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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VALENTIS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 94-3156660
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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863A MITTEN ROAD
BURLINGAME, CA 94010
(650) 697-1900
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
BENJAMIN F. MCGRAW, III
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VALENTIS, INC.
863A MITTEN ROAD
BURLINGAME, CA 94010
(650) 697-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
ALAN C. MENDELSON, ESQ.
LATHAM & WATKINS
135 COMMONWEALTH DRIVE
MENLO PARK, CA 94025
(650) 328-4600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value............. 5,554,324 $6.5625 $36,450,262 $9,113
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(1) Includes (i) up to 3,499,996 shares of common stock issuable upon conversion
of Valentis's Series A Convertible Redeemable Preferred Stock (the
"Preferred Stock"), at the current conversion price of $9.00; (ii) up to
1,266,828 shares of common stock issuable upon exercise of Valentis's Common
Stock Purchase Warrants (the "Warrants"); (iii) up to 787,500 shares of
common stock issuable in lieu of cash dividends on the Preferred Stock (the
"Dividend Shares"), assuming an applicable conversion price of $9.00; and
(vi) any additional shares of common stock which become issuable upon
conversion of the Preferred Stock, exercise of the Warrants and/or payment
of the Dividend Shares by reason of any stock dividend, stock split,
recapitalization or other similar transactions effected without the receipt
of consideration which results in an increase in the number of outstanding
shares of common stock of Valentis, Inc.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) of the Securities Act of 1933. The
price per share and aggregate offering price are based upon the average
($6.5625) of the high ($6.875) and low ($6.25) sales price of Valentis's
common stock on January 11, 2001 as reported on the Nasdaq National Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
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SUBJECT TO COMPLETION, DATED JANUARY 19, 2001
PROSPECTUS
VALENTIS, INC.
5,554,324 SHARES OF COMMON STOCK
This prospectus covers up to 5,554,324 shares of Valentis's common stock
that may be offered for sale by the stockholders named in this prospectus and
the person(s) to whom such stockholders may transfer their shares. The selling
securityholders and any broker-dealer who may participate in sales of the shares
may use this prospectus. See "Plan of Distribution."
We will not receive proceeds from the sale of the shares. We will bear
substantially all expenses of registration of the shares. The selling
securityholders will pay any underwriting fees, discounts or commissions, and
transfer taxes in connection with the sale of the shares.
Our common stock is listed on the Nasdaq National Market under the symbol
"VLTS." The closing sale price of our common stock, as reported on the Nasdaq
National Market on January 18, 2001, was $7.20 per share.
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INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS,"
BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is , 2001.
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TABLE OF CONTENTS
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PAGE
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Summary..................................................... 2
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements........... 15
Use of Proceeds............................................. 15
Selling Securityholders..................................... 16
Plan of Distribution........................................ 19
Legal Matters............................................... 20
Experts..................................................... 20
Where You Can Find More Information......................... 20
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Our web site address is www.valentis.com. Information contained on our web
site is not part of this prospectus.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling securityholders are offering to sell
and seeking offers to buy the shares only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus.
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SUMMARY OF OUR BUSINESS
Valentis, Inc. is a leader in the field of biopharmaceutical delivery. We
develop a broad array of products, proprietary technologies and intellectual
property and apply our preclinical and early clinical development expertise to
create novel therapeutics and improved versions of existing marketed
biopharmaceuticals. Our core technologies include multiple gene delivery and
gene expression systems and PEGylation technologies designed to improve the
safety, efficacy and dosing characteristics of genes, proteins, peptides,
peptidomimetics, antibodies, replicating and non-replicating viruses and
liposomes. We focus our research and development efforts in several therapeutic
areas including cardiovascular disorders, oncology, hematology and immunology.
Valentis has positioned itself to be the near-term beneficiary of genomics
research, a massive effort underway to understand the sequence and function of
the human genome. The first products being generated from genomics research are
biopharmaceuticals such as proteins, antibodies and gene medicines. Valentis has
a portfolio of delivery technologies that potentially allows us to develop new
products, create improved versions of currently marketed products and make these
biopharmaceuticals safer, more effective and more convenient for patients to
use.
In August 1999, Valentis acquired U.K.-based PolyMASC Pharmaceuticals plc.
Valentis has facilities in three locations: The Woodlands, Texas, which houses
personnel focused on preclinical research and development; London, England,
where PolyMASC Pharmaceuticals plc operates as a wholly owned subsidiary and
focuses on PEGylation technologies; and Burlingame, California, which is
Valentis's corporate headquarters as well as the center for manufacturing and
clinical development.
We are developing delivery systems for biopharmaceuticals based on two broad
technology platforms: gene medicines and PEGylation technologies.
GENE MEDICINE TECHNOLOGIES: Each cell in the human body contains genes that
code for the production of proteins that directly and/or indirectly impact all
of the body's functions. Gene medicines are used to achieve production of
therapeutic proteins in their natural, most active form at specific sites in the
body. Gene medicines are typically administered by conventional pharmaceutical
routes after being reconstituted from single-vial, stable, lyophilized products.
A gene is delivered to target cells via a synthetic gene delivery system, and
gives the cells the instructions needed to produce a therapeutic protein that is
intended to correct, prevent or modulate genetic and acquired diseases.
PEGYLATION TECHNOLOGIES: PolyMASC's PEGylation technology allows for the
gentle coupling of polyethylene glycol, or PEG, molecules directly to proteins
(protoMASC-TM-), antibodies (antiMASC-TM-), viruses (viraMASC-TM-) and liposomes
(lipoMASC-TM-) in a manner that retains the biological activity of the material.
These PEG molecules can protect the biopharmaceutical from degradation and
attack by the immune system, resulting in products with improved safety,
efficacy and dosing profiles.
CORPORATE PARTNERS: Valentis, either directly or through our PolyMASC
subsidiary, currently has corporate collaborations with:
- Roche Holdings Ltd. for cancer immunotherapeutics based on the IL-2 and
IL-12, and Interferon-a genes;
- Eli Lilly & Co. to develop treatments for breast and ovarian cancer using
the BRCA-1 gene;
- Glaxo Wellcome plc to develop a treatment for cystic fibrosis using the
CFTR gene;
- Boehringer Ingelheim International GmbH for the treatment of rheumatoid
arthritis with gene medicines;
- Invitrogen Corporation to sell Valentis's proprietary GeneSwitch-TM- gene
regulation system for use in research applications;
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- Heska Corporation for a gene-based immunotherapeutic for cancer and
allergies in companion animals;
- Eurogene Ltd. for cardiovascular diseases using gene medicines and
Eurogene's collar delivery system;
- DSM Biologics and QIAGEN, N.V. for plasmid manufacturing;
- Onyx Pharmaceuticals, Inc. for a PEGylated virus-based cancer therapeutic;
- Bayer Corporation, Inc. for a PEGylated Factor VIII;
- Flemington Pharmaceutical Corp. for a PEGylated oral insulin;
- Transkaryotic Therapies for the development of two PEGylated proteins; and
- Viragen, Inc. for the development of a PEGylated interferon-alpha (IFN-a)
for treatment of hepatitis C.
To date, substantially all revenue has been generated by collaborative
research and development agreements from corporate partners, and only minimal
revenue has been generated from royalties on sales of the GeneSwitch-TM- gene
regulation system to the research market. Under the terms of our corporate
collaborations, Valentis generally receives research and development funding on
a quarterly basis in advance of associated research and development costs. We
expect that future revenue will be derived in the short-term from research and
development agreements and milestone payments, and in the long-term from
royalties on product sales.
We have incurred significant losses since inception and expect to incur
substantial losses for the foreseeable future, primarily due to the expansion of
our research and development programs and because we do not expect to generate
revenue from the sale of products in the foreseeable future, if at all. We
expect that operating results will fluctuate from quarter to quarter and that
such fluctuations may be substantial. As of September 30, 2000, Valentis's
accumulated deficit was approximately $129.9 million.
RECENT DEVELOPMENTS
PRIVATE PLACEMENT OF SERIES A PREFERRED STOCK AND WARRANTS.
On December 5, 2000, pursuant to Subscription Agreements, dated as of
November 20, 2000, between Valentis and certain of the selling securityholders
listed in this prospectus, we sold and issued 31,500 shares of Series A
convertible redeemable preferred stock, at a purchase price of $1,000 per share,
for an aggregate purchase price of $31,500,000. In connection with the sale of
the preferred stock, we issued common stock purchase warrants exercisable for up
to an aggregate of 1,126,828 shares of our common stock. In connection with this
transaction, we also issued warrants to purchase up to an aggregate of 140,000
shares of our common stock as fees to certain other selling securityholders who
acted as placement agents or financial advisors in the private transaction.
We are registering for resale up to 5,554,324 shares of common stock
underlying the securities issued to the selling securityholders in
December 2000. The shares being registered for resale include:
- up to 3,499,996 shares of common stock issuable upon conversion of the
preferred stock;
- up to 1,266,828 shares of common stock issuable upon exercise of the
common stock purchase warrants;
- up to 787,500 shares of common stock issuable in lieu of cash dividends
payable on the preferred stock; and
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- an indeterminate number of additional shares of common stock that may
become issuable upon conversion of the preferred stock, exercise of the
warrants, and/or payment of dividends by reason of any stock dividend,
stock split, recapitalization or other similar transactions effected
without receipt of consideration which results in an increase in the
number of outstanding shares of our common stock.
SUMMARY OF CERTAIN TERMS OF THE SERIES A CONVERTIBLE REDEEMABLE PREFERRED
STOCK
This summary of certain terms of the Series A preferred stock and the
warrants issued to the selling securityholders does not purport to be complete
and is subject to and qualified in its entirety by the Subscription Agreements,
the common stock purchase warrants and the certificate of designations of the
Series A convertible redeemable preferred stock.
DIVIDENDS. The Series A preferred stock, with a stated value of $1,000 per
share, is entitled to cumulative dividends which shall accrue at an annual rate
of 5%, payable quarterly, in cash, or, at our election, in shares of common
stock. If we elect to pay dividends in shares of our common stock, those shares
will be valued at the average closing bid price for our common stock during the
twenty consecutive trading days ending on and including the trading day
immediately prior to the dividend payment date.
CONVERSION. Each share of Series A preferred stock, together with accrued
and unpaid dividends, is convertible, at the option of the holder, into that
number of shares of our common stock that is calculated by dividing the stated
value, plus accrued and unpaid dividends, by a fixed conversion price of $9.00,
subject to certain anti-dilution adjustments described in the Subscription
Agreements.
LIQUIDATION PREFERENCE. In the event of our liquidation, the holders of the
Series A preferred stock will be entitled to a liquidation preference, equal to
the stated value plus accrued and unpaid dividends, before any amounts are paid
to the holders of our common stock.
MANDATORY REDEMPTION. The Series A preferred stock shall be redeemed by us
on June 4, 2004, subject to a one-year extension at the option of the holder, at
a redemption price equal to the stated value plus accrued and unpaid dividends.
The holders of the Series A preferred stock may also require that we redeem
their shares, at a price equal to the stated value plus accrued and unpaid
dividends per share, under certain circumstances, including in the event that
our common stock ceases to be listed on the Nasdaq National Market, there is a
fundamental change in control of our company, or we breach any of our covenants
to the holders.
OPTIONAL REDEMPTION. Beginning on December 5, 2002, we may redeem all, but
not less than all, of the outstanding shares of Series A preferred stock if a
certain triggering event occurs. The triggering event occurs any time that the
closing bid price of our common stock exceeds $24.83 (subject to adjustment in
the event of the conversion price) for twenty consecutive trading days.
VOTING RIGHTS. Other than as required by law, the holders of the Series A
preferred stock shall have no voting rights, except that the consent of the
holders of a majority of the preferred stock shall be required to effect any
change in our certificate of corporation that would materially and adversely
affect any rights of the Series A preferred stock or would create any series of
preferred stock with rights senior to those of the Series A preferred stock.
SUMMARY OF CERTAIN WARRANT TERMS
We issued Common Stock Purchase Warrants, Class A and Common Stock Purchase
Warrants, Class B to purchase an aggregate of 1,266,828 shares of our common
stock.
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CLASS A WARRANTS. We issued Common Stock Purchase Warrants, Class A,
exercisable for an aggregate of 959,512 shares of common stock to the purchasers
of the Series A preferred stock and to the placement agents. The Class A
Warrants are immediately exercisable and remain exercisable for four years at an
exercise price of $10.25 per share, subject to adjustment. In the event that the
average closing bid price of the common stock during any ten consecutive trading
days exceeds 275% of the exercise price, we may require that the holders of the
warrants exercise the warrants or have them cancelled.
CLASS B WARRANTS. We issued Common Stock Purchase Warrants, Class B, to the
purchasers of the Series A preferred stock, exercisable for an aggregate of
307,316 shares of common stock. The Class B Warrants become exercisable one year
after issuance and remain exercisable for three years at an exercise price of
$10.25 per share, subject to adjustment. If, at any time before the one-year
anniversary of the issuance of the warrants, the closing bid price of our common
stock exceeds $23.99 for twenty consecutive trading days, these warrants shall
be cancelled.
Our executive offices are located at 863A Mitten Road, Burlingame, CA 94010,
and our telephone number is (650) 697-1900.
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RISK FACTORS
An investment in our common stock involves risk. You should carefully
consider the risk and uncertainties described below before making an investment
decision. These risks and uncertainties are not the only ones that we face or
that may adversely affect our business. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also materially
harm our business, operating results and financial condition and could result in
the complete loss of your investment.
DEVELOPMENT OF OUR PRODUCTS WILL TAKE SEVERAL MORE YEARS AND WILL REQUIRE
REGULATORY APPROVAL BEFORE THEY CAN BE SOLD
Because substantially all of our potential products currently are in
research, preclinical development, or the early stages of clinical testing,
revenues from sales of any products will not occur for at least the next several
years, if at all. We cannot be certain that any of our products will be safe and
effective or that we will obtain regulatory approvals. In addition, any products
that we develop may not be economical to manufacture on a commercial scale. Even
if we develop a product that becomes available for commercial sale, we cannot be
certain that consumers will accept the product.
If we cannot satisfy existing clinical and regulatory approval requirements,
we or one of our partners may not be able to market our products. We may not
obtain regulatory approval for the commercial sale of any of our products, or be
able to demonstrate that a potential product is safe and effective for its
intended use. We cannot be certain that our corporate partners or we will be
permitted to undertake clinical testing of our potential products and, if we are
successful in initiating clinical trials, we may experience delays in conducting
them.
While we have demonstrated some evidence that our gene delivery systems have
utility in preclinical studies, these results do not mean that the resulting
products will be safe and effective in humans. Our gene delivery systems may
have undesirable and unintended side effects or other characteristics that may
prevent or limit their use.
Gene-based therapies and enhanced delivery of pharmaceuticals based on
biologics are new and rapidly evolving technologies that are expected to undergo
significant technological changes in the future. Many other companies are
seeking to identify therapeutic genes and understand their function in the
development and progression of various diseases. However, only limited clinical
data are available regarding the safety and efficacy of gene-based therapeutics.
We are not aware of any gene-based therapeutic that has received marketing
approval from the United States Food and Drug Administration, or FDA, or foreign
regulatory authorities. As a result, clinical trials relating to gene-based
therapeutics may take longer to complete than clinical trials involving more
traditional pharmaceuticals.
We do not yet have products in the commercial markets. All of our potential
products are in preclinical development or in the early stages of clinical
testing. We cannot apply for regulatory approval of our potential products until
we have performed additional research and development and testing. Our clinical
trials may not demonstrate the safety and efficacy of our potential products,
and we may encounter unacceptable side effects or other problems in the clinical
trials. Should this occur, we may have to delay or discontinue development of
the potential product that causes the problem. After a successful clinical
trial, we cannot market products in the United States until we receive
regulatory approval. If we are able to gain regulatory approval of our products
after successful clinical trials and then commercialize and sell those products,
we may be unable to manufacture enough products to maintain our business or
secure additional financing to fund our operations.
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WE HAVE A HISTORY OF LOSSES AND MAY NEVER BE PROFITABLE
We may never generate profits, and if we do become profitable, we may be
unable to sustain or increase profitability on a quarterly or annual basis. As a
result, the trading price of our stock could decline and you could lose all or
part of your investment.
Since our inception, we have engaged in research and development activities.
We have generated only small amounts of revenue and have experienced significant
operating losses since we began business. As of September 30, 2000, we have
incurred losses totaling $129.9 million. The process of developing our products
will require significant additional research and development, preclinical
testing, clinical trials and regulatory approvals. These activities, together
with general and administrative expenses, are expected to result in operating
losses for the foreseeable future.
WE MUST BE ABLE TO CONTINUE TO SECURE ADDITIONAL FINANCING
Developing and commercializing our potential products will require
substantial additional financial resources. Because we cannot expect internally
generated cash flow to fund development and commercialization of our products,
we will look to outside sources for funding. These sources could involve one or
more of the following types of transactions:
- technology partnerships;
- technology sales;
- technology licenses;
- issuing debt; or
- sales of common or preferred stock.
Our future capital requirements will depend on many factors, including:
- scientific progress in our research and development programs;
- size and complexity of such programs;
- scope and results of preclinical studies and clinical trials;
- ability to establish and maintain corporate collaborations;
- time and costs involved in obtaining regulatory approvals;
- time and costs involved in filing, prosecuting and enforcing patent
claims;
- competing technological and market developments; and
- the cost of manufacturing material for preclinical, clinical and
commercial purposes.
We have financed our operations primarily through the sale of equity
securities and through corporate collaborations. We have not generated
significant royalty revenues from product sales, and we do not expect to receive
significant revenue from royalties for the foreseeable future, if ever. We
expect that our existing resources will enable us to maintain our operations
through at least the calendar year ending December 31, 2001. However, we may
require additional funding prior to such time.
We cannot be certain that additional financing to meet our funding
requirements will be available. Even if financing is available, the terms may
not be attractive. If we cannot obtain additional financing when needed or on
acceptable terms, we will be unable to fund continuing operations. In addition,
if we raise additional funds by issuing equity securities, our shareholders will
likely experience significant dilution of their ownership interest.
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THERE IS INTENSE COMPETITION IN THE BIOLOGICS-BASED THERAPEUTICS MARKET
The pharmaceutical and biotechnology industries are highly competitive. The
intense competition and rapid technological change in our market may result in
pricing pressures and failure of our products to achieve market acceptance.
We are aware of several pharmaceutical and biotechnology companies that are
pursuing gene-based therapeutics or are incorporating PEGylated technologies
into new pharmaceuticals. Many of these companies are addressing diseases that
have been targeted by our corporate partners and us. We are also aware that some
of our corporate partners are developing gene-based and PEGylated therapeutics
with one or more of our competitors. We also face competition from companies
developing cell-based therapies and from companies using more traditional
approaches to treating human diseases. Most of our competitors have
substantially more experience and financial and infrastructure resources than we
do in the following areas:
- research and development;
- clinical trials;
- obtaining Food and Drug Administration and other regulatory approvals; and
- manufacturing, marketing and distribution.
As competitors develop their technologies, they may develop proprietary
positions in a particular aspect of biologics delivery that could prevent us
from developing our products. Consequently, our competitors may be able to
commercialize new products more rapidly than we do, or manufacture and market
competitive products more successfully than we do. This could result in pricing
pressures or the failure of our products to achieve market acceptance.
Gene therapy and enhanced delivery of biologics are new and rapidly evolving
fields and are expected to continue to undergo significant and rapid
technological change. Rapid technological development by our competitors could
result in our actual and proposed technologies, products or processes losing
market share or becoming obsolete.
In addition, we face intense competition from other companies for corporate
collaborations, for establishing relationships with academic and research
institutions and for licenses to proprietary technology. Our competitors may
develop safer, more effective or less costly biologic delivery systems,
gene-based therapeutics or chemical-based therapies. In addition, competitors
may achieve superior patent protection or obtain regulatory approval or product
commercialization earlier than we can.
WE MUST ATTRACT AND RETAIN CORPORATE PARTNERS
Our business strategy is to attract business partners to fund or conduct
research and development, preclinical studies, clinical trials, manufacturing,
marketing and sales of our products. While we believe that our partners will be
motivated to develop, market and distribute potential products based on our
technologies, they may not commit sufficient resources to commercializing our
products on a timely basis. They may also pursue the development or marketing of
competing products. If our business partners do not successfully market and
distribute our products and we are unable to develop sufficient marketing and
distribution capabilities on our own, our business will fail.
WE MUST ATTRACT AND RETAIN QUALIFIED EMPLOYEES AND CONSULTANTS
Our success will depend on our ability to retain our executive officers and
scientific staff to develop our potential products and formulate our research
and development strategy. We have programs in place to retain personnel,
including programs to create a positive work environment and competitive
compensation packages. Because competition for employees in our field is
intense,
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however, we may be unable to retain our existing personnel or attract additional
qualified employees. Our success also depends on the continued availability of
outside scientific collaborators to perform research and develop processes to
advance and augment our internal research efforts. Competition for collaborators
is intense. If we do not attract and retain qualified personnel and scientific
collaborators, and if we experience turnover or difficulties recruiting new
employees, our research and development programs could be delayed and we could
experience difficulties in generating sufficient revenue to maintain our
business.
WE MUST OBTAIN RIGHTS TO PROPRIETARY GENES, PROTEINS OR OTHER TECHNOLOGIES
We, and our corporate partners, are investigating the use of gene sequences
and proteins in our products. A number of these gene sequences and proteins have
been, or may be, patented by others. As a result, we may be required to obtain
licenses to those gene sequences, proteins or other technologies. In addition,
some of the products based on our gene or PEGylation delivery systems will
require the use of multiple proprietary technologies. We may not be able to
obtain a license to those technologies at reasonable terms, if at all. As a
consequence, we might be prohibited from developing potential products or we
might have to make cumulative royalty payments to several companies. These
cumulative royalties would reduce amounts paid to us and could make the costs of
our products too expensive to introduce.
WE MAY BE UNABLE TO PROTECT OUR PATENTS AND PROPRIETARY RIGHTS
We may be unable to adequately protect our proprietary rights, which may
limit our ability to compete effectively. Our success will depend to a
significant degree on our ability to:
- obtain patents and licenses to patent rights;
- preserve trade secrets; and
- operate without infringing on the proprietary rights of others.
We own or have licenses to patents on a number of genes, processes,
practices and techniques critical to our present and potential products. If we
fail to obtain and maintain patent protection for our technologies, our
competitors may market competing products that threaten our market position. The
failure of our licensors to obtain and maintain patent protection for technology
they license to us could similarly harm our business. Patent positions in the
field of biotechnology are highly uncertain and involve complex legal,
scientific and factual questions. Our patent applications may not result in
issued patents. Even if we secure a patent, the patent may not afford adequate
protection against our competitors. Intellectual property claims and litigation
could subject us to significant liability for damages and invalidation of our
patent rights.
We also rely on unpatented trade secret technologies. Because these
technologies do not benefit from the protection of patents, we may be unable to
meaningfully protect these trade secret technologies from unauthorized use or
misappropriation by a third party.
As the biotechnology industry expands, the risks increase that other
companies may claim that our processes and potential products infringe on their
patents. Defending these claims would be costly and would likely divert
management's attention and resources away from our operations. If we infringe on
another company's patented processes or technology, we may have to pay damages
or obtain a license in order to continue manufacturing or marketing the affected
product or using the affected process. We may be unable to obtain a license on
acceptable terms.
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OUR PRODUCTS MUST SATISFY GOVERNMENT REGULATIONS
We may not receive approval from regulatory authorities to market any of our
products. Also, delays or unexpected costs in obtaining approval of our products
or complying with governmental regulatory requirements could decrease our
ability to sell products, generate revenue and would make funding our operations
more difficult.
Prior to marketing any drug or biological product in the United State, a
potential product must undergo rigorous preclinical studies and clinical trials.
In addition, the product must receive regulatory approval from the federal Food
and Drug Agency. Satisfaction of the FDA requirements typically takes several
years or more and costs a substantial amount of money. We cannot be certain that
we will obtain regulatory approval even if we devote substantial resources and
time. The regulatory process in the biologics delivery industry is costly,
time-consuming and subject to unpredictable delays. Accordingly, we cannot
predict with any certainty how long it will take or how much it will cost to
obtain regulatory approvals for clinical trials or for manufacturing or
marketing our potential products. Delays in bringing a potential product to
market or unexpected costs in obtaining regulatory approvals could decrease our
ability to generate revenue and make it more difficult to obtain additional
financing necessary to fund our operations.
In addition, drug manufacturing facilities in the United States must comply
with the FDA's good manufacturing process regulations. Such facilities are
subject to periodic inspection by the FDA and state authorities. Manufacturers
of biologics also must comply with the FDA's general biological product
standards and also may be subject to state regulation. While we anticipate that
we will be able to manufacture product that meets these requirements, we may be
unable to attain or maintain compliance with current or future Good
Manufacturing Practices requirements. If we discover previously unknown problems
after we receive regulatory approval of a potential product or fail to comply
with applicable regulatory requirements, we may suffer restrictions on our
ability to market the product, including mandatory withdrawal of the product
from the market. This, or an unexpected increase in the cost of compliance,
could decrease our ability to generate revenue or become profitable.
WE MUST OBTAIN FOREIGN REGULATORY APPROVALS TO MAKE AND SELL PRODUCTS IN FOREIGN
COUNTRIES
We cannot be certain that we will obtain regulatory approvals in other
countries. In order to market our products outside the United States, we, and
our corporate partners, must comply with numerous and varying regulatory
requirements of other countries regarding safety and quality. The approval
procedures vary among countries and can involve additional testing. The time
required obtaining approval in other countries might differ from that required
obtaining FDA approval. The regulatory approval process in other countries
involves similar risks to those associated with obtaining FDA approval set forth
above. Approval by the FDA does not ensure approval by the regulatory
authorities of any other country.
OUR PRODUCTS MUST BE ACCEPTED BY PHYSICIANS AND INSURERS
Concerns have arisen regarding the potential safety and efficacy of
gene-based therapeutics using viral delivery systems. While our gene delivery
systems do not contain viruses, these concerns could negatively affect
physicians' and health care payers' evaluations of our products. Physicians and
health care payers could conclude that our products or technologies are not safe
and effective. Our success is dependent on commercial acceptance of our
products. We believe that recommendations by physicians and health care payers
will be essential for commercial acceptance of our products. If products
developed by us and our corporate partners are not commercially accepted by
patients, physicians or third-party payers, sales would be adversely affected.
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ADVERSE EVENTS IN THE FIELD OF GENE THERAPY MAY NEGATIVELY IMPACT REGULATORY
APPROVAL OR PUBLIC PERCEPTION OF OUR POTENTIAL PRODUCTS
The recent death of a patient undergoing a viral-based gene therapy has been
widely publicized. This death and other adverse events in the field of gene
therapy that may occur in the future could result in greater governmental
regulation of our potential products and potential regulatory delays relating to
the testing or approval of our potential products. For example, as a result of
this death, the Recombinant DNA Advisory Committee of the National Institutes of
Health may become more active in reviewing the clinical trials or proposed
clinical trials of all companies involved in gene therapy. It is uncertain what
effect this increased scrutiny will have on our product development efforts or
clinical trials.
The commercial success of our potential products will depend in part on
public acceptance of the use of gene therapy for the prevention or treatment of
human diseases. Public attitudes may be influenced by claims that gene therapy
is unsafe, and consequently our products may not gain the acceptance of the
public or the medical community. Negative public reaction to gene therapy in
general could result in greater government regulation and stricter labeling
requirements of gene therapy products, including any of our products, and could
cause a decrease in the demand for products we may develop.
OUR PRODUCTS MUST OBTAIN ADEQUATE REIMBURSEMENT
Even if we and our corporate partners succeed in bringing products to
market, we cannot be certain that reimbursement will be available. Sales volume
and price of any of our potential products will depend, in part, on the
availability of third-party reimbursement for the cost of such products and
related treatments. Reimbursement is generally provided by government health
administration authorities, private health insurers and other organizations.
Third-party payers are increasingly challenging the price of medical products
and services. Significant uncertainty exists as to the reimbursement status of
newly approved health care products. Even if reimbursement is available, payers'
reimbursement policies may adversely affect our corporate partners' ability to
sell such products on a profitable basis. If these corporate partners are unable
to profitably sell our products, our royalty revenue will be reduced.
THE SUCCESS OF OUR POTENTIAL PRODUCTS IN ANIMAL MODELS DOES NOT GUARANTEE THAT
THESE RESULTS WILL BE REPLICATED IN HUMANS
Even though our product candidates have shown successful results in animal
models, animals are different than humans and these results may not be
replicated in our clinical trials with humans. In addition, human clinical
results could be different from our expectations following our preclinical
studies with large animals. Consequently, you should not rely on the results in
our animal models as being predictive of the results that we will see in our
clinical trials with humans.
WE HAVE LIMITED EXPERIENCE IN CONDUCTING CLINICAL TRIALS, WHICH MAY CAUSE DELAYS
IN RECEIVING REGULATORY APPROVAL OF OUR POTENTIAL PRODUCTS
Clinical trials must meet FDA regulatory requirements. We have limited
experience in conducting the preclinical studies and clinical trials necessary
to obtain FDA regulatory approval. Consequently, we may encounter problems in
clinical trials that may cause us, or the FDA, to delay, suspend or terminate
these trials. Problems we may encounter include the chance that we may not be
able to conduct clinical trials at preferred sites, obtain sufficient test
subjects or begin or successfully complete clinical trials in a timely fashion,
if at all. Furthermore, the FDA may suspend clinical trials at any time if it
believes the subjects participating in trials are being exposed to unacceptable
health risks or if it finds deficiencies in the clinical trial process or
conduct of the investigation.
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Failure to recruit patients could delay or prevent clinical trials of our
potential products, which could cause a delay or inability to introduce products
to market and a resulting decrease in our ability to generate revenue. The
timing of our clinical trials depends on the speed at which we can recruit
patients to participate in testing our products. Delays in recruiting or
enrolling patients to test our products could result in increased costs, delays
in advancing our product development, delays in proving the usefulness of our
technology or termination of the clinical trials altogether. If we are unable to
introduce potential products to market after successful clinical trials on a
timely basis, our ability to generate revenue may decrease and we may be unable
to secure additional financing.
THE RESULTS OF OUR EARLY CLINICAL TRIALS ARE BASED ON A SMALL NUMBER OF PATIENTS
OVER A SHORT PERIOD OF TIME, AND OUR SUCCESS MAY NOT BE INDICATIVE OF RESULTS IN
A LARGE NUMBER OF PATIENTS OR HAVE LASTING EFFECTS
Results in early phases of clinical testing are based upon limited numbers
of patients. Actual results with more data points may show less favorable
results. In addition, we do not yet know if these early results will have a
lasting effect. If a larger population of patients does not experience similar
results, or if these results do not have a lasting effect, our product
candidates may not receive approval from the FDA. In addition, any report of
clinical trial results that are below the expectations of financial analysts or
investors would most likely cause our stock price to drop dramatically.
WE MUST DEMONSTRATE LARGE SCALE MANUFACTURING CAPABILITIES
Our limited manufacturing experience may compromise our ability to
successfully introduce our potential products.
Although we entered into a strategic collaboration with DSM Biologics and
Qiagen N.V. for manufacturing and supplying plasmid DNA to the gene therapy
industry, neither DSM nor any third party has successfully manufactured plasmid
DNA on a large-scale commercial basis. The collaboration has the potential to
create the first manufacturing facilities that can produce high-quality,
ultra-pure material for plasmid-based therapeutics on every scale, from
preclinical toxicology studies to commercial products. DSM will have full
responsibility for manufacturing material to be marketed to any company or
institution working in the field of gene therapy. We will depend on DSM for
commercial-scale manufacturing of our products. DSM may be unable to develop
adequate manufacturing capabilities for commercial-scale quantities of
gene-based therapeutic products. If DSM or third parties are unable to establish
and maintain large-scale manufacturing capabilities, we will be unable to
introduce sufficient product to sustain our business.
DELAWARE LAW AND OUR CHARTER COULD MAKE THE ACQUISITION OF OUR COMPANY BY
ANOTHER COMPANY MORE DIFFICULT
We are incorporated in the State of Delaware. Provisions of Delaware law
applicable to our company could delay a merger, tender offer or proxy contest or
make such a transaction more difficult. State laws prohibit a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years from the date the person became an
interested stockholder unless a number of conditions are met. In addition, our
Board of Directors may issue shares of preferred stock without the approval of
our stockholders. The rights of our common stockholders may be decreased by the
rights of the any future preferred stockholders. In addition, we have:
- a board of directors divided into three classes, with staggered,
three-year terms;
- no right of stockholders to act by written consent without a meeting;
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- advance stockholder notice required to nominate directors and raise
matters at the annual stockholders meeting;
- no cumulative voting in the election of directors; and
- removal of directors only for cause and with a two-thirds vote of our
issued common stock.
These provisions could delay, defer or prevent a change in control of our
company or limit the price that investors might be willing to pay in the future
for shares of our common stock.
OUR INSURANCE MAY NOT BE ADEQUATE
The costs of product liability claims and product recalls could exceed the
amount of our insurance, which could significantly harm our results of
operations or our reputation and result in a decline in the value of our stock.
Our business activities expose us to the risk of liability claims or product
recalls and any adverse publicity that might result from a liability claim
against us. We currently have only limited amounts of product liability
insurance, and the amounts of claims against us may exceed our insurance
coverage. Product liability insurance is expensive and may not continue to be
available on acceptable terms. A product liability claim not covered by
insurance or in excess of our insurance or a product recall could significantly
harm our financial results or our reputation. Either of these could result in a
decrease in our stock price, and you could lose all or part of your investment.
THERE ARE RISKS ASSOCIATED WITH ACQUIRING OTHER COMPANIES
Part of our strategy is to grow through mergers and acquisitions of
products, companies and businesses, and we intend in the future to pursue
additional acquisitions of complementary product lines, technologies and
businesses. We may have to issue debt or equity securities to pay for future
acquisitions, which could be dilutive to existing stockholders. We have also
incurred and may continue to incur certain liabilities or other expenses in
connection with acquisitions, which have and could continue to materially
adversely affect our business, financial condition and results of operations. In
addition, mergers and acquisitions involve numerous other risks, including:
- difficulties assimilating the operations, personnel, technologies and
products of the acquired companies;
- diversion of management's attention from other business concerns; and
- the potential loss of key employees of the acquired companies.
For these reasons, we cannot be certain what effect existing or future
acquisitions may have on our business, financial condition and results of
operations.
WE USE HAZARDOUS MATERIALS
Our research and development activities involve the controlled use of
hazardous materials. Although we believe that our safety procedures for handling
and disposing of these materials comply with applicable laws and regulations, we
cannot eliminate the risk of accidental contamination or injury from hazardous
materials. If a hazardous material accident occurred, we would be liable for any
resulting damages. This liability could exceed our financial resources.
Additionally, hazardous materials are subject to regulatory oversight. Accidents
unrelated to our operations could cause federal, state or local regulatory
agencies to restrict our access to hazardous materials needed in our research
and development efforts. If our access to these materials is limited, we could
experience delays in our research and development programs. Paying damages or
experiencing delays caused by restricted access could reduce our ability to
generate revenues and make it more difficult to fund our operations.
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THE STOCK MARKET IS VOLATILE AND OUR STOCK PRICE COULD DECLINE
Our common stock has closed as high as $18.8125 and as low as $5.375 between
January 3, 2000 and January 17, 2001. Market fluctuations or volatility could
cause the market price of our common stock to decline. In recent years the stock
market in general and the market for biotechnology-related companies in
particular have experienced extreme price and volume fluctuations, often
unrelated to the operating performances of the affected companies. Our common
stock has experienced, and is likely to continue to experience, these
fluctuations in price, regardless of our performance. These fluctuations could
cause the market price of our common stock to decline.
CONVERSION OF SERIES A PREFERRED SHARES AND THE EXERCISE OF THE RELATED WARRANTS
COULD AFFECT THE MARKET PRICE OF OUR COMMON STOCK
On December 5, 2000, we issued 31,500 shares of our Series A convertible
redeemable preferred stock, $1,000 stated value per share, and common stock
warrants to purchase an aggregate of 1,266,828 shares of our common stock with a
current exercise price of $10.25 per share, subject to adjustment. The Series A
preferred stock is entitled to cumulative dividends that accrue at an annual
rate of 5%, payable quarterly. Each share of Series A preferred stock, plus
accrued and unpaid dividends, is convertible into shares of the Company's common
stock at a fixed conversion price of $9.00 per share, subject to adjustment. For
additional information regarding the Series A preferred stock and the common
stock warrants, see "Summary of Our Business--Recent Developments--Private
Placement of Series A Preferred Stock and Warrants."
To the extent shares of Series A preferred stock are converted, the warrants
are exercised and the dividends on the Series A preferred stock are paid in
shares of common stock rather than cash, a significant number of shares of
common stock may be sold into the market, which could decrease the price of our
common stock and may result in substantial dilution to the interests of other
holders of our common stock.
THE SALE AND ISSUANCE OF THE SERIES A PREFERRED STOCK WILL HAVE AN IMPACT TO
EARNINGS AVAILABLE TO COMMON STOCKHOLDERS
Of the proceeds from our sale of Series A convertible redeemable preferred
stock, approximately $6.8 million will be allocated to both the common stock
warrants and the conversion option feature included within the subscription
agreement, and will be reflected as an increase to additional paid-in capital
and a decrease to the Series A convertible redeemable preferred stock. This
$6.8 million will be accreted to preferred stock over the term of the initial
redemption period. This accretion, along with the preferred stock dividend, will
increase the net loss (reduce the net income) available to common stockholders.
WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK.
We have never paid any cash dividends on our common stock and do not
anticipate paying cash dividends on our common stock in the foreseeable future.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Any statements about our expectations, beliefs, plans, objectives, assumptions
or future events or performance are not historical facts and may be
forward-looking. These statements are often, but not always, made through the
use of words or phrases such as "anticipate," "estimate," "plans," "projects,"
"continuing," "ongoing," "expects," "management believes," "we believe," "we
intend" and similar words or phrases. Accordingly, these statements involve
estimates, assumptions and uncertainties which could cause actual results to
differ materially from those expressed in them. Any forward-looking statements
are qualified in their entirety by reference to the factors discussed in this
prospectus or incorporated by reference.
Because the factors discussed in this prospectus or incorporated by
reference could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements made by us or on behalf of our
company, you should not place undue reliance on any such forward-looking
statements. Further, any forward-looking statement speaks only as of the date on
which it is made, and we undertake no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to
predict which will arise. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common stock
offered by the selling securityholders.
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SELLING SECURITYHOLDERS
The shares of common stock being offered by the selling securityholders are
issuable upon conversion of or issuance of dividends on the Series A preferred
stock in shares of common stock or upon exercise of common stock purchase
warrants. We are registering these shares of our common stock for resale by the
selling securityholders identified below. The shares are being registered to
permit public secondary trading of the shares, and the selling securityholders
may offer the shares for resale from time to time. See "Plan of Distribution."
In accordance with registration rights granted to the selling securityholders,
we have filed with the SEC, under the Securities Act, a Registration Statement
on Form S-3, of which this prospectus forms a part, with respect to the resales
of the shares from time to time on the Nasdaq National Market, in
privately-negotiated transactions, or otherwise, and have agreed to prepare and
file such amendments and supplements to the Registration Statement as may be
necessary to keep such Registration Statement effective until the shares are no
longer required to be registered for the sale thereof by the selling
securityholders. The following table sets forth:
- the name of the selling securityholders;
- the number of shares of our common stock issuable to the selling
securityholders upon conversion of or payment of dividends on the
Series A preferred stock in shares of our common stock, assuming a $9.00
conversion price, the number of shares issuable upon exercise of the
common stock purchase warrants, and other shares of common stock
beneficially owned as of January 5, 2001;
- the number of shares of our common stock that may be offered for resale
for the account of each of the selling securityholders pursuant to this
prospectus; and
- the number of shares of our common stock to be held by the selling
securityholders after the sale of all of the shares by the selling
securityholders (none of whom will own 1% or more of our common stock
after such sale).
This information is based upon information provided by each respective
selling securityholder, Schedules 13G and other public documents filed with the
SEC, and assumes the sale of all of the resale shares by the selling
securityholders. The term "selling securityholders" includes the stockholders
listed below and their transferees, pledgees, donees or other successors. The
applicable percentages of ownership are based on an aggregate of 29,434,147
shares of common stock issued and outstanding as of January 5, 2001.
<TABLE>
<CAPTION>
SHARES OWNED NUMBER OF SHARES SHARES OWNED
SELLING SECURITYHOLDERS PRIOR TO OFFERING BEING OFFERED AFTER OFFERING
----------------------- ----------------- ---------------- ---------------
<S> <C> <C> <C>
Banca Del Gottardo............................ 118,941 85,941(1) 33,000
Delta Opportunity Fund (Institutional), LLC... 635,969 635,969(2) 0
Delta Opportunity Fund, Ltd................... 1,082,865 1,082,865(3) 0
Diaz & Altschul Capital, LLC.................. 1,823,834 1,823,834(4) 0
Gallahad Private Equity Fund LLC.............. 146,060 120,318(5) 25,742
Leonardo Capital Fund......................... 257,824 257,824(6) 0
Omicron Partners, L.P......................... 859,416 859,416(7) 0
OTATO Limited Partnership..................... 257,824 257,824(8) 0
Perseus-Soros Biopharmaceutical Fund, LP...... 1,718,835 1,718,835(9) 0
Pharma w/Health............................... 65,297 51,565(10) 13,732
Triaxis Trust AG.............................. 858,269 343,767(11) 514,502
Wells Fargo Van Kasper........................ 35,000 35,000(12) 0
</TABLE>
------------------------
(1) Includes 55,555 shares of common stock issuable upon conversion of 500
shares of Series A preferred stock, 13,008 shares of common stock issuable
upon the exercise of an immediately
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exercisable common stock purchase warrant, 4,878 shares of common stock
issuable upon the exercise of a common stock purchase warrant that will
become exercisable on December 5, 2001, and up to 12,500 shares of common
stock issuable as dividends on the Series A preferred stock.
(2) Includes 411,111 shares of common stock issuable upon conversion of 3,700
shares of Series A preferred stock, 96,260 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 36,098 shares of common stock issuable upon the exercise of a
common stock purchase warrant that will become exercisable on December 5,
2001, and up to 92,500 shares of common stock issuable as dividends on the
Series A preferred stock.
(3) Includes 700,000 shares of common stock issuable upon conversion of 6,300
shares of Series A preferred stock, 163,902 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 61,463 shares of common stock issuable upon the exercise of a
common stock purchase warrant that will become exercisable on December 5,
2001, and up to 157,500 shares of common stock issuable as dividends on the
Series A preferred stock.
(4) Includes 635,969 shares held by Delta Opportunity Fund (Institutional), LLC
("Delta Institutional") and 1,082,865 shares held by Delta Opportunity Fund,
Ltd. ("Delta"). Diaz & Altshul Advisors, LLC, an affiliate of Diaz & Altshul
Capital, LLC, provides portfolio management services to Delta and Delta
Institutional and therefore may be deemed the beneficial owner of the shares
held by Delta and Delta Institutional. Diaz & Altschul Capital, LLC, was a
placement agent in connection with the private placement of the Series A
preferred stock and the warrants. In compensation for its services, Diaz &
Altschul Capital, LLC received a cash payment equal to $785,000 and an
immediately exercisable common stock purchase warrant exercisable for
105,000 shares of common stock. Patrick Enright, one of our directors, is a
one-third managing member of Diaz & Altschul Group, LLC, an affiliate of
Diaz & Altschul Capital, LLC. Mr. Enright disclaims beneficial ownership of
these securities except to the extent of his pecuniary interest therein.
(5) Includes 77,777 shares of common stock issuable upon conversion of 700
shares of Series A preferred stock, 18,211 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 6,830 shares of common stock issuable upon the exercise of a common
stock purchase warrant that will become exercisable on December 5, 2001, and
up to 17,500 shares of common stock issuable as dividends on the Series A
preferred stock.
(6) Includes 166,666 shares of common stock issuable upon conversion of 1,500
shares of Series A preferred stock, 39,024 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 14,634 shares of common stock issuable upon the exercise of a
common stock purchase warrant that will become exercisable on December 5,
2001, and up to 37,500 shares of common stock issuable as dividends on the
Series A preferred stock.
(7) Includes 555,555 shares of common stock issuable upon conversion of 5,000
shares of Series A preferred stock, 130,081 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 48,780 shares of common stock issuable upon the exercise of a
common stock purchase warrant that will become exercisable on December 5,
2001, and up to 125,000 shares of common stock issuable as dividends on the
Series A preferred stock.
(8) Includes 166,666 shares of common stock issuable upon conversion of 1,500
shares of Series A preferred stock, 39,024 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 14,634 shares of common stock issuable upon the exercise of a
common stock purchase warrant that will become exercisable on December 5,
2001, and up to 37,500 shares of common stock issuable as dividends on the
Series A preferred stock.
(9) Includes 1,111,111 shares of common stock issuable upon conversion of 10,000
shares of Series A preferred stock, 260,163 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 97,561 shares of common stock issuable upon the exercise of a
common stock purchase warrant that will become exercisable on December 5,
2001, and up to 250,000 shares of common stock issuable as dividends on the
Series A preferred stock.
(10) Includes 33,333 shares of common stock issuable upon conversion of 300
shares of Series A preferred stock, 7,805 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 2,927 shares of common stock issuable upon the
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exercise of a common stock purchase warrant that will become exercisable on
December 5, 2001, and up to 7,500 shares of common stock issuable as
dividends on the Series A preferred stock.
(11) Includes 222,222 shares of common stock issuable upon conversion of 2,000
shares of Series A preferred stock, 52,033 shares of common stock issuable
upon the exercise of an immediately exercisable common stock purchase
warrant, 19,512 shares of common stock issuable upon the exercise of a
common stock purchase warrant that will become exercisable on December 5,
2001, and up to 50,000 shares of common stock issuable as dividends on the
Series A preferred stock.
(12) Wells Fargo Van Kasper was a financial advisor in connection with the
private placement of the Series A preferred stock and the warrants. In
compensation for its services, Wells Fargo Van Kasper received a cash fee
equal to $948,135 and an immediately exercisable common stock purchase
warrant exercisable for 35,000 shares of common stock.
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PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
securityholders in one or more transactions at fixed prices, at market prices at
the time of sale, at varying prices determined at the time of sale or at
negotiated prices. The selling securityholders may offer their shares of common
stock in one or more of the following transactions:
- on any national securities exchange or quotation service at which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Market;
- in the over-the-counter market;
- in private transactions;
- through options; and
- by pledge to secure debts and other obligations, or a combination of any
of the above transactions.
When we use the term "selling securityholder" in this prospectus, it
includes donees, pledgees and other transferees who are selling shares received
after the date of this prospectus from a selling securityholder whose name
appears in "Selling Securityholders." If we are notified by a selling
stockholder that a donee, pledgee or other transferee intends to sell more than
500 shares, we will file a prospectus supplement if required by law. In
addition, if required, we will distribute a supplement to this prospectus to
describe any material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling securityholders. Alternatively, the selling
securityholders may from time to time offer shares of common stock to or through
underwriters, broker/dealers or agents. The selling securityholders and any
underwriters, broker/dealers or agents that participate in the distribution of
the shares of common stock may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933 and will be subject to the prospectus delivery
requirements of the Securities Act of 1933. Any profits on the resale of shares
of common stock and any compensation received by any underwriter, broker/dealer
or agent may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
Any shares covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act of 1933 may be sold under rule 144 rather than
under the terms of this prospectus. The selling securityholders may not sell all
of the shares. The selling securityholders may transfer, will or gift such
shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the common stock may not be
offered or sold unless they have been registered or qualified for sale or an
exemption is available and complied with.
Under the applicable rules and regulations of the Securities Exchange Act of
1934, any person engaged in the distribution of the common stock may not bid for
or purchase shares of common stock during a period which commences one business
day (5 business days, if Valentis's public float is less that $25 million or the
average daily trading volume of its stock is less than $100,000) prior to such
person's participation in the distribution, subject to exceptions for certain
passive market making activities. In addition and without limiting the
foregoing, each selling securityholder will be subject to the applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of shares of Valentis's common stock by
such selling securityholder or any such
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other person. These factors may affect the marketability of the common stock and
the ability of brokers or dealers to engage in market-making activities.
Valentis agreed to register the shares under the Securities Act and to
indemnify and hold the selling securityholders harmless against certain
liabilities under the Securities Act of 1933 that could arise in connection with
the sale by the selling securityholders of the shares. Valentis has agreed to
pay all reasonable fees and expenses incident to the filing of this registration
statement. The selling securityholder will pay all brokerage commissions and
similar selling expenses, if any, attributable to its sale of shares.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for Valentis
by Latham & Watkins, Menlo Park, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended June 30, 2000, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in this registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy these
reports, proxy statements and other information at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. You can request copies of these
documents by writing to the SEC and paying a fee for the copying cost. Please
call the SEC at 1-800-SEC-0330 for more information about the operation of the
public reference rooms. The SEC maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at "http://www.sec.gov."
This prospectus is only part of a registration statement on Form S-3 that we
have filed with the SEC under the Securities Act, and therefore omits certain
information contained in the registration statement. We have also filed exhibits
with the registration statement that are not included in this prospectus, and
you should refer to the applicable exhibit for a compete description of any
statement referring to any contract or other document. A copy of the
registration statement, including the exhibits thereto, may be inspected without
charge at the Public Reference Room of the SEC described above, and copies of
such material may be obtained from such office upon payment of the fees
prescribed by the SEC.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
- Annual Report on Form 10-K for the year ended June 30, 2000;
- Quarterly Report on Form 10-Q for the quarter ended September 30, 2000;
- Proxy Statement for the annual meeting of stockholders held on
December 12, 2000; and
20
<PAGE>
- Registration statement on Form 8-A, as amended, which includes a
description of our common stock.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address or telephone number:
Valentis, Inc.
863A Mitten Road
Burlingame, CA 94010
(650) 697-1900
21
<PAGE>
5,554,324 SHARES
COMMON STOCK
VALENTIS, INC.
PROSPECTUS
, 2001
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses relating to the registration of the common stock will be borne
by Valentis. Those expenses and the expenses in connection with the issuance and
distribution of the securities being registered are set forth in the following
table. All amounts are estimates except the SEC registration fee and the Nasdaq
National Market listing fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 9,113
Nasdaq National Market Listing Fee.......................... $ 17,500
Legal fees and expenses..................................... $175,000
Accounting fees and expenses................................ $ 8,600
Transfer agent fees......................................... $ 0
--------
Total................................................... $210,213
========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the DGCL and (ii) require the Registrant to indemnify its
directors and officers to the fullest extent permitted by applicable law,
including circumstances in which indemnification is otherwise discretionary.
Pursuant to Section 145 of the DGCL, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in or not opposed to, the best interests of the corporation and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate the directors' or officers' duty of care, and,
in appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under the DGCL. In addition,
each director will continue to be subject to liability pursuant to Section 174
of the DGCL, for breach of the director's duty of loyalty to the Registrant, for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for acts or omissions that the director believes to
be contrary to the best interests of the Registrant or its stockholders, for any
transaction from which the director derived an improper personal benefit, for
acts or omissions involving a reckless disregard for the director's duty to the
Registrant or its stockholders when the director was aware or should have been
aware of a risk of serious injury to the Registrant or its stockholders, for
acts or omission that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Registrant or its
stockholders, for improper transactions between the director and the Registrant
and for improper loans to directors and officers. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with each of its
directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Registrant and,
with respect to
II-1
<PAGE>
any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
The Registrant has an insurance policy covering the officers and directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 16. EXHIBITS.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
4.1 Certificate of Designations of Series A Convertible
Redeemable Preferred Stock.
4.2 Form of Common Stock Purchase Warrant, Class A.
4.3 Form of Common Stock Purchase Warrant, Class B.
5.1 Opinion of Latham & Watkins.
10.1 Form of Subscription Agreement between the Registrant and
each of the selling securityholders, dated as of November
20, 2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Latham & Watkins (included in its opinion filed
as Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period during 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 any
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 end 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 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
II-2
<PAGE>
(2) That, for purposes of determining 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 to be offered therein, and the
offering of such securities at that time shall be deemed to be an initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which shall remain unsold at the termination
of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
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 Burlingame, State of California, on January 19, 2001.
<TABLE>
<S> <C> <C>
VALENTIS, INC.
By: /s/ BENJAMIN F. MCGRAW, III
----------------------------------------
Benjamin F. McGraw, III
President and Chief Executive Officer
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Benjamin F. McGraw, III, and Bennet L. Weintraub,
jointly and severally, as his or her true and lawful attorneys-in-fact and
agent, each with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his or her substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
--------------------------------------------- ------------------------------------ ----------------
<S> <C> <C>
/s/ BENJAMIN F. MCGRAW, III Chairman, Chief Executive Officer January 19, 2001
------------------------------------ and President (Principal Executive
Benjamin F. McGraw, III Officer)
/s/ BENNET L. WEINTRAUB Vice President, Finance and Chief January 19, 2001
------------------------------------ Financial (Principal Financial and
Bennet L. Weintraub Officer Accounting Officer)
/s/ PATRICK G. ENRIGHT Director January 19, 2001
------------------------------------
Patrick G. Enright
/s/ RAJU KUCHERLAPATI Director January 19, 2001
------------------------------------
Raju Kucherlapati
Director
------------------------------------
Mark McDade
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
--------------------------------------------- ------------------------------------ ----------------
<S> <C> <C>
/s/ BERT W. O'MALLEY Director January 19, 2001
------------------------------------
Bert W. O'Malley
/s/ ARTHUR M. PAPPAS Director January 19, 2001
------------------------------------
Arthur M. Pappas
/s/ GILLIAN E. FRANCIS Director January 19, 2001
------------------------------------
Gillian E. Francis
/s/ STANLEY T. CROOKE Director January 19, 2001
------------------------------------
Stanley T. Crooke
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
4.1 Certificate of Designations of Series A Convertible
Redeemable Preferred Stock.
4.2 Form of Common Stock Purchase Warrant, Class A.
4.3 Form of Common Stock Purchase Warrant, Class B.
5.1 Opinion of Latham & Watkins.
10.1 Form of Subscription Agreement between the Registrant and
each of the selling securityholders, dated as of
November 20, 2000.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Latham & Watkins (included in its opinion filed
as Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
