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As filed with the Securities and Exchange Commission on February 12, 1999
Registration No. 333 -
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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
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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. |_|
CALCULATION OF REGISTRATION FEE
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Proposed Proposed Amount of
Title of Shares Amount to be Maximum Offering Maximum Aggregate Registration
to be Registered Registered Price Per Share Offering Price Fee
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Common Stock 300,000 (1) $13.53 (2) $4,059,000 (2) $1,128
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(1) Includes shares of Registrant's common stock issuable upon exercise of
warrants granted pursuant to an Underwriting Agreement between the
Registrant and M.H. Meyerson & Co., Inc. dated August 14, 1996.
(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
February 11, 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
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UP TO 300,000 SHARES OF COMMON STOCK
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The stockholders of PharmaPrint Inc. ("PharmaPrint") listed in this
Prospectus under "Selling Stockholders" are offering and selling up to 300,000
shares of common stock. The Selling Stockholders may acquire the shares of
common stock offered pursuant to this Prospectus upon exercise of warrants.
The Selling Stockholders may offer the shares of common stock through
public or private transactions, on the Nasdaq National Market at prevailing
market prices, or at privately negotiated prices. PharmaPrint will pay all costs
and expenses incurred in connection with the registration of the resale of the
shares of common stock under the Securities Act. The Selling Stockholders will
pay the costs associated with any sales of the shares of common stock, including
any discounts, commissions and applicable transfer taxes.
PharmaPrint's common stock is listed on the Nasdaq National Market
under the symbol "PPRT." On February 8, 1999, the closing sale price for the
common stock, as quoted on the Nasdaq National Market, was $14 7/8 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 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.
The Selling Stockholders may not sell these securities until the
Registration Statement filed with the Securities and Exchange Commission is
effective. This Prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
The date of this Prospectus is February __, 1999.
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TABLE OF CONTENTS
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................................................3
RISK FACTORS......................................................................................................3
PHARMAPRINT......................................................................................................12
INDEMNIFICATION OF OFFICERS AND DIRECTORS........................................................................14
USE OF PROCEEDS..................................................................................................14
SELLING STOCKHOLDERS.............................................................................................15
PLAN OF DISTRIBUTION.............................................................................................17
LEGAL MATTERS....................................................................................................18
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................18
WHERE YOU CAN GET MORE INFORMATION...............................................................................18
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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;
- uncertainties related to the PharmaPrint(TM) Process;
- government regulation and the uncertainty of product
approvals;
- the ability to commercialize and market products;
- the future capital needs of PharmaPrint;
- control by existing stockholders;
- other risks described under "Risk Factors" below and which may
be described in the 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
You should carefully consider each of the following factors and other
information in this prospectus before deciding to invest in shares of common
stock.
EARLY STAGE OF MANUFACTURING AND PRODUCT DEVELOPMENT; HISTORY OF OPERATING
LOSSES
We have a 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 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.
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DEPENDENCE ON AHP
EXCLUSIVE LICENSE
Under several agreements, we have granted American Home Products
Corporation ("AHP") an exclusive license to market and sell certain dietary
supplement products. Because we cannot sell these dietary supplement products by
any other means, we are relying on AHP as our only source of product revenues in
the near future.
RISK OF TERMINATION
AHP 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. AHP could decide to terminate our
agreements for many reasons, including shifts in its strategic focus, poor
market reaction to Centrum-branded dietary supplements, lack of patent
protection for the PharmaPrint(TM) Process or a determination to pursue
alternative methods of producing dietary supplements. If AHP 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 AHP. This will
require significant expenditures that we may not recover if AHP terminates the
agreements in whole or in part or if sales with AHP are lower than anticipated.
Under an agreement reached in November 1998, AHP paid us an additional $5
million as reimbursement for certain development and production costs and
increased the price that AHP pays us for products delivered before February 28,
1999. AHP and PharmaPrint are currently negotiating an extension of this per
unit increase or alternative pricing provisions. Beginning March 1, 1999, the
prices that AHP 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 AHP pays us, will reduce the
profitability of the AHP supply arrangements.
LIMITED OBLIGATION TO PAY ROYALTIES; PATENT PROTECTION
AHP 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 AHP is marketing and we
can provide no assurance that we will obtain patents for any of the products
sold through AHP. Our business, financial condition and results of operations
will suffer if AHP does not pay royalties to us.
LIMITED OBLIGATION TO MARKET PRODUCTS
Our agreements with AHP limit their obligation to provide marketing
support. During each of the first two years after the initial launch date of the
first product, AHP 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 AHP. AHP 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, AHP is not required to
spend any specific amount on marketing support. If AHP does not provide
sufficient marketing support, our business, financial condition and results of
operations may suffer. In addition, our sole remedy if AHP fails to meet its
minimum spending commitments (provided that AHP has otherwise met its
obligations under our agreements), is to sell our 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. AHP has certain options to develop
with us other Food and Drug Administration regulated pharmaceutical products for
sale in the over-the-counter market. The success of any of our products, even if
successfully developed, will depend
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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 and maintaining 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 AHP with all of AHP's requirements of the
products that we have licensed to AHP. 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 futures 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 increases in the
price of the botanical extracts used in our products. In addition, if due to
supply shortages AHP 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 AHP 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 9 months. We
will then need substantial additional funds to support our dietary supplement
business and long-term pharmaceutical product development programs. Under a loan
agreement, we recently borrowed $500,000 to fund the purchase of certain
equipment. Under the loan agreement, we will be permitted to borrow up to an
additional $4 million depending upon the availability of approved accounts
receivable and purchase orders as security for such additional loans. Under the
loan agreement, our ability to borrow funds is also subject to the satisfaction
of certain financial ratios and covenants. Our future capital requirements will
depend on many factors including:
- the amount of orders we receive from AHP;
- the amount of inventory we are required to maintain;
- the revenues generated under the agreements with
AHP;
- the cost of botanical extracts and other
manufacturing costs;
- scientific 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;
- competing technological and market developments; and
- 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
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anticipated. Other than the $4.5 million loan agreement described in the prior
paragraph, 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 market 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 products. We could make claims of
efficacy only after successful clinical trials, which will not be conducted with
respect to our dietary supplement products. Accordingly, we can provide no
assurance that our dietary supplement 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 business would be dietary supplements.
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 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 and multi-molecule
pharmaceuticals that can market its products on the basis of consistent
composition, the presence of at 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 supplements
market will be impaired. Furthermore, AHP 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 that 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 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 components.
However, it is arguable that prior work on bioactivity relating to the
development of single molecule drugs or multi-molecule chemical composition
analysis could contradict novelty or nonobviousness of our invention.
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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 reexamination, 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 propriety 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 a 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 a supply agreement with AHP, we are AHP's exclusive
supplier of the herbal products sold by AHP 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 AHP or others may be adversely
affected.
If we fail to supply AHP with certain commercial quantities of
products for a period of 60 consecutive days for any reason, AHP 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
PharmaPrint is 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 AHP 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 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 or other standards prescribed by regulatory agencies in
other countries.
Most of our manufacturing, 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
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AHP 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 products to a partner. If we do transfer such control, we would
then depend on our partners' efforts to effectively develop our drug candidates
Additionally, if we outsource the manufacturing of drug candidates, we may lose
the opportunity to generate profits from manufacturing.
COMPETITION AND TECHNOLOGICAL CHANGE
The 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 AHP 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 manufacturing and marketing
products;
- greater research and development staffs and
facilities;
- greater experience in conducting toxicology testing
and human clinical trials on new pharmaceutical
products; and
- greater experience in 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 may be 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
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 trials 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 be safe or effective in clinical trials, that PPRT-321 or any
other drug candidate will receive regulatory approval for any
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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, processing, 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 in 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 or 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 a 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 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
-9-
<PAGE>
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 and Robert Burgess, our
President and Chief Operating Officer. Loss of the services of Mr. Friedman or
Mr. Burgess 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
companies, research and academic institutions, government entities and 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
AHP;
- failures or unexpected delays in manufacturing;
- patent developments;
- negative reaction to dietary supplements in general;
- results of toxicology testing and clinical trials;
- termination or modification of agreement 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;
-10-
<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.
CONTROL BY EXISTING STOCKHOLDERS AND MANAGEMENT
Our current executive officers, directors and other significant
stockholders own approximately 39.3% 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.
-11-
<PAGE>
PHARMAPRINT
PharmaPrint Inc. uses its proprietary development and manufacturing
process technologies (the "PharmaPrint(TM) Process") 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 a dual commercialization strategy for its
PharmaPrint(TM) Process technology. The first application of the PharmaPrint(TM)
Process is the development of high quality, herbal dietary supplements. In the
United States, dietary supplements are considered food products under the
Dietary Supplement Health and Education Act of 1994 ("DSHEA") and, as such, are
not regulated as drugs by the United States Food and Drug Administration (the
"FDA") and do not require FDA approval prior to marketing. PharmaPrint has
developed products derived from six of the most commonly used dietary
supplements (echinacea, garlic, ginkgo biloba, ginseng, saw palmetto and St.
John's wort).
In October 1997 PharmaPrint entered into several agreements (the "AHP
Agreements") with American Home Products Corporation ("AHP") whereby PharmaPrint
is applying the PharmaPrint(TM) Process to produce a line of high quality
dietary supplement products currently marketed by AHP under its Centrum brand
name (the "AHP Products"). Pursuant to the terms of the agreements, AHP 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 AHP
of the initial AHP Products in sufficient time to permit AHP to meet its
proposed launch date. AHP has agreed to spend at least the lesser of $20 million
or an amount equal to 50% of net sales of the AHP Products in advertising and
other marketing expenditures during each of the first two years following
initial product launch. AHP has also agreed to purchase the AHP 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, AHP will pay royalties to PharmaPrint on net sales of
such patented products of 4% in the first year and 6% thereafter. AHP commenced
marketing PharmaPrint's six dietary supplement products in October 1998. In
November 1998, AHP and PharmaPrint entered into an agreement pursuant to which
AHP paid PharmaPrint $5.0 Million as reimbursement for certain development and
production costs and increased the per unit amount to be paid by AHP to
PharmaPrint for the AHP Products delivered or to be delivered prior to February
28, 1999. AHP and PharmaPrint are currently negotiating an extension of this per
unit increase or alternative pricing provisions. If an agreement is not reached,
beginning March 1999 the prices at which AHP purchase products from PharmaPrint,
with certain limited exceptions, will revert to the prices agreed upon in the
AHP Agreements based upon the manufacturing specifications agreed upon in the
AHP Agreements. Such prices will remain fixed until October 2000. Accordingly,
increases in material or production costs, without a corresponding increase in
the price AHP pays us, will reduce the profitability to PharmaPrint of the AHP
supply arrangements.
The second application of the PharmaPrint(TM) Process is the
development of FDA-approvable pharmaceuticals from natural plant sources.
PharmaPrint is focusing its pharmaceutical development efforts initially on
certain plants and plant extracts (such as saw palmetto and St. John's wort)
that have shown indications of clinical effectiveness in treating a variety of
diseases and physical conditions. Although these multi-molecule, plant-derived
products are widely sold in many European countries on a prescription or OTC
basis, they currently are available only as dietary supplements in the United
States. PharmaPrint believes that these products have not been approved as
pharmaceuticals under FDA guidelines primarily due to the difficulties of
identifying the bioactives and manufacturing the compounds to FDA standards.
PharmaPrint believes that the PharmaPrint(TM) Process will, for the
first time, make it feasible to develop multi-molecule, plant-derived drug
candidates with sufficient quality and consistency of bioactives to potentially
qualify
-12-
<PAGE>
for FDA approval. Because of the well-documented history of safe usage of
products derived from the same plant sources as PharmaPrint's drug candidates,
PharmaPrint believes that, in certain cases, the FDA may allow PharmaPrint to
commence clinical trials at the Phase II stage while concurrently performing
toxicology studies. PharmaPrint received such FDA clearance for its initial
pharmaceutical product candidate, PPRT-321, derived from saw palmetto.
PharmaPrint is currently examining the results of its Phase II study on
PPRT-321.
PharmaPrint's principal executive offices are located at 2600 Michelson
Drive, Suite 1600, Irvine, CA 92612 and its telephone number is (949) 794-7778.
-13-
<PAGE>
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 ("Indemnity
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 is deemed a person who 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.
USE OF PROCEEDS
PharmaPrint will not receive any proceeds from the sale of the shares
of common stock offered hereby. The Selling Stockholders will pay the exercise
price of the warrants to purchase the shares of common stock offered hereby in
connection with the exercise of such warrants. PharmaPrint will use any proceeds
received from the exercise of the warrants for working capital and general
corporate purposes.
-14-
<PAGE>
SELLING STOCKHOLDERS
The following persons are eligible to sell, pursuant to this
Prospectus, the number of shares of common stock set forth opposite their names
in the table below. The Selling Stockholders may offer and sell the shares of
common stock from time to time in the manner set forth in the Plan of
Distribution. However, the Selling Stockholders are under no obligation to sell
all or any portion of their shares of common stock offered hereby.
<TABLE>
<CAPTION>
PRE-OFFERING POST
OFFERING
Total Total
Number Number
of Shares of Shares
Name of Selling Beneficially Beneficially Percentage
Stockholder Owned Shares Offered Owned (1) of Class (2)
- ----------- ------------- -------------- ---------- ------------
<S> <C> <C> <C>
Paul M. Appelbaum 20,000 (3) 10,000 10,000 *
Jeffrey Berg (4) 3,000 (5) 2,000 1,000 *
Linda Cramer 2,000 (6) 2,000 0 0
Richard Dorsi 2,000 (6) 2,000 0 0
Eric J. Logan 3,350 (7) 2,000 1,350 *
Peter Melillo 1,000 (8) 500 500 *
Douglas J. Meyerson 1,000 (6) 1,000 0 0
Jeffrey E. Meyerson (9) 105,000 (6) 105,000 0 0
Jill Elyse Meyerson (10) 1,000 (6) 1,000 0 0
Martin H. Meyerson (11) 110,000 (12) 65,000 45,000 *
M.H. Meyerson & Co., Inc. (13) 89,500 (6) 89,500 0 0
Michael Mirkin 2,000 (6) 2,000 0 0
Michael Silvestri 25,700 (14) 15,000 10,700 *
Rona Kudroff Steinerman 1,000 (6) 1,000 0 0
Eugene M. Whitehouse 5,000 (15) 2,000 3,000 *
--------------- ----------- --------- -----
371,550 300,000 71,550 *
--------------- ----------- --------- -----
--------------- ----------- --------- -----
</TABLE>
- -----------------------------
* Indicates less than one percent (1%).
(1) Assumes the sale of all shares of common stock eligible to be sold
hereby by the Selling Stockholders to third parties unaffiliated with
such Selling Stockholders.
-15-
<PAGE>
(2) Calculated in accordance with Section 13(d) of the Securities and
Exchange Act and the rules promulgated thereunder. Based upon
13,651,589 shares of common stock issued and outstanding as of
February 5, 1999.
(3) Includes 10,000 shares of common stock issuable upon exercise of
warrants beneficially owned by Mr. Appelbaum, 5,000 shares of common
stock held by Mr. Appelbaum and 5,000 shares of common stock held by
Mr. Appelbaum's minor children.
(4) Mr. Berg acted as a consultant to PharmaPrint during the period of
April through September, 1997.
(5) Includes 1,000 shares of common stock and 2,000 shares of common stock
issuable upon exercise of warrants beneficially owned by Mr. Berg.
(6) Represents shares of common stock issuable upon exercise of warrants
beneficially owned by the Selling Stockholder.
(7) Includes 1,350 shares of common stock held jointly by Mr. Logan and his
spouse and 2,000 shares of common stock issuable upon exercise of
warrants beneficially owned by Mr. Logan.
(8) Includes 300 shares of common stock held by Mr. Melillo, 200 shares of
common stock held by Mr. Melillo's brother and 500 shares of common
stock issuable upon exercise of warrants beneficially owned by Mr.
Melillo.
(9) Mr. Meyerson is the nephew of Nathan Troum, a director of PharmaPrint.
(10) Ms. Meyerson is the niece of Nathan Troum, a director of PharmaPrint.
(11) Mr. Meyerson is the brother-in-law of Nathan Troum, a director of
PharmaPrint.
(12) Includes 65,000 shares of common stock issuable upon exercise of
warrants beneficially owned by Mr. Meyerson, 35,000 shares of common
stock held by Mr. Meyerson and 10,000 shares of common stock held by
Mr. Meyerson's spouse.
(13) M.H. Meyerson & Co. acted as underwriter for the initial public
offering of PharmaPrint's common stock in August, 1996 and has also
acted as a consultant to PharmaPrint.
(14) Includes 7,730 shares of common stock held by Mr. Silvestri, 15,000
shares of common stock issuable upon exercise of warrants beneficially
owned by Mr. Silvestri and 2,970 shares of common stock held by Mr.
Silvestri's minor children.
(15) Includes 3,000 shares of common stock and 2,000 shares of common stock
issuable upon exercise of warrants beneficially owned by Mr.
Whitehouse.
-16-
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock are being offered on behalf of the Selling
Stockholders and PharmaPrint will not receive any proceeds from the Offering.
The shares of common stock may be sold or distributed from time to time by the
Selling Stockholders, or by pledgees, donees or transferees of, or other
successors in interest to, the Selling Stockholders, directly to one or more
purchasers (including pledgees) or through brokers, dealers or underwriters who
may act solely as agent or may acquire such shares as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices, or at fixed prices, which may be subject to
change. The sale of the shares of common stock may be effected in one or more of
the following methods: (i) ordinary brokers' transactions, which may include
long or short sales; (ii) transactions involving cross or block trades or
otherwise on the Nasdaq National Market; (iii) purchases by brokers, dealers or
underwriters as principal and resale by such purchasers for their own accounts
pursuant to this Prospectus; (iv) "at the market" to or through market makers or
into established trading markets, including direct sales to purchasers or sales
effected through agents; (vi) any combination of the foregoing, or by any other
legally available means. In addition, the Selling Stockholders or their
successors in interest may enter into hedging transactions with broker-dealers
who may engage in short sales of shares of common stock in the course of hedging
the position they assume with the Selling Stockholders. The Selling Stockholders
or their successors in interest may also enter into option or other transactions
with broker-dealers that require the delivery by such broker-dealers of the
shares of common stock, which shares of common stock may be resold thereafter
pursuant to this Prospectus. There can be no assurance that all or any of the
shares of common stock will be issued to, or sold by, the Selling Stockholders.
Brokers, dealers, underwriters or agents participating in the sale of
the shares of common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Stockholders or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation to a particular
broker-dealer may be less than or in excess of customary commissions). The
Selling Stockholders and any broker-dealers or other persons who act in
connection with the sale of the common stock hereunder may be deemed to be
"Underwriters" within the meaning of the Securities Act, and any commission they
receive and proceeds of any sale of such shares may be deemed to be underwriting
discounts and commissions under the Securities Act. Neither PharmaPrint nor the
Selling Stockholders can presently estimate the amount of such compensation.
PharmaPrint knows of no existing arrangements between the Selling Stockholders
and any other stockholders, broker, dealer, underwriter or agent relating to the
sale or distribution of the shares of common stock.
The Selling Stockholders and any other persons participating in the
sale or distribution of the common stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the common
stock by the Selling Stockholders or any other such persons. The foregoing may
affect the marketability of the common stock.
PharmaPrint will pay substantially all of the expenses incident to the
registration, offering and sale of the common stock to the public other than
commissions or discounts of underwriters, broker-dealers or agents. PharmaPrint
has also agreed to indemnify the Selling Stockholders and certain related
persons against certain liabilities, including liabilities under the Securities
Act.
-17-
<PAGE>
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-KSB for the fiscal year
ended March 31, 1998;
(b) PharmaPrint's Quarterly Reports on Form 10-QSB for the
quarters ended June 30, 1998 and September 30, 1998; and
(c) 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 Commission filings are also available to the
public, free of charge, on the Securities and Exchange Commission Internet site
at http:\\www.sec.gov.
-18-
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED 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 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.
UP TO 300,000 SHARES
COMMON STOCK
PHARMAPRINT INC.
----------
PROSPECTUS
----------
FEBRUARY __, 1999
<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 under the
Securities Act. The Selling Stockholders 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................... $ 1,128
*Accountants' fees and expenses ........................................ $ 2,000
*Legal fees and expenses ............................................... $ 5,000
*Printing and EDGAR expenses ........................................... $ 2,000
*Miscellaneous ......................................................... $ 2,500
-------
Total ......................................................... $ 12,628
-------
-------
</TABLE>
- ------------------
* Estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
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 ("Indemnity
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 is deemed a person who 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>
Exhibits
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
II-2
<PAGE>
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 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 February 10th,
1999.
PHARMAPRINT INC.
By: /s/ Elliot P. Friedman
---------------------------------------------
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 February 10th, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S)
--------- --------
<S> <C>
/s/ Elliot P. Friedman Chairman of the Board of Directors and 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/ Philip G. Trad Senior Vice President, General Counsel and Director
- --------------------------------
Philip G. Trad
/s/ Tanseem A. Khwaja Director
- --------------------------------
Tanseem A. Khwaja
Director
- --------------------------------
John H. Abeles
/s/ Enrich R. Ozada Director
- --------------------------------
Enrich R. Ozada
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]
February 12, 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 300,000 shares of Common Stock issuable upon the
exercise of warrants (the "Warrants") granted pursuant to an Underwriting
Agreement between the Company and M.H. Meyerson & Co., Inc. dated August 14,
1996. Certain of the Shares may be offered and sold from time to time for the
account of the persons referred to in the Registration Statement as "Selling
Stockholders."
In this regard, we have examined: (i) the Warrants; (ii) the
Underwriting Agreement; (iii) the Company's Certificate of Incorporation and
Bylaws, each as amended and as presently in effect; (iv) the Registration
Statement; and (v) 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. Other than such
documents and other materials, 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, upon exercise of the Warrants, the Shares
will be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock.
<PAGE>
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 incorporated by
reference in this registration statement on Form S-3, of our report dated June
1, 1998 included in PharmaPrint Inc. and Subsidiary's Form 10-KSB for the year
ended March 31, 1998 and to all references to our Firm in this registration
statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Orange County, CA
February 9, 1999
