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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1998
REGISTRATION NO. 333-60251
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MIRAVANT MEDICAL TECHNOLOGIES
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0222872
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
7408 HOLLISTER AVENUE
SANTA BARBARA, CALIFORNIA 93117
(805) 685-9880
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
GARY S. KLEDZIK, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MIRAVANT MEDICAL TECHNOLOGIES
7408 HOLLISTER AVE.
SANTA BARBARA, CALIFORNIA 93117
(805) 685-9880
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
JOSEPH E. NIDA, ESQ. JAMES L. NOUSS, JR., ESQ.
THEODORE R. MALONEY, ESQ. ELIZABETH A. KING, ESQ.
Nida & Maloney, a Professional Corporation Bryan Cave LLP
800 Anacapa Street 120 Broadway, Suite 500
Santa Barbara, California 93101 Santa Monica, California 90401
(805) 568-1151 (310) 576-2100
</TABLE>
------------------------------
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 the form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. /X/ 333-39905
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT OF SHARES OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED TO BE REGISTERED PER SHARE PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share............................... 4,440,000(1) $19.97(2) $220,706,250(2) $66,700.27(3)
</TABLE>
(1) Includes 3,164,797 shares of Common Stock of Miravant Medical Technologies
(the "Company" or the "Registrant") issuable upon exercise of Common Stock
Purchase Warrants (the "Warrants") and pursuant to the anti-dilution
provisions of the Warrants, as such number may be adjusted in accordance
with Rule 416, or the price protection provisions of Section 5.3 of the
Securities Purchase Agreements among the Company and the Selling
Shareholders named herein. A total of 3,540,000 shares were the subject of
the earlier filing, 337,500 of which have been repurchased by the Company as
of November 3, 1998. This Registration Statement includes for registration
1,125,000 additional shares which are issuable upon the exercise of
additional Common Stock Purchase Warrants and under Section 5.3, as amended
with respect to certain of the Selling Shareholders.
(2) Estimated pursuant to Rule 457(h) solely for the purpose of calculating the
amount of the registration fee on the basis of the average of the high and
low reported sale prices of a share of Common Stock of the Company of $56.00
for 3,540,000 shares on November 5, 1997 and of $19.97 for 1,125,000 shares
on July 27, 1998, as reported by the Nasdaq National Market.
(3) Previously paid.
THIS POST-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE UPON FILING WITH THE COMMISSION IN ACCORDANCE WITH RULE 462(b) UNDER
THE SECURITIES ACT OF 1933.
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<PAGE>
4,440,000 SHARES
MIRAVANT
MEDICAL TECHNOLOGIES
COMMON STOCK
---------------------
Shares of Common Stock of Miravant Medical Technologies, formerly PDT, Inc.
(the "Company"), registered pursuant to the Registration Statement of which this
Prospectus is a part (the "Shares") may be sold from time to time for the
accounts of and by the persons named under the caption "Selling Shareholders."
The Shares include 3,164,797 Shares of Common Stock issuable upon the exercise
of Common Stock Purchase Warrants (the "Warrants") and to be issued pursuant to
the anti-dilution provisions of the Warrants, as such number may be adjusted in
accordance with Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act"), or the price protection provisions of Section 5.3 of the
Securities Purchase Agreements among the Company and the Selling Shareholders.
900,000 of the Shares (including 450,000 Shares issuable upon the exercise of
the Warrants) remain subject to a Lock-Up Agreement which generally prohibits or
prohibited the sale of the Shares until various termination dates, with the
first termination date on November 1, 1998 and the last termination date on
March 1, 1999, subject to certain exceptions. See "Selling Shareholders." The
Selling Shareholders have advised the Company that the Shares may be sold from
time to time on the Nasdaq National Market ("NNM") or in negotiated
transactions, in each case at prices satisfactory to the seller. The Selling
Shareholders and the brokers and dealers through which the sales of the Shares
may be made may be deemed to be "underwriters" within the meaning set forth in
the Securities Act, and their commissions and discounts and other compensation
may be regarded as underwriters' compensation. See "Plan of Distribution." The
Company has issued, or will issue upon the exercise of the Warrants, the Shares
in certain Private Placement transactions.
The Company will not receive any proceeds from the sale of Shares by the
Selling Shareholders, but will receive the exercise prices payable upon the
exercise of the Warrants, if exercised for cash. There can be no assurance that
all or any of the Warrants will be exercised or that they will be exercised for
cash. All expenses incurred in connection with this offering are being borne by
the Company, other than any commissions or discounts paid or allowed by the
Selling Shareholders to underwriters, dealers, brokers or agents.
The Common Stock of the Company is traded on the NNM under the symbol
"MRVT." On December 11, 1998, the last sale price of the Common Stock as
reported by the NNM was $14.375.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
December 14, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's Regional Offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Branch of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statements and
other materials that are filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. This Web site can be accessed
at http://www.sec.gov. Shares of the Company's Common Stock are listed on the
NNM and the reports, proxy statements and other information filed by the Company
also can be inspected at the offices of the National Association of Securities
Dealers, Inc. (the "NASD"), at 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed or incorporated by
reference as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and the schedules
thereto. For further information pertaining to the Company or the Common Stock
offered hereby, reference is made to the Registration Statement and such
exhibits and schedules thereto, which may be inspected without charge at, and
copies thereof may be obtained at prescribed rates from, the Public Reference
Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith, as indicated below. The Company will provide
without charge to each person to whom a copy of this Prospectus has been
delivered, on the written or oral request of such person, a copy of any or all
of the documents referred to below which are incorporated herein by reference
(other than exhibits to such documents unless they are specifically incorporated
by reference into such documents). Requests for such copies should be directed
to Corporate Secretary, Miravant Medical Technologies, 7408 Hollister Avenue,
Santa Barbara, California 93117; telephone number (805) 685-9880.
The following documents filed with the Commission by the Company under File
No. 0-25544 pursuant to the Exchange Act are incorporated herein by reference:
Annual Report on Form 10-K for the fiscal year ended December 31, 1997;
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998; Definitive Proxy Statement dated May 8,
1998; Current Report on Form 8-K dated June 30, 1998; and description of the
Company's Common Stock as contained in Item 1 of the Company's Registration
Statement on Form 8-A filed February 9, 1995.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this
Prospectus and prior to the termination of the offering of the Common Stock
offered hereby shall be deemed to be incorporated by reference herein and to be
a part hereof from the date of filing of such documents. See "Available
Information." Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
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<PAGE>
herein or in any subsequently filed document incorporated or deemed to be
incorporated herein by reference, which statement is also incorporated herein by
reference, modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or any Selling Shareholder. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby to any person in any jurisdiction in
which it is unlawful to make such an offer or solicitation. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any circumstances
create any implication that the information contained herein is correct as of
any date subsequent to the date hereof.
3
<PAGE>
THE COMPANY
Miravant Medical Technologies is engaged in the integrated development of
drug and medical device products for use in PhotoPoint-TM-, the Company's
proprietary technologies for photodynamic therapy. PhotoPoint is a medical
procedure which integrates the use of light-activated (photoreactive) drugs,
light producing devices and light delivery devices to achieve selective
photochemical destruction of diseased cells. The Company believes that
PhotoPoint has the potential to be a safe, cost-effective, minimally invasive
primary or adjunctive treatment for indications in a broad number of disease
areas, including oncology, ophthalmology, urology, dermatology, gynecology and
cardiology. The Company is conducting clinical trials in oncology and
ophthalmology. All of the Company's clinical trials are testing the Company's
leading drug candidate, Purlytin-TM- (tin ethyl etiopurpurin, SnET2)
("Purlytin"). The Company is developing products in collaboration with its
corporate partners, Boston Scientific Corporation ("Boston Scientific"), Chiron
Diagnostics ("Chiron"), Cordis Corporation, a Johnson & Johnson company
("Cordis"), Iridex Corporation ("Iridex"), Medicis Pharmaceutical Corporation
("Medicis"), Pharmacia & Upjohn, Inc. ("Pharmacia & Upjohn"), Ramus Medical
Technologies ("Ramus") and Xillix Technologies Corp. ("Xillix").
PhotoPoint typically involves the intravenous injection of a photoreactive
drug followed by the application of light of a specific wavelength which
activates the drug. When exposed to the appropriate light wavelength, Purlytin
acts as a catalyst to generate a highly reactive form of oxygen which destroys
the membranes of the cells containing the drug. Importantly, neither Purlytin
nor light alone can produce the photodynamic reaction. After administration,
Purlytin is absorbed by cells throughout the body. The drug begins to clear from
normal cells after several hours but is generally retained at higher levels by
hyperproliferating cells. As a result, PhotoPoint can be used to selectively
destroy diseased or undesirable cells in two ways: (i) DRUG
SELECTIVITY--hyperproliferating cells such as in a cancer tumor can be
selectively destroyed by allowing the drug to clear from non-target cells before
delivering light to the general area; and (ii) LIGHT SELECTIVITY--in conditions
such as certain eye disorders, tissues can be selectively destroyed by precisely
delivering the light to discrete areas before the drug has cleared. The Company
believes that this selectivity may offer advantages over existing chemotherapy,
radiation therapy and surgery treatments, which can damage both normal and
abnormal tissues.
The Company's objective is to develop and commercialize, with its corporate
partners, all three components of PhotoPoint: photoreactive drugs, light
producing devices and light delivery devices, for use as adjunct or primary
treatments. The key elements of the Company's strategy include: (i) integrating
photoreactive drugs, light producing devices and light delivery devices into
easy-to-use, cost-effective clinical treatment systems, (ii) initially targeting
high-incidence or serious diseases for which there is no satisfactory
alternative treatment or which may offer accelerated regulatory processes and
(iii) collaborating with industry-leading corporate partners who are leaders in
the Company's targeted disease areas and who can assist the Company in expanding
the number of target applications and expediting the development and marketing
of its products.
The Company was incorporated in Delaware in 1989 and, effective September
15, 1997, changed its name from PDT, Inc. to Miravant Medical Technologies. The
Company's executive offices and the offices of its three subsidiaries, Miravant
Pharmaceuticals, Inc., Miravant Systems, Inc. and Miravant Cardiovascular, Inc.,
are located at 7408 Hollister Avenue, Santa Barbara, California 93117. The
Company's telephone number is (805) 685-9880. Unless otherwise indicated, all
references to the Company include the Company and its subsidiaries.
RECENT DEVELOPMENTS
The Company is currently in discussions with Pharmacia & Upjohn regarding a
proposed transaction involving, among other things, (i) a general purpose term
loan from Pharmacia & Upjohn to the Company in an amount and on terms to be
negotiated, (ii) the conversion of Pharmacia & Upjohn's future
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<PAGE>
committed oncology research and development funding and potential milestone
payments into an equity investment in shares of the Company's Common Stock at a
price to be negotiated, and (iii) certain other amendments to the Company's
agreements with Pharmacia & Upjohn. These discussions are at a preliminary stage
and there is no obligation on either party to continue such discussions.
Moreover, the closing of the proposed transaction is subject to the satisfaction
of a number of conditions, including the execution of a definitive agreement. No
definitive agreement has been reached by the parties and there can be no
assurance that the parties will reach an agreement on the terms described
herein, or at all.
5
<PAGE>
RISK FACTORS
THE COMPANY DOES NOT PROVIDE FORECASTS OF POTENTIAL FUTURE OPERATIONAL OR
FINANCIAL PERFORMANCE. WHILE MANAGEMENT OF THE COMPANY IS OPTIMISTIC ABOUT THE
COMPANY'S LONG-TERM PROSPECTS, THE FOLLOWING ISSUES AND UNCERTAINTIES, AMONG
OTHERS, SHOULD BE CONSIDERED IN EVALUATING ITS OUTLOOK. THIS PROSPECTUS, AS WELL
AS THE INFORMATION INCORPORATED BY REFERENCE, CONTAINS FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995, WHICH INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENT OF THE COMPANY,
OR INDUSTRY RESULTS, TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE
OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH STATEMENTS. THE
FACTORS LISTED BELOW REPRESENT CERTAIN IMPORTANT FACTORS THE COMPANY BELIEVES
COULD CAUSE SUCH RESULTS TO DIFFER. THESE FACTORS ARE NOT INTENDED TO REPRESENT
A COMPLETE LIST OF THE GENERAL OR SPECIFIC RISKS THAT MAY AFFECT THE COMPANY. IT
SHOULD BE RECOGNIZED THAT OTHER RISKS MAY BE SIGNIFICANT, PRESENTLY OR IN THE
FUTURE, AND THE RISKS SET FORTH BELOW MAY AFFECT THE COMPANY TO A GREATER EXTENT
THAN INDICATED.
EARLY STAGE OF THE COMPANY AND ITS PRODUCTS
The Company and its products are in an early stage of development. No
revenues have been generated from sales of the Company's drugs and only limited
revenues have been generated from sales of the Company's devices. The Company
does not expect to achieve significant levels of revenues for at least several
years. The Company's revenues to date have consisted, and for the foreseeable
future are expected to consist, principally of grants awarded and payments for
its devices which are purchased by others engaged in preclinical and clinical
testing and research of photodynamic drugs or by companies that distribute the
devices and payments under research and development agreements, license fees,
royalties, clinical reimbursements, milestone payments and interest income. To
achieve profitable operations on a continuing basis, the Company, alone or with
collaborative partners, must successfully research, develop, test, obtain
regulatory approval, manufacture, introduce, market and distribute its products.
The time frame necessary to achieve these goals for any individual product is
long and uncertain. Most of the products currently under development by the
Company will require significant additional research and development,
preclinical and clinical testing and regulatory approval prior to
commercialization. There can be no assurance that the Company's research or
product development efforts or those of its collaborative partners will be
successfully completed, that the drugs or devices currently under development
will be successfully transformed into marketable products, that required
regulatory approvals can be obtained, that products can be manufactured at an
acceptable cost and with appropriate quality, that any approved products can be
successfully marketed, or that any products that may be marketed will be
favorably accepted. The likelihood of the Company's success must be considered
in light of these and other problems, expenses, difficulties, complications and
delays frequently encountered in connection with the formation of a new business
and the development and commercialization of new products, particularly
pharmaceutical and medical device products.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company has generated little revenue to date, has experienced operating
losses since its inception in 1989 and has not yet achieved profitability. The
Company had an accumulated deficit of approximately $80.9 million (audited) and
$101.9 million (unaudited) as of December 31, 1997 and September 30, 1998,
respectively. These losses have resulted primarily from the Company's research
and development programs, the funding of preclinical and clinical testing and
regulatory activities and the general and administrative expenses associated
with these activities. The Company anticipates incurring substantial and
increasing losses over at least the next several years. The extent of losses and
the time required to reach profitability are highly uncertain. To achieve
sustained profitable operations, the Company, alone or with collaborative
partners, must successfully research, develop, test, obtain regulatory approval,
manufacture, introduce, market and distribute its products. There can be no
assurance that the
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Company will be able to achieve profitability or that profitability, if
achieved, can be sustained on an ongoing basis. Moreover, if profitability is
achieved, the level of that profitability cannot be accurately predicted.
UNPROVEN SAFETY AND EFFICACY; CLINICAL TRIALS
All drug and device products currently under development by the Company will
require extensive preclinical and clinical testing prior to regulatory approval
for commercial use. None of the Company's products have completed testing for
efficacy or safety in humans. There can be no assurance that such testing will
demonstrate that Purlytin or any other of the Company's products is safe or
efficacious or that testing for any of the Company's compounds currently under
development will be commenced or completed successfully within any specified
time period, if at all. Further, there can be no assurance that clinical data
reported by the Company will not change as a result of the continuing evaluation
of patients. Data obtained from preclinical and clinical trials are subject to
varying interpretations which can delay, limit or prevent approval by the United
States Food and Drug Administration (the "FDA") or other regulatory authorities.
There can be no assurance that the Company will not encounter problems in
research and development, preclinical testing or clinical trials that will cause
the Company to delay, suspend or cancel clinical trials. Many potential
pharmaceutical and medical device products that achieve promising results in
preclinical tests and clinical trials fail to demonstrate sufficient safety or
efficacy to warrant approval by the FDA or other regulatory authorities, and
there can be no assurance that any of the Company's potential products will
obtain the required approvals or, if approved, will obtain sufficient market
acceptance to become commercially successful. Moreover, as a result of changing
markets, economic considerations, clinical or regulatory conditions, or clinical
trial results, the Company's focus has shifted among indications, and in the
future may again shift to other indications, and it has been determined, and in
the future it may again be determined, not to further pursue one or more of the
indications which have been or are currently being pursued.
To date, the Company has very limited experience in conducting clinical
trials. The Company will either need to rely on third parties, including its
collaborative partners, to design and conduct any required clinical trials or
expend resources to hire additional personnel to administer such clinical
trials. There can be no assurance that the Company will be able to find
appropriate third parties to design and conduct clinical trials or that it will
have the resources to hire personnel to administer clinical trials in-house.
RELIANCE ON COLLABORATIVE PARTNERS
The Company has entered into collaborative relationships with certain
corporations and academic institutions in connection with the research and
development, preclinical and clinical testing, licensing, manufacturing and
distribution of its products. In July 1995, the Company entered into a
collaborative agreement with a subsidiary of Pharmacia & Upjohn (collectively
with certain subsidiaries referred to herein as "Pharmacia & Upjohn") which was
subsequently restated and amended in June 1998 pursuant to which the Company
granted to Pharmacia & Upjohn an exclusive worldwide license to use, distribute
and sell Purlytin for certain therapeutic or diagnostic applications in the area
of photodynamic therapy. The amount of royalty revenues and other payments, if
any, ultimately received by the Company with respect to sales of Purlytin is
dependent, in part, on the amount and timing of resources Pharmacia & Upjohn
commits to research and development, clinical testing and regulatory and
marketing activities, which are substantially within the control of Pharmacia &
Upjohn. The resources committed by Pharmacia & Upjohn in these areas will depend
on Pharmacia & Upjohn's own competitive, marketing and strategic considerations,
including the relative advantages of alternative products or therapies developed
and marketed by Pharmacia & Upjohn or competitors. There can be no assurance
that Pharmacia & Upjohn will pursue the development and commercialization of
Purlytin or that Pharmacia & Upjohn will perform its obligations as expected.
7
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In addition, the Company is also collaborating with Boston Scientific and
Cordis with respect to the development of catheters for use in PhotoPoint. Also,
the Company is collaborating with Medicis to facilitate the clinical development
of PhotoPoint in dermatology and with Chiron for the early detection and
treatment of lung cancer. The Company has not entered into any definitive
collaborative agreement with any of these companies. No assurance can be given
that these additional collaborations will culminate in definitive collaborative
agreements or marketable products, or will otherwise be successful. Also, there
can be no assurance that Iridex, Ramus and Xillix will continue to pursue the
development of devices in the fields of ophthalmology, cardiology and oncology,
respectively, or that such development will result in marketable products.
In addition, the Company is currently at various stages of discussions with
other companies regarding the establishment of various collaborations. The
Company's current and future collaborations are important to the Company because
they allow the Company greater access to funds, to research, development or
testing resources and to manufacturing, sales or distribution resources than it
would otherwise have, and the Company intends to continue to rely on such
collaborative arrangements. However, there can be no assurance that the Company
will be able to negotiate acceptable collaborative arrangements in the future or
that such future or existing collaborative arrangements will be successful or
result in products that are marketed or sold. In addition, there can be no
assurance that such collaborative relationships will not limit or restrict the
Company in any way. Further, there can be no assurance that the Company's
collaborative partners will not develop or pursue alternative technologies
either on their own or in collaboration with others, including the Company's
competitors, as a means of developing or marketing products for the diseases
targeted by the collaborative programs and the Company's products. If the
Company's partners elect to terminate the development and other activities
contemplated by the collaborative relationships described above, the Company
will be required to seek other partners, or expend substantial additional
resources to pursue such activities independently. There can be no assurance
that such efforts would be successful.
ADDITIONAL FINANCING REQUIREMENTS AND UNCERTAINTY OF CAPITAL FUNDING
The Company has incurred negative cash flows from operations since its
inception and has expended substantial funds in connection with its research and
development programs and preclinical and clinical testing. The Company may
require substantial funding in the future to continue or undertake its research
and development activities, preclinical and clinical testing and manufacturing,
marketing, sales, distribution and administrative activities or to pursue
acquisition opportunities. There can be no assurance that the Company's existing
capital resources, together with the proceeds from future offerings and future
cash flows, will be sufficient to fund the Company's future operations.
PRICE PROTECTION PROVISIONS OF SECURITIES PURCHASE AGREEMENTS
The original Securities Purchase Agreements relating to the sales by the
Company to the Selling Shareholders of the Shares offered hereby (the
"Securities Purchase Agreements") provided that if on the first anniversary of
the closing of such purchases, the 30 day average closing bid price of the
Common Stock for the period ending on the trading day prior to the anniversary
date is less than the closing price paid by the Selling Shareholders, then the
Company shall pay each Selling Shareholder additional cash or stock, or a
combination of both, as determined by the Company at its sole option. These
price protection provisions remained applicable to the purchasers of 516,000
Shares of the total 1,416,000 Shares sold and a total of 2,444,380 shares of
Common Stock have been issued by the Company pursuant to the terms thereof. For
purchasers of the remaining 900,000 Shares, the Securities Purchase Agreement
was amended by an Amendment Agreement effective June 30, 1998 (the "Amendment
Agreement") so that the Company's obligation under the price protection
provisions relating to these Shares is now spread out over an eight month period
beginning August 1, 1998 and ending March 1, 1999, and is determined by the
difference between the closing price and the 30 day average closing bid price of
the Common Stock on the
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first day of each month (each a "Monthly Anniversary Price") beginning August 1
and ending March 1 (each a "Monthly Anniversary Date"). Further, while a portion
of the payments may still be made in stock, in the event that any Monthly
Anniversary Price is less than $25.00 the difference between $25.00 and such
monthly Anniversary Price must be paid in cash. The price of the Common Stock is
currently significantly below the closing price and may continue to be at the
applicable measurement dates. Such payments, if made all in cash, would have a
material adverse impact on the liquidity and financial condition of the Company,
and will, when made in shares of Common Stock, result in dilution to existing
shareholders. Under the Amendment Agreement, the Company was granted the right,
upon giving the required notice, until March 1, 1999 to repurchase at each
Monthly Anniversary Date at the closing price 1/8 (112,500 Shares) of such
900,000 Shares sold to these purchasers and thus terminate the price protection
provisions with respect to the Shares so repurchased. As of December 4, 1998,
the Company has repurchased 3/8 (337,500 Shares) of such 900,000 Shares, related
to the August 1, September 1 and October 1 Monthly Anniversary Dates, thereby
terminating the price protection provisions with respect to those Shares. For
the November 1 and December 1 Monthly Anniversary Dates, the Company did not
exercise its repurchase right with respect to 2/8 (225,000 Shares), but instead
elected to fulfill the price protection provisions in all cash, which amounted
to $4,626,897 and $4,018,711, respectively. See "Selling Shareholders."
COMPETITION AND TECHNOLOGICAL UNCERTAINTY
Many of the Company's competitors have substantially greater financial,
technical and human resources than the Company and substantially greater
experience in developing products, conducting preclinical or clinical testing,
obtaining regulatory approvals and manufacturing and marketing. Further, the
Company's competitive position could be materially adversely affected by the
establishment of patent protection by its competitors. There can be no assurance
that the Company's existing competitors or other companies will not succeed in
developing technologies and products that are more effective or affordable than
those being developed by the Company or that would render the Company's
technology and products less competitive or obsolete.
The Company's products are subject to the risks of failure inherent in the
development and testing of products based on innovative technologies. These
risks include the possibilities that this technology or any or all of the
Company's products may be found to be ineffective or to have unanticipated
limitations or otherwise fail.
GOVERNMENT REGULATION
The production and marketing of the Company's products and its ongoing
research and development, preclinical testing and clinical trial activities are
subject to extensive regulation and review by numerous governmental authorities
in the United States, including the FDA, and in other countries. All drugs and
most medical devices developed by the Company must undergo rigorous preclinical
and clinical testing and an extensive regulatory approval process administered
by the FDA under the Food, Drug and Cosmetic Act, as amended, and comparable
foreign authorities before they can be marketed. These processes involve
substantial cost and can take many years. The Company has limited experience in,
and limited resources available to commit to, regulatory activities. Failure to
comply with the applicable regulatory requirements can, among other things,
result in non-approval, suspensions of regulatory approvals, fines, product
seizures and recalls, operating restrictions, injunctions and criminal
prosecution.
The time required for completing such testing and obtaining such approvals
is uncertain and approval itself may not be obtained. In addition, delays or
rejections may be encountered due to, among other reasons, regulatory review of
each submitted new drug, device or combination drug/device application or
product license application, as well as changes in regulatory policy during the
period of product development. Similar delays may also be encountered in foreign
countries. To date, no pharmaceutical product candidate being developed by the
Company has been submitted for approval or has been approved by the FDA or any
other regulatory authority for marketing, and there can be no assurance that,
even after
9
<PAGE>
investing substantial time and expense, regulatory approval will be obtained for
any products developed by the Company. Moreover, if regulatory approval of a
product is granted, such approval may entail limitations on the indicated uses
for which the product may be marketed. Further, even if such regulatory approval
is obtained, a marketed product, its manufacturer and the facilities in which
the product is manufactured are subject to continual review and periodic
inspections. Later discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on such product or
manufacturer, including withdrawal of the product from the market and
litigation. Although to date photodynamic therapy products have been categorized
by the FDA as combination drug-device products, there can be no assurance that
the Company's products currently under investigation or any future drug/ device
products will continue to be categorized for regulatory purposes as combination
products, that they will not require separate drug and device submissions, or
that they will not require separate approval by regulatory authorities.
REIMBURSEMENT
The Company's ability to commercialize its products successfully may depend
in part on the extent to which reimbursement for such products and related
treatment will be available from corporate partners, government health
administration authorities, private health insurers, managed care entities and
other organizations. Such payors are increasingly challenging the price of
medical products and services and establishing protocols and formularies which
effectively limit physicians' ability to select products and procedures.
Uncertainty exists as to the reimbursement status of health care products
(especially innovative technologies), and there can be no assurance that
adequate reimbursement coverage will be available to enable the Company to
achieve market acceptance of its products or to maintain price levels sufficient
for realization of an appropriate return on its products.
LIMITED MANUFACTURING AND MARKETING CAPABILITY AND EXPERIENCE
To be successful, the Company's products must be manufactured in commercial
quantities under current Good Manufacturing Practices regulations ("GMP")
prescribed by the FDA and at acceptable costs. Although the Company intends to
manufacture drugs and devices, the Company has not yet manufactured any products
in commercial quantities under GMP and has no experience in such commercial
manufacturing. The Company will need to expand its manufacturing capabilities
and/or depend on its collaborators, licensees or contract manufacturers for the
commercial manufacture of its products. In the event the Company determines to
expand its manufacturing capabilities, it will require the expenditure of
substantial funds, the hiring and retention of significant additional personnel
and compliance with extensive regulations applicable to such expansion. There
can be no assurance that the Company will be able to expand such capabilities
successfully or that it will be able to manufacture products in commercial
quantities for sale at competitive prices. Further, there can be no assurance
that the Company will be able to enter into manufacturing arrangements with
collaborators, licensees, or contract manufacturers on acceptable terms or at
all. If the Company is not able to expand its manufacturing capabilities or
enter into additional commercial manufacturing agreements, it could be
materially and adversely affected.
The Company has limited experience in marketing, distributing and selling
pharmaceutical products, and will need to develop a sales force or rely on its
collaborators or licensees or make arrangements with others to provide for the
marketing, distribution and sale of its products. There can be no assurance that
the Company's marketing, distribution and sales capabilities or current or
future arrangements with third parties to perform such activities will be
adequate for the successful commercialization of its products.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY TECHNOLOGY
The Company's success will depend, in part, on its and its licensors'
ability to obtain, assert and defend its patents, protect trade secrets and
operate without infringing the proprietary rights of others. The Company has
filed applications for or has been issued U.S. and foreign patents a majority of
which relate
10
<PAGE>
to its light delivery and measurement devices, and the Company has an exclusive
license under patent applications or patents of others relating to certain
photoreactive compounds. Such issued U.S. patents expire from 2006 through 2015.
Certain of the foregoing patents and patent applications are subject to certain
governmental rights. The exclusive license to the Company under various drug
patents, including patents relating to its leading drug candidate Purlytin,
provides that the licensors may elect that the license become non-exclusive if
the Company fails to satisfy certain development and commercialization
objectives. Although the Company believes it should be able to achieve such
objectives, there can be no assurance that the Company will be successful. The
patent position of pharmaceutical and medical device firms generally is highly
uncertain and involves complex legal and factual questions. There can be no
assurance that the patent applications owned by or licensed to the Company will
result in issued patents, that any issued patents will provide the Company with
proprietary protection or competitive advantages, will not be infringed upon or
designed around by others, will not be challenged by others and held to be
invalid or unenforceable or that the patents of others will not have a material
adverse effect on the Company.
The Company is aware that its competitors and other companies, institutions
and individuals have been issued patents relating to photodynamic therapy. In
addition, the Company's competitors and other companies, institutions and
individuals may have filed patent applications or been issued patents relating
to other potentially competitive products of which the Company is not aware.
Further, the Company's competitors and other companies, institutions and
individuals may in the future file applications for, or be granted or license or
otherwise obtain proprietary rights to, patents relating to other potentially
competitive products. There can be no assurance that these existing or future
patents or patent applications will not conflict with the Company's or its
licensors' patents or patent applications. Such conflicts could result in a
rejection of the Company's or its licensors' patent applications or the
invalidation of their patents, which could have a material adverse effect on the
Company's competitive position. In the event of such conflicts, or in the event
the Company believes that such competitive products may infringe the patents
owned by or licensed to the Company, the Company may pursue patent infringement
litigation or interference proceedings against, or may be required to defend
against litigation involving, holders of such conflicting patents or competing
products. Such proceedings may materially adversely affect the Company's
competitive position, and there can be no assurance that the Company will be
successful in any such proceeding. Litigation and other proceedings relating to
patent matters, whether initiated by the Company or a third party, can be
expensive and time consuming, regardless of whether the outcome is favorable to
the Company, and can result in the diversion of substantial financial,
managerial and other resources from the Company's other activities. An adverse
outcome could subject the Company to significant liabilities to third parties or
require the Company to cease any related research and development activities or
product sales. The Company does not have contractual indemnification rights
against the licensors of the various drug patents. In addition, if patents that
contain dominating or conflicting claims have been or are subsequently issued to
others and such claims are ultimately determined to be valid, the Company may be
required to obtain licenses under patents or other proprietary rights of others.
No assurance can be given that any licenses required under any such patents or
proprietary rights would be made available on terms acceptable to the Company,
if at all. If the Company does not obtain such licenses, it could encounter
delays or could find that the development, manufacture or sale of products
requiring such licenses is foreclosed.
The Company also seeks to protect its proprietary technology and processes
in part by confidentiality agreements with its collaborative partners, employees
and consultants. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors. Certain of the research activities relating to the
development of certain of the patents owned by or licensed to the Company were
funded, in part, by agencies of the United States government. When the United
States government participates in research activities, it retains certain rights
that include the right to use the resulting patents for government purposes
under a royalty-free license.
11
<PAGE>
DEPENDENCE UPON KEY PERSONNEL AND CONSULTANTS
The Company's ability to successfully develop its products, manage growth
and maintain a competitive position will depend in large part on its ability to
attract and retain highly qualified scientific, management and other personnel
and to develop and maintain relationships with leading research institutions and
consultants. The Company is highly dependent upon principal members of its
management, key employees, scientific staff and consultants which the Company
may retain from time to time. Competition for such personnel and relationships
is intense, and there can be no assurance that the Company will be able to
continue to attract and retain such personnel. The Company's consultants may be
affiliated or employed by others, and some have consulting or other advisory
arrangements with other entities that may conflict or compete with their
obligations to the Company. Inventions or processes discovered by such persons
will not necessarily become the property of the Company and may remain the
property of such persons or others.
DEPENDENCE UPON SUPPLIERS
The Company currently depends upon outside suppliers, contracted or
otherwise, for certain raw materials and components for its products. There can
be no assurance that such raw materials or components will continue to be
available to the Company's standards or on acceptable terms, if at all, or that
alternative suppliers will be available to the Company on acceptable terms, if
at all. Further, there can be no assurance that the Company will be able to
produce needed materials or components in-house in a timely manner or in
sufficient quantities to meet the needs of the Company, if at all. Although most
of the Company's raw materials and components are available from various
sources, the Company is currently dependent on single, contracted sources for
certain key materials or services used by the Company in its drug development,
light producing and light delivery device development and production operations.
Although the Company has entered into agreements with these suppliers, there can
be no assurance that these arrangements will be successful or that the Company
will not encounter delays or other problems which may materially adversely
affect its business.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, county and local laws and
regulations relating to the protection of the environment. In the course of its
business, the Company is involved in the handling, storage and disposal of
materials that are classified as hazardous. The Company's safety procedures for
handling, storage and disposal of such materials are designed to comply with the
standards prescribed by applicable laws and regulations. However, there can be
no assurance that the Company will not be involved in contamination or injury
from these materials. In the event of such an occurrence, the Company could be
held liable for any damages that result, and any such liability could materially
and adversely affect the Company. Further, there can be no assurance that the
cost of complying with these laws and regulations will not increase materially
in the future.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. The Company's
computer equipment and software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process accounting, payroll, database, network, and software transactions,
possible disruption of environmental, lighting, and security controls, possible
disruption of copier and fax capabilities, and loss of telephone voicemail
messages, in addition to other similar normal business activities.
12
<PAGE>
The Company has undertaken various initiatives intended to ensure that its
computer equipment and software will function properly with respect to dates in
the Year 2000 and thereafter. For this purpose, the term "computer equipment and
software" includes systems that are commonly thought of as Information
Technology ("IT") systems, including accounting, data processing, and
telephone/PBX systems and other miscellaneous systems, as well as systems that
are not commonly thought of as IT systems, such as alarm systems, fax machines,
air conditioning units, internally developed software and other miscellaneous
systems. Both IT and non-IT systems may contain embedded technology, which
complicates the Company's Year 2000 identification, assessment, remediation, and
testing efforts. Based upon its identification and assessment efforts to date,
the Company believes that certain of the computer equipment and software it
currently uses may require replacement or modification. In addition, in the
ordinary course of replacing computer equipment and software, the Company
attempts to obtain replacements that are Year 2000 compliant. Utilizing both
internal and external resources to identify and assess needed Year 2000
remediation, the Company currently anticipates that its Year 2000
identification, assessment, remediation and testing efforts, which began in
February 1998, will be completed by June 30, 1999. The Company estimates that as
of September 30, 1998, it had completed approximately 25% of the initiatives
that it believes will be necessary to fully address potential Year 2000 issues
relating to its computer equipment and software. The projects comprising the
remaining 75% of the initiatives are in process and expected to be completed on
or about June 30, 1999. Additionally, the Company has recently commenced its
initiatives relating to the non-IT systems. The following table describes the
Year 2000 initiatives as well as the Company's progress and the anticipated
completion dates as of September 30, 1998:
<TABLE>
<CAPTION>
PERCENT
YEAR 2000 INITIATIVES TIME TABLE COMPLETE
- - ---------------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Initial IT system identification...................................................... 2/98 - 10/98 100%
Initial IT system assessment.......................................................... 2/98 - 12/98 95%
Remediation and testing regarding central system issues............................... 2/98 - 5/99 15%
Identification, assessment, remediation and testing regarding desktop and individual
system issues....................................................................... 2/98 - 6/99 35%
Identification regarding non-IT system issues......................................... 2/98 - 10/98 100%
Assessment regarding non-IT system issues............................................. 2/98 - 1/99 65%
Remediation and testing regarding non-IT system issues................................ 2/98 - 6/99 35%
</TABLE>
The Company is in the process of communicating with its significant vendors
and service providers and strategic partners to determine the extent to which
interfaces with such entities are vulnerable to Year 2000 issues and whether the
products and services utilized by such entities are Year 2000 compliant. This
process is expected to be completed in December 1998.
The Company believes that the cost of its Year 2000 identification,
assessment, remediation and testing efforts, as well as those costs related to
Year 2000 issues of third parties, are expected to approximate $250,000. As of
September 30, 1998, the Company had not incurred any external costs related to
its Year 2000 identification, assessment, remediation and testing efforts. Other
non-Year 2000 IT efforts have not been materially delayed or impacted by Year
2000 initiatives. The Company presently believes that the Year 2000 issue will
not pose significant operational problems for the Company. However, if all Year
2000 issues are not properly identified, or assessment, remediation and testing
are not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with vendors, or others. Additionally, there can be no assurance
that the Year 2000 issues of other entities will not have a material adverse
impact on the Company's systems or results of operations.
13
<PAGE>
POTENTIAL VOLATILITY OF STOCK PRICE; NO DIVIDENDS
The market prices for securities of emerging pharmaceutical and medical
device companies have historically been highly volatile. Future announcements
concerning the Company or its collaborators, competitors or industry, including
but not limited to the results of testing, technological innovations or new
commercial products, the achievement of or failure to achieve certain
milestones, governmental regulations, rules and orders, developments concerning
patents or other proprietary rights, litigation or public concern about the
safety of the Company's products, may have a material adverse effect on the
market price of the Common Stock. In addition, the stock market has experienced
extreme price and volume fluctuations. This volatility has significantly
affected the market prices of securities of many emerging pharmaceutical and
medical device companies for reasons frequently unrelated or disproportionate to
the performance of the specific companies. These broad market fluctuations may
materially adversely affect the market price of the Common Stock. Except for the
three for two split of the Common Stock declared for stockholders of record at
July 24, 1995, the Company has never paid dividends, cash or otherwise, on its
capital stock and does not anticipate paying any such dividends in the
foreseeable future. The Company's bank credit line prohibits the payment of
dividends on its capital stock.
CONTROL BY OFFICERS AND DIRECTORS
As of November 30, 1998, the Company's officers and directors beneficially
own approximately 11% of the outstanding Common Stock (approximately 14% is
beneficially owned if all options granted to such officers and directors become
vested and are exercised). These shareholders will be able to elect a
substantial number of the Company's directors and will have the ability to
influence significantly the Company and the direction of its business and
affairs. Such concentration of ownership may have the effect of delaying or
preventing a change in control of the Company, which could adversely affect the
market price for the Common Stock.
OUTSTANDING OPTIONS AND WARRANTS
As of November 30, 1998, there were outstanding options to purchase
2,279,043 shares of Common Stock at a weighted average exercise price of $21.86
per share, and warrants to purchase 3,087,302 shares of Common Stock at a
weighted average exercise price of $30.31 per share. Also, the Company is
obligated to issue additional warrants to purchase up to 450,000 additional
shares to certain of the Selling Shareholders in March 1999, or on the earlier
termination of the Lock-Up Agreement relating to such Selling Shareholders. See
"Selling Shareholders." The exercise of these options and warrants would result
in significant book value and earnings dilution to existing shareholders.
LIABILITY AND RECALL EXPOSURE
The use of the Company's products in clinical trials and the sale of such
products may expose the Company to liability claims. These claims could be made
directly by patients or consumers or by companies, institutions or others using
or selling such products. In addition, the Company is subject to the inherent
risk that a government authority or third party may require the recall of one or
more of the Company's products. The Company has not obtained liability insurance
that would cover a claim relating to the use or recall of its products. In the
absence of such insurance, claims made against the Company or a product recall
could have a material adverse effect on the Company. In addition, there can be
no assurance that, if the Company seeks insurance coverage in the future, such
coverage will be available at all or, if available, at reasonable cost and in
amounts sufficient to protect the Company against claims that could have a
material adverse effect on the financial condition and prospects of the Company.
Further, liability claims relating to the use of the Company's products or a
product recall could negatively affect the Company's ability to obtain or
maintain regulatory approvals for its products. The Company has agreed to
indemnify certain of its collaborative partners against certain potential
liabilities relating to the manufacture and sale of Purlytin and PhotoPoint
light devices.
14
<PAGE>
POSSIBLE ADVERSE EFFECTS OF FUTURE LEGISLATION OR REGULATIONS
Heightened public awareness and concerns regarding the growth in overall
health care expenditures in the United States, combined with the continuing
efforts of governmental authorities to contain or reduce costs of health care,
may result in the enactment of national health care reform or other legislation
or regulations that impose limits on the number and type of medical procedures
which may be performed or which have the effect of restricting a physician's
ability to select specific products for use in certain procedures. Such new
legislation or regulations may materially adversely affect the demand for the
Company's products. In the United States, there have been, and the Company
expects that there will continue to be, a number of federal and state
legislative proposals and regulations to implement greater governmental control
in the health care industry. For example, the Clinton Administration and certain
members of Congress have proposed health care reform legislation that may impose
pricing or profitability limitations or other restrictions on companies in the
health care industry. The announcement of such proposals may materially
adversely affect the Company's ability to raise capital or to form
collaborations, and the enactment of any such reforms could have a material
adverse effect on the Company. In certain foreign markets, the pricing and
profitability of health care products are subject to governmental influence or
control. In addition, legislation or regulations that impose restrictions on the
price that may be charged for health care products or medical devices may
adversely affect the Company's results of operations. From time to time,
legislation or regulatory proposals are considered that could alter the review
and approval process relating to pharmaceutical or medical device products. The
Company is unable to predict the likelihood of adverse effects which might arise
from future legislative or administrative action, either in the United States or
abroad.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of Common Stock in the public market following this offering, pursuant
to Rule 144 under the Securities Act, or upon the exercise of outstanding
options or warrants under Rule 701 or pursuant to the Company's Registration
Statements on Form S-8, could materially adversely affect prevailing market
prices and may have a material and adverse effect on the Company's ability to
raise the capital necessary to fund its future operations. Additionally, certain
holders of shares of Common Stock are entitled to have their shares registered
for sale under the Securities Act by the Company under certain circumstances.
The exercise of these rights and the sale of such shares could have a material
adverse effect on the market price for the Common Stock.
USE OF PROCEEDS
The Company will receive none of the proceeds from the sale of the Shares by
the Selling Shareholders, but will receive the exercise prices payable upon the
exercise of the Warrants, if exercised for cash. Such proceeds will be used for
working capital and general corporate purposes.
15
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth information with respect to the number of
Shares beneficially owned by each of the Selling Shareholders, the number of
Shares that may be offered hereby by each Selling Shareholder and the number of
shares of Common Stock to be owned after the offering, assuming all the Shares
offered hereby are sold to persons not affiliated with the Selling Shareholders.
None of the Selling Shareholders has, or in the past has had, any position,
office or relationship with the Company (other than as a security holder) or any
of its affiliates. As of November 30, 1998 there were 16,041,339 shares of
Common Stock issued and outstanding.
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF
BENEFICIALLY SHARES NUMBER OF
OWNED PRIOR TO BEING OFFERED SHARES OWNED
NAME OFFERING (4) (4) AFTER THE OFFERING
- - --------------------------------------------------------- ----------------- ---------------- -----------------------
<S> <C> <C> <C>
Elliott Associates, L.P.(1)(2)........................... 425,000 425,000 0
Westgate International, L.P.(1)(2)....................... 425,000 425,000 0
Shepard Investments International, Ltd.(1)(2)............ 503,625 503,625 0
Stark International(1)(2)................................ 503,625 503,625 0
Staro Partners(1)(2)..................................... 55,250 55,250 0
Stanley Arkin(3)......................................... 6,730 6,730 0
Clark Callander(3)....................................... 4,180 4,180 0
Matt Donnelly(3)......................................... 3,484 3,484 0
Richard Edwards 1997 Family Trust(3)..................... 697 697 0
Volker Engelbert(3)...................................... 3,484 3,484 0
Seth Ferguson(3)......................................... 1,393 1,393 0
David Goldsmith(3)....................................... 1,393 1,393 0
Ken Haupt(3)............................................. 6,967 6,967 0
Greg Hausler(3).......................................... 697 697 0
Lauren Herbstman(3)...................................... 697 697 0
David Hetz(3)............................................ 8,779 8,779 0
Tom Hodapp(3)............................................ 697 697 0
Jim Kelly(3)............................................. 2,090 2,090 0
Patrick Lin(3)........................................... 1,393 1,393 0
Doug Moore(3)............................................ 557 557 0
Daniel Murphy(3)......................................... 2,090 2,090 0
Andy Page(3)............................................. 1,393 1,393 0
Mischa Petkerich(3)...................................... 6,967 6,967 0
Karl Power(3)............................................ 3,484 3,484 0
Robertson Stephens Private Equity Group(3)............... 1,115 1,115 0
David Reilly(3).......................................... 20,901 20,901 0
Sanford Robertson(3)..................................... 34,835 34,835 0
John Robson(3)........................................... 697 697 0
John Rohal(3)............................................ 2,090 2,090 0
Dan White(3)............................................. 1,393 1,393 0
-
----------------- ----------------
2,030,703 2,030,703 0
</TABLE>
(1) Of the 1,912,500 Shares set forth in the above table with respect to such
Selling Shareholders, 900,000 represent Shares issuable on the exercise of
the Warrants originally issued to such Selling Shareholders in September
1997 (the "Warrant Shares") and 450,000 represent Shares (the "Additional
Warrant Shares") issuable on the exercise of additional Warrants (the
"Additional Warrants") that, pursuant to the Amendment Agreement, the
Company has agreed to issue to these Selling Shareholders within five
business days of March 1, 1999 or the earlier termination of the Lock-Up
Agreement relating to
16
<PAGE>
such Selling Shareholders, as amended by the Amendment Agreement. Pursuant
to the Amendment Agreement, (i) the Warrant Shares and the Additional
Warrant Shares are exercisable at $35 per share and (ii) the Company was
granted the right, upon giving required notice, until March 1, 1999 to
repurchase at each Monthly Anniversary Date for cash at the closing price
1/8 (112,500 Shares) (on a pro rata basis among these Selling Shareholders)
of the 900,000 Shares originally purchased by such Selling Shareholders. As
of December 4, 1998 the Company has repurchased a total of 337,500 of such
900,000 Shares and such repurchased Shares are not included in the table
above. See "Risk Factors-- Price Protection Provisions of Securities
Purchase Agreements."
(2) Such Shares are subject to a Lock-Up Agreement, as amended by the Amendment
Agreement, prohibiting any offer or sale until March 1, 1999; provided
however, that the prohibition on any offer or sale terminates in phases as
to 1/8th (112,500 Shares) of the Shares (and a corresponding proportionate
number of the Warrant Shares) on the first day of each month beginning
August 1, 1998 and ending on March 1, 1999; provided further however, that
since a total of 337,500 Shares of Common Stock that would have been
eligible for sale on August 1, September 1 and October 1 have been
repurchased by the Company, the phased termination of the prohibitions on
any offer or sale commenced with respect to the remaining Shares (and the
Warrant Shares) on November 1, 1998. The Lock-Up Agreement is subject to
earlier termination in certain limited circumstances and the prohibition on
sales is subject to certain limited exceptions.
(3) With respect to these Selling Shareholders, 17,000 of the amounts shown
represent Shares issuable upon the exercise of the Warrants (the "Warrant
Shares"). Of such Warrant Shares, 50% are exercisable at $55 per share and
50% are exercisable at $60 per share.
(4) Includes Shares that may become issuable pursuant to the anti-dilution
provisions of the Warrants, as such number may be adjusted in accordance
with Rule 416, and that have been and may be issued under the price
protection provisions of Section 5.3 of the Securities Purchase Agreement,
and which may be offered hereby. See "Risk Factors--Price Protection
Provisions of Securities Purchase Agreements." The Registration Rights
Agreements among the Company and the Selling Shareholders require the
Company to register an amount at least equal to 125% of the Shares
(including Shares issuable upon exercise of the Warrants) held by the
Selling Shareholders.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling Shareholders or
their pledgees or donees, subject to the Lock-Up Agreement described above. See
"Selling Shareholders." Such sales may be made on the NNM or in negotiated
transactions, at prices and on terms then prevailing or at prices related to the
then current market price or at negotiated prices. The methods by which the
Shares may be sold may include, but not be limited to, the following: (a) block
trades in which the broker or dealer will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (d) privately negotiated
transactions; (e) short sales; and (f) a combination of any such methods of
sale. In effecting sales, brokers or dealers engaged by the Selling Shareholders
may receive commissions or discounts from the Selling Shareholders or from the
purchasers in amounts to be negotiated immediately prior to the sale.
The Company has agreed to maintain the effectiveness of the registration of
the Shares offered hereby until the earlier of the date upon which all of the
Shares offered hereby have been sold without restriction on resale, or the date
on which the Shares offered hereby, in the opinion of counsel, may be
immediately sold by the Selling Shareholders without registration or restriction
on resale. There can be no assurance that the Selling Shareholders will sell any
or all of the Shares offered hereby.
17
<PAGE>
The Company is bearing all of the costs relating to the registration of the
Shares. Any commissions, discounts or other fees payable to a broker, dealer,
underwriter, agent or market maker in connection with the sale of any of the
Shares will be borne by the Selling Shareholders. The Company will not receive
any of the proceeds from this offering, but will receive the exercise price
payable upon the exercise of the Warrants if the Warrants are exercised for
cash.
Pursuant to the registration rights granted to the Selling Shareholders in
connection with the sale by the Company of the Shares, the Company has agreed to
indemnify the Selling Shareholders, any person who controls a Selling
Shareholder, and any underwriters for the Selling Shareholders, against certain
liabilities and expenses arising out of or based upon the information set forth
or incorporated by reference in this Prospectus, and the Registration Statement
of which this Prospectus is a part, including liabilities under the Securities
Act and the Exchange Act. The Selling Shareholders and any brokers participating
in such sales may be deemed to be underwriters within the meaning of the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any broker, dealer, underwriter, agent or market maker and, if any such broker,
dealer, underwriter, agent or market maker purchases any of the Shares as
principal, any profits received on the resale of such Shares, may be deemed to
be underwriting commissions or discounts under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the Shares of Common Stock offered hereby
has been passed upon for the Company by Nida & Maloney, a Professional
Corporation, Santa Barbara, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the Company's
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, as set forth in their report,
which is incorporated in this prospectus by reference. The Company's
consolidated financial statements are incorporated by reference in reliance on
their report, given on their authority as experts in accounting and auditing.
18
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and distribution of the securities being registered
hereby:
<TABLE>
<S> <C>
SEC registration fee.................................................. $ 66,700.27
Nasdaq National Market listing fee.................................... 17,500
Accounting fees and expenses.......................................... 25,000*
Legal fees and expenses............................................... 45,000*
Printing expenses..................................................... 20,000*
Miscellaneous......................................................... 5,000*
-----------
TOTAL............................................................. $164,200.27*(1)
-----------
-----------
</TABLE>
(1) Includes $132,572.73 in expenses relating to the earlier effective
Registration Statement on Form S-3 (333-39905) for the same offering.
* estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "Delaware
Law") permits a corporation to provide in its certificate of incorporation that
directors of the corporation shall not be personally liable to the corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for payments of unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The Company's Certificate of Incorporation contains
such a provision.
Section 145 of the Delaware Law provides that a corporation may indemnify
directors and officers as well as other employees and individuals against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation -- a "derivative action"), if 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 or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with defense or settlement of such action, and the statute requires
court approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation. Under Section 145, a
corporation shall indemnify an agent of the corporation for expenses actually
and reasonably incurred if and to the extent such person was successful on the
merits in a proceeding or in defense of any claim, issue or matter therein.
The Registrant is presently subject to Section 2115 of the California
Corporations Code (the "California Code"), according to which Section 317 of the
California Code applies to the indemnification of officers and directors of the
Registrant. Under Section 317 of the California Code, permissible
indemnification by a corporation of its officers and directors is substantially
the same as permissible indemnification under Section 145 of the Delaware Law,
except that (i) permissible indemnification does not cover actions the person
reasonably believed were not opposed to the best interests of the corporation,
as opposed to those the person believed were in fact in the best interests of
the corporation, (ii) the Delaware Law permits advancement of expenses to agents
other than officers and directors only upon approval of the board of directors,
(iii) in a case of stockholder approval of indemnification, the California Code
requires certain minimum votes in favor of such indemnification and excludes the
vote of the
II-1
<PAGE>
potentially indemnified person, and (iv) the California Code only permits
independent counsel to approve indemnification if an independent quorum of
directors is not obtainable, while the Delaware Law permits the directors in any
circumstance to appoint counsel to undertake such determination.
The Registrant in its Bylaws has provided for indemnification of its
officers, directors, employees and other agents substantially identical to that
permitted under the California Code. Section 145 of the Delaware Law and Section
317 of the California Code provide that they are not exclusive of other
indemnification that may be granted by a corporation's charter, bylaws,
disinterested director vote, shareholder vote, agreement or otherwise. The
limitation of liability contained in the Registrant's Certificate of
Incorporation and the indemnification provision included in the Registrant's
Bylaws are consistent with Delaware Law Sections 102(b)(7) and 145. The
Registrant has also entered into separate indemnification agreements with its
directors and officers that could require the Registrant, among other things, to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors and officers and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, including liabilities that may arise under the Securities Act of
1933. In addition, the Company has purchased directors and officers insurance.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to such provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- - ------
<C> <S>
4.1 Form of $55 Common Stock Purchase Warrant issued to the Selling
Shareholders(1)[4.1]
4.2 Form of $60 Common Stock Purchase Warrant issued to the Selling
Shareholders(1)[4.2]
4.3 Form of $35 Amended and Restated Common Stock Purchase Warrant issued to
the Selling Shareholders named in the Amendment Agreement(2)[4.1]
4.4 Form of $35 Additional Common Stock Purchase Warrant to be issued to the
Selling Shareholders named in the Amendment Agreement(2)[4.2]
5.1 Opinion of Nida & Maloney, a Professional Corporation(1)[5.1]
10.1 Form of Securities Purchase Agreement among the Company and the Selling
Shareholders(1)[10.1]
10.2 Form of Lock-Up Agreement among the Company and the Selling
Shareholders(1)[10.2]
10.3 Form of Registration Rights Agreement among the Company and the Selling
Shareholders(1)[10.3]
10.4 Amendment Agreement dated June 30, 1998 to Securities Purchase Agreement
dated September 22, 1997 by and among the Company and the Selling
Shareholders named therein(2)[10.1]
23.1 Consent of Ernst & Young LLP
23.2 Consent of Nida & Maloney, a Professional Corporation (included in Exhibit
5.1)
24 Power of Attorney (1)[24]
</TABLE>
- - ------------------------
(1) Incorporated herein by this reference from the exhibits referred to in
brackets filed with the Company's Registration Statement on Form S-3
(Registration No. 333-39905) effective December 9, 1997.
(2) Incorporated herein by this reference from the exhibit referred to in
brackets filed with the Company's Current Report on Form 8-K dated June 30,
1998.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
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 by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
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 Santa Barbara, State of California, on December 14,
1998.
<TABLE>
<S> <C> <C>
MIRAVANT MEDICAL TECHNOLOGIES
By: /s/ GARY S. KLEDZIK
-----------------------------------------
Gary S. Kledzik, Ph.D.,
CHIEF EXECUTIVE OFFICER
</TABLE>
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>
NAME TITLE DATE
- - ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board,
/s/ GARY S. KLEDZIK Director, and Chief
- - ------------------------------ Executive Officer December 14, 1998
Gary S. Kledzik (principal executive
officer)
/s/ DAVID E. MAI*
- - ------------------------------ Director and President December 14, 1998
David E. Mai
Chief Financial Officer
/s/ JOHN M. PHILPOTT* (principal financial
- - ------------------------------ officer and principal December 14, 1998
John M. Philpott accounting officer)
- - ------------------------------ Director December 14, 1998
Larry S. Barels
- - ------------------------------ Director December 14, 1998
William P. Foley, II
/s/ CHARLES T. FOSCUE*
- - ------------------------------ Director December 14, 1998
Charles T. Foscue
/s/ RAUL E. PEREZ*
- - ------------------------------ Director December 14, 1998
Raul E. Perez, M.D.
/s/ JONAH SHACKNAI*
- - ------------------------------ Director December 14, 1998
Jonah Shacknai
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ GARY S. KLEDZIK
-------------------------
Gary S. Kledzik
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- - ----------- ------------------------------------------------------------------------------------------- -------------
<C> <S> <C>
4.1 Form of $55 Common Stock Purchase Warrant issued to the Selling Shareholders(1)[4.1].......
4.2 Form of $60 Common Stock Purchase Warrant issued to the Selling Shareholders(1)[4.2].......
4.3 Form of $35 Amended and Restated Common Stock Purchase Warrant issued to the Selling
Shareholders named in the Amendment Agreement(2)[4.1]....................................
4.4 Form of $35 Additional Common Stock Purchase Warrant to be issued to the Selling
Shareholders named in the Amendment Agreement(2)[4.2]....................................
5.1 Opinion of Nida & Maloney, a Professional Corporation(1)[5.1]..............................
10.1 Form of Securities Purchase Agreement among the Company and the Selling
Shareholders(1)[10.1]....................................................................
10.2 Form of Lock-Up Agreement among the Company and the Selling Shareholders(1)[10.2]..........
10.3 Form of Registration Rights Agreement among the Company and the Selling
Shareholders(1)[10.3]....................................................................
10.4 Amendment Agreement dated June 30, 1998 to Securities Purchase Agreement dated September
22, 1997 by and among the Company and the Selling Shareholders named therein(2)[10.1]....
23.1 Consent of Ernst & Young LLP...............................................................
23.2 Consent of Nida & Maloney, a Professional Corporation (included in Exhibit 5.1)............
24 Power of Attorney (1)[24]..................................................................
</TABLE>
- - ------------------------
(1) Incorporated herein by this reference from the exhibits referred to in
brackets filed with the Company's Registration Statement on Form S-3
(Registration No. 333-39905) effective December 9, 1997.
(2) Incorporated herein by this reference from the exhibit referred to in
brackets filed with the Company's Current Report on Form 8-K dated June 30,
1998.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Post-Effective Amendment No. 1. to the Registration Statement (Form S-3 No.
333-60251) and related Prospectus of Miravant Medical Technologies for the
registration of up to 4,440,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 12, 1998, with
respect to the consolidated financial statements of Miravant Medical
Technologies included in its Annual Report (Form 10-K) for the year ended
December 31, 1997, filed with the Securities and Exchange Commission.
Woodland Hills, California
December 11, 1998
/s/ ERNST & YOUNG LLP
---------------------
Ernst & Young LLP
