<PAGE> 1
As filed with the Securities and Exchange Commission on May 31, 2000
Registration No. 333-37254
================================================================================
SECURITIES AND EXCHANGE COMMISSION
------------------
AMENDMENT NO. 2
TO
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>
<CAPTION>
<S> <C>
NEW YORK 13-3754005
(State or other jurisdiction of incorporation organization) (I.R.S. Employer Identification No.)
</TABLE>
1720 WALTON ROAD, BLUE BELL, PENNSYLVANIA 19422, (610) 260-9350
(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.
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. [ ]
<PAGE> 2
<PAGE> 3
----------
PROSPECTUS
----------
3,352,758 SHARES
INKINE PHARMACEUTICAL COMPANY, INC.
COMMON STOCK, PAR VALUE $.0001 PER SHARE
The shareholders named on page 11 are selling up to 3,352,758 shares
of InKine's stock.
InKine's common stock is traded on the Nasdaq SmallCap Market under the
symbol "INKP". On May 11, 2000, the reported closing price of the common stock
was $6.188 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 MAY 31, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
RISK FACTORS.........................................................................................................1
RECENT EVENTS.......................................................................................................10
USE OF PROCEEDS.....................................................................................................10
SELLING SHAREHOLDERS................................................................................................11
PLAN OF DISTRIBUTION................................................................................................13
AVAILABLE INFORMATION...............................................................................................14
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....................................................................15
LEGAL MATTERS.......................................................................................................16
EXPERTS.............................................................................................................17
</TABLE>
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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 REQUIRED APPROVALS FROM THE GOVERNMENT, THEN WE MAY NOT
SUCCESSFULLY MARKET OR SELL OUR PRODUCTS.
The U.S. Food and Drug Administration, or 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. 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 developing 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 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
<PAGE> 6
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
- 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(TM),
we are developing plans for the manufacture and
marketing of DIACOL(TM). 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 for ITP. In December 1999, we enrolled patients
in a phase II trial for the treatment of patients with
inflammatory bowel disease using CBP-1011. Inflamatory
bowel disease consists of both Chrohns disease and
ulcerative colitis, both of which are inflammation
disorders of the bowel. 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
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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.
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.
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 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 March 31, 2000, we had an accumulated
deficit of approximately $30.9 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 conduct our operations at a profit.
Our common stock is likely to decrease in value if we fail 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 shares and
options.
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 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 contracted with Pharmaceutical Manufacturing Research
Services, a manufacturing development company, to supply commercial quantities
of DIACOL(TM) in a manner which meets FDA requirements. To date, however, the
FDA has not approved the manufacturing processes of
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<PAGE> 8
Pharmaceutical Manufacturing Research Services. 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 or convert
from an external sales force after a few years of selling DIACOL(TM). 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:
<TABLE>
<CAPTION>
PRODUCT CANDIDATES
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Thrombospondin
DIACOL(TM) CBP-1011 Technology
--------- ------------ -----------
<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.
Centocor, Inc.
</TABLE>
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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.
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
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<PAGE> 10
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. In
January 1999 we received notice of allowance from the U.S. Patent and Trademark
Office for an application that we filed for numerous solid-dose colonic
cleansing agents. We have also filed 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 for ITP, 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 ITP for seven years. In October of 1999
we filed a U.S. patent application to treat inflammatory bowel disease with
CBP-1011 and other similar compounds. The U. S. Patent and Trademark Office has
not yet issued this patent.
Patents or patent applications are pending for our TSP-1 peptide and
angiocidin, two 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 and angiocidin.
Our employees or scientific consultants may develop inventions or
processes independently that may be related to our products. These employees or
consultants could 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.
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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 depend 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 WE DO NOT OBTAIN DEBT FINANCING OR ADDITIONAL CAPITAL IN THE FUTURE, THEN WE
MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS BEYOND DECEMBER 31, 2001.
We need 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 December 31, 2001. 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
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development activities or enter into arrangements with others to develop and
market certain proposed products that we may otherwise have developed
ourselves.
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 7 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 1.3
million options pursuant to our option plans. To date, option and warrant
holders have exercised approximately 4,900,000 options and warrants in the
aggregate at prices ranging from $0.50 to $2.16. 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.
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
29,000,000 shares and its average daily trading volume has historically been
approximately 479,000 shares. If our stock continues to trade thinly, our
shareholders may not be able to sell their shares when desired.
IF WE DO NOT 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
- 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
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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 May 5, 2000, we sold a total of 2,838,871 shares of common stock
to the investors listed on the selling shareholders table on page 11 and a
warrant to purchase 283,887 shares of common stock to our placement agent. After
expenses, we will realize approximately $9.9 million of the approximately $10.8
million in proceeds from the offering. The warrant holder may exercise the
warrant at $5.13 per share at any time before May 4, 2005. We 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 warrant. We also agreed to reimburse the selling shareholders
for liability we caused 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 May 11, 2000 and the number of shares of common stock
the selling shareholders may sell under this prospectus. The selling
shareholders, which includes their transferees, pledgees, distributees or donees
or their successors, may offer all, some or none of their shares. The following
table assumes that the selling shareholders sell all of their shares offered
hereby.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SHARES OWNED SHARES OWNED
SHARES SHARES OFFERED PRIOR TO AFTER
SELLING SHAREHOLDERS OWNED(1) HEREBY(2) OFFERING(3) CLOSING(3)
-------------------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Cahill Warnock Strategic Partners
Fund, L.P.(4) 862,225 862,225 2.56% 0.0%
The Tail Wind Fund Ltd 573,481(5) 65,789 1.73% 1.53%
The J Fund, L.P. 496,000 496,000 1.47% 0.0
Leerink Swann & Company 323,887(6) 323,887(6) * 0.0
Baker Street Technology Partners, LP 131,579 131,579 * 0.0
Baker Street Capital Partners, LP 131,579 131,579 * 0.0
Worthington Growth LP 131,578 131,578 * 0.0
Donald Weinberger 130,000(7) 130,000(7) * 0.0
Little Wing, LP 110,000 110,000 * 0.0
Peter Grabler 105,263 105,263 * 0.0
Strategic Growth International, Inc. 100,000(8) 100,000(8) * 0.0
Nob Hill Capital Partners, L.P. 80,000 80,000 * 0.0
Middenbank Curacao N.V. 66,000 66,000 * 0.0
Charles P. Hammersmith, Jr. 65,700 65,700 * 0.0
Tradewinds Fund Ltd 56,000 56,000 * 0.0
Gerry D. Koumatos &
Flora D. Koumatos, JTWROS 53,000 53,000 * 0.0
Wayne Saker 52,631 52,631 * 0.0
Strategic Associates, L.P.(9) 47,775 47,775 * 0.0
Lighthouse Management, L.P. 40,000 40,000 * 0.0
Toledano Capital LLC 35,000 35,000 * 0.0
Little Wing LP Too 34,000 34,000 * 0.0
James A. Ruffalo &
Margaret M. Ruffalo, JTWROS 26,500 26,500 * 0.0
Harry T. Poteat 26,500 26,500 * 0.0
Willoughby I. Stuart 26,315 26,315 * 0.0
Ira Daniel Sherman &
Darlene Bryant, JTWROS 26,315 26,315 * 0.0
Donald D. Graham 26,315 26,315 * 0.0
Dunn Family Charitable Foundation 25,000 25,000 * 0.0
Nob Hill Capital Associates, L.P. 20,000 20,000 * 0.0
Jeffrey T. Barnes 18,500 18,500 * 0.0
Peter M. Greco &
Pamela A. Greco, JTWROS 13,157 13,157 * 0.0
John J. Connor 13,150 13,150 * 0.0
Edmond E. Charrette, M.D. Profit
Sharing Trust 10,000 10,000 * 0.0
Michael T. Foley, M.D. 3,000 3,000 * 0.0
-------- --------
Totals: 3,860,450 3,352,758
</TABLE>
-11-
<PAGE> 16
--------------------
* Represents ownership of less than 1% of the outstanding shares of
our common stock.
(1) Assumes the exercise of all outstanding warrants and options owned
by four of the selling shareholders.
(2) Assumes the exercise of all outstanding warrants and options, except
for The Tail Wind Fund Ltd warrant. We have previously registered
the resale of the shares underlying that warrant.
(3) Based on shares of common stock outstanding as of May 11, 2000 plus,
for each selling shareholder that owns shares of common stock which
are issuable upon the exercise of outstanding warrants and options,
the shares underlying such shareholder's options and warrants.
(4) Cahill Warnock Strategic Partners Fund, L.P. may distribute shares
of common stock to its limited partners and such distributees shall
be deemed "selling shareholders" for purposes of this prospectus.
See the Plan of Distribution on page 13.
(5) Includes 507,692 shares of common stock which are issuable upon the
exercise of an outstanding warrant owned by the selling shareholder.
We have previously registered the resale of the shares underlying
that warrant.
(6) Includes 283,887 shares of common stock which are issuable upon the
exercise of an outstanding warrant owned by the selling shareholder.
(7) Consists of options, dated December 1, 1997, to purchase 100,000
shares of common stock with an exercise price of $1.38 per share and
30,000 shares of common stock with an exercise price of $0.875 per
share, respectively.
(8) Consists of an option, dated December 1, 1997, to purchase 100,000
shares of common stock with an exercise price of $0.875 per share.
(9) Strategic Associates, L.P. may distribute shares of common stock to
its limited partners and such distributees shall be deemed "selling
shareholders" for purposes of this prospectus. See the Plan of
Distribution on page 13.
-12-
<PAGE> 17
PLAN OF DISTRIBUTION
We are registering all of the shares on behalf of the selling
shareholders. We 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 us 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.
From time to time, the selling shareholders may transfer, pledge,
distribute, donate or assign shares of our common stock to lenders or others. At
such time, each of the persons receiving these shares may become a selling
shareholder. The selling shareholder who transfers, pledges, distributes donates
or assigns its shares of our common stock will own fewer shares after they take
such actions. The plan of distribution for selling shareholders' shares sold
according to this prospectus will otherwise remain unchanged, except that the
transferees, pledgees, distributees, donees or other successors will become
selling shareholders.
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
-13-
<PAGE> 18
You should rely only on the information contained in this prospectus
or incorporated by reference. We have not authorized anyone to provide you with
additional or different information. We are 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.
-------------
INKINE PHARMACEUTICAL COMPANY, INC.
Common Stock
------------------
Prospectus
------------------
MAY 31, 2000
<PAGE> 19
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We 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 and the Nasdaq filing fee, the amounts stated are
estimates.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee...................................................... $ 5,089
Accounting fees and expenses.............................................. 10,000
Legal fees and expenses................................................... 25,000
Nasdaq filing fee......................................................... 17,500
Printing.................................................................. 3,000
Miscellaneous expenses.................................................... 5,000
----------
Total......................................................... $ 65,589
==========
</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.
Our certificate of incorporation provides that the directors of our
company 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.
Our bylaws provide that we shall indemnify and hold harmless our
directors and officers 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 we advance expenses to persons eligible for
indemnification. In addition, the bylaws authorize our company to maintain
insurance to protect our company and any of our directors or officers against
any expense, liability, or loss, whether or not we would have the power to
indemnify these persons against such expense, liability, or loss under the New
York Business Corporation Law.
II-1
<PAGE> 20
ITEM 16. EXHIBITS.
The following is a list of exhibits filed as part of the
registration statement:
No. Title
-- -----
*4.1 Form of Subscription Agreement between InKine and the Investors
listed on the Selling Shareholders table.
*4.2 Common Stock Purchase Warrant, dated May 5, 2000, granted to the
placement agent, Leerink, Swann, Garrity, Sollami, Yaffe & Wynn,
Inc.
*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. 333-37254) FILED ON MAY 17, 2000, 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> 21
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> 22
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 May
30, 2000.
INKINE PHARMACEUTICAL
COMPANY, INC.
By: /s/Leonard S. Jacob
--------------------------------------------
Leonard S. Jacob, M.D., Ph.D.
Chairman and Chief Executive Officer
<TABLE>
<CAPTION>
Signature Title Date
---------- ------ -------
<S> <C> <C>
/s/Leonard S. Jacob Chairman and Chief May 30, 2000
-------------------------------------- Executive Officer and
Leonard S. Jacob, M.D., Ph.D. Director
/s/Robert F. Apple Sr. Vice President and May 30, 2000
-------------------------------------- Chief Financial Officer
Robert F. Apple (principal financial and
accounting officer)
/s/ROBERT F. APPLE, ATTORNEY-IN-FACT Director May 30, 2000
--------------------------------------
J.R. LeShufy
/s/ROBERT F. APPLE, ATTORNEY-IN-FACT Director May 30, 2000
--------------------------------------
Steven B. Ratoff
/s/ROBERT F. APPLE, ATTORNEY-IN-FACT Director May 30, 2000
--------------------------------------
Thomas P. Stagnaro
/s/ROBERT F. APPLE, ATTORNEY-IN-FACT Director May 30, 2000
--------------------------------------
Robert A. Vukovich, Ph.D.
/s/ROBERT F. APPLE, ATTORNEY-IN-FACT Director May 30, 2000
--------------------------------------
Jerry A. Weisbach, Ph.D.
</TABLE>
