As filed with the Securities and Exchange Commission on August 27, 1999
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Registration No. 333-86105
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DISCOVERY LABORATORIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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<TABLE>
<CAPTION>
<S> <C>
Delaware 350 Main Street 13-3711775
(State or Other Jurisdiction of Suite 307 (I.R.S. Employer
Incorporation or Organization) Doylestown, Pennsylvania 18901 Identification Number)
(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
-----------------------------
Steve H. Kanzer, C.P.A., Esq.
Chairman of the Board
350 Main Street
Suite 307
Doylestown, Pennsylvania 18901
(215) 340-4699
(Name, address, including zip code, and telephone number, including area code, of agent for service)
</TABLE>
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Copies to:
Steven A. Fishman, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
(212) 856-7000
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Approximate date of commencement of proposed sale to public: From time to
time or at one time after the effective date of this registration statement as
determined by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box./ /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
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. / /
-----------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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864725.6
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(RED HERRING)
The information in this prospectus is not complete and may be changed. We 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 such offer or sale is not permitted.
================================================================================
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED SEPTEMBER __, 1999
7,192,870 Shares
DISCOVERY LABORATORIES, INC.
Common Stock
------------------
All of the shares of common stock covered by this prospectus are owned by
the stockholders listed in the section of this prospectus called "Selling
Stockholders" or are issuable on exercise of warrants owned by the selling
stockholders. The selling stockholders may sell any or all of their shares from
time to time. See "Plan of Distribution."
We will not receive any of the proceeds of sales by the selling
stockholders. We have agreed to bear all expenses related to this offering,
other than underwriting discounts and commissions and any transfer taxes on the
shares of common stock being offered. The registration of the common stock
covered by this Prospectus does not necessarily mean that any of the common
stock will be offered or sold by the selling stockholders.
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"DSCO."
The common stock offered hereby involves a high degree of risk. See "Risk
Factors" beginning on page 4 for certain factors relevant to an investment in
our common stock.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is September ___, 1999.
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864725.6
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TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.............................................................1
COMPANY SUMMARY................................................................1
RISK FACTORS...................................................................2
FORWARD-LOOKING STATEMENTS....................................................10
USE OF PROCEEDS...............................................................11
SELLING STOCKHOLDERS..........................................................11
PLAN OF DISTRIBUTION..........................................................12
WHERE YOU CAN FIND MORE INFORMATION...........................................13
INFORMATION INCORPORATED BY REFERENCE.........................................13
EXPERTS.......................................................................14
LEGAL MATTERS.................................................................14
864725.6
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PROSPECTUS SUMMARY
Because this is a summary, it does not contain all the details that may be
important to you. You should read this entire prospectus carefully before you
invest.
COMPANY SUMMARY
We are a development stage pharmaceutical company that is focused on
developing compounds intended for neonatal use in critical care hospital
settings. We are also developing our lead product candidate for the treatment of
acute respiratory distress syndrome and acute lung injury. Our two lead drug
candidates are directed towards respiratory indications. We may seek to enter
into collaborations with corporate partners for manufacturing and marketing of
these drugs.
Our lead product is Surfaxin(R), a peptide (or small protein molecule)
phospholipid formulation containing a proprietary, synthetic peptide called
sinapultide. Surfaxin(R) is patterned after a human surfactant protein and is
intended to be used for the treatment of several conditions characterized by
insufficient surfactant. The lungs produce surfactant, a detergent-like
substance consisting mainly of phospholipids (a derivative in which one of the
fatty acids has been replaced by a phosphate). Lung surfactants lower the
surface tension of the fluid normally present within the alveoli (air sacs). In
the absence of sufficient surfactants, these air sacs tend to collapse. As a
result, the lungs do not absorb sufficient oxygen. Surfaxin(R) is a synthetic or
artificial surfactant designed to replace lung surfactant in patients suffering
from a surfactant deficit. Replacement surfactants are currently approved only
for treating respiratory distress syndrome in premature infants. Infants with
this condition, as well as infants born with meconium (a component of the fetal
bowel) in their lungs, which can lead to meconium aspiration syndrome, typically
suffer from insufficient surfactant. This condition can lead to a
life-threatening loss of pulmonary function. In addition, patients with acute
respiratory distress syndrome and acute lung injury typically suffer from
surfactant deficiency as well. Acute respiratory distress syndrome and acute
lung injury can result from pneumonia, aspiration of gastric contents, trauma,
smoke inhalation, head injury, and a variety of other events.
We are also developing SuperVent(TM) as a stable, aerosolized therapy for
airway diseases such as cystic fibrosis and chronic bronchitis. These conditions
are characterized by inflammation, injurious oxidation (a condition where atoms
in tissue lose electrons, which can result in damage to the tissue) and
excessive mucus. Cystic fibrosis is a progressive, lethal respiratory disease
that afflicts approximately 23,000 patients in the United States and a
comparable number in Europe. It is the most common lethal genetic disease among
Caucasians. Because of this genetic defect, cystic fibrosis mucus is excessively
viscous, as a result of which it does not flow and adheres to airway walls. This
can lead to gradual destruction of the lungs of cystic fibrosis patients. The
inability to clear mucus from the lungs can lead to blockage of the airways
usually beginning in the smaller airways and alveoli. A new therapy that
minimizes the complications of cystic fibrosis could have a major impact on the
length and quality of life of its patients.
We are conducting clinical trials of Surfaxin(R) for treatment of Meconium
aspiration syndrome and acute respiratory distress syndrome and acute lung
injury and SuperVent(TM) for treatment of cystic fibrosis.
Discovery Laboratories was incorporated in Delaware on November 6, 1992 as
Ansan, Inc. On November 25, 1997, Discovery Laboratories, Inc., a former
Delaware corporation ("Old Discovery"), was merged with and into Discovery
Laboratories, then known as Ansan. In connection with this merger in 1997, our
name was changed to Discovery Laboratories, Inc. On June 16, 1998, Discovery
Laboratories completed the acquisition of the then outstanding minority interest
in Acute Therapeutics, Inc.
Surfaxin(R) and SuperVent(TM) are our trademarks. This prospectus also
includes product names, trademarks and trade names of other companies, which
names are the exclusive property of the holders thereof.
Our executive offices are located at 350 South Main Street, Suite 307,
Doylestown, Pennsylvania 18901. Our telephone number is (215) 340-4699 and our
facsimile number is (215) 340-3940.
864725.6
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
consider carefully the following risk factors together with all of the other
information included or incorporated by reference in this prospectus before you
decide to purchase shares of our common stock. The risks and uncertainties
described below are not the only ones facing our company. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations.
If any of the following risks actually occur, our business, financial
condition and results of operations could be materially and adversely affected.
In this event, the trading price of our common stock could decline and you could
lose part or all of your investment.
BECAUSE WE ARE A DEVELOPMENT STAGE COMPANY, WE MAY NOT BE ABLE TO DEVELOP AND
MARKET OUR PRODUCTS, AND EVEN IF WE DO, WE MAY NOT GENERATE ENOUGH REVENUE TO BE
PROFITABLE.
We are a development stage company. Therefore, you must evaluate us in
light of the uncertainties and complexities present in a development stage
pharmaceutical company. Our product candidates are in the research and
development stage and, accordingly, we have not begun to market or generate
revenues from the commercialization of any of these products. Our products under
development will require significant time-consuming and costly research,
development, preclinical studies, clinical testing, regulatory approval and
significant additional investment prior to their commercialization. We may not
be able to develop and commercialize our products. We cannot assure you that our
products under development, if successfully developed, will generate sufficient
or sustainable revenues to enable us to be profitable.
BECAUSE WE DO NOT YET HAVE PRODUCT REVENUES AND HAVE A HISTORY OF LOSSES, OUR
FUTURE PROFITABILITY IS UNCERTAIN.
We are not currently generating any product revenues and we expect that we
will not generate significant product revenues for the foreseeable future, if at
all. As a development stage company engaged in conducting development and
clinical testing activities, we expect to generate significant operating losses
for the foreseeable future. We expect to incur significant increasing operating
losses over the next several years. To achieve profitable operations, we, either
alone or with others, must successfully develop and obtain regulatory approval
for marketing our products. We cannot assure you that we will:
-- enter into potentially necessary collaborative arrangements with
third parties;
-- successfully complete preclinical or clinical trials;
-- obtain required regulatory approvals;
-- successfully develop, manufacture and market product candidates; or
-- generate additional revenues or profitability.
If we fail to achieve any of the above goals, we will continue to incur
loss from operations and may not be able to continue our operations.
THE TYPES OF PRODUCTS WE ARE DEVELOPING ARE SUBJECT TO RISKS THAT ARE DIFFICULT
TO FORESEE, AND OUR DEVELOPMENT EFFORTS MAY BE UNSUCCESSFUL.
Our development of products is subject to the risks of failure inherent in
the development of new pharmaceutical products based on innovative or new
technologies. During the development process, we could experience unforeseen
problems that could delay us from completing the development of our products. We
cannot assure you that:
-- our research and development efforts will be successful;
-- our proposed products will be commercially viable or successfully
marketed.
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IF WE ARE NOT ABLE TO RAISE ADDITIONAL CAPITAL WE WILL BE UNABLE TO CONTINUE OUR
RESEARCH AND DEVELOPMENT ACTIVITIES. IN ADDITION, ANY ADDITIONAL FINANCING THAT
MAY BE AVAILABLE COULD RESULT IN DILUTION.
Our existing working capital will not be sufficient to meet our needs and
we may not be able to obtain adequate additional financing necessary to meet our
working capital requirements. We will need substantial additional funding to
conduct our research and product development activities and, if approved by the
FDA or corresponding foreign regulatory authorities, to manufacture and market
the products currently under development and any other products that we may
develop in the future. We intend to seek to raise further funds through
collaborative ventures entered into with potential corporate partners and
additional debt or equity financings. We cannot provide assurance that these
types of arrangements can be obtained. We have not entered into arrangements to
obtain any additional financing. Any additional financing could be on
unattractive terms or result in significant dilution of stockholders' interests.
If we fail to enter into collaborative ventures or to receive additional
funding, we would have to scale back or discontinue our research and development
operations. Furthermore, we could ultimately cease to qualify for listing of our
securities on the Nasdaq SmallCap Market. See "Possible Delisting From Nasdaq
SmallCap Market; Market Illiquidity." If additional financing is not available,
we will be required to modify our business development plans or reduce or cease
certain or all of our operations.
IF WE FAIL TO OBTAIN REGULATORY APPROVAL TO COMMERCIALLY MANUFACTURE OR SELL ANY
OF OUR PRODUCTS OR IF APPROVAL IS DELAYED, IT COULD INCREASE THE COST OF PRODUCT
DEVELOPMENT OR ULTIMATELY PREVENT OR DELAY OUR ABILITY TO SELL OUR PRODUCTS AND
GENERATE REVENUES.
In order to sell our products that are under development, we must receive
regulatory approvals for our products. The testing, manufacture, distribution,
advertising and marketing of drug products are subject to extensive and rigorous
regulation by governmental authorities in the United States and other countries.
Prior to marketing, any pharmaceutical products developed or licensed by us must
undergo an extensive regulatory approval process required by the FDA and by
comparable agencies in other countries. This process, which includes preclinical
studies and clinical trials of each pharmaceutical compound to establish its
safety and effectiveness and confirmation by the FDA that good laboratory,
clinical and manufacturing practices were maintained during testing and
manufacturing, is lengthy, expensive and uncertain. Clinical trials generally
take two to five years or more to complete.
The testing and approval processes require the expenditure of substantial
resources. We may not be able to obtain the requisite approvals for our products
on a timely basis, if at all. Any required approvals, once obtained, may be
withdrawn. Further, if there is a later discovery of unknown problems or if we
fail to comply with other applicable regulatory requirements at any stage in the
regulatory process, we may be restricted or delayed in the marketing of a
product, forced to make product recalls or seizures or may be subject to other
sanctions such as fines, injunctions, civil penalties or criminal prosecutions.
For marketing outside the United States, we also will be subject to foreign
regulatory requirements governing human clinical trials and marketing approval
for pharmaceutical products. None of our products under development has been
approved for marketing in the United States or elsewhere. If we fail to obtain
requisite governmental approvals or fail to obtain approvals of the scope
requested of our business, we will be unable to market our products.
OUR STRATEGY IS TO ENTER INTO COLLABORATIVE AGREEMENTS WITH THIRD PARTIES WITH
RESPECT TO OUR PRODUCTS AND WE HAVE NOT YET ENTERED INTO ANY OF THESE
AGREEMENTS. IN ADDITION, IF WE ENTER INTO THESE AGREEMENTS AND THE THIRD PARTIES
DO NOT PERFORM, IT COULD IMPAIR OUR ABILITY TO COMMERCIALIZE OUR PRODUCTS.
Our strategy for the completion of the development and clinical testing of
our products and for the manufacturing, marketing and commercialization of our
products depends upon the formation of collaborative arrangements with
pharmaceutical companies. We have not yet entered into any of these arrangements
or agreements to date. Our success will depend upon obtaining partners. In
addition, if we obtain partners, we will depend on their expertise and their
dedication of sufficient resources to develop and commercialize certain of our
proposed products. We may in the future grant to our collaborative partners, if
any, rights to license and commercialize pharmaceutical products developed under
these collaborative agreements. Those rights would limit our flexibility in
considering alternatives for the commercialization of our products. If we fail
to successfully develop these relationships or if
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our collaborative partners fail to develop or commercialize successfully any of
our products, it may delay of prevent us from developing or commercializing our
products in a competitive and timely manner.
DISCOVERIES OR DEVELOPMENTS OF NEW TECHNOLOGIES BY OUR COMPETITORS OR OTHERS MAY
MAKE OUR PRODUCTS LESS COMPETITIVE OR MAKE OUR PRODUCTS OBSOLETE.
The market for biotechnology is characterized by rapidly changing
technology and evolving industry standards. Our products under development are
intended to treat diseases for which other technologies and proposed treatments
are rapidly developing. The results of our research and product development
efforts may be rendered obsolete by research efforts of others, including the
efforts and activities of governments, major research facilities and large
multinational corporations with greater research and development, manufacturing,
marketing, financial, technological, personal and managerial resources than we
have.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, WE MAY BE UNABLE TO
PREVENT OTHER COMPANIES FROM USING OUR TECHNOLOGY IN COMPETITIVE PRODUCTS. IF WE
INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WE MAY BE PREVENTED FROM
DEVELOPING OR MARKETING OUR PRODUCTS.
IF WE ARE UNABLE TO OBTAIN PATENTS FOR OUR PRODUCTS OTHERS COULD
COMMERCIALIZE EQUIVALENT PRODUCTS
We seek patent protection for our drug candidates so as to prevent others
from commercializing equivalent products in substantially less time and at
substantially lower expense. The pharmaceutical industry places considerable
importance on obtaining patent and trade secret protection for new technologies,
products and processes. Our success will depend in part on our ability and that
of our licensors to:
-- defend our patents and otherwise prevent others from infringing on
our proprietary rights;
-- protect trade secrets; and
-- operate without infringing upon the proprietary rights of others,
both in the United States and in other countries.
The patent position of firms relying upon biotechnology is highly
uncertain and involves complex legal and factual questions. To date, there has
emerged no consistent policy at the United States Patent and Trademark Office
regarding the breadth of claims allowed in biotechnology patents or the degree
of protection afforded under these types of patents.
EVEN IF WE ARE ABLE TO OBTAIN PATENTS TO PROTECT OUR PRODUCTS, THOSE
PATENTS MAY NOT BE BROAD ENOUGH TO KEEP OTHERS FROM COMPETING WITH US.
Various United States and foreign patents applications (including
international applications filed under the Patent Cooperation Treaty) have been
filed with respect to the products and technologies under our development and
patents have been issued with respect to our products and technologies. These
patents and patent applications have been licensed to us. Our pending patent
applications, those we may file in the future or those we may license from third
parties may not result in patents being issued. Also, patent rights may not be
sufficiently broad enough to provide us with proprietary protection or
competitive advantages against competitors with similar products and
technologies. Furthermore, patents, if issued, may be challenged, invalidated or
circumvented. Thus, any patents we own or license from third parties may not
provide any protection against competitors. In particular, our issued and
pending patents relating to SuperVent(TM) cover high concentrations of
tyloxapol. These patents could prove meaningless if it were to be determined
that low concentrations of tyloxapol are as effective as higher concentrations
of tyloxapol in treating the indications for which we are seeking to develop our
SuperVent(TM) product.
OUR ABILITY TO MARKET OUR PRODUCTS MAY BE LIMITED BY PATENTS OBTAINED BY
OTHERS.
Our commercial success also depends significantly on our ability to
operate without infringing the patents or violating the proprietary rights of
others. A United States patent application is maintained under conditions of
confidentiality while the application is pending. Accordingly, we will not be
able to determine which inventions are
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claimed in pending patent applications filed by third parties. Litigation may be
necessary to defend or enforce our patent and license rights or to determine the
scope and validity of the proprietary rights of others. Defense and enforcement
of patent claims can be expensive and time-consuming. Thus, even in those
instances in which the outcome is favorable to us, these proceedings can result
in the diversion of substantial resources from our other activities. An adverse
determination may subject us to significant liabilities or require us to seek
licenses that may not be available from third parties. We may be required to
alter our products or processes or cease altogether any related research and
development activities or product sales.
IF WE CANNOT MEET REQUIREMENTS UNDER OUR LICENSE AGREEMENTS, WE COULD LOSE
OUR RIGHTS TO OUR PRODUCTS.
We depend on licensing arrangements to maintain rights to our products
under development, and we will be required to make certain payments and satisfy
certain performance obligations in order to maintain those licensing
arrangements. Pursuant to our licensing agreements, we are responsible for the
cost of filing and prosecuting patent applications and maintaining issued
patents. If we do not meet our obligations under our license agreements in a
timely manner, we could lose the rights to our proprietary technology.
WE RELY ON CONFIDENTIALITY AGREEMENTS THAT COULD BE BREACHED.
We require all employees to enter into confidentiality agreements that
prohibit the disclosure of confidential information to third parties and require
disclosure and assignment to us of rights to our employees' ideas, developments,
discoveries and inventions while so employed. In addition, we seek to obtain
these types of agreements from our consultants, advisors and research
collaborators. To the extent that consultants, key employees or other third
parties apply technological information independently developed by them or by
others to any of our proposed projects, disputes may arise as to the proprietary
rights to this type of information that may not be resolved in our favor. In
addition, we will rely on trade secrets and proprietary know-how that we will
seek to protect in part by confidentiality agreements with its employees,
consultants, advisors or others. We cannot assure you that:
-- these agreements will not be breached;
-- we would obtain adequate remedies for this type of breach; or
-- our trade secrets or proprietary know-how will not otherwise become
known or be independently developed by competitors.
IF THE THIRD PARTIES WE DEPEND ON FOR THE MANUFACTURE OF OUR PHARMACEUTICAL
PRODUCTS DO NOT SUPPLY THESE PRODUCTS IN A TIMELY MANNER, IT MAY DELAY OR IMPAIR
OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS.
We will be required to rely on outside manufacturers, including Taylor
Pharmaceuticals, Inc., to produce appropriate clinical grade material that meets
standards for use in clinical studies for certain of our products. We may also
enter into arrangements with other manufacturers for the manufacture of material
for use in clinical testing.
Our outside manufacturers may not perform as agreed or may not remain in
the contract manufacturing business for the time required by us to successfully
produce and market our product candidates. If one of our outside manufacturers
fails to deliver the required quantities of our product candidates for clinical
use on a timely basis and at commercially reasonable prices, and we fail to find
a replacement manufacturer or develop our own manufacturing capabilities, it
could delay or impair our ability to obtain regulatory approval for our
products.
In addition, our third-party manufacturers are required to register
manufacturing facilities with the FDA and foreign regulatory authorities. The
facilities will then be subject to inspections confirming compliance with good
manufacturing practice requirements established with the FDA or corresponding
foreign regulations. If our third-party foreign or domestic suppliers or
manufacturers of our products fail to comply with good manufacturing practice
requirements or other FDA regulatory requirements, our products may not be
marketable.
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WE DO NOT HAVE MARKETING AND SALES EXPERIENCE, AND OUR LACK OF THAT EXPERIENCE
COULD LIMIT OUR ABILITY TO GENERATE REVENUES FROM FUTURE PRODUCT SALES.
We do not have marketing and sales experience or marketing or sales
personnel. If we do not develop a marketing and sales force, then we will be
dependent on entering into arrangements with corporate partners or other
entities for the marketing and sale of our products. We may not be successful in
entering into any satisfactory third-party arrangements for the marketing and
sale of our products. In addition, we may not successfully develop marketing and
sales experience and personnel or we may not have sufficient resources to do so.
If we fail to establish successful marketing and sales capabilities or fail to
enter into successful distribution, marketing and selling arrangements with
third parties for our anticipated products, our business, financial condition
and results of operations will be materially adversely affected.
WE DEPEND UPON KEY EMPLOYEES AND CONSULTANTS IN A COMPETITIVE MARKET FOR SKILLED
PERSONNEL. IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONAL, IT COULD
ADVERSELY EFFECT OUR ABILITY TO DEVELOP AND MARKET OUR PRODUCTS.
We are highly dependent upon the principal members of our management team,
especially Dr. Capetola, and our directors, as well as our scientific advisory
board members, consultants and collaborating scientists. We have an employment
agreement with Dr. Capetola which expires on June 15, 2002. We also have
employment agreements with other key personnel with termination dates expiring
in 2001. We do not maintain key main life insurance. The loss of any of these
persons' services would adversely affect our ability to develop and market our
products and obtain necessary regulatory approvals.
Our future success also will depend in part on the continued service of
our key scientific and management personnel and our ability to identify, hire
and retain additional personnel, including marketing and sales staff. We
experience intense competition for qualified personnel.
While we attempt to provide competitive compensation packages to attract
and retain key personnel, some of our competitors are likely to have greater
resources and be more established than we are, making it difficult for us to
compete for key personnel.
WE ARE IN AN INDUSTRY CHARACTERIZED BY INTENSE COMPETITION AND WE HAVE LESS
CAPITAL AND RESOURCES THAN MANY OF OUR COMPETITORS, AND THIS MAY GIVE THEM AN
ADVANTAGE IN DEVELOPING AND MARKETING PRODUCTS SIMILAR TO OURS.
We are engaged in a highly competitive industry. Competition from numerous
existing companies and potential new entities is intense and expected to
increase. Many of these companies have substantially greater research and
development, marketing, financial, technological, personnel and managerial
resources than we have. In addition, many of these competitors, either alone or
with their collaborative partners, have significantly greater experience than we
do in:
-- developing products;
-- undertaking preclinical testing and human clinical trials;
-- obtaining FDA and other regulatory approvals or products; and
-- manufacturing and marketing products.
Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA approval or commercializing products before us. If we commence
commercial product sales, we will be competing against companies with greater
marketing and manufacturing capabilities, areas in which, as yet, we have
limited or no experience. In addition, developments by competitors may render
our product candidates obsolete or competitive. Our competitors may succeed in
developing and marketing products that are more effective than ours.
We also face, and will continue to face, competition from colleges,
universities, governmental agencies and other public and private research
organizations. These competitors are becoming more active in seeking patent
protection
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and licensing arrangements to collect royalties for use of technology that they
have developed, some of which may be directly competitive with the technologies
to be developed by us. These institutions will also compete with us in
recruiting highly qualified scientific personnel. It is expected that
therapeutic developments in the areas in which we will be active may occur at a
rapid rate and that competition will intensify as advances in this field are
made. Accordingly, we will be required to continue to devote substantial
resources and efforts to research and development activities.
IF WE BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS, IT MAY RESULT IN REDUCED
DEMAND FOR OUR PRODUCTS OR DAMAGES THAT EXCEED OUR INSURANCE COVERAGE.
If we successfully develop any products, the marketing and use of our
products, through third-party arrangements or otherwise, whether for commercial
applications or during clinical trials, exposes us to product liability claims
in the event that the use or misuse of those products causes injury, disease or
results in adverse effects. We presently carry product liability insurance
relating to our clinical trials of SuperVent(TM) and our clinical trials of
Surfaxin(R) in treating acute respiratory distress syndrome and acute lung
injury and Meconium aspiration syndrome. However, this insurance coverage might
not be sufficient to fully cover any potential claims. We may be required to
obtain additional product liability insurance coverage prior to initiation of
other clinical trials. We expect to obtain product liability insurance coverage
before commercialization of our proposed products; however, this insurance can
be expensive and difficult to obtain. We cannot provide assurance that adequate
insurance will be available in the future at an acceptable cost, if at all. Any
product liability claim, even one that was not in excess of our insurance
coverage or one that was ultimately determined to be meritless, could have a
material adverse effect on our business, financial condition and results of
operations.
HEALTHCARE REFORM MEASURES AND REIMBURSEMENT PROCEDURES MAY PREVENT US FROM
OBTAINING AN ADEQUATE LEVEL OF REIMBURSEMENT FOR OUR PRODUCTS THAT IN TURN WOULD
DECREASE OUR ABILITY TO GENERATE REVENUES.
The levels of revenues and profitability of pharmaceutical and/or
biotechnology products and companies may be affected by efforts of governmental
and third-party payers to contain or reduce the costs of health care through
various means. For example, in certain foreign markets, pricing or profitability
of prescription pharmaceuticals is subject to government control. In the United
States, there have been a number of federal and state proposals to implement
similar government control. Pricing constraints on our products could have a
material adverse effect on our business.
In the United States and elsewhere, successful commercialization of our
products will depend in part on the availability of reimbursement to the
consumer using our products from third-party health care payers such as
government and private insurance plans. Adequate third-party reimbursement may
not be available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development. Third- party health
care payers are increasingly challenging the price and examining the
cost-effectiveness of medical products and services. If we succeed in bringing
one or more products to market, and the government or third-party payers fail to
provide adequate coverage or reimbursement rates for those products, we may not
be able to sell our products on a competitive basis. If we are not able to sell
our products on a competitive basis, our business, financial condition and
results of operations will be materially adversely affected.
DIRECTORS, EXECUTIVE OFFICERS, PRINCIPAL STOCKHOLDERS AND AFFILIATED ENTITIES
OWN A SIGNIFICANT PERCENTAGE OF OUR CAPITAL STOCK, AND THIS COULD HAVE AN EFFECT
ON CERTAIN DECISIONS.
As of August 13, 1999, our directors, executive officers, principal
stockholders and affiliated entities beneficially own, in the aggregate,
approximately 34% of our outstanding voting securities, assuming conversion of
convertible securities. Accordingly, these stockholders have the ability to
exert substantial influence over the election of our Board of Directors and the
outcome of issues requiring approval by our stockholders. Such a concentration
of ownership may have the effect of delaying or preventing a change in control,
including transactions in which stockholders might otherwise recover a premium
for their shares over their current market prices.
864725.6
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<PAGE>
WE FACE THE POSSIBILITY OF BEING DELISTED FROM THE NASDAQ SMALLCAP MARKET.
To meet the current Nasdaq listing requirements for our securities to
continue to be listed on the Nasdaq SmallCap Market, we will have to maintain
(a) (1) at least $2 million in net tangible assets, (2) $35 million in market
capitalization or (3) $500,000 in net income (over two of the last three years),
(b) a public float of at least 500,000 shares valued at $1 million or more and
(c) a minimum bid price of $1. In addition, our common stock will have to be
held by at least 300 holders and will have to have at least two active market
makers. For purposes of determining compliance with the public float
requirement, shares of stock held by officers, directors and 10% or greater
stockholders are excluded. At June 30, 1999, we had $2,090,000 in net tangible
assets. In addition, we received net proceeds of approximately $2.45 million in
a private placement completed in July 1999. The closing price of our common
stock during the period from January 1, 1999 to September 27, 1999 ranged from
$1.00 to $4.00 and the Closing Price of our common stock on September 27, 1999
was $1.44. We will need to raise additional capital in order to continue to meet
the listing requirements.
If we are unable to satisfy the NASD's listing maintenance requirements,
our securities may be delisted from the Nasdaq SmallCap Market. In this type of
event, trading, if any, in our securities would thereafter be conducted in the
over-the-counter market in the Pink Sheets(R), a quotation medium operated by
the National Quotation Bureau, LLC, or on the NASD's OTC Bulletin Board(R).
Consequently, the liquidity of our securities could be impaired, not only in the
number of securities that could be bought and sold, but also through delays in
the timing of the transactions, reduction in securities analysts' and the news
media's coverage of us and lower prices for our securities than might otherwise
be attained.
THE "PENNY STOCK" RULES MAY ADVERSELY AFFECT THE LIQUIDITY FOR OUR COMMON STOCK.
If our securities were to be delisted from the Nasdaq SmallCap Market,
they could become subject to Rule 15g-9 under the Exchange Act, which imposes
additional sales practice requirements on broker-dealers that sell these types
securities to persons other than established customers and "accredited
investors" (generally, individuals with net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For
transactions covered by this rule, a broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, the rule may
adversely affect the ability of broker-dealers to sell our securities and may
adversely affect the ability of stockholders to sell any of the securities
acquired hereby in the secondary market.
The Commission has adopted regulations that define a "penny stock" to be
an equity security that has a market price (as therein defined) less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
These restrictions will not apply to our securities if our securities
continue to be listed on the Nasdaq SmallCap Market and have certain price and
volume information provided on a current and continuing basis or meet certain
minimum net tangible assets or average revenue criteria. Our securities may not
qualify for exemption from these restrictions. In any event, even if our
securities continue to be exempt from these restrictions, we would remain
subject to Section 15(b)(6) of the Exchange Act, which gives the Commission the
authority to prohibit any person who is engaged in unlawful conduct while
participating in a distribution of a penny stock from associating with a
broker-dealer or participating in a distribution of a penny stock, if the
Commission finds that these restrictions would be in the public interest. If
our securities were subject to the existing or proposed rules on penny stocks,
the market liquidity for our securities could be severely adversely affected.
864725.6
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<PAGE>
A SUBSTANTIAL NUMBER OF OUR SECURITIES ARE ELIGIBLE FOR FUTURE SALE AND THIS
COULD AFFECT THE MARKET PRICE FOR OUR STOCK AND OUR ABILITY TO RAISE CAPITAL.
The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. As of August 10, 1999, in addition to approximately 9,064,881 shares of
common stock, we could be required to issue up to 10,951,289 shares of Common
Stock if outstanding options, warrant and preferred stock are converted into
Common Stock. In addition, shares of Series C preferred stock would be
convertible into approximately 1,775,821 shares of common stock based on the
market price of the common stock as of June 1, 1999.
Our stock options and warrants are likely to be exercised, if at all, at a
time when we otherwise could obtain a price for the sale of our securities that
is higher than the exercise price per security of the options or warrants. This
exercise or the possibility of this exercise may impede our efforts to obtain
additional financing through the sale of additional securities or make this
financing more costly.
No prediction can be made as to the effect, if any, that the availability
of these shares for sale will have on the market price of our common stock.
Nevertheless, because substantial amounts of our common stock may be sold in the
public market, subject, in some cases, to compliance with Rule 144 under the
Securities Act, the market price of our common stock could drop as a result of
sales of these securities or the perception that these types of sales may occur.
These factors could also make it more difficult for us to raise funds through
future offerings of securities.
WE ARE SUBJECT TO ANTITAKEOVER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION
AND DELAWARE LAW.
Certain provisions of our Certificate of Incorporation and Delaware law
may discourage transactions involving actual or potential changes in control.
Our Certificate of Incorporation allows us to issue shares of preferred stock
without any vote or further action by our shareholders. Our Board of Directors
has the authority to fix and determine the relative rights and preferences of
preferred shares, as well as the authority to issue these shares, without
further stockholder approval. As a result, our Board of Directors could
authorize the issuance of a series of preferred stock that would grant to
holders the preferred right to our assets upon liquidation, the right to receive
dividend coupons before dividends would be declared to holders of common stock
and the right to the redemption of these shares, together with a premium, prior
to the redemption of our common stock. In addition, our Board of Directors,
without further stockholder approval, could issue large blocks of preferred
stock to fend against unwanted tender offers or hostile takeovers.
We are subject to certain provisions of Delaware law that could delay or
make more difficult a merger, tender offer or proxy contest involving us. In
particular, we are subject to Section 203 of the Delaware General Corporation
Law that prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years unless
certain conditions are met. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with or controlling or controlled by this type of entity or person. The possible
issuance of preferred stock and Delaware law could have the effect of
discouraging others from making tender offers for our securities and, as a
consequence, they also may inhibit fluctuations in the market price of our
common stock that otherwise could result from actual or rumored takeover
attempts. Those provisions also may have the effect of preventing changes in our
management.
OUR BUSINESS COULD BE AFFECTED BY THE YEAR 2000 ISSUE.
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
or hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000.
In terms of our internal operations, we do not use equipment with embedded
chip technology that is date sensitive. We expect that the systems to be
affected by the Year 2000 date change include the database, networking and
accounting software licensed by us. We expect to incur out-of-pocket costs
related to making inquiries of, and receiving confirmations from, third parties
of no more than $10,000.
864725.6
9
<PAGE>
If our computer systems or the computer systems of any of our suppliers,
customers or other third parties are not Year 2000 compliant or if those systems
are unable to recover from system interruptions that may result from the Year
2000 date change, our business could be materially adversely affected.
FORWARD-LOOKING STATEMENTS
This prospectus may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are subject to risks and
uncertainties. Those risks and uncertainties may cause our actual results,
performance or achievements to be materially different from what is expressed or
implied by the forward-looking statements. Forward-looking statements are based
on assumptions and describe our future plans, strategies and expectations.
Forward-looking statements are generally identifiable by use of the words "may,"
"will," "should," "expect," "anticipate," "estimate," "believe," "intend" or
"project" or comparable terminology.
864725.6
10
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sales of common stock by the
selling stockholders pursuant to this prospectus.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
amount of common stock held by each selling stockholder as of the date of this
prospectus and the shares being offered by the selling stockholders. The table
indicates the nature of any position, office or other material relationship that
the selling stockholder has had within the past three years with Discovery
Laboratories or any of its predecessors or affiliates. This prospectus relates
to the offer and sale of the selling stockholders of up to 7,192,870 shares of
common stock, including 2,759,189 shares of common stock issuable upon the
exercise of outstanding warrants issued by Discovery Laboratories. The selling
stockholders may offer all or part of the shares of common stock covered by this
prospectus. Information with respect to shares owned beneficially after the
offering assumes the sale of all of the shares offered and no other purchases or
sales of common stock. The common stock offered by this prospectus may be
offered from time to time by the selling stockholders named below.
<TABLE>
<CAPTION>
Number of Total
Shares of Common Number Number of Number of Percentage
Stock, not of Shares Shares of Percentage Shares to be Number of to be
including Represented Common Beneficially Offered for Shares to Beneficially
Warrants, by Warrants Stock Owned the Account be Owned Owned
Beneficially Beneficially Beneficially Before of the Selling after this after this
Name Owned Owned Owned + Offering Stockholder Offering Offering
- --------------- --------------- ------------- -------------- ------------- -------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Moonlight International,
Ltd........................... 165,289 165,289 330,578 4.9% 330,578 0 *
Dr. Tis Prager.................. 41,322 41,322 82,644 1.2% 82,644 0 *
Keys Foundation................. 165,289 165,289 330,578 4.9% 330,578 0 *
Finsbury Worldwide
Pharmaceutical Trust............ 826,446 826,446 1,652,892 20.0% 1,652,892 0 *
Caduceus Capital II, L.P........ 165,289 165,289 330,578 4.9% 330,578 0 *
Winchester Global Trust
Company Ltd..................... 661,157 661,157 1,322,314 16.7% 1,322,314 0 *
Windward Venture Partners 83,645 56,903 139,548 2.0% 139,548 0 *
Benjamin Bollag................. 61,693 42,677 104,370 1.5% 104,370 0 *
Michael Bollag.................. 61,693 42,677 104,370 1.5% 104,370 0 *
Concordia Partners L.P.......... 310,954 56,903 367,857 4.6% 139,548 175,117 2.6%
Aries Domestic Fund, L.P........ 385,576 117,529 503,105 7.4% 230,253 272,852 4.1%
The Aries Master Fund 907,012 274,237 1,181,249 17.0% 537,258 643,991 9.7%
126736 Canada, Inc.............. 378,358 28,451 69,773 1.0% 69,773 0 3.4%
CPC Offshore Equity
Fund I LTD...................... 41,322 0 69,773 1.0% 69,773 0 *
Johnson & Johnson Inc........... 205,846 0 205,846 3.0% 205,846 0 *
Paramount Capital Inc........... 0 404,958 404,958 5.0% 404,958 0 *
Brobeck, Phleger & Harrison LLP 14,000 0 14,000 0.21% 14,000 0 *
Yi, Tuan & Brunstein............ 4,850 0 4,850 0.07% 4,850 0 *
Scripps Research Institute...... 117,500 0 117,000 1.7% 117,000 0 *
RAQ, LLC 1,001,739 0 1,001,739 15.2% 1,001,739 0 *
- ---------------
</TABLE>
* Less than 1%.
+ The information contained in this table reflects "beneficial" ownership of
common stock within the meaning of Rule 13d-3 under the Exchange Act. On
August 13, 1999, Discovery Laboratories had 9,064,889 shares of common
stock outstanding. Beneficial ownership information reflected in the table
includes shares issuable upon the exercise of outstanding warrants issued
by Discovery Laboratories.
864725.6
11
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock covered by this prospectus are owned by the
selling stockholders. As used in the rest of this section of the prospectus, the
term "selling stockholders" includes the named selling stockholders and any of
their pledgees, donees, transferees or other successors in interest selling
shares received from a named selling stockholder after the date of this
prospectus. The selling stockholders may offer and sell, from time to time, some
or all of the shares. We have registered the shares for sale by the selling
stockholders so that the shares will be freely tradeable by them. Registration
of the shares does not mean, however, that the shares necessarily will be
offered or sold. We will not receive any proceeds from any offering or sale by
the selling stockholders of the shares. We will pay all costs, expenses and fees
in connection with the registration of the shares. The selling stockholders will
pay all brokerage commissions and similar selling expenses, if any, attributable
to the sale of the shares.
The selling stockholders will act independently of us in making decisions
with respect to the timing, manner and size of each sale. The shares may be sold
by or for the account of the selling stockholders from time to time in
transactions on the Nasdaq SmallCap Market, the over-the-counter market, or
otherwise. These sales may be at fixed prices or prices that may be changed, at
market prices prevailing at the time of sale, at prices related to these
prevailing market prices or at negotiated prices. The shares may be sold by
means of one or more of the following methods:
-- in a block trade in which a broker-dealer will attempt to sell a
block of shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
-- purchases by a broker-dealer as principal and resale by that
broker-dealer for its account pursuant to this prospectus;
-- on markets where our common stock is traded or in an exchange
distribution in accordance with the rules of the exchange;
-- through broker-dealers, that may act as agents or principals;
-- directly to one or more purchasers;
-- through agents;
-- in connection with the loan or pledge of shares to a broker-dealer,
and the sale of the Shares so loaned or the sale of the Shares so
pledged upon a default;
-- in connection with put or call option transactions, in hedge
transactions, and in settlement of other transactions in
standardized or over-the-counter options;
-- through short sales of the Shares by the selling stockholders or
counterparties to those transactions, in privately negotiated
transactions; or
-- in any combination of the above. In addition, any of the shares that
qualify for sale pursuant to Rule 144 under the Securities Act may
be sold under Rule 144 rather than pursuant to this prospectus.
In effecting sales, brokers or dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. The
broker-dealer transactions may include:
-- purchases of the shares by a broker-dealer as principal and resales
of the shares by the broker-dealer for its account pursuant to this
prospectus;
-- ordinary brokerage transactions; or
-- transactions in which the broker-dealer solicits purchasers.
864725.6
12
<PAGE>
If a material arrangement with any broker-dealer or other agent is
entered into for the sale of any Shares through a block trade, special offering,
exchange distribution, secondary distribution, or a purchase by a broker or
dealer, a prospectus supplement will be filed, if necessary, pursuant to Rule
424(b) under the Securities Act disclosing the material terms and conditions of
these arrangement.
The selling stockholders and any broker-dealers or agents participating
in the distribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any profit on the sale of the Shares by the
selling stockholders and any commissions received by a broker-dealer or agents,
acting in this capacity, may be deemed to be underwriting commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent or
broker-dealer that participates in transactions involving sales of the Shares
against certain liabilities, including liabilities arising under the Securities
Act.
The selling stockholders are not restricted as to the price or prices at
which they may sell their shares. Sales of such shares may have an adverse
effect on the market price of the common stock. Moreover, the selling
stockholders are not restricted as to the number of shares that may be sold at
any time, and it is possible that a significant number of shares could be sold
at the same time, which may have an adverse effect on the market price of the
common stock.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the Securities and Exchange Commission's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our Securities and Exchange Commission filings are
also available to the public from the Securities and Exchange Commission's
Website at "http://www.sec.gov."
We have filed with the Securities and Exchange Commission a registration
statement (which contains this prospectus) on Form S-3 under the Securities Act
of 1933. The registration statement relates to the common stock offered by the
selling stockholders. This prospectus does not contain all of the information
set forth in the registration statement and the exhibits and schedules to the
registration statement. Please refer to the registration statement and its
exhibits and schedules for further information with respect to us and the common
stock. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
we refer you to the copy of that contract or document filed as an exhibit to the
registration statement. You may read and obtain a copy of the registration
statement and its exhibits and schedules from the Commission, as described in
the preceding paragraph.
INFORMATION INCORPORATED 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 filings we make with
the Securities and Exchange Commission after the date of this prospectus under
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
1. Our Annual Report on Form 10-KSB and 10-KSB/A for the year ended
December 31, 1998;
2. Our Quarterly Reports on Form 10-Q-SB and Form 10-QSB/A for the
quarter ended March 31, 1999;
3. Our Quarterly Report on Form 10Q-SB for the quarter ended June 30,
1999;
4. The description of our capital stock contained in our Form 8-A as
filed with the Securities and Exchange Commission on July 13, 1995;
and
864725.6
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<PAGE>
5. Our current report on Form 8-K as filed with the Securities
and Exchange Commission on August 9, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Discovery Laboratories, Inc., 305 South
Main Street, Doylestown, Pennsylvania 18901, Attention: Cynthia Davis. Telephone
requests may be directed to (215) 340-4699. Exhibits to the documents will not
be sent, unless those exhibits have specifically been incorporated by reference
in this prospectus.
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission. You should rely only on the information
contained in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of the document.
EXPERTS
The consolidated financial statements of Discovery Laboratories as of
December 31, 1998 and each of the years in the two-year period ended December
31, 1998 and the period from May 18, 1993 (inception) through December 31, 1998
incorporated by reference in this registration statement have been audited by
Richard A. Eisner & Company, LLP ("RAE"), independent auditors, as stated in
their reports appearing therein. These financial statements have been so
included in reliance on the reports of RAE given on their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed
upon for us by Battle Fowler LLP, New York, New York.
864725.6
14
<PAGE>
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION OR TO REPRESENT
ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED
INFORMATION OR REPRESENTATIONS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL,
AND SEEKING OFFERS TO BUY, ONLY THE SHARES OF DISCOVERY LABORATORIES COMMON
STOCK COVERED BY THIS PROSPECTUS, AND ONLY UNDER CIRCUMSTANCES AND IN
JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CURRENT ONLY AS OF ITS DATE, REGARDLESS OF THE TIME OF DELIVERY OF
THIS PROSPECTUS OR OF ANY SALE OF THE SHARES.
7,192,870 SHARES
DISCOVERY LABORATORIES, INC.
COMMON STOCK
SEPTEMBER __, 1999
864725.6
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the selling stockholders. All amounts are estimated except the
Commission registration fee.
Amount
------
SEC registration fee........................ $1,769
Accounting fees and expenses................ 4,500
Legal fees and expenses..................... 22,000
Miscellaneous fees and expenses............. 1,731
-----------------
Total............................ $30,000
=================
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation law empowers a Delaware
corporation to indemnify any persons who are, or are threatened to be made,
parties to any threatened, pending or completed legal action, suit or
proceedings, whether civil, criminal, administrative or investigative (other
than action by or in the right of such corporation), by reason of the fact that
such person was an officer or director of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests and, for criminal proceedings, had no reasonable cause to believe his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation in the
performance of his duty. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
In accordance with Delaware law, our restated certificate of
incorporation contains a provision to limit the personal liability of our
directors for violations of their fiduciary duty as a director. This provision
eliminates each director's liability to us or our stockholders for monetary
damages except (i) for any breach of each director's duty of loyalty to us or
our stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions or (iv)
for any transaction from which a director derived an improper personal benefit.
The effect of this provision is to eliminate the personal liability of directors
for monetary damages for actions involving a breach of their fiduciary duty of
care, including any such actions involving gross negligence.
864725.6
<PAGE>
Item 16. Exhibits
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1* Agreement and Plan of Merger dated as of March 5, 1998 among
Discovery, ATI Acquisition Corp. and ATI.
2.2** Agreement and Plan of Reorganization and Merger, dated as of July
16, 1997, by and between Discovery and Old Discovery.
5.1+ Opinion of Battle Fowler LLP regarding the legality of the
securities being registered.
16.1*** Letter dated January 28, 1998 from Ernst & Young LLP to the
Securities and Exchange Commission.
23.1+ Consent of Richard A. Eisner & Company, LLP.
24.1+ Powers of Attorney.
- ----------------------
* Incorporated by reference to Discovery's Annual Report on Form 10-KSB for
the year ending December 31, 1997.
** Incorporated by reference to Discovery's Registration Statement on Form S-4
(File No. 333-34337).
*** Incorporated by reference to Discovery's Current Report on Form 8-K/A dated
January 16, 1998.
+ Previously Filed.
Item 17. Undertakings
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 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 that the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of 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.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registrant Statement:
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) that individually or in the
aggregate represent a fundamental change in the information set
forth in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
864725.6
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<PAGE>
provided, however, that paragraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
15(d) of the Exchange Act that are incorporated by reference in the Registration
Statement.
(2) 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
864725.6
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of New York,
New York, on the 28th day of September, 1999.
DISCOVERY LABORATORIES, INC.
(Registrant)
By: /s/ Robert Capetola, PH.D
-------------------------------
Robert J. Capetola, Ph.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to this Registration Statement has been signed by the following
persons in the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ------------------
<S> <C> <C>
/s/ Robert J. Capetola, Ph.D.
- ------------------------------------------ Chief Executive Officer September 30, 1999
Robert J. Capetola, Ph.D.
*
- ------------------------------------------ Vice President, Finance September 30, 1999
Evan Myrianthopoulos
*
- ------------------------------------------ Controller September 30, 1999
Cynthia Davis (Principal Accounting Officer)
*
- ------------------------------------------- Chairman of the Board September 30, 1999
Steve H. Kanzer, C.P.A., Esq.
*
- ------------------------------------------- Director September 30, 1999
Richard Power
*
- ------------------------------------------- Director September 30, 1999
Marvin Rosenthale
- ------------------------------------------- Director September 30, 1999
Mark C. Rogers, M.D.
*
- ------------------------------------------- Director September 30, 1999
Herbert McDade, Jr.
- ------------------------------------------- Director September 30, 1999
Max Link, Ph.D.
*
- ------------------------------------------- Director September 30, 1999
David Naveh, Ph.D.
*
- ------------------------------------------- Director September 30, 1999
Richard Sperber
- ----------------------------
Robert J. Capetola
* As Attorney-in-fact
</TABLE>
864725.6
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1* Agreement and Plan of Merger dated as of March 5, 1998 among
Discovery, ATI Acquisition Corp. and ATI.
2.2** Agreement and Plan of Reorganization and Merger dated as of July 16,
1997, by and between Discovery and Old Discovery.
5.1+ Opinion of Battle Fowler LLP regarding the legality of the securities
being registered.
16.1*** Letter dated January 28, 1998 from Ernst & Young LLP to the
Securities and Exchange Commission.
23.1+ Consent of Richard A. Eisner & Company, LLP.
24.1+ Powers of Attorney.
- -------------------------------
* Incorporated by reference to Discovery's Annual Report on Form 10-KSB
for the year ending December 31, 1997.
** Incorporated by reference to Discovery's Registration Statement on Form
S-4 (File No. 333-34337).
*** Incorporated by reference to Discovery's Current Report on Form 8-K/A
dated January 16, 1998.
+ Previously filed.
