As filed with the Securities and Exchange Commission on April 20, 2000
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Registration No. 333-86105
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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DISCOVERY LABORATORIES, INC.
(Exact Name of Registrant as Specified in its Charter)
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<TABLE>
<S> <C> <C>
Delaware 350 South Main Street 94-3171943
(State or Other Jurisdiction of Incorporation or Suite 307 (I.R.S. Employer
Organization Doylestown, Pennsylvania 18901 Identification Number)
</TABLE>
(Address, Including Zip Code and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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Robert J. Capetola, Ph.D.
Chief Executive Officer
350 South 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)
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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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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of each class of Amount to be Maximum Offering Maximum Aggregate Amount of
securities to be registered registered(1) Price Per Share(2) Offering Price(2) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value 3,846,694 $4.4100 $16,955,307.91 $4,476.20
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</TABLE>
(1) Includes 580,569 shares of common stock issuable upon the exercise of
certain Class E warrants and 348,341 shares of common stock issuable upon
the exercise of certain placement warrants issued by the registrant.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 as amended and
determined by multiplying (i) 2,917,784 shares of common stock owned by the
selling stockholders and registered for resale hereunder by $3.375 the
average of the high and low of the common stock on the Nasdaq SmallCap
Market on April 17, 2000, (ii) 580,569 shares of common stock issuable upon
the exercise of certain Class E warrants by $7.375 and (iii) 348,341
issuable on exercise of the placement warrants by $8.113. The proposed
maximum offering price per share represents the weighted average price per
share.
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928158.3
<PAGE>
Pursuant to Rule 416 under the Securities Act of 1933, as amended, there
are also being registered such additional shares of common stock as may become
issuable pursuant to the anti-dilution provisions of the warrants referred to in
footnote 1 above.
928158.3
<PAGE>
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 APRIL 20, 2000
3,846,694 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 that the selling stockholders are offering.
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"DSCO."
Investing in this common stock involves a high degree of risk. See "Risk
Factors" beginning on page 4.
---------------
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 April __, 2000.
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928158.3
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TABLE OF CONTENTS
Page
Prospectus Summary............................................................1
Company Summary...............................................................1
Risk Factors..................................................................3
Forward-Looking Statements...................................................12
Additional Information.......................................................13
Use of Proceeds..............................................................13
Selling Stockholders.........................................................13
Plan of Distribution.........................................................15
Where You Can Find More Information..........................................16
Information Incorporated by Reference........................................16
Experts......................................................................16
Legal Matters................................................................16
928158.3
<PAGE>
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 focuses on
developing compounds to treat respiratory diseases that affect the ability of
the lungs to absorb oxygen. We are initially developing our lead product
candidate, Surfaxin(R), for use by newborn infants to treat two respiratory
conditions in critical care units of hospitals. We are also developing this lead
product candidate for the treatment of acute respiratory distress syndrome and
acute lung injury in adult patients. We believe we can use Surfaxin(R) to treat
other respiratory conditions. These include asthma, chronic obstructive
pulmonary disease, emphysema and cystic fibrosis. In addition, we believe we can
use Surfaxin(R) to deliver drugs that are currently delivered by injection.
These drugs include antibiotics, pulmonary vasodilators, brochodilators,
steroids and proteins. We are also evaluating acquiring licenses to drug
candidates in the early stage of development for the treatment of respiratory
diseases. We may develop and market our products on our own or seek to enter
into collaborations with corporate partners for manufacturing and marketing
these drugs.
Our lead product is Surfaxin(R). Surfaxin(R) is a formulation of an
artificial lung surfactant containing a peptide or chain of amino acids. We
patterned Surfaxin(R) after a human surfactant protein. Surfactants are
substances that are produced in the lungs. They possess the ability to lower the
surface tension of the fluid normally present within the air sacs that are
inside of the lungs. In the absence of sufficient surfactants, these air sacs
tend to collapse. As a result, the lungs do not absorb sufficient oxygen.
We intend to use Surfaxin(R) for the treatment of several respiratory
conditions. Currently, we are developing Surfaxin(R) for the treatment of
respiratory distress syndrome in premature infants, meconium aspiration syndrome
in full-term infants and acute respiratory distress syndrome and acute lung
injury in adults. We have also begun developing Surfaxin(R) to treat other
respiratory disorders.
Respiratory distress syndrome is a condition in which premature infants
are born with an insufficient amount of their own natural surfactant. Meconium
aspiration syndrome is a similar condition, in which full-term infants are born
with meconium in their lungs. Meconium is the baby's first bowel movement in the
mother's womb. This condition can lead to meconium aspiration syndrome if the
baby breathes in the meconium. Both of these conditions can be life-threatening
as a result of the failure of the lungs to absorb sufficient oxygen. These
conditions can also deplete natural surfactants in the lungs. This results in
the need for mechanical ventilation. Acute respiratory distress syndrome can
result from a variety of events. Some of these events are pneumonia, breathing
in the contents of the stomach, trauma, smoke inhalation, near drowning and head
injury.
Acute respiratory distress syndrome/acute lung injury affects
approximately 240,000 patients per year in the United States. Respiratory
distress syndrome in premature infants affects 40,000 to 50,000 newborns per
year in the United States. Twenty to forty percent of infants with respiratory
distress syndrome require extended mechanical ventilation and hospitalization.
Meconium aspiration syndrome affects approximately 26,000 newborn infants per
year in the United States.
928158.3
<PAGE>
Presently, the FDA has only approved replacement surfactants for
treating respiratory distress syndrome in premature infants. These approved
replacement surfactants come from pigs and cows. Surfaxin(R) is a synthetic
surfactant. As a result, we believe that we can manufacture Surfaxin(R) less
expensively. In addition we believe that Surfaxin(R) might possess other
pharmaceutical benefits not possessed by animal surfactants. The FDA has not
approved replacement surfactants for treatment of meconium aspiration syndrome
and acute respiratory distress syndrome. The FDA has granted meconium aspiration
syndrome and acute respiratory distress syndrome fast track designation. Fast
track status does not accelerate the clinical trials nor does it mean that the
regulatory requirements are less stringent. However, the FDA will review the New
Drug Application for a drug granted fast track status within six months. The FDA
has awarded us an orphan drug grant to support our development of Surfaxin(R) in
meconium aspiration syndrome.
We also intend to begin preclinical research into converting Surfaxin(R)
into an aerosol spray for the treatment of asthma, chronic obstructive pulmonary
disease, acute and chronic bronchitis and a variety of other respiratory
diseases.
Our second compound under development is SuperVent(TM). We intend to use
SuperVent(TM) to treat airway diseases such as cystic fibrosis and chronic
bronchitis. We deliver SuperVent(TM) to patients using a nebulizer. A nebulizer
is a device that turns liquid into mist, making it breathable. We anticipate
using SuperVent(TM) for the treatment of lung conditions involving inflammation,
excessive mucous and injurious oxidation. Injurious oxidation is a condition
where atoms in tissue lose electrons, which can result in damage to the tissue.
Cystic fibrosis is a progressive, lethal respiratory disease that
afflicts approximately 23,000 patients in the United States and a comparable
number in Europe. Cystic fibrosis is the most common lethal genetic disease
among Caucasians. Because of this genetic defect, mucus accumulates and clogs
the lungs, impairing breathing. 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 in the lungs. A new therapy that is intended
to minimize 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 the treatment of
respiratory distress syndrome, meconium aspiration syndrome and acute
respiratory distress syndrome. In addition, we are conducting clinical trials of
SuperVent(TM) for treatment of cystic fibrosis.
In October 1999, we entered into a sublicense agreement and exclusive
manufacturing agreement for Surfaxin(R) in the territories of southern Europe
and Latin America with Laboratorios Del Dr. Esteve, S.A.
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.
928158.3
2
<PAGE>
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 Successfully Develop and
Market Our Products, and Even If We Do, We May Not Generate Enough Revenue or
Become Profitable.
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We are a development stage company. Therefore, you must evaluate us in light of
the uncertainties and complexities present in a development stage biotechnology
company. We are conducting research and development on our product candidates.
Accordingly, we have not begun to market or generate revenues from the
commercialization of any of these products. We will need to engage in
significant, time- consuming and costly research, development, pre-clinical
studies, clinical testing and regulatory approval for our products under
development prior to their commercialization. In addition, pre-clinical or
clinical studies may show that our products are not effective or safe for one or
more of their intended uses. We may fail in the development and
commercialization of our products. Since inception, we have incurred a
cumulative operating loss of approximately $32,000,000 and we expect to incur
significant increasing operating losses over the next several years. If we
succeed in the development of our products, we still cannot assure you that we
will generate sufficient or sustainable revenues or that we will be profitable.
The Types of Products We Are Developing Are Subject to Risks That Are Difficult
to Foresee, and We May Not Succeed In Our Development Efforts.
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Our development of products is subject to the risks of failure inherent in the
development of new pharmaceutical products which utilize innovative or new
technologies. During the development process, we could experience unforeseen
problems that could delay us from completing the development of our products. As
a result, we may terminate development of these products or applications. We
cannot assure you:
-- that we will succeed in our research and development;
-- that we will successfully market our proposed products.
If We Cannot Raise Additional Capital We Will Need to Discontinue Our Research
and Development Activities. In Addition, Any Additional Financing Could Result
in Dilution.
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We do not have enough working capital to continue to meet our research and
development requirements and we may not obtain the additional financing
necessary to meet these requirements. We will need substantial additional
funding to conduct our research and product development activities and, if we
are successful, to manufacture and market products. We intend to raise further
funds through collaborative ventures entered into with potential corporate
partners and through additional debt or equity financings. We may in some cases
elect to develop products on our own instead of entering into collaboration
928158.3
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<PAGE>
arrangements. This would increase our cash requirements for research and
development. We cannot provide assurance that we will obtain necessary
financing. Any additional financing could include unattractive terms or result
in significant dilution of stockholders' interests. If we fail to enter into
collaborative ventures or to receive additional funding, we may have to scale
back or discontinue our research and development operations. Furthermore, we
could cease to qualify for listing of our securities on the Nasdaq SmallCap
Market. See "We Face the Possibility of Delisting From the Nasdaq SmallCap
Market."
If We Fail to Obtain Regulatory Approval to Commercially Manufacture or Sell Any
of Our Products or If the FDA Delays Approval of Our Product Candidates, it
Could Increase the Cost of Product Development or Ultimately Prevent or Delay
Our Ability to Sell Our Products and Generate Revenues.
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In order to sell our products that are under development, we must receive
regulatory approvals for our products. The FDA and comparable agencies in
foreign countries extensively and rigorously regulate the testing, manufacture,
distribution, advertising, pricing and marketing of drug products. The FDA and
comparable agencies in other countries require an extensive regulatory approval
process before we can market our product. This process includes preclinical
studies and clinical trials of each pharmaceutical compound to establish its
safety and effectiveness and confirmation by the FDA that the manufacturer
maintains good laboratory, clinical and manufacturing practices during testing
and manufacturing. The process is lengthy, expensive and uncertain. It is also
possible that we may not reach agreement with the FDA on the design of clinical
studies necessary for approval. In addition, conditions imposed by the FDA on
our clinical trials could significantly increase the time required for
completion of clinical trials and the costs of conducting clinical trials.
Clinical trials generally take two to five years or more to complete.
The testing and approval processes require the expenditure of substantial
resources. The FDA may not give us the requisite approvals for our products on a
timely basis, if ever. The FDA could withdraw any approvals we obtain. 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,
the FDA may restrict or delay our marketing of a product, or force us to make
product recalls. In addition, the FDA could impose other sanctions such as
fines, injunctions, civil penalties or criminal prosecutions. For marketing
outside the United States, we also need to comply with foreign regulatory
requirements governing human clinical trials and marketing approval for
pharmaceutical products. The FDA and foreign regulators have not yet approved
any of our products under development for marketing in the United States or
elsewhere. If the FDA and other regulators do not approve our products, it could
prevent us from marketing our products.
Our Strategy, In Many Cases, Is to Enter into Collaboration Agreements with
Third Parties with Respect to Our Products and We May Require Additional
Collaboration 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.
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Our strategy for the completion of the required development and clinical testing
of our products and for the manufacturing, marketing and commercialization of
our products, in many cases, depends upon entering into collaboration
arrangements with pharmaceutical companies. We have entered into a sublicense
agreement for Surfaxin(R) covering southern Europe and Latin America. We may
need to enter into additional collaboration agreements. Our success may depend
upon obtaining partners. In addition, we may depend on our partners' expertise
and dedication of sufficient resources to develop and commercialize our proposed
products. We may in the future grant to collaboration partners rights to license
and
928158.3
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<PAGE>
commercialize pharmaceutical products developed under collaboration agreements.
Under these arrangements our collaboration partners may control key decisions
relating to the development of the products. Those rights would limit our
flexibility in considering alternatives for the commercialization of our
products. If we fail to develop successfully these relationships or if our
collaboration partners fail to develop successfully or commercialize any of our
products, it may delay or 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.
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There are rapidly changing technologies and evolving industry standards in the
biotechnology and pharmaceutical markets. We intend to market our products under
development for the treatment of diseases for which other technologies and
proposed treatments are rapidly developing. The research efforts of others may
render our research and product development efforts obsolete. Third parties
conducting research include governments, major research facilities and large
multinational corporations. Many of the third parties have greater research and
development, manufacturing, marketing, financial, technological, personal and
managerial resources than we have.
If We Cannot Protect Our Intellectual Property, Other Companies Could Use Our
Technology in Competitive Products. If We Infringe the Intellectual Property
Rights of Others, Other Companies Could Prevent us from Developing or Marketing
Our Products.
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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 parties from whom we license technology 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, the United States Patent
and Trademark Office ("USPTO") has not adopted a consistent policy regarding the
breadth of claims that the USPTO allows in biotechnology patents or the degree
of protection that these types of patents afford.
Even If We Obtain Patents to Protect Our Products, Those Patents May Not Be
Sufficiently Broad and Others Could Compete with Us.
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We, or the parties licensing technologies to us, have filed various United
States and foreign patent applications with respect to the products and
technologies under our development and the USPTO and foreign patent offices have
issued patents with respect to our products and technologies. These patent
applications include international applications filed under the Patent
Cooperation Treaty. Our pending patent applications, those we may file in the
future or those we may license from third parties may not result in the USPTO or
foreign patent office issuing patents. Also, if patent rights covering our
products
928158.3
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are not sufficiently broad, they may not provide us with proprietary protection
or competitive advantages against competitors with similar products and
technologies. Furthermore, if the USPTO or foreign patent offices issue patents
to us or our licensors, others may challenge the patents or circumvent the
patents, or the patent office or the courts may invalidate the patents. 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 low concentrations of tyloxapol are as effective as higher
concentrations of tyloxapol in treating the indications which we are developing
our SuperVent(TM) product to treat.
Patents Which Others Obtain Could Limit Our Ability to Market Our Products.
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Our commercial success also significantly depends on our ability to operate
without infringing the patents or violating the proprietary rights of others.
The USPTO keeps United States patent applications confidential while the
applications are pending. Accordingly, we cannot determine which inventions
third parties claim in pending patent applications which they have filed. We may
need to engage in litigation to defend or enforce our patent and license rights
or to determine the scope and validity of the proprietary rights of others. It
will be expensive and time consuming to defend and enforce patent claims. 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 third parties may not grant to us. An
adverse determination could also require us 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.
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We depend on licensing arrangements to maintain rights to our products under
development. These agreements require us to make payments and satisfy
performance obligations in order to maintain our rights under these licensing
arrangements. In addition, we are responsible for the cost of filing and
prosecuting patent applications and maintaining issued patents licensed to us.
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 Our Employees Could Breach.
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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 we employ them. 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 which they or other parties
independently develop to any of our proposed projects, disputes may arise as to
the proprietary rights to this type of information. In such case, a court may
determine that the right belongs to a third party. In addition, we will rely on
trade secrets and proprietary know-how that we will seek to protect in part by
confidentiality agreements with our employees, consultants, advisors or others.
We cannot assure you:
-- that they will not breach these agreements; or
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-- that agreements we would obtain would provide adequate remedies for this
type of breach or that our trade secrets or proprietary know-how will
not otherwise become known or competitors will not independently develop
similar technology.
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.
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We rely on outside manufacturers, including Taylor Pharmaceuticals, Inc., to
produce appropriate clinical grade material that meets standards for use in
clinical studies for our products. We will also rely on outside manufacturers
for production of products after marketing approval. We may also enter into
arrangements with other manufacturers for the manufacture of material for use in
clinical testing and after marketing approval.
Our outside manufacturers may not perform as they have agreed or may not remain
in the contract manufacturing business for a sufficient time to successfully
produce and market our product candidates. In this event we may fail to find a
replacement manufacturer or develop our own manufacturing capabilities. If we
cannot do so, it could delay or impair our ability to obtain regulatory approval
for our products. There could be a substantial delay before the FDA and foreign
regulatory authorities qualify and register a new facility of a replacement
manufacturer
We may in the future elect to manufacture some of our products on our own. We do
not currently have a manufacturing facility, manufacturing experience or
manufacturing personnel. If we determine to manufacture products on our own and
do not successfully develop manufacturing capabilities, it will adversely affect
sales of our products.
In addition, the FDA and foreign regulatory authorities require manufacturers to
register manufacturing facilities. The FDA and corresponding foreign regulators
inspect these facilities to confirm compliance with good manufacturing practice
requirements that the FDA or corresponding foreign regulators establish. 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, it could adversely affect our ability to market our products.
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.
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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 depend on
arrangements with corporate partners or other entities for the marketing and
sale of our products. We may not succeed in entering into any satisfactory
third- party arrangements for the marketing and sale of our products. In
addition, we may not succeed in developing marketing and sales capabilities or
we may not have sufficient resources to do so. If we fail to establish marketing
and sales capabilities or fail to enter into arrangements with third parties, it
will adversely affect sales of our products.
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.
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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 in 2001.
We do not maintain key-man 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 more experience than we have, making it difficult for us to
compete for key personnel.
Our Industry is Highly Competitive 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.
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Our industry is highly competitive. We compete with numerous existing companies
intensely in many ways. We expect new companies to enter our industry and we
expect competition 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 compete against companies with greater
marketing and manufacturing capabilities. These are areas in which, as yet, we
have limited or no experience. In addition, developments by competitors may
render our product candidates obsolete or uncompetitive. 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 and licensing arrangements to collect royalties for use of technology
that they have developed. Some of these technologies may compete directly with
the technologies that we are developing. These institutions will also compete
with us in recruiting highly qualified scientific personnel. We expect that
therapeutic developments in the areas in which we are active may occur at a
rapid rate and that competition will intensify as advances in this field are
made. Accordingly, we need to continue to devote substantial resources and
efforts to research and development activities.
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If Product Liability Claims Are Brought Against Us, it May Result in Reduced
Demand for Our Products or Damages That Exceed Our Insurance Coverage.
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The marketing and use of our products 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. Use of our products in clinical trials, as well as
commercial sale, could result in product liability claims. In addition, sales of
our products through third party arrangements could also subject us to product
liability claims. We presently carry product liability insurance relating to our
clinical trials of Surfaxin(R) and SuperVent(TM). However, this insurance
coverage might not fully cover any potential claims. We may need 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 is expensive
and insurance companies may not issue this type of insurance when we need it. We
cannot provide assurance that we can obtain adequate insurance in the future at
an acceptable cost. Any product liability claim, even one that was not in excess
of our insurance coverage or one that is meritless, could adversely affect our
cash available for other purposes, such as research and development. In
addition, the existence of a product liability claim could affect the market
price of our common stock.
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.
- --------------------------------------------------------------------------------
Efforts of governmental and third-party payors to contain or reduce the costs of
health care through various means could affect the levels of revenues and
profitability of pharmaceutical and biotechnology products and companies. For
example, in some 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 negatively impact
our revenues and profitability.
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 payors such as government and private
insurance plans. Third-party payors may not provide sufficient reimbursement 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 payors fail to provide adequate
coverage or reimbursement rates for those products, it could reduce our product
sales and product revenues.
Directors, Executive Officers, Principal Stockholders and Affiliated Entities
Own a Significant Percentage of Our Capital Stock, and this Could Have an Effect
on Actions by the Stockholders.
- --------------------------------------------------------------------------------
As of March 29, 2000, our directors, executive officers, principal stockholders
and affiliated entities beneficially own, in the aggregate, approximately 32% of
our outstanding voting 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. This
concentration of ownership may have the effect of delaying or preventing a
change in control. This could prevent transactions in which stockholders might
otherwise recover a premium for their shares over current market prices.
We Face the Possibility that Nasdaq May Delist our Common Stock from the NASDAQ
Smallcap Market.
- --------------------------------------------------------------------------------
928158.3
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<PAGE>
To meet the current listing requirements for Nasdaq to continue to list our
securities on the Nasdaq SmallCap Market, we will have to maintain:
(a) (1) at least $2 million in net tangible assets or
(2) $35 million in market capitalization or
(3) $500,000 in net income (over two of the last three years), and
(b) a public float of at least 500,000 shares valued at $1 million or
more and
(c) a minimum bid price of $1 and
(d) at least 300 holders of our common stock and
(e) at least two active market makers.
At December 31, 1999, we had $3,108,000 in net tangible assets. The closing
price of our common stock during the period from January 1, 1999 to April 19,
2000 ranged from $1.00 to $12.63 and the closing price of our common stock on
April 19, 2000 was $5.34. We may need to raise additional capital in order to
continue to meet the listing requirements.
If we are unable to satisfy the listing requirements, Nasdaq may delist our
securities from the Nasdaq SmallCap Market. If any trading markets for our
securities are available, investors could only trade 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,
this would impair the liquidity of our securities. This could reduce the number
of our securities investors could buy and sell and could result in 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.
The "Penny Stock" Rules May Adversely Affect the Liquidity of Our Common Stock.
- --------------------------------------------------------------------------------
If Nasdaq delisted our securities from the Nasdaq SmallCap Market, Rule 15g-9
under the Exchange Act would apply. Rule 15g-9 imposes additional sales practice
requirements on broker-dealers that sell these types of 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 that this
rule covers, a broker-dealer must make a special suitability determination for
the purchaser and receive 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 our securities in the secondary market.
The Commission has adopted regulations that define a "penny stock". Generally, a
penny stock is an equity security that has a market price of less than $5.00 per
share. For any transaction involving a penny stock that is not exempt, the rules
require that a broker-dealer deliver a disclosure schedule that the Commission
has prepared relating to the penny stock market. The rule also requires the
broker-dealer to disclose information about commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, rules require that the broker-dealers send monthly
statements disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
928158.3
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<PAGE>
These restrictions will not apply to our securities if the Nasdaq SmallCap
Market continues to list our securities. If Nasdaq delists our securities and
they become subject to the existing or proposed rules on penny stocks, it could
severely adversely affect the market liquidity for our securities.
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 April 19, 2000, there were approximately 20,707,804 shares of common stock
currently outstanding. In addition, as of April 19, 2000 up to 6,412,794 shares
of Common Stock were issuable on exercise of outstanding options and warrants.
Holders of our stock options and warrants are likely to exercise them, if ever,
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.
We cannot predict the effect that the availability of these shares for sale will
have on the market price of our common stock. Nevertheless, because holders may
sell substantial amounts of our common stock in the public market, 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.
Anti-takeover Provisions of Our Certificate of Incorporation and Delaware Law
Could Delay Actual or Potential Changes of Control, Which Could Affect
Stockholder Ability to Benefit From Market Fluctuations and Changes in
Management.
- --------------------------------------------------------------------------------
Our Certificate of Incorporation and Delaware law contain provisions which 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. Our Board of Directors also has 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 payments before dividends on 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 also subject to 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 the Board of
Directors and stockholders approve the transactions in a prescribed manner. 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 the provisions of Delaware law could have the effect of discouraging
others from making tender offers for our securities. As a consequence, they also
may inhibit
928158.3
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<PAGE>
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.
FORWARD-LOOKING STATEMENTS
The statements set forth under the captions "Company Summary" and elsewhere in
this prospectus, including in "Risk Factors," which are not historical
constitute "Forward Looking Statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended, including statements regarding the expectations, beliefs, intentions or
strategies for the future. We intend that all forward-looking statements be
subject to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements reflect our views as of the
date they are made with respect to future events and financial performance, but
are subject to many risks and uncertainties, which could cause our actual
results to differ materially from any future results expressed or implied by
such forward-looking statements.
Examples of such risks and uncertainties include, but are not limited to, the
inherent risks and uncertainties in developing products of the type we are
developing; possible changes in our financial condition; the progress of our
research and development (including the risk that our lead product candidate,
Surfaxin(R), will not prove to be safe or useful for the treatment of certain
indications); the impact of development of competing therapies and/or
technologies by other companies; our ability to obtain additional required
financing to fund our research programs; our ability to enter into agreements
with collaborators and the failure of collaborators to perform under their
agreements with us; the results of clinical trials being conducted by the
Company; the progress of the FDA approvals in connection with the conduct of our
clinical trials and the marketing of our products; the additional cost and
delays which may result from requirements imposed by FDA in connection with
obtaining the required approvals; and the other risks and certainties detailed
in "Risk Factors", and in the documents incorporated by reference in this
prospectus.
We do not undertake to update any forward-looking statements.
ADDITIONAL INFORMATION
The Company and the Placement Agent will make available to each
prospective investor and his or her representative during the course of the
Offering, upon request by the prospective investor or his or her representative,
copies of the Exhibits hereto not included herewith, the opportunity to ask
questions and receive answers concerning the terms and conditions of the
Offering, and to obtain any additional information.
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 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
928158.3
12
<PAGE>
to 2,917,784 shares of common stock, including 928,910 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.
928158.3
13
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of Total
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>
Leonard Adams 15,385 3,077 18,462 * 18,462 0 0
Louis Adler 3,846 769 4,615 * 4,615 0 0
Burton Ahrens 3,846 769 4,615 * 4,615 0 0
Balanced Investment LLC 76,923 15,385 95,308 * 95,308 0 0
Banque SCS Alliance SA 76,923 15,385 95,308 * 95,308 0 0
Beck Family Partners LP 38,462 7,692 46,154 * 46,154 0 0
Nancy Beres 1,538 308 1,846 * 1,846 0 0
David Bershad 30,769 6,154 36,923 * 36,923 0 0
Elliott Broidy 23,077 4,615 27,692 * 27,692 0 0
Richard Buonocore 3,846 769 4,615 * 4,615 0 0
Mark Butler 3,846 769 4,615 * 4,615 0 0
Andrew and Barbara Cichelli 7,692 1,538 9,230 * 9,230 0 0
Roger and Margaret Coleman 3,846 769 4,615 * 4,615 0 0
Concordia Partners LP 76,923 15,385 95,308 * 95,308 0 0
Robert Conrads 7,692 1,538 9,230 * 9,230 0 0
Archibald Cox, Jr. 38,462 7,692 46,154 * 46,154 0 0
Credito Privato Commerciale SA 153,846 30,769 184,615 * 184,615 0 0
Deephaven Private Placement 23,077 4,615 27,692 * 27,692 0 0
Trading Ltd.
Elke R. DeRamirez 7,692 1,538 9,230 * 9,230 0 0
Donner Corp. International 5,000 0 5,000 * 5,000 0 0
DG Lux Lacuna Apo Biotech Fund 123,077 24,615 147,692 * 147,692 0 0
John Joseph Dougherty 3,846 769 4,615 * 4,615 0 0
Drax Holding, LP 153,846 30,769 184,615 * 184,615 0 0
Marc Florin 23,077 4,615 27,692 * 27,692 0 0
Albert Fried, Jr. 230,769 46,154 276,923 1.33% 276,923 0 0
Wendy Grabler 15,385 3,077 18,462 * 18,462 0 0
Greenlight Capital LP 55,800 11,160 66,960 * 66,960 0 0
Greenlight Capital Offshore Ltd. 86,615 17,323 103,938 * 103,938 0 0
Greenlight Capital Qualified LP 88,354 17,671 106,025 * 106,025 0 0
Jack Hirschfield 1,923 385 2,308 * 2,308 0 0
Theresa Incagnoli 1,538 308 1,846 * 1,846 0 0
JAS Oil & Gas Partnership Ltd. 7,692 1,538 9,230 * 9,230 0 0
J.F. Shea & Co., Inc. 76,923 15,385 95,308 * 95,308 0 0
Keys Foundation 76,923 15,385 95,308 * 95,308 0 0
Ira Kotel 3,959 769 4,728 * 4,615 113 *
Leiden Overseas Ltd. 3,846 769 4,615 * 4,615 0 0
Kenneth Lerer 3,105 0 3,105 * 3,105 0 0
Michael H. Schwartz Profit 15,385 3,077 18,462 * 18,462 0 0
Sharing Plan
Maria Molinsky 15,385 3,077 18,462 * 18,462 0 0
Walter Montgomery 690 0 690 * 690 0 0
Cecilia and Raul Obregon 7,692 1,538 9,230 * 9,230 0 0
Omicron Partners, LP 53,846 10,769 64,615 * 64,615 0 0
</TABLE>
928158.3
14
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of Total
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>
Paramount Capital, Inc.1 2,387,609 1,100,501 3,488,110 16% 348,341 3,139,768 15.74%
PIMCO Opportunity Fund 461,538 92,308 553,846 2.66% 553,846 0 0
Richard Pollak 7,692 1,538 9,230 * 9,230 0 0
Alexander Pomper 7,692 1,538 9,230 * 9,230 0 0
Richard Power 3,077 615 3,692 * 3,692 0 0
Dr. Tis Prager 7,692 1,538 9,230 * 9,230 0 0
Royal Bank of Canada 153,846 30,769 184,615 * 184,615 0 0
Linda Gosden Robinson 3,105 0 3,105 * 3,105 0 0
Rahn & Bodmer 153,846 30,769 184,615 * 184,615 0 0
David Ruttenberg 7,692 1,538 9,230 * 9,230 0 0
Wayne Saker 12,308 2,462 14,770 * 14,770 0 0
Scoggin Capital Management, LP 76,923 15,385 95,308 * 95,308 0 0
Lori Shapero 11,538 2,308 13,846 * 13,846 0 0
John Siebel 2,308 462 2,770 * 2,770 0 0
Simon Family Trust 3,846 769 4,615 * 4,615 0 0
Southshore Capital Fund Ltd. 76,923 15,385 95,308 * 95,308 0 0
St John's Trust 76,923 15,385 95,308 * 95,308 0 0
Stern Joint Venture LP 76,923 15,385 95,308 * 95,308 0 0
Myron Teitelbaum 3,846 769 4,615 * 4,615 0 0
The Moore Family Trust 15,385 3,077 18,462 * 18,462 0 0
The Lincoln Fund Tax Advantage 11,538 2,308 13,846 * 13,846 0 0
LP
The Lincoln Fund, LP 23,077 4,615 27,692 * 27,692 0 0
The Rapier Group, GP 4,769 954 5,723 * 5,723 0 0
Sean C. Twomey 2,308 462 2,770 * 2,770 0 0
Melvyn Weiss 30,769 6,154 36,923 * 36,923 0 0
Robert Whetten 11,538 2,308 13,846 * 13,846 0 0
Windward Venture Partners, Inc. 15,385 3,077 18,462 * 18,462 0 0
Yi Tuan & Brunstein 10,504 0 10,504 * 3,036 7,468 *
</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 April 19, 2000, Discovery Laboratories had 20,707,804 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
- ----------------------------
1 Includes shares beneficially owned by RAQ, LLC and Aries Domestic Fund, L.P.
("Aries Domestic") and The Aries Master Fund, a Cayman Island Exempted
Corporation ("Aries Fund" and, together with Aries Domestic, "Aries").
Lindsay Rosenwald is Chairman, President and sole stockholder of Paramount
Capital, Inc. ("Paramount Capital") and, as a result, Paramount Capital may
be deemed to share beneficial ownership of shares owned by Dr. Rosenwald.
Dr. Rosenwald is also Chairman, President and sole stockholder of Paramount
Capital Asset Management, Inc. ("PCAM"). PCAM is the general partner of
Aries Domestic and the investment manager of Aries Fund. As a consequence of
these relationships, each of Dr. Rosenwald and PCAM may be deemed to share
beneficial ownership of the Common Stock beneficially owned by Aries. Dr.
Rosenwald is also the Managing Member of RAQ, LLC and, accordingly, may be
deemed to have beneficial ownership of the Common Stock beneficially owned
by RAQ, LLC. The placement agent warrants pursuant to which the shares of
Common Stock registered hereby may be transferred to employees of Paramount
Capital and placement agent warrants granted in connection with prior
placements have been transferred to employees of Paramount Capital. Dr.
Rosenwald disclaims beneficial ownership of any securities issuable upon
exercise of warrants held by employees of Paramount Capital.
928158.3
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<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.
928158.3
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<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 for the year ended December 31, 1999;
2. Our Current Report on Form 8-K filed on February 8, 2000, March 7, 2000,
March 20, 2000 and March 29, 2000; and
928158.3
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<PAGE>
3. The description of our capital stock contained in our Form 8-A as filed
with the Securities and Exchange Commission on July 13, 1995.
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, Suite 307, Doylestown, Pennsylvania 18901, Attention: Cynthia
Davis. Telephone requests may be directed to (215) 340-4699, extension 112.
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, Inc. and
subsidiary (the "Company") as of December 31, 1999 and for each of the years in
the two-year period ended December 31, 1999 and the period from May 18, 1993
(inception) through December 31, 1999 included in the Company's Annual Report on
Form 10-KSB, incorporated by reference in this registration statement, and have
been incorporated herein in reliance on the report of Richard A. Eisner &
Company, LLP, independent auditors, stated in their reports appearing therein.
These financial statements have been given upon 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.
928158.3
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<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.
3,846,694 SHARES
DISCOVERY LABORATORIES, INC.
COMMON STOCK
April 20, 2000
928158.3
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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............................... $ 4,476.20
Accounting fees and expenses....................... $ 4,000.00
Legal fees and expenses............................ $ 25,000.00
Miscellaneous fees and expenses.................... $ 6,523.80
--------------------------
Total......................................... $ 40,000.00
==========================
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.
928158.3
II-1
<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.
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, 1998.
** Incorporated by reference to Discovery's Registration Statement on Form S-4
(File No. 333-34337).
+ 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;
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.
928158.3
II-2
<PAGE>
(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.
928158.3
II-3
<PAGE>
SIGNATURES
Pursuant to the requirement 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 New York, New York, on the 20th day of April, 2000.
DISCOVERY LABORATORIES, INC.
(Registrant)
By: /s/ Robert J. Capetola, Ph.D.
--------------------------------
Robert J. Capetola, Ph.D.
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Robert J. Capetola and Evan
Myrianthopoulis, or any of them, each acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person in his name, place and stead, in any and all capacities, in
connection with the Registrant's Registration Statement on Form S-3 under the
Securities Act of 1933, as amended, including, without limiting the generality
of the foregoing, to sign the Registration Statement in the name and on behalf
of the Registrant or on behalf of the undersigned as a director or officer of
the Registrant, and any and all amendments or supplements to the Registration
Statement, including any and all stickers and post-effective amendments to the
Registration Statement, and to sign any and all additional registration
statements relating to the same offering of securities as the Registration
Statement that are filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission
and any applicable securities exchange or securities self-regulatory body,
granting unto said attorneys-in-fact and agents, each acting alone, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, 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 April 20, 2000
- --------------------------------
Robert J. Capetola, Ph.D.
/s/ Evan Myrianthopoulos Vice President, Finance April 20, 2000
- --------------------------------
Evan Myrianthopoulos
/s/ Cynthia Davis Controller April 20, 2000
- -------------------------------- (Principal Accounting Officer)
Cynthia Davis
/s/ Steve H. Kanzer, C.P.A., Esq. Chairman of the Board April 20, 2000
- --------------------------------
Steve H. Kanzer, C.P.A., Esq.
/s/ Richard G. Power Director April 20, 2000
- --------------------------------
Richard G. Power
</TABLE>
928158.3
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marvin E. Rosenthale, Ph.D. Director April 20, 2000
- --------------------------------
Marvin E. Rosenthale, Ph.D.
Director April __, 2000
- --------------------------------
Mark C. Rogers, M.D.
/s/ Herbert McDade, Jr. Director April 20, 2000
- --------------------------------
Herbert McDade, Jr.
Director April __, 2000
- --------------------------------
Max Link, Ph.D.
/s/ David Naveh, Ph.D. Director April 20, 2000
- --------------------------------
David Naveh, Ph.D.
/s/ Richard Sperber Director April 20, 2000
- --------------------------------
Richard Sperber
</TABLE>
928158.3
II-5
BATTLE FOWLER LLP
A LIMITED LIABILITY PARTNERSHIP
75 East 55th Street
New York, New York 10022-305
(212) 856-7000
April 20, 2000
Board of Directors
Discovery Laboratories, Inc.
350 South Main Street, Suite 307
Doylestown, PA 18901
Re: Discovery Laboratories, Inc.
Public Offering of Common Stock
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Discovery Laboratories, Inc., a
Delaware corporation (the "Company"), in connection with the preparation of the
registration statement on Form S-3, and any amendments thereto (the
"Registration Statement"), as filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"), on April
20, 2000, for the registration under the Securities Act of up to 3,846,694
shares (the "Shares") of the Company's common stock, par value $0.001 per share
(the "Common Stock"), including 2,917,784 shares (the "Outstanding Shares") of
Common Stock which have been issued and are outstanding, an additional 580,569
shares (the "Class E Warrant Shares")of Common Stock which are issuable upon the
exercise of certain Class E warrants (the "Class E Warrants") and an additional
348,341 shares (the "Placement Agent Warrant Shares" and together with the Class
E Warrant Shares the "Warrant Shares")of Common Stock which are issuable upon
the exercise of certain placement agent warrants (the "Placement Agent
Warrants"). The Shares are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act by certain selling stockholders
(the "Selling Stockholders") named in the Registration Statement. Capitalized
terms used and not defined in this opinion have the meanings ascribed to them in
the Registration Statement. You have requested that we furnish our opinion as to
matters hereinafter set forth.
942192.1
<PAGE>
2
Board of Directors
Discovery Laboratories, Inc.
In rendering this opinion, we have relied upon, among other
things, our examination of such records of the Company, including without
limitation, the Company's Restated Certificate of Incorporation and the
Company's Bylaws and certificates of its officers and of public officials as we
have deemed necessary for the purpose of the opinion expressed below.
In addition, we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as certified
or photostatic copies. As to various questions of fact material to this opinion,
we have relied, to the extent we deem reasonably appropriate, upon
representations or certificates of officers or directors of the Company and upon
documents, records and instruments furnished to us by the Company, without
independently checking or verifying the accuracy of such documents, records and
instruments furnished to us by the Company.
We are not admitted to the practice of law in any jurisdiction
but the State of New York, and we do not express any opinion as to the laws of
other states or jurisdictions other than the laws of the State of New York, the
Delaware General Corporation Law and the federal law of the United States. No
opinion is expressed as to the effect that the law of any other jurisdiction may
have upon the subject matter of the opinion expressed herein under conflicts of
law principles, rules and regulations or otherwise.
Based on and subject to the foregoing, we are of the opinion
that: (i) the Outstanding Shares offered by the Selling Stockholders pursuant to
the Registration Statement have been duly and validly authorized and issued and
are fully paid and nonassessable and (ii) the Warrant Shares offered by the
Selling Stockholders pursuant to the Registration Statement have been duly
authorized for issuance pursuant to the Class E Warrants and the Placement Agent
Warrants, and when issued and delivered in the manner described in the Class E
Warrants and the Placement Agent Warrants will be validly issued, fully paid and
nonassessable.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the use
of our name under the caption "Legal Matters" in the Prospectus included
therein. In giving this consent, we do not admit that we are within the category
of persons whose consent is required by Section 7 of the Securities Act of 1933
or the rules and regulations promulgated thereunder by the Securities and
Exchange Commission.
942192.1
<PAGE>
3
Board of Directors
Discovery Laboratories, Inc.
Very truly yours,
942192.1
Exhibit 23.1
Independent Auditors' Consent
We consent to the incorporation by reference in this Registration Statement of
Discovery Laboratories, Inc. (the "Company") on Form S-3 of our report dated
February 25, 2000 (with respect to the last paragraph of Note A, March 23, 2000,
Note F[3], March 1, 2000, the second paragraph of Note G, March 14, 2000 and the
last paragraph of Note G, March 3, 2000) on our audit of the financial
statements appearing in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999. We also consent to the reference made to us under the
caption "Experts" in the Prospectus.
Richard A. Eisner & Company, LLP
New York, New York
April 19, 2000
