<PAGE> 1
As filed with the Securities and Exchange Commission on December 18, 1997
Registration No. 333
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INKINE PHARMACEUTICAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW YORK 2834 13-3754005
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification No.) Identification No.)
</TABLE>
425 PARK AVENUE, NEW YORK, NY 10022, (212) 319-8300
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive office)
LEONARD S. JACOB, M.D., PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INKINE PHARMACEUTICAL COMPANY, INC.
425 PARK AVENUE, NEW YORK, NY 10022, (212) 319-8300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications to:
CHARLES C. ZALL, ESQUIRE, SAUL, EWING, REMICK & SAUL LLP
1500 MARKET STREET, 38TH FLOOR, PHILADELPHIA,
PENNSYLVANIA 19102-2186, (215) 972-7701
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement. If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
TITLE OF SECURITIES TO BE REGISTERED AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
SHARE PRICE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, Par Value $.0001 Per Share 21,789,672(1) $1.2188(2) $26,557,252.23(2) $8,047.65(3)
===============================================================================================================================
</TABLE>
(1) Includes 2,591,242 shares of Common Stock that may be acquired by certain
Selling Stockholders named herein upon the exercise of outstanding warrants.
(2) Estimated solely for the purpose of calculating the registration fee, based
on the average of the high and low sale price for the Common Stock as reported
on the Nasdaq SmallCap Market on December 16, 1997, in accordance with Rule
457(c) under the Securities Act of 1933.
(3) Represents 1/33rd of 1% of the proposed maximum aggregate offering price.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
PROSPECTUS
21,789,672 SHARES
INKINE PHARMACEUTICAL COMPANY, INC.
COMMON STOCK
This Prospectus relates to up to (i) 19,198,430 shares (the "Original
Shares") of common stock, par value $0.0001 per share ("Common Stock"), of
InKine Pharmaceutical Company, Inc., a New York corporation ("InKine" or the
"Company"), which are held by the selling stockholders named herein under the
caption "Selling Stockholders" (collectively, the "Selling Stockholders") and
(ii) up to 2,591,242 shares of Common Stock (the "Warrant Shares," and together
with the Original Shares, the "Shares"), which may be acquired from time to time
by certain of the Selling Stockholders upon exercise of warrants issued by the
Company (the "Warrants"). The Original Shares may be offered from time to time
by the selling Stockholders and the Warrant shares may be offered from time to
time by certain of the Selling Stockholders following exercise of their
Warrants.
The Selling Stockholders may from time to time sell all or part of the
Shares offered hereby in ordinary brokers' transactions on the SmallCap tier of
the Nasdaq Stock Market (the "Nasdaq SmallCap Market") at prevailing market
prices, or in privately negotiated transactions at negotiated prices, or
otherwise. All expenses of registration in connection herewith are being borne
by the Company, but all selling and other expenses incurred by any Selling
Stockholder will be borne by the Selling Stockholder. The Company will not
receive any proceeds from the sale of Shares by the Selling Stockholders.
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "INKP." On December 16, 1997, the last reported sale price of the
Company's Common Stock, as reported on the Nasdaq SmallCap Market, was $1.25 per
share.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 6 TO 19 OF THIS PROSPECTUS.
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.
THE DATE OF THIS PROSPECTUS IS DECEMBER ___, 1997
<PAGE> 3
AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement
on Form S-3 (the "Registration Statement"), filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), omits certain information set forth
in the Registration Statement. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and the exhibits thereto. Copies of the Registration Statement and the exhibits
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. Statements contained in
this Prospectus concerning the provisions of documents are necessarily summaries
of such provisions and documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the
Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected without charge and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048; and Northwestern
Atrium Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661.
Copies of such material may also be obtained in person from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
the prescribed rates. The Company files certain reports and other information
electronically with the Commission. The Commission maintains a World Wide Web
site that provides access to this information at http://www.sec.gov. InKine's
Common Stock is listed and traded on the Nasdaq SmallCap Market. Reports, proxy
statements and other information filed by the Company may also be inspected at
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which provide certain information with respect
to the Company, are incorporated by reference in this Prospectus:
1. Annual Report of the Company on Form 10-KSB for the fiscal
year ended June 30, 1997;
2. Quarterly Report of the Company on Form 10-QSB for the fiscal
quarter ended September 30, 1997, as amended by Form 10-QSB/A
filed on November 19, 1997;
3. Proxy Statement of the Company, dated October 7, 1997, as
amended;
4. Current Report of the Company on Form 8-K filed on November
21, 1997, as amended by Form 8-K/A filed on December 3, 1997;
and
5. The description of the Common Stock contained in the Company's
registration statement on Form 8-A, including any amendments
or reports filed for the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of the offering shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated by reference or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that the statement is
modified or superseded by any other subsequently filed document which is
incorporated or is deemed to be incorporated by reference herein. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
-2-
<PAGE> 4
This Prospectus incorporates documents by reference that are not
presented herein or delivered herewith. The Company hereby undertakes to
provide without charge to each person, including any beneficial owner, to whom
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any and all of the documents referred to above that have been
or may be incorporated by reference into this Prospectus and deemed to be part
hereof, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference in such documents. These documents are
available upon request from Robert F. Apple, Vice President, Finance and
Administration, InKine Pharmaceutical Company, Inc., 425 Park Avenue, New York,
NY 10022, telephone (212) 319-8300.
-3-
<PAGE> 5
THE COMPANY
The Company's principal executive offices are located at 425 Park
Avenue, New York, New York 10022, and its telephone number is (212) 319-8300.
The Company changed its name on November 6, 1997 from Panax Pharmaceutical
Company Ltd. to InKine Pharmaceutical Company, Inc. and changed its Nasdaq
SmallCap Market symbol from PANX to INKP.
RECENT EVENTS
As previously reported in the Company's reports filed under the
Exchange Act, as of November 6, 1997, the Company acquired all the outstanding
capital stock of CorBec Pharmaceuticals, Inc. ("CorBec'), a privately owned,
development-stage, bio-pharmaceutical company founded in 1993 to discover and
develop drugs to treat autoimmune disease, serious infections and
asthma/allergy, and Sangen Pharmaceutical Company ("Sangen"), a privately owned,
development-stage, bio-pharmaceutical company formed in early 1997 and focused
on the development of a potential cancer treatment technology. CorBec's
technology, which consists of compounds designed to modulate the immune system,
is licensed from the University of Pennsylvania and has been developed in the
laboratory of Alan D. Schreiber, M.D., Professor of Medicine and Assistant Dean
for Research at the University of Pennsylvania School of Medicine (the "CorBec
Technology"). The most advanced product within this family of compounds,
CBP-1011, is in Phase III clinical trials for the treatment of idiopathic
thrombocytopenic purpura ("ITP"). Sangen's technology consists of specific
peptide molecules and a polyclonal antibody developed by Dr. George Tuszynski,
Professor of Surgery, Medicine and Pathology at Allegheny University of the
Health Sciences, based on a specific thrombospondin receptor, which Dr.
Tuszyuski discovered (the "Thrombospondin Technology"). In addition, in early
1997, the Company acquired an exclusive, worldwide license to a tablet form of
the aqueous sodium phosphate purgative formula used to clean the colon for any
medical purpose and for use as a laxative (the "Purgative Product"), which is in
clinical development for colonoscopies. The Company licensed this technology
from a partnership of physicians ("ALW Partnership"), including Craig Aronchik,
M.D., an attending gastroenterologist and Head of the Endoscopy Unit at
Pennsylvania Hospital in Philadelphia and an Associate Professor of Medicine at
Jefferson Medical College. As of November 6, 1997, certain rights of ALW
Partnership to cancel this license lapsed. The acquisitions of CorBec, Sangen
and the Purgative Product license are referred to collectively herein as the
"Acquisitions."
On November 18, 1997, the Company completed the third and final closing
of a private placement (pursuant to Section 4(a) of, and Rule 506 of Regulation
D promulgated under, the Securities Act of 1933) of 17 million shares of common
stock at a purchase price of $1 per share for gross proceeds of $17 million and
net proceeds (after deducting estimated expenses of $1.1 million) of $15.9
million (the "Private Placement"). The initial closing of the Private Placement
occurred as of November 6, 1997 (for 15,613,982 shares of Common Stock) (the
"Initial Closing"), and a second closing occurred on November 14, 1997 (for
1,346,018 shares of common stock). The Acquisitions were consummated in
connection with the Initial Closing.
The Shares offered hereby consist of (i) 17,000,000 shares purchased by
investors in the Private Placement (the "Private Placement Shares"), (ii)
1,448,430 shares in the aggregate (the "Commission Shares") issued in lieu of
certain cash commissions and fees to Aurora Capital Corp., Sunrise Securities
Corp., and Shipley-Raidy Capital Partners LP (collectively, the "Placement
Agents"), the placement agents for the Private Placement, (iii) 2,044,843 shares
(the "Warrant Shares") underlying warrants (to purchase shares of Common Stock
for $1 per share) issued to the
-4-
<PAGE> 6
Placement Agents upon consummation of the Private Placement (the "Placement
Agent Warrants"), (iv) 750,000 shares (the "Acquisition Shares") issued to the
former stockholders of CorBec as partial consideration for the acquisition of
CorBec, plus (v) 546,399 shares (the "Financial Consultant Warrant Shares")
underlying warrants (to purchase shares of common stock for approximately $.60
per share) issued to an investment banking firm in October 1995 in connection
with the execution of an agreement for financial and business services (the
"Financial Consultant Warrants").
-5-
<PAGE> 7
RISK FACTORS
This Prospectus contains and incorporates by reference, in addition to
historical information, statements by the Company with regard to its
expectations as to financial results and other aspects of its business that
involve risks and uncertainties and may constitute forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements reflect management's current views and are based on certain
assumptions. Actual results could differ materially from those currently
anticipated as a result of a number of factors, including, but not limited to,
the risks and uncertainties discussed below. In addition to the other
information in this Prospectus, prospective investors should carefully consider
the following risk factors in evaluating the Company and its business before
purchasing shares of the Common Stock offered hereby.
EARLY STAGE OF DEVELOPMENT; UNCERTAINTY OF PRODUCT DEVELOPMENT;
TECHNOLOGICAL UNCERTAINTY. InKine has not completed the development of any
product to date. Accordingly, InKine has not begun to market products or
generate revenues from the commercialization of any such products. It will be
several years, if ever, before the Company may realize significant revenues from
product sales or royalties. The Company's technologies and products under
development require significant, time-consuming and costly research,
development, preclinical studies, clinical testing, regulatory approval and
significant additional investment prior to their commercialization, which may
never occur. There can be no assurance that the Company's research and
development programs will be successful, that its products will exhibit the
expected biological results in humans, prove to be safe and efficacious, obtain
the required regulatory approvals, demonstrate substantial therapeutic or
diagnostic benefit, be commercialized on a timely basis, experience no design or
manufacturing problems, be manufactured on a large scale, be economical to
market, or that the Company or its collaborators will be successful in obtaining
market acceptance of any of the Company's products or generate sufficient
revenue to support ongoing research and development programs. To achieve its
goals the Company will seek to effect strategic alliances or collaborative
arrangements on commercially reasonable terms. No assurance can be given that
such arrangements will be available, will be successful, or that the parties
with which the Company will establish such arrangements will perform their
obligations thereunder. The Company or its collaborators may encounter problems
and delays relating to research and development, regulatory approval,
manufacturing, marketing and commercialization and obsolescence of product
candidates. The failure by the Company to successfully address such problems and
delays would have a material adverse effect on the Company's business, financial
condition and results of operations.
ACCUMULATED DEFICIT; CONTINUING LOSSES. InKine has incurred net
operating losses since inception of its operations (July 1, 1993) and as of
September 30, 1997, had an accumulated deficit of approximately $4.3 million,
which has increased to date. InKine anticipates incurring additional losses over
at least the next several years and such losses are expected to increase and be
substantial as the Company expands its research and development activities. To
become profitable, the Company, alone or working in collaboration with others,
must successfully develop and commercialize its technologies and products,
conduct preclinical studies and clinical trials, obtain required regulatory
approvals and successfully manufacture, introduce and market such technologies
and related products. The amount of time required to attain profitability is
highly uncertain, and there can be no assurance as to the ability of the Company
to achieve profitability on a sustained basis, if at all.
The Acquisitions were treated, for accounting purposes, as "purchases,"
and the purchase price thereof, which includes cash and the value of shares of
Common Stock and options issued as consideration therefor, were substantially in
excess of the fair value of the underlying tangible assets.
-6-
<PAGE> 8
Such excess costs over the estimated fair value of the net assets acquired is
treated as purchased research and development and charged to operations at the
time of the acquisitions. As a result, there will be a material increase in the
Company's net operating loss in the current fiscal year in connection with the
Acquisitions. In addition, as of the Initial Closing the Company granted, or
committed to grant, options to consultants to acquire an aggregate of 1,595,000
shares of Common Stock, the exercise of which with respect to 950,000 shares
will be subject to the satisfaction of product development milestones pertaining
to U.S. Food and Drug Administration ("FDA") filings and approvals and the
achievement of certain net sales targets. The Company will incur substantial
non-cash charges to earnings equal to the fair value of such options, which will
be charged to operations at the time such milestones are achieved. Increases in
the Company's net operating loss or operating losses per share could have an
adverse effect on the Company's ability to secure additional financing.
ADDITIONAL FINANCING REQUIREMENTS AND ACCESS TO CAPITAL. In order to
develop the technology acquired in the Acquisitions, the Company will require
substantial additional funds for its research and development programs,
including preclinical studies and clinical trials, to seek regulatory approval
of its products, to develop manufacturing and distribution capabilities, and to
fund the growth that is expected to occur if any of its proposed products are
approved for marketing. InKine expects that its capital resources after the
consummation of Private Placement will be adequate to fund its operations
through fiscal year 2000. No assurance can be given, however, that unanticipated
events will not occur that will make the Company's capital resources,
insufficient to fund its activities through such date. In any event, the Company
expects to require substantial additional capital after such date. The Company's
future capital requirements will depend on many factors, including continued
progress in its research and development activities, progress with preclinical
studies and clinical trials, prosecution and enforcement of patent claims,
technological and market developments, the ability of the Company to establish
product development arrangements, the cost of manufacturing scale-up and
effective marketing activities and collaborative or other arrangements. In order
to obtain the substantial additional funds that the Company will require, the
Company intends to seek public or private financings, including equity or debt
financings, collaborative or other arrangements with corporate partners and
others, and other financing mechanisms. Additional equity financings may cause
further dilution to current stockholders. No assurance can be given that
additional financing will be available when needed, if at all, or on terms
acceptable to the Company. If adequate additional funds are not available, the
Company will be required to delay, scale back or eliminate all or certain of its
research or development activities and marketing efforts, or seek to license to
third parties certain products or technologies that the Company would otherwise
seek to develop itself.
PATENTS AND PROPRIETARY RIGHTS; NO ASSURANCE OF ENFORCEABILITY OR
COMPETITIVE ADVANTAGE. In general, the patent positions of companies in the
biotechnology field are highly uncertain and involve complex legal and factual
questions. The most advanced product in the family of compounds comprising the
CorBec Technology is CBP-1011. Although it is not patentable, InKine expects
this compound will receive protection based on approval for an Orphan Drug
indication and that the Company will, as a result, have an exclusive right to
commercialize the compound for that particular indication for seven years. No
assurance can be given that the compound will in fact receive such protection.
The other compounds comprising the CorBec Technology, including a second
generation series of compounds called CBP-2011, the Purgative Product and also
the Thrombospondin Technology, are the subject of patents and/or patent
applications. Although InKine believes that such patents and patent applications
will cover the Company's rights to use such technologies and product candidates
in the United States, there can be no assurance patents that have been issued,
or additional patents, if any, that will issue from pending patent applications,
will afford adequate protection against competitors or companies with
competitive product candidates or technologies. Patents on the
-7-
<PAGE> 9
Purgative Product are pending in an application filed under the Patent
Cooperation Treaty ("PCT") which designates Europe, Japan and Canada. In
addition, the Company has obtained the rights to foreign patents pending and
intends to apply for additional patents in foreign jurisdictions covering its
products and technologies. No assurance can be given that any additional foreign
patents will be issued or, if issued, that they will afford adequate protection
against foreign competitors or foreign companies with competitive product
candidates or technologies. In addition, there can be no assurance that any
domestic or foreign patents issued will not be challenged, invalidated or
circumvented, or that the scope of any claims granted thereunder will provide
meaningful proprietary protection or competitive advantages to the Company, or,
if challenged, that a court will find the patents to be valid and enforceable.
To date, there has emerged no consistent policy regarding the breadth of claims
that are properly accorded to biotechnology patents. The commercial success of
the Company will also depend upon avoiding infringement of patents issued to
competitors. InKine has not conducted an independent search to determine the
existence of any patents similar to those covering certain compounds comprising
the CorBec Technology or covering the Purgative Product or the Thrombospondin
Technology and has not received an opinion as to the viability or validity of
any of such patents.
In the United States, patent applications are maintained in secrecy
until patents issue, and publications in scientific and patent literature lag
behind actual discoveries. In the event a third party has also filed a patent
application relating to an invention claimed in a Company patent application,
the Company may be required to participate in an interference proceeding
overseen by the United States Patent and Trademark Office to determine priority
of invention, which could result in substantial uncertainties for, and cost to,
the Company, even if the eventual outcome is favorable to the Company. An
adverse outcome could subject the Company to significant liabilities to third
parties and require the Company to license disputed rights from third parties at
undetermined cost or require the Company to cease using the technology.
The Company's product candidates are still in the development stage,
and neither their formulations nor their methods of manufacture have been
finalized and thus no assurance can be given that the manufacture, use or sale
of the Company's product candidates will not infringe patent rights of others.
There can be no assurance that a license will be available to the Company, if at
all, upon terms and conditions acceptable to the Company or that the Company
will prevail in any patent litigation. Patent litigation is costly and time
consuming, and there can be no assurance that the Company will have sufficient
resources to pursue such litigation. If the Company does not obtain a license
under any such patents held by others, if such infringement claims are found to
be valid, or if the Company is not able to have such competing patents declared
invalid, the Company may be liable for significant money damages, may encounter
significant delays in bringing products to market, or may be precluded from
participating in the manufacture, use or sale of products or methods of
treatment covered by such patents.
The Company relies substantially in its product development activities
on certain technologies and certain proprietary trade secrets and know-how that
are not patentable. Although the Company has taken steps to protect its
unpatented trade secrets and know-how, 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
will 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. If the Company's employees, scientific consultants or collaborators
develop inventions or processes independently that may be applicable to the
Company's product candidates, disputes may arise about ownership of proprietary
rights to those inventions and processes. Such inventions and processes will not
necessarily become the Company's property, but may remain
-8-
<PAGE> 10
the property of those persons or their employers. Protracted and costly
litigation could be necessary to enforce and determine the scope of the
Company's proprietary rights. Failure to obtain or maintain patent and trade
secret protection, for any reason, could have a material adverse effect on the
Company.
Certain of the Company's patents may cover inventions developed with
funds from United States government agencies or within academic institutions
from which the Company earlier acquired rights to such patents. As a result of
these arrangements, the United States government or such academic institutions
may have rights to certain inventions developed during the course of the
performance of federally funded or university sponsored projects, as the case
may be, as required by law or agreements with the funding agency or university,
respectively, including rights to the royalty-free use, but not sale, of the
invention or technology for its own purposes.
Several bills affecting patent rights have been introduced in the
United States Congress. These bills address various aspects of patent law,
including publication, patent term, re-examination, subject matter and
enforceability. It is not certain whether any of these bills will be enacted
into law or what form any new laws may take. Accordingly, the effect of
legislative change on the Company's intellectual property estate is uncertain.
The information contained in this Prospectus concerning patent matters
has not been reviewed or opined upon by independent patent counsel.
DEPENDENCE ON LICENSES OF RIGHTS TO TECHNOLOGY. The Company's rights to
the Purgative Product, its rights to certain compounds comprising the CorBec
Technology and its rights to the Thrombospondin Technology are held pursuant to
license agreements. In addition, the Company anticipates entering into licenses
for other product candidates and technologies that may be limited in scope and
duration, and may authorize the development and marketing of specified licensed
products or technologies for a limited period of time. The license agreements
may be terminated prior to their expiration date under certain circumstances,
including the Company's failure to comply with product development commitments
specified therein.
The success of licensing arrangements depends on many factors,
including the reasonableness of license fees in relation to revenue generated by
sales of the licensed products and the viability and potential developmental
success of the licensed products. Certain of the Company's licensing
arrangements require, and future licensing arrangements may require, specified
levels of research and development expenditures by the Company. The inability of
the Company to finance any or all of such expenditures could result in the
termination of affected licenses, and the termination, cancellation or inability
to renew any of its existing licensing arrangements, coupled with the inability
to develop and enter into new licensing arrangements, could have a material
adverse effect on the Company's financial condition and results of operation.
The license with respect to the compounds comprising the CorBec
Technology (the "CorBec License") may be terminated by the licensor if the
Company has not, by June 1998, (i) submitted a product to the FDA for approval,
(ii) offered a product for sale, either directly or through a sublicensee, or
(iii) made continuing reasonable efforts to develop a product for submission for
FDA approval or for sale. The CorBec License may also be terminated if the
Company fails to make minimum annual royalty payments of $50,000 during 1998 and
1999 and $100,000 thereafter, or fails to fund at least $1,000,000 towards the
completion of the CBP-1011 clinical trials.
-9-
<PAGE> 11
The ALW License, which covers the Purgative Product, may be terminated
by the licensor if (a) the Company fails to commit at least $1,000,000 of
funding to the development of the Purgative Product for the first two years
following the Initial Closing Date, (b) the Company fails to pay, commencing in
February 2003, minimum royalties of $100,000 per year whether or not any sales
have occurred or (c) there is no commercial sale of the Purgative Product or any
product under the ALW License by February 2005. In addition, the Company's
rights under the ALW License will no longer be exclusive, and the minimum
royalty payment will no longer be due (although decreased actual royalty
payments will be due) if there is no valid or enforceable patent on the
Purgative Product or any other product under the ALW License.
The termination of any license or the loss of exclusivity thereunder
could have a material adverse effect on the Company's business, financial
condition and results of operations.
DEVELOPMENT OF CORBEC TECHNOLOGY, PURGATIVE PRODUCT AND THROMBOSPONDIN
TECHNOLOGY. InKine has acquired the worldwide exclusive rights to the Purgative
Product, the CorBec Technology and the Thrombospondin Technology.
The Company is evaluating a number of product opportunities for the
CorBec Technology, including the development of therapeutic products for
autoimmune diseases and other diseases, including asthma/allergy and certain
serious infectious diseases, which will require strategic alliances with other
entities. No assurance can be given regarding the Company's ability to establish
such alliances, or the successful timing of the establishment thereof. The
compound CBP-1011 is currently in Phase III clinical trials for the treatment of
ITP. There can be no assurance that CBP-1011 will prove to be safe and
efficacious in clinical trials, or that it will receive the required FDA and
other regulatory approvals. Further, even if such approvals are obtained, there
can be no assurance that the Company or its collaborators will be able to
successfully commercialize CBP-1011.
The Company is preparing to conduct human clinical trials of the
Purgative Product. There can be no assurance that the Company's Purgative
Product development program will be successful, that the Purgative Product will
prove to be safe and efficacious in clinical trials, that the Purgative Product
will obtain the required FDA and other regulatory approvals, that the Purgative
Product can be manufactured in commercially required quantities at an acceptable
price, or that the Company or its collaborators will be successful in obtaining
market acceptance of the Purgative Product. The Company or its collaborators may
encounter problems and delays relating to research and development, regulatory
approval, manufacturing and marketing of the Purgative Product.
The Company is evaluating a number of product opportunities for the
Thrombospondin Technology, including its use as an agent to inhibit tumor
metastasis and as a cancer imaging agent. The Company will seek to expand the
research and development of Thrombospondin Technology applications primarily
through strategic alliances with other entities. No assurance can be given as to
the Company's ability to establish such alliances or the success of the ongoing
research concerning the Thrombospondin Technology.
GOVERNMENT REGULATION; NO ASSURANCE OF PRODUCT APPROVAL; EXTENSIVE
CLINICAL TESTING REQUIRED. The research, testing, manufacture, distribution,
advertising and marketing of pharmaceutical products are subject to extensive
regulation by governmental authorities in the United States and other countries.
To date, CorBec has completed Phase I and II clinical trials on CBP-1011 for the
treatment of ITP and Phase III clinical trials for this indication are currently
in process. There
-10-
<PAGE> 12
can be no assurance, however, that additional Phase III clinical trials will not
be required, including a direct competitive comparison with prednisone.
Phase IIb clinical trials have been completed as to the Purgative
Product, and the Company currently plans to submit an IND (defined below) with
respect to this product in the second quarter of 1998. There can be no assurance
that such IND will be submitted in accordance with this schedule or at all, and
if submitted, that such IND will be accepted. In addition, there can be no
assurance that additional Phase IIb clinical trials will not be required.
Prior to marketing either the compounds derived from the CorBec
Technology or the Purgative Product or any other compounds or products to be
developed by the Company (including the Thrombospondin Technology), such product
candidate or compound must undergo an extensive regulatory approval process
required by the FDA and by comparable agencies in other countries. This process,
which includes preclinical studies and clinical trials of each compound to
establish its safety and efficacy and confirmation by the FDA that good
manufacturing practices ("GMP") were maintained during testing and
manufacturing, can take many years, requires the expenditure of substantial
resources and gives larger companies with greater financial resources a
competitive advantage over the Company. The stages involved in the regulatory
process generally include (i) preclinical laboratory and animal test, (ii)
submission to the FDA of an investigational new drug application ("IND") which
must become effective before clinical trials may begin, (iii) adequate and well
controlled human clinical trials to establish the safe and efficacy of the drug
in question for its intended indication, (iv) submission to the FDA of a new
drug application ("NDA") or, in the case of biological products, such as
recombinant proteins, a product licensing application ("PLA"), as well as an
establishment licensing application ("ELA") and (v) review by the FDA of the NDA
or PLA and ELA in order to determine, among other things, whether the drug is
safe and effective for its intended uses.
To date, no NDA has been submitted to the FDA for any product candidate
being developed or to be developed by the Company, and the Company has not
obtained approval by the FDA or any other regulatory authority for marketing any
drug, and there can be no assurance that any such product or compound will ever
be so submitted or that FDA approval or approval from any other regulatory
authority for any products developed by the Company will be granted on a timely
basis, if at all, or that the Company will be able to obtain the labeling claims
desired for its products or compounds. The Company is and will continue to be
dependent upon the laboratories and medical institutions conducting its
preclinical studies and clinical trials to maintain both good laboratory and
good clinical practices. Data obtained from preclinical studies and clinical
trials are subject to varying interpretations, which could delay, limit or
prevent FDA regulatory approval. Delays or rejections may be encountered based
upon changes in FDA policy for drug approval during the period of development
and FDA regulatory review. Similar delays also may be encountered in foreign
countries. Any denials or delays in obtaining the requisite approvals would
likely have a material adverse effect on the Company.
The pharmaceutical regulatory process includes extensive preclinical
safety, pharmacological and toxicological testing. This preclinical data is
required before the filing of an IND with the FDA to establish safety, efficacy,
purity and potency of any investigational pharmaceutical or biological product.
With respect to each pharmaceutical or biological product candidate, after an
IND has been allowed by the FDA (as to which there can be no assurance) the
Company must initially conduct a limited Phase I (safety) study, extensive Phase
II studies, followed by a more extensive Phase III study. This testing can take
several years and require the expenditure of substantial capital and other
resources. There can be no assurance that this testing will be completed on a
timely basis or at all.
-11-
<PAGE> 13
These delays may be encountered both domestically and abroad. Prior to a company
commencing marketing of a pharmaceutical product, it must file an NDA or a
Product License Application ("PLA") and an Establishment License Application
("ELA") with the FDA and be issued the appropriate new drug approval or product
license and establishment license. An NDA or PLA relates to the product itself,
while an ELA is required before product marketing can begin. There can be no
assurance that after clinical testing, regulatory approval of an NDA or PLA or
an ELA will ever be obtained. Delays or denials of marketing approval are
encountered regularly. If obtained, NDA or PLA and ELA regulatory approval may
entail limitations on the indicated uses for which any product may be marketed.
Following regulatory approval, if any, a product and its manufacturer
are subject to continuing regulatory oversight and review. Later discovery of
problems with a product or its manufacturer may result in restrictions on such
product or its manufacturer. These restrictions may include withdrawal of the
marketing approval for the product. Further adverse government regulation that
might arise from future legislative or administrative action, particularly as it
relates to health care reform and product pricing, cannot be predicted.
Violation of FDA requirements in general can lead to recall or seizure of
products, injunction against production, distribution, sales and marketing, and
criminal prosecution, among other sanctions.
The cost to the Company of conducting extensive human clinical trials
for any potential biopharmaceutical or biological product can vary dramatically
based on a number of factors, including, but not limited to, the order and
timing of clinical indications pursued, the size of the patient population, the
number of participating institutions and the number and type of end points
subject to data collection. Because of the intense competition in the market in
which the Company operates, the Company may have to expend substantial
additional funds to obtain access to such resources, or delay or modify its
plans significantly. There can be no assurance that the Company will have
sufficient resources to complete the required clinical testing, regulatory
review and approval process or that the Company could survive the inability to
obtain, or delays in obtaining, such approvals. Moreover, there can be no
assurance that clinical testing of the Company's product candidates will provide
sufficient evidence of safety and efficacy in humans, that regulatory approvals
will be granted for any product candidate or that it will be economically
feasible for the Company to commercialize any product candidate for which
regulatory approval is ultimately granted.
InKine has not engaged the services of FDA regulatory counsel to review
any of the regulatory procedures conducted in the development of the CorBec
Technology, the Purgative Product or the Thrombospondin Technology, including
without limitation, preclinical studies, clinical trials and correspondence with
the FDA in connection therewith. In addition, the information contained in this
prospectus concerning government regulatory matters has not been reviewed or
opined upon by independent FDA counsel.
LIMITED CLINICAL TRIAL EXPERIENCE. Before obtaining required regulatory
approvals for the commercial sale of its proposed products, the Company must
demonstrate through human clinical trials that such products are safe and
efficacious for use. The initiation and completion of clinical trials is
dependent upon many factors, including the availability of qualified clinical
investigators. Delays in initiating and completing clinical trials may result in
increased costs of trials and delays in FDA submissions, which could have a
material adverse effect on the Company. To date, the Company has limited
experience in conducting clinical trials. There can be no assurance that the
Company will be able to find appropriate third parties to design and conduct
clinical trials or that it will have the resources to hire personnel to
administer clinical trials in-house.
-12-
<PAGE> 14
A number of companies in the biotechnology and pharmaceutical
industries have suffered significant setbacks in clinical trials, even after
showing promising results in earlier studies or trials. There can be no
assurance that the Company will not encounter problems in its clinical trials
that will cause the Company to delay or suspend such trials, that such testing
will ultimately demonstrate the safety or efficacy of such proposed products or
that any proposed products will receive regulatory approval on a timely basis,
if at all or, if approved, that such proposed products will prove commercially
successful.
NO COMMERCIAL MANUFACTURING CAPABILITY OR EXPERIENCE. To be successful,
the Company's products must be manufactured in commercial quantities under GMP
requirements prescribed by the FDA and at costs acceptable to the Company. The
license of the Purgative Product requires the Company, upon successful
development of the Purgative Product, to obtain a supply agreement for the
manufacture of a solid dosage form of sodium phosphate under GMP requirements
prescribed by the FDA and other governmental agencies. InKine has identified a
commercial manufacturer to handle such production upon receiving FDA approval of
the product. In addition, CorBec has engaged a commercial manufacturer for the
production of CBP-1011. The Company has not yet manufactured any products in
commercial quantities and currently does not have the facilities to manufacture
any products in commercial quantities under GMP. Therefore, the Company will
need to develop its own GMP manufacturing facility and/or depend on
collaborators, licensees or contract manufacturers for the commercial
manufacture of its products. In the event the Company determines to establish a
manufacturing facility, it will require substantial additional funds and will
need to hire and retain significant additional personnel and comply with
extensive regulations applicable to such a facility. The Company has no
experience in such commercial manufacturing, and there can be no assurance that
the Company will be able to establish such a facility successfully and, if
established, that it will be able to manufacture products in commercial
quantities for sale at competitive prices. If the Company determines to rely on
collaborators, licensees or contract manufacturers for the commercial
manufacture of its products, the Company will be dependent on such corporate
partners or other entities for, and will have only limited control over, the
commercial manufacturing of its products. There can be no assurance that the
Company will be able to enter into any such manufacturing arrangements on
acceptable terms, if at all.
LIMITED MARKETING OR SALES CAPABILITY OR EXPERIENCE. The Company has
limited experience in marketing, distributing and selling pharmaceutical
products, and will need to develop a sales force or rely on its collaborators or
licensees or on arrangements with other third parties to provide for the
marketing, distribution, and sales of its products. There can be no assurance
that the Company will be able to establish marketing, distribution and sales
capabilities or marketing arrangements with third parties to perform such
activities on acceptable terms, and such arrangements, if established, may
result in a lack of control by the Company over the marketing, distribution and
sales of its proposed products. In addition, there can be no assurance that the
Company or any third party will be successful in marketing, selling or
distributing any products.
COMPETITION. The biopharmaceutical industry is highly competitive,
including the industry segments related to (i) receptor based technologies,
which include the CorBec Technology, (ii) purgative agents for clearing the
colon, which include the Purgative Product, and (iii) the treatment and
prevention of cancer, which includes the Thrombospondin Technology. The Company
is likely to encounter significant competition with respect to its product
candidates currently under development, including, but not limited to,
competition from La Jolla Pharmaceutical Company, GeneLabs Technologies, Inc.,
IDEC Pharmaceuticals Corporation, Immune Response Corporation, Autoimmune,
-13-
<PAGE> 15
Inc. and Anergen, Inc. with respect to the treatment of diseases targeted by the
CorBec Technology; Braintree Laboratories, Reedco, Inc. and C.B. Fleet Company,
Inc. with respect to the product applications targeted by the Purgative Product;
and Boston Life Sciences, Inc. and Entremed, Inc. with respect to the treatment
of diseases targeted by the Thrombospondin Technology.
The Company is pursuing areas of product development in which there is
the potential for extensive technological innovation in relatively short periods
of time. Substantially all companies which have established positions in the
pharmaceutical industry and which compete with the Company in the development of
products with applications similar to those of the Company's product candidates,
in particular competitors involved in the development of antibody-based and
peptide-based products, have substantially greater financial and technological
resources and sales and marketing capabilities than the Company, and have
significantly greater experience in research and development. Accordingly, the
Company's competitors may succeed in developing competitive products more
rapidly than the Company and in developing competitive products that are more
efficacious and useful and less costly than any that are developed by the
Company, and may also be more successful than the Company in manufacturing and
marketing such products. Academic institutions, hospitals, governmental agencies
and other public and private research organizations are also conducting research
and seeking patent protection and may develop competing products or technologies
on their own or through joint ventures. There can be no assurance that
developments by others will not render products which the Company seeks to
develop or technologies it employs noncompetitive or obsolete or that the
Company will be able to keep pace with technological developments. Rapid
technological change or developments by others may result in the Company's
product candidates and potential products becoming obsolete or non-competitive.
DEPENDENCE ON THIRD-PARTY REIMBURSEMENT; TREND TOWARDS COST
CONTAINMENT. Successful sales, if any, of the Company's products in the United
States and other countries will depend on the availability of adequate
reimbursement from third-party payors such as governmental entities, managed
care organizations and private insurance plans. Reimbursement by a third-party
payor may depend upon a number of factors, including the payor's determination
that use of a product is safe and efficacious, medically necessary, appropriate
for the specific patient, cost effective and neither experimental nor
investigational. Since reimbursement approval is required from each payor
individually, seeking such approvals is a time-consuming and costly process.
Third-party payors routinely limit reimbursement coverage and in many instances
are exerting significant pressure on medical suppliers to lower their prices.
There is significant uncertainty concerning third-party reimbursement for the
use of any pharmaceutical product incorporating new technology, and there is no
assurance that third-party reimbursement will be available for the Company's
products, or that such reimbursement, if obtained, will be adequate. Less than
full reimbursement by governmental and other third-party payors for products
developed by the Company would adversely affect the market acceptance of these
products and would also have a material adverse effect on the Company's
business, financial condition and results of operations. Furthermore, health
care reimbursement systems vary from country to country, and there can be no
assurance that third-party reimbursement will be made available for the
Company's products under any other reimbursement system.
The health care industry is experiencing a trend toward cost
containment as government and private third party payors seek to impose lower
reimbursement and utilization rates and negotiate reduced payment schedules with
service providers. This cost-containment trend may result in reductions in
reimbursement rates for products and treatment therapies like those under
development by the Company. Further reductions in payments to health care
providers or other changes in reimbursement for health care service could have a
material adverse effect on the Company once its
-14-
<PAGE> 16
products, if any, become commercialized. There can be no assurance that the
Company will be able to offset successfully any or all of the payment reductions
that may occur.
RISK OF LIABILITY; ADEQUACY OF INSURANCE COVERAGE; RISK OF PRODUCT
RECALL. The Company's business may be affected by potential product liability
risks which are inherent in the testing, manufacturing and marketing of
pharmaceutical and other products proposed to be developed by the Company. There
can be no assurance that if the Company's product candidates are developed and
marketed, product liability claims will not be asserted against the Company, its
collaborators or licensees. The use of products developed by the Company in
clinical trials and the subsequent sale of such products is likely to cause the
Company to bear all or a portion of those risks. Such litigation claims could
have a material adverse effect on the business or financial condition of the
Company. Neither InKine nor Sangen currently has product liability insurance.
The license covering the CorBec Technology requires CorBec to maintain general
liability and product liability insurance in amounts not less than $2,000,000
per occurrence and $4,000,000 in the aggregate upon commencement of human
clinical trials. CorBec currently maintains a product liability policy in the
amount of $1,000,000 per occurrence and $3,000,000 in the aggregate. To the
extent reasonably possible, the Company intends to obtain and maintain product
liability insurance as, and if, required and in such per-occurrence and
aggregate amounts as are believed by the Company to be adequate under the
circumstances. There can be no assurance, however, that insurance coverage would
be adequate to protect the Company against future claims or that a medical
malpractice claim or other claims would not materially and adversely affect the
business, prospects, financial condition or results of operations of the
Company. Although a majority of the former CorBec stockholders have agreed to
indemnify the Company against breaches of certain representations and warranties
in the merger agreement between the Company and CorBec (the "CorBec Merger
Agreement") such indemnification is limited to the cash and the value of the
Company's shares received by those CorBec shareholders under the CorBec Merger
Agreement. Furthermore, for indemnification purposes, the Company's shares
issued to the CorBec shareholders will be valued as of the dates of issuance
thereof and will be subject to a substantial discount. Moreover, there can be no
assurance that the Company can obtain sufficient indemnity protection from any
collaborators or licensees. In addition, products such as those sold or proposed
to be sold by the Company may be subject to recall for unforeseen reasons. Such
a recall could have a material adverse effect on the Company and its reputation.
DEPENDENCE ON KEY MANAGEMENT AND QUALIFIED PERSONNEL. The Company is
highly dependent upon the efforts of Leonard S. Jacob M.D., Ph.D., who is the
Chairman and Chief Executive Officer of the Company and Taffy J. Williams,
Ph.D., who is the President and Chief Operating Officer of the Company. The loss
of the services of either of them could impede the achievement of the Company's
development objectives. Although the Company has entered into three-year
employment agreements with Dr. Jacob and Dr. Williams, neither is prohibited
from competing with the Company upon the termination of employment. As a result,
although the Company believes that it has provided both of them with sufficient
financial incentives to continue their employment with the Company for at least
the full period of their respective employment agreements, there can be no
assurance that either of them will not terminate his employment sooner and
engage in a competing business.
Due to the specialized scientific nature of the Company's business, the
Company is also highly dependent upon its ability to attract and retain other
qualified scientific, technical and key management personnel. There is intense
competition for qualified personnel in the scientific arenas in which the
Company conducts its activities and there can be no assurance that InKine can
presently, or that the Company will in the future be able to, attract and retain
the qualified personnel necessary for the
-15-
<PAGE> 17
development of its products and licenses and its expansion into areas and
activities requiring additional expertise. In addition, the Company's ability to
expand into areas requiring additional skill and expertise, such as sales and
marketing capability, will require the addition of new management personnel and
the development of additional expertise by existing management personnel. The
loss of, or failure to recruit, key scientific, technical, sales and marketing
and managerial personnel could have a material adverse effect on the Company.
LIMITED PERSONNEL; DEPENDENCE ON CONTRACTORS; POTENTIAL CONFLICT.
InKine relies, in substantial part, and for the foreseeable future the Company
will rely, on certain independent contractors, independent organizations,
advisors and consultants who are employed on a part-time basis to provide
certain services, including substantially all aspects of manufacturing,
regulatory approval and clinical management. The provision of such services on a
part-time basis presents potential conflicts of interest with respect to other
professional or employment positions such contractors may hold, including
conflicts as to availability, interest and loyalty, and could result in material
detriment to the Company should such conflicts be resolved against the Company's
best interest. No assurance can be given that the services of independent
contractors, organizations, advisors and consultants will be available to the
Company on a timely basis. The Company's advisors and consultants generally sign
agreements that provide for confidentiality of the Company's proprietary
information. However, there can be no assurance that the Company will be able to
maintain the confidentiality of the Company's technology, the dissemination of
which could have a material adverse effect on the Company's business.
RELOCATION OF FACILITY; DUPLICATION OF RENT OBLIGATIONS. InKine is in
the process of relocating its office facilities to the Philadelphia area from
New York City. The present facility is held under a sublease expiring in April
2000 and which provides for an annual rent of $193,500, plus insurance, taxes
and maintenance. To the extent the Company is not successful in having its lease
obligation terminated or materially reduced through an assignment or sublease,
the Company will be required to bear 100% of the remaining rental term, which is
material, while bearing the rental expense for its Philadelphia area facility.
RISKS ASSOCIATED WITH ACQUISITIONS. One of the Company's strategies is
to acquire, or acquire rights to develop and commercialize, additional
pharmaceutical products and product candidates to expand its pipeline of
commercially viable pharmaceutical products. While the Company may accomplish
such objectives by entering into licensing arrangements with the owners of
certain patents and proprietary technology, such as with respect to the
Purgative Product, the Company may also acquire established businesses, such as
it did in the case of CorBec, through business acquisitions including, without
limitation, corporate mergers, for the purpose of acquiring the rights to
product candidates and products. There can be no assurance that the Company will
be able to effect any acquisition on terms believed to be favorable to the
Company, or successfully integrate into its operations any business it may
acquire. Under New York law, various forms of business combinations can be
effected without stockholder approval and, accordingly, the Company's
stockholders likely will not receive or otherwise have the opportunity to
evaluate any financial or other information which may be made available to the
Company in connection with any future acquisition and must rely entirely upon
the ability of management in selecting, structuring and consummating
acquisitions that are consistent with the Company's business objectives.
Although the Company will endeavor to evaluate the risks inherent in a
particular acquisition, there can be no assurance that the Company will properly
ascertain or assess all significant risk factors prior to consummating any
acquisition.
-16-
<PAGE> 18
RAPID GROWTH. The Company intends to actively pursue a strategy of
growth and will seek to expand the number of product candidates which it is
currently developing and possibly acquire new products. In the event of rapid
growth in the Company's operations, the Company will require additional
personnel, and may need to improve the Company's operational, financial and
management information systems. The hiring of such additional personnel and
improvements to the Company's existing systems will require the expenditure of
additional funds. In the event the Company's funds available for expansion and
acquisitions are fully expended or otherwise are not sufficient or become
insufficient to cover such expenditures, the Company will be required to raise
additional funds to support such expansion. In addition, since the Company has
limited experience in marketing, distributing and selling pharmaceutical
products, it may experience difficulty in managing such growth in its
operations. There can be no assurance that the Company will be able to obtain
the personnel required to achieve such growth or that the Company will be able
to obtain and maintain all regulatory approvals and comply with all applicable
laws, regulations and licensing requirements which may be necessary as a result
thereof.
POTENTIAL VOLATILITY OF MARKET PRICE OF COMMON STOCK; LOW TRADING
VOLUME. The Common Stock trades on the Nasdaq SmallCap Market. The market price
of the Common Stock, like that of many other development-stage public
pharmaceutical or biotechnology companies, has been highly volatile and may
remain so for the foreseeable future. Factors such as announcements of
technological innovations or new commercial products by the Company or its
competitors, disclosure of results of preclinical and clinical testing, adverse
reactions to products, governmental regulation and approvals, developments in
patent or other proprietary rights, public or regulatory agency concerns as to
the safety of products developed by the Company, litigation and general market
conditions may have a significant adverse effect on the market price of the
Common Stock. In addition, in general, the Common Stock has been thinly traded
on the Nasdaq SmallCap Market, which may affect the ability of the Company's
stockholders to sell shares of the Common Stock in the public market. There can
be no assurance that a more active trading market will develop in the future.
MAINTENANCE OF LISTING; POSSIBLE DELISTING OF SECURITIES FROM NASDAQ
SYSTEM; AND RISK OF LOW-PRICED STOCKS. In order to maintain a listing of common
stock on the Nasdaq SmallCap Market, a company must maintain (i) net tangible
assets of at least $2 million or $35 million of market capitalization or
$500,000 of net income in the latest fiscal year or two of the last three fiscal
years; (ii) a public float of 500,000 shares or more; (iii) market value of
public float of at least $1,000,000; (iv) a minimum bid price of $1.00 per
share; (v) a minimum of two market makers; and (vi) at least 300 round lot
shareholders; and (vii) meet certain corporate governance requirements. No
assurance can be given that the Company will be able to maintain the standards
for continued listing and that the securities will not be delisted from the
Nasdaq SmallCap Market. In the event of any such delisting, trading, if any,
would thereafter be conducted in the over-the-counter market on an electronic
bulletin board established for securities that do not meet the Nasdaq listing
requirements or in what are commonly referred to as the "pink sheets." As a
result, an investor would then find it more difficult to dispose of, or to
obtain accurate quotations as to the price of, the Company's securities. If the
Common Stock were delisted from the Nasdaq SmallCap Market, and if it traded at
prices below $5.00 per share, it would also be subject to so-called "penny
stock" rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors. For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase and
must have received the purchaser's written consent to the transaction prior to
sale. Consequently, delisting from the Nasdaq SmallCap Market, if it were to
occur, could affect the ability of broker-dealers to sell the Common Stock and
the ability of the Company's stockholder to sell their securities in the
secondary market. The National Association of
-17-
<PAGE> 19
Securities Dealers, Inc. ("NASD") has proposed listing and maintenance
requirements that are more rigorous than those currently in effect. There can be
no assurance that such new listing and maintenance requirements, if implemented,
will not have a material adverse impact on the Company.
SHARES ELIGIBLE FOR FUTURE SALE; EFFECT ON ABILITY TO RAISE CAPITAL. Of
the 22,703,174 shares of Common Stock outstanding 19,731,354 shares (including
18,448,430 Original Shares offered pursuant to this Prospectus) have been
registered under the Securities Act and are freely tradable, not subject to any
restrictions, either under securities laws or under lock-up or other
agreements, and 2,090,602 shares are eligible for sale pursuant to Rule 144
under the Securities Act, subject, in the case of affiliates of the Company, to
volume limitations. The remaining 750,000 Original Shares issued as
consideration in the CorBec acquisition have been registered under the
Securities Act and will be eligible for sale without restriction two months
after the date of this Prospectus (upon the expiration of a lock-up agreement).
An additional 125,000 shares issued in connection with the license of the
Thrombospondin Technology will be eligible for sale under Rule 144 on November
6, 1998, subject to volume limitations, and on an unrestricted basis on
November 6, 1999. Further, the following shares have been registered for resale
without restriction pursuant to this Prospectus when issued upon the exercise
of currently exercisable warrants: (i) 2,044,843 shares underlying warrants
issued to the Placement Agents; and (ii) 546,399 (after anti-dilution
adjustment) shares underlying a warrant issued to an investment banking firm in
October 1995. An additional (i) 1,958,354 shares reserved for issuance upon the
exercise of the IPO Warrants, after giving effect to anti-dilution adjustment,
issued in the Company's IPO (ii) 2,574,949 shares reserved for issuance upon
exercise of options granted under the Company's Stock Option Plan (including
1,771,182 options held by Dr. Williams, the Company's President and Chief
Operating Officer, who is subject to a lock-up agreement until November 6, 1998
(the "Management Lock-Up")), (iii) 1,945,000 shares reserved for issuance upon
exercise of options granted under the Company's Consultant Stock Option Plan,
and (iv) 2,056,773 shares reserved for issuance upon exercise of options
granted to Dr. Jacob, the Company's Chairman and Chief Executive Officer, who
is subject to the Management Lock-Up (excluding an option covering 15,000
shares granted to Dr. Jacob under the Company's Stock Option Plan and an option
covering 300,000 shares granted to Dr. Jacob in connection with the Company's
acquisition of Sangen) have been, or are intended to be, registered under the
Securities Act. An additional 2,126,118 shares are reserved for issuance upon
exercise of options to be granted under the Stock Option Plan and Consultant
Stock Option Plan, all of which are contemplated to be registered under the
Securities Act.
Many of the foregoing options and warrants are likely to be exercised
at a time when the Company might be able to obtain additional equity capital on
more favorable terms. The exercise of such instruments and sale of the
underlying shares could have a material adverse effect on the Company's ability
to raise new equity capital. In addition, while those options and warrants are
outstanding, they may adversely affect the terms on which the Company could
obtain capital. The Company cannot predict the effect, if any, that market sales
of Common Stock, the exercise of options or warrants, or the availability of
such Common Stock for sale will have on the market price prevailing from time to
time. Furthermore, certain holders of the Company's securities have the right to
cause the Company to register their Common Stock under the Securities Act in the
future, which could cause the Company to incur substantial expense, could affect
the Company's ability to raise capital and also materially and adversely affect
the prevailing market price of the Common Stock.
VARIABILITY OF QUARTERLY RESULTS OF OPERATIONS. The Company's operating
results may be subject to significant fluctuations due to several factors
including the consummation of acquisitions, the timing of research and
development expenditures, the timing of successful product development, if any,
the timing of new product announcements, if any, and the release, if any, of new
products by the
-18-
<PAGE> 20
Company and its competitors. The Company has, to date, operated at a loss.
Progress, if any, as to development and commercialization of products, and the
commencement and extent of sales, cannot be predicted and may vary from quarter
to quarter.
ANTI-TAKEOVER CONSIDERATIONS. The Certificate of Incorporation of the
Company has been amended to authorize 5,000,000 shares of "blank check"
Preferred Stock, which may be issued without shareholder approval (provided that
issuances during the 18 months following the closing of the Private Placement
shall require approval of the holders of a majority of the Shares) and with such
designations, rights and preferences as are determined by the Board of
Directors. The Board of Director's authority to issue and fix the rights and
preferences of such stock, together with certain provisions of New York law as
to transactions with beneficial holders of 20% of the outstanding voting shares
of a corporation, may have the effect of delaying, deterring or preventing a
change in control of the Company, may discourage bids for the Common Stock at a
premium over the market price and may adversely affect the market price, and the
voting and other rights of the holders of the Common Stock.
NO DIVIDENDS. InKine has not paid cash dividends on its Common Stock
since its inception and the Company does not intend to pay any dividends on its
Common Stock in the foreseeable future.
-19-
<PAGE> 21
SELLING STOCKHOLDERS
The Shares being sold by the Selling Stockholders pursuant to this
Prospectus include (i) the Private Placement Shares, (ii) the Commission Shares,
(iii) the Acquisition Shares, (iv) the Warrant Shares, and (v) the Financial
Consultant Warrant Shares. Certain of the Commission Shares and Warrant Shares
are held and are being offered pursuant to this Prospectus by designees of the
Placement Agents (which designees may include the Placement Agents' employees,
account executives and registered representatives and/or selected dealers that
are members of the NASD).
The Company and the Placement Agents are parties to a Sales Agency
Agreement pursuant to which the Company delivered to the Placement Agents, as
compensation in connection with the Private Placement, the Commission Shares,
the Placement Agent Warrants and cash payment of $660,000. Pursuant to the Sales
Agency Agreement, the Company has agreed to indemnify the Placement Agents
against certain liabilities, including liabilities under the Securities Act.
Further, the Company has agreed that, if so requested by the Placement Agents,
the Company will permit one person designated by the Placement Agents and
acceptable to the Company to observe any and all meetings of the Board of
Directors of the Company until March 31, 1998. The Company also has agreed with
Sunrise Capital Corp. not to sell additional securities for a period of 18
months after the final closing of the Private Placement without the written
consent of Sunrise Capital Corp., which consent will not be unreasonably
withheld.
The following table sets forth certain information as of December 16,
1997 (and as adjusted to reflect the sale of all of the Shares) with respect to
the ownership of the Company's outstanding common stock by the Selling
Stockholders:
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Biotechnology Development Fund, L.P. 1,500,000 1,500,000 *
Veron International Ltd. 1,500,000 1,500,000 *
BT Holdings (New York), Inc. 1,000,000 1,000,000 *
The Aries Trust 629,800 629,800 *
Oxford Bioscience Partners II L.P. 571,620 571,620 *
D.H. Blair & Co., Inc. 0 546,399(3) *
Canadian Imperial Holding Inc. 500,000 500,000 *
Alfa Mutual Insurance 500,000 500,000 *
Bernard J. Korman 500,000 500,000 *
Lisa Low as custodian for
Gabriel Low 447,473 447,473 *
</TABLE>
-20-
<PAGE> 22
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Oxford Bioscience Partners (Bermuda)
II Limited Partnership 428,380 428,380 *
Porter Partners, LP 400,000 400,000 *
Sonz Partners, L.P. 400,000 400,000 *
Howard P. Milstein 400,000 400,000 *
Richard B. Stone 286,320 371,143(4) *
Family Trust of Nathan A. Low
dated 4/12/96 0 354,605(5) *
Aries Domestic Fund, LP 310,200 310,200 *
Trenton Small Cap Fund 300,000 300,000 *
Alfa Mutual Fire Insurance 300,000 300,000 *
Sunrise Securities Corp. 275,000 275,000 *
Pine Street Asset Management, LP 267,000 267,000 *
DC Investment Partners Opportunity
Fund, LP 250,000 250,000 *
Highbridge International LDC 250,000 250,000 *
October 1983 Trust f/b/o Jesselson
Grandchildren 250,000 250,000 *
York Investment Ltd. 240,000 240,000 *
Hillman Medical Ventures 1993 L.P. 238,718 238,718(6) *
Kevin J. Raidy 0 225,000(5) *
Alfa Life Insurance 200,000 200,000 *
HCA Enterprises Worldwide, LLC 200,000 200,000 *
A. Baron Cass III 200,000 200,000 *
Joseph Giamanco 200,000 200,000 *
Alexander Mitchell 200,000 200,000 *
Robert L. Swisher, Jr. 200,000 200,000 *
</TABLE>
-21-
<PAGE> 23
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Christopher Lenzo 200,000 200,000 *
Curran Partners L.P. 200,000 200,000 *
Sands Partnership #1 Money Purchase
Pension Plan 200,000 200,000 *
Paul Scharfer 95,141 179,964(4) *
Dwight Miller 95,141 179,964(4) *
Jeff Eliot Margolis 0 169,220(5) *
Avner Hacohen 0 161,925(5) *
York Capital Management, L.P. 160,000 160,000 *
Nader Tavakoli 150,000 150,000 *
Scott Hillstrom 128,000 128,000 *
Michael G. Jesselson 12/18/80 Trust 125,000 125,000 *
John W. Holley Trustee,
John W. Holley Grantor Trust 125,000 125,000 *
Hillman Medical Ventures 1995 L.P. 124,132 124,132(6) *
Samuel R. Shipley 0 116,500(5) *
Plexus Ventures, Inc. 116,077 116,077(6) *
Bradley J. Ackerman 0 113,500(5) *
Marc L. Seelenfreund 80,678 112,487(7) *
Shipley Raidy Capital Partners, LP 107,198 107,198 *
Hillman Medical Ventures 1996 L.P. 101,453 101,453(6) *
Eric M. Javits 1984 Irrevocable Trust, 100,000 100,000 *
Charles F. Faddis, as Trustee
EDJ Limited 100,000 100,000 *
Daniel German 100,000 100,000 *
James J. Cotter 100,000 100,000 *
Jeffrey Markowitz 100,000 100,000 *
</TABLE>
- 22 -
<PAGE> 24
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
MDBC Capital Corp. 100,000 100,000 *
The Alan W. Steinberg L.P. 100,000 100,000 *
State Capital Partners 100,000 100,000 *
Kembar Group, LP 100,000 100,000 *
Matthew I. Rebold 100,000 100,000 *
JIBS Equities 100,000 100,000 *
Aurora Capital Corp. 0 100,000(5) *
Alan D. Schreiber, M.D 90,893(8) 90,893(6) *
Ray Rivers 47,571 89,982(9) *
Dr. James Lafferty 75,000 75,000 *
Joseph C. Roselle 75,000 75,000 *
David Stone 75,000 75,000 *
Leonard Makowka 75,000 75,000 *
David S. Hannes 71,000 71,000 *
The Norwest Bank North Dakota, N.A
as Trustee of the Conmy, Feste,
Bossart, Hubbard and Corwin, Ltd.
401(k) Profit Sharing Plan and Trust
f/b/o Charles A. Feste 73,000 70,000 *
Lawrence Zaslow 25,786 66,197(9) *
John Gallagher 23,785 66,196(9) *
Europa International 64,350 64,350 *
Valor Capital Management L.P. 64,350 64,350 *
Sunrise Foundation Trust 64,000 64,000 *
Stanley Bienenfeld 60,000 60,000 *
Dr. Morton Seelenfreund 60,000 60,000 *
David Bartash 0 60,000(5) *
</TABLE>
- 23 -
<PAGE> 25
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Trustees of the University of
Pennsylvania 55,087 55,087(6) *
Quiltex Co. Profit Sharing Trust 55,000 55,000 *
Bank Austria (Switzerland) Ltd., Zurich 50,000 50,000 *
R.L.H. Options, Inc. 50,000 50,000 *
David Balser 50,000 50,000 *
Michael E. Lewis & Jill M. Roberts-Lewis,
JTWROS 50,000 50,000 *
David H. Feinberg 50,000 50,000 *
Jerry Heymann 50,000 50,000 *
John S. Lemak 50,000 50,000 *
Alan J. Rubin 50,000 50,000 *
Nachum Stein 50,000 50,000 *
Nobukuni Taneya 50,000 50,000 *
Jackson Hole Investments Acquisitions L.P. 50,000 50,000 *
Carl F. Steinfield 50,000 50,000 *
Eric M. Hecht 50,000 50,000 *
William Jeffery III 50,000 50,000 *
Isaac Michalovsky 50,000 50,000 *
John W. Holley & John D. Holley
Co-Trustees, Barbara Holley
Art VII U/A/D 6/2/83 50,000 50,000 *
Derek Caldwell 0 50,000(5) *
Alan Swerdloff 78,607 49,189(10) *
Ronald M. Urvater 0 47,700(5) *
Carlin Equities Corp. Profit Sharing Plan 45,000 45,000 *
Robert Fuchs 45,000 45,000
</TABLE>
- 24 -
<PAGE> 26
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Mitchel Sutin 0 43,313(5) *
Balestra Capital Partners, L.P. 40,300 40,300 *
Bruce N. & Jacqueline A. Barron
JTW/ROS 40,000 40,000 *
Alan Cohen 40,000 40,000 *
Robert Cohen 40,000 40,000 *
Preston Tsao 8,066 37,161(11) *
Honey Myers 35,000 35,000 *
Glenn Fuhrman 30,000 30,000 *
Lewis H. Erlicht and/or Wilma S. Erlicht 30,000 30,000 *
David M. Israel 30,000 30,000 *
Stephen L. Ross 0 30,000(5) *
Lorne Caplan 14,271 26,994(12) *
R. Scott Bowers 25,000 25,000 *
Pramod Rustagi 25,000 25,000 *
Alison E. Shimer 25,000 25,000 *
Michael Adam Balser 25,000 25,000 *
Judson Cooper 25,000 25,000 *
Ilan Kaufthal 25,000 25,000 *
Robert W. Kiley 25,000 25,000 *
Joshua D. Schein 25,000 25,000 *
Radix Associates 25,000 25,000 *
Rutgers Casualty Insurance Co. 25,000 25,000 *
Kentucky National Insurance Company 25,000 25,000 *
Penn Footware Retirement Trust 25,000 25,000 *
</TABLE>
- 25 -
<PAGE> 27
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Barbara Wilson Holley and John W.
Holley Co-Trustees, Barbara Wilson
Holley Revocable Trust dated 7/31/96 25,000 25,000 *
Charles F. Faddis 25,000 25,000 *
Foster & Foster 25,000 25,000 *
Alan L. Sarroff 25,000 25,000 *
Robert Ty Howard and Melanie Shepherd
Howard, JTWROS 25,000 25,000 *
Penn Footwear Corporation 25,000 25,000 *
Penn Footwear Retirement Trust 25,000 25,000 *
Trenton Performance Fund 25,000 25,000 *
William Davidowitz 25,000 25,000 *
Davidowitz Foundation 25,000 25,000 *
Paul Dauber 20,000 20,000 *
Richard C.E. Morgan 20,000 20,000 *
Stefanie Rubin 20,000 20,000 *
Bishop Rosen & Co., Inc. 0 18,562(5) *
James E. Schwalbe 15,000 15,000 *
Jeremy Schwalbe 15,000 15,000 *
Christopher Scott 15,000 15,000 *
Carl Goldfischer 15,000 15,000 *
Jonathan E. Gold 15,000 15,000 *
Kenneth Hecht 15,000 15,000 *
Michael Sabeh 15,000 15,000 *
Andrea P. Thau O.D. Profit Sharing Plan 15,000 15,000 *
Nir Hacohen 0 15,000(5) *
</TABLE>
- 26 -
<PAGE> 28
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Estate of James H. Boyle 14,685 14,685(6) *
Maozdiam Int'l Corporation 10,000 10,000 *
Chris N. Prince 1994 Trust 10,000 10,000 *
Gary and Gina Abrams 10,000 10,000 *
Phyllis Swerdloff 10,000 10,000 *
C. Seth Cunningham 10,000 10,000 *
Paul Erlicht and/or Wilma Erlicht 10,000 10,000 *
Jamie Erlicht and/or Wilma Erlicht 10,000 10,000 *
Todd Gelman 10,000 10,000 *
Gary Greengrass 10,000 10,000 *
Evan Malik 10,000 10,000 *
Miriam W. Sheftel 10,000 10,000 *
Stuart Fuchs 0 7,500(5) *
Carol Adaman 6,000 6,000 *
Jong-Gu Park, Ph.D 5,970 5,970(6) *
Albert W. Kruger III 0 5,000(5) *
Herbert Aber & Elaine Aber JTWROS 5,000 5,000 *
Robert J. Bertoldi 5,000 5,000 *
Betty Bergen 5,000 5,000 *
Jerard I. Bronfman 5,000 5,000 *
Bradford J. Magaro 5,000 5,000 *
Harvey A. Goralnick 0 5,000(5) *
Kathleen D. Raidy 0 5,000(5) *
John F. and Marybeth Raidy 0 5,000(5) *
Mark Roffman, Ph.D. 2,985 2,985(6) *
</TABLE>
- 27 -
<PAGE> 29
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
SHARES OFFERED SHARES OWNED
SELLING STOCKHOLDERS OWNED(1) HEREBY(2) AFTER OFFERING
-------------------- --------- --------- --------------
<S> <C> <C> <C>
Eric L. Sichel, M.D 0 2,500(5) *
Hunter College Elementary School 0 2,000(5) *
University of Rochester f/b/o 0 2,000(5) *
William E. Simon Graduate School of
Business Administration
University of Rochester f/b/o
The College 0 2,000(5) *
Barry Ackerman 0 1,000(5) *
A. Trevor Ackerman 0 1,000(5) *
Ryan Ackerman 0 1,000(5) *
---------- ----------
Total 19,278,037 21,789,672
========== ==========
</TABLE>
- -------------------------------------
* Represents ownership of less than 1% of the outstanding shares of the
Company's Common Stock.
(1) Excludes the Warrant Shares. All the Placement Agent Warrants are
currently exercisable.
(2) Includes the Warrant Shares. The holders of the Acquisition Shares have
agreed with the Company not to sell the Acquisition Shares until two
months after the date of this Prospectus (the "two-month lock-up").
(3) Consists solely of Financial Consultant Warrant Shares. The Financial
Consultant Warrants are currently exerciseable.
(4) Includes 84,823 Warrant Shares.
(5) Consists solely of Warrant Shares.
(6) Subject to the two-month lock-up.
(7) Includes 31,809 Warrant Shares.
(8) Excludes 120,000 shares covered by options that are not currently
exerciseable.
(9) Includes 42,411 Warrant Shares.
(10) Includes 39,189 Warrant Shares.
(11) Includes 29,095 Warrant Shares.
(12) Includes 12,723 Warrant Shares.
- 28 -
<PAGE> 30
PLAN OF DISTRIBUTION
The shares of Common Stock covered by this Prospectus are being
registered by the Company for the accounts of the Selling Stockholders. The
Company will pay all expenses of registering the Shares (provided that the
Company will not be liable for any stock transfer taxes or for any legal fees or
expenses of any Selling Stockholder to effect the sale of Shares). The Company
will not receive any of the proceeds from sales of the Shares by any of the
Selling Stockholders. As of the date of this Prospectus, the Company understands
that none of the Shares will be offered through underwriters.
The Shares may be offered and sold by the Selling Stockholders pursuant
to this Prospectus from time to time through one or more brokers or dealers or
through privately negotiated transactions or otherwise, at market prices
prevailing at the time of sale or at prices otherwise negotiated. In connection
therewith, brokerage commissions may be paid or discounts allowed that will not
exceed those customary in the types of transactions involved. The Selling
Stockholders and participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act, and commissions or
discounts or any profit realized on the sale of the Shares received by a Selling
Stockholder or any such broker or dealer may be deemed to be underwriting
commissions or discounts within the meaning of the Securities Act. As of the
date of this Prospectus, the Company understands that none of the Selling
Stockholders has any agreement, arrangement or understanding with any brokers or
dealers concerning the distribution of the Shares. The Company has agreed to
indemnify the Selling Stockholders against certain liabilities under the
Securities Act of 1933.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Saul, Ewing, Remick & Saul LLP, Philadelphia,
Pennsylvania.
EXPERTS
The financial statements of the Company contained in the Company's
annual report on Form 10-KSB for the fiscal year ended June 30, 1997,
incorporated by reference in this Prospectus, have been audited by Richard A.
Eisner & Company, LLP, independent auditors, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon such
report given upon the authority of said firm as experts in accounting and
auditing.
The financial statements of CorBec Pharmaceuticals, Inc. as of December
31, 1996 and 1995 and for the years then ended and for the period from inception
(June 11, 1993) to December 31, 1996, incorporated by reference in this
Prospectus and elsewhere in the Registration statement, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. Reference is made to
their report, which includes an explanatory paragraph regarding CorBec
Pharmaceuticals, Inc.'s ability to continue as a going concern.
- 29 -
<PAGE> 31
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or the Selling
Stockholders. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy to any person in any jurisdiction in which such
offer or solicitation would be unlawful or to any person to whom it is unlawful.
Neither the delivery of this Prospectus nor any offer or sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company or that information contained herein is
correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Available Information ................................................ 2
Incorporation of Certain Documents
by Reference ....................................................... 2
The Company .......................................................... 4
Recent Events ........................................................ 4
Risk Factors ......................................................... 6
Selling Stockholders ................................................. 20
Plan of Distribution ................................................. 29
Legal Matters ........................................................ 29
Experts .............................................................. 29
21,789,672 Shares
INKINE PHARMACEUTICAL COMPANY, INC.
Common Stock
--------------
PROSPECTUS
--------------
December __, 1997
<PAGE> 32
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the securities
being registered will be borne by the Company. Other than the SEC registration
fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC registration fee $ 8,048
Accounting fees and expenses 10,000
Legal fees and expenses 15,000
Printing 10,000
Miscellaneous expenses 11,952
-------
Total $55,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 721-726 of the New York Business Corporation Law empower a
corporation to indemnify any person, made, or threatened to be made, a party to
an action or proceeding, other than one by or in the right of the corporation,
whether civil or criminal, by reason of the fact that he or she was a director
or officer of the corporation or served such corporation in any capacity. The
corporation is empowered to indemnify such director or officer against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorney's fees, if such director or officer acted, in good faith, for a purpose
which he or she reasonably believed to be in the best interest of the
corporation and, in criminal actions or proceedings, had no reasonable cause to
believe that his or her conduct was unlawful.
The Company's Certificate of Incorporation provides that the directors
of Corporation shall not be liable for damages for any breech of duty as
directors, except that a director shall be liable if a judgment or other final
adjudication adverse to such director establishes that his acts or omissions
were in bad faith or involved intentional misconduct or a knowing violation of
law or that he personally gained in fact a financial profit or other advantage
to which he was not legally entitled or that his acts violated Section 719 of
the New York Business Corporation law.
ITEM 16. EXHIBITS.
The following is a list of exhibits filed as part of the Registration Statement:
5 Opinion of Saul, Ewing, Remick & Saul LLP as to the legality of the
securities registered hereunder
23.1 Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Arthur Andersen, LLP
23.3 Consent of Saul, Ewing, Remick & Saul, LLP (included in Exhibit 5)
24 Power of Attorney (contained on signature page of initial filing)
<PAGE> 33
ITEM 17. UNDERTAKINGS.
a. The undersigned Registrant hereby undertakes:
(i) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement
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;
and
(ii) that, for the purpose for determining any liability under
the Securities Act of 1933, 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; and
(iii) to remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at
the termination of the offering.
b. 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 liability (other than payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on December 18,
1997.
INKINE PHARMACEUTICAL
COMPANY, INC.
By: /s/ Leonard S. Jacob
---------------------
Leonard S. Jacob, M.D., Ph.D.
Chairman of the Board and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby makes, constitutes and appoints Leonard S. Jacob and Robert
F. Apple, and each of them, with full power to act without the other, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this Registration Statement,
including post-effective amendments, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or any
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Leonard S. Jacob Chairman of the Board and December 18, 1997
- --------------------------------- Chief Executive Officer
Leonard S. Jacob, M.D., Ph.D. (principal executive officer)
/s/ Taffy J. Williams President, Chief Operating December 18, 1997
- --------------------------------- Officer and Director
Taffy J. Williams, Ph.D.
/s/ Robert F. Apple Vice President, Finance and December 18, 1997
- --------------------------------- Administration (principal
Robert F. Apple financial officer)
/s/ Jerry A. Weisbach Director December 18, 1997
- ---------------------------------
Jerry A. Weisbach, Ph.D.
/s/ J.R. LeSufy Director December 18, 1997
- ---------------------------------
J.R. LeShufy
/s/ Thomas P. Stagnaro Director December 18, 1997
- ---------------------------------
Thomas P. Stagnaro
</TABLE>
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
5 Opinion of Saul, Ewing, Remick & Saul LLP as to the legality of the
securities registered hereunder
23.1 Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Arthur Andersen, LLP
23.3 Consent of Saul, Ewing, Remick & Saul, LLP (included in Exhibit 5)
24 Power of Attorney (contained on signature page of initial filing)
</TABLE>
<PAGE> 1
EXHIBIT 5
[LETTERHEAD OF SAUL, EWING, REMICK & SAUL LLP]
December 18, 1997
InKine Pharmaceutical Company, Inc.
425 Park Avenue
New York, NY 10022
Gentlemen:
We refer to the Registration Statement on Form S-3 (the "Registration
Statement") of InKine Pharmaceutical Company, Inc., a New York corporation
(the "Company"), to be filed with the Securities and Exchange Commission
covering the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of up to 21,789,672 shares of common stock, par value $.0001
per share, of the Company (the "Shares"), including (i) 19,198,430 (the
"Original Shares") currently issued and outstanding and (ii) 2,591,242 shares
(the "Warrant Shares") issuable upon exercise of certain warrants (the
"Warrants"), all as described in the Prospectus included in the Registration
Statement.
We have examined the Registration Statement, the Certificate of
Incorporation and By-laws of the Company and such records, certificates and
other documents as we have considered necessary or appropriate for the purposes
of this opinion. Without limiting the generality of the foregoing, in our
examination we have assumed without independent verification that (i) each
natural person executing a document we examined is legally competent to do so,
(ii) all documents submitted to us as originals are authentic, the signatures
on all documents that we examined are genuine, and all documents submitted to
us as certified, conformed, photostatic or facsimile copies conformed to the
original document, and (iii) all corporate records made available to us by the
Company and or public records reviewed are accurate and complete.
Based on the foregoing, it is our opinion that:
1. the Original shares were, when issued, duly authorized, validly
issued, fully paid and non-assessable; and
2. the Warrant Shares have been duly authorized and, when issued in
accordance with the terms of the Warrants, and upon receipt by the Company of
payment therefor as provided in the Warrants, will be validly issued, fully
paid and non-assessable.
<PAGE> 2
InKine Pharmaceutical Company, Inc.
December 18, 1997
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this from under the caption
"Legal Matters" in the Prospectus contained therein. In giving this consent, we
do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
SAUL, EWING, REMICK & SAUL LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of InKine Pharmaceutical Company, Inc., a development stage company,
(the "Company") of our report dated July 24, 1997 relating to the balance sheet
of the Company, formerly known as Panax Pharmaceutical Company Ltd., as of June
30, 1997 and the related statements of operations, changes in stockholders'
equity (deficiency) and cash flows for each of the years in the two-year period
ended June 30, 1997 and for the period July 1, 1993 (commencement of the
operations) through June 30, 1997 included in the Company's annual report on
Form 10-KSB for the fiscal year ended June 30, 1997. We also consent to the
reference to our firm under the caption "Experts" in the prospectus.
Richard A. Eisner & Company, LLP
New York, New York
December 16, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this S-3 Registration Statement of our report on CorBec
Pharmaceuticals, Inc. dated March 11, 1997 included in InKine Pharmaceutical
Company, Inc.'s (formerly Panax Pharmaceutical Company Ltd.) Proxy Statement
dated October 7, 1997 and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
December 18, 1997
