<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1998
REGISTRATION NO. 333-48665
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO THE FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ONCORMED, INC.
(Exact name of Registrant as specified in its charter)
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<TABLE>
<S> <C>
DELAWARE 52-1842781
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
205 PERRY PARKWAY, GAITHERSBURG, MARYLAND 20877
(301) 208-1888
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
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TIMOTHY J. TRICHE, M.D., PH.D.
CHIEF EXECUTIVE OFFICER
ONCORMED, INC.
205 PERRY PARKWAY
GAITHERSBURG, MARYLAND 20877
(301) 208-1888
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service of Process)
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Copies Of All Communications To:
ALEXANDER D. LYNCH, ESQ.
ALAN P. BLAUSTEIN, ESQ.
BROBECK, PHLEGER & HARRISON LLP
1633 BROADWAY, 47TH FLOOR
NEW YORK, NEW YORK 10019
(212) 581-1600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable on or after this Registration Statement is declared 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 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.
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.
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<PAGE> 2
1,596,189 SHARES
ONCORMED, INC.
COMMON STOCK
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This Prospectus relates to the offer and resale by the persons listed
herein under "Selling Stockholders" (collectively, the "Selling Stockholders")
of up to 1,596,189 shares (the "Shares") of common stock, par value $.01 per
share (the "Common Stock"), of Oncormed, Inc., a Delaware corporation (the
"Company" or "Oncormed"), to be issued from time to time to the Selling
Stockholders: (i) upon conversion of the Company's 6% Series A Convertible
Preferred Stock (the "Series A Preferred Stock"), (ii) as dividends on the
Series A Preferred Stock for a period of two years from February 27, 1998, and
(iii) upon exercise of certain warrants to purchase the Company's Common Stock
(collectively, the "Warrants"). The Shares represent the sum of (i) 200% times
the maximum number of shares of Common Stock into which the Series A Preferred
Stock is convertible, (ii) the number of shares of Common Stock issuable upon
exercise of certain of the Warrants, and (iii) the number of shares of Common
Stock issuable upon payment of dividends on the Series A Preferred Stock,
assuming each share of Series A Preferred Stock is outstanding for two years.
This Prospectus also covers, in accordance with Rule 416 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), the resale by the
Selling Stockholders of such presently indeterminate number of additional shares
of Common Stock as may from time to time become issuable (i) upon conversion of
the Series A Preferred Stock, based upon adjustments or fluctuations in the
conversion price of the Series A Preferred Stock, (ii) upon exercise of certain
Warrants, based on adjustments in the exercise price of such Warrants, and (iii)
upon payment as dividends on the Series A Preferred Stock beyond February 27,
2000. The Series A Preferred Stock, the shares of Common Stock issuable upon the
conversion thereof, the Warrants, and the shares of Common Stock issuable upon
the exercise thereof, have been and will be issued in transactions exempt from
the registration requirements of the Securities Act.
The Shares may be offered by the Selling Stockholders from time to time in
transactions on the American Stock Exchange, in negotiated transactions, or a
combination of such methods of sale, at fixed prices which may be changed, at
market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The Shares may be sold by the Selling
Stockholders by one or more of the following methods, including without
limitation: (a) block trades in which the broker or dealer so engaged will
attempt to sell the Shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction, (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus, (c) an exchange distribution in accordance with
the rules of such exchange, (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers, (e) privately negotiated
transactions, and (f) a combination of any such methods of sale. In effecting
sales, brokers and dealers engaged by the Selling Stockholders may arrange for
other brokers of dealers to participate. In order to comply with the securities
laws of certain states, if applicable, the Shares will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, the Selling Stockholders may pledge or make gifts of their Shares and
such Shares may also be sold by the pledgees or transferees. To the extent
required, the specific Shares to be sold, the names of the Selling
Stockholders, the public offering price, the names of any such agent, dealer or
underwriter, and any applicable commission or discount with respect to any
particular offer will be set forth in an accompanying Prospectus Supplement.
See "Selling Stockholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares will be received by the
Company. The Company has agreed to bear certain expenses in connection with
the registration of the Shares pursuant to certain preexisting agreements with
the Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders and their affiliates against certain liabilities, including
liabilities under the Securities Act. The Selling Stockholders have agreed to
indemnify the Company and its affiliates against certain liabilities, including
liabilities under the Securities Act under certain circumstances.
AN INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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The Common Stock is traded on the American Stock Exchange under the symbol
"ONM." The last reported sales price of the Common Stock on the American Stock
Exchange on March 31, 1998 was $5.0625 per share.
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The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of Section 2(11)
of the Securities Act, and any commissions received by them and any profit on
the resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
herein for a description of indemnification arrangements.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS APRIL 1, 1998
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act
with respect to the Shares offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
the schedules thereto. For further information with respect to the Company and
such Shares, reference is made to the Registration Statement and the exhibits
and schedules thereto. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete, and, with respect to any contract or other document filed as an
exhibit to the Registration Statement, each such statement is qualified in all
respects by reference to such exhibit. Copies of the Registration Statement and
the exhibits and schedules thereto are on file at the offices of the Commission
and may be obtained upon payment of the prescribed fee or may be examined
without charge at the public reference facilities of the Commission described
below.
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected, and copies of such material may be obtained upon
payment of the prescribed fees, at the Commission's Public Reference Section,
Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, as well as at the
Commission's Regional Offices at Seven World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, or may be obtained from the Commission's Internet site on
the world wide web at http://www.sec.gov. Copies of such material can be
obtained in person from the Public Reference Section of the Commission at its
principal office located at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of the prescribed fees.
The Common Stock of the Company is traded on the American Stock Exchange,
and in accordance therewith, annual and quarterly reports, proxy statements and
other information concerning the Company may be inspected at the American Stock
Exchange's offices located in New York.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission are hereby incorporated
by reference in this Prospectus: (1) the Annual Report of the Company on Form
10-K for the fiscal year ended December 31, 1997; (2) the Proxy Statement of
the Company in connection with the Annual Meeting of the Stockholders held on
June 24, 1997; and (3) the Form 8-K filed on March 5, 1998.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement incorporated herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
report or other document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom reports or
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than exhibits to such reports or documents, unless such exhibits are
specifically incorporated by reference into such document). Requests for such
documents should be submitted in writing to Mr. L. Robert Johnston, Jr., Senior
Vice President and Chief Financial Officer, Oncormed, Inc., 205 Perry Parkway,
Gaithersburg, Maryland 20877.
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<PAGE> 4
THE COMPANY
The Company was incorporated in Delaware in July, 1993. The Company's
principal offices are located at 205 Perry Parkway, Gaithersburg, Maryland
20877, and its telephone number is (301) 208-1888.
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk and should not be made by any investor who cannot afford the
loss of his entire investment. Accordingly, prospective investors should
carefully consider the following factors, in addition to all of the other
information presented in this Prospectus, before purchasing any of the shares
of Common Stock offered hereby. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in the
following risk factors and elsewhere in this Prospectus.
ADDITIONAL FINANCING REQUIREMENTS; GOING CONCERN; ACCESS TO CAPITAL
The Company has incurred cumulative losses since its inception and, as of
December 31, 1997, had an accumulated deficit of approximately $29.5 million.
The Company has expended, and will continue to expend, substantial funds to
continue its sales and marketing efforts, research and development programs and
laboratory operations. The Company has yet to generate any significant
revenues and cannot anticipate when, or if, it will be able to generate
significant revenues in the future. The Company's ability to achieve
profitability depends on its ability to successfully market and sell its
services. There can be no assurance when, or if, the Company will become
profitable. At March 23, 1998, the Company had cash, cash equivalents and
short-term investments of approximately $2.1 million. Currently, the Company
expends from $800,000 to $1,000,000 per month and will need to raise additional
funds in the second quarter of 1998 to continue the Company's operations, which
raises substantial doubt whether the Company can continue as a going concern.
The Company is actively seeking additional capital to fund its operations
through private financings or a collaborative licensing or other arrangements
with corporate partners. There can be no assurance, however, that additional
financing will be available, or if available, will be available on acceptable
terms. If additional funds are raised by issuing equity securities, further
dilution to existing stockholders will result and future investors may be
granted rights superior to those of existing stockholders. The unavailability
of adequate funds in the future would have a material adverse effect on the
Company's business, financial condition and results of operations and raises
substantial doubt about whether the Company can continue as a going concern.
DEVELOPMENT STAGE COMPANY; HISTORY OF OPERATING LOSSES; UNCERTAINTY OF
FUTURE PROFITABILITY
The Company commenced operations in July 1993, has a limited operating
history and is a development stage company. Since its inception, the Company
has been engaged in research and development activities, organizational efforts
and sales and marketing activities, including the development of its services,
the hiring of its scientific and marketing staff and its initial sales and
marketing efforts. The Company has incurred operating losses since its
inception. As of December 31, 1997, the Company's accumulated deficit was
approximately $29.5 million. The Company's losses have resulted principally
from selling, general and administrative expenses, laboratory operations and
research and development expenses. The Company has yet to generate any
significant revenues and the Company cannot anticipate when, or if, it will be
able to generate significant revenues in the future. The Company expects its
operating losses to continue as its sales and marketing efforts, research and
development programs and laboratory operations continue and increase. The
Company's ability to achieve profitability depends on its ability to
successfully market and sell its services. There can be no assurance when, or
if, the Company will become profitable.
DEPENDENCE ON PROPRIETARY RIGHTS
The Company relies on a combination of patent, trade secret and copyright
laws and confidentiality agreements to protect its proprietary technology,
rights and know-how. The Company's success will depend in part
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<PAGE> 5
on its ability or the ability of its licensors or sublicensors to
obtain patents, defend patents, maintain trade secrets, defend copyrights and
operate without infringing upon the proprietary rights of others, both in the
United States and in foreign countries. The patent position of companies
relying upon biotechnology is highly uncertain in general and involves complex
legal and factual issues, and no consistent policy has emerged regarding the
breadth of claims allowed in biotechnology patents. Except for a patent issued
to the Company in early July 1997 for a pattern recognition methodology and in
early August 1997 related to the BRCA1 gene, to date, none of the Company, its
licensors or its sublicensors has been granted any patents related to the
technology or genetic discoveries underlying the Company's services. Although
the Company and certain of the Company's licensors and sublicensors have patent
applications pending relating to such technologies and discoveries, there can
be no assurance that patents will be issued as a result of such patent
applications or that, if issued, such patents will be sufficiently broad to
afford protection against competitors with similar technologies or discoveries.
There can also be no assurance that any patents issued to the Company, or for
which the Company has license or sublicense rights, will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
competitive advantages to the Company. The commercial success of the Company
also will depend upon avoiding the infringement of patents issued to third
parties, obtaining licenses to third parties' technologies and genetic
discoveries and maintaining licenses upon which certain of the Company's
services are, or might be, based. In particular, third parties, including
competitors such as Myriad Genetics, Inc. ("Myriad") and other potential
competitors, have been issued patents relating to certain genes and genetic
mutations including BRCA1 and related mutations, underlying certain of the
Company's services, and have filed and may in the future file additional patent
applications relating to genes and genetic mutations including BRCA2, p16 and
related mutations. On November 19, 1996, the Company filed suit in the U.S.
District Court for the District of Columbia, against the National Institutes of
Health challenging the improper grant of an exclusive license to the University
of Utah in BRCA1. On November 17, 1997, the Company filed suit in U.S.
District Court for the District of Columbia against Myriad. The suit claims
infringement of the Company's BRCA1 gene patent issued to the Company in August
1997 (No. 5,654,155). On December 2, 1997, Myriad filed suit in U.S. District
Court for the District of Utah, Central Division, against the Company for
infringement of a patent issued to Myriad in December 1997 (No. 5,693,473). On
January 20, 1998, the Company and Steven A. Narod filed suit in the U.S.
District Court for the District of Columbia, against Myriad. The suit is an
action to correct inventorship regarding Dr. Narod on U.S. Patents No.
5,693,473 and 5,709,999 issued to Myriad, and requests that the Court order the
Commissioner of Patents and Trademarks to include Dr. Narod as an inventor on
the patents. On January 20, 1998, the Company filed suit against Myriad
claiming that the patent entitled "Linked Breast and Ovarian Gene" issued to
Myriad (No. 5,709,999) infringes upon the Company's BRCA1 gene patent (No.
5,654,155). On January 20, 1998, Myriad filed suit against the Company
claiming that the Company's BRCA1 gene patent (No. 5,654,155) infringes upon
Myriad's "Linked Breast and Ovarian Gene" patent (No. 5,709,999). There can be
no assurance that the Company will prevail in such litigation or be successful
in defending its BRCA1-related proprietary rights. In addition, such
litigation could subject the Company to significant liability for damages and
could result in invalidation of the Company's proprietary rights and, even if
not meritorious, could be time-consuming and expensive to defend, and could
result in the diversion of management time and attention, any of which could
have a material adverse effect on the Company's business, results of operations
and financial condition. Further, if unsuccessful, such litigation may hinder
or prevent the Company from providing certain related genetic services and
could require the Company to enter into licenses with Myriad or cease such
activities. There can be no assurance that any required licenses would be
available on acceptable terms, or at all. The failure of the Company to
successfully defend its intellectual property rights, or the failure by the
Company to obtain any licenses related to such rights, if required, would have
a material adverse effect on the Company's business, financial condition and
results of operations.
Under an agreement with Oncor, Inc. ("Oncor"), Oncor has the primary right
and obligation to obtain, maintain and enforce proprietary rights in relation to
its own technologies and any improvements to such technologies assigned to Oncor
by the Company. The amount and timing of resources devoted to such activities
are beyond the Company's control. There can be no assurance that Oncor will
perform such obligations on a timely basis or at all, or that it will expend
sufficient resources on such activities. The Company has the primary right and
obligation to obtain, maintain and enforce proprietary rights in relation to all
its own technologies.
The Company relies on certain technologies, trade secrets and know-how
that are not patentable or proprietary and are available to the Company's
competitors. Although the Company has taken steps to protect its unpatented
technologies, trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
contractors, there can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed or discovered by competitors.
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GOVERNMENT REGULATION
CLIA provides for regulation of clinical laboratories by the United States
Department of Health and Human Services ("HHS"). These regulations mandate that
virtually all clinical laboratories be certified to perform testing on human
specimens and provide specific conditions for certification. These regulations
also contain requirements for the qualifications, responsibilities, training,
working conditions and oversight of clinical laboratory employees. In addition,
specific standards are imposed for each type of test that is performed in a
laboratory. The Company's laboratory is certified under these regulations and
the Company believes that it is in substantial compliance with them. CLIA and
the regulations promulgated thereunder are enforced through continuous quality
inspections of test methods, equipment, instrumentation, materials and supplies
on a bi-annual and "spot" basis. While the United States Food and Drug
Administration (the "FDA") minimally regulates the genetic tests underlying the
Company's services if they are performed in the Company's CLIA certified
clinical laboratory, there can be no assurance that the FDA will not seek to
further regulate such tests in the future. If, in the future, the FDA should
determine that the tests underlying the Company's services should receive FDA
approval prior to their provision in the Company's laboratory, or impose other
requirements, there can be no assurance that such requirement would be met on a
timely basis or at all. Any change in CLIA or related regulations, or in the
interpretation thereof, or in the Company's certification under CLIA, or in the
FDA's position on regulating the tests underlying the Company's services, could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company's laboratory is licensed and regulated
by the State of Maryland, in which it is located. The Company's laboratory is
also regulated by certain other states from which the Company may accept
specimens. The Company has received approval for a license from the State of
New York and the State of Florida and intends to seek approval from other
states as required. No assurance can be given that the Company will be able to
obtain such approvals on a timely basis or at all. The loss of, or the failure
to obtain, any required state license or other required approval, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The use of human tissue in medical research and the operation of human tissue
repositories to collect, store and distribute human tissue materials for
research purposes are regulated under federal regulations. These regulations
mandate that IRBs are the mechanism by which research protocols are reviewed
and approved to assure the protection of human rights. The Health and Human
Services Office for the Protection from Research Risks oversees this process
and issues guidelines for IRBs to use when evaluating research protocols to
assure informed consent and that privacy is protected and confidentiality is
maintained. Some states have requirements that are similar to the foregoing
guidelines. The Company believes that it is in compliance with federal and
state regulations in the establishment and operation of a human tissue
repository for use in genomic research. The Company operates its repository
under an IRB-approved protocol and requires that all institutions and
pathologists supplying tissue have an IRB-approved protocol to assure patient
informed consent, privacy and confidentiality. The Company does not have
access to patient identifiers. The use of human tissue, especially for genetic
research, is continuously examined by a number of agencies. There are no
assurances that federal or state regulations will not be passed in the future
that would materially affect the Company's ability to operate a human tissue
repository.
The Company is subject to extensive federal, state and local regulation,
including regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other laws, rules and regulations governing
health care, clinical laboratory activities, waste disposal, handling of toxic,
dangerous or radioactive materials and other matters. Although the Company's
services are currently considered screening services under Medicare and are
therefore excluded from coverage under Medicare, the Company's services may
still be subject to laws, rules and regulations governing reimbursement and
fraud and abuse and prohibiting the filing of false claims. These laws, rules
and regulations include "anti-kickback" and "Stark" laws, which contain
extremely broad proscriptions, the violation of which may result in exclusion
from Medicare and Medicaid and criminal and civil penalties. In addition, the
Company is subject to state laws, rules and regulations limiting certain
financial relationships between health care service providers and physicians
and other referral sources as well as state Medicaid requirements. Although
the Company believes that it is in substantial compliance with all applicable
laws, rules and regulations, there can be no assurance that the Company will
remain in compliance with applicable laws, rules and regulations or that
changes in, or new interpretations of, existing laws, rules and regulations
would not have a material adverse effect on the Company's business, financial
condition and results of operations.
RELATIONSHIP WITH ONCOR
In February 1997, the Company and Oncor agreed to certain changes to an
agreement with Oncor regarding sublicenses for certain proprietary technology
(the "Oncor Agreement"). Pursuant to the Oncor Agreement, Oncor is providing the
Company with an exclusive worldwide license to certain of Oncor's existing human
genome technologies that are useful for the development and commercialization of
certain of the Company's services, including: (i) testing, detection and/or
analysis of genes; (ii) genetic assessment of risk of an individual to develop
cancer; and (iii) testing and analysis for the purposes of cancer management. In
addition, Oncor is providing the Company with a non-exclusive worldwide license
to certain of Oncor's existing human genome technologies, and any future
improvements thereto, to be used by the Company in the provision of services
direct to third parties other than services that are provided pursuant to the
exclusive license. The Company does not have the right to sublicense any Oncor
technologies licensed to it by Oncor without Oncor's prior written consent.
Technologies sublicensed to the Company by Oncor include technologies covered by
the collaborative licensing and research agreements between Oncor and each of
The Johns Hopkins University and the Massachusetts General Hospital. The term of
the Oncor Agreement shall expire in June 2004 unless earlier terminated in
accordance with its terms. Further, in the event of a change of control of
Oncor, the acquiring party shall have the option to either maintain the Oncor
Agreement or to terminate the Oncor Agreement. In the event that the acquiror
terminates the Oncor Agreement, both the exclusive license and the non-exclusive
license shall remain in full force and effect under rates to be determined.
Certain of the Company's services are reliant on the technologies licensed
directly from Oncor and from third parties through Oncor which form the basis
for some of the Company's services. The Company's rights under the Oncor
Agreement are subject to certain rights retained by Oncor, which include
Oncor's right to use the licensed technologies for internal, non-commercial
research and development purposes and for development and commercialization of
Oncor's products. Oncor intends to develop its technologies into diagnostic
products for sale to third parties. These third parties may then use these
products to provide services that compete directly with the Company's services,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the Oncor
Agreement will be renewed at the end of its initial term or that it will not be
terminated earlier pursuant to its terms. There also can be no assurance that
conflicts of interest between Oncor and the Company will not arise with respect
to the Oncor Agreement, any services that might be provided by Oncor to the
Company in the future or other aspects of the Company's relationship with
Oncor.
The Company's rights to technologies licensed to the Company from third
parties through Oncor are subject to various provisions in the license
agreements between such third parties and Oncor. No assurance can be given that
Oncor will perform its obligations under such agreements, that such agreements
will not be terminated or that such agreements can be renewed upon termination
or expiration. If Oncor breaches such agreements or otherwise fails to comply
with such agreements, or if such agreements are terminated or otherwise expire,
the development or commercialization of certain of the Company's services may
be delayed or terminated, or the Company would have to expend substantial
additional resources on development and commercialization, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. Oncor currently owns approximately 25.4% of the
Company's outstanding Common Stock. Accordingly, Oncor may be able to
effectively control or influence certain actions such as the election of
directors and the authorization of certain transactions that require
stockholder approval and may be able to otherwise effectively control the
Company's policies without concurrence of the Company's other stockholders. In
addition, Stephen Turner, Chief Executive Officer and Chairman of the Board of
Directors of Oncor, is a director of the Company, and Timothy J. Triche, M.D.,
Ph.D., a director of Oncor, is the Chief Executive Officer and Chairman of the
Board of Directors of the Company.
RELIANCE ON PHARMACEUTICAL INDUSTRY
The Company expects that a significant portion of its revenues in the
foreseeable future will be derived from services provided to the genomics,
pharmaceutical and biotechnology industries. Accordingly, the Company's
success in the foreseeable future will be directly dependent upon the success
of the companies within those industries
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<PAGE> 7
and their continued demand for the Company's services. The Company's
operations may in the future be subject to substantial period-to-period
fluctuations as a consequence of reductions and delays in research and
development expenditures by companies in such industries resulting from factors
such as changes in economic conditions, pricing pressures, market-driven
pressures on companies to consolidate and reduce costs, and other factors
affecting research and development spending.
LENGTHY SALES CYCLE
The ability of the Company to obtain collaborators and subscribers for its
services depends in significant part upon the perception that such services can
help accelerate the translation of cancer-related genetic discoveries into
clinically-useful products. The sales cycle for the Company's services is
typically lengthy due to the education effort that is required as well as the
need to effectively sell the benefits of the Company's services to a variety of
constituencies within potential collaborators and subscribers, including
research and development personnel and key management. In addition, each
subscription and collaboration will involve the negotiation of agreements
containing terms that may be unique to each subscriber or collaborator. The
Company may expend substantial funds and management effort with no assurance
that a collaboration or subscription will result.
LIMITED PATIENT POPULATIONS FOR CERTAIN SERVICES
Certain of the Company's services currently address subtypes of broader
types of cancers. Patients with such subtypes typically represent only a small
percentage of those patients who are under treatment or have a history of the
broader types of cancer. Accordingly, the market for such services may be
limited and such services may not generate significant revenues.
UNPROVEN COMMERCIAL STRATEGY
The Company's success will depend upon its ability to assemble a portfolio
of identified disease-related genes and regulatory regions which have potential
therapeutic value and to select appropriate commercialization strategies for
drug discovery and development. While the Company anticipates that it will
select appropriate commercialization strategies, depending on the service, with
several different strategic partners, failure to allocate its resources to
those services with the most commercial potential and to the appropriate
strategic partner could have a material adverse effect on the Company's
business, financial condition and results of operations. Even if the Company
is successful in identifying disease-related genes, relatively few products
based on genes have been developed and commercialized to date, and there can be
no assurance that the Company or other entities working in collaboration with
the Company will be able to discover drugs and develop commercial products
based upon its gene discoveries. In addition, the development and
commercialization of drugs based on genes discovered by the Company will be
subject to the risks inherent in any new drug. These risks include the
possibilities that any or all of the products will be found to be ineffective
or toxic, or otherwise fail to receive necessary regulatory clearances; that
the products, if safe and effective, will be difficult to manufacture on a
large scale or uneconomical to market; that proprietary rights of third parties
will preclude the Company or its strategic partners from marketing products; or
that third parties will market superior or equivalent products. As a result,
the Company's commercial strategy is unproven.
The Company's clinical genomics services represent a new approach to
cancer management for which there is little precedent and for which the market
is evolving. The Company's business is to help accelerate the translation of
cancer related genetic discoveries into clinically useful cancer therapeutics
and diagnostics. The Company's ability to successfully develop its business is
unproven and is dependent on its ability to establish its services as the
standard of care in the translation of cancer related genetic discoveries into
clinically useful cancer therapeutics and diagnostics; expand the distribution
of its services both domestically and internationally; develop strategic
alliances and collaborations with pharmaceutical, genomics and biotechnology
partners; identify, license and develop emerging genetic discoveries and
mutation detection technologies; and continue to expand its portfolio of
services. The Company's ability to succeed is also dependent upon the
acceptance by potential customers and patients of the Company's services as
effective tools for cancer management. There can be no assurance that the
market for the
-6-
<PAGE> 8
Company's services will continue to evolve or that the Company's business
strategy will be successful. The discoveries and technologies which form the
basis for the Company's services have not been widely adopted by the medical
community. Accordingly, the Company is pursuing clinical correlation studies at
academic medical centers and research institutions that are designed to
determine the clinical utility, reliability and accuracy of the Company's
services. There can be no assurance that these studies will confirm the
clinical utility, reliability and accuracy of the Company's services. The
failure of these studies to do so could have a material adverse effect on the
Company's business, financial condition and results of operations.
UNCERTAIN AVAILABILITY OF HEALTH CARE REIMBURSEMENT AND MARKET
ACCEPTANCE OF SERVICES
The successful commercialization of the Company's genetic testing and
information services depends in part on the ability of its customers to obtain
adequate reimbursement for such services and related treatments from
governmental agencies, private health care insurers and other third party
payors. Government and private third party payors are increasingly attempting
to contain health care costs by limiting both the extent of coverage and the
reimbursement rate for new diagnostic and therapeutic products and services.
Medicare has determined that the Company's genetic testing and information
services are screening services and therefore are excluded from coverage under
Medicare. Although various third party payors have begun to reimburse some of
the Company's services, there can be no assurance that third party
reimbursement for the Company's services will be consistently available to its
customers or that any such reimbursement will be adequate. Disapproval of, or
limitations in, coverage by third party payors could materially and adversely
affect market acceptance of the Company's services which would have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON STRATEGIC COLLABORATIONS AND LICENSES WITH OTHERS
The Company's strategy for the research, development and commercialization
of certain of its services is to rely in part on various collaborative and
license arrangements with academic medical centers, research institutions and
commercial entities. Accordingly, the Company is dependent in part upon such
third parties performing their obligations. The Company has entered into
certain collaborative and license arrangements, including arrangements with
Hereditary Cancer Institute ("HCI"), Affymetrix, Inc. ("Affymetrix"), ZENECA
Diagnostics, Incyte Pharmaceuticals, Inc. ("Incyte") and Cancer Research
Campaign Limited and Duke University ("CRCT/Duke"), and is continually seeking
to enter into additional arrangements with other collaborators and licensors.
There can be no assurance that the Company will be able to enter into
acceptable collaborative and license arrangements in the future or that the
parties with which the Company has established or will establish arrangements
will perform their obligations under such arrangements. There also can be no
assurance that its current arrangements or any future arrangements will lead to
the development of additional services with commercial potential, that the
Company will be able to obtain or license proprietary rights with respect to
any technology developed in connection with these arrangements and that the
Company will be able to ensure the confidentiality of any proprietary rights
and information developed in such arrangements or prevent the public disclosure
thereof. In general, the Company's collaborative and license arrangements
provide that they may be terminated under certain circumstances. There can be
no assurance that such arrangements will not be terminated or that the Company
will be able to extend any of its collaborative and license arrangements upon
their expiration. The Company currently has certain licenses from third
parties, either directly or indirectly through the Oncor Agreement, and in the
future may require additional licenses from these or other parties to develop
and market commercially viable services. There can be no assurance that such
licenses will be obtainable on commercially reasonable terms, if at all, or
renewable, that the patents underlying such licenses, if any, will be valid and
enforceable or that the nature of the technology underlying such licenses will
remain proprietary.
The Company's rights to technologies licensed to the Company from third
parties through the Oncor Agreement are subject to the license agreements
between such third parties and Oncor. No assurance can be given that the third
parties to these agreements will perform their obligations under such
agreements on a timely basis or at all. If such third parties breach or
terminate their agreements with Oncor or otherwise fail to, or are unable to,
comply with the provisions of their agreements with Oncor for whatever reason,
the Company would have no direct
-7-
<PAGE> 9
recourse and would be dependent on Oncor to enforce such agreements. The
agreements between Oncor and the third parties expire at various times. There
can be no assurance that these agreements will be renewed at the end of their
initial terms or that such agreements will not be terminated or canceled prior
to their expiration. The Company has no rights under these third party
agreements and is reliant upon Oncor to negotiate renewals of such agreements
and resolve disputes under such agreements. If the third parties to the
agreements that the Company licenses from Oncor through the Oncor Agreement
breach such agreements or otherwise fail to comply with such agreements, or
such agreements are terminated or otherwise expire, the development or
commercialization of certain of the Company's services may be delayed or
terminated, or the Company would have to expend substantial additional
resources on development and commercialization, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION
The Company is engaged in the genomics, biotechnology and pharmaceutical
industries which are characterized by extensive research and development
efforts, rapid technological progress and intense competition. There are many
public and private companies, including well-known pharmaceutical companies,
biotechnology companies and academic institutions, engaged in developing
medical services and the technology underlying such services. Although there
are relatively few direct competitors of the Company, it is anticipated that
the number of direct competitors will increase significantly in the future.
Many of the Company's current and potential competitors have substantially
greater financial and technological resources, sales and marketing capabilities
and experience, and research and development experience than the Company.
Accordingly, the Company's competitors may succeed in developing services and
the underlying technology more rapidly than the Company and in developing
services that are more accurate and useful and less costly than any of the
Company's services. The Company's competitors also may be more successful than
the Company in marketing and selling such services. In addition, other
technologies are, or in the future may become, the basis for competitive
products and services. Oncor may develop technologies under the Oncor Agreement
into products that Oncor will sell to third parties. These third parties may
then use these products to provide services that compete directly with the
Company's services, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company relies on certain technologies that are not patentable or
proprietary and consequently may be available to the Company's competitors.
Competition may increase further as a result of the potential advances in the
technology underlying the services developed by the Company. The Company also
is aware that other companies have developed or may be developing genomics
discovery, development and information technologies, services and products that
are and may be competitive with the Company's services. There can be no
assurance that the Company's competitors will not succeed in developing
technologies, services and products that are more accurate and useful than any
being developed by the Company or that would render the Company's technology
and services obsolete or noncompetitive.
The Company requires that all employees and consultants (including certain
scientific advisors) enter into confidentiality agreements that prohibit the
disclosure of confidential information to anyone outside the Company and
require disclosure and assignment to the Company of their ideas, developments,
discoveries or inventions developed during the course of their service to the
Company. However, no assurance can be given that competitors of the Company
will not gain access to trade secrets and other proprietary information
developed by the Company and disclosed to employees, consultants and/or
scientific advisors.
-8-
<PAGE> 10
CONFIDENTIALITY; RISK OF DISCRIMINATION AGAINST CUSTOMERS; POTENTIAL ADVERSE
IMPACT ON INSURABILITY
The availability of genetic predisposition testing and human tissue usage
for research purposes has raised certain ethical, legal and social issues
regarding the appropriate utilization and confidentiality of information
provided by such testing. The medical information obtained or determined about
an individual from the Company's
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<PAGE> 11
services is of an extremely sensitive nature. In providing its services, the
Company is subject to certain statutory, regulatory and common law requirements
regarding the confidentiality of such medical information. The Company
maintains an internal regulatory compliance review program to monitor
compliance with applicable confidentiality requirements, and believes that it
is in substantial compliance with such requirements. Failure to comply with
such confidentiality requirements could result in material liability to the
Company. It is possible that discrimination by insurance companies could occur
through the raising of premiums by insurers to prohibitive levels, the
cancellation of insurance or the unwillingness to provide coverage to patients
shown to have a genetic predisposition to a particular disease. The Company
could experience a delay in market acceptance or a reduction in the size of its
potential serviceable market if insurance discrimination were to become a
significant factor, which would have a material adverse effect on the Company's
business, financial condition and results of operations. Similarly,
governmental authorities could, for social or other purposes, limit the use of
or prohibit genetic predisposition testing and human tissue usage for research
purposes. If efforts by the Company and others to mitigate potential
discrimination are not successful or if the use of genetic testing is limited,
the Company could experience a delay or reduction in market acceptance of its
services, which would have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED SALES AND MARKETING EXPERIENCE
The Company has limited experience in selling and marketing its services
and will have to further develop its sales force and/or rely on collaborators,
licensees or others to provide for the sales and marketing of its services.
There can be no assurance that the Company will be able to establish adequate
sales and marketing capacity or make arrangements with collaborators, licensees
or others to perform such activities on acceptable terms or at all.
RISK OF LIABILITY; ADEQUACY OF INSURANCE COVERAGE
The marketing and sale of genetic testing and information services could
expose the Company to the risk of certain types of litigation, including
medical malpractice or negligence claims or contract disputes. The Company
currently maintains medical malpractice insurance coverage. There can be no
assurance, however, that such coverage will be adequate to protect the Company
against future claims or that insurance will be available to the Company in the
future on acceptable terms, if at all. A medical malpractice or other claim for
which the Company was not adequately insured could have a material adverse
effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL
The Company is highly dependent upon the efforts of its senior management,
scientific advisory board and consultants. The loss of the services of one or
more members of senior management could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the loss of the services of certain members of the Company's scientific
advisory board and certain consultants could materially and adversely affect
the Company to the extent that the Company is pursuing research and development
in areas of such scientific advisors' or consultants' expertise. Although the
Company is the beneficiary of $1 million key-man life insurance policies on
each of its Chief Executive Officer, Timothy J. Triche, M.D., Ph.D., and its
President and Chief Operating Officer, Douglas Dolginow, M.D., the Company does
not believe such amounts would be adequate to compensate for the loss of either
executive. Due to the specialized scientific nature of the Company's business,
the Company is also highly dependent upon its ability to attract and retain
qualified scientific, technical and key management personnel. There is intense
competition for qualified personnel in the areas of the Company's activities
and there can be no assurance that the Company will be able to continue to
attract and retain the qualified personnel necessary for the development of its
existing business and its expansion into areas and activities requiring
additional expertise. The loss of, or failure to recruit, scientific,
technical, sales and marketing and managerial personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company's scientific advisors and consultants may be employed by or
have consulting agreements with entities other than the Company, some of which
may compete with the Company. To the extent that members of
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<PAGE> 12
the Company's scientific advisory board or consultants have consulting
arrangements with or become employed by any competitor of the Company, the
Company could be materially and adversely affected. Any inventions or processes
independently discovered by the scientific advisors or the consultants will
not, unless otherwise agreed, become the property of the Company and will
remain the property of such persons or their full-time employers. In addition,
the institutions with which the scientific advisors and consultants are
affiliated may make available the research services of their scientific and
other skilled personnel, including the Company's scientific advisors and
consultants, to competitors of the Company pursuant to sponsored research
agreements. Under such sponsored research agreements, such institutions may be
obligated to assign or license to a competitor of the Company patents and other
proprietary information that may result from research sponsored by an entity
other than the Company, including research performed by a scientific advisor or
consultant for a competitor of the Company.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation grants the Board of Directors
the authority to issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders. Pursuant to the terms of that
certain Convertible Preferred Stock Purchase Agreement, dated February 27,
1998, between the Company and the investors named therein (the "Stock Purchase
Agreement"), the Company has issued an aggregate of 333 shares of 6% Series A
Preferred Stock to certain investors. In addition, pursuant to the terms of
the Stock Purchase Agreement, the Company may, subject to certain conditions,
issue 333 shares of 6% Series B Convertible Preferred Stock (the "Series B
Stock"). The rights of the holders of Common Stock will be subject to, and may
be materially and adversely affected by, the rights of the holders of the
Series A Stock, the Series B Stock or any Preferred Stock that may be issued in
the future. The issuance of the Series A Stock, the Series B Stock or any
additional shares of Preferred Stock could have the effect of discouraging a
third party from acquiring a majority of the outstanding Common Stock of the
Company and preventing stockholders from realizing a premium on their shares.
In addition, the Company is subject to Section 203 of the Delaware General
Corporation Law, which prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three
years unless certain conditions are met.
DIVIDEND POLICY
The Company is obligated on a quarterly basis to pay dividends of 6% per
annum on the Series A Stock, which amount is payable by the Company either in
cash or through the issuance of shares of Common Stock. The Company has never
declared or paid any cash dividends on its Common Stock and does not intend to
pay any cash dividends on the Common Stock in the foreseeable future. The
Company currently anticipates that it will retain all its earnings for use in
the operation of its business and, therefore, does not anticipate that it will
pay any cash dividends on its Common Stock in the foreseeable future.
POSSIBLE VOLATILITY OF STOCK PRICE
The price of the Company's Common Stock has fluctuated substantially since
its initial public offering on September 27, 1994. See "Market Price for
Common Stock." The market price of the shares of Common Stock, like that of
the common stock of many other biotechnology companies, is likely to continue
to be highly volatile. Factors such as the timing and results of clinical
trials by the Company or its competitors, governmental regulation, healthcare
legislation, developments in patent or other proprietary rights of the Company
or its competitors, including litigation, fluctuations in the Company's
operating results, and market conditions for biotechnology stocks and life
science stocks in general, could have a significant impact on the future price
of the Common Stock. In addition, the number of shares of Common Stock
issuable upon conversion of the Series A Stock and the subsequent sale of such
shares could have a significant impact on the future price of the Common Stock.
Further, the failure of the Company to maintain compliance with the listing
requirements of the American Stock Exchange could result in the delisting of
the Company's Common Stock from the American Stock Exchange.
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<PAGE> 13
CONTROL BY EXISTING STOCKHOLDERS
As of December 31, 1997, officers and directors of the Company and
stockholders owning more than five percent of the Common Stock, together with
their affiliates, beneficially owned approximately 59.0% of the outstanding
Common Stock. Oncor, Inc. currently holds approximately 25.4% of the Company's
outstanding Common Stock. Such shares were acquired by Oncor in a transaction
not involving a public offering and are therefore "restricted securities" under
the Securities Act and may only be sold (i) in accordance with Rule 144
promulgated thereunder or (ii) pursuant to an effective registration statement
under the Securiites Act. However, Oncor has no rights with respect to the
registration of such shares of Common Stock under the Securities Act.
Furthermore, Oncor is considered an "affiliate" of the Company and is therefore
subject to the volume and other limitations of Rule 144 promulgated under the
Securities Act. As a result, these stockholders, if acting together, would be
able to significantly influence all matters requiring approval by the
stockholders of the Company, including the election of directors and the
approval of mergers and consolidations, sales of all or substantially all of
the assets of the Company or other business combination transactions.
SECURITIES ELIGIBLE FOR FUTURE SALE; OUTSTANDING REGISTRATION RIGHTS
At September 30, 1997, the Company had 7,869,688 shares of Common Stock
outstanding, approximately 3,556,123 of which are freely tradable by the holders
thereof without limitations under the Securities Act. The 4,313,565 remaining
shares of Common Stock are held by officers, directors and other stockholders
who may be deemed to be "affiliates" of the Company and therefore are generally
subject to the volume and other limitations of Rule 144 promulgated under the
Securities Act. Sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
the trading price of the Common Stock and could impair the Company's future
ability to raise capital through an offering of its equity securities. Pursuant
to the Stock Purchase Agreement, except in certain limited circumstances, the
Company shall not, for a period of not less than 90 trading days after the date
that a Registration Statement on Form S-3 relating to shares of Common Stock
underlying the Series A Preferred Stock is declared effective by the United
States Securities and Exchange Commission, (i) issue or sell any of its or any
of its affiliates equity or equity equivalent securities pursuant to Regulation
S promulgated under the Securities Act, or (ii) register for resale any
securities of the Company.
OUTSTANDING OPTIONS, WARRANTS AND OTHER RIGHTS
As of September 30, 1997, options to purchase a total of 1,549,042
shares of Common Stock were outstanding with a weighted average exercise price
of $3.14 per share, of which options to purchase 1,080,043 shares of Common
Stock were then exercisable. In addition, as of such date, an additional
511,900 shares of Common Stock were available for future option grants under
the Company's stock option plan. As of September 30, 1997, warrants to
purchase a total of 920,468 shares of Common Stock were outstanding with a
weighted average exercise price of $7.84 per share. As of September 30, 1997,
a convertible note was outstanding which is convertible into 35,787 shares of
Common Stock. To the extent that the aforementioned options, warrants or the
convertible note are exercised, the interests of the Company's stockholders
would be diluted. Moreover, as long as such options, warrants and the
convertible note are outstanding, the terms upon which the Company will be able
to obtain additional equity capital may be adversely affected since the holders
of the outstanding options and warrants and other rights can be expected to
exercise them, to the extent they are able to, at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than those provided in the options, warrants or other
rights. The Company has registered for sale under the Securities Act the
shares of Common Stock included in the stock option plan and shares of Common
Stock included in its employee Stock Purchase Plan.
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<PAGE> 14
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. All proceeds from the sale of the Shares will be for the accounts of
the Selling Stockholders. See "Selling Stockholders" and "Plan of
Distribution."
DILUTION
The pro forma net tangible book value of the Company as of September 30,
1997 was $0.81 per share of Common Stock. Pro forma net tangible book value
represents the Company's total tangible assets less total liabilities
(including proceeds of approximately $3.33 million received from the issuance
of Series A Preferred Stock in February 1998). Pro forma net tangible book
value per share after conversion and exercise is calculated by dividing the pro
forma net tangible book value by the pro forma number of outstanding shares of
Common Stock after giving effect to (i) the conversion of the Series A
Preferred Stock into Common Stock, and (ii) the exercise of the warrants issued
pursuant to the Stock Purchase Agreement. Dilution per share represents the
difference between the pro forma net tangible book value per share before
giving effect to the conversion and exercise and the pro forma net tangible
book value per share after giving effect to the conversion and exercise. This
represents an immediate dilution in pro forma net tangible book value of $0.05
per share as illustrated in the following table:
<TABLE>
<S> <C>
Pro forma net tangible book value per share before conversion and exercise $0.81
-------
Pro forma net tangible book value per share after conversion and exercise (1) 0.76
-------
Dilution in pro forma net tangible book value per share assuming conversion 0.05
-------
</TABLE>
(1) For purposes of the calculation, the Series A Preferred Stock has been
assumed to convert into shares of Common Stock at a conversion price equal
to $5.9776 per share (97% of the average of the closing bid prices of the
Common Stock on March 6, 1998, March 9, 1998, March 10, 1998,
March 11, 1998 and March 12, 1998).
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<PAGE> 15
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Stockholders as of February 28, 1998.
Except as set forth in the notes below, none of the Selling Stockholders has
had a material relationship with the Company within the past three years other
than as a result of the ownership of the Shares or other securities of the
Company. The Shares offered by this Prospectus may be offered from time to
time by the Selling Stockholders. See "Plan of Distribution."
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Beneficial Ownership
After Offering(5)
-----------------
Number of Shares Number of Shares
Beneficially Owned Registered for Number
Name of Selling Stockholder Prior to Offering(1)(2) Sale Hereby(3)(4) of Shares Percent
- --------------------------- ----------------------- ---------------- --------- -------
<S> <C> <C> <C> <C>
Southbrook International
Investments, Ltd................. 301,317(6) 563,777 - *
Westover Investments L.P......... 105,939(7) 198,325 - *
Montrose Investments, LTD........ 195,379(8) 365,453 - *
Brown Simpson Strategic Growth
Fund, L.P.................. 28,927(9) 54,123 - *
Brown Simpson Strategic Growth
Fund, Ltd.................. 91,601(10) 171,389 - *
Incyte Pharmaceuticals, Inc.
3174 Porter Drive
Palo Alto, California 94304 859,038(11) 149,004 779,323 9.9
Gaines, Berland Inc.............. 94,118(12) 94,118 - *
--------- ------- ------- -------
TOTAL............................ 1,676,319 1,596,189 779,323
========= ========= =======
</TABLE>
* Less than one percent.
(1) Gives effect to the shares of Common Stock issuable within 60 days of
February 28, 1998 upon the exercise of all rights beneficially owned by
the indicated stockholders on that date. Beneficial ownership is
determined in accordance with the rules of the Commission and includes
voting and investment power with respect to shares. Unless otherwise
indicated, the persons named in the table have sole voting and sole
investment control with respect to all shares beneficially owned.
(2) The Series A Preferred Stock was issued by the Company to the Series A
Stockholders on February 27, 1998 and March 24, 1998 in a transaction
exempt from the registration requirements of the Securities Act pursuant
to Regulation D promulgated thereunder. Except as described below, each
holder of Series A Preferred Stock has the right at any time, and from
time to time, to convert some or all such shares into fully paid and
nonassessable shares of Common Stock. The number of shares of Common
Stock issuable upon conversion of each share of Series A Preferred Stock
will equal (i) the sum of (a) $10,000 and (b) accrued and unpaid dividends
on such share, divided by (ii) the lesser of (a) $7.5625 or (b) an
applicable percentage (ranging from 97% to 85% depending upon the time of
such conversion) of the average of five (5) closing bid prices of the
Common Stock on the American Stock Exchange during the thirty (30) trading
days immediately preceding the time of such conversion. For the purposes
of the calculation set forth herein, the conversion price per share of
Series A Preferred Stock was assumed to be $5.2865 (97% of the average of
the closing bid prices of the Common Stock on January 15, 1998, January
16, 1998, January 20, 1998, January 21, 1998 and January 22, 1998). The
Series A Preferred Stock accrues dividends in the amount of 6% per annum,
which dividends are payable on a quarterly basis by the Company either in
cash or through the issuance of Common Stock. Certain Selling Stockholders
have agreed to restrict their ability to convert the Series A Preferred
Stock into Common Stock to the extent that the number of shares of Common
Stock held by such holders and their affiliates after such conversion
exceeds 4.999% of the then issued and outstanding shares of Common Stock
following such conversion.
(3) The number of shares of Common Stock being registered for sale hereby on
behalf of certain of the Selling Stockholders (collectively, the "Series
A Stockholders") includes the sum of (i) 200% times the maximum number of
shares of Common Stock into which the Series A Preferred Stock is
convertible, (ii) the number of shares of Common Stock issuable upon
exercise of certain of the Warrants, and (iii) the number of shares of
Common Stock issuable on payment of dividends on the Series A Preferred
Stock during the two-year period commencing February 27, 1998.
(4) The number of shares of Common Stock being registered for resale by the
Selling Stockholders does not include such presently indeterminate number
of additional shares of Common Stock as may from time to time become
issuable (i) upon conversion of the Series A Preferred Stock, based upon
adjustments or fluctuations in the conversion price of the Series A
Preferred Stock, (ii) upon exercise of certain Warrants, based on
adjustments in the exercise price of such Warrants, and (iii) upon payment
as dividends on the Series A Preferred Stock beyond February 27, 2000.
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<PAGE> 16
Certain Selling Stockholders have agreed to restrict their ability to
convert the Series A Preferred Stock into Common Stock to the extent that
the number of shares of Common Stock held by such holders and their
affiliates after such conversion exceeds 4.999% of the then issued and
outstanding shares of Common Stock following such conversion.
(5) The number of shares of Common Stock and the percentage of Common Stock
beneficially owned by each Selling Stockholder after the offering are
based on the assumption that all of the Selling Stockholders will sell all
of the Shares registered for sale hereby. See "Plan of Distribution."
(6) Consists of 236,452 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, 2,365 shares of Common Stock issuable as
dividends on the Series A Preferred Stock and 62,500 shares of Common
Stock issuable upon exercise of a Warrant.
(7) Consists of 83,231 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, 833 shares of Common Stock issuable as
dividends on the Series A Preferred Stock and 21,875 shares of Common
Stock issuable upon exercise of a Warrant.
(8) Consists of 153,221 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, 1,533 shares of Common Stock issuable as
dividends on the Series A Preferred Stock and 40,625 shares of Common
Stock issuable upon exercise of a Warrant.
(9) Consists of 22,700 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, 227 shares of Common Stock issuable as
dividends on the Series A Preferred Stock and 6,000 shares of Common
Stock issuable upon exercise of a Warrant.
(10) Consists of 71,882 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, 719 shares of Common Stock issuable as
dividends on the Series A Preferred Stock and 19,000 shares of Common
Stock issuable upon exercise of a Warrant.
(11) Includes 62,424 shares of Common Stock issuable upon conversion of Series
A Preferred Stock (which shares were issued on March 24, 1998 but which,
for purposes of this calculation, are assumed to have been outstanding as
of February 28, 1998), 625 shares of Common Stock issuable as dividends on
the Series A Preferred Stock and 16,666 shares issuable upon exercise of a
Warrant. Except in certain specified circumstances, Incyte cannot convert
its Series A Preferred Stock or exercise its Warrants if the number of
shares of Common Stock held by it after such conversion and/or exercise
exceeds 9.95% of the then issued and outstanding shares of Common Stock
following such conversion and/or exercise. Pursuant to an agreement with
Incyte, the Company and Incyte have formed a collaboration in clinical
genomics. Additionally, the Company has issued to Incyte a warrant
to purchase up to an aggregate of ten (10%) percent of the Company's Common
Stock issued and outstanding on the date of such warrant's exercise. See
"Description of Capital Stock-Common Stock Purchase Warrants."
(12) Consists of 94,118 shares issuable upon exercise of a Warrant. Gaines,
Berland Inc. served as the underwriter in connection with the Company's
initial public offering.
The Shares registered for sale hereby were acquired by certain of the
Selling Stockholders from the Company through a private placement of securities
consummated in February 1998 and March 1998 resulting in aggregate gross
proceeds of approximately $3.33 million, which proceeds were to be used for
general corporate purposes. The Company has agreed to bear certain expenses in
connection with the registration of the Shares.
The Company has agreed to prepare and file such amendments and supplements
to the Registration Statement as may be necessary to keep this Registration
Statement continuously effective until the earlier of two years after the date
of effectiveness of this Registration Statement or until all of the Shares have
been sold pursuant to the terms hereof or may be sold without volume
restrictions pursuant to Rule 144 promulgated under the Securities Act.
-15-
<PAGE> 17
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock, $0.01 par value, and 2,000,000 shares of Preferred Stock,
$0.01 par value.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the Company's stockholders. The holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to any prior
distribution rights of Preferred Stock, if any, then outstanding. The Common
Stock has no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to the Common
Stock. The rights, preferences and privileges of the holders of Common Stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of the Series A Preferred Stock and any series of Preferred Stock that
the Company may designate in the future.
As of September 30, 1997, there were 7,869,688 shares of Common Stock
issued and outstanding. Based upon the number of shares outstanding as of that
date, and assuming (i) the conversion of the Series A Preferred Stock into
Common Stock, and (ii) the exercise of the Warrants, there would have been
8,687,551 shares of Common Stock outstanding as of that date. The foregoing
assumes that outstanding options to purchase Common Stock as of September 30,
1997 have not been exercised, that a convertible note outstanding as of
September 30, 1997 has not been converted and that the Company's other
outstanding warrants as of September 30, 1997 have not been exercised. See
"Selling Stockholders" for the derivation of the assumed conversion price of the
Series A Preferred Stock.
PREFERRED STOCK
The Company's Certificate of Incorporation grants the Board of Directors
the authority to issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders.
On February 27, 1998, the Company, entered into the Stock Purchase
Agreement with certain of the Selling Stockholders. Pursuant to the Stock
Purchase Agreement, such Selling Stockholders purchased a total of Three
Hundred Thirty Three (333) shares of the Series A Preferred Stock from the
Company for Three Million Three Hundred Thirty Thousand Dollars ($3,330,000).
The holders of the Series A Preferred Stock may convert their shares at
any time into shares of the Company's Common Stock, at a conversion price per
share equal to the lesser of (i) $7.5625 or (ii) a percentage (ranging from 97%
to 85% depending upon the timing of such conversion) of the average of five (5)
closing bid prices of the Common Stock over a thirty (30) trading day period
immediately preceding the time of such conversion. In addition, at any time on
or after February 27, 2000, the Company may require that the Series A Preferred
Stock be converted into Common Stock if, among other things, the closing bid
prices of the Common Stock for at least twenty (20) consecutive trading days
immediately preceding such conversion shall have been at least $11.34375 per
share. Except in certain specified circumstances, Incyte cannot convert its
Series A Preferred Stock or its Warrants if the number of shares of Common
Stock held by it after such conversion and/or exercise exceeds 9.95% of the
then issued and outstanding shares of Common Stock following such conversion
and/or exercise. Further, in certain limited circumstances, the holders of the
Series A Preferred Stock can require that the Company redeem their respective
shares of Series A Preferred Stock.
Dividends in the amount of six percent (6%) per annum will be due
quarterly on the shares of Series A Preferred Stock. The Company may pay such
dividends either in cash or through the issuance of shares of Common Stock. If
dividends are paid in shares of Common Stock, the number of shares of Common
Stock payable to each holder shall be equal to the cash amount of such dividend
payable to such holder on such dividend payment date divided by the closing bid
price of the Common Stock on the trading day immediately prior to the Company's
dividend payment notice.
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<PAGE> 18
COMMON STOCK PURCHASE WARRANTS
Pursuant to the Stock Purchase Agreement, the purchasers of Series A
Preferred Stock received warrants to purchase an aggregate of One Hundred
Sixty-Six Thousand Six Hundred Sixty-Six (166,666) shares of the Company's
Common Stock at an exercise price of $8.54 per share. Such warrants expire on
February 27, 2001 and contain anti-dilution provisions providing for
adjustments of the exercise price and the number of shares underlying the
warrants upon the occurrence of certain events, including, without limitation,
any recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. Except in certain specified circumstances
Incyte cannot convert its Series A Preferred Stock or exercise its Warrants
if the number of shares of Common Stock held by it after such conversion and/or
exercise exceeds 9.95% of the then issued and outstanding shares of Common
Stock following such conversion and/or exercise.
The Company has warrants outstanding to purchase an aggregate of 133,500
shares of Common Stock. The warrants are exercisable at $6.90 per share for a
period of three years ending on September 27, 1999. The warrants contain
anti-dilution provisions providing for adjustments of the exercise price and
the number of shares underlying the warrants upon the occurrence of certain
events, including any recapitalization, reclassification, stock dividend, stock
split, stock combination or similar transaction.
In connection with that certain License, Services and Marketing
Agreement, dated February 25, 1997 between the Company and Incyte (the "Incyte
License Agreement") the Company issued Incyte a warrant to purchase up to an
aggregate of ten percent (10%) of the Company's Common Stock issued and
outstanding on the date of such warrant's exercise (the "Warrant Shares"). The
warrant is exercisable until February 25, 2000 at an exercise price per share
equal to the greater of one hundred-ten percent (110%) of the fair market value
per share of Common Stock on the trading day prior to the date of exercise and
(i) Nine Dollars ($9.00) per share (if the warrant is exercised after February
25, 1998 but on or prior to February 25, 1999), or (ii) Thirteen Dollars and
Fifty Cents ($13.50) per share (if the warrant is exercised after February 25,
1999 but on or prior to February 25, 2000). Notwithstanding the foregoing,
Incyte has the option to fix the exercise price per share during each of the
aforementioned periods; provided, however, that in no event shall the exercise
price per share during each of the aforementioned periods be less than Nine
Dollars ($9.00) per share and Thirteen Dollars and Fifty Cents ($13.50) per
share, respectively.
CONVERTIBLE NOTE
The Company has a note outstanding, in the principal amount of $715,751,
which is convertible at the option of the holder into 35,787 shares of Common
Stock at a conversion price of $20 per share. The note contains anti-dilution
provisions providing for adjustments of the conversion price upon the
occurrence of certain events, including any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction.
REGISTRATION RIGHTS
In connection with the purchase of the Series A Preferred Stock, the
Company and certain Selling Stockholders entered into a Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Company has
agreed to use commercially reasonable efforts to file with the Securities and
Exchange Commission this Registration Statement on Form S-3 covering the resale
by the such Selling Stockholders of shares of Common Stock issuable (i) upon
conversion of the Series A Preferred Stock, (ii) upon exercise of the Warrants,
and (iii) as dividends on the Series A Preferred Stock.
In connection with the Incyte License Agreement, the Company and Incyte
entered into an Investor's Rights Agreement. Incyte was granted certain
registration and other stockholder rights with respect to the shares of Common
Stock issued or issuable to Incyte.
In connection with the issuance of certain warrants, the holders of the
Common Stock issuable upon exercise of the warrants have certain registration
rights. Under the terms of the agreement between the Company and the holders
of such registrable securities, if the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include shares
of such Common Stock therein. The stockholders benefiting from these rights
may also require the Company to file a registration statement under the
Securities Act at its expense with respect to their shares of Common Stock, and
the Company is required to use its best efforts to effect such registration.
The right to notice and inclusion in any registration statement filed by the
Company is effective for seven years after September 27, 1994. The right to
demand the registration of the Common Stock issuable upon exercise of the
warrants extends from September 27, 1996 to September 27, 1999.
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<PAGE> 19
PLAN OF DISTRIBUTION
The Shares offered hereby are being offered directly by the Selling
Stockholders. The Company will not receive any of the proceeds from
the sale of the Shares by the Selling Stockholders. The sale of the Shares may
be effected by the Selling Stockholders from time to time in transactions on
the American Stock Exchange, in negotiated transactions, or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to prevailing market prices
or at negotiated prices. The Shares may be sold by the Selling Stockholders by
one or more of the following methods, including without limitation: (a) block
trades in which the broker or dealer so engaged will attempt to sell the Shares
as agent buy may position and resell a portion of the block as principal to
facilitate the transaction, (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus, (c) an exchange distribution in accordance with the rules of such
exchange, (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers, (e) privately negotiated transactions, and (f) a
combination of any such methods of sale. In addition, from time to time, the
Selling Stockholders may sell or deliver the Shares to settle positions taken
by the Selling Stockholders in the Company's securities. In effecting sales,
brokers and dealers engaged by the Selling Stockholders may arrange for other
brokers of dealers to participate. Brokers or dealers may receive commissions
or discounts from the Selling Stockholders (or, if any such broker-dealer acts
as agent for the purchaser of such shares, from such purchaser) in amounts to
be negotiated which are not expected to exceed those customary in the types of
transactions involved. Broker-dealers may agree with the Selling Stockholders
to sell a specified number of such Shares at a stipulated price per share, and,
to the extent such broker-dealer is unable to do so acting as agent for a
Selling Stockholder, to purchase as principal any unsold Shares at the price
required to fulfill the broker-dealer commitment to the Selling Stockholders.
Broker-dealers who acquire Shares as principal may thereafter resell such
Shares from time to time in transactions (which may involve block transactions
and sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market or otherwise at prices
and on terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such Shares
commissions as described above. The Selling Stockholders may transfer their
Shares under certain circumstances to other persons who may, in turn, resell
Shares in the manner described above. In addition, the Selling Stockholders
may pledge or make gifts of their Shares and such Shares may also be sold by
the pledgees or transferees.
At the time a particular offer of Shares is made, to the extent required,
a Prospectus Supplement will be distributed which will set forth the number of
Shares being offered and the terms of the offering including the name or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from Selling Stockholders, any discounts,
commissions and other items constituting compensation from the Selling
Stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. 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 by the Company and the Selling
Stockholders.
The Selling Stockholders may also transfer their Shares pursuant to Rule
144, whether or not the Registration Statement, of which this Prospectus forms
a part, is effective at the time of any such transfer.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the
Shares may be deemed to be "underwriters" within the meaning of Section 2(11)
of the Securities Act, and any commissions received by them and any profit on
the resale of the Selling Stockholder Shares purchased by them may be deemed to
be underwriting commissions or discounts under the Securities Act. The Company
has agreed to indemnify the Selling Stockholders and their affiliates against
certain liabilities, including liabilities under the Securities Act. The
Selling Stockholders have agreed to indemnify the Company and its affiliates
against certain liabilities, including liabilities under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the Shares, including reasonable fees and disbursements (not to
exceed an aggregate of $10,000) of counsel to the Selling Stockholders. The
Company has agreed to indemnify the Selling Stockholders against certain losses,
claims, damages and liabilities, including liabilities under the Securities Act.
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<PAGE> 20
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 the Common Stock of the Company for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Stockholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M which
provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholders.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, New York, New York.
EXPERTS
The audited financial statements of the Company incorporated in this
Prospectus by reference in this Prospectus and included elsewhere in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
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<PAGE> 21
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, by any Selling Stockholder or by any other person. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy the Shares to any person
or by anyone in any jurisdiction in which such offer or solicitation may not
lawfully be made.
------------------
Table of Contents
<TABLE>
<S> <C>
Available Information................................ 2
Incorporation of Certain Information by Reference.... 2
The Company.......................................... 3
Risk Factors......................................... 3
Use of Proceeds...................................... 13
Dilution............................................. 13
Selling Stockholders................................. 14
Description of Capital Stock......................... 16
Plan of Distribution................................. 18
Legal Matters........................................ 19
Experts.............................................. 19
</TABLE>
1,596,189
ONCORMED, INC.
Common Stock
------------------
PROSPECTUS
------------------
APRIL 1, 1998
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the expenses to be incurred
by the Company in connection with the issuance and distribution of the
securities being registered:
<TABLE>
Amount to
Be Paid
<S> <C>
Registration Fee - SEC ................................ $ 3,120
American Stock Exchange Listing Fee ................... 17,500
Legal Fees and Expenses ............................... 90,000
Accounting Fees and Expenses .......................... 5,000
Miscellaneous ......................................... 300,000
-------
Total ................................................. $415,620
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 10 of the Registrant's Certificate of Incorporation, as amended,
provides that the Registrant shall, to the full extent permitted by law,
indemnify all directors, officers, employees or agents of the Registrant.
Section 145 of the General Corporation Law of Delaware permits indemnification
of directors, officers, employees, and agents of a corporation under certain
conditions and subject to certain limitations. The Section provides generally
that such persons may be indemnified unless they engage in a material act or
omission in bad faith or that is the result of active and deliberate
dishonesty, they actually receive an improper personal benefit in money,
property or services, or, in the case of a criminal proceeding, they have
reasonable cause to believe that the act or omission is unlawful. Provision is
made for reimbursement of reasonable expenses so long as it is finally
determined that the standards of conduct have been met. The Selling
Stockholders have agreed to indemnify officers, directors and controlling
persons of the Registrant against certain liabilities, including liabilities
under the Securities Act under certain circumstances.
ITEM 16. EXHIBITS
The following is a list of Exhibits filed as part of the Registration
Statement:
<TABLE>
<S> <C>
3.1** Certificate of Incorporation of the Company.
3.2* Bylaws of the Company.
3.3+ Certificate of Designation, Preferences and Rights of 6% Series A
Convertible Preferred Stock of Oncormed, Inc.
4.1** Specimen certificate for shares of the Company's Common Stock.
4.2+ See Exhibits 3.1, 3.2 and 3.3 for provisions of the Certificate
of Incorporation and Bylaws of the Company defining rights of holders
of capital stock of the Company.
4.3** Form of Underwriter's Warrant Certificate.
4.4 (Reserved)
4.5+ Form of Common Stock Purchase Warrant issued by the Company to
Purchasers of 6% Series A Convertible Preferred Stock.
5.1+ Opinion and consent of Brobeck, Phleger and Harrison LLP.
10.1** Sublease, dated June 1994, between the Company and Oncor, Inc.
10.2** Lease, dated December 1, 1993, between Scoular Properties, Inc., and
the Company, as amended.
</TABLE>
II-1
<PAGE> 23
<TABLE>
<S> <C>
10.3** Asset Purchase Agreement and Plan of Reorganization, dated September
1, 1993, among the Company, Genetic Systems Management, Inc., Henry T.
Lynch, Ralph Rosenberg, Steven Evans and Jerome Block.
10.4** Form of Subscription Agreement, with a schedule of substantially
identical documents.
10.5** Form of Registration Rights Agreement, with a schedule of
substantially identical documents.
10.6** License Agreement, dated September 1, 1993, among Creighton
University, The Hereditary Cancer Institute and the Company.
10.7** Services Agreement, dated September 1, 1993, between the Company and
The Hereditary Cancer Institute.
10.8** Stock Purchase Agreement, dated September 15, 1993, between the
Company and Morgan Guarantee Trust Company of New York and Socrates G.
Pappajohn, as Trustees.
10.9** Technology License Agreement, dated as of July 12, 1993, between Oncor and the Company.
10.10** Restated Technology License Agreement, dated as of June 6, 1994, between Oncor and the Company.
10.11** Consulting Agreement, dated March 1, 1994, with David Sidransky.
10.12** Restated 1993 Stock Option Plan.
10.13** Note, dated June 6, 1994, issued by the Company to Oncor.
10.14** Clinical Study Agreement, dated May 31, 1994, between the Company
and The University of Texas, MD Anderson Cancer Center.
10.15** Research and License Agreement, dated February 1, 1994, between
Oncor, Inc. and The General Hospital Corporation.
10.16** License Agreement, dated March 9, 1994, between The Johns Hopkins
University and the Company.
10.17** License Agreement, dated October 27, 1993, between The Johns
Hopkins University and the Company.
10.18** License Agreement, dated November 1, 1993, among Oncor, Inc.,
Institut Suisse De Recherches Experimentales Sur Le Cancer and The
General Hospital Corporation.
10.19** Collaborative Research Agreement, dated October 20, 1992, between
Oncor, Inc. and The Johns Hopkins University.
10.20** Agreement between Roche Molecular Systems, Inc. and the Company.
10.21** Licensing Agreement and related correspondence between Genetic
Systems Management and Hoag Cancer Center.
10.22** Licensing Agreement and related correspondence between Genetic
Systems Management and Harris Methodist Northwest.
10.23** Clinical Study Agreement, dated August 1, 1994, between the Company
and Sloan-Kettering Institute of Cancer Research.
10.24** Licensing Agreement, dated June 1, 1994, among the Company, the
Dana-Farber Cancer Institute, Inc., The State of Oregon, the
University of Vermont and Yale University.
10.25* Stock Option Agreement, dated February 6, 1995, between the Company
and Leslie Alexandre.
10.26* Services Agreement, dated February 16, 1995, between the Company and
Preferred Oncology Networks of America, Inc.
10.27* Lease, dated December 2, 1994, between Saul Holdings Limited
Partnership and Oncor.
10.28* Assignment of Lease, dated March 15, 1995, between Oncor, the
Company and Saul Holdings Limited Partnership.
10.29*** Sponsored Research and License Agreement among the Company, the
Hereditary Cancer Institute and Creighton University.
10.30*** Services Agreement among the Company, the Hereditary Cancer
Institute and Creighton University.
</TABLE>
II-2
<PAGE> 24
<TABLE>
<S> <C>
10.31*** Services Agreement between the Company and Oncor.
10.32**** Correspondence, dated September 26, 1995, from the Company to Memorial Sloan-Kettering Cancer Center.
10.33**** Correspondence, dated September 7, 1995, from the Registrant to UT MD Anderson Cancer Center.
10.34***** Term Sheet, dated February 24, 1997 between the Company and Oncor.
10.35***** License, Services and Marketing Agreement, dated February 25,
1997 between the Company and Incyte Pharmaceuticals, Inc.
10.36****** License Agreement, dated July 7, 1997 between the Company,
Cancer Research Campaign Technology Limited and Duke University.
10.37+ Convertible Preferred Stock Purchase Agreement, dated February
27, 1998, by and between the Company and Southbrook International
Investments, Ltd., Westover Investments L.P., Montrose Investments,
Ltd., Brown Simpson Strategic Growth Fund, L.P., Brown Simpson
Strategic Growth Fund, Ltd., and Incyte Pharmaceuticals, Inc.
10.38+ Registration Rights Agreement, dated February 27, 1998 by and
between Oncormed, Inc. and Southbrook International Investments, Ltd.,
Westover Investments L.P., Montrose Investments, Ltd., Brown Simpson
Strategic Growth Fund, L.P., Brown Simpson Strategic Growth Fund,
Ltd., and Incyte Pharmaceuticals, Inc.
10.39+ Amendment No. 1 to the Convertible Preferred Stock Purchase
Agreement, dated March 23, 1998, by and between the Company and Southbrook
International Investments, Ltd., Westover Investments L.P., Montrose
Investments, Ltd., Brown Simpson Strategic Growth Fund, L.P., Brown Simpson
Stategic Growth Fund, Ltd., and Incyte Pharmaceuticals, Inc.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2+ Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit
5.2).
24.+ Powers of Attorney
</TABLE>
- ---------------
*Incorporated by reference to the Exhibits filed with the Company's Form
10-K for the year ended December 31, 1994.
**Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1, File No.33-80758.
***Incorporated by reference to the Exhibits filed with the Company's Form
10-Q for the period ended June 30, 1995.
****Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1, File No.33-98826.
*****Incorporated by reference to the Exhibits filed with the Company's
Form 10-Q for the period ended, March 31, 1997.
******Incorporated by reference to the Exhibits filed with the Company's
form 10-Q for the period ended September 30, 1997.
+ Previously filed.
II-3
<PAGE> 25
ITEM 17. UNDERTAKINGS
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
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of 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 Act and will
be governed by the final adjudication of such issue.
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 in volume and
price represent no more than a 20 percent 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.
(2) That, for the purpose of determining any liability under the 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended (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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained
II-4
<PAGE> 26
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Gaithersburg, State of
Maryland, on April 1, 1998.
ONCORMED, INC.
By: /s/ Timothy J. Triche
---------------------------------------------
Timothy J. Triche, Chairman of the Board of
Directors and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed by the
following persons in the capacities indicated on April 1, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Timothy J. Triche
- ---------------------------
Timothy J. Triche Chairman of the Board of Directors and Chief
Executive Officer (Principal Executive
*
- ---------------------------
L. Robert Johnston, Jr. Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
*
- ---------------------------
Douglas Dolginow President, Chief Operating Officer and Director
*
- ---------------------------
John W. Colloton Director
*
- ---------------------------
John Pappajohn Director
*
- ---------------------------
Wayne C. Patterson Director
*
- ---------------------------
Stephen Turner Director
* /s/ Timothy J. Triche
- ---------------------------
Timothy J. Triche
Attorney-in-Fact
</TABLE>
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<S> <C>
3.1** Certificate of Incorporation of the Company.
3.2* Bylaws of the Company.
3.3+ Certificate of Designation, Preferences and Rights of 6% Series A Convertible Preferred Stock of Oncormed, Inc.
4.1** Specimen certificate for shares of the Company's Common Stock.
4.2+ See Exhibits 3.1, 3.2 and 3.3 for provisions of the Certificate of
Incorporation and Bylaws of the Company defining rights of holders of
capital stock of the Company.
4.3** Form of Underwriter's Warrant Certificate.
4.4 (Reserved)
4.5+ Form of Common Stock Purchase Warrant issued by the Company to
Purchasers of 6% Series A Convertible Preferred Stock.
5.1+ Opinion and consent of Brobeck, Phleger and Harrison LLP.
10.1** Sublease, dated June 1994, between the Company and Oncor, Inc.
10.2** Lease, dated December 1, 1993, between Scoular Properties, Inc., and
the Company, as amended.
10.3** Asset Purchase Agreement and Plan of Reorganization, dated September 1,
1993, among the Company, Genetic Systems Management, Inc., Henry T.
Lynch, Ralph Rosenberg, Steven Evans and Jerome Block.
10.4** Form of Subscription Agreement, with a schedule of substantially
identical documents.
10.5** Form of Registration Rights Agreement, with a schedule of substantially
identical documents.
10.6** License Agreement, dated September 1, 1993, among Creighton University,
The Hereditary Cancer Institute and the Company.
10.7** Services Agreement, dated September 1, 1993, between the Company and
The Hereditary Cancer Institute.
10.8** Stock Purchase Agreement, dated September 15, 1993, between the Company
and Morgan Guarantee Trust Company of New York and Socrates G. Pappajohn,
as Trustees.
10.9** Technology License Agreement, dated as of July 12, 1993, between Oncor and the Company.
10.10** Restated Technology License Agreement, dated as of June 6, 1994, between Oncor and the Company.
10.11** Consulting Agreement, dated March 1, 1994, with David Sidransky.
10.12** Restated 1993 Stock Option Plan.
10.13** Note, dated June 6, 1994, issued by the Company to Oncor.
10.14** Clinical Study Agreement, dated May 31, 1994, between the Company and
The University of Texas, MD Anderson Cancer Center.
10.15** Research and License Agreement, dated February 1, 1994, between Oncor, Inc. and The General Hospital Corporation.
10.16** License Agreement, dated March 9, 1994, between The Johns Hopkins University and the Company.
10.17** License Agreement, dated October 27, 1993, between The Johns Hopkins University and the Company.
10.18** License Agreement, dated November 1, 1993, among Oncor, Inc., Institut
Suisse De Recherches Experimentales Sur Le Cancer and The General
Hospital Corporation.
10.19** Collaborative Research Agreement, dated October 20, 1992, between Oncor, Inc. and The Johns Hopkins University.
10.20** Agreement between Roche Molecular Systems, Inc. and the Company.
10.21** Licensing Agreement and related correspondence between Genetic Systems Management and Hoag Cancer Center.
10.22** Licensing Agreement and related correspondence between Genetic Systems
Management and Harris Methodist Northwest.
10.23** Clinical Study Agreement, dated August 1, 1994, between the Company
and Sloan-Kettering Institute of Cancer Research.
10.24** Licensing Agreement, dated June 1, 1994, among the Company, the
Dana-Farber Cancer Institute, Inc., The State of Oregon, the University
of Vermont and Yale University.
10.25* Stock Option Agreement, dated February 6, 1995, between the Company and
Leslie Alexandre.
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
10.26* Services Agreement, dated February 16, 1995, between the Company and
Preferred Oncology Networks of America, Inc.
10.27* Lease, dated December 2, 1994, between Saul Holdings
Limited Partnership and Oncor.
10.28* Assignment of Lease, dated March 15, 1995, between Oncor, the
Company and Saul Holdings Limited Partnership.
10.29*** Sponsored Research and License Agreement among the Company, the
Hereditary Cancer Institute and Creighton University.
10.30*** Services Agreement among the Company, the Hereditary Cancer Institute and Creighton University.
10.31*** Services Agreement between the Company and Oncor.
10.32**** Correspondence, dated September 26, 1995, from the Company to Memorial Sloan-Kettering Cancer Center.
10.33**** Correspondence, dated September 7, 1995, from the Registrant to UT MD Anderson Cancer Center.
10.34***** Term Sheet, dated February 24, 1997 between the Company and Oncor.
10.35***** License, Services and Marketing Agreement, dated February 25, 1997
between the Company and Incyte Pharmaceuticals, Inc.
10.36****** License Agreement, dated July 7, 1997 between the Company, Cancer
Research Campaign Technology Limited and Duke University.
10.37+ Convertible Preferred Stock Purchase Agreement, dated February 27,
1998, by and between the Company and Southbrook International
Investments, Ltd., Westover Investments L.P., Montrose Investments,
Ltd., Brown Simpson Strategic Growth Fund, L.P., Brown Simpson
Strategic Growth Fund, Ltd., and Incyte Pharmaceuticals, Inc.
10.38+ Registration Rights Agreement, dated February 27, 1998 by and between
Oncormed, Inc. and Southbrook International Investments, Ltd.,
Westover Investments L.P., Montrose Investments, Ltd., Brown
Simpson Strategic Growth Fund, L.P., Brown Simpson Strategic Growth
Fund, Ltd., and Incyte Pharmaceuticals, Inc.
10.39+ Amendment No. 1 to the Convertible Preferred Stock Purchase
Agreement, dated March 23, 1998, by and between the Company and Southbrook
International Investments, Ltd., Westover Investments L.P., Montrose
Investments, Ltd., Brown Simpson Strategic Growth Fund, L.P., Brown Simpson
Stategic Growth Fund, Ltd., and Incyte Pharmaceuticals, Inc.
23.1 Consent of Arthur Andersen LLP, independent public accountants.
23.2+ Consent of Brobeck, Phleger & Harrison LLP. (included in
Exhibit 5.2).
24.+ Powers of Attorney
</TABLE>
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*Incorporated by reference to the Exhibits filed with the Company's Form
10-K for the year ended December 31, 1994.
**Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1, File No.33-80758.
***Incorporated by reference to the Exhibits filed with the Company's Form
10-Q for the period ended June 30, 1995.
****Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-1, File No.33-98826.
*****Incorporated by reference to the Exhibits filed with the Company's
Form 10-Q for the period ended, March 31, 1997.
******Incorporated by reference to the Exhibits filed with the Company's
form 10-Q for the period ended September 30, 1997.
+ Previously Filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 20, 1998
included in OncorMed, Inc.'s Form 10-K for the year ended December 31, 1997 and
to all references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Washington, D.C.
March 30, 1998
