<PAGE> 1
As filed with the Securities and Exchange Commission on September 14, 1999
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------
GUILFORD PHARMACEUTICALS INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-1841960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
------------------------------
6611 TRIBUTARY STREET
BALTIMORE, MARYLAND 21224
(410) 631-6300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
CRAIG R. SMITH, M.D.
CHIEF EXECUTIVE OFFICER
GUILFORD PHARMACEUTICALS INC.
6611 TRIBUTARY STREET
BALTIMORE, MARYLAND 21224
(410) 631-6300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
MICHAEL J. SILVER, ESQ.
HOGAN & HARTSON L.L.P.
111 SOUTH CALVERT STREET, 16TH FLOOR
BALTIMORE, MARYLAND 21202
(410) 659-2700
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than the securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered registered offering price per unit (1) aggregate offering price (1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value (2) ...... 3,360,000 $14.31 $48,090,000.00 $ 13,370
shares
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) We estimated this amount only to calculate the registration fee. We based
this amount on the average of the high and low sale prices of our common stock
on September 9, 1999 as reported on the Nasdaq Stock Market of $14.3125 per
share.
(2) Includes Series A Junior Participating Preferred Share Purchase Rights
attached thereto, for which no separate fee is payable pursuant to Rule 457(i).
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC IS
EFFECTIVE. THIS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION
SEPTEMBER 14, 1999
GUILFORD PHARMACEUTICALS INC.
3,360,000 SHARES OF COMMON STOCK
We have prepared this prospectus to allow the selling stockholders we
identify herein to sell up to 3,360,000 shares of our common stock. The selling
stockholders acquired the shares from us in a private placement. We will not
receive any of the proceeds from the sale of common stock by the selling
stockholders.
Our common stock is traded on the Nasdaq Stock Market under the symbol
"GLFD." On September 13, 1999, the last reported sale price of our common stock
on Nasdaq was $14.50 per share.
------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 2.
------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE COMMON
STOCK, NOR HAVE THESE ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is September ___ , 1999.
<PAGE> 3
THE COMPANY
Guilford Pharmaceuticals Inc. is a biopharmaceutical company engaged in
the development and commercialization of novel products in two principal areas:
(i) targeted and controlled drug delivery systems using proprietary
biodegradable polymers for the treatment of cancer and other diseases; and (ii)
therapeutic and diagnostic products for neurological diseases and conditions.
Our principal executive offices are located at 6611 Tributary Street, Baltimore,
Maryland 21224, and our telephone number is (410) 631-6300.
RISK FACTORS
An investment in our stock is very speculative and involves a high degree
of risk. In addition to the other information contained in this prospectus
(including the reports we incorporate by reference), you should consider the
following important factors carefully in evaluating our company and its business
before purchasing shares of our stock.
In addition to historical information, this prospectus contains
forward-looking statements that reflect our current expectations regarding the
future results of our operations, economic performance and financial condition
as well as other matters that may affect our business. In general, we try to
identify these forward-looking statements by using words such as:
- "anticipate,"
- "believe,"
- "estimate,"
- "expect" and similar expressions.
While these statements reflect our current plans and expectations and we
base the statements on information currently available to us, we cannot be sure
that we will be able to implement these plans successfully. We may never realize
any or all of our expectations.
The forward-looking statements contained in this prospectus may cover
many topics, including the following:
- our efforts in conjunction with Rhone-Poulenc Rorer
Pharmaceuticals, Inc. ("RPR") to obtain international
regulatory clearances to market and sell GLIADEL(R) Wafer
("GLIADEL") and to increase end-user sales of the product,
-2-
<PAGE> 4
- our efforts in conjunction with RPR to expand the labeled
uses for GLIADEL,
- our efforts to develop polymer drug delivery product line
extensions and new polymer drug deliver products,
- the conduct and completion of the research programs
relating to our FKBP neuroimmunophilin ligand technology
and other technologies,
- clinical development activities, including commencement and
conduct of clinical trials related to our polymer based
drug delivery candidates, including GLIADEL, and our
pharmaceutical product candidates including:
- drug candidates falling under the FKBP
neuroimmunophilin ligand technology, such as
NIL-A,
- NAALADase inhibitors,
- PARP inhibitors, and
- DOPASCAN(R) Injection ("DOPASCAN"),
- our efforts to scale-up product candidates from laboratory
bench quantities to commercial quantities,
- our efforts to secure a supply of the active pharmaceutical
ingredients for the clinical development and
commercialization of our polymer-based and other drug
candidates,
- our efforts to manufacture drug candidates for clinical
development and eventual commercial supply,
- our strategic plans,
- our anticipated expenditures and the potential need for
additional funds, and
- our plans to implement solutions to the Year 2000 issue.
All of these areas of our business involve significant risks and
uncertainties.
-3-
<PAGE> 5
Any of the statements we make in this prospectus (including the documents
we incorporate by reference) that are forward-looking are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
We wish to caution you that our actual results may differ significantly from the
results we discuss in the forward-looking statements, and you should not unduly
rely on them. Many factors that could cause or contribute to such differences
and include those discussed below, as well as those discussed elsewhere in our
filings with the Securities and Exchange Commission. In addition, any
forward-looking statement we make in this document speaks only as of the date of
this prospectus, and we do not intend to update any such forward-looking
statement to reflect events or circumstances that occur after that date.
WE HAVE A HISTORY OF LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN.
We cannot be sure that we will be able to achieve significant and
sustained revenues or realize sustained profitable operating results in the
future. Guilford was founded in July 1993 and, with the sole exception of 1996,
we have not earned a profit in any year since inception. Our losses stem mainly
from the significant amount of money that we have spent on research and
development. As of June 30, 1999, we had an accumulated deficit of $73.1
million. We expect to have significant additional losses over the next several
years.
Most of our product candidates are in research or early stages of
pre-clinical and clinical development. Except for GLIADEL, none of our product
candidates has been marketed and sold to the public. At this time, nearly all of
our revenues have come from:
- payments from RPR from the sale and distribution of GLIADEL,
- one-time signing fees from our corporate partners under our
collaboration agreements supporting the research, development and
commercialization of our product candidates,
- one-time payments from our corporate partners upon the achievement
of specified regulatory or development milestones; for example,
RPR's payment to us in July 1999 relating to approval in France to
market and sell GLIADEL for the recurrent surgery indication, and
- periodic research funding under our collaboration with Amgen Inc.
We do not expect current and anticipated revenues from GLIADEL to be
sufficient to support all our anticipated future activities. Whether GLIADEL
sales will ever generate any significant revenues continues to remain uncertain.
In
-4-
<PAGE> 6
addition, we do not anticipate generating revenues from the sale of our product
candidates for the next several years, if ever. We will require payments from
our current corporate partners, principally RPR and Amgen, and any future
corporate partners, to fund our ongoing activities.
Whether we will ever recognize significant revenues from Amgen in the
form of milestone payments or royalties paid on product sales is also subject to
significant risk and uncertainty. These risks are part of each of the following
activities, among others:
- new product development,
- the conduct of pre-clinical animal studies and human clinical
trials,
- applying for and obtaining regulatory approval to market and sell
product candidates,
- scale-up of the processes for making product candidates in
quantities and qualities needed for research and development
purposes to commercial scale manufacture needed to support
marketing and sales of new products, and
- commercialization of new products.
We discuss these and other risks in greater detail below in this "Risk
Factors" section.
Whether we will ever be able to achieve sustained profitability in the
future will depend on many factors, including:
- the successful marketing of GLIADEL by RPR,
- receipt of regulatory clearance to market and sell GLIADEL in
Europe,
- receipt of regulatory clearance to market and sell GLIADEL for
patients undergoing initial surgery for malignant glioma in the
United States as well as Europe and other countries,
- the successful development and commercialization of product
candidates that result from our collaboration with Amgen, and
- our ability to enter into additional collaborative arrangements
and license agreements with other corporate partners for our
product candidates and earlier stage technologies as we develop
them.
-5-
<PAGE> 7
We will need to conduct substantial additional research, development and
clinical trials. We will also need to receive necessary regulatory clearances.
We expect that these research, development and clinical trial activities, and
regulatory clearances, together with future general and administrative
activities, will result in significant expenses for the foreseeable future.
OUR RESULTS OF OPERATIONS ARE LIKELY TO FLUCTUATE.
Our revenues and expenses have fluctuated significantly in the past
because of the nature of their sources. This fluctuation has in turn caused our
results of operations to vary significantly from quarter to quarter and year to
year. We expect the fluctuations in our revenues and expenses to continue and
thus our results of operations should also continue to vary significantly. These
fluctuations are due to a variety of factors, including:
- the timing and amount of sales of GLIADEL to RPR and RPR's sales
to others,
- the timing and realization of milestone and other payments from
our corporate partners, including RPR and Amgen,
- the timing and amount of expenses relating to our research and
development, product development, and manufacturing activities,
and
- the extent and timing of costs related to our activities to obtain
patents on our inventions and to extend, enforce and/or defend our
patent and other rights to our intellectual property.
WE ARE DEPENDENT ON GLIADEL AND RPR FOR REVENUES.
Our near term prospects depend to a large extent on sales by RPR of
GLIADEL, our only commercial product to date. GLIADEL was commercially launched
in the United States in February 1997. We currently do not know whether the
product will ever gain broad market acceptance or the extent of the marketing
efforts necessary to achieve broad market acceptance. If GLIADEL fails to gain
market acceptance, that failure would have a material adverse effect on our
business, financial condition and results of operations.
To date, we have received clearance from the FDA to market GLIADEL in the
United States for a limited subset of patients suffering from brain cancer. This
clearance extends to those patients for whom surgical tumor removal, commonly
referred to as "resection", is indicated and who have recurrent forms of the
brain cancer glioblastoma multiforme. A recurrent form of glioblastoma
multiforme is
-6-
<PAGE> 8
one in which the cancer has returned after initial surgery to remove a brain
tumor. The number of patients undergoing recurrent surgery for glioblastoma
multiforme is very limited, and we believe the total annual incidence of
glioblastoma multiforme in the United States is less than 10,000.
In order to expand the medical uses, commonly referred to as
"indications", for which RPR may market GLIADEL, we and RPR must successfully
complete additional lengthy clinical trials. Thereafter, we and RPR will have to
apply to the FDA and international health regulatory authorities for clearance
to market GLIADEL for patients undergoing initial surgery for glioblastoma
multiforme and potentially other brain cancers. We cannot be sure that we and
RPR will be able to successfully complete these clinical trials or receive the
desired regulatory clearance. If GLIADEL fails to receive regulatory clearance,
that failure would limit RPR's ability to market GLIADEL for use in patients
beyond the current narrow indication. The failure would also have a material
adverse effect on our business prospects, financial condition and results of
operations.
In addition, RPR has filed for marketing clearance for the current
indication for GLIADEL in a number of foreign countries, and as of the date of
this prospectus, RPR has received international regulatory approvals to market
and sell GLIADEL in only a limited number of foreign countries, including France
and Germany. RPR may not be able to obtain any other international regulatory
approvals for GLIADEL. If RPR fails to obtain those approvals, the failure would
have a material adverse effect on our business prospects, financial condition
and results of operations.
We have granted RPR exclusive worldwide (excluding Scandinavia and Japan)
marketing, sales and distribution rights for GLIADEL. However, our agreements
with RPR do not impose any minimum requirements on RPR for the purchase of
GLIADEL from us or for the sale of GLIADEL to end-users. Therefore, we have no
control over the revenues we receive from the sale and distribution of GLIADEL,
which depend completely on RPR's marketing efforts. In addition, prior to the
February 1997 commercial launch of GLIADEL in the United States, RPR's oncology
sales force had no previous experience in marketing a product to neurosurgeons.
We cannot be sure that RPR will elect to continue or increase its marketing and
promotional activities for GLIADEL or that its efforts in that regard will be
successful. The inability or unwillingness of RPR to aggressively market and
promote GLIADEL would have a material adverse effect on our business, financial
condition and results of operations.
GLIADEL is also a very fragile product and can easily break into many
pieces if not handled with great care. Product recalls due to excessive breakage
of the GLIADEL wafers or for other reasons could also have a material adverse
effect on our business, financial condition and results of operations.
-7-
<PAGE> 9
RPR must make designated one-time milestone payments to us upon achieving
specified domestic and international regulatory approvals. By and large, RPR is
responsible for the timing and content of the applications necessary for
international regulatory clearances to market and sell GLIADEL. Thus, whether
GLIADEL will receive these clearances depends heavily on the efforts of RPR. We
cannot be sure any or all of these milestones will be satisfied in a manner so
as to entitle us to receive the corresponding milestone payments from RPR. The
potential milestone payments are significant, and failure to achieve the
designated regulatory objectives could have a material adverse effect on our
business, financial condition and result of operations.
THE SUCCESS OF OUR AMGEN COLLABORATION IS DEPENDENT ON A NUMBER OF FACTORS, MOST
OF WHICH ARE OUTSIDE OF OUR CONTROL.
Regulatory and development milestone payments as well as royalty amounts
on product sales payable to us under our collaboration with Amgen depend on a
number of factors. Many of these factors are not within our control, including:
- the selection of one or more appropriate lead compounds,
- successful completion of pre-clinical and clinical development
activities,
- application for and obtaining regulatory clearances to market
potential products,
- commercialization of products, and
- the successful preservation and extension of the patent and other
intellectual property rights licensed to Amgen.
All of these activities are subject to significant risks and
uncertainties. For a description of these and other material risks related to
the research, development and commercialization of the FKBP neuroimmunophilin
ligand technology, you should read the following sections contained in this
"Risk Factors" discussion:
- "We face technological uncertainties related to research,
development and commercialization,"
- "We may be unable to protect our proprietary rights, permitting
competitors to duplicate our products and services,"
- "We are dependent on licensed intellectual property,"
-8-
<PAGE> 10
- "Pre-clinical and clinical trial results for our products may not
be favorable,"
- "Our products use novel alternative technologies and therapeutic
approaches which have not been widely studied," and
- "Our business is dependent on our ability to keep pace with the
latest technological changes"
Moreover, under the terms of our collaboration with Amgen, we have no
control over the development activities regarding the FKBP neuroimmunophilin
ligand technology, which have been left to the sole discretion of Amgen. Our
agreement with Amgen also does not specify a binding timetable for achieving
development and commercialization goals with respect to the FKBP
neuroimmunophilin ligand technology. If Amgen determines to conduct clinical
trials on a product candidate resulting from our collaboration, Amgen still may
not be able successfully to complete those clinical trials and then receive
clearance from the FDA or foreign regulatory authorities to market and sell any
such products.
The FKBP neuroimmunophilin ligand technology we have licensed to Amgen
represents a new approach to the treatment of certain types of neurological and
other diseases and conditions. We and Amgen have very limited experience in
taking the kinds of compounds likely to result from our work and formulating
them into final drug products appropriate for sale to the public. In addition,
both of us have limited experience with the scale-up of such compounds from the
quantity and quality needed to support research and development efforts to
quantities needed to support commercial scale distribution. Also, both we and
Amgen have limited experience with the manufacture of compounds of this type for
commercial sale. There is a risk that Amgen will not be successful in scaling-up
and manufacturing any such compounds needed for commercial sale. For a more
complete description of the kinds of risks associated with product manufacture,
you should read the section entitled "We have limited manufacturing
capabilities" below.
If Amgen is able to obtain all regulatory approvals necessary to market a
product resulting from our collaboration, our agreement does not specify any
minimum sales requirements for Amgen. Thus, any royalty amounts payable to us in
the future will depend entirely on the sales and marketing efforts of Amgen, an
activity over which we will have no control. In addition, our agreement with
Amgen does not prevent Amgen from pursuing technologies for product candidates
competitive with the FKBP neuroimmunophilin ligand technology in the future.
-9-
<PAGE> 11
WE HAVE LIMITED MANUFACTURING CAPABILITIES.
To commercialize GLIADEL, we must be able to manufacture this product in
sufficient quantities, in compliance with regulatory requirements, and at
acceptable costs. We manufacture GLIADEL at our manufacturing facility in
Baltimore, Maryland, which consists of production laboratories and redundant
cleanrooms. We estimate that the facility currently has the capacity to
manufacture approximately 8,000 GLIADEL treatments per year.
Although we believe this GLIADEL manufacturing facility meets the FDA's
current requirements for good manufacturing practices, which are commonly
referred to as "cGMP", and the FDA has inspected the facility in the past, we
have manufactured only limited quantities of GLIADEL in the facility. We cannot
be sure that we will be able to continue to satisfy applicable regulatory
standards, including cGMP requirements, and other requirements relating to the
manufacture of GLIADEL in the facility.
We also face risks inherent in the operation of a single facility for
manufacture of GLIADEL. These risks include:
- unforeseen plant shutdowns due to personnel, equipment or other
factors, and
- the possible inability of the facility to produce GLIADEL in
quantities sufficient to meet demand.
Any delay in the manufacture of GLIADEL could result in delays in product
shipment. Delays in product shipment would have a material adverse effect on our
business, financial condition and results of operations.
Currently, we have no manufacturing capabilities for our product
candidates, including DOPASCAN. Consequently, in order to complete the
commercialization process of any of our product candidates, we must either
acquire, build or expand our internal manufacturing capabilities or rely on
third parties to manufacture these product candidates. We cannot be sure that we
or our corporate partners, including Amgen, will be able to (1) acquire, build
or expand facilities that will meet quality, quantity and timing requirements or
(2) enter into manufacturing contracts with others on acceptable terms, or at
all. Our inability, or that of our corporate partners, to accomplish these tasks
could have a material adverse effect on our business, financial condition and
results of operations.
Third-party manufacturers must also comply with FDA, Drug Enforcement
Administration, and other regulatory requirements for their facilities,
including the FDA's cGMP regulations. In addition, manufacture of product
candidates on a
-10-
<PAGE> 12
limited basis for investigational use in animal studies or human clinical trials
does not guarantee that large-scale, commercial production is viable. Small
changes in methods of manufacture can affect the safety, efficacy, controlled
release or other characteristics of a product. Changes in methods of
manufacture, including commercial scale-up, can, among other things, require the
performance of new clinical studies. Moreover, if we decide to manufacture one
or more of our product candidates ourselves, we would incur substantial start-up
expenses and need to expand our facilities and hire additional personnel.
WE FACE TECHNOLOGICAL UNCERTAINTIES RELATED TO RESEARCH, DEVELOPMENT AND
COMMERCIALIZATION.
The research, development and commercialization of pharmaceutical drugs
inherently involve significant risk. Before we or our corporate partners can be
in a position to commercialize a new product (i.e., to market, distribute and
sell the product), each of us will have to:
- expend substantial capital and effort to develop our product
candidates further, which includes conducting extensive and
expensive pre-clinical animal studies and human clinical trials,
- apply for and obtain regulatory approval to market and sell such
product candidates, and
- conduct other costly activities related to preparation for product
launch, among many other activities.
In some of our research programs, we are using compounds that we consider
to be "prototype" compounds in the research phase of our work. These compounds
include the PARP inhibitor GPI-6150 and the cocaine binding inhibitor GPI-2138.
By prototype compounds we mean compounds that we are using primarily to
establish that a relevant scientific mechanism of biological or chemical action
could have commercial application in diagnosing, treating or preventing disease.
These activities are sometimes referred to as establishing the "proof of
principle" of a particular approach to drug research and development. We
generally do not consider our prototype compounds to be lead compounds
acceptable for further development into a product(s) because of factors that
render them unsuitable as drug candidates. Such factors include sub-optimal
metabolic or pharmacokinetic characteristics or unfavorable patent coverage. In
order to develop commercial products, we will need to conduct research using
other compounds that share the key aspects of the prototype compounds but do not
have the unsuitable characteristics. We cannot be sure that this will always be
possible.
-11-
<PAGE> 13
In addition, our product candidates are subject to the risks of failure
inherent in the development of products based on new and unproved technologies.
These risks include the possibility that:
- our new approaches will not result in any products that gain
market acceptance;
- a product candidate will prove to be unsafe or ineffective, or
will otherwise fail to receive and maintain regulatory clearances
necessary for marketing,
- a product, even if found to be safe and effective, could still be
difficult to manufacture on the large scale necessary for
commercialization or otherwise not be economical to market,
- a product will unfavorably interact with other types of commonly
used medications, thus restricting the circumstances in which it
may be used,
- proprietary rights of third parties will preclude us from
manufacturing or marketing a new product, or
- third parties will market superior or more cost-effective
products.
As a result, our activities, either directly or through corporate
partners, may not result in any commercially viable products.
WE ARE DEPENDENT ON COLLABORATIONS WITH THIRD PARTIES FOR THE DEVELOPMENT AND
COMMERCIALIZATION OF OUR PRODUCTS.
Our resources are limited, particularly because we are developing our
technologies for a variety of different diseases. Our business strategy requires
that we enter into various arrangements with:
- corporate partners, such as RPR and Amgen,
- academic investigators at universities, such as The Johns Hopkins
University ("Johns Hopkins") and others,
- licensors of technologies, such as Johns Hopkins, Massachusetts
Institute of Technology and Research Triangle Institute,
- licensees of our technologies, such as Daiichi Radioisotope
Laboratories, Ltd. and others.
-12-
<PAGE> 14
Our success depends in large part upon the efforts of these parties.
Like many small biopharmaceutical companies, our business strategy
includes finding larger pharmaceutical companies to collaborate with us to
support the research, development and commercialization of our product
candidates. In trying to attract corporate partners to collaborate with us in
the research, development and commercialization process, we face serious
competition from other small biopharmaceutical companies and even the in-house
research and development staffs of the larger pharmaceutical companies
themselves. If we are unable to enter into such arrangements with corporate
partners, this failure may severely limit our ability to proceed with the
research, development, manufacture or sale of product candidates. For example,
we are actively seeking corporate partners to assist in the development of
DOPASCAN as well as our NAALADase and PARP inhibitor neuroprotective drug
programs, but we may not find suitable corporate partners for these programs.
It is common in many corporate partnerships in our industry for the
larger partner to have responsibility for conducting pre-clinical studies and
human clinical trials and/or preparing and submitting applications for
regulatory approval of potential pharmaceutical or other products. That is the
case with some of our current corporate partnerships, including our
collaboration with Amgen. It is possible that this will also be the case with
future arrangements into which we may enter. If one of our collaborative
partners fails to develop or commercialize successfully any of our product
candidates, this failure could materially and adversely affect our business,
financial condition and results of operations.
Furthermore, larger pharmaceutical companies often explore multiple
technologies and products for the same medical conditions. Therefore, they are
likely to enter into collaborations with our competitors for products addressing
the same medical conditions targeted by our technologies. Thus our
collaborators, including Amgen, may pursue alternative technologies or product
candidates either on their own or in collaboration with others, including our
competitors, in order to develop treatments for the diseases or disorders
targeted by our collaborative arrangements. Depending on how other product
candidates advance, a corporate partner may slow down or abandon its work on our
product candidates or terminate its collaborative arrangement with us in order
to focus on these other prospects.
We also depend to a large extent on technology license agreements with
third parties, including our agreements with Johns Hopkins relating to the
neuroimmunophilin ligand technology. This license agreement and others we have
require that we meet a specified schedule for achieving designated research,
development and regulatory milestones and that we spend minimum amounts of money
to develop the technology, as well as make specified payments from proceeds from
corporate partners and royalty payments. If we are unable to meet or agree
-13-
<PAGE> 15
upon these requirements under a license, our licensor could terminate the
license and thus deprive us of access to key technology. A deprivation of this
type could have a material adverse effect on our business, financial condition
and results of operations.
WE MAY BE UNABLE TO OBTAIN THE ADDITIONAL CAPITAL NEEDED TO OPERATE AND GROW OUR
BUSINESS.
We will require substantial funds in order to continue our research and
development programs and pre-clinical and clinical testing and to manufacture
and, where applicable, market our products. We cannot be sure that we will be
able to obtain any future funds that we may require on acceptable terms, or at
all. Under our operating lease with a trust affiliated with First Union National
Bank for our new research and development facility, we are required to hold, in
the aggregate, unrestricted cash, cash equivalents and investments of $40
million at all times during the term of the lease. In addition, we are required
to maintain specified amounts of cash ($24.8 million restricted at June 30,
1999) as collateral at First Union under this arrangement and other loan
agreements with First Union. These requirements may limit our ability to access
our capital in the future.
Our capital requirements depend on numerous factors, including:
- the progress of our research and development programs,
- the progress of pre-clinical and clinical testing,
- the time and costs involved in obtaining regulatory approvals,
- the cost of filing, prosecuting, defending and enforcing any
patent claims and other intellectual property rights,
- competing technological and market developments,
- changes in our existing research relationships with universities
and others,
- our ability to establish collaborative arrangements with large
pharmaceutical companies and others,
- the requirements and timing of entering into technology licensing
agreements and other similar arrangements, and
- the progress of efforts to scale-up manufacturing processes.
-14-
<PAGE> 16
We may use our existing resources before we may otherwise expect because
of changes in our research and development and commercialization plans or other
factors affecting our operating expenses or capital expenditures, including
potential acquisitions of other businesses, assets or technologies.
We anticipate that we will fund future capital requirements through a
combination of:
- revenues generated under our agreements with RPR relating to
GLIADEL,
- revenues generated under our agreement with Amgen related to the
FKBP neuroimmunophilin ligand technology,
- public or private financings as necessary,
- borrowings from RPR under our loan agreement with it,
- new agreements with corporate partners for the research,
development and commercialization of our technologies, and/or
- other potential sources.
Our ability to raise future capital on acceptable terms depends on
conditions in the public and private equity markets and our performance, as well
as the overall performance of other companies in the biopharmaceutical and
biotechnology sectors.
OUR STOCK PRICE IS VOLATILE.
The market price of our stock has been and is likely to continue to be
highly volatile, and an investment in our shares involves substantial risks. The
market prices for shares of smaller biotechnology companies like ours have a
history of being highly volatile. Furthermore, the stock market generally and
the market for stocks of companies with lower market capitalizations, like us,
have from time to time experienced and likely will again experience significant
price and volume fluctuations that are unrelated to the operating performance of
a particular company.
From time to time, stock market professionals publish research reports
covering our business and our future prospects. A number of factors may limit
our ability to meet the expectations of securities analysts or investors and
thus may adversely affect our stock price. Such factors include:
-15-
<PAGE> 17
- announcements by us or our competitors of clinical results,
technological innovations, product sales, new products or product
candidates,
- developments or disputes concerning patent or proprietary rights,
- regulatory developments affecting our products,
- period-to-period fluctuations in the results of our operations,
and
- market conditions for emerging growth companies and
biopharmaceutical companies.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, PERMITTING COMPETITORS TO
DUPLICATE OUR PRODUCTS AND SERVICES.
Any success will depend in large part on our ability to:
- obtain, maintain and enforce patent protection for our products
and processes,
- license rights to patents from third parties,
- maintain trade secret protection, and
- operate without infringing upon the proprietary rights of others.
Patent protection for our technologies and products will be a crucial
factor in our ability to develop and commercialize our products. Large
pharmaceutical companies consider a strong patent estate critical when they
evaluate whether to enter into a collaborative arrangement to support the
research, development and commercialization of a technology. Without the
prospect of reasonable patent protection, it would be difficult for a corporate
partner, or our company for that matter, to justify the time and money that is
necessary to complete the development of a product.
The rules and criteria for receiving and enforcing a patent for
pharmaceutical and biotechnological inventions are in flux and are unclear in
many respects. The ultimate scope of patent protection afforded these types of
patents remains uncertain, and a number of our product candidates are subject to
this uncertainty.
Many others, including companies, universities and other research
organizations, work in the areas of our business, and we cannot be sure that the
claims contained in our issued patents will be interpreted as broadly as we
would like in light of the inventions of these other parties. In addition, we
cannot be sure
-16-
<PAGE> 18
that the claims set forth in our pending patent applications will issue in the
form submitted. These claims may be narrowed or stricken, and the applications
may not ever ultimately result in valid and enforceable patents. Thus, we cannot
be sure that our patents and patent applications will adequately protect our
product candidates.
We are aware of a company which has asserted publicly that it has patents
and pending patent applications in the United States and in certain foreign
countries covering the use of various classes of chemical compounds which are or
may be related to neuroimmunophilin ligands ("NILs") to treat a variety of
neurological disorders. We do not believe that our neurotrophic compounds,
including those under the FKBP neuroimmunophilin ligand technology licensed to
Amgen, infringe on this company's patents. Nevertheless, we cannot be certain
that our neurotrophic product candidates will not infringe or be dominated by
this company's current patents or patents that may issue in the future, or those
of any other company.
In order to protect our proprietary position with respect to our
neuroimmunophilin ligands, we filed an opposition in 1998 in an effort to
prevent the final issuance of a European patent to the company we reference in
the immediately preceding paragraph. While we do not believe the claims of this
European patent are valid, any final issuance could result in future litigation
if this company were to allege that we infringed the claims of this patent in
Europe.
Furthermore, we cannot be sure that any or all of the patent applications
assigned or licensed to us from third parties will be granted. We cannot offer
assurances that we will develop additional products or processes that are
patentable, or that any patents issued to us, or licensed by us, will provide us
with any competitive advantages or adequate protection for our products. We also
cannot be sure that others will not successfully challenge, circumvent or
invalidate any of our existing or future patents or intellectual property.
Our policy is to control the disclosure and use of our know-how and trade
secrets by entering into confidentiality agreements with our employees,
consultants and third parties. There is a risk, however, that:
- these parties will not honor our confidentiality agreements,
- others will independently develop equivalent or competing
technology,
- disputes will arise concerning the ownership of intellectual
property or the applicability of confidentiality obligations, or
- disclosure of our trade secrets will occur regardless of these
contractual protections.
-17-
<PAGE> 19
In our business, we often work with consultants and research
collaborators at universities and other research organizations. To the extent
that any of these consultants or research collaborators uses intellectual
property owned by others as part of their work with us, disputes may arise
between us and these other parties as to which one of us has the rights to
intellectual property related to or resulting from the work done.
We support and collaborate in research conducted in universities, such as
Johns Hopkins, and in governmental research organizations, such as the National
Institutes of Health. We cannot be sure that we will have or be able to acquire
exclusive rights to the inventions or technical information that result from
work performed by university personnel or at these organizations. Also, disputes
may arise as to which party should have rights in research programs that we
conduct on our own or in collaboration with others that are derived from or
related to the work performed at the university or governmental research
organization. In addition, in the event of a contractual breach by us, some of
our collaborative research contracts provide that we must return the technology
rights (including any patents or patent applications) to the contracting
university or governmental research organization.
Questions of infringement of intellectual property rights, including
patent rights, may involve highly technical and subjective analyses. Some or all
of our existing or future products or technologies may now or in the future
infringe the rights of other parties. These other parties might initiate legal
action against us to enforce their claims, and our defense of the claims might
not be successful.
We may incur substantial costs if we must defend against charges of
infringement of patent or proprietary rights of third parties. We may also incur
substantial costs if we find it necessary to protect our own patent or
proprietary rights by bringing suit against third parties, including suits
involving our neurotrophic product candidates. We could also lose rights to
develop or market products or be required to pay monetary damages or royalties
to license proprietary rights from third parties. In response to actual or
threatened litigation, we may seek licenses from third parties or attempt to
redesign our products or processes to avoid infringement. We cannot be sure that
we will be able to obtain licenses on acceptable terms, or at all, or
successfully redesign our products or processes.
In addition to the risk that we could be a party to patent infringement
litigation, the U.S. Patent and Trademark Office, or its foreign counterparts,
could require us to participate in patent interference proceedings that it
declares. These proceedings are often expensive and time-consuming, even if we
were to prevail in such a proceeding. We may also be forced to initiate legal
proceedings to protect our patent position or other proprietary rights. These
proceedings typically are costly, protracted, and offer no assurance of success.
-18-
<PAGE> 20
Under our collaboration, Amgen is responsible for preparing, filing,
prosecuting, maintaining and defending patent applications and patents relating
to the FKBP neuroimmunophilin ligand technology. We cannot be sure that Amgen
will pursue these activities in the same manner or as vigorously as we would if
we had that responsibility. Furthermore, Amgen has the option to take the lead
in bringing actions to enforce patent rights relating to the FKBP
neuroimmunophilin ligand technology and to defend against third party
infringement suits regarding that technology. While Amgen and Guilford have
agreed to consult with each other on such matters, in the event of disagreement,
Amgen's decisions will control.
WE ARE DEPENDENT ON LICENSED INTELLECTUAL PROPERTY.
We have licensed intellectual property, including patents, patent
applications and know-how, from universities and others, including intellectual
property underlying GLIADEL, DOPASCAN and the neuroimmunophilin ligand
technology. Some of our product development programs depend on our ability to
maintain rights under these licenses. Under the terms of our license agreements,
we are generally obligated to:
- exercise diligence in the research and development of these
technologies,
- achieve specified development and regulatory milestones,
- expend minimum amounts of resources in bringing potential products
to market,
- make specified royalty and milestone payments to the party from
which we have licensed the technology, and
- reimburse patent costs to these parties.
In addition, these license agreements obligate us to abide by
record-keeping and periodic reporting obligations. Each licensor has the power
to terminate its agreement if we fail to meet our obligations under that
license. We may not be able to meet our obligations under these license
agreements. Furthermore, these obligations may conflict with our obligations
under other agreements that we have.
If we default under any of these license agreements, we may lose our
right to market and sell any products based on the licensed technology. Losing
our marketing and sales rights would have a material and adverse effect on our
business, financial condition and results of operations. Our license agreements
require that we pay a royalty on sales of GLIADEL to the university that
licensed us the technology underlying that product. In addition, we will have to
pay
-19-
<PAGE> 21
milestone and/or royalty payments in connection with the successful development
and commercialization of DOPASCAN and any products that result from the NIL and
PARP technologies.
In the future, to support our product development efforts, we may need
research materials or scientific information that researchers at universities or
other organizations generate. We cannot be sure that we will be able to obtain
this scientific information or research materials in a timely manner or at all.
REVENUES FROM OUR PRODUCTS ARE DEPENDENT IN PART ON REIMBURSEMENT FROM
HEALTHCARE PAYORS, WHICH IS UNCERTAIN.
Sales of our product candidates will depend in part on the availability
of reimbursement from third-party healthcare payors, such as government
insurance plans, including Medicare and Medicaid in the United States, private
insurance and managed care plans. Reimbursement policies for GLIADEL remain
uncertain, both domestically and internationally. We cannot be sure that any
reimbursement will be available for GLIADEL or any of our product candidates
under development. Furthermore, even if reimbursement is available, we cannot be
sure that it will be available at price levels sufficient to realize an
appropriate return on our investment in GLIADEL or our other products in
development.
WE ARE DEPENDENT ON ONE SOURCE OF SUPPLY FOR SEVERAL OF OUR KEY PRODUCT
COMPONENTS.
Currently, we are able to purchase some of the key components for GLIADEL
and our product candidates only from single source suppliers. These vendors are
subject to many strict regulatory requirements regarding the supply of these
components. We cannot be sure that these suppliers will comply, or have
complied, with applicable regulatory requirements or that they will otherwise
continue to supply us with the key components we require. If suppliers are
unable or refuse to supply us, or will supply us only at a prohibitive cost, we
may not be able to access additional sources at acceptable prices, on a timely
basis, if ever.
The current formulation of GLIADEL utilizes the chemotherapeutic agent
BCNU, which is also known as "carmustine." Currently we have the option to
procure BCNU from only two sources in the United States, and we are not aware of
any supplier outside of the United States. We currently obtain BCNU from one of
these two U.S. suppliers on a purchase order basis and not through any long-term
supply agreement. If we fail to receive key supplies necessary for the
manufacture of GLIADEL on a timely basis at a reasonable cost, delays in product
shipment could result. Delays of this type would have a material adverse effect
on our business, financial condition and results of operations.
-20-
<PAGE> 22
could result. Delays of this type would have a material adverse effect on our
business, financial condition and results of operations.
The manufacture of DOPASCAN requires that a precursor compound be labeled
with a radioactive isotope of iodine, known as Iodine-123, to form the final
product. Only a limited number of companies worldwide are capable of performing
the necessary "radioiodination" of the precursor and distribution of the final
product. Currently, we do not have any arrangement for the manufacture and
supply of DOPASCAN nor do we have the internal capability to manufacture
DOPASCAN ourselves. Consequently, we will not be in a position to commence Phase
III or other clinical trials for DOPASCAN until we locate a qualified supplier.
We have assessed the companies that we believe are currently capable of
manufacturing a product like DOPASCAN. Based on this assessment, we believe a
significant risk exists that we may not be able to find a manufacturer who can
meet the quality and cost requirements required to conduct the Phase III
clinical trials that will be necessary to support application to the FDA for
regulatory approval. Inability to come to agreement with a suitable manufacturer
for the clinical and commercial supply of DOPASCAN on acceptable terms would
prevent us from developing this product candidate further.
THE U.S. GOVERNMENT HOLDS RIGHTS WHICH MAY PERMIT IT TO LICENSE TO THIRD PARTIES
TECHNOLOGY WE CURRENTLY HOLD THE EXCLUSIVE RIGHT TO USE.
The U.S. government holds rights that govern aspects of certain of the
technologies licensed to us. These rights include a non-exclusive, royalty-free,
worldwide license for the government to practice or have practiced resulting
inventions for any governmental purpose. In addition, the U.S. government has
the right to grant to others licenses that may be exclusive under any of these
inventions if the government determines that:
- adequate steps have not been taken to commercialize such
inventions,
- the grant is necessary to meet public health or safety needs, or
- the grant is necessary to meet requirements for public use under
federal regulations.
The U.S. government also has the right to take title to a subject
invention if we fail to disclose the invention, and may elect to take title
within specified time limits. The U.S. government may acquire title in any
country in which we do not file a patent application within specified time
limits.
-21-
<PAGE> 23
technical data relating to licensed technology that was developed in whole or in
part at government expense. Our principal technology license agreements contain
provisions recognizing these rights.
We have entered into a contract with the U.S. Army, funded by the Office
of National Drug Control Policy, commonly referred to as the "Drug Czar", to
provide financial support for research being conducted by us on a potential
cocaine inhibitor. That contract permits the U.S. government to obtain unlimited
rights to data developed in the course of our performance if we do not use the
data within five years after termination of the contract to conduct further
laboratory investigation and/or clinical trials aimed at developing a commercial
product to combat drug abuse.
PRE-CLINICAL AND CLINICAL TRIAL RESULTS FOR OUR PRODUCTS MAY NOT BE FAVORABLE.
In order to obtain regulatory approval for the commercial sale of any of
our product candidates, we must conduct both pre-clinical studies and human
clinical trials. These studies and trials must demonstrate that the product is
safe and effective for the clinical use for which we are seeking approval.
Together with RPR, we commenced a Phase III clinical trial for GLIADEL in
December 1997 in patients undergoing initial surgery for the brain cancer
malignant glioma. We cannot be sure that the results of this or other clinical
trials we may conduct in the future will be successful. Adverse results from
this or any future trial would have a material adverse effect on our business,
financial condition and results of operations.
We also face the risk that we will not be permitted to undertake or
continue clinical trials for any of our product candidates in the future. Even
if we are able to conduct such trials, we may not be able to demonstrate
satisfactorily that the products are safe and effective and thus qualify for the
regulatory approvals needed to market and sell them. Results from pre-clinical
studies and early clinical trials are often not accurate indicators of results
of later-stage clinical trials that involve larger human populations.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION, WHICH MAY CHANGE AND HARM
OUR BUSINESS.
Our research, pre-clinical development and clinical trials, and the
manufacturing and marketing of our product candidates, are subject to extensive
regulation by numerous governmental authorities in the United States and other
countries, including the FDA and the DEA. Controlled drugs such as GLIADEL and
radiolabeled drugs such as DOPSCAN are subject to additional requirements.
Except for GLIADEL, none of our product candidates has received marketing
clearance from the FDA. In addition, none of our product candidates has received
clearance from any foreign regulatory authority for commercial sale, except with
-22-
<PAGE> 24
respect to GLIADEL, which has received marketing clearance in a limited number
of foreign countries.
As a condition to approval of our product candidates under development,
the FDA could require additional pre-clinical, clinical or other studies. Any
requirement that we perform additional pre-clinical, clinical or other studies,
or purchase clinical or other data from other companies could have a material
adverse effect on our business, financial condition and results of operations.
In order to obtain FDA approval of a new drug product for a specific
clinical use, we must demonstrate to the satisfaction of the FDA that the
product is safe and effective for its intended use. We must also demonstrate
that the product is capable of being manufactured in accordance with applicable
regulatory standards. Significant risks exist that:
- we will not be able to satisfy the FDA's requirements with respect
to any of our drug product candidates or with respect to the
proposed expanded labeling for GLIADEL for patients undergoing
initial surgery for malignant glioma, or
- even if the FDA does approve our product candidates or expanded
labeling, the FDA will approve less than the full scope of uses or
labeling that we seek.
Failure to obtain regulatory drug approvals on a timely basis could have
a material adverse effect on our business, financial condition and results of
operations.
Even if we are able to obtain necessary FDA approval, the FDA may
nevertheless require post-marketing testing and surveillance to monitor the
approved product and continued compliance with regulatory requirements. The FDA
may withdraw product approvals if we or our corporate partners, such as RPR in
the case of GLIADEL, do not maintain compliance with regulatory requirements.
The FDA may also withdraw product approvals if problems concerning safety or
efficacy of the product occur following approval.
The process of obtaining FDA and other required approvals or licenses and
of meeting other regulatory requirements to test and market drugs, including
controlled substances and radiolabeled drugs, is rigorous and lengthy. It has
required, and will continue to require, that we expend substantial resources. We
will need to conduct clinical trials and other studies on all of our product
candidates before we are in a position to file a new drug application for
marketing and sales approval. Unsatisfactory clinical trial results and other
delays in obtaining regulatory approvals or licenses would prevent the marketing
of the products we
-23-
<PAGE> 25
are developing. Until we receive the necessary approvals or licenses and meet
other regulatory requirements, we will not receive revenues or royalties related
to product sales.
In addition to the requirements for product approval, before a
pharmaceutical product may be marketed and sold in some foreign countries, the
proposed pricing for the product must be approved as well. Products may be
subject to price controls or limits on reimbursement. The requirements governing
product pricing and reimbursement vary widely from country to country and can be
implemented disparately at the national level. As to reimbursement, the European
Union generally provides options for its fifteen Member States to restrict the
range of medicinal products covered by their national health insurance systems.
The European Union also generally provides options for its Member States to
control the prices of medicinal products for human use. A Member State may
approve a specific price for the medicinal product or it may, instead, adopt a
system of direct or indirect controls on the profitability of the company
placing the medicinal product on the market. We cannot guarantee that any
country which has price controls or reimbursement limitations for
pharmaceuticals will allow favorable reimbursement and pricing arrangements for
our products or those of our corporate partners, including RPR and its
applications for GLIADEL outside the United States.
Where applicable, we hope to capitalize on current FDA regulations and
the new provisions of the FDA Modernization Act of 1997. These regulations or
provisions permit "fast track", expedited or accelerated approval or more
limited "treatment use" of, and cost recovery for, certain experimental drugs
under limited circumstances. The fast track and treatment provisions, and FDA's
accelerated, expedited and treatment regulations apply generally only to:
- drug products intended to treat severely debilitating or serious
or life-threatening diseases, and
- drug products that provide meaningful therapeutic benefit to
patients over existing treatments, that potentially address an
unmet medical need, or that are for diseases for which no
satisfactory or comparable therapy exists.
The FDA Modernization Act contains provisions patterned after the
accelerated approval regulations and other provisions pertaining to expanded
access, i.e., treatment uses. Since some of the new statutory provisions and
current FDA regulations are different from one another, it is unclear how they
will apply, if at all, to our drug candidates. We cannot be sure that our drug
candidates will qualify for fast track, accelerated or expedited approvals or
for treatment use and cost recovery.
-24-
<PAGE> 26
Because controlled drug products and radiolabeled drugs are subject to
special regulations in addition to those applicable to other drugs, some of our
products and product candidates, including DOPASCAN, are or may be subject to
regulation by the DEA as controlled substances and by the Nuclear Regulatory
Commission as radiolabeled drugs. The NRC licenses persons who use nuclear
materials and establishes standards for radiological health and safety. The DEA
is responsible for the control of manufacture, distribution and dispensing of
controlled substances, including the equipment and raw materials used in their
manufacture and packaging in order to prevent such articles from being diverted
into illicit channels of commerce. Registration is required and other activities
involving controlled substances are subject to a variety of record keeping and
security requirements, and to permits and authorizations and other requirements.
States often have requirements for controlled substances, as well. Certain
exceptions are granted by the DEA from requirements for permits and
authorizations to export or import materials related to or involving controlled
substances. If we are unable to continue to obtain exceptions from the DEA for
shipment abroad or other activities, as we have in the past, this situation
could have a material adverse effect on us.
We have obtained registrations for our facilities from the DEA. We have
also obtained exceptions from the DEA with respect to various of our activities
involving DOPASCAN, including the shipment of specified quantities of a
precursor of this product candidate to an overseas collaborative partner.
However, we cannot be sure that these exceptions will be sufficient to cover our
future activities or that the DEA will not revoke the exceptions. We also cannot
be sure that we will be able to meet the other requirements to test, manufacture
and market controlled substances or radiolabeled drugs, or that we will be able
to obtain additional necessary approvals, permits, authorizations, registrations
or licenses to meet state, federal and international regulatory requirements to
manufacture and distribute these products. The FDA Modernization Act required
the FDA to issue and finalize within one and one-half years regulations
governing the approval of radiolabeled drugs. Final regulations were issued in
May 1999. These cover general factors relevant to safety and effectiveness,
possible indications for radiopharmaceuticals, and the evaluation criteria for
safety and effectiveness. We do not know and cannot predict how these and other
provisions may affect the potential for approval of DOPASCAN.
OUR PRODUCTS USE NOVEL ALTERNATIVE TECHNOLOGIES AND THERAPEUTIC APPROACHES WHICH
HAVE NOT BEEN WIDELY STUDIED.
Many of our product development efforts focus on novel alternative
therapeutic approaches and new technologies that have not been widely studied.
Applications for these approaches and technologies include, among other things,
the treatment of brain cancer, the diagnosis and monitoring of Parkinson's
disease, the promotion of nerve growth and the prevention of neuronal damage.
These
-25-
<PAGE> 27
approaches and technologies may not be successful. We are applying these
approaches and technologies in our attempt to discover new treatments for
conditions that are also the subject of research and development efforts of many
other companies. Our competitors may succeed in developing technologies or
products that are more effective or economical than those we are developing.
Rapid technological change or developments by others may result in our
technology or product candidates becoming obsolete or noncompetitive.
OUR BUSINESS IS DEPENDENT ON OUR ABILITY TO KEEP PACE WITH THE LATEST
TECHNOLOGICAL CHANGES.
The technological areas in which we work continue to evolve at a rapid
pace. Our future success depends upon maintaining our ability to compete in the
research, development and commercialization of products and technologies in our
areas of focus. Competition from pharmaceutical, chemical and biotechnology
companies, universities and research institutions is intense and expected to
increase. Many of these competitors have substantially greater research and
development capabilities and experience and manufacturing, marketing, financial
and managerial resources than we do, and represent significant competition for
us.
Acquisitions of competing companies by large pharmaceutical companies or
other companies could enhance the financial, marketing and other resources
available to these competitors. These competitors may develop products that are
superior to those we are developing. We are aware of the development by other
companies and research scientists of alternative approaches to:
- the treatment of malignant glioma,
- the diagnosis of Parkinson's disease,
- the promotion of nerve growth and repair,
- the treatment and prevention of neuronal damage, and
- the treatment of cocaine addiction.
Our competitors may develop products that render our products or
technologies noncompetitive or obsolete. In addition, we may not be able to keep
pace with technological developments.
OUR PRODUCTS MUST COMPETE WITH OTHERS TO GAIN MARKET ACCEPTANCE.
Any product candidate that we develop and for which we gain regulatory
approval, including GLIADEL, must then compete for market acceptance and
-26-
<PAGE> 28
market share. An important factor will be the timing of market introduction of
competitive products. Accordingly, we expect that the relative speed with which
we and competing companies can develop products, complete the clinical testing
and approval processes, and supply commercial quantities of the products to the
market will be an important element of market success.
Significant competitive factors include:
- capabilities of our collaborators,
- product efficacy and safety,
- timing and scope of regulatory approval,
- product availability,
- marketing and sale capabilities,
- reimbursement coverage from insurance companies and others,
- the amount of clinical benefit of our product candidates relative
to their cost,
- the method of administering a product,
- price, and
- patent protection.
Our competitors may develop more effective or more affordable products or
achieve earlier product development completion, patent protection, regulatory
approval or product commercialization than we do. Our competitors' achievement
of any of these goals could have a material adverse effect on our business,
financial condition and results of operations.
WE HAVE LIMITED CLINICAL AND REGULATORY COMPLIANCE CAPABILITIES.
We have limited resources in the areas of product testing and regulatory
compliance. Consequently, in order to carry our products through the necessary
regulatory approvals and prepare our product candidates for commercialization
and marketing, we will have to:
- expend capital to acquire and expand such capabilities,
-27-
<PAGE> 29
- reach collaborative arrangements with third parties to provide
these capabilities, or
- contract with third parties to provide these capabilities.
WE ARE SUBJECT TO RISKS OF PRODUCT LIABILITY.
We may potentially become subject to large liability claims and
significant defense costs as a result of the design, manufacture or marketing of
our products, including GLIADEL, or the conduct of clinical trials involving
these products. A product liability-related claim or recall could have a
material adverse effect on us. We currently maintain only $15 million of product
liability insurance covering clinical trials and product sales. We cannot be
sure that this existing coverage or any future insurance coverage we obtain will
be adequate. Furthermore, we cannot be sure that our insurance will cover any
claims made against us.
Product liability insurance varies in cost. It can be difficult to
obtain, and we may not be able to purchase it in the future on terms acceptable
to us, or at all. We also may not be able to otherwise protect against potential
product liability claims. If this occurs, it could prevent or inhibit the
clinical development and/or commercialization of any products we are developing.
WE ARE DEPENDENT ON QUALIFIED PERSONNEL AND CONSULTANTS.
We depend heavily on the principal members of our management and
scientific staff, including Craig R. Smith, M.D., our Chief Executive Officer,
and Solomon H. Snyder, M.D., who is a member of our Board of Directors and a
consultant to our company. The loss of the services of either of these
individuals or other members of our senior management team could have a material
adverse effect on our business, financial condition and results of operations.
We have entered into a consulting agreement with Dr. Snyder and an
employment agreement with Dr. Smith, each of which provides protection for our
proprietary rights. Nevertheless, either Dr. Snyder or Dr. Smith may terminate
his relationship with us at any time. Accordingly, we cannot be sure that either
of these individuals or any of our other employees or consultants will remain
with us. In the future they may take jobs or consulting positions with our
competitors. These employees or consultants may also choose to organize
competing companies or ventures.
Our planned activities will require individuals with expertise in many
areas including:
- medicinal chemistry and other research specialties,
-28-
<PAGE> 30
- pre-clinical testing,
- clinical trial management,
- regulatory affairs,
- manufacturing, and
- business development.
These planned activities will require additional personnel, including
management personnel, and will also require existing management personnel to
develop added expertise. Recruiting and retaining qualified personnel,
collaborators, advisors and consultants will be critical to our activities. We
cannot be sure that we will be able to attract and retain the personnel
necessary for the development of our business. Furthermore, many pharmaceutical,
biotechnology and health care companies and academic and other research
institutions compete intensely for experienced scientists. If we are not able to
hire the necessary experienced scientists or develop the necessary expertise,
this inability could have a material adverse effect on us. In addition, we also
depend on the support of our collaborators at research institutions and our
consultants.
WE CURRENTLY LACK SALES AND MARKETING EXPERIENCE.
We currently do not have a sales force, and we have no experience in
marketing or selling a product in a commercial setting. If we decide to
establish an in-house sales force, our efforts may not be successful in this
regard. In addition, if we succeed in bringing additional products to market,
our sales force will have to compete with many other companies that currently
have extensive and well-funded marketing and sales operations. We cannot be sure
that our marketing and sales efforts would compete successfully against these
other companies.
OUR BUSINESS INVOLVES USING HAZARDOUS AND RADIOACTIVE MATERIALS AND ANIMAL
TESTING, ALL OF WHICH MAY RESULT IN ENVIRONMENTAL LIABILITY.
Our research and development processes involve the controlled use of
hazardous and radioactive materials. We and our collaborative partners are
subject to international, federal, state and local laws and regulations
governing the use, manufacture, storage, handling and disposal of hazardous and
radioactive materials. We believe that the safety procedures relating to our
in-house research and development and manufacturing efforts comply in all
material respects with the standards prescribed by such laws and regulations.
However, we cannot completely eliminate the risk of accidental contamination or
injury from these
-29-
<PAGE> 31
materials. Moreover, we cannot be sure that our collaborative partners are
currently complying with the governing standards. We also cannot be sure that we
and our collaborative partners will be in compliance with such standards in the
future. If a regulatory authority determines that we or our collaborative
partners are not complying with the governing laws and regulations, that
determination could have a material adverse effect on our business, operations
or finances. In addition, we and/or our collaborative partners could be held
liable for damages, fines or other liabilities, which could exceed our
resources.
We believe that we are and will continue to be in compliance in all
material respects with applicable environmental laws and regulations and
currently do not expect to make material capital expenditures for environmental
control facilities in the near term. However, we may have to incur significant
costs to comply with environmental laws and regulations in the future. In
addition, future environmental laws or regulations may have a material adverse
effect on our operations, business or assets.
Many of the research and development efforts we sponsor involve the use
of laboratory animals. Changes in laws, regulations or accepted clinical
procedures may adversely affect these research and development efforts. Social
pressures that would restrict the use of animals in testing or actions against
us or our collaborators by groups or individuals opposed to testing using
animals could also adversely affect these research and development efforts.
THE COMMON STOCK SOLD IN THIS OFFERING OR THE PUBLIC SALE OF OTHER SHARES MAY
INCREASE THE AMOUNT OF OUR COMMON STOCK ON THE PUBLIC MARKET, CAUSING OUR STOCK
PRICE TO DECLINE.
As of the date of this prospectus, we had approximately [_] million
shares of common stock outstanding. As of that date, we had issued options to
purchase an aggregate of approximately [___] million shares of our common stock
and warrants to purchase approximately 700,000 additional shares of our common
stock.
A significant portion of our outstanding common stock is freely tradable
in the public markets. The shares offered by this prospectus are also eligible
for sale in the public markets. Additionally, shares issuable upon exercise of
outstanding options and warrants would be freely tradable in the public markets.
Amgen, which holds approximately 640,095 shares of our common stock and warrants
to purchase an additional 700,000 shares, has rights to register the shares of
common stock underlying these options and warrants with the SEC for sale in the
public market, or may sell shares under SEC Rule 144. Amgen may exercise its
registration rights at any time.
If we were to initiate a public offering of our shares in the future to
raise additional capital, Amgen could require us to include their shares in that
-30-
<PAGE> 32
registration. If Amgen requests inclusion in the registration, the sale of its
shares could limit our ability to raise the desired additional capital. We
cannot predict what effect, if any, sales of shares of our common stock by Amgen
or the availability for sale such shares will have on the market prices of our
common stock prevailing from time to time. The possibility that substantial
amounts of our common stock may be sold in the public market could create a
downward force on the prevailing market prices for our common stock. This
possibility could also impair our ability to raise capital through the sale of
our stock.
During the term of the outstanding warrants and options, the holders can
take advantage of a rise in the market price of our common stock by purchasing
the shares underlying their warrants and options from us and then reselling
those shares on the public market. The holders can profit from the difference
between the price they have to pay to us to issue the shares to them and the
higher price for which they can sell the shares on the public market.
Accordingly, holders of options and warrants will most likely exercise them at
times when the market price of our common stock is high relative to the exercise
prices of the options and warrants with the intention of promptly reselling the
shares in the public market.
This practice could negatively affect our other stockholders in certain
ways, including the following:
- placing downward pressure on the market price for our common stock
by adding to the volume of our shares available for sale at a
given time;
- diluting the interests of other stockholders by issuing shares at
below-market prices upon the exercise of options and warrants; and
- limiting our ability to sell shares to the public market since we
might want to raise capital at times that our stock price is
relatively higher.
EFFECTING A CHANGE OF CONTROL OF GUILFORD WOULD BE DIFFICULT, WHICH MAY
DISCOURAGE OFFERS FOR SHARES OF OUR COMMON STOCK.
Our certificate of incorporation and the Delaware General Corporation Law
contain provisions that may delay or prevent an attempt by a third party to
acquire control of us. These provisions include the requirements of Section 203
of the Delaware General Corporation Law. In general, Section 203 prohibits
designated types of business combinations, including mergers, for a period of
three years between us and any third party who owns 15% or more of our common
stock. This provision does not apply if:
- our Board of Directors approves of the transaction before the
third party acquires 15% of our stock,
-31-
<PAGE> 33
- the third party acquires at least 85% of our stock at the time its
ownership goes past the 15% level, or
- our Board of Directors and two-thirds of the shares of our common
stock not held by the third party vote in favor of the
transaction.
We have also adopted a stockholder rights plan intended to deter hostile
or coercive attempts to acquire us. Under the plan, if any person or group
acquires more than 20% of our common stock without approval of the Board of
Directors under specified circumstances, our other stockholders have the right
to purchase shares of our common stock, or shares of the acquiring company, at a
substantial discount to the public market price. The plan thus makes an
acquisition much more costly to a potential acquirer.
Our certificate of incorporation also authorizes us to issue up to
4,700,000 shares of preferred stock in one or more different series with terms
fixed by the Board of Directors. We do not have to obtain stockholder approval
to issue preferred stock in this manner. Issuance of these shares of preferred
stock could have the effect of making it more difficult for a person or group to
acquire control of us. No shares of our preferred stock are currently
outstanding. While our Board of Directors has no current intentions or plans to
issue any preferred stock, issuance of these shares could also be used as an
anti-takeover device.
OUR OPERATIONS AND BUSINESS COULD BE DISRUPTED OR DAMAGED IF OUR SYSTEMS AND
PRODUCTS ARE NOT YEAR 2000 COMPLIANT.
We have conducted and continue to conduct a review of our internal
computer systems to determine whether these systems will experience a so-called
"Year 2000 problem". We have also made inquiries of third parties with which we
do business with respect to their computer systems, to determine whether their
systems will experience a Year 2000 problem. A Year 2000 problem would result
from a computer system, which includes embedded software in computer chips,
recognizing the first two digits of a year after the year 1999 as "19" instead
of "20", thereby reading the wrong year.
While at this point we believe we have identified and replaced or
corrected all internal computer systems that would cause a significant Year 2000
problem, we cannot be sure that we have not missed one or more internal computer
systems that could be adversely affected by the Year 2000 problem. If our
remediation efforts later prove to be inadequate, this failure could disrupt
important operations that could affect the manufacture of GLIADEL as well as
research, development and commercialization of our potential products. We would
then be at a competitive disadvantage relative to companies that have corrected
Year 2000 problems.
-32-
<PAGE> 34
In addition, the third parties with which we do business may not identify
and replace in a timely manner those of their computer systems that will fail or
not properly function because of a Year 2000 problem. These third parties
include our corporate partners such as RPR and Amgen, our banks and the
financial institutions that hold our financial assets, and our significant
vendors. Other than making inquiries of these third parties and assessing their
responses, we are not in a position to verify independently the Year 2000
compliance status of these third parties. In most cases we have limited or no
ability to directly influence the Year 2000 compliance activities of these third
parties. Failure of any or all of these third parties to achieve substantial
Year 2000 compliance could have a material adverse effect on our business,
financial condition and results of operations.
Finally, our ability to continue to manufacture GLIADEL, conduct our
research and product development programs, and function as a viable business
enterprise depends on the continued availability of various basic infrastructure
systems. These include electric power, telecommunications and transportation
systems. We cannot be sure that the Year 2000 issue will not disrupt these
infrastructure systems. If such disruptions were to occur in the Baltimore,
Maryland metropolitan region where our manufacturing facilities and research and
development laboratories are located, or in areas in which we or the third
parties on which we rely conduct business, these disruptions could very well
have a material adverse effect on our business, financial condition, results of
operations, or business prospects.
-33-
<PAGE> 35
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-732-0330
for further information on the public reference rooms.
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 these documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below (and any amendments thereto) and any
future filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the selling stockholders sell all of their
common stock:
- Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
- Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999;
- Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1999;
- Current Report on Form 8-K filed September 13, 1999;
- The description of our common stock contained in Form 8-A filed on
March 25, 1994.
To obtain a copy of these filings at no cost, you may write or telephone
us at the following address:
Corporate Secretary
Guilford Pharmaceuticals Inc.
6611 Tributary Street
Baltimore, MD 21224
(410) 631-6300
-34-
<PAGE> 36
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock.
-35-
<PAGE> 37
SELLING STOCKHOLDERS
We are registering all 3,360,000 shares covered by this prospectus on
behalf of the selling stockholders named in the table below. We issued all of
the shares to the selling stockholders in a private placement transaction. We
have registered the shares to permit the selling stockholders and their
pledgees, donees, transferees or other successors-in-interest that receive their
shares from selling stockholders as a gift, partnership distribution or another
non-sale related transfer after the date of this prospectus (collectively, the
"Selling Stockholders") to resell the shares when they deem appropriate.
The following table sets forth the following information with respect to
each Selling Stockholder as of the date of this prospectus: (i) name of the
Selling Stockholder; (ii) the number and percentage of total outstanding shares
of Guilford common stock each Selling Stockholder beneficially owned before this
offering; (iii) the number of shares of common stock the Selling Stockholder is
offering; and (iv) the number of total outstanding shares of Guilford common
stock that the Selling Stockholder will own after the Selling Stockholder sells
all of the shares in this offering. None of the Selling Stockholders has had a
material relationship with us within the last three years other than as a result
of the ownership of the shares or other securities of Guilford. We do not know
how long the Selling Stockholders will hold the shares before selling them and
we currently have no agreements, arrangements or understandings with any of the
Selling Stockholders regarding the sale of any of the shares. The shares offered
by this prospectus may be offered from time to time by the Selling Stockholders
named below.
The applicable percentage of total Guilford outstanding Shares
beneficially owned before the offering is based on 23,014,685 shares of Common
Stock outstanding, giving effect to the issuance of 3,360,000 shares to the
Selling Stockholders in the private placement.
-36-
<PAGE> 38
<TABLE>
<CAPTION> Percentage of
Number of Total Guilford
Shares Outstanding Shares Number of
Beneficially Beneficially Shares Owned
Name of Selling Owned Before Owned Before Number of After the
Stockholder the Offering the Offering Shares Offered Offering
----------- ------------ ------------ -------------- --------
<S> <C> <C> <C> <C>
Alta BioPharma Partners, L.P. 248,634 1.08% 248,634 -
Alta Embarcadero BioPharma Partners,
LLC 9,372 * 9,372 -
Guilford Chase Partners (AltaBio), LLC 141,994 * 141,994 -
Aries Domestic Fund, L.P. 44,715 * 44,715 -
Aries Domestic Fund II, L.P. 2,430 * 2,430 -
The Aries Master Fund 102,855 * 102,855 -
Baystar Capital, L.P. 225,000 * 225,000 -
CFBD I, LLC 152,000 * 100,000 52,000
Chase Venture Capital Associates 225,000 * 225,000 -
Closefire Ltd. 30,000 * 30,000 -
Pogue Capital International Ltd. 70,000 * 70,000 -
Dompe farmaceutici s.p.a. 186,000 * 186,000 -
Formula Growth Fund 105,000 * 105,000 -
Formula Unit Trust 125,000 * 125,000 -
IDS Life Series Fund, Inc. - Equity
Portfolio 750,000 3.26% 750,000 -
Narragansett I, L.P. 192,500 * 192,500 -
Narragansett Offshore, Ltd. 57,500 * 57,500 -
Quantum Partners LDC 371,000 1.61% 371,000 -
Vector Later-Stage Equity Fund II
(QP), L.P. 279,750 1.22% 279,750 -
Vector Later-Stage Equity Fund II, L.P. 93,250 * 93,250 -
</TABLE>
* means less than 1%
-37-
<PAGE> 39
PLAN OF DISTRIBUTION
The Selling Stockholders may sell the common stock from time to time. The
Selling Stockholders will act independently of us in making decisions regarding
the timing, manner and size of each sale. The Selling Stockholders may make
these sales on one or more exchanges, in the over-the-counter market or
otherwise, at prices and terms that are then-prevailing or at prices related to
the then-current market price, or in privately negotiated transactions. The
Selling Stockholders may use one or more of the following methods to sell the
common stock:
- a block trade in which the Selling Stockholder's broker or
dealer will attempt to sell the shares as agent, but may
position and resell all or a portion of the block as a
principal to facilitate the transaction;
- a broker or dealer may purchase the common stock as a
principal and then resell the common stock for its own
account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of
the applicable exchange; and
- ordinary brokerage transactions and transactions in which
the broker solicits purchasers.
To the extent required, this prospectus may be amended or
supplemented from time to time to describe a specific plan of distribution. If
the plan of distribution involves an arrangement with a broker-dealer for the
sale of shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, the supplement will
disclose:
- the name of each Selling Stockholder and of the
participating broker-dealer(s);
- the number of shares involved;
- the price at which the shares were sold;
- the commissions paid or discounts or concessions allowed to
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 transaction.
-38-
<PAGE> 40
In effecting sales, broker-dealers engaged by the Selling
Stockholders may arrange for other broker-dealers to participate in the resales.
The Selling Stockholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of the shares in
the course of hedging the positions they assume with Selling Stockholders. The
Selling Stockholders may also sell shares short and redeliver the shares to
close out such short positions. The Selling Stockholders may enter into options
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The Selling Stockholders also
may loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon default, the broker-dealer may sell the pledged shares
pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from Selling Stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principal, or both. Compensation
as to a particular broker-dealer might be in excess of customary commissions and
will be in amounts to be negotiated in connection with the sale. Broker-dealers
or agents and any other participating broker-dealers or the Selling Stockholders
may be deemed to be "underwriters" within the meaning of section 2(11) of the
Securities Act of 1933 in connection with sales of the shares. Accordingly, any
such commission, discount or concession received by them and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
discounts or concessions under the Securities Act. Because Selling Stockholders
may be deemed "underwriters" within the meaning of section 2(11) of the
Securities Act, the Selling Stockholders will be subject to the prospectus
delivery requirements of the Securities Act.
Any shares covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition, each
Selling
-39-
<PAGE> 41
Stockholder will be subject to applicable provisions of the Exchange Act and the
associated rules and regulations under the Exchange Act, including Regulation M,
which provisions may limit the timing of purchases and sales of shares of our
common stock by the Selling Stockholders. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver copies of this prospectus to purchasers at or prior to the time of any
sale of the shares.
We will bear all costs, expense and fees in connection with the
registration of the shares. The Selling Stockholders will bear all commissions
and discounts, if any, attributable to the sale of the shares. The Selling
Stockholders may agree to indemnify any broker-dealer or agent that participates
in transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act. We have agreed to
indemnify the Selling Stockholders against certain liabilities in connection
with their offering of the shares, including liabilities arising under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the common shares offered hereby
have been passed upon for Guilford by Hogan & Hartson L.L.P., Baltimore,
Maryland.
EXPERTS
The consolidated financial statements of Guilford Pharmaceuticals Inc.
and subsidiaries as of December 31, 1998 and 1997, and for each of the years in
the three-year period ended December 31, 1998, have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of such firm as experts in accounting and
auditing.
-40-
<PAGE> 42
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----
<S> <C>
The Company .................................... 2
Risk Factors .................................... 2
Where You Can
Find More
Information .................................... 34
Use of Proceeds .................................... 35
Selling Stockholders .................................... 36
Plan of Distribution .................................... 37
Legal Matters .................................... 39
Experts .................................... 39
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GUILFORD PHARMACEUTICALS INC.
3,360,000 SHARES
COMMON STOCK
------------------------
PROSPECTUS
------------------------
September __, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 43
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be paid by the
Company in connection with the distribution of the securities being registered
hereby. All the amounts are estimates, except the Commission registration fee.
The selling stockholders will bear the cost of all selling commissions and
underwriting discounts with respect to the sale of any securities by them.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................. $ 13,370
Blue sky qualification fees and expenses........................................ 5,000
Printing and engraving expenses................................................. 5,000
Legal fees and expenses ........................................................ 10,000
Accounting and Miscellaneous expenses........................................... 6,630
------
Total............................................................... $ 40,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL"), a corporation may indemnify its directors, officers, employees and
agents and its former directors, officers, employees and agents and those who
serve, at the corporation's request, in such capacities with another enterprise,
against expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The DGCL provides,
however, that such person must have 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 the case of a criminal action, such person must have had no
reasonable cause to believe his or her conduct was unlawful. In addition, the
DGCL does not permit indemnification in an action or suit by or in the right of
the corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for costs the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
Article NINTH of the Company's Amended and Restated Certificate of
Incorporation, as amended, provides that the Company will indemnify its
directors and officers to the full extent permitted by law and that no director
shall be liable for monetary damages to the Registrant or its stockholders for
any breach of fiduciary duty, except to the extent provided by applicable law
(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) pursuant to Section
174 of the DGCL, or (iv) for any transaction from which such director derived an
improper personal benefit. In addition, under indemnification agreements with
its directors, the Registrant is obligated, to the fullest extent permissible by
the DGCL, as it currently exists or may be amended, to indemnify and hold
harmless its directors, from and against all expense, liability and loss
reasonably incurred or suffered by such directors.
II-1
<PAGE> 44
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------ -------------------
<S> <C>
4.01 Amended and Restated Certificate of Incorporation of the Company. (1)
4.02 Certificate of Amendment to Amended and Restated Certificate of Incorporation. (2)
4.03 Amended and Restated By-laws of the Company. (1)
4.04 Amendments to Amended and Restated By-laws of the Company.(3)
4.05 Specimen Stock Certificate. (1)
4.06 Stockholder Rights Agreement dated September 26, 1995. (4)
4.07 Form of Amendment No. 1 to Stockholder Rights Agreement. (5)
4.08 Form of Purchase Agreement between the Registrant and the Selling Stockholders.
5.01 Opinion of Hogan & Hartson L.L.P.
23.1 Consent of KPMG LLP.
23.2 Consent of Hogan & Hartson L.L.P. (included in their opinion filed as Exhibit 5).
24 Powers of Attorney (included in the Signature Page to this Registration Statement).
</TABLE>
- -------------------------
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (No. 33-76938) declared effective June 16, 1994.
(2) Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
(3) Incorporated by reference from Exhibit 3.29 to the Registrant's
Registration Statement on Form S-8 (No. 333-17833) declared effective
December 13, 1996, Exhibit 3.03 to the Registrant's Form 10-Q filed
August 13, 1998 and Exhibit 3.02B to the Registrant's Form 10-K filed
March 30, 1999.
(4) Incorporated by reference from the Registrant's Form 8-K filed October
10, 1995.
(5) Incorporated by reference from the Registrant's Form 8-K filed October
20, 1998.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
II-2
<PAGE> 45
in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the 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 and Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 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.
II-3
<PAGE> 46
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 Baltimore, State of Maryland on September 14, 1999.
Guilford Pharmaceuticals Inc.
By: /s/ Craig R. Smith M.D.
-------------------------------------
Craig R. Smith M.D.
Chief Executive Officer,
President, and Director
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Craig
R. Smith, M.D., Andrew R. Jordan, Thomas C. Seoh, Jordan P. Karp and Michael J.
Silver, and each of them, with full power of substitution and resubstitution and
each with full power to act without the other, his or her true and lawful
attorney-in-fact and agent, for him or her and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission or any state, granting unto said
attorneys-in-fact and agents, 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
and about the premises, 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 and agents, or any of them, or their, his or her substitutes
or substitute, 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 by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: September 14, 1999 /s/ CRAIG R. SMITH M.D.
----------------------------------------
Craig R. Smith M.D.
Chief Executive Officer,
President, and Director
(Principal Executive Officer)
Date: September 14, 1999 /s/ ANDREW R. JORDAN
----------------------------------------
Andrew R. Jordan
Financial Officer and Treasurer
(Principal Financial and Principal
Accounting Officer)
Date: September 14, 1999 /s/ SOLOMON H. SNYDER, M.D.
----------------------------------------
Solomon H. Snyder, M.D.
Director
Date: September 14, 1999 /s/ RICHARD L. CASEY
----------------------------------------
Richard L. Casey
Director
Date: September 14, 1999 /s/ GEORGE L. BUNTING, JR.
----------------------------------------
George L. Bunting, Jr.
Director
</TABLE>
II-4
<PAGE> 47
'
<TABLE>
<S> <C>
Date: September 14, 1999 /s/ W. LEIGH THOMPSON, M.D., PH.D.
----------------------------------------
W. Leigh Thompson, M.D., Ph.D.
Director
Date: September 14, 1999 /s/ ELIZABETH M. GREETHAM
----------------------------------------
Elizabeth M. Greetham
Director
Date: September 14, 1999 /s/ JOSEPH KLEIN, III
----------------------------------------
Joseph Klein III
Director
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------ -------------------
<S> <C>
4.01 Amended and Restated Certificate of Incorporation of the Company. (1)
4.02 Certificate of Amendment to Amended and Restated Certificate of Incorporation. (2)
4.03 Amended and Restated By-laws of the Company. (1)
4.04 Amendments to Amended and Restated By-laws of the Company. (3)
4.05 Specimen Stock Certificate. (1)
4.06 Stockholder Rights Agreement dated September 26, 1995. (4)
4.07 Form of Amendment No. 1 to Stockholder Rights Agreement. (5)
4.08 Form of Purchase Agreement between the Registrant and the Selling Stockholders.
5.01 Opinion of Hogan & Hartson L.L.P.
23.1 Consent of KPMG LLP.
23.2 Consent of Hogan & Hartson L.L.P. (included in their opinion filed as Exhibit 5).
24 Powers of Attorney (included in the Signature Page to this Registration Statement).
</TABLE>
- -------------------------
(1) Incorporated by reference from the Registrant's Registration Statement on
Form S-1 (No. 33-76938) declared effective June 16, 1994.
(2) Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
(3) Incorporated by reference from Exhibit 3.29 to the Registrant's
Registration Statement on Form S-8 (No. 333-17833) declared effective
December 13, 1996, Exhibit 3.03 to the Registrant's Form 10-Q filed
August 13, 1998, and Exhibit 3.02B to the Registrant's Form 10-K
filed March 30, 1999.
(4) Incorporated by reference from the Registrant's Form 8-K filed October
10, 1995.
(5) Incorporated by reference from the Registrant's Form 8-K filed October
20, 1998.
II-5
<PAGE> 1
EXHIBIT 4.08
PURCHASE AGREEMENT
THIS AGREEMENT is made as of the __ day of September, 1999, by and between
Guilford Pharmaceuticals Inc. (the "Company"), a corporation organized under the
laws of the State of Delaware, with its principal offices at 6611 Tributary
Street, Baltimore, Maryland 21224, and the purchaser whose name and address is
set forth on the signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms and
conditions of this Agreement, the Company has authorized the sale of up to
__________ shares (the "Shares") of common stock, par value $0.01 per share (the
"Common Stock"), of the Company.
SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing (as
defined in Section 3), the Company will sell to the Purchaser, and the Purchaser
will buy from the Company, upon the terms and conditions hereinafter set forth,
the number of Shares (at the purchase price) shown below:
<TABLE>
<CAPTION>
Price Per
Number to Be Share In Aggregate
Purchased Dollars Price
--------- ------- -----
<S> <C> <C>
</TABLE>
The Company proposes to enter into this same form of purchase agreement
with certain other investors (the "Other Purchasers") and expects to complete
sales of the Shares to them. The Purchaser and the Other Purchasers are
hereinafter sometimes collectively referred to as the "Purchasers," and this
Agreement and the agreements executed by the Other Purchasers are hereinafter
sometimes collectively referred to as the "Agreements." The term "Placement
Agent" shall mean the Prudential Vector Healthcare Group, a unit of Prudential
Securities Incorporated.
SECTION 3. Delivery of the Shares at the Closing. The completion of the
purchase and sale of the Shares (the "Closing") shall occur as soon as
practicable and as agreed by the parties hereto following notification by the
staff of the Securities and Exchange Commission (the "Commission") to the
Company of the staff's willingness to grant acceleration of effectiveness of the
registration statement to be filed by the Company pursuant to Section 7.1 hereof
(the "Registration Statement") at a place and time (the "Closing Date") to be
agreed upon by the Company and the Placement Agent and of which the Purchasers
will be notified by
1
<PAGE> 2
facsimile transmission or otherwise, provided that in no event shall the closing
occur earlier than the expiration of any required waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
At the Closing, the Company shall deliver to the Purchaser one or more
stock certificates registered in the name of the Purchaser, or in such nominee
name(s) as designated by the Purchaser in writing, representing the number of
Shares set forth in Section 2 above. The name(s) in which the stock certificates
are to be registered are set forth in the Stock Certificate Questionnaire
attached hereto as part of Appendix I. The Company's obligation to complete the
purchase and sale of the Shares and deliver such stock certificate(s) to the
Purchaser at the Closing 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
same-day funds in the full amount of the purchase price for the Shares being
purchased hereunder; (b) completion of the purchases and sales under the
Agreements with all of the Other Purchasers; and (c) the accuracy of the
representations and warranties made by the Purchasers and the fulfillment of
those undertakings of the Purchasers to be fulfilled prior to the Closing. The
Purchaser's obligation to accept delivery of such stock certificate(s) and to
pay for the Shares evidenced thereby shall be subject to the following
conditions: (a) the staff of the Commission having notified the Company of the
staff's willingness to accelerate the effectiveness of the Registration
Statement on or prior to the 75th day after the date the Registration Statement
was filed by the Company; and (b) the accuracy in all material respects of the
representations and warranties made by the Company herein and the fulfillment in
all material respects of those undertakings of the Company to be fulfilled prior
to Closing, including the Company's undertaking to prepare and file the
Registration Statement pursuant to Section 7.1(a) hereof. The Purchaser's
obligations hereunder are expressly not conditioned on the purchase by any or
all of the Other Purchasers of the Shares that they have agreed to purchase from
the Company.
SECTION 4. Representations, Warranties and Covenants of the Company. The
Company hereby represents and warrants to, and covenants with, the Purchaser, as
of the date hereof, as follows:
4.1 Organization and Qualification. The Company and each of its significant
subsidiaries (as that term is defined under the rules and regulations under
Securities Act of 1933) ("subsidiaries") is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and the Company and each of its subsidiaries is qualified to do
business as a foreign corporation in each jurisdiction in which qualification is
required, except where the failure to so qualify would not individually or in
the aggregate have a material adverse effect on the financial condition, results
of operations or prospects of the Company and its subsidiaries taken as a whole
(a "Material Adverse Effect").
4.2 Authorized Capital Stock. Except as disclosed in the Confidential
Private Placement Memorandum dated August 27, 1999 prepared by the Company
(including all Exhibits (except Exhibit G), supplements and amendments thereto
and documents expressly incorporated by reference in any Exhibits (except
Exhibit G), the "Private Placement Memorandum"), the Company had authorized and
outstanding capital stock as set forth under the
2
<PAGE> 3
heading "Capitalization" in the Private Placement Memorandum as of the date set
forth therein; the issued and outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and conform in all material respects to the
description thereof contained in the Private Placement Memorandum. Except as
disclosed in the Private Placement Memorandum and except for shares issuable
under other Agreements and options issued under the Company's stock plans after
August 13, 1999, the Company does not have outstanding any options or warrants
to purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any shares of
capital stock of any subsidiary and there is no commitment, plan or arrangement
to issue, any securities or obligations convertible into any shares of capital
stock of the Company or its subsidiaries or any such options, rights convertible
securities or obligations. The description of the Company's capital stock, stock
bonus and other stock plans or arrangements and the options or other rights
granted and exercised thereunder, contained in the Private Placement Memorandum
accurately and fairly presents the information required to be shown with respect
to such capital stock, plans, arrangements, options and rights.
4.3 Issuance, Sale and Delivery of the Shares. The Shares have been duly
authorized and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform in all material respects to the description
thereof set forth in the Private Placement Memorandum. The issued shares of
capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable and are owned by the
Company free and clear of any perfected security interest, or any other security
interests, liens, encumbrances, equities or claims. No preemptive rights or
other rights to subscribe for or purchase exist with respect to the issuance and
sale of the Shares by the Company pursuant to this Agreement. Except for rights
disclosed in the Private Placement Memorandum, no stockholder of the Company has
any right (which has not been waived or has not expired by reason of lapse of
time following notification of the Company's intent to file the Registration
Statement) to request or require the Company to register the sale of any shares
owned by such stockholder under the Securities Act of 1933, as amended (the
"Securities Act"), in the Registration Statement. No further approval or
authority of the stockholders or the Board of Directors of the Company will be
required for the issuance and sale of the Shares to be sold by the Company as
contemplated herein.
4.4 Due Execution, Delivery and Performance of the Agreements. The Company
has full legal right, corporate power and authority to enter into the Agreements
and perform the transactions contemplated hereby and thereby. The Agreements
have been duly authorized, executed and delivered by the Company. The execution,
delivery and performance of the Agreements by the Company and the consummation
of the transactions herein and therein contemplated will not violate any
provision of the organizational documents of the Company or any of its
subsidiaries and will not result in the creation of any lien, charge, security
interest or encumbrance upon any assets or property of the Company or any of its
subsidiaries pursuant to
3
<PAGE> 4
the terms or provisions of, or will not conflict with, result in the breach or
violation of, or constitute, either by itself or upon notice or the passage of
time or both, a default under any agreement, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective assets or properties may be bound or
affected or, to the Company's knowledge, any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its subsidiaries or any of their respective properties. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required for the execution,
delivery and performance of the Agreements or the consummation of the
transactions contemplated hereby or thereby, except for compliance with the Blue
Sky laws and federal securities laws applicable to the offering of the Shares.
Upon their execution and delivery, and assuming the valid execution thereof by
the respective Purchasers, the Agreements will constitute legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' 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 Company in Section 7.3 hereof may be legally
unenforceable.
4.5 Accountants. KPMG LLP have expressed their opinion with respect to the
audited consolidated financial statements to be incorporated by reference into
the Registration Statement and the Prospectus which forms a part thereof from
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, and are independent accountants as required by the Securities Act and the
rules and regulations promulgated thereunder (the "Rules and Regulations"). The
Company's consolidated financial statements (including all notes and schedules
thereto) included in the Private Placement Memorandum present fairly the
financial position, the results of operations, the statements of cash flows and
the statements of stockholders' equity and the other information purported to be
shown therein of the Company and its subsidiaries at the respective dates and
for the respective periods to which they apply and such consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved.
4.6 No Defaults. Neither the Company nor any of its subsidiaries is (i) in
violation or default in any material respect of any provision of its certificate
of incorporation, bylaws or other organizational documents, or (ii) in breach of
or default with respect to any provision of any agreement, judgment, decree,
order, mortgage, deed of trust, lease, franchise, license, indenture, permit or
other instrument to which it is a party or by which it or any of its assets or
properties are bound, except for breaches and defaults which individually or in
the aggregate would not have a Material Adverse Effect; and there does not exist
any state of fact which, with notice or lapse of time or both, would constitute
an event of default on the part of the Company or any of its subsidiaries as
defined in such documents, except such defaults which individually or in the
aggregate would not have a Material Adverse Effect.
4
<PAGE> 5
4.7 Contracts. The contracts described in the Private Placement Memorandum
that are material to the Company and its subsidiaries are in full force and
effect on the date hereof and are valid and enforceable by the Company in
accordance with the terms thereof, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and except as may be limited by general principles of equity
and public policy; and neither the Company nor any of its subsidiaries, nor, to
the Company's knowledge, any other party are in breach of or default under any
of such contracts, which breaches and defaults would individually or in the
aggregate have a Material Adverse Effect.
4.8 No Actions. Except as disclosed in the Private Placement Memorandum,
there are no legal or governmental actions, suits or proceedings pending or, to
the Company's knowledge, threatened to which the Company or any of its
subsidiaries is or may be a party or of which property owned or leased by the
Company or any of its subsidiaries is or may be the subject, or related to
environmental or discrimination matters, which actions, suits or proceedings,
individually or in the aggregate, might prevent or might reasonably be expected
to materially and adversely affect the transactions contemplated by this
Agreement or result in a Material Adverse Effect; and no labor disturbance by
the employees of the Company or any of its subsidiaries exists or, to the
Company's knowledge, is imminent which might reasonably be expected to have a
Material Adverse Effect. Except as disclosed in the Private Placement
Memorandum, neither the Company nor any of its subsidiaries is a party to or
subject to the provisions of any material injunction, judgment, decree or order
of any court, regulatory body administrative agency or other governmental body.
4.9 Properties. Each of the Company and its subsidiaries has good and
marketable title to all the properties and assets reflected as owned by them in
the consolidated financial statements included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998, subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if any,
reflected in such consolidated financial statements, or (ii) those which are not
material in amount and do not materially and adversely affect the use made and
intended to be made of such property by the Company or its subsidiaries. Each of
the Company and its subsidiaries holds its leased properties under valid and
binding leases, with such exceptions as are not materially significant in
relation to the business of the Company and its subsidiaries, taken as a whole.
Except as disclosed in the Private Placement Memorandum, each of the Company and
its subsidiaries owns or leases all such properties as are necessary to its
operations as now conducted.
4.10 No Material Change. Since June 30, 1999 (i) neither the Company nor
its subsidiaries have incurred any liabilities or obligations, indirect, or
contingent, or entered into any verbal or written agreement or other transaction
which is not in the ordinary course of business or which could reasonably be
expected to result in a material reduction in the future earnings of the Company
or its subsidiaries or in a Material Adverse Effect; (ii) neither the Company
nor its subsidiaries have sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other calamity
not covered by insurance; (iii) neither the Company nor its subsidiaries have
paid or declared any dividends or other distributions with respect to its
capital stock and neither the Company nor its subsidiaries is in
5
<PAGE> 6
default in the payment of principal or interest on any outstanding debt
obligations; (iv) there has not been any change in the capital stock of the
Company other than the sale of the Shares hereunder and shares or options issued
pursuant to exercise of outstanding warrants or employee and director stock
option plans approved by the Company's Board of Directors, or indebtedness
material to the Company (other than in the ordinary course of business); and (v)
except for operating losses and changes to the Company's financial condition
resulting therefrom, there has not been a change that would result in a Material
Adverse Effect.
4.11 Intellectual Property. Except as otherwise disclosed in the Private
Placement Memorandum, (i) The Company and its subsidiaries own or have obtained
valid licenses, options or rights to use for the material inventions, patent
applications, patents, trademarks (both registered and unregistered),
tradenames, copyrights and trade secrets necessary for the conduct of the
Company's and its subsidiaries' respective businesses as currently conducted and
as the Private Placement Memorandum indicates the Company and its subsidiaries
contemplate conducting in all material respects (collectively, the "Intellectual
Property"); (ii) neither the Company nor any of its subsidiaries has received
notice of any third parties who have any ownership rights to any Intellectual
Property that is owned by, or has been licensed to, the Company or its
subsidiaries for the product indications described in the Private Placement
Memorandum that would preclude the Company or its subsidiaries from conducting
their respective businesses as currently conducted and as the Private Placement
Memorandum indicates the Company and its subsidiaries contemplate conducting in
all material respects; (iii) to the Company's knowledge there are currently no
sales of any products that would constitute an infringement by third parties of
any material Intellectual Property owned, licensed or optioned by the Company or
its subsidiaries; (iv) there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others challenging the rights of
the Company or its subsidiaries in or to any material Intellectual Property
owned, licensed or optioned by the Company or its subsidiaries; (v) there is no
pending or, to the Company's knowledge, threatened action, suit, proceeding or
claim by others challenging the validity or scope of any material Intellectual
Property owned, licensed or optioned by the Company or its subsidiaries; and
(vi) there is no pending or, to the Company's knowledge, threatened action,
suit, proceeding or claim by others that the Company or its subsidiaries
infringe or otherwise violate any patent, trademark, copyright, trade secret or
other proprietary right of others as would reasonably be expected to result in a
Material Adverse Effect.
4.12 Compliance. Neither the Company nor any of its subsidiaries has been
advised, and has no reason to believe, that it is not conducting its business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations; except
where failure to be so in compliance would not individually or in the aggregate
have a Material Adverse Effect.
4.13 Taxes. Each of the Company and its subsidiaries has filed or obtained
filing extensions with respect to all federal, state, local and foreign income
and franchise tax returns material to the Company and the subsidiaries, taken as
a whole and has paid or accrued all taxes shown as due thereon, and neither the
Company nor any of its subsidiaries has
6
<PAGE> 7
knowledge of a tax deficiency which has been or might be asserted or threatened
against it which would reasonably be expected to have a Material Adverse Effect.
4.14 Transfer Taxes. On the Closing Date, all stock transfers or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Shares to be sold to the Purchaser hereunder will
be, or will have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been fully complied with.
4.15 Insurance. Each of the Company and its subsidiaries maintains
insurance of the type and in the amount that the Company reasonably believes is
adequate for its business, including, but not limited to, insurance covering all
real and personal property owned or leased by the Company or its subsidiaries
against risks customarily insured against by similarly situated companies, all
of which insurance is in full force and effect.
4.16 Contributions. Neither the Company at any time since its incorporation
nor its subsidiaries at any time since they were acquired or formed by the
Company have, directly or indirectly, (i) made any unlawful contribution to any
candidate for public office, or failed to disclose fully where required by law
any contribution in violation of law, or (ii) made any payment to any federal or
state governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof and in each case except
for instances that would not have a Material Adverse Effect.
4.17 Year 2000 Compliance. The Company has reviewed its operations to
evaluate the extent to which the business or operations of the Company and its
subsidiaries will be affected by the Year 2000 Problem (as defined below). As a
result of such review, the Company has no reason to believe, and does not
believe, that the Year 2000 Problem will have a Material Adverse Effect. The
"Year 2000 Problem" as used herein means any significant risk that computer
hardware or software used in the receipt, transmission, processing,
manipulation, storage, retrieval, retransmission or other utilization of data or
in the operation of mechanical or electrical systems of any kind will not, in
the case of dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
4.18 Investment Company. The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company Act of 1940, as
amended.
4.19 Offering Materials. The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the offering and sale of the Shares other than the Private Placement Memorandum
or any amendment or supplement thereto. The Company has not nor will it take any
action independent of the Placement Agent to sell, offer for sale or solicit
offers to buy any securities of the Company which would reasonably
7
<PAGE> 8
be expected to cause the offer or sale of the Shares, as contemplated by this
Agreement, to be within the provisions of Section 5 of the Securities Act.
4.20 Related Party Transactions. No transaction has occurred between or
among the Company and its affiliates, officers or directors or any affiliate or
affiliates of any such officer or director that is required to be described in
the Company's reports and other filings under the Securities Exchange Act of
1934 (the "Exchange Act") attached as Exhibits to the Private Placement
Memorandum that is not so described.
4.21 Books and Records. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions in, and
dispositions of, the assets of, and the results of operations of, the Company,
all to the extent required by generally accepted accounting principles. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
4.22 Additional Information. The Company represents and warrants that each
of the following documents, which the Placement Agent has furnished to the
Purchaser, or will furnish prior to the Closing, as of its date (or date of
filing with the Commission, as applicable), does not or will not contain an
untrue statement of a material fact or omit or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were or will be made, not misleading:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
(b) the Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1999 and June 30, 1999;
(c) the Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders;
(d) the Resale Registration Statement;
(e) the Private Placement Memorandum, including all addenda and exhibits
thereto (other than the Appendices); and
(f) all other documents, if any, filed by the Company with the Securities
and Exchange Commission since June 30, 1999 pursuant to the reporting
requirements of the Exchange Act.
8
<PAGE> 9
4.23 Legal Opinions. Prior to and as a condition to the Closing, (i) Hogan
& Hartson LLP, counsel to the Company, will deliver its legal opinion to the
Placement Agent in form and substance as agreed with the Placement Agent and
(ii) intellectual property counsel to the Company will deliver its legal opinion
to the Placement Agent as to certain intellectual property matters in form and
substance as agreed with the Placement Agent. Each such opinion shall also state
that each of the Purchasers may rely thereon as though it were addressed
directly to such Purchaser.
4.24 Certificate. At the Closing, the Company will deliver to the Purchaser
a certificate executed by the Chairman of the Board or President and the chief
financial or accounting officer of the Company, dated the Closing Date, to the
effect that the representations and warranties of the Company set forth in this
Section 4 are true and correct in all material respects as of the date of this
Agreement and as of the Closing Date (except for such changes or modifications
as are specified therein), and the Company has complied with all the agreements
and satisfied all the conditions herein on its part to be performed or satisfied
on or prior to such Closing Date.
SECTION 5. Representations, Warranties and Covenants of the Purchaser. (a)
The Purchaser represents and warrants to, and covenants with, the Company that:
(i) the Purchaser is knowledgeable, sophisticated and experienced in making, and
is qualified to make, decisions with respect to investments in shares
representing an investment decision like that involved in the purchase of the
Shares, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information it deems relevant
in making an informed decision to purchase the Shares; (ii) the Purchaser is
acquiring the number of Shares set forth in Section 2 above 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
(it being understood that the foregoing does not limit the Purchaser's right to
sell Shares pursuant to the Registration Statement or, other than with respect
to any claims arising out of a breach of this Section 5, the Purchaser's right
to indemnification pursuant to Section 7.3); (iii) the Purchaser 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 and the Rules
and Regulations; (iv) the Purchaser has completed or caused to be completed the
Registration Statement Questionnaire and the Stock Certificate Questionnaire,
both attached hereto as Appendix I, 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 effective date of the Registration
Statement; (v) the Purchaser has, in connection with its decision to purchase
the number of Shares set forth in Section 2 above, relied solely upon the
Private Placement Memorandum and the documents included therein and the
representations and warranties of the Company contained herein; (vi) the
Purchaser is an "accredited investor" within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act; and (vi) the Purchaser is not
a "dealer" within the meaning of the Securities Act or a "broker" or "dealer"
within the meaning of the Exchange Act.
9
<PAGE> 10
(b) The Purchaser hereby covenants with the Company not to make any sale of
the Shares under the Registration Statement without effectively causing the
prospectus delivery requirement under the Securities Act to be satisfied, and
the Purchaser acknowledges and agrees that such Shares are not transferable on
the books of the Company unless the certificate submitted to the transfer agent
evidencing the Shares is accompanied by a separate officer's certificate: (i) in
the form of Appendix II hereto, (ii) executed by an officer of, or other
authorized person designated by, the Purchaser, and (iii) to the effect that (A)
the Shares have been sold in accordance with the Registration Statement and (B)
the requirement of delivering a current prospectus has been satisfied. The
Purchaser acknowledges that there may occasionally be times when the Company
must suspend the use of the prospectus forming a part of the Registration
Statement until such time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the Commission, or until such
time as the Company has filed an appropriate report with the Commission pursuant
to the Exchange Act. The Purchaser hereby covenants that it will not sell any
Shares pursuant to said prospectus during the period commencing at the time at
which the Company gives the Purchaser written notice of the suspension of the
use of said prospectus and ending at the time the Company gives the Purchaser
written notice that the Purchaser may thereafter effect sales pursuant to said
prospectus. The Purchaser further covenants to notify the Company promptly of
the sale of all of its Shares.
(c) The Purchaser further represents and warrants to, and covenants with,
the Company that (i) the Purchaser 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, obtained all necessary consents and
has satisfied or will satisfy all notification and filing requirements necessary
to authorize the execution, delivery and performance of this Agreement by the
Purchaser, and (ii) upon the execution and delivery of this Agreement, this
Agreement shall constitute a legal, valid and binding obligation of the
Purchaser, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' 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 Purchaser in Section 7.3
hereof may be legally unenforceable.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties made
by the Company and the Purchaser herein and in the certificates for the Shares
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of the Shares being purchased and the payment
therefor.
10
<PAGE> 11
SECTION 7. Registration of the Shares; Compliance with the Securities Act.
7.1 Registration Procedures and Expenses. The Company shall:
(a) as soon as practicable, prepare and file with the Commission the
Registration Statement on Form S-3 relating to the sale of the Shares
by the Purchaser from time to time on the Nasdaq National Market or
the facilities of any national securities exchange on which the Common
Stock is then traded or in privately-negotiated transactions;
(b) use its reasonable efforts, subject to receipt of necessary
information from the Purchasers, to cause the staff of the Commission
to notify the Company of the staff's willingness to grant acceleration
of the effective date of the Registration Statement within 75 days
after the Registration Statement is filed by the Company;
(c) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the prospectus used in connection
therewith as may be necessary to keep the Registration Statement
effective until the earlier of (i) two years after the effective date
of the Registration Statement or (ii) the date on which the Shares may
be resold by the Purchasers without registration by reason of Rule
144(k) under the Securities Act or any other rule of similar effect;
(d) furnish to the Purchaser with respect to the Shares registered under
the Registration Statement (and to each underwriter, if any, of such
Shares) such number of copies of prospectuses and such other documents
as the Purchaser may reasonably request, in order to facilitate the
public sale or other disposition of all or any of the Shares by the
Purchaser; provided, however, that the obligation of the Company to
deliver copies of prospectuses to the Purchaser shall be subject to
the receipt by the Company of reasonable assurances from the Purchaser
that the Purchaser 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;
(e) file documents required of the Company for normal blue sky clearance
in states specified in writing by the Purchaser; 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; and
11
<PAGE> 12
(f) bear all expenses in connection with the procedures in paragraphs (a)
through (e) of this Section 7.1 and the registration of the Shares
pursuant to the Registration Statement, other than fees and expenses,
if any, of counsel or other advisers to the Purchaser or the Other
Purchasers or underwriting discounts, brokerage fees and commissions
incurred by the Purchaser or the Other Purchasers, if any.
7.2 Transfer of Shares After Registration. The Purchaser 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 that it will promptly notify the Company of any changes in the information
set forth in the Registration Statement regarding the Purchaser or its plan of
distribution.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Purchaser/Affiliate" shall mean the Purchaser and any person
who controls the Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act; and
(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.
(a) The Company agrees to indemnify and hold harmless the Purchaser and
each Purchaser/Affiliate, against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Purchaser or such Purchaser/Affiliate
may become subject, under the Securities Act, the Exchange Act, or any other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, as amended at the
time of effectiveness of the Registration Statement, including any information
deemed to be a part thereof as of the time of effectiveness pursuant to
paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and
Regulations, or the prospectus, in the form first filed with the Commission
pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required (the
"Prospectus"), or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in the
Registration Statement or any amendment or supplement thereto not misleading or
in the Prospectus or any amendment or supplement thereto not misleading in the
light of the circumstances under which they were made, or arise out of or are
based in whole or in part on any inaccuracy in the representations and
warranties of the Company contained in this Agreement, or any failure of the
Company to perform its obligations
12
<PAGE> 13
hereunder, and will reimburse the Purchaser and each such Purchaser/Affiliate
for any legal and other expenses as such expenses are reasonably incurred by
such Purchaser or such Purchaser/Affiliate in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser expressly for use therein, or (ii) the failure of such
Purchaser to comply with the covenants and agreements contained in Sections 5(b)
or 7.2 hereof respecting the sale of the Shares, or (iii) the inaccuracy of any
representations made by such Purchaser herein or (iv) any statement or omission
in any Prospectus that is corrected in any subsequent Prospectus that was
delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser.
(b) The Purchaser will indemnify and hold harmless the Company, each of its
directors, each of its officers who signed the Registration Statement and each
person, if any, who controls the Company within the meaning of the Securities
Act and the Exchange Act, against any losses, claims, damages, liabilities or
expenses to which the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (i) any failure to comply with the covenants and agreements
contained in Sections 5(b) or 7.2 hereof respecting the sale of the Shares or
(ii) the inaccuracy of any representation made by such Purchaser herein or (iii)
any untrue or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or (iv) the omission or alleged omission to state in the Registration Statement,
the Prospectus or any amendment or supplement thereto a material fact required
to be stated therein or necessary to make the statements in the Registration
Statement or any amendment or supplement thereto not misleading or in the
Prospectus or any amendment or supplement thereto not misleading in the light of
the circumstances under which they were made, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by the Purchaser
expressly for use therein, and will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action.
(c) Promptly after receipt by an indemnified party under this Section 7.3
of notice of the threat or commencement of any action, such indemnified party
will, if a claim in
13
<PAGE> 14
respect thereof is to be made against an indemnifying party under this Section
7.3 promptly notify the indemnifying party in writing thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7.3 or to the extent it is not
prejudiced as a result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends to
seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be a conflict between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 7.3 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel,
approved by such indemnifying party in the case of paragraph (a), representing
the indemnified parties who are parties to such action, plus local counsel, if
appropriate) or (ii) the indemnified party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party.
(d) If the indemnification provided for in this Section 7.3 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) or
(c) of this Section 7.3 in respect to any losses, claims, damages, liabilities
or expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses referred to herein (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Purchaser from the placement of the Common Stock
contemplated by this Agreement or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
the relative fault of the Company and the Purchaser in connection with the
statements or omissions or inaccuracies in the representations and warranties in
this Agreement that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and each Purchaser on the other
shall be deemed to be in the same proportion as the amount paid by such
Purchaser to the
14
<PAGE> 15
Company pursuant to this Agreement for the Shares purchased by such Purchaser
that were sold pursuant to the Registration Statement bears to the difference
(the "Difference") between the amount such Purchaser paid for the Shares that
were sold pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The relative fault of the Company on the one hand and
each Purchaser on the other shall be determined by reference to, among other
things, whether the untrue or alleged statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Company or by such Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in paragraph (c) of this
Section 7.3, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim. The
provisions set forth in paragraph (c) of this Section 7.3 with respect to the
notice of the threat or commencement of any threat or action shall apply if a
claim for contribution is to be made under this paragraph (d); provided,
however, that no additional notice shall be required with respect to any threat
or action for which notice has been given under paragraph (c) for purposes of
indemnification. The Company and each Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 7.3 were determined
solely by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 7.3, the Purchaser shall not be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. 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.
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 on the date
all such Shares are eligible for sale under Rule 144(k) or at such time as an
opinion of counsel satisfactory in form and substance 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 Purchaser, the Company will
furnish to the Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Stockholders, within 120 days after the end
of each fiscal year of the Company), 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)
if not included in substance in the Annual Report to Stockholders, its
Annual Report on
15
<PAGE> 16
Form 10-K, (iii) its Quarterly Reports on Form 10-Q, (iv) its Current
Reports on Form 8-K, and (v) a full copy of the particular
Registration Statement covering the Shares (the foregoing, in each
case, excluding exhibits);
(b) upon the written request of the Purchaser, all exhibits excluded by
the parenthetical to subparagraph (a)(v) of this Section 7.5; and
(c) upon the written request of the Purchaser, a reasonable number of
copies of the prospectuses to supply to any other party requiring such
prospectuses in connection with the Purchaser's prospectus delivery
requirements under the Securities Act;
and the Company, upon the reasonable request of the Purchaser, will meet with
the Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares, subject to appropriate confidentiality limitations as the
Company may require.
SECTION 8. Broker's Fee. The Purchaser acknowledges that the Company
intends to pay to the Placement Agent a fee in respect of the sale of the Shares
to the Purchaser. Each of the parties hereto hereby represents that, on the
basis of any actions and agreements by it, there are no other brokers or finders
entitled to compensation in connection with the sale of the Shares to the
Purchaser.
16
<PAGE> 17
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:
(a) if to the Company, to:
Guilford Pharmaceuticals Inc.
6611 Tributary Street
Baltimore, MD 21224
Attention: Craig R. Smith, M.D.
Facsimile: (410) 631-6899
with a copy to:
Hogan & Hartson LLP
111 South Calvert Street, Suite 1600
Baltimore, MD 21202
Attention: Michael J. Silver
Facsimile: (410) 539-6981
or to such other person at such other place as the Company shall
designate to the Purchaser in writing; and
(b) if to the Purchaser, at its address as set forth at the end of this
Agreement, or at such other address or addresses as may have been
furnished to the Company in writing.
SECTION 10. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser.
SECTION 11. 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.
SECTION 12. 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.
SECTION 13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York and the federal
law of the United States of America.
17
<PAGE> 18
SECTION 14. 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.
18
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
GUILFORD PHARMACEUTICALS INC.
By:
---------------------------------
Name:
Title:
Print or Type:
Name of Purchaser
(Individual or Institution):
---------------------------------
Name of Individual representing
Purchaser (if an Institution):
---------------------------------
Title of Individual representing
Purchaser (if an Institution):
---------------------------------
Signature by:
Individual Purchaser or Individual
representing Purchaser:
---------------------------------
Address:
-------------------------------
Telephone:
-------------------------------
Facsimile:
-------------------------------
19
<PAGE> 20
Appendix I
(one of two)
GUILFORD PHARMACEUTICALS INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of this Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be registered in (this is the name
that will appear on your stock certificate(s)). You may use a nominee name
if appropriate:
-----------------------
2. The relationship between the Purchaser of the Shares and the Registered
Holder listed in response to item 1 above:
-----------------------
3. The mailing address of the Registered Holder listed in response to item 1
above:
-----------------------
----------------------
----------------------
----------------------
4. The Social Security Number or Tax Identification Number of the Registered
Holder listed in response to item 1 above:
-----------------------
<PAGE> 21
GUILFORD PHARMACEUTICALS INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the number of shares that you or your organization will
own immediately after Closing, including those Shares purchased by you or your
organization pursuant to this Agreement and those shares purchased by you or
your organization through other transactions:
3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?
Yes No
----- -----
If yes, please indicate the nature of any such relationships below:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
<PAGE> 22
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
_____________________________________________________________
[fill in official name of individual or institution]
hereby certifies that he/she [said institution] is the Purchaser of
the shares evidenced by the attached certificate, and as such,
sold such shares on ________ in accordance with
[date]
Registration Statement number _____________________________________
[fill in the number of or otherwise
________________________________ and the requirement of delivering a
identify Registration Statement]
current prospectus by the Company has been complied with in connection with such
sale.
Print or Type:
Name of Purchaser
(Individual or
Institution): ______________________
Name of Individual
representing
Purchaser (if an
Institution) ______________________
Title of Individual
representing
Purchaser (if an
Institution): ______________________
Signature by:
Individual Purchaser
or Individual
representing Purchaser: ______________________
<PAGE> 1
EXHIBIT 5.01
HOGAN & HARTSON L.L.P.
111 South Calvert Street
Baltimore, Maryland 21202
September 14, 1999
Board of Directors
Guilford Pharmaceuticals Inc.
6611 Tributary Street
Baltimore, MD 21224
Ladies and Gentlemen:
We are acting as counsel to Guilford Pharmaceuticals Inc., a Delaware
corporation (the "COMPANY"), in connection with its registration statement on
Form S-3, as amended (the "REGISTRATION STATEMENT") filed with the Securities
and Exchange Commission relating to the proposed public offering of up to
3,360,000 shares of the Company's common stock, par value $0.01 per share, all
of which shares (the "SHARES") are to be sold by the Selling Stockholders named
therein. This opinion letter is furnished to you at your request to enable you
to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R.
Section 229.601(b)(5), in connection with the Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Certificate of Incorporation of the Company, as certified by the
Secretary of the State of the State of Delaware on September 13, 1999
and by the Assistant Secretary of the Company on the date hereof as
then being complete, accurate and in effect.
3. The Bylaws of the Company, as certified by the Assistant Secretary of
the Company on the date hereof as then being complete, accurate and in
effect.
4. Resolutions of the Board of Directors of the Company adopted at
meetings held on August 17, 1999 and September 9, 1999, and
<PAGE> 2
resolutions of a committee thereof adopted at a meeting held on
September 10, 1999, as certified by the Assistant Secretary of the
Company on the date hereof as being complete, accurate and in
effect, relating to the issuance and sale of the Shares and
arrangements in connection therewith.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the
authenticity, accuracy and completeness of all documents submitted to us, and
the conformity with the original documents of all documents submitted to us as
certified, telecopied, photostatic, or reproduced copies. This opinion letter is
given, and all statements herein are made, in the context of the foregoing.
This opinion letter is based as to matters of law solely on Delaware
corporate law. We express no opinion herein as to any other laws, statutes,
regulations, or ordinances.
Based upon, subject to and limited by the foregoing, we are of the opinion
that, assuming receipt by the Company of the consideration for the Shares as
specified in the resolutions of the Board of Directors, the Shares will be
validly issued, fully paid and nonassessable.
This opinion letter has been prepared for your use in connection with the
filing of the Registration Statement on the date hereof. We assume no obligation
to advise you of any changes in the foregoing subsequent to the delivery of this
opinion letter.
We hereby consent to the filing of this opinion letter as Exhibit 5.01 to
the Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus constituting a part of the Registration
Statement. In giving this consent, we do not thereby admit that we are an
"expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
HOGAN & HARTSON L.L.P.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Guilford Pharmaceuticals Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Registration Statement.
KPMG LLP
Philadelphia, Pennsylvania
September 13, 1999
