internal
ability to manufacture products. Second, we could contract with a third party
to manufacture for us products based on our technology. If, however, we are
unable to expand our own manufacturing capability or find a suitable
manufacturer on acceptable terms in a timely manner, we may be unable to meet
demand for existing products and could be delayed in introducing new products
to the market. Failure to meet demand for existing products or delays in
introducing new products could put us at a competitive disadvantage and could
harm our financial condition or our business prospects.
We will also need to develop greater selling, marketing and
distribution capabilities. To market clinical diagnostic products directly to
customers, and not through a licensee, we need to develop a substantial sales
force with technical expertise. We also need to establish a distribution
system to support the sales force. Alternatively, we could license or
contract with another company to provide sales and distribution services for
products, in much the same way as we have done with Roche, Eisai and Organon
Teknika. We cannot be sure, however, that we will be able to develop a
sufficient sales and distribution force or that we will be able to find a
suitable company to fill that role for us.
THE SUCCESS OF OUR BUSINESS DEPENDS ON PATENTS THAT WILL EXPIRE AND THAT MUST
BE ACTIVELY PURSUED AND PROTECTED.
Our business depends heavily on patents that will expire over time and
may be challenged or circumvented by competitors. Patents allow us to prevent
others, for a time, from using our inventions to compete against us. Our
business success or failure will depend, in part, on our ability to obtain
and maintain adequate patent protection for the ORIGEN technology. We cannot
be certain that current patents or future patents will adequately protect our
technology from being used by our competitors. For example, we currently are
challenging a patent owned by EnzoBiochem because we believe the patent
infringes on our patents.
Because there is no consistent policy governing the scope of claims in
medical patents, patent protection is uncertain. Companies may, for example,
challenge and invalidate patents or circumvent valid claims in patents, all
of which could make it necessary for us to defend our patents in litigation.
Litigation over patents poses the following risks to our business:
- Litigation costs can be extremely high, which could drain our financial
resources.
- Litigation over our patents could discourage other companies from
working with us to develop and market new products based on technology
covered by these disputed patents.
- If we lose some patent protection as a result of litigation, our
competitive advantage could be eroded.
OUR BUSINESS WOULD BE HARMED IF WE VIOLATE THE PATENT RIGHTS OF OTHERS.
Our business success or failure will also depend, in part, on the
patent rights of others. We license technology from other companies and
academic institutions. Because access to this technology is necessary to our
business, we must be certain that we comply with these license agreements.
Our business could be harmed if we breached any of these license agreements
and lost the rights to use this patented technology or if we were unable to
renew existing licenses on acceptable terms or get additional licenses that
we may need on acceptable terms.
We must also make sure that we do not infringe the patent rights of
others. If we were to infringe others' patent rights we could be exposed to
the following risks:
- We could be required to alter our products or processes.
- We could be required to obtain a license from the patent holder.
- We could lose customers that are reluctant to continue using our
products or doing business with us
- We could be forced to abandon development work that we had begun with
respect to these products.
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- We could be required to pay damages that could be substantial.
We cannot be sure that we would be able to alter products or processes or
that we could obtain a license at a reasonable cost, if at all. Our business
could be damaged if we were unable to make necessary alterations or obtain a
necessary license on acceptable terms.
In addition, we may need to litigate the scope and validity of patents
held by others. Litigation could be a substantial cost for us. We are
currently defending a patent infringement claim that Laboratoires Serono,
S.A. filed against us and two of our licensees. This action claims that we
and the other defendants are infringing a patent for "A Method Assay
Employing a Magnetic Electrode." We, along with the other defendants, have
denied any infringement and have asserted that the patent is invalid and
unenforceable. Recently, F. Hoffman-La Roche Ltd., a member of the Roche
family of companies, acquired the patent from Serono and continues in
Serono's place to assert the infringement claim. We cannot assure you that we
will be successful in defending against this claim. If we are not successful,
our business and financial condition could be adversely affected.
WE RELY ON TRADE SECRETS AND OTHER INFORMATION THAT CANNOT BE PROTECTED BY
PATENTS, AND WE FACE RISKS THAT THIS INFORMATION WILL BE DISCLOSED TO OTHERS.
In addition to patents, we also rely in our business on trade secrets,
know-how and other proprietary information. If this information were
disclosed to competitors, our business would suffer. We seek to protect this
information, in part, by entering into confidentiality agreements with
licensees, employees and consultants, which prohibit these parties from
disclosing our confidential information. Despite our entering into these
agreements, we cannot be sure that the agreements will provide adequate
protection for our trade-secrets, know-how and other proprietary information
or that the information we share with others during the course of our
business will remain confidential. We also cannot be certain that we would
have sufficient legal remedies to correct or compensate for unauthorized
disclosures or sufficient resources to seek redress.
RESTRICTIONS ON HEALTH CARE COSTS AND HEALTH CARE AND INSURANCE FINANCING
PRACTICES COULD LIMIT DEMAND FOR OUR PRODUCTS.
In the United States and elsewhere, demand for clinical diagnostic
testing is dependent, in part, on consumers' ability to be reimbursed for the
cost of the tests by third-party payors, such as government agencies, health
maintenance organizations and private insurers. Medicaid and other
third-party payors are increasingly challenging the prices charged for
medical services, including clinical diagnostic tests. They are also
attempting to contain costs by limiting their coverage of, and the amount
they will reimburse for, clinical diagnostic tests and other health care
products. We cannot be certain that insurers will provide coverage for
clinical diagnostic tests in the future. Without adequate coverage and
reimbursement, consumer demand for clinical diagnostic tests may decrease.
Decreased demand would likely cause sales of our clinical diagnostic
products, and sales by our licensees, to fall since fewer tests would be
performed or prices would be lowered, or both. Reduced sales would hurt our
business and our business prospects.
In many foreign markets, governments directly set the prices that
clinical diagnostic companies may charge for their products and services. In
the United States, a number of legislative and regulatory proposals aimed at
changing the health care system have been proposed in recent years. We cannot
predict whether these proposals will be adopted or the effect that these
proposals or managed care efforts may have.
WE ARE EXPOSED TO PRODUCT LIABILITY RISKS.
We may not be able to adequately insure against risk of product
liability. As we begin marketing products, we may face product liability for
claims and lawsuits brought by customers. Damages awarded in product
liability cases can be very large. While we have product liability insurance,
this coverage is limited. We cannot assure you that our current product
liability insurance would be adequate to cover us against our potential
liabilities or that we will be able to maintain current levels of product
liability insurance on acceptable terms, if at all. Claims or losses in
excess of our current or future product liability insurance coverage could
have a material adverse effect on our financial condition.
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<PAGE>
MANAGEMENT EXERCISES SIGNIFICANT CONTROL OVER IGEN.
Our management has significant control over IGEN through its stock
ownership. Our officers and directors, own, or have the right to purchase,
about 36% of our common stock. Our Chief Executive Officer owns approximately
27% of our common stock. Our officers and directors have significant
influence over the election of directors and other stockholders actions.
FAILURE TO MANAGE OUR GROWTH COULD ADVERSELY AFFECT OUR BUSINESS.
We have grown rapidly and expect to continue to grow rapidly by hiring
new employees in all areas of our operations, increasing our presence in
existing markets and introducing new products we develop into new potential
high-growth markets. Our growth has placed, and continues to place, a strain
on our management and our operating and financial systems.
As we grow, our personnel, systems, manufacturing capabilities and
resources, procedures and controls may be inadequate to support future
operations. In order to accommodate the increased operations for sales and
marketing, research and development, facilities and administration, we will
need to hire, train and retain the appropriate personnel. We may also need to
improve our financial and management controls, reporting systems and
operating systems. We may encounter difficulties in developing and
implementing other new systems.
In response to our growth, we have recently implemented a new
enterprise resource planning system in order to automate all of our
accounting, manufacturing, sales and purchasing. If the enterprise resource
planning system fails to operate as we expect or experiences delays or
interruptions, our operations, as well as our ability to manage our increased
growth, could be materially adversely affected.
PROVISIONS OF OUR GOVERNING DOCUMENTS MAY DETER OTHERS FROM ATTEMPTING TO
ACQUIRE US.
Our governing documents contain provisions designed to prevent hostile
takeovers, which may limit the ability of stockholders to sell their stock at
a premium on a takeover. According to our governing documents, stockholders
can only act at annual meetings or at special meetings of stockholders.
Stockholders are not allowed to act by written consent. In addition,
stockholders are not allowed to call for a special meeting. Only our board of
directors, the chairman of the board or the president may call a special
meeting. These provisions may make it difficult for stockholders to force us
to hold special meetings. These provisions may also limit the ability of
stockholders to consider transactions that they may want to approve, such as
a hostile takeover of us.
Our governing documents also contain other provisions that could make
it more difficult for a change in control to be effected. Our board of
directors can issue preferred stock and can determine the rights of those
preferred stockholders without the approval of our common stockholders. For
example, our board of directors could give preferred stockholders one or more
votes on issues on which common stockholders vote. This could have the effect
of diluting the voting rights of common stockholders, which might further
discourage other companies from trying to acquire us.
In addition, our certificate of incorporation contains provisions
dividing our board of directors into three classes. Each class serves until
the third succeeding annual meeting, and one class is elected at each annual
meeting of stockholders. As a result, even if our stockholders might prefer
to effect a change sooner, it could take at least two annual meetings of
stockholders to change a majority of the members of the board of directors.
Furthermore, our certificate of incorporation authorizes, and we have
adopted, a preferred share purchase rights plan, commonly referred to as a
"poison pill." Under the rights plans, we have made a dividend distribution
to the stockholders of record on November 6, 1996 of one right to purchase
from us one one-hundredth of a share of our preferred stock for each
outstanding share of our common stock. The terms of the rights and the
circumstances under which they may be exercised are contained in a rights
agreement, which has been filed with the SEC. These terms have been designed
to deter hostile takeovers of us, even though our stockholders might favor a
takeover, especially if it were to afford them an opportunity to sell their
stock at a price above the prevailing market rate.
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<PAGE>
OUR STOCK PRICE IS VOLATILE AND COULD DROP PRECIPITOUSLY AND UNEXPECTEDLY.
Our common stock currently trades on The Nasdaq National Market. The
prices of publicly traded stock often fluctuate. The price of our stock may rise
or fall dramatically, even though our business performance has not changed. In
the past, the stock price of technology companies has been especially volatile.
We expect that this will continue to be the case.
In addition to these fluctuations, an investment in our stock could be
affected by a wide variety of factors that relate to our business and industry,
many of which are outside of our control. For example, the value of our common
stock could be affected by:
- new product introductions;
- innovations by competitors;
- our competitors' announcements of their financial results;
- the failure of our operating results to meet or exceed the expectations
of investors and analysts;
- changes in financial estimates and recommendations by security
analysts;
- general economic conditions;
- disputes over patents or other proprietary rights;
- our litigation with Roche;
- publicity;
- regulations;
- market conditions; and
- fluctuations in our performance and the performances of our licensees.
WE DO NOT PLAN TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK.
We have never paid cash dividends on our common stock. We have no plans to
pay cash dividends in the foreseeable future.
THE VALUE OF THE COMMON STOCK YOU PURCHASE IN THIS OFFERING MAY BE DILUTED IN
THE FUTURE.
Our officers, directors, employees and consultants have options to
purchase a significant aggregate amount of our common stock. If they exercise
their options and purchase common stock, your investment in our common stock
will be diluted. In addition, we currently have preferred stockholders and
convertible debenture holders who have the right to convert their preferred
shares and debentures, as the case may be, to common stock. Your investment
in our common stock would be diluted if these preferred stockholders or
convertible debenture holders decide to convert their securities in the
future. Moreover, your investment in our common stock could be further
diluted if we issue additional common stock or securities convertible into
common stock in the future, which we may need to do to raise funds for our
business. Sales of additional shares of our common stock or the conversion of
securities into our common stock could cause the market price of our common
stock to decrease.
THIS PROSPECTUS INCLUDES FORWARD-LOOKING INFORMATION.
This prospectus and the documents incorporated in this prospectus by
reference include forward-looking statements under the Securities Act. In
addition, from time to time, we or our representatives have made or may make
forward-looking statements orally or in writing. The words "may," "will,"
"expect," "anticipate," "believe," "estimate," "plan," "intend" and similar
expressions have been used in this prospectus and the documents incorporated
in this prospectus by reference to identify forward-looking statements. We
have based these forward-
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<PAGE>
looking statements on our current views with respect to future events and
financial performance. Actual results could differ materially from those
projected in the forward-looking statements. These forward-looking statements
are subject to risks, uncertainties and assumptions, including, among other
things:
- adverse results in our litigation with Roche
- risks associated with managing and maintaining internal growth
- competition, including market competition, competition in the patent
process and our ability to consummate contract negotiations with
prospective licensees
- the possible termination of contracts with key licensees
- changes in coverage or reimbursement practices of health maintenance
organizations and private insurers
- adverse results in other litigation and in regulatory matters, the
adoption of adverse legislation or regulations, more aggressive
enforcement of existing legislation or regulations or a change in the
interpretation of existing legislation or regulations
- dependence on key members of management
- other risks described in this "Risk Factors" section
- other risks described from time to time in our filings with the SEC
We are not obligated to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained throughout this prospectus and the documents
incorporated in this prospectus by reference. Because of these risks,
uncertainties and assumptions, you should not place undue reliance on these
forward-looking statements.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by
the selling stockholders.
SELLING SECURITY HOLDERS
On January 11, 2000 we issued an aggregate of $35,000,000 in 5%
subordinated convertible debentures due January 2005 and warrants to purchase
our common stock to the selling stockholders. The debentures accrue interest
at 5% per year, payable semi-annually, and are convertible at any time by the
holders into our common stock at a conversion price of $31.00 per share. The
interest accrued on the convertible debentures will be paid, at our election,
in cash or in shares of our common stock. The warrants are exercisable to
purchase 282,258 shares of our common stock at an exercise price of $31.00
per share.
The number of shares of our common stock registered in the registration
statement of which this prospectus is a part and the number of shares offered
in this prospectus represents the sum of the number of shares issuable upon
conversion of the convertible debentures and exercise of the warrants plus
our bona fide estimate of the number of shares issuable upon the payment of
interest on the debentures in shares of common stock. The number of shares of
common stock that will ultimately be issued to the selling stockholders
cannot be determined at this time because it depends on (1) whether the
holders of the convertible debentures elect to convert the convertible
debentures into shares of common stock, (2) whether we elect to pay interest
on the convertible debentures in cash or in shares of common stock, (3)
whether the holders of the warrants exercise their warrants, (4) the period
for which the convertible debentures remain outstanding, and (5) the market
price of our common stock at the time we make any interest payments on the
convertible debentures in shares of common stock.
The table below sets forth information regarding ownership of our
common stock by the selling stockholders and the number of shares that may be
sold by them under this prospectus. The number of shares set forth in the
table as being held by the selling stockholders includes the number of shares
of common stock that are
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<PAGE>
issuable upon conversion of the convertible debentures and the exercise of
the warrants as of January 26, 2000. The number of shares set forth on the
table as being offered by this prospectus equals the sum of the number of
shares of common stock issuable January 26 upon the conversion of the
convertible debentures and exercise of warrants plus our bona fide estimate
of the number of shares that could be issued as interest payments over the
term of the debentures. However, the actual number of shares of common stock
issuable upon payment of interest is indeterminable, and could differ from
the amounts listed on the table due to the factors mentioned above. Because the
selling stockholders may offer all or some portion of the common stock listed
in the table pursuant to this prospectus or otherwise, no estimate can be
given as to the amount or percentage of common stock that the selling
stockholders will hold upon termination of the offering. The selling
stockholders may sell all, part, or none of the shares listed. The percentage
of ownership shown in the table is based on 15,446,333 shares of common stock
issued and outstanding on January 26, 2000. None of the selling stockholders
has had any position, office or other material relationship with IGEN, other
than as a security holder, during the past three years.
<TABLE>
<CAPTION>
Number of shares
Name of Number of shares owned which may be sold Percentage of Common
Selling Stockholder prior to offering in this offering Stock
----------------------- ------------------------ ------------------- -----------------------
<S> <C> <C> <C>
Brown Simpson Strategic Growth 645,161 (1) 777,142 4.79%
Fund, Ltd.
Brown Simpson Strategic Growth 362,904 (2) 437,144 2.75%
Fund, L.P.
LBI Group, Inc. 403,226 (3) 485,714 3.05%
</TABLE>
(1) Includes 516,129 shares issuable upon conversion of $16,000,000 of
convertible debentures, plus 129,032 shares issuable upon the exercise of
warrants. Does not include shares issuable to Brown Simpson Strategic
Growth Fund, L.P. discussed in note (2) below.
(2) Includes 290,323 shares issuable upon conversion of $9,000,000 of
conversion debentures, plus 72,581 shares issuable upon the exercise of
warrants. Does not include shares issuable to Brown Simpson Strategic
Growth Fund, Ltd. discussed in note (1) above.
(3) Includes 322,581 shares issuable upon conversion of $10,000,000 of
convertible debentures, plus 80,645 shares issuable upon the exercise
of warrants.
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
stockholders. We will bear all costs, expenses and fees in connection with
the registration of the shares offered by this prospectus other than
brokerage commissions and similar selling expenses, if any, attributable to
the sale of shares which will be borne by the selling stockholders. Sales of
shares may be effected by the selling stockholders from time to time in one
or more types of transactions (which may include block transactions) on The
Nasdaq National Market, in the over-the-counter market, in negotiated
transactions, through put or call option transactions relating to the shares,
through short sales of shares, or a combination of such methods of sale, at
market prices prevailing at the time of sale, or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The selling
stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers
regarding the sale of their securities, nor is there an underwriter or
coordinated broker acting in connection with the proposed sale of shares by
the selling stockholders.
The selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable
for the shares in the course of hedging positions they assume with selling
stockholders. The selling stockholders may also enter into options or other
transactions with broker-dealers or other financial institutions which
require the delivery to such broker-dealers or other financial institutions
of shares offered by this prospectus, which shares such broker-dealer or
other financial institution may resell pursuant to this prospectus (as
amended or supplemented to reflect such transaction).
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<PAGE>
The selling stockholders may make these transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any broker-dealers that act in connection
with the sale of shares may be "underwriters" within the meaning of Section
2(a)(11) of the Securities Act, and any commissions received by such
broker-dealers or any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The selling stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because the selling stockholders may be "underwriters" within the meaning
of Section 2(a)(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling stockholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to their sales in the
market.
The selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon our being notified by a selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required, pursuant to Rule 424(b) under the Securities Act,
disclosing:
- the name of each such selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
- the initial price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such broker
-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus; and
- other facts material to the transactions.
In addition, upon our being notified by a selling stockholder that a donee or
pledgee intends to sell more than 500 shares, a supplement to this prospectus
will be filed.
LEGAL MATTERS
Wilmer, Cutler & Pickering, Washington, D.C., will pass upon the validity
of the shares offered in this prospectus.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from our Annual Report on Form 10-K for the year ended March 31, 1999
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated by reference herein, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. The Exchange
Act file number for our SEC filings is 023252. You may read and copy any
document we file with the SEC at the following SEC public reference rooms:
<TABLE>
<S> <C> <C>
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Room 1024 Chicago, Illinois 60661 New York, New York 10048
Washington, D.C. 20549
</TABLE>
You may obtain information on the operation of the public reference room
in Washington, D.C. by calling the SEC at 1-800-SEC-0330.
We file information electronically with the SEC. Our SEC filings also are
available from the SEC's Internet site at HTTP://WWW.SEC.GOV, which contains
reports, proxy and information statements and other information regarding
issuers that file electronically. Our common stock is listed on The Nasdaq
National Market.
You may also read and copy our SEC filings and other information at the
offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
This prospectus is a part of a registration statement on Form S-3 that we
filed with the SEC under the Securities Act of 1933. The rules of the SEC allow
us to leave some of the information contained in the registration statement out
of this prospectus. Therefore, you should review the registration statement and
its exhibits for further information about us and our common stock. Copies of
the registration statement and its exhibits are on file at the offices of the
SEC and you can view them at the SEC's website. You should read the exhibits for
a more complete description of the matters involved. You should rely only on the
information or representations provided in this prospectus and the registration
statement. We have not authorized anyone to provide you with different
information.
INFORMATION INCORPORATED INTO THIS PROSPECTUS
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference into this prospectus the following documents or information filed with
the SEC.
- Annual Report on Form 10-K For our fiscal year ended March 31,
1999;
- Proxy Statement for our Annual Meeting of Stockholders held on
September 15, 1999;
- Quarterly Report on Form 10-Q for our fiscal quarter ended
June 30, 1999;
- Quarterly Report on Form 10-Q for our fiscal quarter ended
September 30, 1999;
- Quarterly Report on Form 10-Q for our fiscal quarter ended
December 31, 1999;
- Current Reports on Form 8-K filed January 12, 2000 and
January 27, 2000;
- Description of our common stock contained in the registration
statement on Form 8-A dated December 10, 1996, registering our
common stock under Section 12 of the Exchange Act; and
- All future filings by IGEN with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act until all securities offered under
this prospectus have been either sold or deregistered.
We will provide a copy of any of the documents we incorporate by reference
at no cost, to any person who receives this prospectus including any beneficial
owner of our common stock. To request a copy of any or all of these documents,
you should write or telephone us at the following address and telephone number:
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IGEN International, Inc.
16020 Industrial Drive
Gaithersburg, MD 20877
Attention: George Migausky, Chief Financial Officer
Telephone: (301) 869-9800
We will not provide copies of exhibits to the filings unless the exhibits are
specifically incorporated by reference into the body of the filing.
17
<PAGE>
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. If anyone provides you with different or
inconsistent information, you should not rely on it. This prospectus does not
offer to sell any shares in any jurisdiction where it is unlawful. The
information in this prospectus is current as of the date shown on the cover
page.
IGEN International, Inc.
1,700,000 Shares of Common Stock
--------------------------------------------
PROSPECTUS
--------------------------------------------
February 23, 2000
18
