Filed pursuant to rule 424(b)(3)
Registration number 333-115816
PROSPECTUS
[GRAPHIC OMITTED]
BIOENVISION, INC.
30,164,746 shares of common stock
Of the shares of stock covered by this prospectus: (i) 5,121,613 shares
were issued to former stockholders of Pathagon Inc. in February 2002 in
connection with the consummation of the acquisition of Pathagon Inc (ii)
5,440,000 shares were issued or are issuable upon the exercise of warrants
issued to preferred stockholders in connection with a private placement
consummated in May 2002; (iii) 6,000,000 shares are issuable upon the conversion
of 3,000,000 preferred shares issued in connection with a private placement
consummated in May 2002, (iv) 1,008,333 shares are issuable upon the exercise of
warrants issued to our financial advisor in connection with a private placement
consummated in May 2002; (v) 3,668,559 shares were issued and 3,644,698 shares
are issuable upon the exercise of warrants and options issued to the
co-founders, early round investors and certain former consultants and advisors
for services rendered to or on behalf of us; (vi) 44,166 shares were issued and
133,332 shares are issuable upon the exercise of warrants issued to a former
co-development partner for services rendered to us; (vii) 1,500,000 shares are
issuable upon the exercise of warrants issued in connection with a credit
facility secured by Bioenvision in November 2001; (viii) 160,000 shares are
issuable upon the exercise of warrants issued to two former financial advisors
in March, 2004; (ix) 130,277 shares issued to a regulatory consultant in April
of 2003 for services rendered; (x) 2,532,898 shares were issued in connection
with a private placement consummated in March and May of 2004; and (xi) 780,870
shares are issuable upon the exercise of warrants issued in connection with the
private placement consummated in March and May of 2004.
All of the shares of stock covered by this prospectus are beneficially
owned by the selling stockholders listed in the section of this prospectus
called "Selling Stockholders." We are not selling any of the shares of stock
covered by this prospectus and we will not receive any proceeds from any sales
of our stock covered by this prospectus effected by the selling stockholders.
Our common stock is included for quotation on the Nasdaq National Market
under the symbol "BIVN". The last reported sales price of shares of our common
stock on November 9, 2004, was $8.86 per share.
We urge you to read carefully the "Risk Factors" section beginning on
page 4 where we describe specific risks associated with an investment in
Bioenvision and these securities before you make your investment decision.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is November 17, 2004.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY...........................................................1
THE OFFERING.................................................................3
RISK FACTORS.................................................................4
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS..............................14
USE OF PROCEEDS..............................................................14
SELLING STOCKHOLDERS.........................................................14
PLAN OF DISTRIBUTION.........................................................20
DESCRIPTION OF SECURITIES....................................................22
LEGAL MATTERS................................................................24
EXPERTS......................................................................24
WHERE YOU CAN FIND MORE INFORMATION..........................................24
INCORPORATION BY REFERENCE...................................................24
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES...............................25
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding us and the securities being offered for sale by means of
this prospectus and our financial statements and notes to those statements
appearing elsewhere in this prospectus. The summary highlights information
contained elsewhere in this prospectus. The terms "Bioenvision," "the company,"
"we," "our" and "us" refer to Bioenvision, Inc. and its consolidated
subsidiaries unless the context suggests otherwise. The term "you" refers to a
prospective investor.
Bioenvision, Inc.
We are an emerging biopharmaceutical company that develops and markets
drugs to treat cancer. Our two lead drugs are clofarabine and Modrenal(R),
although we have several other products and technologies under development. As
of October 11, 2004, our internal staff consisted of nine full-time and four
part-time employees based in New York, New York and Edinburgh, Scotland.
Our primary business strategy relates to our two lead drugs, clofarabine
and Modrenal(R). With clofarabine, our strategy is to complete drug development
in Europe and obtain marketing authorization from the European regulatory
authorities to market and distribute clofarabine in Europe for the treatment of
pediatric and adult acute leukemias (ALL and AML). We anticipate launching
clofarabine in Europe in mid-2005, subject to our obtaining from the European
regulatory authorities the first approval for clofarabine which is expected to
be for pediatric acute leukemias. We will continue clinical trials in other
indications with the intention of aggressively seeking label extensions after
clofarabine's first approval, including our Pivotal Phase II trial of
clofarabine in adults with Acute Myeloid Leukemia (AML) which commenced in
August 2004 and is ongoing. Following this strategy, throughout the world,
approximately two-thirds of the cancer patients dosed with clofarabine to date
fall outside of the pediatric acute leukemias.
With Modrenal(R), our strategy is to expand sales in the United Kingdom
and apply for mutual recognition to obtain the right to market and distribute
Modrenal(R) in the major European markets. We anticipate receiving mutual
recognition from major European Community member states by Q3 of calendar 2005.
We intend to further U.S. development of Modrenal(R) in prostate and breast
cancer indications, subject to the ongoing results of our clinical trials we are
currently conducting in the U.S. and Europe.
Our secondary business strategy is to continue to develop our portfolio
of ancillary products and technologies. We anticipate that revenues derived from
clofarabine and Modrenal(R) and milestone payments and royalties from the
ancillary products will permit us to further develop our portfolio of ancillary
products and technologies.
Over the next 12 months, we intend to continue our internal growth
strategy to provide the necessary regulatory, sales and marketing capabilities
which will be required to pursue the expanded development programs for
clofarabine and Modrenal(R) described above.
Clofarabine is a small molecule, purine nucleoside analogue, which we
believe is effective in the treatment of leukemia, based upon our own clinical
studies and studies conducted by others on our behalf. Clofarabine may also be
an effective agent to treat patients with solid tumors, based on preclinical
studies and Phase I clinical trials performed to date.
In July 2004, we filed for approval of clofarabine in Europe to treat
children with pediatric acute leukemia (ALL and AML). Further, we are conducting
a Pivotal Phase II clinical trial of clofarabine, as first line therapy for the
treatment of adults with Acute Myeloid Leukemia (AML). Also in Europe, at our
direction, an Investigator Sponsored Trial of clofarabine as first-line therapy
for adults with AML was completed ahead of schedule and an interim analysis
indicates a 64% complete response rate observed in this patient population.
In the U.S., ILEX Oncology, Inc., our sub-licensor of U.S. and Canadian
cancer marketing rights, filed a New Drug Application ("NDA") in March 2004 for
approval of clofarabine to treat children with acute leukemias (ALL or AML). The
NDA was based upon results of two Pivotal Phase II clinical trials completed by
ILEX prior to the NDA filing. In connection with the NDA, the United States Food
and Drug Administration (the "FDA") has set a Prescription Drug User Fee Act
("PDUFA") response date at December 30, 2004. A PDUFA date is the is the date by
which the FDA is expected to review and act upon an NDA submission. Clofarabine
will be reviewed by the FDA Oncologic Drug Advisory Committee ("ODAC") on
December 1, 2004.
In January, 2002, the European orphan drug application for use of
clofarabine to treat acute leukemia in adults was approved. Orphan Drug
Designation provides the Company with ten years of market exclusivity in Europe
for clofarabine, upon grant of marketing authorization. The drug has also been
granted orphan drug status and "fast track" treatment by the FDA. Further, in
July 2004, the FDA granted six months of extended market exclusivity to
clofarabine under the Best Pharmaceuticals for Children Act.
In August 2003, we obtained the exclusive, irrevocable option to sell,
market and distribute clofarabine in Japan and Southeast Asia from the inventor
of clofarabine. These rights were not previously granted by Southern Research
Institute and fall outside the scope of the Company's then current licensing and
development contracts with respect to clofarabine. We originally
obtained an exclusive license from Southern Research Institute to sell, market
and distribute clofarabine throughout the world, except for Japan and Southeast
Asia, for all human applications, pursuant to a co-development agreement, dated
August 31, 1998, between the Company and Southern Research Institute. On March
12, 2001, we granted an exclusive option to sell, market and distribute
clofarabine in the U.S. and Canada to ILEX Oncology, Inc. We converted ILEX's
option to an exclusive sublicense on December 30, 2003. Accordingly, we do not
possess the rights to sell, market and distribute clofarabine for cancer
indications in the U.S.
Modrenal(R) is a hormonal agent with a novel mode of action that makes
it an effective agent in patients with advanced breast cancer who have acquired
resistance to other hormonal agents. We launched Modrenal(R) in May 2003 in the
United Kingdom, where we have received regulatory approval for its use in the
treatment of post-menopausal breast cancer. In Q2 2005, we intend to apply for
mutual recognition in another four large European territories in an effort to
gain approval for Modrenal(R) in each such territory. We anticipate receiving
approval in each such territory during calendar 2005, but such approval is
subject to the appropriate regulatory decisions.
In the U.S., we filed an IND to conduct Modrenal(R) clinical trials for
prostate cancer in February 2004 and commenced enrolling patients in this
clinical trial in July 2004. Further, we intend to seek regulatory approval for
Modrenal(R) in the United States as salvage therapy for hormone-sensitive breast
cancer upon completion of additional clinical studies.
We originally obtained an exclusive license from Stegram Pharmaceuticals
Ltd. to sell, market and distribute Modrenal(R) throughout the world, except for
South Africa, for all human and animal health applications, pursuant to a
co-development agreement dated July 15, 1998.
Corporate Background
We were incorporated as Express Finance, Inc. under the laws of the
State of Delaware on August 16, 1996, and changed our name to Ascot Group, Inc.
in August 1998 and further to Bioenvision, Inc. in December 1998. Our principal
executive offices are located at 345 Park Avenue, 41st Floor, New York, New York
10154. Our telephone number is (212) 750-6700 and our fax number is (212)
750-6777. Our website is www.bioenvision.com. Information contained on our
website does not constitute, and shall not be deemed to constitute, part of this
prospectus.
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The Offering
Shares of common stock offered by the
selling stockholders........................ 30,164,746
Shares of common stock outstanding as of
November 9, 2004............................ 28,882,319
Shares to be outstanding following
offering (assuming conversion of all
preferred shares into common shares and
the exercise of options and warrants,
and assuming no sales of any securities
pursuant to this
offering)................................... 48,264,038
Use of proceeds............................. We will not receive any proceeds
from theissuance or sale of the
shares included in this offering.
We may receive consideration upon
the exercise of options and we will
receive consideration upon the
conversion of warrants which we
intend to use for general corporate
purposes.
Risk Factors................................ An investment in our common stock
is subject to significant risks.
You should carefully consider the
information set forth in the "Risk
Factors" section of this prospectus
as well as other information set
forth in this prospectus, including
our financial statements and
related notes.
Plan of Distribution........................ The shares of common stock offered
for resale may be sold by the
selling stockholders pursuant to
this prospectus in the manner
described under "Plan of
Distribution" on page 20.
Nasdaq symbol............................... BIVN
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RISK FACTORS
You should carefully consider the following risks before you decide to
buy our Common Stock. Our business, financial condition or operating results may
suffer if any of the events described in the following risk factors actually
occur. All known risks are presented in this prospectus. These risks may
adversely affect our business, financial condition or operating results. If any
of the events we have identified occur, the trading price of our Common Stock
could decline, and you may lose all or part of the money you paid to buy our
Common Stock.
The price of our Common Stock is likely to be volatile and subject to wide
fluctuations
The market price of the securities of biotechnology companies has been
especially volatile. Thus, the market price of our Common Stock is likely to be
subject to wide fluctuations. For the twelve month period ended November 10,
2004, our closing stock price has ranged from a high of $11.75 to a low of
$3.00. If our revenues do not grow or grow more slowly than we anticipate, or,
if operating or capital expenditures exceed our expectations and cannot be
adjusted accordingly, or if some other event adversely affects us, the market
price of our Common Stock could decline. In addition, if the market for
pharmaceutical and biotechnology stocks or the stock market in general
experiences a loss in investor confidence or otherwise fails, the market price
of our Common Stock could fall for reasons unrelated to our business, results of
operations and financial condition. The market price of our stock also might
decline in reaction to events that affect other companies in our industry even
if these events do not directly affect us. In the past, companies that have
experienced volatility in the market price of their stock have been the subject
of securities class action litigation. If we were to become the subject of
securities class action litigation, it could result in substantial costs and a
diversion of management's attention and resources.
Certain events could result in a dilution of holders of our Common Stock
As of November 9, 2004, we had 28,882,319 shares of Common Stock
outstanding, 3,275,000 shares of Series A Convertible Preferred Stock
outstanding which are currently convertible into 6,550,000 shares of Common
Stock and common stock equivalents, including warrants and stock options,
convertible or exercisable into 12,886,865 shares of our Common Stock. The
exercise and conversion prices of the common stock equivalents range from $0.74
to $8.25 per share. We have also reserved for issuance an aggregate of 3,000,000
shares of Common Stock for a stock option plan for our employees. Historically,
from time to time, we have awarded our Common Stock to officers of the Company,
in lieu of cash compensation, although we do not expect to do so in the future.
As of November 9, 2004, (i) we have 37,750,699 shares of common stock registered
under the Securities Act, and (ii) the sale of shares of Common Stock underlying
4,500,000 options are registered under the Securities Act on Form S-8. The
future resale of these shares and shares underlying stock options and warrants
will result in a dilution to your percentage ownership of our Common Stock and
could adversely affect the market price of our Common Stock.
The terms of our Series A Convertible Preferred Stock include
antidilution protection upon the occurrence of sales of our Common Stock below
certain prices, stock splits, redemptions, mergers and other similar
transactions. If one or more of these events occurs the number of shares of our
Common Stock that may be acquired upon conversion or exercise would increase. If
converted or exercised, these securities will result in a dilution to your
percentage ownership of our Common Stock. The resale of many of the shares of
Common Stock which underlie these options and warrants are registered under this
prospectus and the sale of such shares may adversely affect the market price of
our Common Stock.
The provisions of our charter and Delaware law may inhibit potential acquisition
bids that stockholders may believe are desirable, and the market price of our
Common Stock may be lower as a result
Section 203 of the Delaware corporate statute
We are subject to the anti-takeover provisions of Section 203 of the
Delaware corporate statute, which regulates corporate acquisitions. Section 203
may affect the ability of an "interested stockholder" to engage in certain
business combinations, including mergers, consolidation or acquisitions of
additional shares, for a period of three years following the time that the
stockholder becomes an "interested stockholder". An "interested stockholder" is
defined to include persons owning directly or indirectly 15% or more of the
outstanding voting stock of a corporation. These provisions could discourage
potential acquisition proposals and could delay or prevent a change in control
transaction. They could also have the effect of discouraging others from making
tender offers for our Common Stock. As a result, these provisions may prevent
our stock price from increasing substantially in response to actual or rumored
takeover attempts. These provisions may also prevent changes in our management.
Issuance of Preferred Stock Without Common Stockholder Approval.
Our charter authorizes our board of director to increase the number of
shares of preferred stock we may issue without approval of common stockholders.
Preferred stock may be issued in one or more series, the terms of which may be
determined without further
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action by common stockholders. These terms may include preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption. The issuance of any
preferred stock could materially adversely affect the rights of holders of our
common stock, and therefore could reduce its value. In addition, specific rights
granted to future holders of preferred stock could be used to restrict our
ability to merge with, or sell assets to, a third party. The power of the board
of directors to issue preferred stock could make it more difficult, delay,
discourage, prevent or make it more costly to acquire or effect a change in
control, thereby preserving the current stockholders' control.
We have a limited operating history, which makes it difficult to evaluate our
business and to predict our future operating results
Since our inception, August of 1996, we have been primarily engaged in
organizational activities, including developing a strategic operating plan,
entering into various collaborative agreements for the development of products
and technologies, hiring personnel and developing and testing our products. We
have not generated any material revenues to date. Accordingly, we have no
relevant operating history upon which an evaluation of our performance and
prospects can be made.
We have incurred net losses since commencing business and expect future losses
To date, we have incurred significant net losses, including net losses
of approximately $11,574,000 for the fiscal year ended June 30, 2004. At June
30, 2004, we had an accumulated deficit of approximately $41,082,000. We
anticipate that we may continue to incur significant operating losses for the
foreseeable future. We may never generate material revenues or achieve
profitability and, if we do achieve profitability, we may not be able to
maintain profitability.
Clinical trials for our products will be expensive and may be time consuming,
and their outcome is uncertain, but we must incur substantial expenses that may
not result in any viable products
Before obtaining regulatory approval for the commercial sale of a
product, we must demonstrate through pre-clinical testing and clinical trials
that a product candidate is safe and effective for use in humans. Conducting
clinical trials is a lengthy, time-consuming and expensive process. We will
incur substantial expense for, and devote a significant amount of time to
pre-clinical testing and clinical trials. Even with Modrenal(R), which is
approved and marketed by us in the U.K. for the treatment of advanced,
post-menopausal breast cancer, we are conducting a Phase II Clinical Trial in
the U.S. in prostate cancer and a Phase II Clinical Trial in the U.K. for the
treatment of pre-menopausal breast cancer, each of which is a new potential
indication for this approved drug.
Historically, the results from pre-clinical testing and early clinical
trials have often not been predictive of results obtained in later clinical
trials. A number of new drugs have shown promising results in clinical trials,
but subsequently failed to establish sufficient safety and efficacy data to
obtain necessary regulatory approvals. Data obtained from pre-clinical and
clinical activities are susceptible to varying interpretations, which may delay,
limit or prevent regulatory approval. Regulatory delays or rejections may be
encountered as a result of many factors, including changes in regulatory policy
during the period of product development. Regulatory authorities may require
additional clinical trials, which could result in increased costs and
significant development delays. Clofarabine currently is at a pivotal stage of
its development, but many of our other products and technologies are at various
less mature stages of development including l-gossypol for which we have just
commenced a Phase I clinical trial in the U.K. and gene therapy which is
currently in pre-clinical and phase I clinical testing.
Completion of clinical trials for any product may take several years or
more. The length of time generally varies substantially according to the type,
complexity, novelty and intended use of the product candidate. Our commencement
and rate of completion of clinical trials may be delayed by many factors,
including:
o inability of vendors to manufacture sufficient quantities of
materials for use in clinical trials;
o slower than expected rate of patient recruitment or variability
in the number and types of patients in a study;
o inability to adequately follow patients after treatment;
o unforeseen safety issues or side effects;
o lack of efficacy during the clinical trials; or
o government or regulatory delays.
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Our intangible assets constitute a significant portion of our assets and relate
to ancillary products which may not be successfully commercialized
Our ancillary products include OLIGON and Methylene Blue which are
anti-microbial agents that we acquired in February 2002. As of June 30, 2004,
our intangible assets associated with these products amounted to approximately
$14.6 million and constituted approximately 33% of our total assets and
approximately 53% of our stockholders' equity. We amortize approximately $1.3
million of this amount each year for the estimated useful life of these products
of approximately 13 years.
We do not currently devote any significant time or resources to the
research and development of OLIGON and Methylene Blue and only intend to do so
if and to the extent we successfully commercialize our lead drugs, clofarabine
and Modrenal(R), over the next two years. If at any time in the future
management determines that the carrying amount of these assets is not
recoverable, we would need to write down the value of these assets. Based on the
estimated useful life of these assets of approximately 13 years and market
considerations, no assurance can be given that there will not be an impairment
of these assets in the future. Any impairment of these assets could result in a
material impact on our future results of operations.
If our development agreement with ILEX does not proceed as planned we may incur
delay in the commercialization of clofarabine, which would delay our ability to
generate sales and cash flow from the sale of clofarabine
ILEX, and any third party to which ILEX may grant a sublicense or in any
way transfer its obligations, has primary responsibility for conducting clinical
trials and administering regulatory compliance and approval matters in the
United States and Canada pursuant to the terms of our co-development agreement
with ILEX. While there are target dates for completion, that agreement allows
ILEX time to continue working beyond those dates under certain circumstances.
For example, under the co-development agreement, ILEX was required to complete
Pivotal Phase II Trials not later than December 31, 2002, but ILEX failed to do
so. In this situation the co-development agreement provides that the milestone
shall be adjusted such that ILEX receives more time to complete the pivotal
trials if the trials are ongoing at December 31, 2002 and progressing to
completion within a reasonable time thereafter. Further, ILEX was required under
the co-development agreement to have filed a New Drug Application by August 31,
2003, subject to extension if ILEX continues to use its reasonable efforts to
promptly complete the filing after August 31, 2003. ILEX continued to use its
reasonable efforts to complete the filing after August 31, 2003 and in October
2003, Ilex filed the first part of a "rolling NDA" with the FDA.
If ILEX fails to meet its obligations under the co-development
agreement, we could lose valuable time in developing clofarabine for
commercialization both in the U.S. and in Europe. We can not provide assurance
that ILEX will not fail to meet its obligations under the co-development
agreement. Development of compounds to the stage of approval includes inherent
risk at each stage of development that FDA, in its discretion, will mandate a
requirement not foreseeable by us or by ILEX. There would also be testing delays
if, for example, our sources of drug supply could not produce enough clofarabine
to support the then ongoing clinical trials being conducted. If this were to
occur, it could have a material adverse effect on our ability to develop
clofarabine, obtain necessary regulatory approvals, and generate sales and cash
flow from the sale of clofarabine.
If delays in completion constitute a breach by ILEX or there are certain
other breaches of the co-development agreement by ILEX, then, at our discretion,
the primary responsibility for completion would revert to us, but there is no
assurance that we would have the financial, managerial or technical resources to
complete such tasks in timely fashion or at all.
We have limited experience in developing products and may be unsuccessful in our
efforts to develop products
To achieve profitable operations, we, alone or with others, must
successfully develop, clinically test, market and sell our products. We are
developing clofarabine with ILEX Oncology, our U.S. co-development partner, but
on February 26, 2004, Genzyme announced a merger pursuant to which Genzyme
intends to acquire ILEX in a merger transaction. If this transaction is
consummated, no assurance can be given that the operational and managerial
relations with Genzyme will proceed favorably or that the timeline for
development of clofarabine will not be elongated. If the U.S. regulatory
timeline is elongated, this could materially and adversely affect the European
regulatory timeline for the approval of clofarabine.
With respect to our co-lead drug, Modrenal(R), we currently have an
Investigational New Drug Application filed with FDA to conduct a Phase II
Clinical Trial in the U.S. to determine efficacy of Modrenal(R) in prostate
cancer patients. This Phase II Clinical Trial is being conducted at the Mass
General Hospital in Boston, MA. To our knowledge, Modrenal(R) has not been
tested in this indication in the past and there can be no assurance that
Modrenal(R) will be an effective therapy in prostate cancer. Further, our
long-term drug development objectives for Modrenal(R) include attempting to test
the drug and get approval in the U.S. for treatment of advanced post-menopausal
breast cancer patients. These trials will take significant time and resource and
no assurance can be given that developing the drug in this indication will
result in a U.S. approval for Modrenal(R) in advanced post-menopausal breast
cancer patients.
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Generally, most products resulting from our or our collaborative
partners' product development efforts are not expected to be available for sale
for at least several years, if at all. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons, including:
o discovery during pre-clinical testing or clinical trials that the
products are ineffective or cause harmful side effects;
o failure to receive necessary regulatory approvals;
o inability to manufacture on a large or economically feasible
scale;
o failure to achieve market acceptance; or
o preclusion from commercialization by proprietary rights of third
parties.
Most of the existing and future products and technologies developed by
us will require extensive additional development, including pre-clinical testing
and clinical trials, as well as regulatory approvals, prior to
commercialization. Our product development efforts may not be successful. We may
fail to receive required regulatory approvals from U.S. or foreign authorities
for any indication. Any products, if introduced, may not be capable of being
produced in commercial quantities at reasonable costs or being successfully
marketed. The failure of our research and development activities to result in
any commercially viable products or technologies would materially adversely
affect our future prospects.
Our industry is subject to extensive government regulation and our products
require other regulatory approvals which makes it more expensive to operate our
business
Regulation in General. Virtually all aspects of our business are
regulated by federal and state statutes and governmental agencies in the United
States and other countries. Failure to comply with applicable statutes and
government regulations could have a material adverse effect on our ability to
develop and sell products which would have a negative impact on our cash flow.
The development, testing, manufacturing, processing, quality, safety, efficacy,
packaging, labeling, record-keeping, distribution, storage and advertising of
pharmaceutical products, and disposal of waste products arising from these
activities, are subject to regulation by one or more federal agencies. These
activities are also regulated by similar state and local agencies and equivalent
foreign authorities. In our material contracts with vendors providing any
portion of these types of services, we seek assurances that our vendors comply
and will continue to maintain compliance with all applicable rules and
regulations. This is the case, for example, with respect to our contracts with
Ferro Pfanstiehl and Penn Pharmaceuticals. No assurance can be given that our
most significant vendors will continue to comply with these rules and
regulations.
FDA Regulation. All pharmaceutical manufacturers in the United States
are subject to regulation by the FDA under the authority of the Federal Food,
Drug, and Cosmetic Act. Under the Act, the federal government has extensive
administrative and judicial enforcement powers over the activities of
pharmaceutical manufacturers to ensure compliance with FDA regulations. Those
powers include, but are not limited to the authority to:
o initiate court action to seize unapproved or non-complying
products;
o enjoin non-complying activities;
o halt manufacturing operations that are not in compliance with
current good manufacturing practices prescribed by the FDA;
o recall products which present a health risk; and
o seek civil monetary and criminal penalties.
Other enforcement activities include refusal to approve product
applications or the withdrawal of previously approved applications. Any
enforcement activities, including the restriction or prohibition on sales of
products marketed by us or the halting of manufacturing operations of us or our
collaborators, would have a material adverse effect on our ability to develop
and sell products which would have a negative impact on our cash flow. In
addition, product recalls may be issued at our discretion or by the FDA or other
domestic and foreign government agencies having regulatory authority for
pharmaceutical product sales. Recalls may occur due to disputed labeling claims,
manufacturing issues, quality defects or other reasons. Recalls of
pharmaceutical products marketed by us may occur in the future. Any product
recall could have a material adverse effect on our revenue and cash flow.
FDA Approval Process. We have a variety of products under development,
including line extensions of existing products, reformulations of existing
products and new products. All "new drugs" must be the subject of an
FDA-approved new drug application
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before they may be marketed in the United States. All generic equivalents to
previously approved drugs or new dosage forms of existing drugs must be the
subject of an FDA-approved abbreviated new drug application before they may by
marketed in the United States. In both cases, the FDA has the authority to
determine what testing procedures are appropriate for a particular product and,
in some instances, has not published or otherwise identified guidelines as to
the appropriate procedures. The FDA has the authority to withdraw existing new
drug application and abbreviated application approvals and to review the
regulatory status of products marketed under the enforcement policy. The FDA may
require an approved new drug application or abbreviated application for any drug
product marketed under the enforcement policy if new information reveals
questions about the drug's safety or effectiveness. All drugs must be
manufactured in conformity with current good manufacturing practices and drugs
subject to an approved new drug application or abbreviated application must be
manufactured, processed, packaged, held and labeled in accordance with
information contained in the new drug application or abbreviated application.
The required product testing and approval process can take a number of
years and require the expenditure of substantial resources. Testing of any
product under development may not result in a commercially-viable product.
Further, we may decide to modify a product in testing, which could materially
extend the test period and increase the development costs of the product in
question. Even after time and expenses, regulatory approval by the FDA may not
be obtained for any products we develop. In addition, delays or rejections may
be encountered based upon changes in FDA policy during the period of product
development and FDA review. Any regulatory approval may impose limitations in
the indicated use for the product. Even if regulatory approval is obtained, a
marketed product, its manufacturer and its manufacturing facilities are subject
to continual review and periodic inspections. Subsequent discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions on the product or manufacturer, including withdrawal of the product
from the market.
Foreign Regulatory Approval. Even if required FDA approval has been
obtained with respect to a product, foreign regulatory approval of a product
must also be obtained prior to marketing the product internationally. Foreign
approval procedures vary from country to country and the time required for
approval may delay or prevent marketing. In certain instances, we or our
collaborative partners may seek approval to market and sell some of our products
outside of the United States before submitting an application for approval to
the FDA. The clinical testing requirements and the time required to obtain
foreign regulatory approvals may differ from that required for FDA approval.
Although there is now a centralized European Union approval mechanism for new
pharmaceutical products in place, each European Union country may nonetheless
impose its own procedures and requirements, many of which are time consuming and
expensive, and some European Union countries require price approval as part of
the regulatory process. Thus, there can be substantial delays in obtaining
required approval from both the FDA and foreign regulatory authorities after the
relevant applications are filed.
Changes in Requirements. The regulatory requirements applicable to any
product may be modified in the future. We cannot determine what effect changes
in regulations or statutes or legal interpretations may have on our business in
the future. Changes could require changes to manufacturing methods, expanded or
different labeling, the recall, replacement or discontinuation of certain
products, additional record keeping and expanded documentation of the properties
of certain products and scientific substantiation. Any changes or new
legislation could have a material adverse effect on our ability to develop and
sell products and, therefore, generate revenue and cash flow.
The products under development by us may not meet all of the applicable
regulatory requirements needed to receive regulatory marketing approval. Even
after we expend substantial resources on research, clinical development and the
preparation and processing of regulatory applications, we may not be able to
obtain regulatory approval for any of our products. Moreover, regulatory
approval for marketing a proposed pharmaceutical product in any jurisdiction may
not result in similar approval in other jurisdictions. Our failure to obtain and
maintain regulatory approvals for products under development would have a
material adverse effect on our ability to develop and sell products and,
therefore, generate revenue and cash flow.
We may not be successful in receiving orphan drug status for certain of our
products or, if that status is obtained, fully enjoying the benefits of orphan
drug status
Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a rare disease or condition. A disease or condition that
affects populations of fewer than 200,000 people in the United States generally
constitutes a rare disease or condition. We may not be successful in receiving
orphan drug status for certain of our products. Orphan drug designation must be
requested before submitting a new drug application. After the FDA grants orphan
drug designation, the generic identity of the therapeutic agent and its
potential orphan use are publicized by the FDA. Under current law, orphan drug
status is conferred upon the first company to receive FDA approval to market the
designated drug for the designated indication. Orphan drug status also grants
marketing exclusivity in the United States for a period of seven years following
approval of the new drug application, subject to limitations. Orphan drug
designation does not provide any advantage in, or shorten the duration of, the
FDA regulatory approval process. Although obtaining FDA approval to market a
product with orphan drug status can be advantageous, the scope of protection or
the level of marketing exclusivity that is currently afforded by orphan drug
status and marketing approval may not remain in effect in the future.
-8-
Our business strategy involves obtaining orphan drug designation for
certain of the oncology products we have under development. Although clofarabine
has received orphan drug designation with the FDA and EMEA, we do not know
whether any of our other products will receive an orphan drug designation.
Orphan drug designation does not prevent other manufacturers from attempting to
develop similar drugs for the designated indication or from obtaining the
approval of a new drug application for their drug prior to the approval of our
new drug application. If another sponsor's new drug application for a competing
drug in the same indication is approved first, that sponsor is entitled to
exclusive marketing rights if that sponsor has received orphan drug designation
for its drug. In that case, the FDA would refrain from approving an application
by us to market our competing product for seven years, subject to limitations.
Competing products may receive orphan drug designations and FDA marketing
approval before the products under development by us.
New drug application approval for a drug with an orphan drug designation
does not prevent the FDA from approving the same drug for a different
indication, or a molecular variation of the same drug for the same indication.
Because doctors are not restricted by the FDA from prescribing an approved drug
for uses not approved by the FDA, it is also possible that another company's
drug could be prescribed for indications for which products developed by us have
received orphan drug designation and new drug application approval and the same
is true with the EMEA in Europe. Prescribing of approved drugs for unapproved
uses, commonly referred to as "off label" sales, could adversely affect the
marketing potential of products that have received an orphan drug designation
and new drug application approval. In addition, new drug application approval of
a drug with an orphan drug designation does not provide any marketing
exclusivity in foreign markets.
The possible amendment of the Orphan Drug Act by the United States
Congress has been the subject of frequent discussion. Although no significant
changes to the Orphan Drug Act have been made for a number of years, members of
Congress have from time to time proposed legislation that would limit the
application of the Orphan Drug Act. The precise scope of protection that may be
afforded by orphan drug designation and marketing approval may be subject to
change in the future.
The use of our products may be limited or eliminated by professional guidelines
which would decrease our sales of these products and, therefore, our revenue and
cash flows.
In addition to government agencies, private health/science foundations
and organizations involved in various diseases may also publish guidelines or
recommendations to the healthcare and patient communities. These private
organizations may make recommendations that affect the usage of therapies, drugs
or procedures, including products developed by us. These recommendations may
relate to matters such as usage, dosage, route of administration and use of
concomitant therapies. Recommendations or guidelines that are followed by
patients and healthcare providers and that result in, among other things,
decreased use or elimination of products developed by us could have a material
adverse effect on our revenue and cash flows. For example, if clofarabine is
definitively determined in clinical trials to be an active agent to treat solid
tumor cancer patients, but the required dose is high, private healthcare/science
foundations could recommend various other regimens of treatment which may from
time to time show activity at lower doses.
Generic products which third parties may develop may render our products
noncompetitive or obsolete
An increase in competition from generic pharmaceutical products could
have a material adverse effect on our ability to generate revenue and cash flow.
For example, many of the indications in which clofarabine and Modrenal(R), our
co-lead drugs, have demonstrated activity are areas of unmet clinical need, such
as clofarabine's application to pediatric acute leukemias in which, initially,
the drug will be used as a salvage therapy, after other regimens of treatment
have failed. Our lead investigators, who have assisted with the development of
Modrenal(R), envision, initially, that Modrenal(R) would be used as second or
third line therapy, only after patients with advanced post-menopausal breast
cancer receive regimens of tamoxifen and/or aromatase inhibitors (or similar
drug) treatments. If generic drug companies develop a compound which is more
effective than either clofarabine or Modrenal(R) in these areas of unmet
clinical need, or equally as effective but at lower doses, it could adversely
affect our market and/or render our drugs obsolete.
Because many of our competitors have substantially greater capabilities and
resources, they may be able to develop products before us or develop more
effective products or market them more effectively which would limit our ability
to generate revenue and cash flow
Competition in our industry is intense. Potential competitors in the
United States and Europe are numerous and include pharmaceutical, chemical and
biotechnology companies, most of which have substantially greater capital
resources, marketing experience, research and development staffs and facilities
than us. Potential competitors for certain indications of our lead drugs
include, with respect to clofarabine, Schering AG, which markets fludarabine,
and certain generic drug companies in Europe which could market fludarabine upon
expiry of the patent protections held by Schering. Potential competitors with
respect to Modrenal(R) include Astra-zeneca and Novartis, which market tamoxifen
and other aromatase inhibitors, which could be used by clinicians as first and
second line therapies in patients with hormone sensitive, advanced,
post-menopausal breast cancer prior to a Modrenal(R) regimen
-9-
of treatment. No assurance can be given that the ongoing business activities of
our competitors will not have a material adverse effect on our business
prospects and projections going forward.
Although we seek to limit potential sources of competition by developing
products that are eligible for orphan drug designation and new drug application
approval or other forms of protection, our competitors may develop similar
technologies and products more rapidly than us or market them more effectively.
Competing technologies and products may be more effective than any of those that
are being or will be developed by us. The generic drug industry is intensely
competitive and includes large brand name and multi-source pharmaceutical
companies. Because generic drugs do not have patent protection or any other
market exclusivity, our competitors may introduce competing generic products,
which may be sold at lower prices or with more aggressive marketing. Conversely,
as we introduce branded drugs into our product portfolio, we will face
competition from manufacturers of generic drugs which may claim to offer
equivalent therapeutic benefits at a lower price. The aggressive pricing
activities of our generic competitors could have a material adverse effect on
our operations, revenue and cash flow.
If we fail to keep up with rapid technological change and evolving therapies,
our technologies and products could become less competitive or obsolete
The pharmaceutical industry is characterized by rapid and significant
technological change. We expect that pharmaceutical technology will continue to
develop rapidly, and our future success will depend on our ability to develop
and maintain a competitive position. Technological development by others may
result in products developed by us, branded or generic, becoming obsolete before
they are marketed or before we recover a significant portion of the development
and commercialization expenses incurred with respect to these products.
Alternative therapies or new medical treatments could alter existing treatment
regimes, and thereby reduce the need for one or more of the products developed
by us, which would adversely affect our revenue and cash flow. See also
"--Generic products which third parties may develop may render our products
noncompetitive or obsolete" above.
We depend on others for clinical testing of our products which could delay our
ability to develop products
We do not currently have any internal product testing capabilities. Our
inability to retain third parties for the clinical testing of products on
acceptable terms would adversely affect our ability to develop products. Any
failures by third parties to adequately perform their responsibilities may delay
the submission of products for regulatory approval, impair our ability to
deliver products on a timely basis or otherwise impair our competitive position.
Our dependence on third parties for the development of products may adversely
affect our potential profit margins and our ability to develop and deliver
products on a timely basis.
We depend on others to manufacture our products and have not manufactured them
in significant quantities
We have never manufactured any products in commercial quantities, and
the products being developed by us may not be suitable for commercial
manufacturing in a cost-effective manner. Manufacturers of products developed by
us will be subject to current good manufacturing practices prescribed by the FDA
or other rules and regulations prescribed by foreign regulatory authorities. We
may not be able to enter into or maintain relationships either domestically or
abroad with manufacturers whose facilities and procedures comply or will
continue to comply with current good manufacturing practices or applicable
foreign requirements. Failure by a manufacturer of our products to comply with
current good manufacturing practices or applicable foreign requirements could
result in significant time delays or our inability to commercialize or continue
to market a product and could have a material adverse effect on our sales of
products and, therefore, our cash flow. In the United States, failure to comply
with current good manufacturing practices or other applicable legal requirements
can lead to federal seizure of violative products, injunctive actions brought by
the federal government, and potential criminal and civil liability on the part
of a company and our officers and employees.
We have limited sales and marketing capability, and may not be successful in
selling or marketing our products
The creation of infrastructure to commercialize oncology products is a
difficult, expensive and time-consuming process. We may not be able to establish
direct or indirect sales and distribution capabilities or be successful in
gaining market acceptance for proprietary products or for other products. We
currently have very limited sales and marketing capabilities. We currently
employ one full-time sales employee and one full-time marketing employee. To
market any products directly, we will need to develop a more fulsome marketing
and sales force with technical expertise and distribution capability or contract
with other pharmaceutical and/or health care companies with distribution systems
and direct sales forces. To the extent that we enter into co-promotion or other
licensing arrangements, any revenues to be received by us will be dependent on
the efforts of third parties. The efforts of third parties may not be
successful. Our failure to establish marketing and distribution capabilities or
to enter into marketing and distribution arrangements with third parties could
have a material adverse effect on our revenue and cash flows.
-10-
If we lose key management our business will suffer
We are highly dependent on our Chief Executive Officer to develop our
lead drug. Dr. Wood has an employment agreement with the Company, dated December
31, 2002, for an initial term of one year which automatically extends for an
additional one year periods until either party gives the other written notice of
termination at least 90 days prior to the end of the current term. Dr. Wood is
not near retirement age and he does not, to our knowledge, plan on leaving the
Company in the near future. Dr. Wood is one of the founders of the company and
he is intimately familiar with the science that underlies our lead drugs and
ancillary technologies. He also maintains a position on the clofarabine
management team that is responsible for all drug development activities relating
to that lead drug, and has been instrumental in the development and maintenance
of our key relationships within the scientific research and medical communities,
and those with our vendors, inventors, co-development partners and licensors. If
Dr. Wood was no longer employed by the company, the development of our drugs
would be significantly delayed and otherwise would be adversely impacted, and we
may be unable to maintain and develop these important relationships.
Need for additional personnel
The Company will be required to hire additional qualified scientific and
technical personnel, as well as personnel with expertise in clinical testing and
government regulation to expand our research and development programs and pursue
our product development and marketing plans. There is intense competition for
qualified personnel in the areas of the Company's activities, and there can be
no assurance that the Company will be able to attract and retain the qualified
personnel necessary for the development of its business. The Company faces
competition for qualified individuals from numerous pharmaceutical and
biotechnology companies, universities and research institutions. The failure to
attract and retain key scientific, marketing and technical personnel would have
a material adverse effect on the development of the Company's business and our
ability to develop, market and sell our products. See also "- We have limited
sales and marketing capability, and may not be successful in selling or
marketing our products" above.
Our management and internal systems might be inadequate to handle our potential
growth
Our success will depend in significant part on the expansion of our
operations and the effective management of growth. This growth has and will
continue to place a significant strain on our management and information systems
and resources and operational and financial systems and resources. To manage
future growth, our management must continue to improve our operational and
financial systems and expand, train, retain and manage our employee base. Our
management may not be able to manage our growth effectively. If our systems,
procedures, controls, and resources are inadequate to support our operations,
our expansion would be halted or delayed and we could lose our opportunity to
gain significant market share or the timing with which we would otherwise gain
significant market share. Any inability to manage growth effectively may harm
our ability to institute our business plan. The strain on our systems,
procedures, controls and resources is further heightened by the fact that our
executive office and operational development facilities are located in separate
time zones (New York, New York and Edinburgh, Scotland, respectively).
We depend on patent and proprietary rights to develop and protect our
technologies and products, which rights may not offer us sufficient protection
The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and processes.
Our success will depend on our ability to obtain and enforce protection for
products that we develop under United States and foreign patent laws and other
intellectual property laws, preserve the confidentiality of our trade secrets
and operate without infringing the proprietary rights of third parties. Through
our current license agreements, we have acquired the right to utilize the
technology covered by issued patents and patent applications, as well as
additional intellectual property and know-how that could be the subject of
further patent applications in the future. Several of the original patents to
Modrenal(R) have expired in the United States and foreign countries. Thus, we
and our licensors are pursuing patent applications to specific uses, combination
therapy and dosages or formulations of Modrenal(R). We cannot guarantee that
such applications will result in issued patents or that such patents if issued
will provide adequate protection against competitors. Patents may not be issued
from these applications and issued patents may not give us adequate protection
or a competitive advantage. Issued patents may be challenged, invalidated,
infringed or circumvented, and any rights granted thereunder may not provide us
with competitive advantages. Parties not affiliated with us have obtained or may
obtain United States or foreign patents or possess or may possess proprietary
rights relating to products being developed or to be developed by us. Patents
now in existence or hereafter issued to others may adversely affect the
development or commercialization of products developed or to be developed by us.
Our planned activities may infringe patents owned by others. Our patents to
clofarabine are licensed from Southern Research Institute. The current projected
expiration date of the license is March 2021. These patents cover pharmaceutical
compositions and methods of using clofarabine. We cannot guarantee that these
patents would survive an attack on their validity or that they will provide a
competitive advantage over our competitors. Moreover, we cannot guarantee that
Southern Research Institute was the first to invent the subject matter of these
patents. In addition, we are aware of a third party patent which is directed to
the treatment of chronic myeloid leukemia ("CML") using specific doses of
clofarabine. We do not believe that we will infringe this patent. If this patent
is asserted against us, even though we may be successful in defending against
such an assertion, our defense would require substantial financial and human
resources. And, we may
-11-
need a license to this patent to use the claimed dose in the treatment of CML.
However, we do not know if such a license is available at commercially
reasonable terms, if at all.
We could incur substantial costs in defending infringement suits brought
against us or any of our licensors or in asserting any infringement claims that
we may have against others. We could also incur substantial costs in connection
with any suits relating to matters for which we have agreed to indemnify our
licensors or distributors. An adverse outcome in any litigation could have a
material adverse effect on our ability to sell products or use patents in the
future. In addition, we could be required to obtain licenses under patents or
other proprietary rights of third parties. These licenses may not be made
available on terms acceptable to us, or at all. If we are required to, and do
not obtain any required licenses, we could be prevented from, or encounter
delays in, developing, manufacturing or marketing one or more products.
We also rely upon trade secret protection for our confidential and
proprietary information. Others may independently develop substantially
equivalent proprietary information and techniques or gain access to our trade
secrets or disclose our technology. We may not be able to meaningfully protect
our trade secrets which could limit our ability to exclusively produce products.
We require our employees, consultants, members of the scientific
advisory board and parties to collaborative agreements to execute
confidentiality agreements upon the commencement of employment or consulting
relationships or a collaboration with us. These agreements may not provide
meaningful protection of our trade secrets or adequate remedies in the event of
unauthorized use or disclosure of confidential and proprietary information.
Because we have international operations, we will be subject to risks of
conducting business in foreign countries
We have the right to manufacture, market and distribute our lead drugs,
clofarabine and Modrenal(R), in territories outside of the U.S. Specifically, we
currently market Modrenal(R) in the United Kingdom and upon receiving European
approval for clofarabine, we intend to market the drug throughout Europe.
Further, nearly half of our employees are employed by Bioenvision Limited, our
wholly-owned subsidiary with offices in Edinburgh, Scotland.
Because we have international operations in the conduct of our business,
we are subject to the risks of conducting business in foreign countries,
including:
o difficulty in establishing or managing distribution
relationships;
o different standards for the development, use, packaging, pricing
and marketing of our products and technologies;
o our inability to locate qualified local employees, partners,
distributors and suppliers;
o the potential burden of complying with a variety of foreign laws,
trade standards and regulatory requirements, including the
regulation of pharmaceutical products and treatment; and
o general geopolitical risks, such as political and economic
instability, changes in diplomatic and trade relations, and
foreign currency risks.
We do not engage in forward currency transactions which means we are
susceptible to fluctuations in the U.S. dollar against foreign currencies such
as the pound sterling. Accordingly, as the value of the dollar becomes weaker
against the pound sterling, ongoing services provided by our UK employees,
Cancer Research Organizations and other service providers become more expensive
to us. No assurance can be given that the U.S. dollar will not continue to
weaken which could have a material adverse effect on the costs associated with
our drug development activities.
We cannot predict our future capital needs and we may not be able to secure
additional financing which could affect our ability to operate as a going
concern
As of June 30, 2004, we had stockholders' equity of approximately
$27,383,000 and net working capital of approximately $18,828,000. However, we
may need additional financing to continue to fund the research and development
and marketing programs for our products and to generally expand and grow our
business. For example, we will need to employ a European sales force within the
next twelve months to capitalize on the commercial potential for clofarabine and
Modrenal(R) if and to the extent our lead drugs are at market in Europe by mid-
2005. To the extent that we will be required to fund operating losses, our
financial position would deteriorate. There can be no assurance that we will be
able to find significant additional financing at all or on terms favorable to
us. If equity securities are issued in connection with a financing, dilution to
our stockholders would result, and if additional funds are raised through the
incurrence of debt, we may be subject to restrictions on our operations and
finances. Furthermore, if we do incur debt, we may be limiting our ability to
repurchase capital stock, engage in mergers, consolidations, acquisitions and
asset sales, or alter our lines of business or accounting methods, even though
these actions would otherwise benefit our business.
-12-
If adequate financing is not available, we may be required to delay,
scale back or eliminate some of our research and development programs, to
relinquish rights to certain technologies or products, or to license third
parties to commercialize technologies or products that we would otherwise seek
to develop. Any inability to obtain additional financing, if required, would
have a material adverse effect on our ability to continue our operations and
implement our business plan.
The prices we charge for our products and the level of third-party reimbursement
may decrease and our revenues could decrease
Our ability to commercialize products successfully depends in part on
the price we may be able to charge for our products and on the extent to which
reimbursement for the cost of our products and related treatment will be
available from government health administration authorities, private health
insurers and other third-party payors. We believe that Government officials and
private health insurers are increasingly challenging the price of medical
products and services. Significant uncertainty exists as to the pricing
flexibility which distributors will have with respect to newly approved health
care products as well as the reimbursement status for such approved healthcare
products.
Third-party payors may attempt to control costs further by selecting
exclusive providers of their pharmaceutical products. If third-party payors were
to make this type of arrangement with one or more of our competitors, they would
not reimburse patients for purchasing our competing products. For example, if a
third-party payor in the U.K. were to pay patients for regimens of aromatase
inhibitor treatment but not treatments of Modrenal(R), this would cause a
decline in sales of Modrenal(R). This lack of reimbursement would diminish the
market for products developed by us and would have a material adverse effect on
us.
Our products may be subject to recall
Product recalls may be issued at our discretion or by the FDA, the FTC
or other government agencies having regulatory authority for product sales.
Product recalls, if any in the future, may harm our reputation and cause us to
lose development opportunities, or customers or pay refunds. Products may need
to be recalled due to disputed labeling claims, manufacturing issues, quality
defects, or other reasons. We do not carry any insurance to cover the risk of
potential product recall. Any product recall could have a material adverse
effect on us, our prospects, our financial condition and results of operations.
We may face exposure from product liability claims and product liability
insurance may not be sufficient to cover the costs of our liability claims
related to technologies or products
We face exposure to product liability claims if the use of our
technologies or products or those we license from third parties is alleged to
have resulted in adverse effects to users of such products. Product liability
claims may be brought by clinical trial participants, although to date, no such
claims have been brought against us. If any such claims were brought against us,
the cost of defending such claims may adversely affect our business. Regulatory
approval for commercial sale of our products does not mitigate product liability
risks. Any precautions we take may not be sufficient to avoid significant
product liability exposure. Although we have obtained product liability and
clinical trial insurance on our technologies and products at levels with which
management deems reasonable, no assurance can be given that this insurance will
cover any particular claim or that we have obtained an appropriate level of
liability insurance coverage for our development activities. We currently
maintain three million dollars per year, claims made product liability insurance
coverage which we believe is adequate. Existing coverage may not be adequate as
we further develop our products. In the future, adequate insurance coverage or
indemnification by collaborative partners may not be available in sufficient
amounts, or at acceptable costs, if at all. To the extent that product liability
insurance, if available, does not cover potential claims, we will be required to
self-insure the risks associated with those claims. The successful assertion of
any uninsured product liability or other claim against us could limit our
ability to sell our products or could cause monetary damages. In addition,
future product labeling may include disclosure of additional adverse effects,
precautions and contra indications, which may adversely impact product sales.
The pharmaceutical industry has experienced increasing difficulty in maintaining
product liability insurance coverage at reasonable levels, and substantial
increases in insurance premium costs, in many cases, have rendered coverage
economically impractical.
-13-
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Risk Factors," and in other
sections of this prospectus that are forward-looking statements. In some cases,
you can identify these statements by forward-looking words such as "may,"
"might," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential" or "continue," the negative of these terms
and other comparable terminology. These forward-looking statements which are
subject to risks, uncertainties and assumptions about us, may include
projections of our future financial performance, or anticipated growth
strategies and anticipated trends in our business. These statements are only
predictions based on our current expectations and projections about future
events. There are important factors that could cause our actual results, level
of activity, performance or achievements to differ materially from the results,
level of activity, performance or achievements expressed or implied by the
forward-looking statements, including those factors discussed under the section
entitled "Risk Factors." You should specifically consider the numerous risks
outlined under "Risk Factors." Although we believe the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness or
any of these forward-looking statements.
USE OF PROCEEDS
The selling stockholders will receive the proceeds from the resale of
the shares of common stock. We will not receive any proceeds from the resale of
the shares of common stock by the selling stockholders. We may receive
consideration upon the exercise of options and we will receive consideration
upon the conversion of warrants which we will use for general corporate
purposes.
Expenses we are expected to incur in connection with this registration
are estimated at approximately $100,000. The selling stockholders will pay all
of their underwriting commissions and discounts and counsel fees and expenses in
connection with the resale of the shares covered by this prospectus.
SELLING STOCKHOLDERS
As discussed elsewhere in this prospectus, the selling stockholders are
individuals or entities who or which either hold shares of our common stock or
may acquire the same upon the conversion of preferred shares or upon the
exercise of certain options or warrants and, as discussed under the caption
"Plan of Distribution" below, may include certain of their pledgees, donees,
transferees or other successors-in-interest who receive shares as a gift,
pledge, partnership distribution or other non-sale related transfer. The
following table sets forth, as of the date of this prospectus:
o the name of each selling stockholder;
o the number of shares of common stock beneficially owned by each
selling stockholder;
o the number of shares of common stock that may be sold in this
offering; and
o the number and percentage of shares of common stock that will be
beneficially owned by each selling stockholder following the
offering to which this prospectus relates.
The information with respect to ownership after the offering assumes the
sale of all of the shares offered and no purchases of additional shares. The
selling stockholders may offer all or part of the shares covered by this
prospectus at any time or from time to time.
For purposes of the table below, the number of shares "beneficially
owned" are those beneficially owned as determined under the rules of the SEC.
Such information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as to
which a person has sole or shared voting power or investment power and any
shares for which the person has the right to acquire such power within 60 days
through the exercise of any option, warrant or right, through conversion of any
security or pursuant to the automatic termination of a power of attorney or
revocation of a trust, discretionary account or similar arrangement. Percentages
in the table below are based on 28,882,319 shares of our common stock
outstanding as of November 9, 2004.
-14-
Shares Shares
Owned Prior to Owned After
the Offering Number of Shares the Offering
which may be Sold
Name Number Percent in this Offering Number Percent
---- ------ ------- ---------------- ------ -------
Perseus-Soros BioPharmaceutical
Fund, LP (1) 9,450,053 24.90% 9,450,053 -- --
Caduceus Private Investments,
LP(2) 1,040,410 3.52% 770,482 269,928 *
OrbiMed Associates LLC (2) 21,632 * 16,038 5,594 *
UBS Juniper Crossover Fund,
L.L.C.(2) 995,698 3.41% 363,516 632,182 2.19%
Special Situations Private
Equity Fund, L.P. (3) 250,000 * 250,000 -- --
SDS Merchant Fund, LP (4) 144,999 * 48,333 96,666 *
SDS Merchant Fund, LP (5) 354,999 1.21% 118,333 236,666 *
SDS Merchant Fund, LP (6) 380,001 1.31% 166,667 213,334 *
Orion Biomedical Offshore
Fund, LP (7) 133,875 * 44,625 89,250 *
Orion Biomedical Fund, LP (8) 616,125 2.13% 205,375 410,750 1.42%
Beaver Ltd. (9) 75,000 * 25,000 50,000 *
CKH Invest Aps. (10) 50,001 * 16,667 33,334 *
Merlin Nexus I LP (11) 673,617 2.31% 406,949 266,668 *
Alexandra Global Master Fund, ltd.(12) 310,666 1.07% 310,666 -- --
DWS Investment GmbH (13) 1,360,600 4.71% 493,934 866,666 3.00%
Michael Sistenich (14) 125,001 * 41,667 83,334 *
Global Biotechnology Fund (15) 209,369 * 76,037 133,332 *
Oklahoma Medical Research
Foundation (16) 44,166 * 44,166 -- --
Robert A. Floyd (16) 66,666 * 66,666 -- --
Raymond A. Schinazi (16) 66,666 * 66,666 -- --
Christopher B. Wood (17) 3,986,571 13.80% 2,319,905 1,666,666 5.77%
Julie Wood (17) 318,750 * 318,750 -- --
Stuart Smith (18) 700,000 2.38% 700,000 -- --
Thomas Nelson (19) 370,959 1.28% 287,523 83,436 *
Kevin Leech (20) 1,813,912 6.19% 413,912 1,400,000 4.85%
Bioaccelerate, Inc. (21) 1,162,100 3.96% 434,828 727,272 2.52%
Sterling Securities Ltd. (21) 74,045 * 74,045 -- --
Carpe DM, Inc. (21) 59,058 * 59,058 -- --
Michelle Tidball (21) 254,114 * 254,114 -- --
Weil Consulting Corporation (21) 75,000 * 75,000 -- --
Kingsley Securities Ltd. (21) 102,679 * 102,679 -- --
Fontenelle LLC (21) 50,000 * 50,000 -- --
George Margetts (22) 100,000 * 100,000 -- --
Nagy Habib (23) 46,732 * 46,732 -- --
NAB Holdings Ltd. (21) (24) 451,913 1.56% 451,913 -- --
SCO Capital Partners LLC (25), (27) 7,009,946 24.19% 7,009,946 -- --
SCO Financial Group LLC (25), (27) 100,000 * 100,000 -- --
SCO Securities LLC (25), (27) 260,290 * 260,290
Daniel DiPietro (29) 50,000 * 50,000 -- --
Jeremy Kaplan 10,000 * 10,000 -- --
Joshua Golumb 10,000 * 10,000 -- --
The Sophie C. Rouhandeh Trust(25) 150,000 * 150,000 -- --
The Chloe H. Rouhandeh Trust (25) 150,000 * 150,000 -- --
Jeffrey B. Davis (26), (27), (29) 749,243 2.57% 250,000 499,243 1.73%
Edward W. Kelly (27), (28) 356,013 1.22% 200,000 156,013 *
RRD International, Inc. (30) 130,277 * 130,277 -- --
RLB Capital, Inc. (31) 100,000 * 100,000 -- --
Stamford Capital (32) 60,000 * 60,000 -- --
Palladin Opportunity Fund LLC 13,632 * 13,632 -- --
SDS Capital Group SPC, Ltd. (33) 159,802 * 159,802 -- --
Baystar Capital II, L.P. (34) 60,000 * 60,000 -- --
North Sound Legacy Fund, LLC (35) 1,440 * 1,440 -- --
North Sound Legacy Institutional Fund, LLC (36) 15,840 * 15,840 -- --
North Sound Legacy International Fund, LLC (37) 30,720 * 30,720 -- --
Vertical Ventures, LLC (38) 115,200 * 115,200 -- --
Iroquois Capital LP (39) 76,800 * 76,800 -- --
Alpha Capital AG (40) 96,000 * 96,000 -- --
Millenium Partners LP (41) 120,000 * 120,000 -- --
Jennison Health Sciences Fund (42) 288,000 1.00% 288,000 -- --
BioPharmaceutical Portfolio (43) 30,240 * 30,240 -- --
MP BioPharmaceutical Partners, L.P. (44) 16,680 * 16,680 -- --
MP BioPharmaceutical Fund Ltd. (45) 68,880 * 68,880 -- --
MP BioPharm Market-Neutral, L.P. (46) 4,200 * 4,200 -- --
Silveroak Invenstments, Inc. (47) 48,000 * 48,000 -- --
SF Capital Partners Ltd. (48) 288,000 288,000 -- --
Perceptive Lifesciences Master Fund, Ltd. (49) 216,000 * 216,000 -- --
Cranshire Capital, L.P. (50) 48,000 * 48,000 -- --
-15-
Quogue Capital LLC (51) 14,000 * 14,000 -- --
Meditor Master Curra Fund Limited (52) 192,000 * 192,000 -- --
Atlas Equity I, Ltd. (53) 120,000 * 120,000 -- --
Steve Oliviera (54) 24,000 * 24,000 -- --
SRG Capital LLC (55) 24,000 * 24,000 -- --
StoneStreet LP (56) 60,000 * 60,000 -- --
DKR Soundshore Oasis Holding
Company, Ltd. (57) 48,000 * 48,000 -- --
Total 38,085,080 30,164,746 7,920,334
* Represents less than 1% of our outstanding shares of common stock.
(1) Includes 3,000,000 shares of Series A Preferred Stock currently
convertible into 6,000,000 shares of common stock and a warrant
to purchase 3,000,000 shares of common stock exercisable at $2.00
per share for five years from May 8, 2002. Also includes 375,044
common shares and a warrant to purchase 75,009 shares of common
stock exercisable at $7.50 for five years from May 13, 2004.
Based upon information contained in its report on Schedule 13D
filed with the Commission on May 20, 2002 and amended on January
8, 2003, Perseus-Soros BioPharmaceutical Fund, L.P. reported that
Perseus-Soros BioPharmaceutical Fund, L.P. and Perseus-Soros
Partners may be deemed to have sole power to direct the voting
and disposition of the 9,000,000 shares of common stock. By
virtue of the relationships between and among Perseus-Soros
BioPharmaceutical Fund, L.P., Perseus-Soros Partners, LLC,
Perseus BioTech Fund Partners, LLC, SFM Participation, L.P., SFM
AH, LLC, Frank H. Pearl, George Soros, Soros Fund Management LLC,
Perseus EC, LLC, Perseuspur, LLC, each of such Perseus entities,
other than Perseus-Soros BioPharmaceutical Fund, L.P. and
Perseus-Soros Partners, may be deemed to share the power to
direct the voting and disposition of the 9,000,000 shares of
common stock. After the company's May 2002 financing,
Perseus-Soros named two individuals to the company's board of
directors.
(2) Includes 353,693 shares of common stock, a warrant to purchase
669,964 shares of common stock exercisable at $2.00 per share for
five years from May 16, 2002, and a warrant to purchase 16,753
shares of common stock exercisable at $7.50 for five years from
May 13, 2004 all of which are held by Caduceus Private
Investments, LP; 7,338 shares of common stock, a warrant to
purchase 13,945 shares of common stock exercisable at $2.00 per
share for five years from May 16, 2002, and a warrant to purchase
349 shares of common stock exercisable at $7.50 for five years
from May 13, 2004, all of which are held by OrbiMed Associates
LLC; and 671,703 shares of common stock, a warrant to purchase
316,091 shares of common stock exercisable at $2.00 per share for
five years from May 16, 2002, and a warrant to purchase 7,904
shares of common stock exercisable at $7.50 for five years from
May 13, 2004, all of which are held by UBS Juniper Crossover
Fund, L.L.C. Based upon information contained in its report on
Schedule 13G filed with the Commission on June 21, 2002, OrbiMed
Advisors Inc., OrbiMed Advisors LLC, OrbiMed Capital LLC and
Samuel D. Isaly reported that they share the power to direct the
voting and disposition of the shares of common stock.
(3) Includes a Warrant to purchase 250,000 shares of common stock
exercisable at $2.00 per share for five years from May 8, 2002.
(4) Includes 48,333 shares of Series A Preferred Stock currently
convertible into 96,666 shares of common stock and a warrant to
purchase 48,333 shares of common stock exercisable at $2.00 per
share for five years from May 8, 2002, which were sold to SDS
Merchant Fund, LP by XMark Fund, LP. All securities held
registered to SDS Merchant Fund, LP are beneficially owned by SDS
Capital Group SPC, Ltd.
(5) Includes 118,333 shares of Series A Preferred Stock currently
convertible into 236,666 shares of common stock and a warrant to
purchase 118,333 shares of common stock exercisable at $3.00 per
share for five years from May 8, 2002, which were sold to SDS
Merchant Fund, LP by XMark Fund, Ltd. All securities held
registered to SDS Merchant Fund, LP are beneficially owned by SDS
Capital Group SPC, Ltd.
(6) Includes 213,334 shares of common stock and a warrant to purchase
166,667 shares of common stock exercisable at $2.00 per share for
five years from May 8, 2002. All securities held registered to
SDS Merchant Fund, LP are beneficially owned by SDS Capital Group
SPC, Ltd.
(7) Includes 133,875 shares of common stock resulting from converting
their Series A Preferred Stock and exercising a warrant on May
25, 2004.
(8) Includes 616,125 shares of common stock resulting from converting
their Series A Preferred Stock and exercising a warrant on May
25, 2004.
(9) Includes 75,000 shares of common stock resulting from converting
their Series A Preferred Stock and exercising a warrant on May 7,
2004.
-16-
(10) Includes 33,334 shares of common stock and a warrant to purchase 16,667
shares of common stock exercisable at $2.00 per share for five years from
May 14, 2002.
(11) Includes 108,334 shares of Series A Preferred Stock currently convertible
into 216,668 shares of common stock; 444,680 shares of common stock and a
warrant to purchase 12,269 shares of common stock at $7.50 per share for
five years from March 22, 2004. Based upon information contained in its
report on Schedule 13G filed with the Commission on June 28, 2002, Merlin
Nexus I (formerly known as, Merlin BioMed Private Equity Fund, L.P.)
reported that it shares the power to direct the voting and disposition of
its shares of common stock with Merlin BioMed Private Equity, LLC, its
general partner and Dominique Semon, who is the sole managing member of the
general partner.
(12) Includes 120,000 common shares; a warrant to purchase 166,666 shares of
common stock exercisable at $2.00 per share for five years from May 8,
2002; and a warrant to purchase 24,000 shares of common stock exercisable
at $7.50 per share for five years from March 22, 2004.
(13) Includes 1,350,500 shares of common stock resulting from converting their
Series A Preferred Stock, the purchase of an additional 50,501 shares of
common stock in the March 2004 financing and exercising a warrant on March
17, 2004. Also a warrant to purchase 10,100 shares of common stock
exercisable at $7.50 for five years from May 13, 2004.
(14) Includes 83,334 shares of common stock and a warrant to purchase 41,667
shares of common stock exercisable at $2.00 per share for five years from
May 16, 2002.
(15) Includes 66,666 shares of Series A Preferred Stock currently convertible
into 133,332 shares of common stock and a warrant to purchase 66,666 shares
of common stock exercisable at $2.00 per share for five years from May 14,
2002. Also includes 7,809 common shares and a warrant to purchase 1,562
shares of common stock exercisable at $7.50 for five years from May 13,
2004.
(16) Under the terms of an amendment to a license agreement with Oklahoma
Medical Research Foundation, we issued 200,000 shares of common stock, (all
of which have been sold) and a five-year warrant to purchase an additional
200,000 shares of common stock. Such warrant to purchase 200,000 shares of
common stock is exercisable at $2.33 per share for five years from May 14,
2002. On February 17, 2004, Oklahoma Medical Research Foundation did a
non-sale transfer of its warrant to purchase 66,666 shares of common stock
to Dr. Robert A. Floyd and its warrant to purchase 66,666 shares of common
stock to Dr. Raymond A. Schinazi. On April 12, 2004, Oklahoma Medical
Research Foundation converted its warrant into common shares and has 44,166
of such shares remaining.
(17) Dr. Wood is Chairman and Chief Executive Officer of the Company. Excludes
318,750 shares of common stock owned by Julie Wood, Dr. Wood's spouse, as
to which Dr. Wood disclaims any beneficial interest.
(18) Includes options to acquire 450,000 shares of the common stock which are
exercisable at $1.25 per share for five years from April 30, 2001.
(19) Includes options to acquire 200,000 shares of the common stock which are
exercisable at $1.25 per share for five years from April 30, 2001.
(20) These shares are owned of record by Phoenix Ventures Limited, a Channel
Islands (Jersey) corporation, which, to our knowledge, is wholly-owned by
Kevin Leech.
(21) Bioaccelerate, Inc. is a BVI corporation, owned of record by several
private investors. On October 8, 2003, certain options originally issued to
Bioaccelerate, Inc. were transferred as follows:
(i) NAB Holdings Ltd. received options to purchase 500,000 shares of
common stock, 350,000 of which were transferred to Michelle Tidball
on December 9, 2003; on February 20, 2004, they did a cashless
exercise of their remaining option to purchase 150,000 shares of
common stock and received 123,666 shares of common stock ;
(ii) Sterling Securities Ltd. received options to purchase 100,000 shares
of common stock;
(iii) Carpe DM, Inc. received options to purchase 80,000 shares of common
stock;
(iv) Michelle Tidball received options to purchase 100,000 shares of
common stock;
-17-
(v) Kingsley Securities Ltd. received options to purchase 124,544 shares
of common stock and on February 20, 2004, they did a cashless
exercise of this option and received 102,679 shares of common stock;
and
(vi) Fontenelle LLC received options to purchase 50,000 shares of common
stock, which it exercised in November 2003 for 50,000 shares of
common stock.
Further, on November 25, 2003, the following recipients of such options
executed a cashless exercise of such options and received the following
shares of the Company's common stock:
(i) Sterling Securities Ltd. received 74,045 shares of common stock; (ii)
Carpe DM, Inc. received 59,058 shares of common stock; and
(iii) Michelle Tidball received 73,811 shares of common stock. On December
16, 2003, Ms. Tidball executed a cashless exercise of 350,000 options
transferred to her by NAB Holdings Inc. and received 255,303 shares
of the Company's common stock, which includes 75,000 shares issued to
Weil Consulting Corporation.
Barbara Platts, in her capacity as Managing Director of Bioaccelerate,
Inc., has investment power and voting power with respect to these shares,
but disclaims any beneficial ownership thereof.
(22) Includes an option to purchase 100,000 shares of common stock exercisable
at $1.25 per share for five years from April 30, 2001.
(23) Includes an option to purchase 30,000 shares of common stock exercisable at
$1.25 per share for five years from April 30, 2001.
(24) Includes an option to purchase 450,000 shares of common stock exercisable
at $1.25 per share for five years from April 30, 2001. On December 16,
2003, NAB Holdings Ltd. exercised these options and received 328,247 shares
of common stock pursuant to a cashless exercise.
(25) Includes a warrant to purchase 1,200,000 shares of common stock exercisable
at $1.25 per share for five years from November 16, 2001 issued to SCO
Capital, LLC; a warrant to purchase 688,333 shares of common stock
exercisable at $1.50 per share for five years from May 8, 2002 issued to
SCO Capital, LLC; a warrant to purchase 100,000 shares of common stock
exercisable at $1.25 per share for five years from November 16, 2001 issued
to SCO Securities, LLC; a warrant to purchase 150,000 shares of common
stock exercisable at $1.25 per share for five years from November 16, 2001
held by the Sophie C. Rouhandeh Trust; and a warrant to purchase 150,000
shares of common stock at $1.25 per share for five years from November 16,
2001 held by the Chloe H. Rouhandeh Trust. Steven H. Rouhandeh, in his
capacity as President of SCO Capital Partners, LLC and trustee of the
trusts, has investment power and voting power with respect to these shares,
but disclaims any beneficial ownership thereof. Excludes a warrant to
purchase 70,000 shares of common stock exercisable at $1.50 per share for
five years from May 8, 2002 which were originally held by SCO Financial
Group, LLC, but transferred to (i) Daniel DiPietro (50,000), (ii) Jeremy
Kaplan (10,000), and (iii) Joshua Golumb (10,000). SCO Financial Group, LLC
served as a financial advisor to the Company through May 2004 and SCO
Capital Partners, LLC extended a $1 million secured credit facility to the
Company in November 2001. SCO Securities, LLC, a related entity, served as
placement agent to the Company in connection with the Company's May 2002
and March and May 2004 financings. As placement agent in connection with
the March and May 2004 financing, SCO Securities, LLC received a warrant to
purchase 204,452 shares of common stock exercisable at $6.25 per share for
five years from March 22, 2004 and a warrant to purchase 55,838 shares of
common stock exercisable at $6.25 per share for five years from May 13,
2004.
(26) Includes a warrant to purchase 250,000 shares of common stock exercisable
at $1.50 per share for five years from May 8, 2002. Mr. Davis is the
President of SCO Financial Group LLC, an affiliate of SCO Capital Partners
LLC. Mr. Davis disclaims beneficial ownership of all shares of common stock
deemed beneficially owned by SCO Capital Partners LLC.
(27) Indicates the selling stockholder was a former stockholder of Pathagon.
(28) Mr. Kelly has executed a consulting agreement with us pursuant to which we
issued to him 200,000 shares of common stock which vested over an eighteen
month period.
(29) Indicates the selling stockholder is a current employee of SCO Financial
Group LLC.
-18-
(30) Includes 130,277 shares of common stock resulting from the cashless
exercise of a warrant to purchase 175,000 shares of common stock on July
21, 2004.
(31) Includes a warrant to purchase 100,000 shares of common stock exercisable
at $1.25 per share for three years from March 8, 2004.
(32) Includes a warrant to purchase 60,000 shares of common stock exercisable at
$1.80 per share at anytime from March 4, 2004 through February 23, 2007.
(33) Includes 133,168 shares of common stock and warrant to purchase 26,634
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(34) Includes 50,000 shares of common stock and warrant to purchase 10,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(35) Includes 1,200 shares of common stock and warrant to purchase 240 shares of
common stock exercisable at $7.50 per share for five years from March 22,
2004.
(36) Includes 13,200 shares of common stock and warrant to purchase 2,640 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(37) Includes 25,600 shares of common stock and warrant to purchase 5,120 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(38) Includes 96,000 shares of common stock and warrant to purchase 19,200
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(39) Includes 64,000 shares of common stock and warrant to purchase 12,800
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(40) Includes 80,000 shares of common stock and warrant to purchase 16,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(41) Includes 100,000 shares of common stock and warrant to purchase 20,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(42) Includes 240,000 shares of common stock and warrant to purchase 48,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(43) Includes 25,200 shares of common stock and warrant to purchase 5,040 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(44) Includes 13,900 shares of common stock and warrant to purchase 2,780 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(45) Includes 57,400 shares of common stock and warrant to purchase 11,480
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(46) Includes 3,500 shares of common stock and warrant to purchase 700 shares of
common stock exercisable at $7.50 per share for five years from March 22,
2004.
(47) Includes 40,000 shares of common stock and warrant to purchase 8,000 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(48) Includes 240,000 shares of common stock and warrant to purchase 48,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(49) Includes 180,000 shares of common stock and warrant to purchase 36,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
-19-
(50) Includes 40,000 shares of common stock and warrant to purchase 8,000 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(51) Includes a warrant to purchase 14,000 shares of common stock exercisable at
$7.50 per share for five years from March 22, 2004.
(52) Includes 160,000 shares of common stock and warrant to purchase 32,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(53) Includes 100,000 shares of common stock and warrant to purchase 20,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(54) Includes 20,000 shares of common stock and warrant to purchase 4,000 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(55) Includes 20,000 shares of common stock and warrant to purchase 4,000 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
(56) Includes 50,000 shares of common stock and warrant to purchase 10,000
shares of common stock exercisable at $7.50 per share for five years from
March 22, 2004.
(57) Includes 40,000 shares of common stock and warrant to purchase 8,000 shares
of common stock exercisable at $7.50 per share for five years from March
22, 2004.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time by the selling stockholders. The term "selling stockholders" includes
pledgees, donees, transferees or other successors in interest selling shares
received after the date of this prospectus from the selling stockholders as a
pledge, gift, partnership distribution or other non-sale related transfer. The
number of shares beneficially owned by each selling stockholder will decrease as
and when it effects any such transfers. The plan of distribution for the selling
stockholders' shares sold hereunder will otherwise remain unchanged, except that
the transferees, pledgees, donees or other successors will be selling
stockholders hereunder. To the extent required, we may amend and/or supplement
this prospectus from time to time to describe a specific plan of distribution.
The selling stockholders will act independently of us in making
decisions with respect to the timing, manner and size of each sale. The selling
stockholders may offer their shares from time to time pursuant to one or more of
the following methods:
o on Nasdaq or on any other market on which our common stock may
from time to time be trading;
o one or more block trades in which the broker or dealer so engaged
will attempt to sell the shares of common stock as agent but may
position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker or dealer as principal and resale by the
broker or dealer for its account pursuant to this prospectus;
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
o in public or privately-negotiated transactions;
o through the writing of options on the shares; through
underwriters, brokers or dealers (who may act as agents or
principals) or directly to one or more purchasers;
o an exchange distribution in accordance with the rules of an
exchange; through agents;
o through market sales, both long or short, to the extent permitted
under the federal securities laws; or in any combination of these
methods.
The sale price to the public may be:
o the market price prevailing at the time of sale;
-20-
o a price related to the prevailing market price;
o at negotiated prices; or
o any other prices as the selling stockholder may determine from
time to time.
In connection with distributions of the shares or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the shares in
the course of hedging the positions they assume;
o sell the shares short and redeliver the shares to close out such
short positions;
o enter into option or other transactions with broker-dealers or
other financial institutions which require the delivery to them
of shares offered by this prospectus, which they may in turn
resell; and
o pledge shares to a broker-dealer or other financial institution,
which, upon a default, they may in turn resell.
In addition to the foregoing methods, the selling stockholders may offer
their shares from time to time in transactions involving principals or brokers
not otherwise contemplated above, in a combination of such methods as described
above or any other lawful methods.
Sales through brokers may be made by any method of trading authorized by
any stock exchange or market on which the shares may be listed or quoted,
including block trading in negotiated transactions. Without limiting the
foregoing, such brokers may act as dealers by purchasing any or all of the
shares covered by this prospectus, either as agents for others or as principals
for their own accounts, and reselling such shares pursuant to this prospectus. A
selling stockholder may effect such transactions directly, or indirectly through
underwriters, broker- dealers or agents acting on their behalf. In effecting
sales, brokers and dealers engaged by the selling stockholders may arrange for
other brokers or dealers to participate.
Upon our being notified by the selling stockholders that any material
arrangement has been entered into with a broker-dealer for the sale of shares
offered hereby through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, we will file a
supplement to this prospectus, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
o the names of the selling stockholder(s) and of the participating
broker-dealer(s), identifying them as underwriters, as required;
o the number of shares involved;
o the price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable; and
o other facts material to the transaction.
The shares may also be sold pursuant to Rule 144 under the securities
act, which permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the availability of certain current public information concerning the
issuer, the resale occurring following the required holding period under 144 and
the number of shares during any three-month period not exceeding certain
limitations. The selling stockholders have the sole and absolute discretion not
to accept any purchase offer or make any sale of their shares if they deem the
purchase price to be unsatisfactory at any particular time.
The selling stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the shares directly
to market makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. These broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom these broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that the selling stockholders will attempt to
sell shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the
-21-
then market price. The selling stockholders cannot assure that all or any of the
shares offered by this prospectus will be issued to, or sold by, the selling
stockholders if they do not exercise or convert the common stock equivalents
that they own. The selling stockholders and any brokers, dealers or agents, upon
effecting the sale of any of the shares offered by this prospectus, may be
deemed "underwriters" as that term is defined under the securities act or the
exchange act, or the rules and regulations under those acts. In that event, any
commissions received by the broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the securities act.
The selling stockholders, alternatively, may sell all or any part of the
shares offered by this prospectus through an underwriter. To our knowledge, none
of the selling stockholders have entered into any agreement with a prospective
underwriter and there can be no assurance that any such agreement will be
entered into. If the selling stockholders enter into such an agreement or
agreements, then we will set forth in a post-effective amendment to this
prospectus the following information:
o the number of shares being offered;
o the terms of the offering, including the name of any selling
stockholder, underwriter, broker, dealer or agent;
o the purchase price paid by any underwriter;
o any discount, commission and other underwriter compensation;
o any discount, commission or concession allowed or reallowed or
paid to any dealer;
o the proposed selling price to the public; and
o other facts material to the transaction.
We will also file such agreement or agreements. In addition, if we are
notified by the selling stockholders that a donee, pledgee, transferee or other
successor-in-interest intends to sell more than 500 shares, a supplement to this
prospectus will be filed.
The selling stockholders and any other persons participating in the sale
or distribution of the shares will be subject to applicable provisions of the
exchange act and the rules and regulations under the exchange act, including,
without limitation, Regulation M. These provisions may restrict certain
activities of, and limit the timing of purchases and sales of any of the shares
by, the selling stockholders or any other such person. Furthermore, under
Regulation M, persons engaged in a distribution of securities are prohibited
from simultaneously engaging in market making and certain other activities with
respect to the same securities for a specified period of time prior to the
commencement of the distribution, subject to specified exceptions or exemptions.
All of these limitations may affect the marketability of the shares.
We have agreed to pay all costs and expenses incurred in connection with
the registration of the shares offered by this prospectus, except that the
selling stockholder will be responsible for all selling commissions, transfer
taxes and related charges in connection with the offer and sale of the shares
and the fees of the selling stockholder's counsel.
We have agreed with the selling stockholders to keep the registration
statement of which this prospectus forms a part continuously effective until the
earlier of the date that the shares covered by this prospectus may be sold
pursuant to Rule 144(k) of the securities act and the date that all of the
shares registered for sale under this prospectus have been sold.
We have agreed to indemnify the selling stockholders, or their
respective transferees or assignees, against certain liabilities, including
liabilities under the securities act, or to contribute to payments that the
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest, may be required to make in respect of those liabilities.
DESCRIPTION OF SECURITIES
Description of Common Stock
Number of Authorized and Outstanding Shares. Our Certificate of
Incorporation authorizes the issuance of 70,000,000 shares of common stock,
$.001 par value per share, of which 28,882,319 shares were outstanding on
November 9, 2004. All of the outstanding shares of common stock are fully paid
and non-assessable.
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Voting Rights. Holders of shares of common stock are entitled to one
vote for each share on all matters to be voted on by the stockholders. Holders
of common stock have no cumulative voting rights. Accordingly, the holders of a
simple majority of the outstanding common stock and Series A convertible
preferred stock, voting together as a class at a stockholders meeting at which a
quorum is present, can elect all of the directors nominated for election at the
meeting.
Other. Holders of common stock have no preemptive rights to purchase our
common stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock.
Transfer Agent. Shares of common stock are registered at the transfer
agent and are transferable at such office by the registered holder (or duly
authorized attorney) upon surrender of the common stock certificate, properly
endorsed. No transfer shall be registered unless we are satisfied that such
transfer will not result in a violation of any applicable federal or state
securities laws. The transfer agent for our common stock is Liberty Transfer
Company, 274B New York Avenue, Huntington, New York 11743, Attention: Ms. Lisa
Conger.
Description of Preferred Stock
Number of Authorized Shares. Our certificate of incorporation authorizes
the issuance of up to 20,000,000 shares of preferred stock, par value $.001 per
share, in one or more series with such limitations and restrictions as may be
determined in the sole discretion of our board of directors, with no further
authorization by stockholders required for the creation and issuance thereof.
We have designated 5,920,000 shares of our preferred stock as Series A
convertible preferred stock, of which 3,275,000 shares were issued and
outstanding as of November 9, 2004. The holders of the Series A convertible
preferred stock vote as a single class with the common stock, on an as-converted
basis, on all matters upon which the holders of the common stock are entitled to
vote. Each outstanding share of Series A convertible preferred stock may
currently be converted into two shares of common stock. The shares of Series A
convertible preferred stock shall be automatically convertible into shares of
common stock if the market price of the common stock after one year from the
date of issuance is $10.00 or more for 30 consecutive trading days and the
trading volume is at least 150,000 shares per trading day during such 30-day
period. Holders of Series A convertible preferred stock have a liquidation
preference over holders of common stock of $3.00 per share. Holders of the
Series A convertible preferred stock are entitled to an annual 5% dividend which
may be paid in cash or additional shares of common stock in our sole discretion.
Warrants
As of November 9, 2004, there were outstanding warrants to purchase an
aggregate of 8,475,868 shares of our common stock, exercisable at prices ranging
from $1.25 to $7.50 per share. The weighted average exercise price of the
warrants is $2.36.
Stock Options
As of November 9, 2004, there were outstanding options to purchase an
aggregate of 4,441,000 shares of our common stock, exercisable at prices ranging
from $0.735 to $8.25 per share, of which, options to purchase 3,133,334 shares
were exercisable. The weighted average exercise price of the options is $1.84.
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LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus
and other legal matters relating to this offering will be passed on by Paul,
Hastings, Janofsky & Walker LLP, New York, New York.
EXPERTS
Our auditors are Grant Thornton LLP. Our consolidated financial
statements as at and for the years ended June 30, 2004 and June 30, 2003
included in our annual report on Form 10-KSB for the year ended June 30, 2004
and incorporated by reference herein, have been incorporated by reference herein
in reliance upon the report of Grant Thornton LLP, independent registered public
accountants, given on the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any materials we have
filed with the SEC at the SEC's public reference rooms. The SEC also maintains a
web site (http://www.sec.gov) that contains reports, proxy statements and other
information concerning us. Please call the SEC at 1-800-SEC-0330 for information
concerning the operations of the public reference rooms or visit the SEC at the
following locations:
Public Reference Room Midwest Regional Office
450 Fifth Street Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois 60661-2511
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act to register the securities to be sold in this offering. This
prospectus, which is part of the registration statement, does not contain all of
the information set forth in the registration statement or the exhibits and
schedules to the registration statement. For further information regarding
Bioenvision and our securities, please refer to the registration statement and
the documents filed as exhibits to the registration statement.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those filed documents. The information incorporated by
reference is considered to be part of this prospectus, and information that we
file later with the SEC will automatically update and supersede this
information.
The following document, which has been filed with the SEC, is hereby
incorporated by reference:
o Our annual report on Form 10-KSB for the year ended June 30, 2004
filed on September 24, 2004 (File No. 001-31787); and
o Our quarterly report on Form 10-QSB for the quarter ended
September 30, 2004 (file No. 001-31787).
All other reports and documents subsequently filed by us with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
after the date of this prospectus and prior to the termination of the offering
are deemed incorporated by reference into this prospectus and a part hereof from
the date of filing of those documents. Any statement contained in any document
incorporated by reference shall be deemed to be modified or superseded for the
purposes of this prospectus to the extent that a statement contained in a later
document modifies or supersedes such statement. Any statements so modified or
superseded shall not be deemed to constitute a part of this prospectus, except
as modified or superseded.
We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request of such person, a copy of any or all of
the documents referred to above which have been or may be incorporated by
reference into this prospectus (other than the exhibits to such documents).
Requests for such documents should be directed to Bioenvision Inc., 345 Park
Avenue, 41st Floor, New York, New York 10154, Attention: David P. Luci
(telephone: (212) 750-6700).
We have not authorized any dealer, salesperson or other person to give
any information or represent anything not contained in this prospectus. You
should not rely on any unauthorized information. This prospectus does not offer
to sell or solicit an offer to buy any shares in any jurisdiction in which it is
unlawful. The information in this prospectus is current as of the date on the
cover.
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DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our bylaws provide that directors and officers shall be indemnified by
us to the fullest extent authorized by the Delaware General Corporation Law,
against all expenses and liabilities reasonably incurred in connection with
services for us or on our behalf.
Insofar as indemnification for liabilities arising under the Securities
Act might be permitted to directors, officers or persons controlling our company
under the provisions described above, we have been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
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You should rely only on the information ___________________
incorporated or contained in this prospectus or
any supplement. We have not authorized anyone
else to provide you with different or additional
information. This prospectus is not an offer to
sell to - nor is it seeking an offer to buy these 30,164,746 Shares of Common Stock
securities from - any person in any jurisdiction
in which it is illegal or impermissible to make
an offer or solicitation. You should not assume BIOENVISION, INC.
that the information in this prospectus or any
supplement is accurate as of any date other than
the date on the front of those documents. PROSPECTUS
TABLE OF CONTENTS November 17, 2004
Page
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Prospectus Summary............................1 ___________________
The Offering..................................3
Risk Factors..................................4
Disclosure Regarding Forward Looking
Statements..................................14
Use of Proceeds..............................14
Selling Stockholders.........................14
Plan of Distribution.........................20
Description of Securities....................22
Legal Matters................................24
Experts......................................24
Where You Can Find More Information..........24
Incorporation by Reference...................24
Disclosure of Commission Position on
Indemnification For Securities Act Liabilities25
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