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As filed with the Securities and Exchange Commission on July 6, 1999
Registration No. 333 -
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PHARMAPRINT INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
33-0640125
(I.R.S. Employer Identification Number)
2600 MICHELSON DRIVE
SUITE 1600
IRVINE, CALIFORNIA 92612
(949) 794-7778
(Address and Telephone Number of Registrant's Principal Executive Offices)
JAMES R. WODACH
CHIEF FINANCIAL OFFICER
2600 MICHELSON DRIVE
SUITE 1600
IRVINE, CALIFORNIA 92612
(949) 794-7778
(Name, Address and Telephone Number of Agent For Service)
With a copy to:
BARRY J. SIEGEL, ESQUIRE
KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP
1401 WALNUT STREET
PHILADELPHIA, PA 19102-3163
(215) 568-6060
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the registration statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, check the following box: / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
investment plans, check the following box. /X/
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Shares to be Amount to be Proposed Maximum Proposed Maximum Amount of
Registered Registered Offering Price Per Share Aggregate Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock 2,776,595 (1) $5.00 (2) $13,882,975 (2) $3,859
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</TABLE>
(1) Shares of common stock which may be offered pursuant to this
registration statement consist of a maximum of 2,776,595 shares of
common stock issuable upon conversion of 10,000 shares of Series A
convertible preferred stock and 2,000 shares of Series B convertible
preferred stock. The amount to be registered includes an indeterminate
number of shares issuable upon conversion of or in respect of the
Series A convertible preferred stock and Series B convertible preferred
stock, as such number may be adjusted as a result of stock splits,
stock dividends and similar transactions in accordance with Rule 416.
(2) Based on the average of the high and low trading price of the
registrant's common stock as reported by the Nasdaq National Market on
June 30, 1999, as estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) under the Securities
Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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PROSPECTUS
PHARMAPRINT INC.
2600 MICHELSON DRIVE
SUITE 1600
IRVINE, CALIFORNIA 92612
(949) 794-7778
UP TO 2,776,595 SHARES OF COMMON STOCK
The stockholder of PharmaPrint Inc. listed in this prospectus under
"Selling Stockholder" is offering and selling up to 2,776,595 shares of
common stock. The selling stockholder may acquire the shares of common stock
offered pursuant to this prospectus upon conversion of shares of PharmaPrint's
Series A convertible preferred stock and Series B convertible preferred stock.
PharmaPrint's common stock is listed on the Nasdaq National Market
under the symbol "PPRT." On June 30, 1999, the closing sale price for the common
stock, as quoted on the Nasdaq National Market, was $5.00 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN
FACTORS THAT YOU SHOULD CONSIDER BEFORE INVESTING.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these shares of common stock or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
The date of this prospectus is July ___, 1999.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations, financial condition,
growth, prospects and capital expenditures or state other "forward-looking"
information. Those statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements. The forward-looking
information is based on various factors and was derived using numerous
assumptions.
Important factors that may cause actual results to differ from
projections and expectations include, for example:
- the revenues generated from or a change in our relationship
with American Home Products Corporation;
- the cost and availability of botanical extracts;
- the cost and availability of manufacturing service providers;
- the ability to obtain and enforce patents;
- limited manufacturing experience;
- dependence on third parties;
- uncertainties related to the PharmaPrint-TM- Process;
- government regulation and the uncertainty of product
approvals;
- the ability to commercialize and market products;
- results of research and development and clinical and
toxicology studies;
- other risks described under "Risk Factors" below and which may
be described in PharmaPrint's future filings with the
Securities and Exchange Commission.
PharmaPrint does not promise, nor is it obligated, to update
forward-looking information to reflect actual results or changes in assumptions
or other factors that could affect those statements.
RISK FACTORS
EARLY STAGE OF MANUFACTURING AND PRODUCT DEVELOPMENT; HISTORY OF OPERATING
LOSSES
We have limited operating history and have recognized substantial
losses each year since we began operations. Our prospects must be considered in
light of the risks, expenses and difficulties faced by businesses in the
consumer products and pharmaceutical industries. These industries have a large
number of market entrants, intense competition and a high failure rate. To
achieve profitable operations, we will need to continue to commit substantial
resources to successfully develop and manufacture products. While we expect to
be able to satisfy our commitments, we can provide no assurance that we will be
successful in doing so or that we can generate sufficient revenue to fund our
continuing operations.
DEPENDENCE ON AMERICAN HOME PRODUCTS CORPORATION; EXCLUSIVE LICENSE
Under several agreements, we have granted American Home Products
Corporation an exclusive license to market and sell certain herbal dietary
supplement products. Because we cannot sell these herbal dietary supplement
products by any other means, we are currently relying on American Home Products
Corporation as our only source of revenues from these herbals dietary supplement
products.
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RISK OF TERMINATION
American Home Products Corporation can terminate in their sole
discretion our agreements as to specific products upon ninety days notice and
can terminate our agreements in their entirety upon one year's notice.
American Home Products Corporation could decide to terminate our agreements
for many reasons, including shifts in its strategic focus, poor market
reaction to Centrum-REGISTERED TRADEMARK-branded dietary supplements, lack of
patent protection for the PharmaPrint-TM- Process or a determination to
pursue alternative methods of producing herbal dietary supplements. If
American Home Products Corporation terminates our agreements in whole or in
part, we may not be able to enter into comparable agreements for the
distribution and sale of our products or establish our own marketing and
sales force. Termination of our agreements could have a material adverse
effect on our business, financial condition and results of operations.
RESEARCH AND DEVELOPMENT COSTS; FIXED PRICES
We must conduct, at our own expense, the research and development and
regulatory work necessary to produce the products for sale to American Home
Products Corporation. This will require significant expenditures that we may not
recover if American Home Products Corporation terminates the agreements in whole
or in part or if sales with American Home Products Corporation are lower than
anticipated. Under an agreement reached in November 1998, American Home Products
Corporation paid us an additional $5 million as reimbursement for certain
development and production costs and increased the price that American Home
Products Corporation pays us for products delivered before February 28, 1999. In
April 1999, American Home Products Corporation and PharmaPrint entered into an
additional agreement that extended the per unit cost increase for products
delivered from March 1, 1999 through July 31, 1999. American Home Products
Corporation and PharmaPrint are currently negotiating an extension of this per
unit increase or alternative pricing provisions. Beginning August 1, 1999, the
prices that American Home Products Corporation pays us (with some limited
exceptions) will revert to the prices set in the original agreements based upon
the manufacturing specifications agreed upon in the original agreements. Such
prices will remain fixed until October 2000. Accordingly, increases in material
or production costs, without a corresponding increase in the price American Home
Products Corporation pays us, will reduce the profitability of the American Home
Products Corporation supply agreements.
LIMITED OBLIGATION TO PAY ROYALTIES; PATENT PROTECTION
American Home Products Corporation is not obligated to pay us
royalties on sales of products that are not covered by a patent relating to
the PharmaPrint-TM- Process. We currently do not have any such patents for
any of the products that American Home Products Corporation is marketing and
we can provide no assurance that we will obtain patents for any of the
products sold through American Home Products Corporation. Our business,
financial condition and results of operations will suffer if American Home
Products Corporation does not pay royalties to us.
LIMITED OBLIGATION TO MARKET PRODUCTS
Our agreements with American Home Products Corporation limit their
obligation to provide marketing support. During each of the first two years
after the initial launch date of the first product, American Home Products
Corporation must spend the lesser of fifty percent of net sales of the products
or $20 million. Accordingly, poor initial sales could result in very limited
marketing support from American Home Products Corporation. American Home
Products Corporation is obligated to devote the efforts and resources it
normally uses to market its own non-prescription products with similar market
potential and at a similar stage of product life. However, after the first two
years following the initial launch date, American Home Products Corporation is
not required to spend any specific amount on marketing support. If American Home
Products Corporation does not provide sufficient marketing support, our
business, financial condition and results of operations may suffer. In addition,
our sole remedy if American Home Products Corporation fails to meet its minimum
spending commitments (provided that American Home Products Corporation has
otherwise met its obligations under our agreements), is to sell our herbal
dietary supplement products under a national or regional brand through one
additional party.
RELIANCE ON CORPORATE PARTNERS
We expect to enter into agreements with other partners for the
development and marketing of other products. American Home Products Corporation
has certain options to develop with us other Food and Drug Administration
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regulated pharmaceutical products for sale in the over-the-counter market.
The success of any of our products, even if successfully developed, will
depend on the ability of our partners to market and commercialize such
products. We can provide no assurance that any partnership will result in
product revenues or profits. In addition, any of our corporate partners may
pursue alternative technologies or develop alternative therapeutics targeted
at the same markets or diseases that we have targeted. This risk may increase
if we are not successful in obtaining patent protection for the
PharmaPrint-TM- Process.
COST AND AVAILABILITY OF BOTANICAL EXTRACTS
We procure the botanical extracts necessary to develop our products
from various sources in the United States, Europe and Asia. We have agreed and
have the exclusive right to supply all of American Home Products Corporation's
requirements of the herbal products that we have licensed to American Home
Products Corporation. We purchase a significant amount of botanical extracts to
meet these obligations. Since many of the botanical extracts contained in our
products are not commodities, we cannot hedge price risk with traditional future
contracts. In addition, because some of these plants are picked in the wild
rather than farm cultivated, the supply may be unavailable. This uncertain
supply, in combination with the possibility of continued increases in demand,
could result in significant increase in the price of botanical extracts used in
our products. In addition, if due to supply shortages American Home Products
Corporation is unable to meet the demand of its customers, even if for a short
time, the result could be a long-term decrease in sales. Our ability to increase
the price of our products licensed to American Home Products Corporation to
adjust for increases in raw material costs is limited. We can provide no
assurance that an adequate supply of botanical extracts will be available to us
on commercially reasonable terms. We have secured sufficient quantities of
botanical extracts for our near term requirements and believe there are numerous
alternative suppliers throughout the world from which we can obtain these
botanical extracts. However, any shortage of such botanical extracts may cause
delays, as well as increased material costs, that could have a material adverse
effect on our business, financial condition and results of operations.
NEED FOR ADDITIONAL FUNDING; UNCERTAIN ACCESS TO CAPITAL
We expect our current capital resources to last at least 12 months. We
may then need substantial additional funds to support our dietary supplement
business and herbal combination, functional food and pharmaceutical product
development programs. Under a loan agreement, we have borrowed $500,000 to fund
the purchase of certain equipment, and borrowed an additional $4 million based
upon current levels of approved accounts receivable and purchase orders. If
approved accounts receivable for purchase orders decrease, we will be required
to repay such shortfall. Under the loan agreement, our ability to borrow funds
is also subject to satisfaction of certain financial ratios and covenants. In
addition, we recently sold $10,000,000 of Series A convertible preferred stock.
Our future capital requirements will depend on many factors including:
- the amount of orders we receive from American Home Products
Corporation;
- the amount of inventory we are required to maintain;
- the revenues generated under the agreements with American Home
Products Corporation;
- the cost of botanical extracts and other manufacturing costs;
- the cost of and progress in our research and development
programs;
- progress with toxicology testing and clinical trials;
- the time and cost involved in obtaining regulatory approvals;
- patent costs;
- the scope of our patent coverage, if any;
- competing technological and market developments; and
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- our corporate partnerships.
If our capital resources are insufficient to meet our operating
requirements, we will seek additional funds through equity or debt financings or
through arrangements with corporate partners. We may need funds sooner than
anticipated. Other than the $4.5 million loan agreement described in the prior
paragraph and an agreement under certain circumstances to sell $2,000,000 of
Series B convertible preferred stock, we have no arrangements for additional
financing. Any additional financing may substantially dilute our existing
stockholders. We can provide no assurance that additional financing will be
available when needed or upon acceptable terms. Our ability to raise additional
funds will be adversely affected if we are unable to obtain patent protection
for our technologies. If adequate funds are not available, our business,
financial condition and results of operations may suffer.
UNCERTAINTIES RELATED TO THE PHARMAPRINT-TM- PROCESS
We believe that our competitive advantage is our unique ability,
through application of the PharmaPrint-TM- Process, to assess and standardize
the bioactive composition and potency of plant-derived dietary supplements
and pharmaceuticals. We can provide no assurance, however, that consumers in
the dietary supplement or functional food markets will value this
standardization, particularly in light of the fact that these products cannot
be marketed through any claims for the treatment or prevention of disease. In
addition, the PharmaPrint-TM- Process itself does not assure efficacy of our
product. We could make claims of efficacy only after successful clinical
trials, which will not be conducted with respect to our dietary supplement or
functional food products. Accordingly, we can provide no assurance that our
dietary supplement or functional food products will achieve commercial
success.
In the pharmaceutical market, we depend on regulatory approval for
our plant-derived multi-molecule drug candidates. We do not believe that the
Food and Drug Administration and other regulatory authorities have ever
approved multi-molecule, botanical pharmaceuticals. We can provide no
assurance that regulators will approve these compounds in general, accept the
PharmaPrint-TM- Process as an appropriate method of standardizing botanical
compounds for clinical testing, or approve our particular drug candidates.
Without regulatory review and approval, we could not achieve our
pharmaceutical development plans. In such case, our only potential businesses
would be dietary supplements and functional foods.
DEPENDENCE ON UNCERTAIN PATENTS AND OTHER PROPRIETARY RIGHTS
Our success will depend in part on our ability to obtain and
maintain patent protection for our technologies and dietary supplement,
functional food and pharmaceutical products, preserve our trade secrets, and
operate without infringing on the proprietary rights of third parties. We
plan to achieve a competitive advantage as the only provider of botanical,
dietary supplements, functional foods and multi-molecule pharmaceuticals that
can market its products on the basis of consistent composition, the presence
of a least one bioactive and proven bioactivity. This depends on our ability
to obtain a patent covering the PharmaPrint-TM- Process that is broad enough
to prevent competitors from making such claims. We have applied for a broad
process patent covering a method for making high quality botanical products
that incorporates the steps that make up the PharmaPrint-TM- Process, as well
as additional patents covering the application of this method to the
manufacture of 11 specific botanical compositions. We intend to apply for
additional patents as we develop additional products or enhance our
technologies. To date, we have not received any patents or notices of
allowance of any patent application for the PharmaPrint-TM- Process or any
products we currently intend to commercialize, although we have received
certain patents and allowances on products we don't intend on
commercializing. If we are not successful in obtaining and maintaining
adequate patent protection for the PharmaPrint-TM- Process, we will not be
able to protect our pharmaceutical products and our ability to compete
successfully in the dietary supplement and functional food markets will be
impaired. Furthermore, American Home Products Corporation is not obligated to
pay royalties on sales of any products not covered by a patent relating to
the PharmaPrint-TM- Process.
We can provide no assurance that we will obtain any patents covering
our technology or products, or that any patents may be issued will provide
substantial protection or be of commercial benefit. Any patent covering the
PharmaPrint-TM- Process may be vulnerable to challenge on various grounds,
including lack of nonobviousness or novelty. A great deal of research and
development work has taken place in botanicals, including efforts focused on
single- molecule bioactivity and analysis of multiple botanical components.
We believe that the PharmaPrint-TM- Process
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is unique and patentable because of its focus on determining high quality
botanicals by identifying bioactive components having activity relevant to
clinical indications and establishing manufacturing standards covering the range
of bioactivity of the total of these compounds. However, it is arguable that
prior work on bioactivity relating to the development of single molecule drugs
or multi-molecule drugs or multi-molecule chemical composition analysis could
contradict novelty or nonobviousness of our invention.
The issuance of a patent is not conclusive as to its validity or
enforceability, and competitors may be able to design around any patent that we
obtain. Competitors may find ways to substantiate claims about the composition
or bioactivity of competing products without utilizing our process. We can
provide no assurance that any patent issued to us will not be invalidated, or
that we will not be forced to narrow, through re-examination, the scope of such
a patent claim to avoid its invalidation. In addition, we can provide no
assurance that any application of our technology will not infringe on patents or
proprietary rights of others. In addition, any licenses that might be required
as a result of such infringement for our processes or products may not be
available on commercially reasonable terms, if at all.
Litigation may be necessary to enforce our patent and proprietary
rights or to determine the scope and validity of others proprietary rights. Any
such litigation could be very costly and could distract our management and
technical personnel. We may participate in interference proceedings that may in
the future be declared by the Patent and Trademark Office to determine priority
of invention, which could be very costly. We can provide no assurance of a
favorable outcome of any litigation or interference proceedings. An unfavorable
outcome in any proceeding could have material adverse effect on our business,
financial condition and results of operations.
The patent position of biotechnology and biopharmaceutical firms
generally is highly uncertain and involves complex legal and factual questions.
To date, no consistent policy has emerged regarding the breadth of claims
allowed in biotechnology and biopharmaceutical patents. Accordingly, there can
be no assurance that any patent applications that we own or license will result
in patents being issued or that, if issued, the patents will afford protection
against competitors with similar technology.
Many of the processes and much of the know-how that are important to
our technology depend upon the non- patentable skills, knowledge and experience
of our scientific and technical personnel and collaborators. To help protect our
rights, we require employees, collaborators and significant consultants and
advisors with access to confidential information, to sign confidentiality
agreements. We can provide no assurance, however, that these agreements will
provide adequate protection for our trade secrets, know-how or proprietary
information in the event of any unauthorized use or disclosure.
OUTSOURCING OF MANUFACTURING, RESEARCH AND DEVELOPMENT AND REGULATORY ACTIVITIES
Pursuant to our supply agreement with American Home Products
Corporation, we are American Home Products Corporation's exclusive supplier of
the herbal products sold by American Home Products Corporation and must produce
such products under applicable current good manufacturing practices. We do not
have the internal facilities or capabilities to manufacture our products, but
rather rely on third party manufacturers. If we are unable to maintain contract
manufacturing relationships on acceptable terms or otherwise develop
manufacturing capabilities, our ability to deliver products to American Home
Products Corporation or others may be adversely affected.
If we fail to supply American Home Products Corporation with certain
commercial quantities of products for a period of 60 consecutive days for any
reason, American Home Products Corporation has the right to manufacture such
products itself, or to retain a third party manufacturer. This right is
exercisable for a limited period of time if we are able to continue
manufacturing commercial quantities of these products. We can provide no
assurance that we will be able to meet our obligation to supply such products in
sufficient commercial quantities. A loss of manufacturing rights to American
Home Products Corporation or a third party would have a material adverse effect
on our business, financial condition and results of operations.
We have limited experience in the sale, marketing, distribution and
clinical testing of dietary supplements, functional foods and pharmaceutical
products. Therefore, we rely on collaborative arrangements or license and
distribution agreements with third parties. To be successful, our pharmaceutical
products must be manufactured, at an acceptable cost, in commercial quantities
under the Food and Drug Administration's standards or other standards prescribed
by regulatory agencies in other countries.
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All of our manufacturing, and most of our research and development
activities are performed by third party laboratories and manufacturing
facilities. Although we believe that our partners have an economic motivation to
perform their duties in a timely and effective manner, the amount and timing of
the resources devoted by such parties to performing their duties may vary. Any
failure to perform such duties may result in a delay in our manufacturing,
product development and marketing activities. Any failure or delay could also
result in a breach of our obligations under the agreements with American Home
Products Corporation and any other collaborative arrangements. Any such failure
or delay could have a material adverse effect on our business, financial
condition and results of operations.
In the future, we may transfer control of toxicology studies and
clinical trials, the preparation and submission of regulatory approvals and the
manufacture of pharmaceutical products to a partner. If we do transfer such
control, we would then depend on our partner's efforts to effectively develop
our drug candidates. Additionally, if we outsource the manufacturing of our drug
candidates, we will lose the opportunity to generate profits from manufacturing.
COMPETITION AND TECHNOLOGICAL CHANGE
The dietary supplement, functional food, pharmaceutical, consumer
products and biotechnology industries are subject to intense competition and
rapid technological change. We face intense competition from numerous
sources, including pharmaceutical and consumer products, herbal products,
biotechnology and chemical companies, as well as universities and other
research organizations. Industry-wide interest in our arrangement with
American Home Products Corporation and the use of our PharmaPrint-TM- Process
technology, may accelerate as the technology becomes more widely understood.
Competitors may then have additional incentive to develop technologies and
products that compete with ours. These competitors may succeed in developing
technologies and products that are more effective than ours or that would
render our PharmaPrint-TM- Process and products obsolete. If we are not
successful in obtaining and maintaining adequate patent protection for the
PharmaPrint-TM- Process, competitors may be able to duplicate or exceed our
capabilities.
Many of our potential competitors have competitive advantages over us,
including:
- greater capital resources;
- greater experience in developing, manufacturing and marketing
products;
- greater research and development capabilities, staffs and
facilities;
- greater experience in conducting toxicology testing and human
clinical trials on new pharmaceutical products; and
- greater experience on obtaining Food and Drug Administration
and other regulatory approvals of products.
Accordingly, some of our competitors may succeed in obtaining
regulatory approval for products more rapidly or effectively. Moreover, we can
provide no assurance that we will have sufficient resources to undertake the
continuing research and development necessary to remain competitive.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
In order to obtain marketing approval from the Food and Drug
Administration, we must demonstrate through toxicology testing and clinical
trials that PPRT-321, our only drug candidate for which the Food and Drug
Administration has allowed clinical trials to date, is safe and effective for
use in its target indication. The results from initial clinical trials of
PPRT-321 and any other drug candidates may not be indicative of the results that
may be obtained in further clinical trials. Many companies have suffered
significant setbacks in advanced clinical trials, even after promising results
in earlier trials. The rate of completion of our clinical trials maybe delayed
by many factors including slower than anticipated patient enrollment, a slower
than anticipated timetable, or any other adverse event.
During the course of clinical trials, patients can die or suffer other
adverse medical effects for reasons that may not be related to the drug being
tested, but which can affect clinical trial results. We can provide no assurance
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that regulatory authorities will permit us to undertake additional clinical
trials of PPRT-321 or to initiate clinical trials of any other drug candidates.
In addition, we may not successfully complete any clinical trial efforts that we
undertake. Any delays in or termination of our clinical trial efforts would have
a material adverse effect on our business, financial condition and results of
operations. We can provide no assurance that PPRT-321 or any other drug
candidate will receive regulatory approval for any indication or that any
clinical trials undertaken will result in marketable products. If PPRT- 321 or
other drug candidates are not shown to be safe and effective in clinical trials,
our business, financial condition and results of operations would be materially
adversely affected.
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL
The following information describes statutory or regulatory provisions.
This discussion highlights some aspects of applicable law and may not contain
all the information that may be important to you on this topic. The
manufacturing, possessing, formulation, packaging, labeling, advertising and
sale of dietary supplements are regulated by the Federal Food, Drug and Cosmetic
Act, by the Dietary Supplement Health & Education Act of 1994, and by various
federal agencies, including the Food and Drug Administration and the Federal
Trade Commission. Our activities are also regulated by various agencies of the
states, provinces, localities and countries in which our products are sold.
The Dietary Supplement Health Education Act defines dietary
supplements, permits "structure/function" statements under certain conditions,
and regulates the use of published literature in connection with the sale of
herbal products. Dietary supplements do not require approval by the Food and
Drug Administration prior to marketing. Dietary supplements are subject to
various regulatory requirements concerning their composition, permissible claims
(including substantiation of any claims), manufacturing procedures and other
elements. The Dietary Supplement Health Education Act prohibits marketing
dietary supplements for the treatment or prevention of diseases. Because we are
limited to the type of claims we may make, we may not be able to effectively
differentiate our dietary supplement products from those of our competitors. We
cannot determine what effect current or future regulations will have on our
business, financial conditions or results of operations.
The development of pharmaceuticals is subject to extensive, costly and
rigorous regulation by the Food and Drug Administration and foreign regulatory
authorities. Drugs that have not been demonstrated to be safe and effective
according to Food and Drug Administration standards are typically classified as
"new drugs" and require Food and Drug Administration approval prior to
marketing. In order to initiate a clinical trial for a new drug, an
investigational new application must be submitted to the Food and Drug
Administration. The process of obtaining required regulatory approvals from the
Food and Drug Administration and other regulatory authorities often takes many
years. The process is expensive and can vary substantially based on the type,
complexity and novelty of the pharmaceutical product. Any additional
governmental regulations could delay regulatory approval of our pharmaceutical
products. We believe, based upon documentation in medical literature of safe
human use of botanical therapeutics, that we may be able to pursue a less
time-consuming development process in the United States and some foreign
jurisdictions. However, we must engage in extensive toxicology studies and
clinical testing in order to demonstrate the safety and efficacy of our
pharmaceutical products for human use. We can provide no assurance of quick
approval or that we will obtain approval at all. Requests for additional data
and delays in obtaining regulatory approvals, would adversely affect the
marketing of our pharmaceutical products and our ability to generate
pharmaceutical product revenues and royalties.
We can provide no assurance that regulatory authorities will permit us
to carry out further testing. If permitted, additional clinical testing may not
prove that our pharmaceutical products are as safe and effective as necessary to
permit marketing approvals for these products from regulatory authorities.
Additionally, the results of any initial toxicology and clinical testing are not
necessarily predictive of results that may be obtained from subsequent or more
extensive toxicology and clinical testing. We can provide no assurance that
further trials will be successful. Some companies in the pharmaceutical industry
have suffered significant setbacks in advanced clinical trials, even after
promising results in earlier trials. The failure to adequately demonstrate the
safety and efficacy of a pharmaceutical product under development would delay or
prevent regulatory approval of the product and would have material adverse
effect on our business, financial condition and results of operations. Delays in
obtaining regulatory approvals could adversely affect the marketing of our
pharmaceutical products and diminish any competitive advantage we may attain. In
addition, delays in regulatory approvals encountered by any corporate partner
could adversely affect our ability to receive royalties. We can provide no
assurance that if clinical trials are completed, they will be successful or that
we
8
<PAGE>
will be able to submit any new drug application on its anticipated schedule. Any
such applications may not be reviewed and approved by regulatory agencies in a
timely manner, if at all.
The Food and Drug Administration has established a "botanical"
committee to provide regulatory guidelines, including guidelines for approval
of botanicals as pharmaceuticals. However, we believe that the Food and Drug
Administration has never approved for sale a pharmaceutical version of a
multi-molecule, botanical medicine. Food and Drug Administration approval of
botanicals that qualify as pharmaceuticals would presumably be evaluated
under the same statutory standards as are applied to all new drugs. However,
Food and Drug Administration review and approval practices adopted for
botanical medicines under these statutory standards could result in
competitive natural medicines that are not manufactured based on our
PharmaPrint-TM- Process technology.
Any regulatory approval may involve marketing restrictions. In
addition, pharmaceutical products are subject to continuous governmental review
and post-market evaluation, which could result in withdrawal, suspension or
limitation of approvals. Any discovery of previously unrecognized problems could
result in restrictions on the pharmaceutical product or its manufacture,
including withdrawal of the pharmaceutical product from the market. Failure to
comply with applicable regulatory requirements can result in fines, suspension
of regulatory approvals, pharmaceutical product recalls, seizure of products,
operating restrictions or criminal prosecution.
DEPENDENCE ON KEY EMPLOYEES
We depend on the continuing services of Elliot P. Friedman, our
Chairman of the Board and Chief Executive Officer. Loss of the services of Mr.
Friedman could be detrimental to our business. We have obtained key-man life
insurance in the amount of $1 million on the life of Mr. Friedman. Our success
also depends on our ability to attract and retain highly qualified scientific
and managerial personnel. We face competition for such personnel from other
organizations, many of which have significantly greater resources. There can be
no assurance that we will be able to recruit and retain such personnel.
VOLATILITY OF COMMON STOCK PRICE
The market price of our common stock has historically been highly
volatile. This volatility is likely to continue. The market price of our common
stock may fluctuate and drop sharply for many reasons. Some events that may
cause a decline in the price of our common stock include:
- announcements concerning our business or competitors;
- results of the sales of our products sold through American
Home Products Corporation;
- failures or unexpected delays in manufacturing;
- patent developments;
- negative reaction to dietary supplements or functional foods
in general;
- results of toxicology testing and clinical trials;
- termination or modification of agreements with collaborative
partners;
- failures or unexpected delays in obtaining regulatory
approvals;
- technological innovations;
- statements or recommendations by the Food and Drug
Administration or their advisory panels;
- loss of key personnel;
- government regulations;
9
<PAGE>
- litigation or public concern as to the safety or commercial
value of our technologies or products; and
- failure to meet the expectations of securities analysts or
investors.
In addition, market conditions for emerging growth companies and
pharmaceutical companies, economic conditions and general stock market
movements, even if unrelated to our operations, may have a significant impact on
the price of our common stock. A sharp decline in the price of our common stock
could also result in securities class action litigation against us. Such
litigation could be very costly and could divert management's attention and
resources, which may have a material adverse effect on our business, financial
condition and results of operations.
POTENTIAL FOR DILUTION
As of July 2, 1999, 10,000 shares of our Series A convertible preferred
stock were issued and outstanding. Subject to satisfaction of certain
conditions, we are obligated to issue 2,000 shares of Series B convertible
preferred stock. Each share of the Series A convertible preferred stock is
convertible into such number of shares of common stock as is determined by
dividing the stated value ($1,000) of the share of Series A convertible
preferred stock, which value is increased at an annual rate of 6.0%, by the
current conversion price. The conversion price prior to October 4, 1999 is $8.55
and after October 4, 1999 is the lessor of $8.55 and 100% of a measure of the
market price of the common stock at the time of conversion. The maximum number
of shares of common stock issuable upon conversion of the Series A convertible
preferred stock and Series B convertible preferred stock is 2,776,595. If we
issue 2,776,595 shares of common stock on conversion of the Series A convertible
preferred stock and Series B convertible preferred stock, the remaining
outstanding shares will be redeemed by us on or before June 4, 2001 for a price
of 103% of the stated value plus a premium of 6.0% of the stated value per year.
In addition, as of July 2, 1999, 2,545,343 shares of common stock were reserved
for issuance upon exercise of our outstanding options and warrants. Accordingly,
purchasers of common stock could therefore experience substantial dilution of
their investment upon conversion of the Series A convertible preferred stock
and/or exercise of our outstanding options and warrants.
CONTROL BY EXISTING STOCKHOLDERS AND MANAGEMENT
Our current executive officers, directors and other significant
stockholders own, as of June 23, 1999, approximately 38.9% of our issued and
outstanding shares of common stock. Accordingly, such persons will likely
continue to control our Board of Directors and direct the operation of our
business.
PHARMAPRINT
PharmaPrint Inc. uses its proprietary development and manufacturing
process technologies to develop high quality dietary supplement products and
pharmaceutical candidates from botanical sources. PharmaPrint believes that
its PharmaPrint-TM- Process technology represents a new paradigm in the
development of therapeutic products from botanical sources. Unlike
traditional drug development process of identifying, isolating and
synthesizing single molecules from plant and other sources, PharmaPrint's
core technologies were developed based on empirical data suggesting that the
health benefits and safe usage of certain plant-derived therapeutics might be
the result of the natural combination of multiple molecules found in the
plant extract and that single molecules, in isolation, may not replicate the
natural plant's effectiveness. The PharmaPrint-TM- Process technology enables
PharmaPrint to identify, quantify and standardize the bioactives within plant
sources which are believed to provide therapeutic benefits and produce
products having consistent batch-to-batch quantities and ratios of these
bioactives.
PharmaPrint is applying several commercialization strategies for its
PharmaPrint-TM- Process technology. The first application of the
PharmaPrint-TM- Process is the development of high quality, herbal dietary
supplements. In October 1997 PharmaPrint entered into several agreements with
American Home Products Corporation whereby PharmaPrint is applying the
PharmaPrint-TM- Process to produce a line of high quality dietary supplement
products currently marketed by American Home Products Corporation under its
Centrum brand name. Pursuant to the terms of the agreements, American Home
Products Corporation paid PharmaPrint $2.5 million as an up-front licensing
fee and is required to pay additional fees of $500,000 upon each of (I) the
issuance of a patent containing claims covering the PharmaPrint-TM-Process
and (ii) receipt and approval by American Home Products Corporation of the
initial dietary
10
<PAGE>
supplement products in sufficient time to permit American Home Products
Corporation to meet its proposed launch date. American Home Products
Corporation has agreed to spend at least the lesser of $20 million or an
amount equal to 50% of net sales of the dietary supplement products in
advertising and other marketing expenditures during each of the first two
years following initial product launch. American Home Products Corporation
has also agreed to purchase the dietary supplement products from PharmaPrint
under a supply agreement at specified prices. In addition, if PharmaPrint
succeeds in securing a patent containing a claim or claims comprising the
PharmaPrint-TM- Process applied generally or on a product-by-product basis,
American Home Products Corporation will pay royalties to PharmaPrint on net
sales of such patented products of 4% in the first year and 6% thereafter.
American Home Products Corporation commenced marketing PharmaPrint's six
dietary supplement products in October 1998. In November 1998, American Home
Products Corporation and PharmaPrint entered into an agreement pursuant to
which American Home Products Corporation paid PharmaPrint $5.0 Million as
reimbursement for certain development and production costs and increased the
per unit amount to be paid by American Home Products Corporation to
PharmaPrint for the dietary supplement products delivered or to be delivered
prior to February 28, 1999. In April 1999, American Home Products Corporation
and PharmaPrint entered into an additional agreement that extended the per
unit cost increase paid by American Home Products Corporation to PharmaPrint
for dietary supplement products delivered or to be delivered from March 1,
1999 through July 31, 1999. American Home Products Corporation and
PharmaPrint are currently negotiating a permanent increase to the per unit
increase. If an agreement is not reached, beginning August 1, 1999, the
prices at which American Home Products Corporation purchases products from
PharmaPrint, with certain limited exceptions, will revert to the prices
agreed upon in the agreements with American Home Products Corporation in
October 1997 based upon the manufacturing specifications agreed upon in such
agreements. Such prices will remain fixed until October 2000.
Another application of the PharmaPrint-TM- Process is the
development of FDA-approvable pharmaceuticals from natural plant sources.
PharmaPrint has completed a Phase II study for its initial pharmaceutical
product candidate, PPRT-321, a saw palmetto-derived drug that is being
developed for the treatment of symptoms associated with Benign Prostatic
Hyperplasis. The clinical study demonstrated that the product was safe and
appeared to improve symptoms associated with an enlarged prostate gland.
PharmaPrint is currently evaluating further studies for PPRT-321.
PharmaPrint has also commenced the development of, utilizing the
PharmaPrint-TM- Process, a line of herbal products combined with vitamins
and/or minerals. PharmaPrint anticipates that it will initially utilize the
same herbal products developed for American Home Products Corporation in its
combination product line. PharmaPrint anticipates marketing these products
directly to mass market and Internet retailers. PharmaPrint also has
initiated the PharmaPrint-TM- Process for a product classified as a
functional food.
PharmaPrint's principal executive offices are located at 2600 Michelson
Drive, Suite 1600, Irvine, CA 92612 and its telephone number is (949) 794-7778.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
PharmaPrint's bylaws relating to indemnification require that
PharmaPrint indemnify its directors and its executive officers to the fullest
extent permitted under Delaware law, subject to two exceptions. First,
PharmaPrint may modify the extent of such indemnification by individual
contracts with its directors and executive officers. Second, PharmaPrint will
not be required to indemnify any director or executive officer in connection
with a proceeding initiated by such person, with certain exceptions. Delaware
corporate law, PharmaPrint's bylaws, as well as any indemnity agreements, may
also permit indemnification for liabilities arising under the Securities Act or
the Securities Exchange Act. Without limiting any right an indemnitee may have
under Delaware corporate law and PharmaPrint's bylaws, the Board of Directors
has adopted an Indemnification and Hold Harmless Agreement to provide additional
indemnification and reimbursement to all qualified directors and officers of
PharmaPrint, and to hold such directors and officers harmless from certain
liabilities, judgments and related expenses. Any individual who is a duly
elected or appointed member of the Board of Directors, a corporate officer of
PharmaPrint or any employee or agent as approved by the Board of Directors
qualifies as an indemnitee under the indemnity agreement.
The Board of Directors has been advised that, in the opinion of the
Securities and Exchange Commission, indemnification of liabilities arising under
the Securities Act is contrary to public policy as expressed in the Securities
11
<PAGE>
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by PharmaPrint
of expenses incurred or paid by a director or officer of PharmaPrint in the
successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the shares being registered hereby,
PharmaPrint 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 and will be governed by the final adjudication
of such issue.
USE OF PROCEEDS
PharmaPrint will not receive any proceeds from the sale of the shares
of common stock offered pursuant to this prospectus.
SELLING STOCKHOLDER
RGC International Investors, LDC is eligible to sell, pursuant to this
prospectus, the maximum number of shares of common stock set forth in the table
below. RGC International Investors, LDC may offer and sell all or any portion of
such shares from time to time in the manner set forth under the heading "Plan of
Distribution." However, RGC International Investors, LDC is under no obligation
to sell all or any portion of such shares. The number and percentage of shares
set forth in the table below under the heading "Post Offering" assumes the sale
of all shares of common stock eligible to be sold pursuant to this Prospectus.
<TABLE>
<CAPTION>
PRE-OFFERING POST OFFERING
------------ -------------------------------------
TOTAL NUMBER TOTAL NUMBER
NAME OF SELLING OF SHARES OF SHARES PERCENTAGE
STOCKHOLDER BENEFICIALLY OWNED SHARES OFFERED BENEFICIALLY OWNED OF CLASS
- ----------- ------------------ -------------- ------------------ --------
<S> <C> <C> <C> <C>
RGC International Investors, LDC 2,776,595 2,776,595 -0- -0-
</TABLE>
The number of shares set forth in the table above represents the
maximum number of shares of common stock to be offered by RGC International
Investors, LDC. The actual number of shares of common stock issuable upon
conversion of the Series A convertible preferred stock and Series B
convertible preferred stock is indeterminate, is subject to adjustment and
could be materially less than such estimated number depending on factors
which cannot be predicted by us at this time, including, among other factors,
the future market price of the common stock. The actual number of shares of
common stock offered in this prospectus, and included in the registration
statement of which this prospectus is a part, includes such additional number
of shares of common stock as may be issued or issuable upon conversion of the
Series A convertible preferred stock or Series B convertible preferred stock
by reason of any stock split, stock dividend or similar transaction involving
the common stock, in accordance with Rule 416 under the Securities Act. Under
the terms of the Series A convertible preferred stock, if the Series A
convertible preferred stock had been actually converted on July 2, 1999, the
conversion price would have been $8.55, at which price the Series A preferred
stock would have been converted into approximately 1,169,590 shares of common
stock.
Under the terms of the Series A convertible preferred stock and
Series B convertible preferred stock, the shares are convertible by any
holder only to the extent that the number of shares of common stock issuable
pursuant to such securities, together with the number of shares of common
stock owned by such holder and its affiliates (but not including shares of
common stock underlying unconverted shares) would not exceed 4.9% of the then
outstanding common stock as determined in accordance with Section 13(d) of
the Exchange Act. Accordingly, the number of shares of common stock set forth
in the table for RGC International Investors exceeds the number of shares of
common stock that RGC International Investors could own beneficially at any
given time through their ownership of the Series A convertible preferred
stock and Series B convertible preferred stock. In that regard, the
beneficial ownership of the
12
<PAGE>
common stock by RGC International Investors set forth in the table is not
determined in accordance with Rule 13d-3 under the Exchange Act.
PLAN OF DISTRIBUTION
The shares being offered by the selling stockholder or its pledgees,
donees, transferees or other successors in interest, will be sold from time to
time in one or more transactions, which may involve block transactions, on the
Nasdaq National Market or on such other market on which the common stock may
from time to time be trading:
- in privately-negotiated transactions;
- through the writing of options on the shares;
- short sales; or
- any combination thereof.
The sale price to the public may be:
- the market price prevailing at the time of sale;
- a price related to such prevailing market price;
- at negotiated prices; or
- such other price as the selling stockholder determine from
time to time.
The shares may also be sold pursuant to Rule 144. The selling
stockholder shall have the sole and absolute discretion not to accept any
purchase offer or make any sale of shares if it deems the purchase price to be
unsatisfactory at any particular time.
The selling stockholder or its pledgees, donees, transferees or other
successors in interest, may also sell the shares directly to market makers
acting as principals and/or broker-dealers acting as agents for themselves or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that the selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholder cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholder. The selling
stockholder and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations under such acts.
The selling stockholder, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. The selling
stockholder has entered into any agreement with a prospective underwriter and
there is no assurance that any such agreement will be entered into. If the
selling stockholder enters into such an agreement or agreements, the relevant
details will be set forth in a supplement or revisions to this prospectus.
The selling stockholder and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
13
<PAGE>
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
stockholder or any other such person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited form simultaneously
engaging in market making and certain other activities with respect to such
securities for a specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.
We have agreed to indemnify the selling stockholder, or its transferees
or assignees, against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the selling stockholder or its
pledgees, donees, transferees or other successors in interest, may be required
to make in respect of such liabilities.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been
passed upon for PharmaPrint by PharmaPrint's outside legal counsel, Klehr,
Harrison, Harvey, Branzburg & Ellers LLP, Philadelphia, Pennsylvania.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus and information that we file later with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Securities and Exchange Commission under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act:
(a) PharmaPrint's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999;
(b) The description of the PharmaPrint's common stock contained in
the registration statement on Form 8-A, dated August 5, 1996,
including all amendments and reports filed for the purpose of
updating such description.
WHERE YOU CAN GET MORE INFORMATION
At your request, we will provide you, without charge, a copy of any of
the documents incorporated by reference in this prospectus or any exhibits to
the registration statement. If you would like more information, write or call us
at:
PharmaPrint Inc.
2600 Michelson Drive
Suite 1600
Irvine, CA 92612
Telephone: (949) 794-7778
Facsimile: (949) 794-7777
Our fiscal year ends on March 31. We intend to provide to our
stockholders annual reports containing audited financial statements and other
appropriate reports. In addition, we file annual, quarterly and current reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements or other information
we file at the Securities and Exchange Commission's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the Securities and
Exchange Commission. Please call the Securities and Exchange Commission at
1-800- SEC-0330 for further information on the operation of the public reference
rooms. Our Securities and Exchange
14
<PAGE>
Commission filings are also available to the public, free of charge, on the
Securities and Exchange Commission Internet site at http:\\www.sec.gov.
15
<PAGE>
<TABLE>
<S> <C>
YOU SHOULD RELY ONLY ON THE INFORMATION UP TO 2,776,595 SHARES
CONTAINED IN THIS PROSPECTUS OR THAT WE HAVE
REFERRED YOU TO. WE HAVE NOT AUTHORIZED COMMON STOCK
ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT. THE INFORMATION IN THIS
PROSPECTUS MAY NOT BE ACCURATE BEYOND THE
DATE INDICATED BELOW, REGARDLESS OF WHEN
THIS PROSPECTUS IS DELIVERED OR WHEN THE PHARMAPRINT INC.
SECURITIES DESCRIBED IN THIS PROSPECTUS ARE
SOLD. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS
JULY , 1999
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
PharmaPrint will pay all costs and expenses incurred in connection with
the registration of the resale of the shares of common stock pursuant to this
registration statement. The selling stockholder will pay the costs associated
with any sales of the shares of common stock, including any discounts,
commissions and applicable transfer taxes. The following is an itemized
statement of the estimated amounts of all expenses payable by PharmaPrint in
connection with the registration of the shares of common sock offered hereby,
other than underwriting discounts and commissions:
<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission................................ $ 3,859
*Accountants' fees and expenses..................................................... $ 2,000
*Legal fees and expenses............................................................ $ 5,000
*Printing and EDGAR expenses........................................................ $ 2,000
*Miscellaneous ..................................................................... $ 2,500
--------
Total...................................................................... $ 15,359
--------
--------
</TABLE>
- --------------------
* Estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
PharmaPrint's bylaws relating to indemnification require that
PharmaPrint indemnify its directors and its executive officers to the fullest
extent permitted under Delaware law, subject to two exceptions. First,
PharmaPrint may modify the extent of such indemnification by individual
contracts with its directors and executive officers. Second, PharmaPrint will
not be required to indemnify any director or executive officer in connection
with a proceeding initiated by such person, with certain exceptions. Delaware
corporate law, PharmaPrint's bylaws, as well as any indemnity agreements, may
also permit indemnification for liabilities arising under the Securities Act or
the Securities Exchange Act. Without limiting any right an indemnitee may have
under Delaware corporate law and PharmaPrint's bylaws, the Board of Directors
has adopted an Indemnification and Hold Harmless Agreement to provide additional
indemnification and reimbursement to all qualified directors and officers of
PharmaPrint, and to hold such directors and officers harmless from certain
liabilities, judgments and related expenses. Any individual who is a duly
elected or appointed member of the Board of Directors, a corporate officer of
PharmaPrint or any employee or agent as approved by the Board of Directors
qualifies as an indemnitee under the indemnity agreement.
The Board of Directors has been advised that, in the opinion of the
Securities and Exchange Commission, indemnification of liabilities arising under
the Securities Act is contrary to public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by PharmaPrint
of expenses incurred or paid by a director or officer of PharmaPrint in the
successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the shares being registered hereby,
PharmaPrint 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 and will be governed by the final adjudication
of such issue.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
5 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Klehr, Harrison, Harvey, Branzburg & Ellers LLP (included in Exhibit 5)
24 Power of Attorney (included on signature page)
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(I) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(A) to include any prospectus required by Section
10(a)(3) of the Securities Act;
(B) 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;
(C) 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 the undertakings in Item 17(a)(I)(A)
and (B) do not apply if the information required to be
included in a post-effective amendment by such undertakings is
contained in periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act
that are incorporated by reference in this registration
statement;
(ii) That, for the purpose of determining any liability under the
Securities Act, 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; and
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act 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 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
II-2
<PAGE>
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 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 Irvine, State of California, on July 6, 1999.
PHARMAPRINT INC.
By:_____________________________________
Elliot P. Friedman
Chairman of the Board of Directors and
Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of PharmaPrint Inc. whose
signature appears below hereby appoints Elliot P. Friedman and James R. Wodach
as true and lawful attorney-in-fact for the undersigned with full power of
substitution, to execute in his name and on his behalf in each capacity stated
below, any and all amendments (including post-effective amendments) to this
registration statement as the attorney-in-fact shall deem appropriate, and to
cause to be filed any such amendment (including exhibits thereto and other
documents in connection therewith) to this registration statement with the
Securities and Exchange Commission, as fully and to all intents and purposes as
such person might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact, or any of them, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities indicated on July 6, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S)
--------- --------
<S> <C>
Chairman of the Board of Directors and
/s/ Elliot P. Friedman Chief Executive Officer (Principal Executive Officer)
- -------------------------------
Elliot P. Friedman
/s/ James R. Wodach Senior Vice President and Chief Financial Officer
- ------------------------------- (Principal Financial and Accounting Officer)
James R. Wodach
/s/ Phillip G. Trad
- ------------------------------- Senior Vice President, General Counsel and Director
Philip G. Trad
/s/ John H. Abeles
- ------------------------------- Director
John H. Abeles
- ------------------------------- Director
Erinch R. Ozada
/s/ Nathan F. Troum, M.D.
- ------------------------------- Director
Nathan F. Troum, M.D.
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
5 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP
23 Consent of Arthur Andersen LLP
</TABLE>
<PAGE>
EXHIBIT 5
[LETTERHEAD OF KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP]
July 6, 1999
Board of Directors
PharmaPrint Inc.
2600 Michelson Drive, Suite 1600
Irvine, California 92612
RE: REGISTRATION STATEMENT ON FORM S-3
----------------------------------
Gentlemen:
We have acted as counsel to PharmaPrint Inc. (the "Company") in
connection with the proposed registration of shares (the "Shares") of the
Company's common stock, par value $.001 per share (the "Common Stock"), on a
registration statement on Form S-3 being filed by the Company with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"). Such registration statement, as it may be
amended or supplemented from time to time, including all exhibits thereto, is
referred to hereinafter as the "Registration Statement."
The Shares consist of up to 2,776,595 shares of Common Stock issuable
upon the conversion of shares of PharmaPrint's Series A convertible preferred
stock.
In this regard, we have examined: (I) the Company's Certificate of
Incorporation and Bylaws, each as amended and as presently in effect; (ii) the
Registration Statement; and (iii) such officers' certificates, resolutions,
minutes, corporate records and other documents as we have deemed necessary or
appropriate for purposes of rendering the opinions expressed herein.
In rendering such opinions, we have assumed the authenticity of all
documents and records examined, the conformity with the original documents of
all documents submitted to us as copies and the genuineness of all signatures.
The opinions expressed herein are based solely upon our review of the
documents and other materials expressly referred to above. We have not reviewed
any other documents in rendering such opinions. Such opinions are therefore
qualified by the scope of that document examination.
Based upon and subject to the foregoing, and on such other examinations
of law and fact as we have deemed necessary or appropriate in connection
herewith, we are of the opinion that, when issued upon conversion of the Series
A convertible preferred stock, the Shares will be duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock.
This opinion is limited to the law of the State of Delaware and the
federal securities law of the United States. Except as expressly otherwise noted
herein, this opinion is given as of the date hereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference made to this firm under the caption
"Legal Matters" in the prospectus constituting a part of the Registration
Statement. By giving such consent, we do not hereby admit that we fall within
the category of persons whose consent is required pursuant to Section 7 of the
Securities Act.
Very truly yours,
/s/ Klehr, Harrison, Harvey, Branzburg & Ellers LLP
<PAGE>
EXHIBIT 23.1
Arthur Anderson LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-3 dated July 6, 1999, of
our report dated June 18, 1999 included in PharmaPrint Inc. and subsidiaries
Form 10-K for the year ended March 31, 1999 and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
Orange County, CA
July 2, 1999
