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As filed with the Securities and Exchange Commission on January 20, 2000
Registration No. 333-89365
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SECURITIES AND EXCHANGE COMMISSION
------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INKINE PHARMACEUTICAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-3754005
(State or other jurisdiction of incorporation organization) (I.R.S. Employer Identification No.)
</TABLE>
1720 WALTON ROAD, SUITE 200, BLUE BELL, PENNSYLVANIA 19422, (610) 260-9350
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------------------
LEONARD S. JACOB, M.D., PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INKINE PHARMACEUTICAL COMPANY, INC.
1720 WALTON ROAD, BLUE BELL, PENNSYLVANIA
19422, (610) 260-9350 (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.[ ]
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<PAGE> 2
PROSPECTUS
3,069,229 SHARES
INKINE PHARMACEUTICAL COMPANY, INC.
COMMON STOCK, PAR VALUE $.0001 PER SHARE
The shareholders named on page 12 are selling up to 3,069,229 shares of
InKine's stock.
InKine's common stock is traded on the Nasdaq SmallCap Market under the
symbol "INKP". On January 14, 2000, the reported closing price of the common
stock was $3.0625 per share. InKine's principal executive offices are located at
1720 Walton Road, Suite 200, Blue Bell, PA 19422, and its telephone number is
(610) 260-9350.
--------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 1 OF THIS PROSPECTUS.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JANUARY 20, 2000
<PAGE> 3
TABLE OF CONTENTS
RISK FACTORS............................................................ 1
RECENT EVENTS........................................................... 10
USE OF PROCEEDS......................................................... 10
SELLING SHAREHOLDERS.................................................... 11
PLAN OF DISTRIBUTION.................................................... 12
AVAILABLE INFORMATION................................................... 13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 13
LEGAL MATTERS........................................................... 14
EXPERTS................................................................. 14
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RISK FACTORS
Investing in our common stock is very risky. You should be able to bear
a complete loss of your investment. This prospectus and the documents included
in this prospectus contain forward-looking statements that involve risks or
uncertainties. Actual events or results may differ from those discussed in this
prospectus and the documents included in this prospectus. Factors that could
cause or contribute to such differences include, but are not limited to, the
factors discussed below as well as those discussed elsewhere in this prospectus
and in the documents included in this prospectus.
IF WE DO NOT OBTAIN ADDITIONAL CAPITAL IN THE NEAR TERM, THEN WE MAY NOT BE ABLE
TO CONTINUE OUR OPERATIONS BEYOND JUNE 30, 2000.
We need substantial additional capital to develop, manufacture and
market our proposed products. Specifically, we will spend funds for the
following:
- Researching and developing its proposed products, including
participating in human clinical trials and animal studies
conducted before clinical trials;
- Seeking necessary approvals from the government;
- Developing manufacturing and distribution capabilities; and
- Funding our growth as a company.
We believe that our current capital resources will fund our operations
through June 30, 2000. Our future capital requirements will depend on a variety
of factors. For example, if we experience continued progress in our research and
development activities, or if we determine that it is necessary to prosecute and
enforce our patents, we will require additional capital. In addition, our future
marketing activities will affect our future capital requirements. Because we
have no experience in marketing our products, we have no experience in
predicting how much capital will be necessary to successfully complete our
marketing plans. If we fail to accurately predict our future capital
requirements, we may be unable to continue our operations.
We regularly seek funding for our operations from a variety of sources,
including public and private securities offerings, loans and joint arrangements
with partners. We currently do not possess a commitment to obtain additional
funding, and we may never receive additional funding in the future. If we fail
to obtain additional funding, we will delay, scale back or eliminate our
research and development activities or enter into arrangements with others to
develop and market certain proposed products that we may otherwise have
developed ourselves.
WE HAVE NOT GENERATED ANY REVENUE TO DATE. IF WE CONTINUE TO INCUR SUBSTANTIAL
LOSSES, THEN THE VALUE OF OUR COMMON STOCK IS LIKELY TO BE REDUCED. ALSO, WE MAY
NEVER ACHIEVE A PROFITABLE LEVEL OF OPERATION.
<PAGE> 5
To date, we have engaged solely in the research and development of
proposed drug products. We have not generated any revenue from product sales or
royalties and will not do so until the U.S. Food and Drug Administration, or
FDA, has approved our products and we manufacture and market them successfully.
We have incurred losses in each year since our inception on July 1, 1993. As of
June 30, 1999, we had an accumulated deficit of approximately $23.1 million.
Our proposed products are in various stages of development and require
significant research, development and testing. We must obtain all of the
necessary government approvals for our products before we can sell any proposed
product. As a result, we believe our losses will increase further in the
foreseeable future as we develop our products.
If our research spending in the foreseeable future is greater than
potential sales revenue, then we may never be able to conduct our operations at
a profit. Our common stock is likely to decrease in value if we are unable to
generate profits or if the market believes that we are unable to do so.
We have granted or committed to grant shares and options to founding
scientists and consultants when we achieve agreed upon product development
goals. These goals relate to our filing applications with the FDA, and achieving
agreed upon sales targets. As a result, our potential earnings per share will
decrease because of the necessary accounting treatment of these options.
IF WE DO NOT OBTAIN REQUIRED APPROVALS FROM THE GOVERNMENT, THEN WE MAY NOT
SUCCESSFULLY MARKET OR SELL OUR PRODUCTS.
The FDA requires multiple stages of tests, known as phase I, II and III
clinical trials, on all pharmaceutical products. In addition, the FDA must
confirm that our drug manufacturers are complying with applicable federal
regulations.
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The process to obtain government approvals of a pharmaceutical product takes
many years and requires substantial resources.
The FDA may delay or deny the approval of our proposed products. If the
FDA delays or denies approval of a proposed product, then we may delay or stop
marketing this product. We do not believe we are subject to risks which are
materially different than other pharmaceutical companies seeking FDA approval,
but the process of obtaining FDA approval is expensive, time-consuming and often
filled with unexpected problems. Even if we receive approval of a product
candidate, the FDA may limit and restrict the drug's use and may subject our
products to continuous review. If we fail to comply with any applicable
regulatory requirements, the FDA could impose penalties on us, including:
- warning letters;
- fines;
- withdrawal of regulatory approval;
- product recalls;
- operating restrictions;
- injunctions; and
- criminal prosecution.
1. FDA marketing approval:
We submit the results of our scientific studies, commonly
referred to as preclinical studies, to the FDA as part of an investigational new
drug application, commonly referred to as an IND. An IND is a summary document
describing the drug product, the safety of the drug product and the filer's
proposed use of the drug product. After the FDA approves the IND, we will
conduct human clinical trials (phase I, II and III). We then submit the results
of these trials to the FDA as part of a new drug application, or NDA. The FDA
requires the filing of the NDA, which summarizes all human clinical and
manufacturing experiences of the drug. The FDA approves a drug on the basis of
the NDA. After we file the NDA, the FDA may approve the product for marketing,
require additional testing or deny the application.
2. FDA manufacturing approval:
The FDA requires pharmaceutical companies to include detailed
manufacturing information in an NDA. The FDA has mandated that all manufacturing
facilities and processes comply with good manufacturing practices, or GMP. GMP
is a body of federal regulations and guidelines that govern the manufacture of
drugs for human use. For example, all manufacturers must pass manufacturing
plant inspections and provide records of detailed manufacturing processes. Among
other things, drug manufacturers must demonstrate that:
- the drug product can be consistently manufactured at the same
quality standard;
- the drug product is stable over time; and
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- the level of chemical impurities in the drug product are under
a designated level.
For example, the FDA has not approved our manufacturing
process for DIACOL(TM). DIACOL(TM) is one of our proposed products that is taken
in tablet form and used to clean the colon for medical purposes. The FDA may
delay or prevent us from marketing DIACOL(TM) if we do not consistently
manufacture appropriate amounts of DIACOL(TM) or cannot repeat the manufacturing
process used to manufacture the phase III clinical trial batches of DIACOL(TM).
3. FDA oversight after product approval:
The FDA will regulate us after a product has been approved.
The FDA may require post-marketing testing and surveillance to monitor the
effects of an approved drug product. The FDA may also place conditions on any
approvals that could restrict the sale or use of a product.
4. Status of our products in the FDA approval process:
Our proposed products are in various stages of development and
in various stages of the FDA approval process, as set forth below:
- DIACOL(TM). We have completed a phase I, IIb, and two phase
III clinical trials for DIACOL(TM). We submitted a NDA for
DIACOL(TM) to the FDA on November 23, 1999. We are awaiting
FDA approval to begin marketing DIACOL(TM). Pending the FDA's
approval of DIACOL, we are developing plans for the
manufacture and marketing of DIACOL. Although we do not know
what the FDA's response to our NDA will be, we hope to
implement these plans shortly after the FDA responds.
- CBP-1011. We developed CBP-1011 as a compound for the
treatment of idiopathic thrombocytopenic purpura, or ITP, an
autoimmune disease which causes spontaneous bleeding. CBP-1011
is currently in phase III clinical trials. We refer to
CBP-1011 and certain related products as the Fc receptor
technology.
- Thrombospondin technology products. We have acquired an
exclusive worldwide license to a cancer treatment technology
known as the thrombospondin technology. We are evaluating a
number of product opportunities utilizing the thrombospondin
technology in the area of cancer treatment, which are in the
early stages of development (before phases I, II and III). We
have not begun human clinical trials for these products.
We may never receive FDA approval for any of these products, and
without FDA approval, we may not manufacture, market or sell these products.
IF WE DO NOT DEVELOP AND MAINTAIN RELATIONSHIPS WITH MANUFACTURERS, THEN WE MAY
NOT SUCCESSFULLY MANUFACTURE AND SELL OUR PRODUCTS.
We do not possess the capabilities, resources or facilities to
manufacture any of our proposed products. We must contract with manufacturers to
produce our proposed products according to government regulations. Our future
development and delivery of our products on a timely, profitable and competitive
basis depends on the performance of these manufacturers. A limited number of
manufacturers exist which are capable of manufacturing our proposed products. We
may fail to contract with the necessary
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manufacturers or we may contract with manufacturers on terms which may not be
entirely acceptable to us.
Manufacturers may utilize their own technology, our technology or
technology obtained from others in developing a manufacturing process for our
products. We may pay a fee to the manufacturer if we utilize the manufacturing
process that the manufacturer has developed or if we seek a third party to
participate in the development process.
We have retained Pharmaceutical Manufacturing Research Services, a
manufacturing development company, to develop a manufacturing process for
DIACOL(TM) which meets FDA requirements. We are currently seeking an appropriate
manufacturer to produce CBP-1011 and other proposed products. We may be unable
to develop a cost-effective manufacturing process for these products.
IF WE DO NOT DEVELOP AND MAINTAIN EITHER INTERNAL OR EXTERNAL MARKETING
CAPABILITIES, THEN WE MAY NOT SUCCESSFULLY SELL OUR PRODUCTS.
We have no experience in marketing, distributing and selling
pharmaceutical products. We may contract with third parties which specialize in
marketing, selling and distributing pharmaceutical products or try to build an
internal sales and marketing operation. If we choose to utilize third parties
for sales and marketing, then we may exert limited control over these third
parties and the amount and timing of resources which they devote to our
products. We may not achieve our desired amount of revenue from product sales if
these third parties fail to market and sell our products effectively.
We may establish an internal sales and marketing force. If we choose to
follow this strategy, then we will have to spend significant additional funds
and devote significant resources and time to establish this internal sales and
marketing force. Because of our inexperience in these areas, however, we may not
successfully implement an internal sales and marketing force which is
competitive or cost effective.
We may choose to license our products to others to market, or
circumstances may force us to license our products if we do not develop adequate
manufacturing and marketing capabilities. If we license our products, we will
receive less revenue and may realize less profit.
IF WE CANNOT DEVELOP AND MARKET OUR PRODUCTS AS RAPIDLY OR COST-EFFECTIVELY AS
OUR COMPETITORS, THEN WE WILL NOT BE ABLE TO CONDUCT OUR OPERATIONS AT A PROFIT.
We are developing products that will compete in three very competitive
segments of the pharmaceutical industry. The three segments are those which
include (i) DIACOL(TM), (ii) CBP-1011, and (iii) the thrombospondin technology.
Based on total assets and revenues, we are significantly smaller than the
majority of our competitors in these segments. Therefore, we may encounter
significant competition with respect to each of our potential products,
primarily from the following competitors:
PRODUCT CANDIDATES
<TABLE>
<CAPTION>
Thrombospondin
DIACOL(TM) CBP-1011 Technology
<S> <C> <C> <C>
</TABLE>
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<TABLE>
<S> <C> <C> <C>
COMPETITORS Braintree Laboratories, La Jolla Pharmaceutical Boston Life Sciences,
Inc. Company Inc.
C.B. Fleet Company, Inc. GeneLabs Technologies, Inc. Entremed, Inc.
Schwarz Pharma Inc. IDEC Pharmaceuticals Human Genome Sciences
Corporation
Immune Response
Corporation
Autoimmune, Inc.
Anergen, Inc.
</TABLE>
The financial strength of our competitors is particularly important in
the pharmaceutical industry, where technological innovations occur rapidly.
These technological innovations can dramatically affect the price and
effectiveness of a product line, and they can render a competing product line
obsolete. Our competitors that have strong financial resources may develop
competitive products that are cheaper and more effective than our products.
These competitive products may render our products unmarketable or
non-competitive. Even if our competitors do not develop better and more cost
effective products, they may manufacture and market their products more
successfully than us. Therefore, our competitors may capture all or a large
segment of our market, severely restricting our ability to achieve a profitable
level of product sales.
In addition to our competitors in the pharmaceutical industry, colleges
and universities, hospitals, government agencies and other research
organizations are conducting research and seeking patent protection for a
variety of products which may compete with our products. Any of these
organizations could develop products which could render our products obsolete or
non-competitive.
IF THE OWNERS OF TECHNOLOGY LICENSED TO US TERMINATE OUR LICENSE AGREEMENTS,
THEN THESE OWNERS COULD PREVENT US FROM DEVELOPING, MANUFACTURING OR SELLING
THAT PRODUCT COVERED BY THAT LICENSE.
We have acquired the worldwide exclusive right to market DIACOL(TM),
the Fc receptor technology and the thrombospondin technology under various
license agreements. Each of the owners of the technology licensed to us may
terminate the license prior to its expiration date under certain circumstances,
including our failure to comply with commitments related to the development of
the products specified in the licenses. For example, some of our licensing
agreements require us to spend specific amounts for research and development of
our products. If we do not comply with the terms of these agreements, the owners
of the licensed technology could demand the return of all rights to the licensed
technology, and force us to cease developing, manufacturing or selling the
products covered by that license.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, THEN OUR COMPETITORS MAY
DEVELOP SIMILAR PRODUCTS WHICH COULD RENDER OUR PRODUCTS OBSOLETE.
Our success depends, in part, on our ability to develop and maintain a
strong patent position for our products and technologies both in the United
States and other countries. As with most biotechnology and pharmaceutical
companies, our patent position is highly uncertain and involves complex legal
and factual questions. Without patent and other protections, other companies
could offer substantially identical products for sale without incurring the
sizeable development and testing costs that we have incurred. Our ability to
recoup these expenditures and realize profits upon sale of product could be
diminished.
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The process of obtaining patents can be time consuming and expensive.
Even if we spend the necessary time and money, a patent may not issue or it may
insufficiently protect the technology it was intended to protect. We can never
be certain that we were the first to develop the technology or that we were the
first to file a patent application for the particular technology because U.S.
patent applications are maintained in secrecy until a patent issues and
publications in the scientific or patent literature lag behind actual
discoveries.
Even after the U.S. Patent and Trademark Office issues patent rights to
us, our competitors may develop similar or duplicate technologies or design
around the patented aspects of our technology, which may decrease sales of our
prospective products, therefore causing a negative impact on our profit.
Competitors may also challenge our patent rights in court by alleging patent
infringement. If we lose a patent infringement suit, third parties may claim
significant damages, require us to license the disputed technology or require us
to cease using the disputed technology.
In 1997, the U.S. Patent and Trademark Office issued a patent covering
the use of DIACOL(TM) as a colonic cleansing agent or as a laxative. We have
filed patent applications for DIACOL(TM) under the Patent Cooperation Treaty
which designate Europe and Canada.
One of our products, CBP-1011 (within the Fc receptor technology), is
not patentable. Instead of a patent, we expect that CBP-1011 will receive
protection based on FDA designation of Orphan Drug Status, which means the FDA
has determined that the number of people affected by the disease to be treated
by the drug is less than 200,000, and that having numerous companies compete for
the market is unrealistic and likely to harm, rather than help, prospective
users of the product. If we receive this designation, we will have an exclusive
right to sell CBP-1011 for seven years.
Patents or patent applications are pending for our TSP-1 peptide, one
of the thrombospondin technology compounds. The area of cancer technology is
complex and the patents covering our TSP-1 peptide may not be adequate.
We have also obtained the rights to foreign patents, and intend to
apply for additional foreign patents, for other products and technologies.
Competitors could challenge or develop around the patents, or the scope of the
patents may not be adequate to protect the patented product from competitors.
The commercial success of our products will also depend upon our ability to make
sure the products do not infringe on patents issued to competitors. We have not
conducted a search to determine if there are any patents similar to those
covering DIACOL(TM) or the TSP-1 peptide.
Our employees or scientific consultants may develop inventions or
processes independently that may be related to our products. These employees or
consultants could
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<PAGE> 11
claim ownership of these inventions or processes, and these claims could
succeed. We may need to enter into protracted and costly litigation to enforce
or determine the scope of our proprietary rights.
Government agencies and academic institutions have funded the
development of some of our patented technologies, in particular the
thrombospondin technology and the Fc receptor technology. Although we have
acquired the rights to use such technology, these agencies or institutions may
have rights to the technology or inventions, including rights to the
royalty-free use, but not sale, of the invention or technology for our own
purposes.
IF WE DO NOT RECEIVE ADEQUATE REIMBURSEMENT FROM THE GOVERNMENT, MANAGED CARE
ORGANIZATIONS AND PRIVATE INSURANCE PLANS, THEN SOME PATIENTS MAY BE UNABLE OR
UNWILLING TO PURCHASE OUR PRODUCTS AND WE WILL ACHIEVE LESS REVENUE FROM PRODUCT
SALES.
Successful sales of our products in the United States and other
countries depends on the availability of adequate reimbursement from the
government, managed care organizations and private insurance plans.
Pharmaceutical companies often use reimbursement as the basis for determining
their sales. In the pharmaceutical industry, unlike other consumer product
industries, insurance companies, including managed care organizations, often pay
drug manufacturers and distributors directly for their products. In fact,
pharmaceutical companies make a majority of their sales to insurance companies
and not to consumers. These organizations provide for reimbursement only after
considering a number of factors, including product features such as safety,
medical necessity, cost and the experimental nature of the product. We will
spend significant amounts of time and other resources to obtain reimbursement
for our products. The organizations which provide reimbursement routinely limit
reimbursement and attempt to exert significant pressure on medical suppliers to
lower their prices.
We cannot predict the amounts or reliability of reimbursement because
reimbursement for pharmaceutical products incorporating new technology is
historically unpredictable in the pharmaceutical industry. Additionally,
reimbursement varies from country to country. We do not know whether our
products will qualify for reimbursement from domestic or foreign reimbursement
sources.
IF THE HOLDERS OF OUR OUTSTANDING OPTIONS AND WARRANTS EXERCISE SUCH OPTIONS AND
WARRANTS, THEN THE MARKET PRICE OF THE COMMON STOCK MAY DROP.
We have a total of approximately 11 million options and warrants
outstanding. Options and warrants give the holder the right to purchase shares
of a company's stock in the future for a predetermined price which may or may
not be below the current market value of the company's stock at the time the
option or warrant is exercised. In addition, we can issue an additional 1.9
million options pursuant to our option plans. To date, option and warrant
holders have exercised approximately 843,000 options and warrants in the
aggregate at prices ranging from $0.50 to $1.37. We believe that option holders
and warrant holders may exercise options and warrants when we are able to obtain
additional financing on more favorable terms. The exercise of these outstanding
warrants and options and the sale of the related shares may cause our common
stock price to drop.
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IF OUR COMMON STOCK CONTINUES TO BE VOLATILE AND THINLY TRADED, THEN OUR
SHAREHOLDERS MAY NOT BE ABLE TO SELL THEIR SHARES WHEN DESIRED.
The market price of our common stock, similar to other
development-stage public pharmaceutical or biotechnology companies, has been
volatile and may remain volatile for the foreseeable future. Our shareholders
may not sell their shares when they desire because the stock price is highly
volatile and the stock is not widely traded. For example, the number of our
shares theoretically available for sale in any one day is approximately
19,400,000 shares and its average daily trading volume has historically been
approximately 146,000 shares. If our stock continues to trade thinly, our
shareholders may not be able to sell their shares when desired.
IF WE DO NOT MAINTAIN THE NECESSARY STANDARDS FOR LISTING ON THE NASDAQ SMALLCAP
MARKET, THEN OUR SHAREHOLDERS MAY NOT BE ABLE TO SELL THEIR SHARES WHEN DESIRED.
Our common stock is listed on the Nasdaq SmallCap Market. We must meet
specific requirements to maintain our listing. For example, Nasdaq requires a
minimum bid price of $1.00 per share. On several occasions in the first two
quarters of fiscal year 1999, the price of our common stock dropped below $1.00.
We were not removed from Nasdaq on these occasions. If the stock price drops
below $1.00 in the future, Nasdaq may remove us from listing.
If Nasdaq removes our stock from listing, our shareholders would trade
their shares in the over-the-counter market or electronic bulletin board,
commonly referred to as the "pink sheets". Our shareholders may have difficulty
selling their shares when they desire or obtaining accurate price quotations if
their shares trade on the pink sheets rather than Nasdaq.
If Nasdaq removes our stock from listing and its price is below $5.00
per share, these events will trigger the SEC's so called "penny stock" rules.
These rules impose additional sales practice requirements on broker-dealers who
sell these securities to certain purchasers. The broker-dealers must make a
special suitability determination for the purchase and must obtain the
purchaser's written consent to the transaction prior to sale. If Nasdaq removes
our stock from listing and we become subject to the penny stock rules,
broker-dealers and shareholders of ours may not be able to sell their shares
when desired.
IF WE DO NOT HAVE ADEQUATE INSURANCE FOR PRODUCT LIABILITY CLAIMS, WE MAY BE
SUBJECT TO SIGNIFICANT EXPENSES RELATING TO THESE CLAIMS.
We are subject to significant product liability risks relating to the
testing, manufacturing and sale of the products we are developing. These risks
include:
- Our proposed products could cause undesirable side effects or
injury during clinical trials;
- Our products could cause undesirable side effects or injury
when sold; or
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- We may agree to reimburse others that incur liability relating
to our product.
We currently maintain insurance for product liability claims in the
amount of $10,000,000 per occurrence and $10,000,000 in the aggregate. We have
no way of knowing if these amounts will be adequate to cover any product
liability claims filed against us. If we do not or cannot maintain adequate
insurance coverage, we may incur a significant liability if a product liability
claim arises.
IF OUR CERTIFICATE OF INCORPORATION AND NEW YORK LAW CONTINUE TO CONTAIN
PROVISIONS THAT DISCOURAGE POTENTIAL TAKEOVERS, THEN OUR SHAREHOLDERS MAY NOT
RECEIVE A PREMIUM FOR THEIR SHARES IN A TAKEOVER SITUATION AND WILL BE SUBJECT
TO CERTAIN RESTRICTIONS ON VOTING AND OTHER RIGHTS.
Our board of directors has the right, granted under our certificate of
incorporation, to authorize certain preferred stock which may have a variety of
terms, commonly known as blank check preferred stock. The board of directors may
designate the rights and preferences of this stock without shareholder approval.
If the directors authorize and issue this stock, potential purchasers of the
company may be unable to purchase the common stock at a premium over its market
price. In addition, the board of directors issuing this stock could have a
negative impact on the market price of the stock, and the voting rights and
other rights of the holders of the common stock.
New York corporate law places restrictions on transactions with
beneficial owners of 20% or more of the outstanding voting shares of a
corporation. These restrictions could reduce the potential that a third party
will attempt a takeover of us and therefore reduce the chances of shareholders
receiving a premium for their shares over the market price.
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RECENT EVENTS
On September 20, 1999, InKine sold a total of 2,307,691 shares of
common stock and warrants to purchase 761,538 shares of common stock to The Tail
Wind Fund, Ltd., Resonance Limited, Oxford Bioscience Partners II L.P. and
Oxford Bioscience Partners (Bermuda) II Limited Partnership for a total purchase
price of $3 million. The selling shareholders may exercise the warrants at $1.78
per share at any time before September 20, 2003. InKine agreed to file the
registration statement, of which this prospectus is a part, which enables the
selling shareholders to sell their shares, including the shares obtained on the
exercise of the warrants. InKine also agreed to reimburse the selling
shareholders for liability InKine causes by making any untrue statements of
material fact or failing to state a material fact in this registration
statement.
USE OF PROCEEDS
The selling shareholders will receive all of the proceeds from the sale
of the shares of common stock.
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SELLING SHAREHOLDERS
The table below describes the amount of common stock owned by the
selling shareholders on January 14, 2000 and the number of shares of common
stock the selling shareholders are selling under this prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SHARES SHARES OWNED SHARES OWNED
SHARES OFFERED PRIOR TO AFTER
SELLING SHAREHOLDERS OWNED(1) HEREBY(1) OFFERING(2) CLOSING(2)
-------------------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C>
The Tail Wind Fund, Ltd. 2,046,153(3) 2,046,153(3) 7.7% 0
Resonance Limited 511,538(4) 511,538(4) 1.9% 0
Oxford Bioscience Partners II L.P. 2,042,406(5)(6) 292,406(5) 7.6% 6.6%
Oxford Bioscience Partners (Bermuda) 1,969,132(8) 219,132(7) 7.4% 6.6%
II Limited Partnership
</TABLE>
- ----------
(1) Assumes the exercise of all outstanding warrants owned by the selling
shareholders.
(2) Based on shares of common stock outstanding as of January 14, 2000 and
includes 761,538 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholders.
(3) Includes 507,692 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(4) Includes 126,923 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(5) Includes 72,552 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(6) This information is presented in reliance on information disclosed in a
Schedule 13-G filed by this selling shareholder, and includes 749,665
shares of common stock held by Oxford Bioscience Partners (Bermuda) II
Limited Partnership, an affiliate of the selling shareholder.
(7) Includes 54,371 shares of common stock which are issuable upon the
exercise of outstanding warrants owned by the selling shareholder.
(8) This information is presented in reliance on information disclosed in a
Schedule 13-G filed by this selling shareholder, and includes 1,000,335
shares of common stock held by Oxford Bioscience Partners II L.P., an
affiliate of the selling shareholder.
-12-
<PAGE> 16
PLAN OF DISTRIBUTION
InKine is registering all of the shares on behalf of the selling
shareholders. InKine will receive no proceeds from this offering. "Selling
shareholders," as used in this prospectus, includes anyone who receives the
shares from the named selling shareholders after the date of this prospectus.
The selling shareholders may sell their shares from time to time. The selling
shareholders will act independently of InKine in making decisions about the
timing, manner and size of each sale. The selling shareholders may sell shares
on one or more exchanges or in the over-the-counter market or otherwise, at
prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The selling shareholders may use
one or more, or a combination, of the following methods to sell their shares:
- purchases by a broker-dealer as principal and the resale by
such broker or dealer for its account pursuant to this
prospectus;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- block trades in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- in options transactions; and
- for shares that qualify for resale under Rule 144 of the
Securities Act of 1933, or the Securities Act, under that rule
rather than this prospectus.
The selling shareholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
these transactions, broker-dealers may engage in short sales of the shares in
the course of hedging the positions they assume with the selling shareholders.
The selling shareholders also may sell shares short and redeliver the shares to
close out these short positions. The selling shareholders may enter into option
or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer these shares through this prospectus. The selling shareholders also may
loan or pledge the shares to a broker-dealer. The broker-dealer may sell the
shares so loaned, or upon a default the broker-dealer may sell the pledged
shares by use of this prospectus.
In effecting sales, broker-dealers engaged by the selling shareholders
may arrange for other broker-dealers to participate. Broker-dealers will receive
commissions or discounts from the selling shareholders in amounts to be
negotiated immediately prior to the sale. In offering the shares covered by this
prospectus, the selling shareholders and any broker-dealers who execute sales
for the selling shareholders may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. Any profits
realized by the selling shareholders and the compensation of any broker-dealer
may be deemed to be underwriting discounts and commissions. Because the selling
shareholders may be deemed to be underwriters, they will be subject to the
prospectus delivery requirements of the Securities Act. The selling shareholders
have advised InKine that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of the shares. No underwriter or coordinating broker is acting in
connection with the selling shareholders proposed sale of shares.
The selling shareholders will sell their shares only through registered
or licensed brokers or dealers if required under applicable state securities
laws. In addition, in
-13-
<PAGE> 17
some states the selling shareholders may not sell their shares unless the shares
have been registered or qualified for sale in the applicable state or the
selling shareholders comply with an available exemption from the registration or
qualification requirements.
Under applicable rules and regulations of the Securities Exchange Act
of 1934, or the Exchange Act, any person engaged in the distribution of the
shares may not simultaneously engage in market making activities with respect to
InKine's common stock for a period of two business days before the commencement
of this distribution. In addition, the selling shareholders will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations under the Exchange Act, including Regulation M, which provisions may
limit the timing of the selling shareholders' purchases and sales of shares of
InKine's common stock. InKine will make copies of this prospectus available to
the selling shareholders and has informed the selling shareholders of the need
for delivery of copies of this Prospectus to potential purchasers at or before
the time of any sale of the shares.
InKine will file a supplement to this prospectus, if required, under
Rule 424(b) under the Securities Act.
InKine has agreed to reimburse in certain circumstances the selling
shareholders against certain liabilities, including liabilities under the
Securities Act. The selling shareholders have agreed to reimburse in certain
circumstances InKine and certain related persons against certain liabilities,
including liabilities under the Securities Act.
AVAILABLE INFORMATION
InKine has filed a registration statement, of which this prospectus is
a part, and related exhibits with the SEC pursuant to the Securities Act. The
registration statement contains additional information about InKine and InKine's
common stock. InKine also files annual and quarterly reports, proxy statements
and other information with the SEC. You may read and copy the registration
statement or any other document InKine files with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the Public Reference Room.
The SEC also maintains a website that contains reports, proxy and
information statements, and other information that InKine has filed
electronically. The SEC's website is located at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows InKine to "incorporate by reference" the information
InKine provides in documents filed with the SEC, which means that InKine can
disclose important information by referring to those documents. The information
incorporated by reference is an important part of this prospectus. Any statement
contained in a document which is incorporated by reference in this prospectus is
automatically updated and superseded if information contained in this
prospectus, or information that InKine later files with the SEC, modifies and
replaces this information. InKine incorporates by reference the following
documents InKine has filed with the SEC:
1. annual report on Form 10-K for the year ended June 30, 1999;
-14-
<PAGE> 18
2. current report on Form 8-K filed on October 1, 1999;
3. proxy statement, dated October 8, 1999 for InKine's 1999
annual meeting of shareholders; and
4. The description of InKine's common stock, which is registered
under Section 12 of the Exchange Act, contained in InKine's
registration statement on Form 8-A, including any amendments
or reports filed for the purpose of updating such description.
All documents InKine has filed with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus will
become a part of this prospectus.
To receive a free copy of any of the documents incorporated by
reference in this prospectus call or write Robert F. Apple, Senior Vice
President and Chief Financial Officer, InKine Pharmaceutical Company, Inc., 1720
Walton Road, Suite 200, Blue Bell, PA 19422, telephone (610) 260-9350. InKine
will not send exhibits to the documents unless those exhibits have been
specifically incorporated by reference in this prospectus.
You should rely only on the information incorporated by reference or
included in this prospectus or the applicable prospectus supplement. InKine has
not authorized anyone else to provide you with different information. The
selling shareholders may only use this prospectus to sell securities if a
prospectus supplement is delivered with the prospectus, to the extent one is
required. The selling shareholders are only offering these securities in states
where the offer is permitted. You should not assume that the information in this
prospectus or the applicable prospectus supplement is accurate as of any date
other than the dates set forth on the front of these documents.
LEGAL MATTERS
Saul, Ewing, Remick & Saul LLP, Philadelphia, Pennsylvania, will pass
upon the validity of the shares of common stock offered in this prospectus for
InKine.
EXPERTS
The financial statements of InKine as of June 30, 1999 and 1998, and
for the years then ended and for the period from July 1, 1993 (commencement of
operations) through June 30, 1999 included in InKine's 1999 annual report on
Form 10-K, have been incorporated by reference in this prospectus and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, also incorporated by reference in this prospectus,
and upon the authority of KPMG LLP as experts in accounting and auditing.
The statements of operations, changes in shareholders' equity and cash
flows of InKine for the year ended June 30, 1997 and for the period (not
separately presented in the Form 10-K) from July 1, 1993 (inception) to June 30,
1997 contained in InKine's annual report on Form 10-K for the fiscal year ended
June 30, 1999, incorporated by reference in this prospectus and in the
registration statement, have been audited by Richard A. Eisner & Company, LLP,
independent auditors, and are incorporated by reference in this prospectus in
reliance upon such report given upon the authority of Richard A. Eisner &
Company, LLP as experts in accounting and auditing.
-15-
<PAGE> 19
You should rely only on the information contained in this prospectus or
incorporated by reference. InKine has not authorized anyone to provide you with
additional or different information. InKine is not making an offer of these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information contained in or incorporated by reference
in this prospectus is accurate as of any date other than the date on the front
cover of this prospectus, regardless of the date of delivery of this prospectus
or the date of any sale of the securities.
3,069,229
INKINE PHARMACEUTICAL COMPANY, INC.
Common Stock
------------------
Prospectus
------------------
January 20, 2000
<PAGE> 20
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
InKine will pay the following expenses incurred in connection with the
sale of the securities registered under this registration statement. Other than
the SEC registration fee, the amounts stated are estimates.
<TABLE>
<S> <C>
SEC registration fee ....................................... $ 1,409
Accounting fees and expenses ............................... 10,000
Legal fees and expenses .................................... 25,000
Printing ................................................... 3,000
Miscellaneous expenses ..................................... 2,000
-------
Total ............................................. $41,409
=======
</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. A
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.
InKine's certificate of incorporation provides that the directors of
InKine shall not be liable for damages for any breach 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 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.
InKine's bylaws provide that InKine shall indemnify and hold harmless
the directors and officers of InKine to the fullest extent currently authorized
by the New York Business Corporation Law. These provision indemnify these
persons against all expenses, liabilities, and losses that are reasonably
incurred or suffered. Further, the bylaws provide that InKine advance expenses
to persons eligible for indemnification. In addition, the bylaws authorize
InKine to maintain insurance to protect itself and any director or officer of
InKine against any expense, liability, or loss, whether or not InKine would have
the power to indemnify these persons against such expense, liability, or loss
under the New York Business Corporation Law.
<PAGE> 21
ITEM 16. EXHIBITS.
The following is a list of exhibits filed as part of the registration
statement:
No. Title
- --- -----
*4.1 Purchase Agreement dated September 20, 1999 between InKine and certain
Investors listed on the signature page thereto.
*4.2 Registration Rights Agreement dated September 20, 1999 between InKine
and certain Investors listed on the signature page thereto.
*4.3 Form of Common Stock Purchase Warrant (In accordance with Item 601 of
Regulation S-K, similar warrants granted to the selling shareholders
have not been filed because they are identical in all material respects
except for the number of warrants granted to each selling shareholder.)
**5 Opinion of Saul, Ewing, Remick & Saul LLP as to the legality of the
securities registered hereunder.
23.1 Consent of KPMG LLP.
23.2 Consent of Richard A. Eisner & Company, 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).
- ----------
* Filed as an Exhibit to the Registrant's registration statement on Form S-3
(File No. 333-89365) filed on October 20, 1999, and incorporated herein by
reference.
** FILED AS AN EXHIBIT TO AMENDMENT NO. 1 TO THE REGISTRANT'S REGISTRATION
STATEMENT ON FORM S-3 (FILE NO. 333-89365) FILED ON DECEMBER 21, 1999, AND
INCORPORATED HEREIN BY REFERENCE.
ITEM 17. UNDERTAKINGS.
A. Rule 415 Offering
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
II-2
<PAGE> 22
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not
apply if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under
the Securities Act 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. Filing Incorporating Subsequent Exchange Act Documents By
Reference.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
C. Request for Acceleration of Effective Date
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of 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.
D. Incorporated Annual and Quarterly Reports
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with this prospectus, to each person to whom this prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in this prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in this prospectus, to deliver, or
cause to be delivered to each person to whom this prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
this prospectus to provide such interim financial information.
II-3
<PAGE> 23
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 Blue Bell, Commonwealth of Pennsylvania, on January
20, 2000.
INKINE PHARMACEUTICAL
COMPANY, INC.
By: /s/ Leonard S. Jacob, M.D., Ph.D.
------------------------------------
Leonard S. Jacob, M.D., Ph.D.
Chairman and Chief Executive Officer
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, M.D., Ph.D. Chairman and Chief January 20, 2000
- ------------------------------------------ Executive Officer and
Leonard S. Jacob, M.D., Ph.D. Director
/s/ Robert F. Apple Sr. Vice President and January 20, 2000
- ------------------------------------------ Chief Financial Officer
Robert F. Apple (principal financial and
accounting officer)
/s/ Robert F. Apple, Attorney-in-Fact Sr. Vice President Clinical January 20, 2000
- ------------------------------------------ Research and Regulatory
Martin Rose, M.D., J.D. Affairs
/s/ Robert F. Apple, Attorney-in-Fact Director January 20, 2000
- ------------------------------------------
J.R. LeShufy
/s/ Robert F. Apple, Attorney-in-Fact Director January 20, 2000
- ------------------------------------------
Steven B. Ratoff
/s/ Robert F. Apple, Attorney-in-Fact Director January 20, 2000
- ------------------------------------------
Thomas P. Stagnaro
/s/ Robert F. Apple, Attorney-in-Fact Director January 20, 2000
- ------------------------------------------
</TABLE>
II-4
<PAGE> 24
<TABLE>
<S> <C> <C>
Robert A. Vukovich, Ph.D.
/s/ Robert F. Apple, Attorney-in-Fact Director January 20, 2000
- ------------------------------------------
Jerry Weisbach, Ph.D.
</TABLE>
II-5
<PAGE> 25
EXHIBIT INDEX
No. Title
--- -----
23.1 Consent of KPMG LLP.
23.2 Consent of Richard A. Eisner & Company, LLP.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
InKine Pharmaceutical Company, Inc.
We consent to the use of our report dated August 11, 1999, incorporated herein
by reference, and to the reference to our firm under the heading "Experts" in
the prospectus.
/s/ KPMG LLP
KPMG LLP
Philadelphia, Pennsylvania
January 19, 2000
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Amendment No. 2 to Form S-3) and related prospectus of
InKine Pharmaceutical Company, Inc. for the registration of 3,069,229 shares of
its common stock and to the incorporation by reference therein of our report
dated July 24, 1997 relating to the statements of operations, cash flows, and
changes in shareholders' equity of InKine Pharmaceutical Company, Inc. for the
year ended June 30, 1997 and for the period from July 1, 1993 (commencement of
operations) through June 30, 1997 (not separately presented therein), included
in its Annual Report on Form 10-K for the year ended June 30, 1999 filed with
the Securities and Exchange Commission.
/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
New York, New York
January 19, 2000
