<PAGE> 1
Filed Pursuant to Rule 424b(5)
Registrant No. 333-47680
PROSPECTUS SUPPLEMENT
NO. 2
(TO PROSPECTUS DATED OCTOBER 30, 2000)
AVIGEN, INC.
694,441 SHARES
COMMON STOCK
We are offering 694,441 shares of our common stock to selected investors
pursuant to this prospectus supplement and the accompanying prospectus. The
common stock is being offered at the negotiated purchase price of $45 3/16 per
share. The purchase price reflects the last reported sale price of shares of our
common stock on the Nasdaq National Market on November 13, 2000. The common
stock is listed on the Nasdaq National Market under the symbol "AVGN."
INVESTING IN AVIGEN COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE S-4.
We expect the total offering expenses, exclusive of placement agent and
finders fees, to be $100,000 for all sales pursuant to the prospectus
supplemented by this prospectus supplement.
The shares are being offered by us principally to selected institutional
investors. Granite Financial Group has been retained to act, on a best efforts
basis, as placement agent for us in connection with the arrangement of this
transaction. We have agreed to pay the placement agent a fee of $1.35 per share.
We have also agreed to pay certain entities that have acted as finders,
introducing us to prospective investors, fees ranging from 4.75% to 5% of the
gross proceeds from the sales of shares to the investors introduced to us by
these finders. These fees are more fully described in "Plan of Distribution"
beginning on page S-16 of this prospectus supplement. If all of the shares
offered by this prospectus supplement are sold, we will receive aggregate
proceeds, net of placement agent and finders fees but before deducting other
offering expenses, of $29,911,071.
THE SHARES OF AVIGEN COMMON STOCK OFFERED OR SOLD UNDER THIS PROSPECTUS
SUPPLEMENT AND PROSPECTUS HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is November 14, 2000.
<PAGE> 2
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AVIGEN. THIS
PROSPECTUS SUPPLEMENT OR PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE NOTES OR CONVERSION
SHARES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
NOTES OR CONVERSION SHARES TO ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS NOR ANY SALE MADE UNDER
THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AVIGEN SINCE THE
DATE OF THIS PROSPECTUS SUPPLEMENT OR IMPLY THAT INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
--------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Supplement Summary............................................................S-3
Risk Factors.............................................................................S-4
Disclosure Regarding Forward-Looking Statements.........................................S-14
Dividend Policy.........................................................................S-14
Use of Proceeds.........................................................................S-14
Price Range of Common Stock.............................................................S-15
Dilution................................................................................S-15
Plan of Distribution....................................................................S-16
Legal Matters...........................................................................S-17
</TABLE>
S-2.
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
Avigen, Inc. was incorporated in October 1992. Our principal executive
offices are located at 1201 Harbor Bay Parkway, Suite 1000, Alameda, California
94502, and our telephone number is (510) 748-7150. Our Web site is located on
the world wide web at "avigen.com." We do not incorporate by reference into this
prospectus the information on our Web site, and you should not consider it as
part of this prospectus.
THE OFFERING
Shares offered ...................... We are offering all of the 694,441
shares being offered hereby.
Shares outstanding after this Following this offering, assuming all of
offering ............................ the shares offered by this prospectus
supplement are sold, there will be
19,416,866 shares of our common stock
outstanding. This number is based upon
the number of shares outstanding on
September 30, 2000 plus the 1,658,329
shares of our common stock previously
sold under the shelf registration
statement of which this prospectus
supplement forms a part. This number
does not include shares that may be
issued pursuant to the exercise of stock
options and warrants currently
outstanding or which may be granted
under our stock option plans, or upon
the conversion of preferred stock
outstanding.
Use of proceeds ..................... For general corporate purposes,
including:
- to fund research and
development;
- to fund preclinical studies
and clinical trials of our
drug candidates;
- to fund completion of our
manufacturing facilities;
- for working capital; and
- for general corporate
purposes.
S-3.
<PAGE> 4
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should not make such an investment if you cannot afford the loss of your entire
investment. In addition to the other information in this prospectus supplement
or prospectus, you should consider carefully the following factors in evaluating
Avigen and its business before purchasing any shares of our common stock.
WE EXPECT TO CONTINUE TO OPERATE AT Since our inception in 1992, we have not
A LOSS, AND WE MAY NEVER ACHIEVE been profitable, and we cannot be
PROFITABILITY ....................... certain that we will ever achieve and
sustain profitability. To date, we have
been engaged in research and development
activities and have not generated any
revenues from product sales. As of
September 30, 2000, we had an
accumulated deficit of $54.9 million.
The process of developing our products
will require significant research and
development, preclinical testing and
clinical trials, as well as regulatory
approval. We expect these activities,
together with our general and
administrative expenses, to result in
operating losses for the foreseeable
future. Our ability to achieve
profitability will depend, in part, on
our ability to successfully complete
development of our proposed products,
obtain required regulatory approvals and
manufacture and market our products
directly or through partners.
THE RESULTS OF OUR CLINICAL TRIALS Six patients have received intramuscular
FOR COAGULIN-B FOR THE TREATMENT OF injections at low and medium doses
HEMOPHILIA B ARE BASED ON A SMALL according to the approved protocol for
NUMBER OF PATIENTS OVER A SHORT the phase I clinical trial of Coagulin-B
PERIOD OF TIME, AND THE SUCCESSES with dose escalations. Through this
REPORTED MAY NOT BE INDICATIVE OF point in the study, these patients have
RESULTS IN A LARGE NUMBER OF demonstrated successful gene expression
PATIENTS OR HAVE LASTING EFFECTS .... of factor IX in muscle tissue, and the
treatments have been well tolerated.
These results, however, are extremely
preliminary and are based upon the
evaluations of only a small group of
patients. Actual results with more data
points may show less favorable
measurements. In addition, we do not yet
know if these results will have a
lasting effect. If a larger population
of patients does not experience similar
results, or these results do not have a
lasting effect, this product candidate
may not receive approval from the Food
and Drug Administration, commonly
referred to as 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.
THE SUCCESS OF OUR TECHNOLOGY IN Even though our product candidates have
ANIMAL MODELS DOES NOT GUARANTEE shown successful results in animal
THAT THESE RESULTS WILL BE models, animals are different than
REPLICATED IN HUMANS ................ humans and these results may not be
replicated in our clinical trials with
humans. For example, the results of our
gene therapy treatment for Hemophilia B
in dogs were different from the results
of our studies with mice. In addition,
the results we have seen to date in
humans in our clinical trials for
Coagulin-B are different from the
results of our studies with dogs.
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.
BECAUSE OUR PRODUCT CANDIDATES ARE None of our product candidates have
IN AN EARLY STATE OF DEVELOPMENT, received regulatory approval for
THERE IS A HIGH RISK THAT THEY MAY commercial sale, and we face the risk
NEVER BE COMMERCIALIZED ............. that none of our product candidates will
ever receive regulatory approval. All of
our product candidates are in early
stages of development. We have only one
product candidate,
S-4.
<PAGE> 5
Coagulin-B for the treatment of
Hemophilia B, in clinical trials, and
this product candidate is only in phase
I of a clinical trial with dose
escalations. We are not aware of any
gene therapy products that have received
regulatory approval. None of our
prospective products, including
Coagulin-B for the treatment of
Hemophilia B, is expected to be
commercially available for at least
several years. Based on results at any
stage of clinical trials, we may decide
to discontinue development of one or
more of our potential products.
TECHNOLOGICAL CHANGE MAY MAKE OUR Gene therapy is new and rapidly evolving
POTENTIAL PRODUCTS AND TECHNOLOGIES and is expected to continue to undergo
LESS ATTRACTIVE OR OBSOLETE ......... significant and rapid technological
change. Rapid technological development
could result in our actual and proposed
technologies, products or processes
becoming less attractive or obsolete.
ADVERSE EVENTS IN THE FIELD OF GENE In November 1999, the death of a patient
THERAPY MAY NEGATIVELY IMPACT involved in an unrelated clinical trial
REGULATORY APPROVAL OR PUBLIC that was undergoing a viral-based gene
PERCEPTION OF OUR POTENTIAL therapy treatment was widely publicized.
PRODUCTS ............................ 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 any products we may develop.
OUR POTENTIAL PRODUCTS MUST UNDERGO The clinical trial process is complex,
RIGOROUS CLINICAL TESTING AND uncertain and expensive. Positive
REGULATORY APPROVALS, WHICH COULD results from preclinical studies and
SUBSTANTIALLY DELAY OR PREVENT US early clinical trials do not ensure
FROM MARKETING ANY PRODUCTS ......... positive results in clinical trials
designed to permit application for
regulatory approval. Prior to marketing
in the United States, any product
developed by us must undergo rigorous
preclinical testing and clinical trials
as well as an extensive regulatory
approval process implemented by the FDA.
The FDA approval process is typically
lengthy and expensive, and approval is
never certain. Because of the risks and
uncertainties in biopharmaceutical
development, our gene therapy products
could take a significantly longer time
to gain regulatory approval than we
expect or may never gain FDA approval.
If we do not receive these necessary
approvals from the FDA, we will not be
able to generate substantial revenues
and will not become profitable. We may
encounter significant delays or
excessive costs in our efforts to secure
regulatory approvals.
S-5.
<PAGE> 6
Factors that raise uncertainty in
obtaining these regulatory approvals
include:
- gene therapy is a new and
rapidly evolving technology;
- to date, there has been only
limited research and
development in gene therapy
using AAV vectors, which we
believe will cause clinical
trials to proceed more slowly
than clinical trials involving
traditional drugs;
- we must obtain FDA approval to
begin clinical trials of our
potential products, which we
may not be able to obtain;
- we must demonstrate through
clinical trials that the
proposed product is safe and
effective for its intended
use;
- we are not aware of any gene
therapy products that have
obtained marketing approval
from the FDA;
- whether or not our product
candidates cause patients to
develop antibodies to these
potential products or the
proteins produced by these
potential products;
- the regulatory requirements
governing gene therapy
products are uncertain and are
subject to change;
- none of our proposed products
has been tested in humans for
their effectiveness; and
- data obtained from preclinical
and clinical activities are
susceptible to varying
interpretations which could
delay, limit or prevent
regulatory approvals.
Failure to comply with applicable FDA or
other regulatory requirements may result
in criminal prosecution, civil penalties
and other actions that would seriously
impair our ability to conduct our
business. Even if regulatory approval is
granted for a product, this approval
will be limited to those disease states
and conditions for which the product is
useful, as demonstrated through clinical
trials.
WE HAVE LIMITED EXPERIENCE IN Clinical trials must meet FDA regulatory
CONDUCTING CLINICAL TRIALS, WHICH requirements. We have limited experience
MAY CAUSE DELAYS IN COMMENCING AND in conducting the preclinical studies
COMPLETING CLINICAL TRIALS OF OUR and clinical trials necessary to obtain
PRODUCTS ............................ FDA regulatory approval. Consequently,
we may encounter problems in clinical
trials which 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.
S-6.
<PAGE> 7
WE MAY NOT BE SUCCESSFUL IN We cannot be certain that we will obtain
OBTAINING REQUIRED FOREIGN any regulatory approvals in other
REGULATORY APPROVALS, WHICH countries. In order to market our
WOULD PREVENT US FROM MARKETING OUR products outside of the United States,
PRODUCTS INTERNATIONALLY ............ we also must comply with numerous and
varying foreign regulatory requirements
implemented by foreign regulatory
authorities. The approval procedure
varies among countries and can involve
additional testing. The time required to
obtain approval may differ from that
required to obtain FDA approval. The
foreign regulatory approval process
includes all of the risks associated
with obtaining FDA approval set forth
above, and approval by the FDA does not
ensure approval by the health
authorities of any other country.
WE HAVE LIMITED EXPERIENCE IN Even if we are able to develop our
MANUFACTURING, AND NO EXPERIENCE IN potential products and obtain necessary
MARKETING OR SELLING OUR POTENTIAL regulatory approvals, we have limited
PRODUCTS, WHICH RAISES UNCERTAINTY IN experience in manufacturing and no
OUR ABILITY TO COST-EFFECTIVELY experience in marketing or selling, any
COMMERCIALIZE OUR POTENTIAL of our proposed products on a commercial
PRODUCTS ............................ basis. Although we believe our recently
completed construction of a second
manufacturing facility will be capable
of producing commercial-scale quantities
of our proprietary adeno-associated
virus vectors, if we are unable to
manufacture our products in a
cost-effective manner, we will not
become profitable. While the facility is
designed to meet the FDA's regulations
concerning current good manufacturing
practices we have not yet received final
validation, and may fail to maintain
adequate compliance with these
requirements in the future. In addition,
we do not anticipate establishing our
own sales and marketing capabilities in
the foreseeable future. We may not be
able to develop adequate marketing
capabilities either on our own or
through third parties.
WE MAY BE REQUIRED TO OBTAIN RIGHTS We currently investigate and use certain
TO PROPRIETARY GENES AND OTHER gene sequences or proteins encoded by
TECHNOLOGIES TO FURTHER DEVELOP OUR those sequences, including the factor
BUSINESS, WHICH MAY NOT BE VIII gene, and manufacturing processes
AVAILABLE OR MAY BE COSTLY .......... that are or may become patented by
others. As a result, we may be required
to obtain licenses to these gene
sequences or proteins or other
technology in order to test, use or
market products. We may not be able to
obtain these licenses on terms favorable
to us. In connection with our efforts to
obtain rights to these gene sequences or
proteins or other technology, we may
find it necessary to convey rights to
our technology to others. Some of our
gene therapy products may require the
use of multiple proprietary
technologies. Consequently, we may be
required to make cumulative royalty
payments to several third parties. These
cumulative royalties could be
commercially prohibitive. We may not be
able to successfully negotiate these
royalty adjustments.
IF WE DO NOT ACHIEVE CERTAIN We have entered into license agreements
MILESTONES, WE MAY NOT BE ABLE TO with third parties for technologies
RETAIN LICENSES TO OUR INTELLECTUAL related to our gene therapy product
PROPERTY ............................ development programs. Some of these
license agreements provide for the
achievement of development milestones.
If we fail to achieve these milestones
or to obtain extensions, the licensor
may terminate these license agreements
with relatively short notice to us.
Termination of any of our license
agreements could harm our business.
S-7.
<PAGE> 8
WE EXPECT THAT WE WILL FACE INTENSE Our competitors may develop more
COMPETITION, WHICH MAY LIMIT OUR effective or more affordable products,
ABILITY TO BECOME PROFITABLE ........ or commercialize products earlier than
we do, which would limit the prices that
we could charge for the products that we
are able to market, and prevent us from
becoming profitable. We expect increased
competition from fully integrated
pharmaceutical companies and more
established biotechnology companies.
Most of these companies have
significantly greater financial
resources and expertise than we do in
the following:
- research and development;
- preclinical studies and
clinical trials;
- obtaining regulatory
approvals;
- manufacturing; and
- marketing and distribution.
Smaller companies may also prove to be
significant competitors, particularly
through collaborative arrangements with
large pharmaceutical companies. Academic
institutions, government agencies and
other public and private research
organizations also conduct research,
seek patent protection and establish
collaborative arrangements for product
development and marketing. In addition,
these companies and institutions compete
with us in recruiting and retaining
highly qualified scientific and
management personnel.
We are aware that other companies are
conducting preclinical studies and
clinical trials for viral and non-viral
gene therapy products. One of these
companies is supporting clinical studies
for use of AAV vectors in the treatment
of cystic fibrosis.
OUR SUCCESS IS DEPENDENT UPON OUR Our success will depend to a significant
ABILITY TO EFFECTIVELY PROTECT OUR degree on our ability to obtain patents
PATENTS AND PROPRIETARY RIGHTS, and licenses to patent rights, preserve
WHICH WE MAY NOT BE ABLE TO DO ...... trade secrets and to operate without
infringing on the proprietary rights of
others. If we are not successful in
these endeavors, our business will be
substantially impaired.
To date, we have filed a number of
patent applications in the United States
relating to our technologies. In
addition, we have acquired exclusive and
non-exclusive licenses to certain issued
patents and pending patent applications.
We cannot be assured that patents will
issue from these applications or that
any patent will issue on technology
arising from additional research or, if
patents do issue, that claims allowed
will be sufficient to protect our
technologies.
The patent application process takes
several years and entails considerable
expense. The failure to obtain patent
protection on the technologies
underlying our proposed products may
have a material adverse effect on our
competitive position and business
prospects. Important legal issues remain
to be resolved as to the scope of patent
S-8.
<PAGE> 9
protection for biotechnology products,
and we expect that administrative
proceedings, litigation or both may be
necessary to determine the validity and
scope of our and others' biotechnology
patents. These proceedings or litigation
may require a significant commitment of
our resources in the future. If patents
can be obtained, we cannot assure you
that any of these patents will provide
us with any competitive advantage. For
example, others may independently
develop similar technologies or
duplicate any technology developed by
us, and patents may be invalidated in
litigation. In addition, several of our
patents and patent applications are
co-owned with co-inventors or
institutions. Under the terms of the
agreements with the co-inventors, we
have obtained or have an option to
obtain an exclusive, worldwide,
transferable, royalty-bearing license
for the technology. To date, we have
negotiated exclusive licenses for two of
the more significant co-invented
technologies. If we cannot negotiate
exclusive rights to other co-owned
technology, each co-inventor may have
rights to independently make, use, offer
to sell or sell the patented technology.
Commercialization, assignment or
licensing of the technology by a
co-inventor could harm our business.
We also rely on a combination of trade
secret and copyright laws, employee and
third-party nondisclosure agreements and
other protective measures to protect
intellectual property rights pertaining
to our products and technologies. We
cannot be certain that these measures
will provide meaningful protection of
our trade secrets, know-how or other
proprietary information in the event of
any unauthorized use, misappropriation
or disclosure of our trade secrets,
know-how or other proprietary
information. In addition, the laws of
certain foreign countries do not protect
our intellectual property rights to the
same extent as do the laws of the United
States. We cannot assure you that we
will be able to protect our intellectual
property successfully.
OTHER PERSONS MAY ASSERT RIGHTS IN Third parties may assert patent or other
OUR PROPRIETARY TECHNOLOGY, WHICH intellectual property infringement
WOULD BE COSTLY TO CONTEST OR SETTLE claims against us with respect to our
.................................... products or technology or other matters.
Any claims against us, with or without
merit, as well as claims initiated by us
against third parties, can be
time-consuming and expensive to defend
or prosecute and to resolve. There may
be third-party patents and other
intellectual property relevant to our
products and technology which are not
known to us. We have not been accused of
infringing any third party's patent
rights or other intellectual property,
but we cannot assure you that litigation
asserting claims will not be initiated,
that we would prevail in any litigation,
or that we would be able to obtain any
necessary licenses on reasonable terms,
if at all. If our competitors prepare
and file patent applications in the
United States that claim technology also
claimed by us, we may have to
participate in interference proceedings
declared by the Patent and Trademark
Office to determine priority of
invention, which could result in
substantial cost to us, even if the
outcome is favorable to us. In addition,
to the extent outside collaborators
apply technological information
developed independently by them or by
others to our product development
programs or apply our technologies to
other projects, disputes may arise as to
the ownership of
S-9.
<PAGE> 10
proprietary rights to these
technologies.
IF OUR PRODUCTS ARE NOT ACCEPTED BY Our success is dependent on acceptance
PHYSICIANS AND INSURERS, WE WILL of our gene therapy products. We cannot
NOT BE SUCCESSFUL ................... assure you that our products will
achieve significant market acceptance
among patients, physicians or
third-party payors, even if we obtain
necessary regulatory and reimbursement
approvals. Failure to achieve
significant market acceptance will harm
our business. We believe that
recommendations by physicians and health
care payors will be essential for market
acceptance of our gene therapy products.
In the past, there has been concern
regarding the potential safety and
efficacy of gene therapy products
derived from pathogenic viruses such as
retroviruses and adenoviruses. While our
proposed gene therapy products are
derived from AAV, which is a
non-pathogenic virus, we cannot be
certain that physicians and health care
payors will conclude that the technology
is safe.
EVEN IF WE BRING OUR PRODUCTS TO If we succeed in bringing our proposed
MARKET, WE MAY BE UNABLE TO products to the market, we cannot assure
EFFECTIVELY PRICE OUR PRODUCTS OR you that these products will be
OBTAIN ADEQUATE REIMBURSEMENT FOR considered cost-effective and that
SALES OF OUR PRODUCTS, WHICH WOULD reimbursement to the consumer will be
PREVENT OUR PRODUCTS FROM BECOMING available or will be sufficient to allow
PROFITABLE .......................... us to sell our products on a competitive
basis. In both the United States and
elsewhere, sales of medical products and
treatments are dependent, in part, on
the availability of reimbursement to the
consumer from third-party payors, such
as government and private insurance
plans.
Third-party payors are increasingly
challenging the prices charged for
medical products and services. Our
business and financial condition is
affected by the efforts of government
and third-party payors to contain or
reduce the cost of health care through
various means. In the United States,
there have been and will continue to be
a number of federal and state proposals
to implement government controls on
pricing. In addition, the emphasis on
managed care in the United States has
increased and will continue to increase
the pressure on the pricing of
pharmaceutical products. We cannot
predict whether any legislative or
regulatory proposals will be adopted or
the effect these proposals or managed
care efforts may have on our business.
WE MAY BE UNABLE TO ATTRACT AND We are highly dependent on certain
RETAIN THE QUALIFIED EMPLOYEES WE members of our management and research
NEED TO BE SUCCESSFUL ............... and development staff. The loss of any
of these persons, or our inability to
recruit additional personnel necessary
to our business, could substantially
impair our research and development
efforts and impede our ability to
develop and commercialize any of our
products. Recruiting and retaining
qualified technical and managerial
personnel will also be critical to our
success. Our business is located in the
San Francisco Bay Area in California,
where demand for personnel with these
skills is extremely high and is likely
to remain high. As a result, competition
for and retention of personnel,
particularly for employees with
technical expertise, is intense and the
turnover rate for these people is high.
In addition, we rely on consultants and
advisors to assist us in formulating our
research and development strategy. A
majority of our scientific advisors are
engaged by us on a consulting basis and
are employed on a
S-10.
<PAGE> 11
full-time basis by employers other than
us and some have consulting or other
advisory arrangements with other
entities that may conflict or compete
with their obligations to us.
WE MUST SECURE ADDITIONAL We will require substantial additional
FINANCING, OTHERWISE WE WILL NOT BE funding to complete the research and
ABLE TO DEVELOP OUR PRODUCTS..... development activities currently
contemplated and to commercialize our
products. If we do not obtain these
funds, we will not be able to develop
our products. We anticipate that our
existing capital resources as of
September 30, 2000, will be adequate to
fund our needs for at least two years.
Our future capital requirements will
depend on many factors, including:
- continued scientific progress
in research and development
programs;
- the scope and results of
preclinical studies and
clinical trials;
- the time and costs involved in
obtaining regulatory
approvals;
- the costs involved in filing,
prosecuting and enforcing
patent claims;
- competing technological
developments;
- the cost of manufacturing
scale-up;
- the cost of commercialization
activities; and
- other factors which may not be
within our control.
We intend to seek additional funding
through public or private equity or debt
financing, when market conditions allow.
If we raise additional funds by issuing
equity securities, there may be further
dilution to existing stockholders. We
cannot assure you that we will be able
to enter into financing arrangements on
acceptable terms, if at all. Without
additional funding, we may be required
to delay, reduce the scope of or
eliminate one or more of our research or
development programs.
S-11.
<PAGE> 12
WE FACE THE RISK OF PRODUCT The manufacture and sale of medical
LIABILITY CLAIMS WHICH MAY EXCEED products entail significant risk of
THE SCOPE OR AMOUNT OF OUR product liability claims. We currently
INSURANCE COVERAGE .................. carry product liability insurance;
however, we cannot assure you that this
coverage will remain in place or that
this coverage will be adequate to
protect us from all liabilities which we
might incur in connection with the use
or sale of our products. In addition, we
may require increased product liability
coverage as additional products are
commercialized. This insurance is
expensive and in the future may not be
available on acceptable terms, if at
all. A successful product liability
claim or series of claims brought
against us in excess of our insurance
coverage could harm our business. We
must indemnify certain of our licensors
against any product liability claims
brought against them arising out of
products developed by us under these
licenses.
OUR USE OF RADIOACTIVE AND OTHER Because we use radioactive materials and
HAZARDOUS MATERIALS EXPOSES US TO other hazardous substances in our
THE RISK OF MATERIAL ENVIRONMENTAL research and development operations, we
LIABILITIES, AND WE MAY INCUR are potentially subject to material
SUBSTANTIAL ADDITIONAL COSTS TO liabilities related to personal injuries
COMPLY WITH ENVIRONMENTAL LAWS IN or property damages that may be caused
THE EVENT THAT WE DEVELOP OUR OWN by the spread of radioactive
MANUFACTURING FACILITY .............. contamination or by other hazardous
substance releases or exposures at, or
from, our research facility.
Decontamination costs associated with
radioactivity releases, other clean-up
costs, and related damages or
liabilities could harm our business.
We are required to comply with
increasingly stringent laws and
regulations governing environmental
protection and workplace safety,
including requirements governing the
handling, storage and disposal of
radioactive and other hazardous
substances and wastes, and laboratory
operating and safety procedures. These
laws and regulations can impose
substantial fines and criminal sanctions
for violations. Maintaining in
compliance with these laws and
regulations with regard to the operation
of our own commercial manufacturing
facility could require substantial
additional capital. These costs could
decrease our ability to conduct
manufacturing operations in a
cost-effective manner.
ANTI-TAKEOVER EFFECTS OF CERTAIN Certain provisions of our charter and
CHARTER PROVISIONS AND DELAWARE LAW the Delaware Law may negatively affect
MAY NEGATIVELY AFFECT THE ABILITY the ability of a potential buyer to
OF A POTENTIAL BUYER TO PURCHASE attempt a takeover of Avigen, which may
SOME OR ALL OF OUR STOCK AT AN have a negative effect on the price
OTHERWISE ADVANTAGEOUS PRICE, WHICH investors are willing to pay for our
MAY LIMIT THE PRICE INVESTORS ARE common stock. For example, our board of
WILLING TO PAY FOR OUR COMMON STOCK... directors has the authority to issue up
to 5,000,000 shares of preferred stock
and to determine the price, rights,
preferences and privileges of those
shares without any further vote or
action by the stockholders. The rights
of the holders of common stock will be
subject to, and may be materially
adversely affected by, the rights of the
holders of any preferred stock that may
be issued in the future. The issuance of
preferred stock could have the effect of
making it more difficult for a third
party to acquire a majority of the
outstanding voting stock of Avigen. We
have no present plans to issue shares of
preferred stock. In addition, our board
of directors is divided into three
classes, and each year on a rotating
basis the directors of one class are
elected for a three-year term. This
provision could have the effect of
making it less likely that a third party
would
S-12.
<PAGE> 13
attempt to obtain control of Avigen.
Furthermore, certain other provisions of
our restated certificate of
incorporation may have the effect of
delaying or preventing changes in
control or management, which could
adversely affect the market price of the
our common stock. In addition, we are
subject to the provisions of Section 203
of the Delaware General Corporation Law,
an anti-takeover law.
OUR STOCK PRICE IS VOLATILE, AND AS We believe that various factors may
A RESULT, INVESTING IN OUR COMMON cause the market price of our common
STOCK IS VERY RISKY................ stock to continue to fluctuate, perhaps
substantially, including announcements
of:
- technological innovations or
regulatory approvals;
- results of clinical trials;
- new products by us or our
competitors;
- developments or disputes
concerning patents or
proprietary rights;
- our failing to achieve certain
developmental milestones;
- public concern as to the
safety of gene therapy
products;
- health care or reimbursement
policy changes by governments
or insurance companies;
- developments in relationships
with corporate partners; or
- a change in financial
estimates or securities
analysts' recommendations
In addition, in recent years the stock
market in general, and the shares of
biotechnology and health care companies
in particular, have experienced extreme
price fluctuations. These broad market
and industry fluctuations may cause the
market price of our common stock to
decline dramatically.
S-13.
<PAGE> 14
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this prospectus supplement and in the prospectus
contains forward-looking statements that involve risks and uncertainties. Those
statements include words such as "anticipate," "estimate," "project," "intend,"
and similar expressions which we have used to identify these statements as
forward-looking statements. These statements appear throughout this prospectus
supplement and prospectus and are statements regarding our intent, belief, or
current expectations, primarily with respect to the operations of Avigen or
related industry developments. These forward-looking statements do not guarantee
future performance and involve risks and uncertainties, and that actual results
could differ materially from those discussed here, including under "Risk
Factors," and in the documents incorporated by reference in this prospectus
supplement and in the prospectus.
DIVIDEND POLICY
Avigen has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future.
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of the
694,441 shares of our common stock being offered by the prospectus supplement
will be approximately $29.9 million, after deducting the placement agent fees
and estimated offering expenses, assuming all of the shares offered by this
prospectus are sold. We expect to use the net proceeds of this offering as
follows:
- to fund research and development;
- to fund preclinical studies and clinical trials of our drug
candidates;
- to fund completion of our manufacturing facilities;
- for working capital; and
- for general corporate purposes.
We have not determined the amount of net proceeds to be used for each of
the specific purposes listed. Accordingly, we will have broad discretion to use
the proceeds as we see fit.
Based upon the current status of our product development programs, we
believe that the net proceeds from this offering, together with interest on
those net proceeds and our existing capital resources, will satisfy our capital
requirements for at least the next three years.
Pending these uses, we intend to invest the net proceeds of this
offering in short-term, interest-bearing, investment-grade instruments,
certificates of deposit or direct or guaranteed obligations of the United States
or its agencies.
S-14.
<PAGE> 15
PRICE RANGE OF COMMON STOCK
Since May 22, 1996, our common stock has been traded on the Nasdaq
National Market under the symbol "AVGN." A summary of the high and low sale
prices during the periods indicated for our common stock on the Nasdaq National
Market follows:
<TABLE>
<CAPTION>
FISCAL 1999 HIGH LOW
----------- ---- ---
<S> <C> <C>
Quarter ended 9/30/98 $3.56 $1.50
Quarter ended 12/31/98 $7.81 $2.00
Quarter ended 3/31/99 $8.00 $4.63
Quarter ended 6/30/99 $6.63 $4.69
FISCAL 2000
Quarter ended 9/30/99 $13.25 $5.63
Quarter ended 12/31/99 $37.00 $12.25
Quarter ended 3/31/00 $89.00 $28.00
Quarter ended 6/30/00 $46.75 $25.00
FISCAL 2001
Quarter ending 9/30/00 $47.87 $29.63
Quarter ending 12/31/00 (through November 13, 2000) $49.75 $34.50
</TABLE>
On November 13, 2000, the last sale price of our common stock reported
by the Nasdaq National Market was $45 3/16 per share. As of November 1, 2000,
there were 193 stockholders of record of our common stock.
DILUTION
Our net tangible book value as of September 30, 2000, after giving
effect to the sale on November 1, 2000 of 1,658,329 shares of our common stock
at $37.50 per share under the shelf registration statement of which this
prospectus supplement forms a part, after deducting the placement agent fees and
estimated offering expenses, was approximately $135.5 million, or $7.24 per
share. Net tangible book value per share represents the amount of our total
tangible assets less total liabilities divided by the total number of shares of
common stock outstanding. After giving effect to the sale by us of 694,441
shares of common stock offered by us by this prospectus supplement at the
offering price of $45 3/16 per share and after deducting the placement agent
fees and estimated offering expenses, our net tangible book value at September
30, 2000, after giving effect to the sale of the 1,658,329 shares of our common
stock referred to above, would have been approximately $165.4 million, or $8.52
per share. This represents an immediate increase in net tangible book value of
$1.28 per share to existing stockholders and an immediate dilution of $36.54 per
share to new investors in the offering by this prospectus supplement, as
illustrated by the following table:
<TABLE>
<S> <C> <C>
Assumed public offering price per share ......................... $45.06
Net tangible book value per share before this offering ........ $7.24
Increase per share attributable to this offering .............. 1.28
------
Net tangible book value per share after this offering ........... 8.52
------
Dilution per share to new investors ............................. $36.54
======
</TABLE>
In addition, the above computations assume no exercise of options to
purchase 2,420,634 shares of common stock outstanding at September 30, 2000 at a
weighted average exercise price of $16.69 per
S-15.
<PAGE> 16
share and no exercise of warrants to purchase 1,598,730 shares of common stock
at a weighted average exercise price of $13.77 per share outstanding on this
date. To the extent these options and warrants are exercised, there will be
further dilution to investors.
PLAN OF DISTRIBUTION
We are offering the 694,441 shares directly to selected investors. Of
these shares, 177,531 shares are being offered through Granite Financial Group
acting as placement agent for us on a best efforts basis.
In connection with this sale, we have agreed to pay Granite Financial
Group a placement agent fee of 3% of the gross proceeds to us from the sales of
the 177,531 shares placed by them, prior to the deduction of any expenses
payable by us. The following table shows the placement agent fees to be paid by
us to Granite Financial Group in connection with the sale of the shares of our
common stock being sold pursuant to this prospectus supplement, assuming all of
these shares are sold:
<TABLE>
<S> <C>
Placement Agent Fee Per Share ....... $ 1.35
Total ............................... $ 240,000
</TABLE>
In connection with this offering, BioFinance et Developpement SAS and
Privateq Advisors have acted as finders for us, introducing us to prospective
investors in the shares. BioFinance et Developpement SAS and Privateq Advisors
are not obligated to, and do not intend to, take or purchase any of the shares
being offered by this prospectus supplement and related prospectus, nor are
BioFinance et Developpement SAS and Privateq Advisors participating in this
offering as placement agents or otherwise. We have agreed to pay BioFinance et
Developpement SAS and Privateq Advisors each a finders fee of 5% of the gross
proceeds from the sale of shares to investors introduced to us by BioFinance et
Developpement SAS and Privateq Advisors, respectively, prior to the deduction of
any expenses payable by us. Assuming all of the shares offered hereby are sold,
we expect these amounts to be $500,892 payable to BioFinance et Developpement
SAS and $214,047 to Privateq Advisors.
S-16.
<PAGE> 17
In addition, CIBC World Markets Corp. has acted as a finder for us,
introducing us to prospective investors in the shares. CIBC World Markets Corp.
is not obligated to, and does not intend to, take or purchase any of the shares
being offered by this prospectus supplement and related prospectus, nor is CIBC
World Markets Corp. participating in this offering as a placement agent or
otherwise. We have agreed to pay CIBC World Markets Corp. a finders fee of 4.75%
of the gross proceeds from the sale of shares to investors introduced to us by
CIBC World Markets Corp., prior to the deduction of any expenses payable by us.
Assuming all of the shares offered hereby are sold, we expect this amount to be
$427,238. CIBC World Markets Corp. previously acted as one of our managing
underwriters in connection with our underwritten public offering that occurred
in April 2000.
We estimate that the total expenses of the offering, including all
offerings under the prospectus but excluding placement agent fees and finders
fees, including those specified above, will be approximately $100,000.
Proportionally, the amount of these expenses relates to approximately $26,000
for the shares offered by this prospectus supplement.
LEGAL MATTERS
The validity of the 694,441 shares offered by this prospectus supplement
has been passed upon for Avigen by Cooley Godward LLP, Palo Alto, California.
S-17.
