As filed with the Securities and Exchange Commission on October 22, 2001
Registration No. 333-71176
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ISIS PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 33-0336973
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2292 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008
(760) 931-9200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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B. LYNNE PARSHALL, ESQ.
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ISIS PHARMACEUTICALS, INC.
2292 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008
(760) 931-9200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
JULIE M. ROBINSON, ESQ. DONALD J. MURRAY, ESQ.
COOLEY GODWARD LLP DEWEY BALLANTINE LLP
4365 EXECUTIVE DRIVE, SUITE 1100 1301 AVENUE OF THE AMERICAS
SAN DIEGO, CA 92121 NEW YORK, NY 10019
(858) 550-6000 (212) 259-8000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
Proposed maximum Proposed maximum
Title of each class of Amount to be offering price per aggregate offering Amount of
securities to be registered registered(1) share(2) price(2) registration fee(3)
Common Stock, $.001 per
share.................. 5,750,000 $18.28 $105,110,000 $26,278
(1) Includes 750,000 shares of our common stock which may be purchased by the
Underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 based upon the average
of the high and low prices of our common stock as reported on the Nasdaq
National Market on October 2, 2001.
(3) Previously paid by the Registrant.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8 (a),
may determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE IN WHICH THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS Subject to completion October 22, 2001
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5,000,000 Shares
[LOGO]
Common Stock
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We are selling all of the 5,000,000 shares of common stock offered by this
prospectus.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ISIP." On October 18, 2001, the last reported sales price of our common stock
on the Nasdaq National Market was $19.72 per share.
Investing in our common stock involves a high degree of risk. Before buying any
shares you should read the discussion of material risks of investing in our
common stock in "Risk factors" beginning on page 5 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
Per Share Total
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Public offering price $ $
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Underwriting discount and commissions $ $
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Proceeds, before expenses, to us $ $
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The underwriters may also purchase from us up to an additional 750,000 shares of
our common stock at the public offering price less the underwriting discount, to
cover over-allotments, if any, within 30 days of the date of this prospectus.
The underwriters are offering the shares of our common stock as described in
"Underwriting." Delivery of the shares will be made on or about ,
2001.
UBS Warburg
Robertson Stephens
Needham & Company, Inc.
Fortis Securities Inc.
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You should rely only on the information contained in this prospectus, including
information incorporated by reference. We have not authorized anyone else to
provide you with different information. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of this prospectus or that any document incorporated by reference is
accurate as of any date other than its filing date. You should not consider this
prospectus to be an offer or solicitation relating to the securities in any
jurisdiction in which such an offer or solicitation relating to the securities
is not authorized. Furthermore, you should not consider this prospectus to be an
offer or solicitation relating to the securities if the person making the offer
or solicitation is not qualified to do so, or if it is unlawful for you to
receive such an offer or solicitation.
TABLE OF CONTENTS
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Prospectus summary..................... 1
The Offering........................... 3
Other Information...................... 3
Risk factors........................... 5
Disclosure regarding forward-looking
statements........................... 12
Use of proceeds........................ 12
Capitalization......................... 13
Market price of common stock........... 14
Dividend policy........................ 14
Dilution............................... 15
Selected consolidated financial data... 16
Underwriting........................... 17
Where you can find more information.... 19
Incorporation of certain documents by
reference............................ 19
Legal matters.......................... 20
Experts................................ 20
Isis Pharmaceuticals-TM-, GeneTrove-TM- and Ibis Therapeutics-TM- are trademarks
of Isis. Vitravene-Registered Trademark- is a registered trademark of
Novartis AG. This prospectus also contains trademarks and servicemarks of other
companies.
Prospectus summary
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.
THIS PROSPECTUS INCLUDES INFORMATION ABOUT THE SHARES WE ARE OFFERING, AS WELL
AS INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE
YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY, INCLUDING THE DOCUMENTS
INCORPORATED BY REFERENCE. AS USED IN THIS PROSPECTUS, UNLESS OTHERWISE
SPECIFIED OR THE CONTEXT REQUIRES OTHERWISE, THE TERMS "ISIS," "WE," "OUR" AND
"US" REFER TO ISIS PHARMACEUTICALS, INC.
BUSINESS OVERVIEW
We are a biopharmaceutical company pioneering RNA-based drug discovery
technologies to identify and commercialize novel drugs to treat significant
unmet medical needs. RNA, or ribonucleic acid, is a molecule that provides to a
cell the information needed to produce proteins, some of which are involved in
disease. Interference with RNA can keep proteins involved in disease from being
produced. We have strong proprietary positions in RNA-based drug discovery
technologies. With our primary technology, antisense, we create inhibitors
designed to bind with high specificity to their intended RNA target. With our
Ibis technology, we use our expertise in RNA to design small molecule
therapeutics that interfere with RNA. We also use our antisense technology in
collaborations with pharmaceutical company partners to identify and prioritize
attractive gene targets for their drug discovery programs. We believe we have
established a leadership position in exploiting RNA as a target for therapeutic
intervention.
We have used our antisense technology to commercialize our first product,
Vitravene. Vitravene demonstrates our ability to meet FDA regulatory
requirements and to commercially manufacture antisense drugs. We have 12
products in our development pipeline with eight in human clinical trials
designed to assess efficacy. Our products in development address numerous
therapeutic areas with major market potential, including cancer, psoriasis,
rheumatoid arthritis, hepatitis C and diabetes. We are expanding the therapeutic
opportunities for antisense drugs by developing a variety of formulations to
enhance patient compliance and convenience. We are also pursuing
second-generation drugs that may be able to be dosed as infrequently as once per
month and that may be able to be dosed orally.
ISIS 3521, our most advanced product currently under development, is undergoing
Phase III clinical trials in combination with traditional chemotherapy cancer
drugs. We initiated this Phase III trial in late 2000 for patients with
non-small cell lung cancer, the most common form of lung cancer, based on
promising results in patients in the Phase II trial. Results from this study
showed a median survival time of 15.9 months in patients using our drug in
combination with standard chemotherapy. The typical median survival time of
similar cancer patients receiving standard chemotherapy alone is approximately
seven or eight months. In November 2000, the FDA granted ISIS 3521 fast track
review status. Prior to the end of 2001, we also plan to initiate Phase III
clinical trials for another product, ISIS 2302, in an inflammatory bowel disease
known as Crohn's disease. We have five additional products undergoing Phase II
clinical trials.
Our GeneTrove division uses our antisense technology as a tool to provide
pharmaceutical companies with important information about genes that these
companies are interested in targeting for their drug discovery programs. We
provide this information rapidly and efficiently, using the same proprietary
methods and systems that we developed to create antisense drugs. We have
collaborations in place with five major pharmaceutical partners for these
services, including Eli Lilly and Company, Celera Genomics Group, Abbott
Laboratories Inc., Aventis (Rhone-Poulenc Rorer) and the R.W. Johnson
Pharmaceutical Research Institute, a member of the Johnson & Johnson family of
companies. We have supplemented our GeneTrove services business with the
introduction in August 2001 of a subscription database product in August 2001.
This database is expected to contain proprietary information about the function
of thousands of genes, which we believe pharmaceutical companies will find
valuable in
1
designing and prioritizing their drug discovery programs. Our GeneTrove division
is generating near-term revenues while enhancing our own antisense drug
discovery efforts and our patent portfolio.
Our Ibis Therapeutics division designs small molecule drugs that work by binding
to RNA, in contrast to traditional drugs, which bind to proteins. Our scientists
have invented methods of identifying RNA targets and screening for drugs which
bind to RNA. Since its inception, Ibis has received significant financial
support from various federal government agencies to use its technology for the
development of RNA-based countermeasures to biological warfare. In June 2000,
Ibis initiated its first collaboration with a pharmaceutical industry partner,
Agouron Pharmaceuticals, Inc., a Pfizer company, in a research partnership worth
up to $37 million. In May 2001, we received a $2.5 million milestone payment
under this collaboration.
We have a broad patent portfolio relating to our technologies. We own or have an
exclusive license to more than 800 issued patents, which we believe represents
the largest antisense and RNA-oriented patent estate in the pharmaceutical
industry. Our intellectual property is a strategic asset of the company. We are
exploiting our patent estate to generate near-term revenues for the company.
RECENT DEVELOPMENTS
ELI LILLY AND COMPANY. In August 2001, we entered into a broad strategic
relationship with Lilly that has four key components:
- Lilly purchased $75 million of our common stock at $18 per share.
- We licensed to Lilly rights to ISIS 3521, our antisense drug in Phase III
trials for the treatment of non-small cell lung cancer.
- We initiated with Lilly a four-year antisense drug discovery collaboration in
the areas of metabolic and inflammatory diseases and a related GeneTrove
collaboration to determine the function of up to 1,000 genes.
- Lilly committed to lend us, interest-free, up to $100 million over a four-year
period to fund our obligations under the drug discovery collaboration. This
loan is repayable at our option in either cash or our common stock, valued at
$40 per share.
If this collaboration is successful, the cumulative contingent funds over the
life of the development process have the potential to exceed these committed
funds.
MERCK & CO., INC. In May 2001, we licensed to Merck our preclinical antisense
drug candidate, ISIS 113715, for adult onset, or Type 2, diabetes. Under the
agreement, Merck has agreed to develop and commercialize ISIS 113715 in exchange
for an upfront fee and milestone payments and royalties upon its successful
development and approval. In August 2001, we received a $2 million milestone
payment under this agreement.
CELERA GENOMICS GROUP. In July 2001, Celera and our GeneTrove division entered
into a collaboration to identify the biological role of more than 200 genes.
Celera has the right to select for study a portfolio of genes, from which Celera
can further select a limited number of genes for their exclusive use. The data
for the remainder of the genes will be included in our human gene function
database. We retain the rights to develop and commercialize antisense drugs to
genes in the collaboration. Celera has agreed to pay us fees for this 18-month
collaboration.
2
The offering
Common stock offered......................... 5,000,000 shares
Common stock outstanding after the
offering................................... 52,087,796 shares
Use of proceeds.............................. For research, drug discovery and development
activities, including preclinical and
clinical studies, production of compounds for
studies, capital expenditures, and other
general corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol................ "ISIP"
Unless we specifically state otherwise, the information in this prospectus
assumes that the underwriters do not exercise their option to purchase up to
750,000 shares of common stock to cover over-allotments.
The number of shares of our common stock to be outstanding after the offering in
the table above is based on the number of shares outstanding as of
September 30, 2001, and does not include, as of that date:
- 8,443,801 shares of our common stock issuable upon exercise of outstanding
options issued under our equity incentive plans at a weighted average exercise
price of $9.47 per share and an additional 2,228,952 shares of common stock
available for future grants under our equity incentive plans;
- 1,029,881 shares of our common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $25.16 per share;
- 1,562,020 shares of our common stock issuable upon conversion of our
outstanding Series A and Series B Convertible Preferred Stock and related
accreted dividends, assuming a stock price of $17.05 per share, the closing
price of our common stock on September 30, 2001;
- 3,007,182 shares of our common stock issuable upon the conversion of our
outstanding indebtedness assuming a stock price of $17.05 per share, the
closing price of our common stock on September 30, 2001; and
- shares of our common stock issuable to Hybridon, with a maximum of 2,071,429
shares and a minimum of 673,077 shares.
Other information
Isis Pharmaceuticals, Inc. was incorporated in California in January 1989, and
in April 1991 we changed our state of incorporation to Delaware. Our executive
offices are located at 2292 Faraday Avenue, Carlsbad, California 92008, and our
telephone number is (760) 931-9200. Information contained on our website,
www.isip.com, does not constitute part of this prospectus.
Our research and development programs have continued to evolve subsequent to our
description of those programs in documents incorporated by reference in this
prospectus. Some programs may have been deferred or abandoned, and some programs
may have been added. While these changes may be material as to any particular
program, we do not believe that, except as may be described herein or in a
document incorporated by reference, they are material to our business overall.
3
Summary consolidated financial data
The as adjusted balance sheet data gives effect to the sale of 5,000,000 shares
of our common stock in this offering at an assumed price of $19.72 per share,
after deducting the underwriting discount and estimated offering expenses. The
following data should be read together with the financial statements, the
related notes and other financial information included in this prospectus and
incorporated herein by reference.
Nine Months
ended
Years Ended December 31, September 30,
---------------------------------------------------- -------------------
2000 1999 1998 1997 1996 2001 2000
Statement of operations data (unaudited)
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(in thousands, except per share amounts)
Total revenues....................................... $37,255 $33,925 $39,171 $32,722 $22,663 $31,529 $29,319
Research and development expenses.................... 57,014 66,413 62,200 55,940 45,653 58,954 41,986
Net loss applicable to common stock.................. (54,699) (59,645) (42,983) (31,066) (26,521) (59,175) (38,936)
Basic and diluted net loss per share................. (1.48) (2.08) (1.60) (1.17) (1.04) (1.43) (1.08)
Shares used in computing basic and diluted net loss
per share.......................................... 37,023 28,703 26,873 26,456 25,585 41,517 36,172
As of September 30,
2001
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As
Actual Adjusted(1)
Balance sheet data
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(in thousands,
unaudited)
Cash, cash equivalents and short-term investments........... $213,202 $305,576
Working capital............................................. 183,852 276,226
Total assets................................................ 294,412 386,786
Long-term debt and capital lease obligations, less current
portion................................................... 123,651 123,651
Accumulated deficit......................................... (370,635) (370,635)
Stockholders' equity........................................ 118,030 210,404
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(1) THE FINANCIAL DATA ABOVE EXCLUDES TRANSACTIONS SUBSEQUENT TO SEPTEMBER 30,
2001, INCLUDING $5 MILLION RECEIVED FROM LILLY ON OCTOBER 18, 2001 RELATED
TO THE $100 MILLION LOAN LILLY COMMITTED TO LEND ISIS.
4
Risk factors
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE
OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE RISKS
DESCRIBED BELOW BEFORE PURCHASING OUR COMMON STOCK. IF ANY OF THE FOLLOWING
RISKS ACTUALLY OCCUR, OUR BUSINESS COULD BE MATERIALLY HARMED, AND OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED.
AS A RESULT, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MIGHT
LOSE ALL OR PART OF YOUR INVESTMENT.
If we or our partners fail to obtain regulatory approval for our products, we
will not be able to sell them.
We and our partners must conduct time-consuming, extensive and costly clinical
trials to show the safety and efficacy of each of our drug candidates, before a
drug candidate can be approved for sale. We must conduct these trials in
compliance with U.S. Food and Drug Administration regulations and with
comparable regulations in other countries. If the FDA or another regulatory
agency believes that we or our partners have not sufficiently demonstrated the
safety or efficacy of our drug candidates, it will not approve them or will
require additional studies which can be time consuming and expensive, and which
will delay commercialization of a drug candidate. We and our partners may not be
able to obtain necessary regulatory approvals on a timely basis, if at all, for
any of our drug candidates. Failure to receive these approvals or delays in such
receipt could prevent or delay commercial introduction of a product and, as a
result, could negatively impact our ability to generate revenue from product
sales. In addition, following approval of a drug candidate, we and our partners
must comply with comprehensive government regulations regarding how we
manufacture, market and distribute products. If we fail to comply with these
regulations, regulators could force us to withdraw a drug candidate from the
market or impose other penalties or requirements that could have a similar
negative impact.
We have only introduced one commercial product, Vitravene. We cannot guarantee
that any of our other drug candidates will be safe and effective, be approved
for commercialization or will be successfully commercialized by us or our
partners.
If the results of clinical testing indicate that any of our drugs under
development are not suitable for commercial use, or if additional testing is
required to demonstrate such suitability, we may need to abandon one or more of
our drug development programs.
Drug discovery and development has inherent risks, including the risk that
molecular targets prove not to be important in a particular disease, the risk
that compounds that demonstrate attractive activity in preclinical studies do
not demonstrate similar activity in human beings, and the risk that a compound
is not safe or effective for use in humans. Antisense technology in particular
is relatively new and unproven. Most of our resources are being applied to
create safe and effective drugs for human use; any of the risks described above
could prevent us from doing so. In the past, we have invested in clinical
studies of drug candidates, including some that remain in our pipeline, that
have not resulted in proof of efficacy against targeted indications.
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5
If our products are not accepted by the market, we are not likely to generate
significant revenues or become profitable.
Our success will depend upon the medical community, patients and third party
payors accepting our products as medically useful, cost-effective and safe. We
cannot guarantee that any of our products in development, if approved for
commercialization, will be used by doctors to treat patients. We currently have
one commercially available product, Vitravene, a treatment for CMV retinitis in
AIDS patients, which addresses a small market. We and our partners may not be
successful in commercializing additional products.
The degree of market acceptance for any of our products depends upon a number of
factors, including:
- the receipt and scope of regulatory approvals;
- the establishment and demonstration in the medical and patient community of
the efficacy and safety of our drug candidates and their potential advantages
over competing products;
- the cost of our drug candidates compared to other available therapies;
- the patient convenience of the dosing regimen for our drug candidates; and
- reimbursement policies of government and third-party payors.
Based on the profile of our drug candidates, physicians, patients, patient
advocates, payors or the medical community in general may not accept and use any
products that we may develop.
If any of our collaborative partners fail to fund our collaborative programs or
develop or sell any of our products under development, or if we are unable to
obtain additional partners, progress on our drug development programs could be
delayed or stop.
We have entered into collaborative arrangements with third parties to develop
certain product candidates. We enter into these collaborations in order to:
- fund our research and development activities;
- access manufacturing by third parties;
- seek and obtain regulatory approvals; and
- successfully commercialize existing and future product candidates.
If any of our partners fails to develop or sell any drug in which we have
retained a financial interest, our business may be negatively affected. We
cannot be sure that any of these collaborations will be continued or result in
commercialized drugs. Our collaborators can terminate their relationships with
us under certain circumstances, some of which are outside of our control. Our
most advanced drug candidate, ISIS 3521, is being developed collaboratively with
Lilly, with the development funded by Lilly. Additional drug candidates in our
development pipeline are being developed and/or funded by corporate partners
including Merck & Company, Inc. and Elan Corporation, plc. Failure by any of
these pharmaceutical company partners to continue to fund and/or develop these
drug candidates would have a material adverse effect on our business.
Certain of our partners are pursuing other technologies or developing other drug
candidates either on their own or in collaboration with others, including our
competitors, to develop treatments for the same diseases targeted by our own
collaborative programs. Such competition may negatively impact
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6
the partners' focus on and commitment to our drug candidate and, as a result,
could delay or otherwise negatively affect the commercialization of such drug
candidate.
Historically, corporate partnering has played a key role in our strategy to fund
our development programs and to add key development resources. We plan to
continue to rely on additional collaborative arrangements to develop and
commercialize our products. However, we may not be able to negotiate additional
attractive collaborative arrangements, and, even if negotiated, the
collaborative arrangements may not be successful.
If our GeneTrove business is unable to market its products and services as
planned, we could lose our investment in this technology.
Our business could suffer if pharmaceutical companies do not avail themselves of
our GeneTrove target validation or gene functionalization services. We have
invested in the development of a gene target validation and gene
functionalization service business for validation and functionalization of gene
targets for drug discovery. If pharmaceutical companies fail to use these
services due to competition or other factors, our GeneTrove business could fail
to make the planned contribution to our financial performance.
If we fail to introduce our human gene function database in a timely fashion or
if potential customers do not subscribe to the database at the level we have
planned, our GeneTrove business could fail to make the planned contribution to
our financial performance.
We have incurred losses, and our business will suffer if we fail to achieve
profitability in the future.
Because drug discovery and development and the development of database products
and research services require substantial lead time and money prior to
commercialization, our expenses have exceeded our revenues since we were founded
in January 1989. As of September 30, 2001, our accumulated losses were
approximately $371 million. Most of the losses resulted from costs incurred in
connection with our research and development programs and from general and
administrative costs associated with our operations. Most of our revenue has
come from collaborative arrangements, with additional revenue from interest
income and research grants and the sale or licensing of patents. Our current
product revenues are derived solely from sales of Vitravene. This product has
limited sales potential. We expect to incur additional operating losses over the
next several years, and these losses may increase if we cannot increase or
sustain revenue. We may not successfully develop any additional products or
services, or achieve or sustain future profitability.
If we fail to obtain timely funding, we may need to curtail or abandon some of
our programs.
Most of our product candidates are still undergoing clinical trials or are in
the early stages of research and development. All of our products under
development will require significant additional research, development,
preclinical and/or clinical testing, regulatory approval and a commitment of
significant additional resources prior to their commercialization. Based on our
current operating plan, we believe that our available cash and existing sources
of revenue and credit, together with the proceeds from this offering, will be
adequate to satisfy our capital needs for the foreseeable future. If we fail to
meet our goals regarding commercialization of our drug products, gene function
database product and research
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7
services and licensing of our proprietary technologies, we may need additional
funding in the future. Our future capital requirements will depend on many
factors, such as the following:
- the profile and launch timing of our drugs;
- continued scientific progress in our research, drug discovery and development
programs;
- the size of these programs and progress with preclinical and clinical trials;
- the time and costs involved in obtaining regulatory approvals;
- competing technological and market developments, including the introduction of
new therapies that address our markets;
- success in the marketing of our gene function database and research service
products; and
- changes in existing collaborative relationships and our ability to establish
and maintain additional collaborative arrangements.
If we need additional funds we may need to raise them through public or private
financing. Additional financing may not be available, at all or on acceptable
terms. If additional funds are raised by issuing equity securities, the shares
of existing stockholders will be diluted and their price may decline. If
adequate funds are not available, we may be required to cut back on one or more
of our research, drug discovery or development programs or obtain funds through
arrangements with collaborative partners or others. These arrangements may
require us to give up rights to certain of our technologies, product candidates
or products.
If we cannot manufacture our products or contract with a third party to
manufacture our products at costs that allow us to charge competitive prices to
buyers, we will not be able to market products profitably.
If we are successful commercializing any of our drug candidates, we may be
required to establish large-scale commercial manufacturing capabilities. In
addition, as our drug development pipeline increases and matures, we will have a
greater need for clinical trial and commercial manufacturing capacity.
Pharmaceutical products of the chemical class represented by our drug
candidates, called "oligonucleotides", have never been manufactured on a large
scale, and to our knowledge there is no commercial scale oligonucleotide
manufacturer in business today. We have a limited number of suppliers for
certain capital equipment and raw materials that we use to manufacture our
drugs, and some of these suppliers will need to increase their scale of
production to meet our projected needs for commercial manufacturing. Further, we
must continue to improve our manufacturing processes to allow us to reduce our
product costs. We may not be able to manufacture at a cost or in quantities
necessary to make commercially successful products.
Also, manufacturers, including us, must adhere to the FDA's current Good
Manufacturing Practices regulations, which are enforced by the FDA through its
facilities inspection program. The manufacturers may not be able to comply or
maintain compliance with Good Manufacturing Practices regulations.
Non-compliance could significantly delay our receipt or marketing approval or
result in FDA enforcement action.
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8
Risk factors
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If we fail to compete effectively, our products will not contribute significant
revenues.
Our competitors are engaged in all areas of drug discovery throughout the world,
are numerous, and include, among others, major pharmaceutical companies and
specialized biopharmaceutical firms. Other companies are engaged in developing
antisense technology. Our competitors may succeed in developing drug candidates
that are more effective than any drug candidates that we are developing. These
competitive developments could make our products obsolete or non-competitive.
Our GeneTrove division competes with others in the use of antisense technology
for gene target validation and gene functionalization, as well as with other
technologies useful for target validation and gene functionalization. Our
competition may provide services having more value to potential customers or may
market their services more effectively to such potential customers. In either
case, our gene functionalization and target validation businesses may not
contribute to our financial performance as planned.
Many of our competitors have substantially greater financial, technical and
human resources than we do. In addition, many of these competitors have
significantly greater experience than we do in conducting preclinical testing
and human clinical trials of new pharmaceutical products and in obtaining FDA
and other regulatory approvals of products for use in health care. Accordingly,
our competitors may succeed in obtaining regulatory approval for products
earlier than we do. We will also compete with respect to marketing and sales
capabilities, areas in which we have limited or no experience.
If we are unable to protect our patents or our proprietary rights, others may be
able to compete more directly against us.
Our success depends to a significant degree upon our ability to develop and
secure intellectual property rights to proprietary products and services.
However, patents may not be granted on any of our pending patent applications in
the United States or in other countries. In addition, the scope of any of our
issued patents may not be sufficiently broad to adequately protect our
competitive advantage. Furthermore, our issued patents or patents licensed to us
could potentially be successfully challenged, invalidated or circumvented so
that our patent rights would not create an effective competitive barrier.
Intellectual property litigation could be expensive and prevent us from pursuing
our programs.
It is possible that in the future we may have to defend our intellectual
property rights. In the event of an intellectual property dispute, we may be
forced to litigate to defend our rights or assert them against others. Disputes
could involve litigation or proceedings declared by the US Patent and Trademark
Office or the International Trade Commission. Intellectual property litigation
can be extremely expensive, and this expense, as well as the consequences should
we not prevail, could seriously harm our business.
On July 9, 2001, we initiated litigation against Sequitur, Inc. alleging
infringement of U.S. Patent 6,001,653. If we do not prevail in the defense of
this patent, it could impact our ability to realize future licensing revenues.
If a third party claims that our products or technology infringe their patents
or other intellectual property rights, we might be forced to discontinue an
important product or product line, alter our products and processes, pay license
fees or cease certain activities. We may not be able to obtain a
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9
Risk factors
--------------------------------------------------------------------------------
license to such intellectual property on favorable terms, if at all. There are
many patents issued or applied for in the biotechnology industry, and we may not
be aware of patents or applications held by others that relate to our business.
This is especially true since patent applications in the US are filed
confidentially. Moreover, the validity and breadth of biotechnology patents
involve complex legal and factual questions for which important legal issues
remain unresolved.
If we do not progress in our programs as anticipated, our stock price could
decrease.
For planning purposes, we estimate the timing of a variety of clinical,
regulatory and other milestones, such as when a certain product candidate will
enter the clinic, when a clinical trial will be completed or when an application
for marketing approval will be filed. Some of our estimates are included in this
prospectus. Our estimates are based on present facts and a variety of
assumptions. Many of the underlying assumptions are outside of our control. If
milestones are not achieved when we expect them to be, investors could be
disappointed and our stock price would likely decrease.
The loss of key personnel, or the inability to attract and retain highly skilled
personnel, could make it more difficult to run our business and reduce our
likelihood of success.
We are dependent on the principal members of our management and scientific
staff. We do not have employment agreements with any of our management. The loss
of our management and key scientific employees might slow the achievement of
important research and development goals. It is also critical to our success
that we recruit and retain qualified scientific personnel to perform research
and development work. We may not be able to attract and retain skilled and
experienced scientific personnel on acceptable terms, because of intense
competition for experienced scientists among many pharmaceutical and health care
companies, universities and non-profit research institutions. Our collaboration
with Lilly requires us to add a significant number of skilled scientific
personnel. Our inability to add these employees may impact the success of our
Lilly collaboration.
Our stock price may continue to be highly volatile. This could make it harder
for you to liquidate your investment and could increase your risk of suffering a
loss.
The market price of our common stock, like that of the securities of many other
biopharmaceutical companies, has been and is likely to continue to be highly
volatile. During the twelve months preceding October 18, 2001, the market price
of our common stock has ranged from $7.875 to $21.98 per share. The market price
can be affected by many factors, including, for example, fluctuations in our
operating results, announcements of collaborations, clinical trial results,
technological innovations or new drug products being developed by us or our
competitors, governmental regulation, regulatory approval, developments in
patent or other proprietary rights, public concern regarding the safety of our
drugs and general market conditions.
Provisions in our certificate of incorporation, other agreements and Delaware
law may prevent stockholders from receiving a premium for their shares.
Our certificate of incorporation provides for classified terms for the members
of our board of directors. Our certificate also includes a provision that
requires at least 66 2/3% of our voting stockholders to approve a merger or
certain other business transactions with, or proposed by, any holder of 15% or
more of our voting stock, except in cases where certain directors approve the
transaction or certain minimum price criteria and other procedural requirements
are met.
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10
Risk factors
--------------------------------------------------------------------------------
Our certificate of incorporation also requires that any action required or
permitted to be taken by our stockholders must be taken at a duly called annual
or special meeting of stockholders and may not be taken by written consent. In
addition, special meetings of our stockholders may be called only by the board
of directors, the chairman of the board or the president, or by any holder of
10% or more of our outstanding common stock. We also have implemented a
stockholders' rights plan, which is also called a "poison pill," which could
make it uneconomical for a third party to acquire our company on a hostile
basis. These provisions, as well as Delaware law and other of our agreements,
may discourage certain types of transactions in which our stockholders might
otherwise receive a premium for their shares over then current market prices,
and may limit the ability of our stockholders to approve transactions that they
think may be in their best interests. In addition, our board of directors has
the authority to fix the rights and preferences of and issue shares of preferred
stock, which may have the effect of delaying or preventing a change in control
of our company without action by our stockholders.
If registration rights that we have previously granted are exercised, then our
stock price may be negatively affected.
We have granted registration rights in connection with the issuance of our
securities to Elan International Services, Ltd., Eli Lilly and Company,
Hybridon, Inc. and Reliance Insurance Company. In the aggregate, these
registration rights cover approximately 5,732,273 shares of our common stock
which are currently outstanding, an additional $14.5 million of our common stock
we are obligated to issue to Hybridon, and additional shares of our common stock
which may become outstanding upon the conversion of outstanding convertible
securities. If these registration rights are exercised by the holders, it will
bring additional shares of our common stock into the market, which may have an
adverse effect on our stock price. In addition, Reliance has registration rights
with respect to the approximately $66 million of notes we issued to Reliance.
If you purchase our common stock in this offering, you will incur immediate and
substantial dilution in the book value of your shares.
You will experience an immediate and substantial dilution of $16.55 per share in
the net tangible book value per share of our common stock, assuming a public
offering price of $19.72 per share. After giving effect to this offering, and to
other issuances of our common stock as described in the "Dilution" section of
this prospectus, our pro forma adjusted net tangible book value as of
September 30, 2001, would have been $3.17 per share. In addition, this dilution
will be increased to the extent that holders of outstanding options and warrants
to purchase our common stock at prices below our net tangible book value per
share after this offering exercise those options or warrants.
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11
--------------------------------------------------------------------------------
Disclosure regarding forward-looking statements
This prospectus and the documents incorporated by reference contain
forward-looking statements regarding our business and the therapeutic and
commercial potential of our technologies and products in development. Such
statements are subject to certain risks and uncertainties, particularly those
inherent in discovering, developing and commercializing drugs that are safe and
effective for use as human therapeutics, in the process of conducting gene
functionalization and target validation activities and in launching new products
and services for or with collaborators, and the endeavor of building a business
around such potential products. Actual results could differ materially from
those discussed in this Prospectus. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in the section
entitled "Risk Factors" beginning on page 5 of this prospectus. As a result, you
are cautioned not to rely on these forward-looking statements.
Use of proceeds
The net proceeds to us from the sale of the 5,000,000 shares of common stock we
are offering will be approximately $92.4 million. If the underwriters exercise
the over-allotment option in full, the net proceeds to us will be approximately
$106.3 million. For the purpose of estimating net proceeds, we are assuming that
the public offering price will be $19.72 per share. "Net proceeds" is what we
expect to receive after we pay the underwriting discount and other estimated
expenses for this offering.
We intend to use the net proceeds of this offering for research, drug discovery
and development programs, and for other general corporate purposes. Expenses to
be funded with the offering proceeds include costs of preclinical and clinical
studies, the production of compounds for these studies and capital expenditures.
We have not identified precisely the amounts we plan to spend on each research,
drug discovery and development program or the timing of these expenditures.
However, we currently plan that a portion of the proceeds will be used to
support our planned research and development efforts. The remaining proceeds
will be used for general corporate purposes. The amounts actually expended for
each purpose may vary significantly depending upon numerous factors, including
the amount and timing of the proceeds from this offering, progress of our
research, drug discovery and development programs, the results of preclinical
and clinical studies, the timing of regulatory approvals, technological
advances, determinations as to commercial potential of our compounds and the
status of competitive products. In addition, expenditures will also depend upon
the establishment of collaborative research arrangements with other companies,
the availability of other financing and other factors.
We may use a portion of the net proceeds to acquire or invest in businesses,
products or technologies that are complementary to our own. However, we are not
currently a party to any agreement regarding a material acquisition and no
portion of the net proceeds have been allocated for any specific acquisition.
Pending any of the above uses, the net proceeds will be invested in
investment-grade, interest-bearing debt securities.
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12
--------------------------------------------------------------------------------
Capitalization
The following table sets forth our capitalization at September 30, 2001:
- on an actual basis; and
- on an as adjusted basis to give effect to the sale of the 5,000,000 shares of
common stock offered by us, assuming a public offering price of $19.72 per
share and after deducting underwriting discounts and commissions and estimated
offering expenses to be paid by us:
As of
September 30, 2001
-------------------------
As
Actual Adjusted(1)
---------------------------------------------------------------------------------------
(in thousands,
except share data)
Cash, cash equivalents and short term investments........... $ 213,202 $ 305,576
========== ==========
Long-term debt and capital lease obligations, less current
portion................................................... $ 123,651 $ 123,651
Stockholders' equity:
Series A Convertible Exchangeable 5% Preferred stock,
$.001 par value; 120,150 shares authorized, issued and
outstanding, actual and adjusted........................ 12,015 12,015
Accretion of Series A Preferred stock dividends........... 1,542 1,542
Series B Convertible Exchangeable 5% Preferred stock,
$.001 par value; 16,620 shares authorized, 12,015 shares
issued and outstanding, actual and adjusted............. 12,015 12,015
Accretion of Series B Preferred stock dividends........... 1,060 1,060
Common stock, $.001 par value; 100,000,000 shares
authorized, 47,087,796 shares issued and outstanding,
actual; and 52,087,796 shares issued and outstanding, as
adjusted................................................ 47 52
Additional paid-in capital................................ 461,267 553,636
Deferred compensation..................................... (297) (297)
Accumulated other comprehensive income.................... 1,016 1,016
Accumulated deficit....................................... (370,635) (370,635)
---------- ----------
Total stockholders' equity.............................. 118,030 210,404
---------- ----------
Total capitalization.................................... $ 241,681 $ 334,055
========== ==========
---------
(1) THE FINANCIAL DATA ABOVE EXCLUDES TRANSACTIONS SUBSEQUENT TO SEPTEMBER 30,
2001, INCLUDING $5 MILLION RECEIVED FROM LILLY ON OCTOBER 18, 2001 RELATED
TO THE $100 MILLION LOAN LILLY COMMITTED TO LEND ISIS.
The table should be read in conjunction with our consolidated financial
statements and the related notes appearing elsewhere in this prospectus.
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13
--------------------------------------------------------------------------------
Market price of common stock
Our common stock is traded publicly through the Nasdaq National Market under the
symbol "ISIP." The following table presents quarterly information on the price
range of our common stock. This information indicates the high and low sale
prices reported by the Nasdaq National Market. These prices do not include
retail markups, markdowns or commissions.
Common Stock Price
High Low
-------------------------------------------------------------------------------------
Fiscal Year Ended December 31, 1999
First Quarter............................................. $15.25 $ 8.94
Second Quarter............................................ 12.19 9.25
Third Quarter............................................. 13.81 9.16
Fourth Quarter............................................ 17.38 3.88
Fiscal Year Ended December 31, 2000
First Quarter............................................. $39.00 $ 5.75
Second Quarter............................................ 16.25 8.06
Third Quarter............................................. 15.75 10.50
Fourth Quarter............................................ 14.75 8.81
Fiscal Year Ended December 31, 2001
First Quarter............................................. $13.00 $ 7.97
Second Quarter............................................ 13.17 7.88
Third Quarter............................................. 18.05 9.75
Fourth Quarter (through October 18, 2001)................. 21.98 16.70
On October 18, 2001, the last reported sale price for our common stock was
$19.72 per share, and there were approximately 1,044 stockholders of record of
our common stock.
Dividend policy
We have not paid any dividends and do not anticipate paying cash dividends in
the foreseeable future. We currently intend to retain all available funds and
any future earnings for use in the operation of our business. Under the terms of
certain of our term loans, we are restricted from paying cash dividends until
the loans are fully repaid.
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14
--------------------------------------------------------------------------------
Dilution
Our net tangible book value as of September 30, 2001 was $72,897,000, or
approximately $1.55 per share of common stock. Net tangible book value per share
represents the amount of our tangible assets less total liabilities, divided by
47,087,796 shares of common stock.
Net tangible book value dilution per share represents the difference between the
amount per share paid by purchasers of shares of common stock in this offering
and the pro forma adjusted net tangible book value per share of common stock
immediately after completion of this offering. After giving effect to the sale
of 5,000,000 shares of common stock in this offering at an assumed public
offering price of $19.72 per share and the receipt of the estimated net proceeds
therefrom (after deducting estimated offering expenses), our pro forma adjusted
net tangible book value as of September 30, 2001 would have been $165,271,000,
or $3.17 per share, an immediate increase of $1.62 per share over the net
tangible book value to existing stockholders and an immediate dilution of $16.55
per share to the adjusted net tangible book value to purchasers of common stock
in this offering, as illustrated in the following table:
Assumed public offering price per share..................... $19.72
Net tangible book value per share at September 30, 2001... $1.55
Increase per share attributable to new investors in this
offering................................................ 1.62
-----
Pro forma adjusted net tangible book value per share after
offering.................................................. $ 3.17
------
Net tangible book value dilution per share to new investors
in this offering.......................................... $16.55
======
To the extent that outstanding options and warrants are exercised, or our
outstanding convertible preferred stock or convertible debt is converted, there
could be further dilution to new investors.
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15
Selected consolidated financial data
The following selected consolidated financial data for the five years ended
December 31, 2000 are derived from the audited consolidated financial statements
of ISIS Pharmaceuticals, Inc. The financial data for the nine-month periods
ended September 30, 2001 and 2000 are derived from unaudited consolidated
financial statements. The unaudited financial statements include all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods. Operating results for the nine months
ended September 30, 2001 are not necessarily indicative of the results that may
be expected for the entire year ending December 31, 2001. The data should be
read in conjunction with the consolidated financial statements, the related
notes, and other financial information incorporated by reference herein.
Nine Months
ended
Years Ended December 31, September 30,
---------------------------------------------------- -------------------
2000 1999 1998 1997 1996 2001 2000
Statement of operations data: (unaudited)
---------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
Total revenues........................... $37,255 $33,925 $39,171 $32,722 $22,663 $ 31,529 $29,319
Research and development expenses........ 57,014 66,413 62,200 55,940 45,653 58,954 41,986
Net loss applicable to common stock...... (54,699) (59,645) (42,983) (31,066) (26,521) (59,175) (38,936)
Basic and diluted net loss per share..... (1.48) (2.08) (1.60) (1.17) (1.04) (1.43) (1.08)
Shares used in computing basic and
diluted net loss per share............. 37,023 28,703 26,873 26,456 25,585 41,517 36,172
As of
As of December 31, September 30,
------------------------------------------------------------- --------------
2000 1999 1998 1997 1996 2001
Balance sheet data: (unaudited)
--------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash, cash equivalents and
short-term investments............ $127,262 $ 52,839 $ 58,848 $ 86,786 $ 77,624 $ 213,202
Working capital..................... 118,568 44,213 40,651 62,573 56,300 183,852
Total assets........................ 183,256 103,107 96,074 117,881 101,305 294,412
Long-term debt and capital lease
obligations, less current
portion........................... 102,254 87,254 77,724 56,452 19,864 123,651
Accumulated deficit................. (311,460) (256,761) (197,116) (154,133) (123,067) (370,635)
Stockholders' equity (deficit)...... 66,366 869 (4,186) 34,852 58,385 118,030
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16
Underwriting
We and the underwriters for this offering named below have entered into an
underwriting agreement concerning the shares being offered. Subject to
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. UBS Warburg LLC, Robertson
Stephens, Inc., Needham & Company, Inc. and Fortis Securities Inc. are the
representatives of the underwriters.
Underwriters Number of
Shares
------------------------------------------------------------------------------
UBS Warburg LLC.............................................
Robertson Stephens, Inc.....................................
Needham & Company, Inc......................................
Fortis Securities Inc.......................................
---------
Total................................................... 5,000,000
=========
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy up to 750,000 shares
from us at the public offering price less the underwriting discounts and
commissions to cover these sales. If any shares are purchased under this option,
the underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table provides information regarding the amount of the discount to
be paid to the underwriters by us:
No Exercise of Full Exercise of
over-allotment option over-allotment option
-----------------------------------------------------------------------------------------------------------
Per share................................................... $ $
Total................................................... $ $
We estimate that the total expenses of this offering payable by us, excluding
underwriting discounts and commissions, will be about $310,000.
Shares sold by the underwriters to the public will initially be offered at the
public offering price set forth on the cover of this prospectus. Any shares sold
by the underwriters to securities dealers may be sold at a discount of up to
$ per share from the public offering price. Any of these securities dealers
may resell any shares purchased from the underwriters to other brokers or
dealers at a discount of up to $ per share from the public offering price.
If all the shares are not sold at the public offering price, the representatives
may change the offering price and the other selling terms.
We and each of our directors and executive officers have agreed with the
underwriters not to offer, sell, contract to sell, hedge or otherwise dispose
of, directly or indirectly, any of our common stock or securities convertible
into or exchangeable for shares of common stock during the period from the date
of this prospectus continuing through the date 90 days after the date of this
prospectus without the prior written consent of UBS Warburg LLC.
In connection with this offering, the underwriters may purchase and sell shares
of our common stock in the open market. These transactions may include
stabilizing transactions, short sales and purchases to cover positions created
by short sales. Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market price of our
common stock while this offering is in progress. Short sales involve the sale by
the underwriters of a greater number of shares
--------------------------------------------------------------------------------
17
than they are required to purchase in this offering. Short sales may be either
"covered short sales" or "naked short sales." Covered short sales are sales made
in an amount not greater than the underwriters' over-allotment option to
purchase additional shares in this offering. The underwriters may close out any
covered short position by either exercising their over-allotment option or
purchasing shares in the open market. In determining the source of shares to
close out the covered short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. Naked short sales are sales in excess of the
over-allotment option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned there may be downward pressure
on the price of shares in the open market after pricing that could adversely
affect investors who purchase in this offering.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of our common stock. As a result, the price of our common stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected on the Nasdaq National Market or
otherwise.
In addition, in connection this offering certain of the underwriters (and
selling group members) may engage in passive market making transactions in the
common stock on the Nasdaq National Market prior to the pricing and completion
of the offering. Passive market making consists of displaying bids on the Nasdaq
National Market no higher than the bid prices of independent market makers and
making purchases at prices no higher than these independent bids and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the common stock during a specified period and must be
discontinued when such limit is reached. Passive market making may cause the
price of the common stock to be higher than the price that otherwise would exist
in the open market in the absence of such transactions. If passive market making
is commenced, it may be discontinued at any time.
We have agreed to indemnify the several underwriters against some liabilities,
including liabilities under the Securities Act of 1933, and to contribute to
payments that the underwriters may be required to make in respect thereof.
Fortis Bank (Nederland) N.V., an affiliate of Fortis Securities Inc., a
co-managing underwriter of this offering, received $60,000 in advisory fees from
the Company in the six month period preceding the October 9, 2001 filing of the
Registration Statement for this offering. These fees are deemed underwriting
compensation under the NASD's Conduct Rules. In the ordinary course of their
respective businesses, the underwriters and certain of their affiliates may in
the future engage in investment and commercial banking or other transactions
with us, including the provision of certain advisory services and making loans
to us.
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18
--------------------------------------------------------------------------------
Where you can find more information
This prospectus is part of a registration statement on Form S-3 that we filed
with the Securities and Exchange Commission. Certain information in the
registration statement has been omitted from this prospectus in accordance with
the rules of the SEC. We are a public company and file proxy statements and
annual, quarterly and special reports and other information with the SEC. You
can inspect and copy the registration statement as well as the reports, proxy
statements and other information we have filed with the SEC at the public
reference room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC Regional Offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can call the SEC
at 1-800-732-0330 for further information about the public reference rooms. We
are also required to file electronic versions of these documents with the SEC,
which may be accessed from the SEC's World Wide Web site at http://www.sec.gov.
Reports, proxy and information statements and other information concerning Isis
may be inspected at The Nasdaq Stock Market at 1735 K Street, N.W., Washington,
D.C. 20006.
Incorporation of certain documents by reference
The SEC allows us to "incorporate by reference" certain of our publicly-filed
documents into this prospectus, which means that information included in those
documents is considered part of this prospectus. Information that we file with
the SEC after the effective date of this prospectus will automatically update
and supersede this information. We incorporate by reference the documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act, until all the shares of common stock that are part
of this offering are sold.
The following documents filed with the SEC are incorporated by reference in this
prospectus:
- our Annual Report on Form 10-K/A for the year ended December 31, 2000;
- our Quarterly Report on Form 10-Q for the period ended March 31, 2001;
- our Quarterly Report on Form 10-Q, as amended on August 15, 2001, and on
October 11, 2001, for the period ended June 30, 2001;
- our Quarterly Report on Form 10-Q for the period ended September 30, 2001;
- our Current Report on Form 8-K, filed with the SEC on August 29, 2001;
- our Current Report on Form 8-K/A, filed with the SEC on October 5, 2001; and
- the description of our common stock in our Registration Statement on Form 8-A
filed with the SEC on April 12, 1991, as updated by our Certificate of
Amendment of our Restated Certificate of Incorporation filed with our
Quarterly Report on Form 10-Q for the period ended June 30, 2001.
All documents that we file with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus and before the
termination of the offering of the common stock offered in this prospectus shall
be deemed incorporated by reference into this prospectus and to be a part of
this prospectus from the respective dates of filing such documents.
We will furnish without charge to you, on written or oral request, a copy of any
or all of the documents incorporated by reference, other than exhibits to those
documents. You should direct any requests for documents to Vice President of
Finance at Isis' principal executive offices at 2292 Faraday Avenue, Carlsbad,
California 92008, telephone number (760) 931-9200.
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19
--------------------------------------------------------------------------------
Any statement contained in a document incorporated or deemed to be incorporated
by reference in this prospectus shall be deemed modified, superseded or replaced
for purposes of this prospectus to the extent that a statement contained in this
prospectus or in any subsequently filed document that also is or is deemed to be
incorporated by reference in this prospectus modifies, supersedes or replaces
such statement. Any statement so modified, superseded or replaced shall not be
deemed, except as so modified, superseded or replaced, to constitute a part of
this prospectus.
Legal matters
The validity of the issuance of the common stock offered hereby will be passed
upon for us by Cooley Godward LLP, San Diego, California. Dewey Ballantine LLP,
New York, New York, is counsel for the underwriters in connection with the
offering.
Experts
Ernst & Young LLP, independent auditors, have audited our consolidated financial
statements included in our Annual Report on Form 10-K, as amended on April 2,
2001, for the year ended December 31, 2000, as set forth in their report, which
is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
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20
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth all expenses payable by us in connection with the
sale of the 5,750,000 shares of common stock being registered. All the amounts
shown are estimates except for the registration fee.
SEC registration fee........................................ $ 26,278
NASD filing fee............................................. 10,724
Blue Sky fees and expenses.................................. 7,500
Printing and engraving expenses............................. 100,000
Legal fees and expenses..................................... 85,000
Accounting fees and expenses................................ 30,000
Miscellaneous............................................... 50,498
----------
Total................................................... $ 310,000
==========
Item 15. Indemnification of Officers and Directors
Under Section 145 of the Delaware General Corporation Law, the Registrant has
broad powers to indemnify its directors and officers against liabilities they
may incur in such capacities, including liabilities under the Securities Act of
1933.
The Registrant's Certificate of Incorporation and Bylaws include provisions to
(i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its directors and officers to
the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify it present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interest of the corporation, and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate the directors' duty of care, and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware Law. In addition,
each director will continue to be subject to liability for breach of the
directors' duty of loyalty to the Registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the directors' duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper
distributions to stockholders and loans to directors and officers. The provision
also does not affect a director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
II-1
The Registrant has entered into indemnity agreements with each of its directors
and executive officers that require the Registrant to indemnify such persons
against expenses, judgments, fines, settlements and other amounts incurred
(including expenses of a derivative action) in connection with any proceeding,
whether actual or threatened, to which any such person may be made a party by
reason of the fact that such person is or was a director or an executive officer
of the Registrant or any of its affiliated enterprises, provided such person
acted in good faith and in a manner such persons reasonably believed to be in or
not opposed to the best interests of the Registrant and, with respect to any
criminal proceeding, has no reasonable cause to believe his conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
At present, there is no pending litigation or proceeding involving a director or
officer of the Registrant as to which indemnification is being sought, nor is
the Registrant aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
Item 16. Exhibits
Exhibit
Number Description of Document
---------------------------------------------------------------------------------------
1.1 Form of Underwriting Agreement.
4.1 Amended and Restated Certificate of Incorporation filed June
19, 1991.(1)
4.2 Certificate of Amendment to Restated Certificate of
Incorporation filed April 9, 2001.(7)
4.3 Bylaws.(7)
4.4 Certificate of Designation of the Series A Convertible
Preferred Stock.(2)
4.5 Certificate of Designation of the Series B Convertible
Preferred Stock.(6)
4.6 Certificate of Designation of the Series C Junior
Participating Preferred Stock.(8)
4.7 Specimen Common Stock Certificate.(1)
4.8 Specimen Series A Preferred Stock Certificate.(9)
4.9 Specimen Series B Preferred Stock Certificate.(9)
4.10 Form of Right Certificate.(8)
4.11 Purchase Agreement between the Registrant and Reliance
Insurance Company for 14% Senior Subordinated Discount Notes
due November 1, 2007 and Warrants for Common Stock dated
October 24, 1997 (with certain confidential information
deleted).(3)
4.12 First Supplement to Purchase Agreement between the
Registrant and Reliance Insurance Company for 14% Senior
Subordinated Discount Notes due November 1, 2007 and
Warrants for Common Stock dated May 1, 1998 (with certain
confidential information deleted).(4)
4.15 Stock Purchase Agreement between the Registrant and
Boehringer Ingelheim International GmbH, dated as of July
18, 1995 (with certain confidential information
deleted).(10)
4.16 Subscription, Joint Development and Operating Agreement,
dated April 20, 1999 among the Registrant, Elan Corporation,
plc, Elan International Services, Ltd. and Orasense Ltd.
(with certain confidential information deleted), together
with the related Securities Purchase Agreement, Convertible
Promissory Note, Warrant to Purchase Shares of Common Stock,
Registration Rights Agreement and License Agreements.(5)
4.17 Agreement dated August 31, 1999 between Boehringer Ingelheim
International GmbH and the Registrant, together with the
related Amendment to the Stock Purchase Agreement.(11)
II-2
Exhibit
Number Description of Document
---------------------------------------------------------------------------------------
4.18 Subscription, Joint Development and Operating Agreement
dated January 14, 2000 among the Registrant, Elan
Corporation, plc, Elan International Services, Ltd. and
HepaSense, Ltd. (with certain confidential information
deleted), together with the related Securities Purchase
Agreement, Convertible Promissory Note, Warrant to Purchase
Shares of Common Stock, Registration Rights Agreement and
License Agreements.(6)
4.19 Securities Purchase Agreement, dated August 17, 2001,
between the Registrant and Eli Lilly and Company.(12)
4.20 Registration Rights and Standstill Agreement, dated August
17, 2001, between the Registrant and Eli Lilly and
Company.(12)
4.21 Loan Agreement, dated August 17, 2001, between the
Registrant and Eli Lilly and Company.(12)
5.1 * Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 * Power of Attorney.
---------
* Previously filed.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-39640) or amendments thereto and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form S-3
(No. 333-71911) or amendments thereto and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997, and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 and incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's report on Form 8-K dated April 20,
1999 and incorporated herein by reference.
(6) Filed as an exhibit to the Registrant's report on Form 8-K dated
January 28, 2000, as amended on October 5, 2001, and incorporated herein by
reference.
(7) Filed as an exhibit to the Registrant's report on Form 10-Q/A for the
quarter ended June 30, 2001 and incorporated herein by reference.
(8) Filed as an exhibit to the Registrant's Report on Form 8-K dated
December 8, 2000 and incorporated herein by reference.
(9) Filed as an exhibit to the Registrant's Report on Form 10-Q/A for the
quarter ended June 30, 2000 and incorporated herein by reference.
(10) Filed as an exhibit to the Registrant's Report on Form 8-K dated July 18,
1995 and incorporated herein by reference.
(11) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 31, 1999 and incorporated herein by reference.
(12) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 29, 2001 and incorporated herein by reference.
II-3
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against pubic policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes: (1) to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the
prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the Registration Statement; provided however, that clauses
(i) and (ii) do not apply if the information required to be included in a
post-effective amendment by these clauses is contained in periodic reports filed
by the registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Registration
Statement; (2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) of Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant undertakes that: (1) for purpose of determining any
liability under the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of the registration statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective; (2) for the purpose of determining any liability under the Securities
act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and (3) for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
Signatures
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the city of Carlsbad, County of San Diego, State
of California, on the 22nd day of October, 2001.
ISIS PHARMACEUTICALS, INC.
By: /s/ B. LYNNE PARSHALL
--------------------------------------------
B. Lynne Parshall
Executive Vice President and Chief Financial
Officer, Director (Principal financial and
accounting officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated and on the dates indicated.
Signature Title Date
---------------------------------------------------------------------------------------------------
STANLEY T. CROOKE* Chairman of the Board and Chief
------------------------------- Executive Officer (Principal executive October 22, 2001
Stanley T. Crooke, M.D., Ph.D. officer)
/s/ B. LYNNE PARSHALL Executive Vice President and Chief
------------------------------- Financial Officer (Principal financial October 22, 2001
B. Lynne Parshall and accounting officer), Director
CHRISTOPHER F.O. GABRIELI*
------------------------------- Director October 22, 2001
Christopher F.O. Gabrieli
WILLIAM R. MILLER*
------------------------------- Director October 22, 2001
William R. Miller
FREDERICK T. MUTO*
------------------------------- Director October 22, 2001
Frederick T. Muto
MARK B. SKALETSKY*
------------------------------- Director October 22, 2001
Mark B. Skaletsky
JOSEPH H. WENDER*
------------------------------- Director October 22, 2001
Joseph H. Wender
*By: /s/ B. LYNNE PARSHALL
-------------------------
B. Lynne Parshall
Attorney-in-fact
II-5
Exhibit index
Exhibit
Number Description of Document
---------------------------------------------------------------------------------------
1.1 Form of Underwriting Agreement.
4.1 Amended and Restated Certificate of Incorporation filed
June 19, 1991.(1)
4.2 Certificate of Amendment to Restated Certificate of
Incorporation filed April 9, 2001.(7)
4.3 Bylaws.(7)
4.4 Certificate of Designation of the Series A Convertible
Preferred Stock.(2)
4.5 Certificate of Designation of the Series B Convertible
Preferred Stock.(6)
4.6 Certificate of Designation of the Series C Junior
Participating Preferred Stock.(8)
4.7 Specimen Common Stock Certificate.(1)
4.8 Specimen Series A Preferred Stock Certificate.(9)
4.9 Specimen Series B Preferred Stock Certificate.(9)
4.10 Form of Right Certificate.(8)
4.11 Purchase Agreement between the Registrant and Reliance
Insurance Company for 14% Senior Subordinated Discount Notes
due November 1, 2007 and Warrants for Common Stock dated
October 24, 1997 (with certain confidential information
deleted).(3)
4.12 First Supplement to Purchase Agreement between the
Registrant and Reliance Insurance Company for 14% Senior
Subordinated Discount Notes due November 1, 2007 and
Warrants for Common Stock dated May 1, 1998 (with certain
confidential information deleted).(4)
4.15 Stock Purchase Agreement between the Registrant and
Boehringer Ingelheim International GmbH, dated as of
July 18, 1995 (with certain confidential information
deleted).(10)
4.16 Subscription, Joint Development and Operating Agreement,
dated April 20, 1999 among the Registrant, Elan Corporation,
plc, Elan International Services, Ltd. and Orasense Ltd.
(with certain confidential information deleted), together
with the related Securities Purchase Agreement, Convertible
Promissory Note, Warrant to Purchase Shares of Common Stock,
Registration Rights Agreement and License Agreements.(5)
4.17 Agreement dated August 31, 1999 between Boehringer Ingelheim
International GmbH and the Registrant, together with the
related Amendment to the Stock Purchase Agreement.(11)
4.18 Subscription, Joint Development and Operating Agreement
dated January 14, 2000 among the Registrant, Elan
Corporation, plc, Elan International Services, Ltd. and
HepaSense, Ltd. (with certain confidential information
deleted), together with the related Securities Purchase
Agreement, Convertible Promissory Note, Warrant to Purchase
Shares of Common Stock, Registration Rights Agreement and
License Agreements.(6)
4.19 Securities Purchase Agreement, dated August 17, 2001,
between the Registrant and Eli Lilly and Company.(12)
4.20 Registration Rights and Standstill Agreement, dated
August 17, 2001, between the Registrant and Eli Lilly and
Company.(12)
4.21 Loan Agreement, dated August 17, 2001, between the
Registrant and Eli Lilly and Company.(12)
5.1 * Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1 * Power of Attorney.
---------
* Previously filed.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-39640) or amendments thereto and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form S-3
(No. 333-71911) or amendments thereto and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997, and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 and incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's report on Form 8-K dated April 20,
1999 and incorporated herein by reference.
(6) Filed as an exhibit to the Registrant's report on Form 8-K dated
January 28, 2000, as amended on October 5, 2001, and incorporated herein by
reference.
(7) Filed as an exhibit to the Registrant's report on Form 10-Q/A for the
quarter ended June 30, 2001 and incorporated herein by reference.
(8) Filed as an exhibit to the Registrant's Report on Form 8-K dated
December 8, 2000 and incorporated herein by reference.
(9) Filed as an exhibit to the Registrant's Report on Form 10-Q/A for the
quarter ended June 30, 2000 and incorporated herein by reference.
(10) Filed as an exhibit to the Registrant's Report on Form 8-K dated July 18,
1995 and incorporated herein by reference.
(11) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 31, 1999 and incorporated herein by reference.
(12) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 29, 2001 and incorporated herein by reference.
Exhibit 1.1
Isis Pharmaceuticals, Inc.
5,000,000 Shares
Common Stock
($0.001 Par Value)
UNDERWRITING AGREEMENT
________ __, 2001
UNDERWRITING AGREEMENT
________ __, 2001
UBS Warburg LLC
Robertson Stephens, Inc.
Needham & Company, Inc.
Fortis Securities Inc.
c/o UBS Warburg LLC
299 Park Avenue
New York, New York 10171-0026
Ladies and Gentlemen:
Isis Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the Underwriters named in Schedule A
annexed hereto (the "Underwriters") an aggregate of 5,000,000 shares of Common
Stock, $0.001 par value per share (the "Common Stock"), of the Company (the
"Firm Shares"). In addition, solely for the purpose of covering over-allotments,
the Company proposes to grant to the Underwriters the option to purchase from
the Company up to an additional 750,000 shares of Common Stock (the "Additional
Shares"). The Firm Shares and the Additional Shares are hereinafter collectively
sometimes referred to as the Shares. The Shares are described in the Prospectus
which is referred to below.
The Company has filed, in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "Act"), with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-71176)
including a prospectus, relating to the Shares. The Company has furnished to
you, for use by the Underwriters and by dealers, copies of one or more
preliminary prospectuses (each thereof being herein called a "Preliminary
Prospectus") relating to the Shares. Except where the context otherwise
requires, the registration statement, as amended when it becomes effective,
including all documents filed as a part thereof, and including any information
contained in a prospectus subsequently filed with the Commission pursuant to
Rule 424(b) under the Act and deemed to be part of the registration statement at
the time of effectiveness pursuant to Rule 430(A) under the Act, and also
including any registration statement filed pursuant to Rule 462(b) under the
Act, is herein called the Registration Statement, and the prospectus, in the
form filed by the Company with the Commission pursuant to Rule 424(b) under the
Act on or before the second business day after
1
the date hereof (or such earlier time as may be required under the Act) or, if
no such filing is required, the form of final prospectus included in the
Registration Statement at the time it became effective, is herein called the
Prospectus. Any reference herein to the Registration Statement, a Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Form S-3, and any
reference herein to the terms "amend", "amendment" or "supplement" with respect
to the Registration Statement, any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the filing of any document under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively, the "Exchange Act") after the effective date of the
Registration Statement, or the Prospectus, as the case may be, deemed to be
incorporated therein by reference.
The Company and the Underwriters agree as follows:
1. SALE AND PURCHASE. Upon the basis of the
representations and warranties and subject to the terms and conditions herein
set forth, the Company agrees to sell to the respective Underwriters and each of
the Underwriters, severally and not jointly, agrees to purchase from the Company
the respective number of Firm Shares set forth opposite the name of such
Underwriter in Schedule A annexed hereto in each case at a purchase price of
$____ per Share. The Company is advised by you that the Underwriters intend (i)
to make a public offering of their respective portions of the Firm Shares as
soon after the effective date of the Registration Statement as in your judgment
is advisable and (ii) initially to offer the Firm Shares upon the terms set
forth in the Prospectus.
In addition, the Company hereby grants to the several
Underwriters the option to purchase, and upon the basis of the representations
and warranties and subject to the terms and conditions herein set forth, the
Underwriters shall have the right to purchase, severally and not jointly, from
the Company, ratably in accordance with the number of Firm Shares to be
purchased by each of them, all or a portion of the Additional Shares as may be
necessary to cover over-allotments made in connection with the offering of the
Firm Shares, at the same purchase price per share to be paid by the Underwriters
for the Firm Shares. This option may be exercised by you on behalf of the
several Underwriters at any time and from time to time on or before the 30th day
following the date hereof by written notice to the Company. Such notice shall
set forth the aggregate number of Additional Shares as to which the option is
being exercised and the date and time when the Additional Shares are to be
delivered (such date and time being herein referred to as the additional time of
purchase); PROVIDED, HOWEVER, that the additional time of purchase shall not be
earlier than the time of purchase (as defined
2
below) nor earlier than the second business day(1) after the date on which the
option shall have been exercised nor later than the tenth business day after the
date on which the option shall have been exercised. The number of Additional
Shares to be sold to each Underwriter shall be the number which bears the same
proportion to the aggregate number of Additional Shares being purchased as the
number of Firm Shares set forth opposite the name of such Underwriter on
Schedule A hereto bears to the total number of Firm Shares (subject, in each
case, to such adjustment as you may determine to eliminate fractional shares.
2. PAYMENT AND DELIVERY. Payment of the purchase price
for the Firm Shares shall be made to the Company by Federal Funds wire transfer,
against delivery of the certificates for the Firm Shares to you through the
facilities of the Depository Trust Company (DTC) for the respective accounts of
the Underwriters. Such payment and delivery shall be made at 10:00 A.M., New
York City time, on _________ __, 2001 (unless another time shall be agreed to by
you and the Company or unless postponed in accordance with the provisions of
Section 8 hereof). The time at which such payment and delivery are actually made
is hereinafter sometimes called the time of purchase. Electronic transfer of the
Firm Shares shall be made to you at the time of purchase in such names and in
such denominations as you shall specify.
Payment of the purchase price for the Additional Shares shall
be made at the additional time of purchase in the same manner and at the same
office as the payment for the Firm Shares. Electronic transfer of the Firm
Shares shall be made to you at the time of purchase in such names and in such
denominations as you shall specify.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each of the Underwriters that:
(a) The Company has not received nor has notice of any
notice or order of the Commission preventing or suspending the use of
any Preliminary Prospectus, nor has the Company received any notice of
the Commission's instituting proceedings for that purpose, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act; and when the
Registration Statement becomes effective, the Registration Statement
and the Prospectus will conform in all material respects with the
provisions of the Act, and the Registration Statement will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein
--------
(1) As used herein "business day" shall mean a day on which the New York
Stock Exchange is open for trading.
3
not misleading, and the Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that the Company makes no representation or warranty
with respect to any statement contained in the Registration Statement
or the Prospectus in reliance upon and in conformity with information
concerning the Underwriters and furnished in writing by or on behalf of
any Underwriter through you to the Company for use in the Registration
Statement or the Prospectus; and neither the Company nor any of its
affiliates has distributed any offering material in connection with the
offer or sale of the Shares other than the Registration Statement, the
Preliminary Prospectus, the Prospectus or any other materials, if any,
permitted by the Act;
(b) as of the date of this Agreement, the Company's
capitalization is in all material respects as set forth under the
heading entitled "Actual" in the section of the Registration Statement
and the Prospectus entitled "Capitalization" and, as of the time of
purchase, the Company's capitalization shall be in all material
respects as set forth under the heading entitled "As Adjusted" in the
section of the Registration Statement and the Prospectus entitled
"Capitalization" (subject to the issuance of shares of Common Stock
upon the exercise of stock options disclosed as outstanding and issued
under the plans described in the Registration Statement and the
Prospectus and subject to the issuance of shares of Common Stock
pursuant to agreements described in the Registration Statement and the
Prospectus); all of the issued and outstanding shares of capital stock
of the Company have been duly and validly authorized and issued and are
fully paid and non-assessable, have been issued in compliance with all
federal and state securities laws and were not issued in violation of
any preemptive right, resale right, right of first refusal or similar
right;
(c) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own,
lease and operate its properties and conduct its business as described
in the Registration Statement and the Prospectus;
(d) the Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where
the ownership or leasing of its properties or the conduct of its
business requires such qualification, except where the failure to so
qualify would not reasonably be expected to have a material adverse
effect on the business, operations, prospects, properties, condition
(financial or otherwise) or results of operation of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole (a "Material
Adverse Effect"). The Company has no subsidiaries (as defined in the
Act) other than as listed in Schedule B annexed hereto (the
"Subsidiaries") and except for such other inactive subsidiaries that do
not possess,
4
individually or in the aggregate, any assets, liabilities or rights
that are material to the Company and the Subsidiaries taken as a whole;
the Company owns such interest in the Subsidiaries as is set forth in
the Registration Statement and the Prospectus; except for the
Subsidiaries or as described in the Registration Statement and the
Prospectus, the Company does not own, directly or indirectly, any
long-term debt or any material equity interest in any firm,
corporation, partnership, joint venture, association or other entity;
complete and correct copies of the certificates of incorporation and of
the bylaws of the Company and all amendments thereto have been made
available to you; each of the Subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, with the requisite
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Registration Statement
and the Prospectus; each of the Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the ownership or leasing of the properties or the
conduct of its business requires such qualification, except where the
failure to so qualify would not reasonably be expected to have a
Material Adverse Effect; all of the outstanding shares of capital stock
of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable, have been issued in
compliance with all applicable securities laws and were not issued in
violation of any preemptive right, resale right, right of first refusal
or similar right;
(e) neither the Company nor any of the Subsidiaries is in
breach or violation of, or in default under (nor has any event occurred
which with notice, lapse of time, or both would result in the Company's
or any Subsidiary's breach or violation of, or constitute the Company's
or any Subsidiary's default under) (each such breach, violation,
default or event of the Company or any of the Subsidiaries, a "Default
Event"), (i) its charter, by-laws or other organizational documents,
(ii) any obligation, agreement, covenant or condition contained in any
license, permit, indenture, mortgage, deed of trust, bank loan or
credit agreement or other evidence of indebtedness, or any lease,
contract or other agreement or instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of their
properties is bound or affected, (iii) any federal, state, local or
foreign law, regulation or rule or (iv) any decree, judgment or order
applicable to the Company, any of the Subsidiaries or any of their
respective properties, other than, in the case of clauses (ii) and
(iii), such Default Events as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect;
and the execution, delivery and performance of this Agreement,
including the issuance and sale of the Shares and the consummation of
the other transactions contemplated hereby, does not constitute and
will not result in a Default Event under (w) any provisions of the
charter, by-laws or other organizational documents of the Company or
any of the Subsidiaries, (x)
5
under any provision of any license, permit, indenture, mortgage, deed
of trust, bank loan or credit agreement or other evidence of
indebtedness, or any lease, contract or other agreement or instrument
to which the Company or any of the Subsidiaries or by which any of them
or their respective properties may be bound or affected, (y) under any
federal, state, local or foreign law, regulation or rule or (z) under
any decree, judgment or order applicable to the Company, any of the
Subsidiaries or any of their respective properties, except, in the case
of clauses (x) and (y), for such Default Events as would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(f) this Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding agreement of
the Company;
(g) the capital stock of the Company, including the
Shares, conforms in all material respects to the description thereof
contained in the Registration Statement and the Prospectus;
(h) the Shares have been duly and validly authorized by
the Company and, when issued and delivered by the Company against
payment therefor as provided herein, will be validly issued, fully paid
and non-assessable;
(i) no approval, authorization, consent or order of or
filing with any national, state, local or other governmental or
regulatory commission, board, body, authority or agency is required to
be obtained or made by the Company or any of the Subsidiaries in
connection with the issuance and sale of the Shares or the consummation
by the Company of the other transactions contemplated hereby other than
registration of the offer and sale of the Shares under the Act, which
has been or will be effected, and any necessary qualification under the
securities or blue sky laws of the various jurisdictions in which the
Shares are being offered by the Underwriters;
(j) except as set forth in the Registration Statement and
the Prospectus (i) no person has the right, contractual or otherwise,
to cause the Company to issue or sell to it any shares of Common Stock
or shares of any other capital stock or other equity interests of the
Company, (ii) no person has any preemptive rights, co-sale rights,
rights of first refusal or other rights to purchase any shares of
Common Stock or shares of any other capital stock or other equity
interests of the Company, and (iii) no person has the right to act as
an underwriter, or as a financial advisor to the Company, in connection
with the offer and sale of the Shares, in the case of each of the
foregoing clauses (i), (ii) and (iii), whether as a result of the
filing or effectiveness of the Registration Statement or the sale of
the Shares as contemplated thereby or otherwise; no person has the
right, contractual or otherwise, to cause the Company to register under
the Act any shares of Common Stock or shares of any other capital stock
or
6
other equity interests of the Company, or to include any such shares
or interests in the Registration Statement or the offering contemplated
thereby whether as a result of the filing or effectiveness of the
Registration Statement or the sale of the Shares as contemplated
thereby or otherwise, except as disclosed in the Registration Statement
and Prospectus and except for such rights as have been complied with or
waived;
(k) Ernst & Young LLP, whose report on the consolidated
financial statements of the Company and the Subsidiaries is filed with
the Commission as part of the Registration Statement and the
Prospectus, are independent public accountants as required by the Act;
(l) the Company and each of the Subsidiaries has all
necessary licenses, permits, authorizations, consents and approvals and
has made all necessary filings required under any federal, state, local
or foreign law, regulation or rule (collectively, "Permits"), and has
obtained all authorizations, consents and approvals from other persons
(collectively, "Approvals") that are necessary in order to conduct its
business as described in the Registration Statement and the Prospectus,
other than such Permits and Approvals the failure of which to obtain
would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; to its knowledge neither the Company
nor any of the Subsidiaries is in violation of, or any default under,
any such Permit or Approval or any federal, state, local or foreign
law, regulation or rule or any decree, order or judgment applicable to
the Company or any of the Subsidiaries the effect of which would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(m) all legal or governmental proceedings, contracts,
leases or documents of a character required to be described in the
Registration Statement or the Prospectus or any document incorporated
by reference therein or to be filed as an exhibit to the Registration
Statement or any document incorporated by reference therein have been
so described or filed as required;
(n) except as disclosed in the Registration Statement and
the Prospectus, there are no actions, suits, claims, investigations or
proceedings pending or threatened to which the Company, its directors
or officers, any of the Subsidiaries or, to the Company's knowledge,
any of the Subsidiaries' directors or officers is a party or of which
any of their respective properties is subject at law or in equity, or
before or by any federal, state, local or foreign governmental or
regulatory commission, board, body, authority or agency which, if
adversely decided, would reasonably be expected to result in a
judgment, decree or order having a Material Adverse Effect or prevent
consummation of the transactions contemplated hereby;
7
(o) the financial statements, together with the related
schedules and notes, included in the Registration Statement and the
Prospectus present fairly in all material respects the consolidated
financial position of the Company and the Subsidiaries as of the dates
indicated and the consolidated results of operations and cash flows of
the Company and the Subsidiaries for the periods specified and have
been prepared in compliance in all material respects with the
requirements of the Act and in conformity with generally accepted
accounting principles applied on a consistent basis during the periods
involved; the other financial and statistical data set forth under
"Summary Consolidated Financial Data," "Capitalization," and "Selected
Consolidated Financial Data" in the Registration Statement and the
Prospectus are accurately presented in all material respects and
prepared on a basis consistent with such financial statements and books
and records of the Company; and there are no financial statements
(historical or pro forma) that are required to be included in the
Registration Statement and the Prospectus that are not included as
required;
(p) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been (i) any material adverse change, or any development
which could reasonably be expected to result in a material adverse
change in the business, operations, properties, condition (financial or
otherwise), or results of operations of the Company and the
Subsidiaries taken as a whole, (ii) any transaction of the Company or
the Subsidiaries which is material to the Company and the Subsidiaries
taken as a whole, (iii) any obligation, direct or contingent, which is
material to the Company and the Subsidiaries taken as a whole, incurred
by the Company or any of the Subsidiaries, or (iv) any dividend or
distribution of any kind declared, paid or made on the capital stock of
the Company; neither the Company nor any of the Subsidiaries has any
material contingent obligation which is not disclosed in the
Registration Statement and the Prospectus;
(q) the Company has obtained for the benefit of the
Underwriters the agreement (a "LOCK-UP AGREEMENT"), in the form set
forth as EXHIBIT C hereto, of each of its executive officers and
directors; the Company will not release or purport to release any of
its officers or directors from any Lock-Up Agreement without the prior
written consent of UBS Warburg;
(r) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(s) any statistical and market related data included in
the Prospectus are based on or derived from sources that the Company
believes to be reliable and
8
accurate, and the Company has obtained the written consent to the use
of such data from such sources to the extent required;
(t) neither the Company nor any of the Subsidiaries nor,
to the Company's knowledge, any of their respective affiliates has
taken, directly or indirectly, any action designed to or which has
constituted or which might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares;
(u) the Company and each of the Subsidiaries maintain
insurance of the types and in amounts reasonably adequate for their
respective businesses, including, but not limited to, insurance
covering real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and other risks
customarily insured against, all of which insurance is in full force
and effect;
(v) neither the Company nor any of the Subsidiaries has
sustained since the date of the latest financial statements included in
the Prospectus any losses or interferences with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Registration Statement and the Prospectus or other than any losses or
interferences which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;
(w) the Company and each of the Subsidiaries have good
title to all personal property owned by them as described in the
Registration Statement and the Prospectus, which to the Company's
knowledge is free and clear of all liens, encumbrances and defects
except such as (i) are described in the Registration Statement and the
Prospectus, (ii) were incurred in the ordinary course of business and
not required to be described in the Registration Statement and the
Prospectus or (iii) would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; except as
described in the Registration Statement and the Prospectus, any real
property and buildings held under lease by the Company are held by it
under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and presently
proposed to be made of such property and buildings by the Company or
any of the Subsidiaries, as the case may be;
(x) neither the Company nor, to the Company's knowledge,
any of the Subsidiaries has violated any foreign, federal, state or
local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable
9
federal or state wages and hours laws, nor any provisions of the
Employee Retirement Income Security Act or the rules and regulations
promulgated thereunder, which would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect;
(y) the Company and each of the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences;
(z) except as would not individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, all tax
returns required to be filed by the Company and each of the
Subsidiaries have been filed, other than those filings being contested
in good faith, and all taxes, including withholding taxes, penalties
and interest, assessments, fees and other charges due pursuant to such
returns or pursuant to any assessment received by the Company or any of
the Subsidiaries have been paid, other than those being contested in
good faith and for which adequate reserves have been provided;
(aa) all documents incorporated by reference by the
Registration Statement, the Preliminary Prospectus or the Prospectus
complied in all material respects, at the time the Registration
Statement was filed with the Commission, with the requirements of the
Exchange Act;
(bb) other than as set forth in the Registration Statement
and the Prospectus, or as would not individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, the Company
and the Subsidiaries own, possess, license or have other rights to use,
all patents, trademarks, servicemarks, trade names, copyrights, trade
secrets, information, proprietary rights and processes ("Intellectual
Property") necessary for their business as described in the
Registration Statement and the Prospectus, without any known conflict
with or infringement of the interests of others. Except as described in
the Registration Statement and the Prospectus, the Company is not aware
of any options, licenses or agreements of any kind relating to the
Intellectual Property of the Company or the Subsidiaries that are
outstanding and which are required to be described in the Registration
Statement and the Prospectus, and, except as described in the
Registration Statement and the Prospectus, neither the Company nor
either of the Subsidiaries is a party to or bound by any options,
licenses or
10
agreements with respect to the Intellectual Property of any other
person or entity which are required to be described in the Registration
Statement and the Prospectus; none of the technology employed by the
Company and the Subsidiaries has been obtained or is used or proposed
to be used by the Company or the Subsidiaries in violation of any
contractual obligation binding on the Company or the Subsidiaries or
any of their respective directors or executive officers or, to the
Company's knowledge, any employees of the Company or the Subsidiaries,
other than any violation which would not reasonably be expected to
individually or in the aggregate have a Material Adverse Effect; except
as described in the Registration Statement and the Prospectus, to the
Company's knowledge neither the Company nor either of the Subsidiaries
has violated, infringed or conflicted with, or, by conducting its
business as described in the Registration Statement and the Prospectus
and commercializing the products under development described therein,
would violate, infringe or conflict with any of the Intellectual
Property of any other person or entity other than any such violation,
infringement or conflict which would not reasonably be expected to
individually or in the aggregate have a Material Adverse Effect; and
(cc) The clinical, pre-clinical and other studies and
tests conducted by or on behalf of or sponsored by the Company or any
Subsidiary or in which the Company, any Subsidiary or its products or
product candidates have participated that are described in the
Prospectus or the results of which are referred to in the Prospectus
were and, if still pending, are being conducted in accordance with
standard medical and scientific research procedures; except to the
extent disclosed in the Registration Statement and the Prospectus, the
Company and each Subsidiary has operated and currently is in compliance
in all material respects with all applicable rules, regulations and
policies of the U.S. Food and Drug Administration and comparable drug
regulatory agencies outside of the United States (collectively, the
"REGULATORY AUTHORITIES"); and except to the extent disclosed in the
Registration Statement and the Prospectus, the Company has not received
any notices or other correspondence from the Regulatory Authorities or
any other governmental agency requiring the termination or suspension
of any clinical or pre-clinical studies or tests that are described in
the Prospectus or the results of which are referred to in the
Prospectus.
4. CERTAIN COVENANTS OF THE COMPANY. The Company hereby
agrees:
(a) to furnish such information as may be required and
otherwise to cooperate in qualifying the Shares for offering and sale
under the securities or blue sky laws of such states as you may
designate and to maintain such qualifications in effect so long as
required for the distribution of the Shares; PROVIDED that the Company
shall not be required to qualify as a foreign corporation or to consent
to the service of process under the laws of any such state (except
service of process with respect to the
11
offering and sale of the Shares); and to promptly advise you of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of any proceeding for such
purpose;
(b) to make available to the Underwriters in New York
City, as soon as practicable after the Registration Statement becomes
effective, and thereafter from time to time to furnish to the
Underwriters, as many copies of the Prospectus (or of the Prospectus as
amended or supplemented if the Company shall have made any amendments
or supplements thereto after the effective date of the Registration
Statement) as the Underwriters may request for the purposes
contemplated by the Act; in case any Underwriter is required to deliver
a prospectus after the nine-month period referred to in Section
10(a)(3) of the Act in connection with the sale of the Shares, the
Company will prepare promptly upon request such amendment or amendments
to the Registration Statement and such prospectuses as may be necessary
to permit compliance with the requirements of Section 10(a)(3) of the
Act;
(c) to advise you promptly and (if requested by you) to
confirm such advice in writing, (i) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective and (ii) if Rule 430A under the Act is used, when the
Prospectus is filed with the Commission pursuant to Rule 424(b) under
the Act (which the Company agrees to file in a timely manner under such
Rules);
(d) to advise you promptly, confirming such advice in
writing (if requested by you), of any request by the Commission for
amendments or supplements to the Registration Statement or the
Prospectus or for additional information with respect thereto, or of
notice of institution of proceedings for, or the entry of a stop order
suspending the effectiveness of the Registration Statement and, if the
Commission should enter a stop order suspending the effectiveness of
the Registration Statement, to make every reasonable effort to obtain
the lifting or removal of such order as soon as possible; to advise you
promptly of any proposal to amend or supplement the Registration
Statement or Prospectus and to file no such amendment or supplement to
which you shall object in writing;
(e) if necessary or appropriate, to file a registration
statement pursuant to Rule 462(b) under the Act;
(f) to furnish, upon request, to you and, upon request,
to each of the other Underwriters for a period of five years from the
date of this Agreement (i) copies of any reports or other
communications which the Company shall send to its stockholders or
shall from time to time publish or publicly disseminate, (ii) copies of
all annual,
12
quarterly and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms, as may be designated by the
Commission, (iii) copies of documents or reports filed with any
national securities exchange on which any class of securities of the
Company is listed, and (iv) such other public information as you may
reasonably request regarding the Company or any of the Subsidiaries, in
each case as soon as reasonably practicable after such reports,
communications, documents or information become available;
(g) to advise the Underwriters promptly of the happening
of any event known to the Company within the time during which a
Prospectus relating to the Shares is required to be delivered under the
Act which would require the making of any change in the Prospectus then
being used so that the Prospectus would not include an untrue statement
of material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
are made, not misleading, and, during such time, to prepare and
furnish, at the Company's expense, to the Underwriters promptly such
amendments or supplements to such Prospectus as may be necessary to
reflect any such change and to furnish you a copy of such proposed
amendment or supplement before filing any such amendment or supplement
with the Commission;
(h) to make generally available to its security holders,
and to deliver to you, an earnings statement of the Company (which will
satisfy the provisions of Section 11(a) of the Act) covering a period
of twelve months beginning after the effective date of the Registration
Statement (as defined in Rule 158(c) of the Act) and ending not later
than 15 months thereafter;
(i) to furnish to you five conformed copies of the
Registration Statement, as initially filed with the Commission, and of
all amendments thereto (including all exhibits thereto) and sufficient
additional conformed copies (other than exhibits) for distribution of a
copy to each of the other Underwriters;
(j) to furnish to you as early as reasonably practicable
prior to the time of purchase and the additional time of purchase, as
the case may be, but not later than two business days prior thereto, a
copy of the latest available unaudited interim consolidated financial
statements, if any, of the Company and the Subsidiaries which have been
read by the Company's independent certified public accountants, as
stated in their letter to be furnished pursuant to Section 6(f) hereof;
(k) to apply the net proceeds from the sale of the Shares
in the manner set forth under the caption "Use of proceeds" in the
Prospectus;
13
(l) to pay all costs, expenses, fees and taxes in
connection with (i) the preparation and filing of the Registration
Statement, each Preliminary Prospectus, the Prospectus, and any
amendments or supplements thereto, and the printing and furnishing of
copies of each thereof to the Underwriters and to dealers (including
costs of mailing and shipment), (ii) the registration, issue, sale and
delivery of the Shares, (iii) the printing of this Agreement, any
Agreement Among Underwriters, any dealer agreements, any Powers of
Attorney and any closing documents (including compilations thereof) and
the reproduction and/or printing and furnishing of copies of each
thereof to the Underwriters and (except closing documents) to dealers
(including costs of mailing and shipment), (iv) the qualification of
the Shares for offering and sale under state laws and the determination
of their eligibility for investment under state law as aforesaid
(including associated filing fees and the reasonable legal fees and
disbursements of counsel for the Underwriters) and the printing and
furnishing of copies of any blue sky surveys or legal investment
surveys to the Underwriters and to dealers, (v) any listing of the
Shares on any securities exchange or qualification of the Shares for
quotation on the Nasdaq National Market and any registration thereof
under the Exchange Act, (vi) review of the public offering of the
Shares by NASD Regulation, Inc. (including associated filing fees and
the reasonable legal fees and disbursements of counsel for the
Underwriters), (vii) the costs and expenses of the Company relating to
presentations or meetings undertaken in connection with the marketing
of the offer and sale of the Shares to prospective investors and the
Representatives' sales forces, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations, travel, lodging and other expenses incurred by the
officers of the Company and any such consultants, and the cost of any
aircraft chartered in connection with the road show and (viii) the
performance of the other obligations of the Company hereunder.
(m) for so long as the delivery of the Prospectus is
required in connection with the offer or sale of the Shares, to furnish
to you, before filing with the Commission, a copy of any document
proposed to be filed pursuant to Section 13, 14 or 15(d) of the
Exchange Act;
(n) not to sell, offer or agree to sell, contract to
sell, hypothecate, pledge, grant any option to sell or otherwise
dispose of, directly or indirectly, any shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common
Stock or other rights to purchase Common Stock or any other securities
of the Company that are substantially similar to Common Stock, or file
or cause to be declared effective a registration statement under the
Act relating to the offer and sale of any shares of Common Stock or
securities convertible into or exercisable or exchangeable for Common
Stock or other rights to purchase Common Stock or any
14
other securities of the Company that are substantially similar to
Common Stock, for a period of ninety (90) days after the date hereof
(the "LOCK-UP PERIOD"), without the prior written consent of UBS
Warburg except for (i) the registration of the Shares and the sales to
the Underwriters pursuant to this Agreement, (ii) issuances of Common
Stock upon the exercise of options or warrants or upon the conversion
of convertible securities disclosed as outstanding in the Registration
Statement and the Prospectus, (iii) the issuance of stock options not
exercisable during the Lock-up Period pursuant to stock option plans
described in the Registration Statement and the Prospectus and (iv) the
issuance of securities which may be required pursuant to the Company's
or the Subsidiaries' currently outstanding agreements which are
described in the Registration Statement and the Prospectus, including
without limitation the issuance of Common Stock to Hybridon, Inc. and
the registration thereof under the Act.
5. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the
Shares are not delivered for any reason other than the termination of this
Agreement pursuant to the last paragraph of Section 8 hereof or the default by
one or more of the Underwriters in its or their respective obligations
hereunder, the Company agrees, in addition to paying the amounts described in
Section 4(l) hereof, to reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of their
counsel.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters hereunder are subject to the accuracy of the
representations and warranties on the part of the Company on the date hereof and
at the time of purchase (and the several obligations of the Underwriters at the
additional time of purchase are subject to the accuracy of the representations
and warranties on the part of the Company on the date hereof and at the time of
purchase (unless previously waived) and at the additional time of purchase, as
the case may be), the performance by the Company of its obligations hereunder
and to the following additional conditions precedent:
(a) You shall have received, at the time of purchase and
at the additional time of purchase, as the case may be, an opinion of
Cooley Godward LLP, counsel for the Company, addressed to the
Underwriters, and dated the time of purchase or the additional time of
purchase, as the case may be, with reproduced copies for each of the
other Underwriters and in form reasonably satisfactory to Dewey
Ballantine LLP, counsel for the Underwriters, stating that:
(i) the Company has been duly incorporated and
is validly existing as a corporation and in good standing
under the laws of the State of Delaware, with full corporate
power and authority to own, lease and operate its properties
and conduct its business as described in the Registration
Statement and the Prospectus, to execute and deliver this
Agreement and to issue, sell and deliver the Shares as herein
contemplated;
15
(ii) the Company is duly qualified to do business
as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is necessary, except
where the failure to so qualify would not reasonably be
expected to have a Material Adverse Effect;
(iii) this Agreement has been duly authorized,
executed and delivered by the Company;
(iv) the Firm Shares have been duly authorized
and, when issued (in the case of the Firm Shares) and
delivered to and paid for by the Underwriters in accordance
with and for the consideration set forth herein, will be duly
and validly issued and will be fully paid and non-assessable;
(v) the Company has authorized and outstanding
(as of the dates indicated) shares of capital stock as set
forth in the Registration Statement and the Prospectus under
the caption "Capitalization"; the outstanding shares of
capital stock of the Company (A) have been duly authorized and
validly issued and are fully paid and non-assessable and (B)
are free of preemptive rights, resale rights, rights of first
refusal and similar rights under the Delaware General
Corporation Law (the "DGCL") or the charter or bylaws or other
organizational documents of the Company or any contract,
commitment or instrument filed as an exhibit to the
Registration Statement; the Firm Shares when issued will be
free of preemptive or similar rights under the DGCL or any
contract, commitment or instrument filed as an exhibit to the
Registration Statement; and the certificates for the Shares
are in due and proper form and conform to the requirements of
the DGCL and the Nasdaq National Market;
(vi) the common stock of the Company, including
the Shares, conforms in all material respects to the
description thereof contained in the Registration Statement
and Prospectus (as incorporated by reference therein from the
Company's Registration Statement on Form 8-A filed with the
Commission on April 12, 1991 and from the Company's
Certificate of Amendment of Restated Certificate of
Incorporation filed with the Company's Quarterly Report on
Form 10-Q for the period ended June 30, 2001, as amended);
(vii) the Registration Statement and the
Prospectus (except as to the financial statements and
schedules and other financial and statistical data contained
therein, as to which such counsel need express no opinion)
comply as to form in all material respects with the
requirements of the Act;
16
(viii) the Registration Statement has become
effective under the Act, and to such counsel's knowledge no
stop order with respect to the effectiveness thereof has been
issued and no stop order proceedings with respect thereto have
been instituted or are overtly threatened under the Act; and
any required filing of the Prospectus and any supplement
thereto pursuant to Rule 424 under the Act has been made in
the manner and within the time period required by such Rule
424;
(ix) no approval, authorization, consent or order
of or filing with any national, state or local governmental or
regulatory commission, board, body, authority or agency is
required in connection with the execution and delivery of this
Agreement and the issuance and sale of the Shares and
consummation of the other transactions contemplated hereby
other than those that have been obtained under the Act, the
Exchange Act and the rules of the Nasdaq National Market,
other than any necessary qualification under the state
securities or blue sky laws of the various jurisdictions in
which the Shares are being offered by the Underwriters or any
necessary approval of the Corporate Financing Department of
NASD Regulation, Inc., as to which such qualification and
approval such counsel need express no opinion;
(x) the execution, delivery and performance of
this Agreement by the Company, including the consummation of
the transactions contemplated hereby and by the Registration
Statement, do not constitute, and will not result in, a
Default Event pursuant to (A) any provision of the charter or
bylaws or other organizational documents of the Company, (B)
any provision of any license, permit, franchise,
authorization, indenture, mortgage, deed of trust, note, bank
loan, credit agreement, other evidence of indebtedness, lease,
contract, agreement or instrument filed as an exhibit to the
Registration Statement, (C) any federal, state, local or
foreign law, regulation or rule applicable to the Company or
(D) any decree, judgment or order known by such counsel to be
applicable to the Company or any of the Subsidiaries other
than, in the case of clause (B) such Default Events as would
not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect;
(xi) to such counsel's knowledge, there are no
contracts, licenses, agreements, leases or documents of a
character which are required to be filed as exhibits to the
Registration Statement or to be summarized or described in the
Prospectus which have not been so filed, summarized or
described;
(xii) to such counsel's knowledge, there are no
actions, suits, claims, investigations or proceedings pending
or overtly threatened to which the Company or any of the
Subsidiaries is subject or of which any of their
17
respective properties is subject, whether at law, in equity
or before or by any federal, state, local or foreign
governmental or regulatory commission, board, body,
authority or agency, which are required to be described in
the Prospectus but are not so described;
(xiii) the Company is not and, after giving effect
to the offer and sale of the Shares, will not be an
"investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the
Investment Company Act;
(xiv) those statements in the Registration
Statement and the Prospectus under the captions "Risk
Factors--If registration rights that we have previously
granted are exercised, then our stock price may be
negatively affected." and "Risk Factors--Provisions in our
certificate of incorporation, other agreements and Delaware
law may prevent stockholders from receiving a premium for
their shares." and in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 under the
caption "Recent Sales of Unregistered Securities" that are
descriptions of contracts, agreements or other legal
documents or of legal proceedings, or refer to statements of
law or legal conclusions, are accurate in all material
respects and present fairly the information required to be
shown; and
(xv) except as described in the Registration
Statement and the Prospectus (including those rights held by
Hybridon, Inc. pursuant to the agreements described in the
Registration Statement and the Prospectus), no person has the
right, pursuant to the terms of any contract, agreement or
other instrument filed as an exhibit to the Registration
Statement to have any securities issued by the Company and
owned by them registered pursuant to the Act, included in the
Registration Statement or sold in the offering contemplated
thereby, whether as a result of the filing or effectiveness of
the Registration Statement or the transactions contemplated by
this Agreement or otherwise, except for such rights as have
been complied with or waived;
In addition, such counsel shall state that such
counsel has participated in conferences with officers and other
representatives of the Company, representatives of the independent
public accountants of the Company and representatives of the
Underwriters at which the contents of the Registration Statement and
Prospectus were discussed. Although such counsel has not
independently verified and is not passing upon and does not assume
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or Prospectus
(except as and to the extent stated in subparagraphs (vi) (vii) and
(xiv) above), on the basis of the foregoing nothing has come to the
attention of such counsel that causes them to believe that the
Registration Statement or any amendment thereto at the time such
Registration Statement or amendment became effective contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus or any
18
supplement thereto at the date of such Prospectus or such
supplement, and at all times up to and including the time of
purchase or additional time of purchase, as the case may be,
contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that such
counsel need express no opinion with respect to the financial
statements and schedules and other financial or statistical data
included in the Registration Statement or Prospectus).
(b) You shall have received at the time of purchase
and at the additional time of purchase, as the case may be, the
opinion of Woodcock Washburn LLP, patent counsel to the Company,
dated the time of purchase or the additional time of purchase, as
the case may be, with reproduced copies for each of the other
Underwriters and in form reasonably satisfactory to Dewey Ballantine
LLP, counsel for the Underwriters, stating that:
(i) based on information brought to our
attention by the Company with respect to the Company's
investigation of the published literature and patent
references relating to the inventions claimed in its patent
applications in our care (the "relevant applications"), we
have disclosed all pertinent art references to the United
States Patent and Trademark Office in such applications. To
the best of our knowledge, all information submitted to the
United States Patent and Trademark Office in the relevant
applications and in connection with the prosecution of the
relevant applications was accurate. Neither we nor, to the
best of our knowledge, the Company has made any
misrepresentation or concealed any material fact from the
Patent and Trademark Office in any of the relevant
applications, or in connection with the prosecution of such
applications. Woodcock Washburn LLP has not independently
conducted any investigation of the published literature and
patent references relating to the inventions claimed in the
Company patent applications;
(ii) the statements in the Prospectus under the
heading "Risk factors-- Intellectual property litigation could
be expensive and prevent us from pursuing our programs" and in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2000 under the caption "Patents and Proprietary
Rights" constitute an accurate summary of the matters referred
to therein and fairly present the information called for with
respect to such matters; and
(iii) other than as disclosed in the Prospectus,
to the best of our knowledge, the Company's products and
products under development do not, and would not upon
commercialization, infringe or conflict with asserted rights
19
of any third party with respect to any material patents,
trademarks, licenses, copyrights and proprietary or other
confidential information employed by the Company in connection
with its business.
With respect to subparagraph (i) of paragraph (b) above, Woodcock
Washburn LLP may state that they have not independently conducted any
investigation of the published literature and patent references relating to
the inventions claimed in the Company's patent applications.
(c) You shall have received at the time of purchase and
at the additional time of purchase, as the case may be, the opinion of
Dewey Ballantine LLP, counsel for the Underwriters, dated the time of
purchase or the additional time of purchase, as the case may be, with
respect to the issuance and sale of the Shares by the Company, the
Registration Statement, the Prospectus (together with any supplement
thereto) and other related matters as the Underwriters may require.
(d) You shall have received from Ernst & Young LLP
letters dated, respectively, the date of this Agreement and the time of
purchase and additional time of purchase, as the case may be, and
addressed to the Underwriters (with reproduced copies for each of the
Underwriters) in the forms heretofore approved by UBS Warburg.
(e) No amendment or supplement to the Registration
Statement or Prospectus, or document which upon filing with the
Commission would be incorporated by reference therein, shall at any
time have been filed to which you have objected or shall object in
writing.
(f) The Registration Statement shall have become
effective, or if Rule 430A under the Act is used, the Prospectus shall
have been filed with the Commission pursuant to Rule 424(b) under the
Act, at or before 5:00 P.M., New York City time, on the date of this
Agreement, unless a later time (but not later than 5:00 P.M., New York
City time, on the second full business day after the date of this
Agreement) shall be agreed to by the Company and you in writing or by
telephone, confirmed in writing; PROVIDED, HOWEVER, that the Company
and you and any group of Underwriters, including you, who have agreed
hereunder to purchase in the aggregate at least 50% of the Firm Shares
may from time to time agree on a later date.
(g) Prior to the time of purchase or the additional time
of purchase, as the case may be, (i) no stop order with respect to the
effectiveness of the Registration Statement shall have been issued
under the Act or proceedings initiated under Section 8(d) or 8(e) of
the Act; (ii) the Registration Statement and all amendments thereto, or
modifications thereof, if any, shall not contain an untrue statement of
a material fact or
20
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and (iii)
the Prospectus and all amendments or supplements thereto, or
modifications thereof, if any, shall not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
(h) Between the time of execution of this Agreement and
the time of purchase or the additional time of purchase, as the case
may be, (i) no material and adverse change or any development involving
a prospective material and adverse change (other than as specifically
described in the Registration Statement and Prospectus), in the
business, properties, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries, taken as a whole, shall
occur or become known and (ii) no transaction which is material and
adverse to the Company shall have been entered into by the Company or
any of the Subsidiaries.
(i) The Company will, at the time of purchase or
additional time of purchase, as the case may be, deliver to you a
certificate signed by one of the Company's executive officers to the
effect that the representations and warranties of the Company as set
forth in this Agreement are true and correct as of each such date, that
the Company has performed such of its obligations under this Agreement
as are to be performed at or before the time of purchase and at or
before the additional time of purchase, as the case may be, and the
conditions set forth in paragraphs (g) and (h) of this Section 6 have
been met.
(j) You shall have received the letters referred to in
Section 3(q).
(k) The Company shall have furnished to you such other
documents and certificates as to the accuracy and completeness of any
statement in the Registration Statement and the Prospectus as of the
time of purchase and the additional time of purchase, as the case may
be, as you may reasonably request.
(l) The Shares shall have been approved for listing for
quotation on the Nasdaq National Market, subject only to notice of
issuance at or prior to the time of purchase or the additional time of
purchase, as the case may be.
(m) Between the time of execution of this Agreement and
the time of purchase or additional time of purchase, as the case may
be, there shall not have occurred any downgrading, nor shall any notice
or announcement have been given or made of (i) any intended or
potential downgrading or (ii) any review or possible change that does
not indicate an improvement, in the rating accorded any securities of
21
or guaranteed by the Company or any Subsidiary by any "nationally
recognized statistical rating organization", as that term is defined in
rule 436(g)(2) under the Act.
7. EFFECTIVE DATE OF AGREEMENT; TERMINATION. This
Agreement shall become effective (i) if Rule 430A under the Act is not used,
when you shall have received notification of the effectiveness of the
Registration Statement, or (ii) if Rule 430A under the Act is used, when the
parties hereto have executed and delivered this Agreement.
The obligations of the several Underwriters hereunder shall be
subject to termination in the absolute discretion of you or any group of
Underwriters (which may include you) which has agreed to purchase in the
aggregate at least 50% of the Firm Shares, (i) if, since the time of execution
of this Agreement or the respective dates as of which information is given in
the Registration Statement and Prospectus, there has been any material adverse
change, financial or otherwise (other than as specifically described in the
Registration Statement and Prospectus), in the operations, business, condition
or prospects of the Company and the Subsidiaries taken as a whole, which would,
in your judgment or in the judgment of such group of Underwriters, make it
impracticable to market the Shares, (ii) there shall have occurred any
downgrading, or any notice shall have been given of (x) any intended or
potential downgrading or (y) any review or possible change that does not
indicate an improvement, in the rating accorded any securities of or guaranteed
by the Company or any Subsidiary by any "nationally recognized statistical
rating organization", as that term is defined in Rule 436(g)(2) under the Act or
(iii) if, at any time prior to the time of purchase or, with respect to the
purchase of any Additional Shares, the additional time of purchase, as the case
may be, trading in securities on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market shall have been suspended or limitations
or minimum prices shall have been established on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market, or if a banking
moratorium shall have been declared either by the United States or New York
State authorities, or if the United States shall have declared war in accordance
with its constitutional processes or there shall have occurred any material
outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on the financial markets of
the United States as, in your judgment or in the judgment of such group of
Underwriters, to make it impracticable to market the Shares.
If you or any group of Underwriters elects to terminate this
Agreement as provided in this Section 7, the Company and each other Underwriter
shall be notified promptly by letter or telegram from such terminating
Underwriter.
If the sale to the Underwriters of the Shares, as contemplated
by this Agreement, is not carried out by the Underwriters for any reason
permitted under this Agreement or if such sale is not carried out because the
Company shall be unable to comply with any of the terms of this Agreement, the
Company shall not be under any obligation or
22
liability under this Agreement (except to the extent provided in Sections
4(1), 5 and 9 hereof), and the Underwriters shall be under no obligation or
liability to the Company under this Agreement (except to the extent provided
in Section 9 hereof) or to one another hereunder.
8. INCREASE IN UNDERWRITERS' COMMITMENTS. Subject to
Sections 6 and 7, if any Underwriter shall default in its obligation to
purchase and pay for the Firm Shares to be purchased by it hereunder
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 7 hereof) and if the number of Firm
Shares which all Underwriters so defaulting shall have agreed but failed to
purchase and pay for does not exceed 10% of the total number of Firm Shares,
the non-defaulting Underwriters shall purchase and pay for (in addition to
the aggregate number of Firm Shares they are obligated to purchase pursuant
to Section 1 hereof) the number of Firm Shares agreed to be purchased by all
such defaulting Underwriters, as hereinafter provided. Such Shares shall be
purchased and paid for by such non-defaulting Underwriter or Underwriters in
such amount or amounts as you may designate with the consent of each
Underwriter so designated or, in the event no such designation is made, such
Shares shall be purchased and paid for by all non-defaulting Underwriters pro
rata in proportion to the aggregate number of Firm Shares set opposite the
names of such non-defaulting Underwriters in Schedule A.
Without relieving any defaulting Underwriter from its
obligations hereunder, the Company agrees with the non-defaulting Underwriters
that it will not sell any Firm Shares hereunder unless all of the Firm Shares
are purchased by the Underwriters (or by substituted Underwriters selected by
you with the approval of the Company or selected by the Company with your
approval).
If a new Underwriter or Underwriters are substituted by the
Underwriters or by the Company for a defaulting Underwriter or Underwriters in
accordance with the foregoing provision, the Company or you shall have the right
to postpone the time of purchase for a period not exceeding five business days
in order that any necessary changes in the Registration Statement and Prospectus
and other documents may be effected.
The term Underwriter as used in this Agreement shall refer to
and include any Underwriter substituted under this Section 8 with like effect as
if such substituted Underwriter had originally been named in Schedule A.
If the aggregate number of Shares which the defaulting
Underwriter or Underwriters agreed to purchase exceeds 10% of the total
number of Shares which all Underwriters agreed to purchase hereunder, and if
neither the non-defaulting Underwriters nor the Company shall make
arrangements within the five business day period stated above for the
purchase of all the Shares which the defaulting Underwriter or Underwriters
agreed to purchase hereunder, this Agreement shall terminate without further
act or deed and without any liability on the part of the Company to any
non-defaulting Underwriter and without any
23
liability on the part of any non-defaulting Underwriter to the Company.
Nothing in this paragraph, and no action taken hereunder, shall relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
9. INDEMNITY AND CONTRIBUTION.
(a) The Company agrees to indemnify, defend and hold
harmless each Underwriter, its partners, directors and officers, and any person
who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and the successors and assigns of all of the
foregoing persons from and against any loss, damage, expense, liability or claim
(including the reasonable cost of investigation) which, jointly or severally,
any such Underwriter or any such person may incur under the Act, the Exchange
Act, the common law or otherwise, insofar as such loss, damage, expense,
liability or claim arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or in the Registration Statement as amended by any post-effective
amendment thereof by the Company) or in a Prospectus (the term Prospectus for
the purpose of this Section 9 being deemed to include any Preliminary
Prospectus, the Prospectus and the Prospectus as amended or supplemented by the
Company), or arises out of or is based upon any omission or alleged omission to
state a material fact required to be stated in either such Registration
Statement or Prospectus or necessary to make the statements made therein not
misleading, except insofar as any such loss, damage, expense, liability or claim
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact contained in and in conformity with information furnished in
writing by or on behalf of any Underwriter through you to the Company expressly
for use with reference to such Underwriter in such Registration Statement or
such Prospectus or arises out of or is based upon any omission or alleged
omission to state a material fact in connection with such information required
to be stated in such Registration Statement or such Prospectus or necessary to
make such information not misleading, or (ii) any untrue statement or alleged
untrue statement made by the Company in Section 3 of this Agreement or the
failure by the Company to perform when and as required any agreement or covenant
contained herein or (iii) any untrue statement or alleged untrue statement of
any material fact contained in any audio or visual materials provided by the
Company or based upon written information furnished by or on behalf of the
Company including, without limitation, slides, videos, films, tape recordings,
used in connection with the marketing of the Shares, PROVIDED, HOWEVER, that the
indemnity agreement contained in clause (i) of this subsection (a) with respect
to any Preliminary Prospectus or amended Preliminary Prospectus shall not inure
to the benefit of any Underwriter from whom the person asserting any such loss,
damage, expense, liability or claim purchased the Shares which is the subject
thereof if the Prospectus corrected any such alleged untrue statement or
omission and if such Underwriter failed to send or give a copy of the Prospectus
to such person at or prior to the written confirmation of the sale of such
Shares
24
to such person, unless the failure is the result of noncompliance by the
Company with Section 4(b) hereof.
If any action, suit or proceeding (together, a "Proceeding")
is brought against an Underwriter or any such person in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such Underwriter or such person shall promptly notify the Company in writing of
the institution of such Proceeding and the Company shall assume the defense of
such Proceeding, including the employment of counsel reasonably satisfactory to
such indemnified party and payment of all fees and expenses; PROVIDED, HOWEVER,
that the omission to so notify the Company shall not relieve the Company from
any liability which the Company may have to any Underwriter or any such person
or otherwise, except to the extent the Company is materially prejudiced thereby.
Such Underwriter or such person shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such Underwriter or of such person unless the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such Proceeding or the Company shall not have, within a
reasonable period of time in light of the circumstances, employed counsel to
have charge of the defense of such Proceeding or such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from, additional to or in conflict with those
available to the Company (in which case the Company shall not have the right to
direct the defense of such Proceeding on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
Company and paid as incurred (it being understood, however, that the Company
shall not be liable for the expenses of more than one separate counsel (in
addition to any local counsel) in any one Proceeding or series of related
Proceedings in the same jurisdiction representing the indemnified parties who
are parties to such Proceeding). The Company shall not be liable for any
settlement of any Proceeding effected without the written consent of the
Company, but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless any Underwriter and any such person from
and against any loss or liability by reason of such settlement. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement of any
Proceeding effected without the Company's written consent if (i) such settlement
is entered into more than 60 business days after receipt by the indemnifying
party of the aforesaid request, (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement and (iii) such indemnified party shall have given the
indemnifying party at least 30 days' prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened Proceeding in respect
of which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party,
25
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
Proceeding and does not include an admission of fault, culpability or a
failure to act, by or on behalf of such indemnified party.
(b) Each Underwriter severally agrees to indemnify,
defend and hold harmless the Company, its directors and officers, and any person
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act and the successors and assigns of all of the foregoing
persons from and against any loss, damage, expense, liability or claim
(including the reasonable cost of investigation) which the Company or any such
person may incur under the Act, the Exchange Act, the common law or otherwise,
insofar as such loss, damage, expense, liability or claim arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
contained in and in conformity with information furnished in writing by or on
behalf of such Underwriter through you to the Company expressly for use with
reference to such Underwriter in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment thereof by the
Company) or in a Prospectus, or arises out of or is based upon any omission or
alleged omission to state a material fact in connection with such information
required to be stated in such Registration Statement or such Prospectus or
necessary to make such information not misleading.
If any Proceeding is brought against the Company or any such
person in respect of which indemnity may be sought against any Underwriter
pursuant to the foregoing paragraph, the Company or such person shall promptly
notify such Underwriter in writing of the institution of such Proceeding and
such Underwriter shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses; PROVIDED, HOWEVER, that the omission to so
notify such Underwriter shall not relieve such Underwriter from any liability
which such Underwriter may have to the Company or any such person or otherwise,
except to the extent such Underwriter is materially prejudiced thereby. The
Company or such person shall have the right to employ their or its own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of the Company or such person unless the employment of such counsel
shall have been authorized in writing by such Underwriter in connection with the
defense of such Proceeding or such Underwriter shall not have, within a
reasonable period of time in light of the circumstances, employed counsel to
defend such Proceeding or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to or in conflict with those available to such
Underwriter (in which case such Underwriter shall not have the right to direct
the defense of such Proceeding on behalf of the indemnified party or parties,
but such Underwriter may employ counsel and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Underwriter), in any of which events such fees and expenses shall be borne by
such Underwriter and paid as incurred (it being
26
understood, however, that such Underwriter shall not be liable for the
expenses of more than one separate counsel (in addition to any local counsel)
in any one Proceeding or series of related Proceedings in the same
jurisdiction representing the indemnified parties who are parties to such
Proceeding). No Underwriter shall be liable for any settlement of any such
Proceeding effected without the written consent of such Underwriter but if
settled with the written consent of such Underwriter, such Underwriter agrees
to indemnify and hold harmless the Company and any such person from and
against any loss or liability by reason of such settlement. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for fees
and expenses of counsel as contemplated by the second sentence of this
paragraph, then the indemnifying party agrees that it shall be liable for any
settlement of any Proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement and (iii) such indemnified party
shall have given the indemnifying party at least 30 days' prior notice of its
intention to settle. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened Proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such Proceeding and does not include an admission of fault,
culpability or a failure to act, by or on behalf of such indemnified party.
(c) If the indemnification provided for in this Section 9
is unavailable to an indemnified party under subsections (a) and (b) of this
Section 9 in respect of any losses, damages, expenses, liabilities or claims
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, damages, expenses,
liabilities or claims (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses, liabilities or
claims, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same respective proportions as the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, bear to the aggregate
public offering price of the Shares. The relative fault of the Company on the
one hand and of the Underwriters on the
27
other shall be determined by reference to, among other things, whether the
untrue statement or alleged untrue statement of a material fact or omission
or alleged omission relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, damages,
expenses, liabilities and claims referred to in this subsection shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating, preparing to defend or defending
any Proceeding.
(d) The Company and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 9 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in subsection (c) above.
Notwithstanding the provisions of this Section 9, in no case shall any
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by such Underwriter and
distributed to the public were offered to the public exceeds the amount of any
damage which such Underwriter has otherwise been required to pay by reason of
such untrue statement or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 9 are several in proportion
to their respective underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained
in this Section 9 and the covenants, warranties and representations of the
Company contained in this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of any Underwriter, its
partners, directors or officers or any person (including each partner, officer
or director of such person) who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, or by or on behalf of
the Company, its directors or officers or any person who controls any of the
foregoing within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and shall survive any termination of this Agreement or the
issuance and delivery of the Shares. The Company and each Underwriter agree
promptly to notify each other of the commencement of any Proceeding against it
and against any of the officers or directors of the Company in connection with
the issuance and sale of the Shares, or in connection with the Registration
Statement or Prospectus.
10. NOTICES. Except as otherwise herein provided, all
statements, requests, notices and agreements shall be in writing and, if to the
Underwriters, shall be sufficient in all respects if delivered or sent to UBS
Warburg LLC, 299 Park Avenue, New York, N.Y. 10171-
28
0026, Attention: Syndicate Department; and if to the Company, shall be
sufficient in all respects if delivered or sent to the Company at the offices
of the Company at 2292 Faraday Avenue, Carlsbad, CA 92008, Attention: B.
Lynne Parshall, Esq., Executive Vice President and Chief Financial Officer.
11. INFORMATION FURNISHED BY THE UNDERWRITERS. The
statements set forth in the last paragraph on the cover page of the Prospectus
and the statements set forth in the fifth, seventh, eighth, ninth and tenth
paragraphs under the caption "Underwriting" in the Prospectus constitute the
only information furnished by or on behalf of the Underwriters as such
information is referred to in Sections 3 and 9 hereof.
12. GOVERNING LAW; CONSTRUCTION. This Agreement and any
claim, counterclaim or dispute of any kind or nature whatsoever arising out of
or in any way relating to this Agreement ("Claim"), directly or indirectly,
shall be governed by, and construed in accordance with, the laws of the State of
New York. The Section headings in this Agreement have been inserted as a matter
of convenience of reference and are not a part of this Agreement.
13. SUBMISSION TO JURISDICTION. Except as set forth
below, no Claim may be commenced, prosecuted or continued in any court other
than the courts of the State of New York located in the City and County of New
York or in the United States District Court for the Southern District of New
York, which courts shall have jurisdiction over the adjudication of such
matters, and you and the Company consent to the jurisdiction of such courts and
personal service with respect thereto. The Company hereby consents to personal
jurisdiction, service and venue in any court in which any Claim arising out of
or in any way relating to this Agreement is brought by any third party against
an Underwriter or any indemnified party. Each Underwriter and the Company (on
its behalf and, to the extent permitted by applicable law, on behalf of its
stockholders and affiliates) waives all right to trial by jury in any action,
proceeding or counterclaim (whether based upon contract, tort or otherwise) in
any way arising out of or relating to this Agreement. The Company agrees that a
final judgment not subject to appeal in any such action, proceeding or
counterclaim brought in any such court shall be conclusive and binding
thereupon, and may be enforced in any other courts in the jurisdiction to which
the Company is or may be subject, by suit upon such judgment.
14. PARTIES AT INTEREST. The Agreement herein set forth
has been and is made solely for the benefit of the Underwriters, the Company
and, to the extent provided in Section 9 hereof, the controlling persons,
directors and officers referred to in such section, and their respective
successors, assigns, heirs, personal representatives and executors and
administrators. No other person, partnership, association or corporation
(including a purchaser, as such purchaser, from any of the Underwriters) shall
acquire or have any right under or by virtue of this Agreement.
29
15. COUNTERPARTS. This Agreement may be signed by the
parties in one or more counterparts which together shall constitute one and the
same agreement among the parties.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the Underwriters and the Company and their successors and assigns
and any successor or assign of any substantial portion of the Company's and any
of the Underwriters' respective businesses and/or assets.
17. MISCELLANEOUS. UBS Warburg LLC, an indirect, wholly
owned subsidiary of UBS AG, is not a bank and is separate from any affiliated
bank, including any U.S. branch or agency of UBS Warburg LLC. Because UBS
Warburg LLC is a separately incorporated entity, it is solely responsible for
its own contractual obligations and commitments, including obligations with
respect to sales and purchases of securities. Securities sold, offered or
recommended by UBS Warburg LLC are not deposits, are not insured by the Federal
Deposit Insurance Corporation, are not guaranteed by a branch or agency, and are
not otherwise an obligation or responsibility of a branch or agency.
A lending affiliate of UBS Warburg LLC may have lending
relationships with issuers of securities underwritten or privately placed by UBS
Warburg LLC. To the extent required under the securities laws, prospectuses and
other disclosure documents for securities underwritten or privately placed by
UBS Warburg LLC will disclose the existence of any such lending relationships
and whether the proceeds of the issue will be used to repay debts owed to
affiliates of UBS Warburg LLC.
30
If the foregoing correctly sets forth the understanding among
the Company, and the Underwriters, please so indicate in the space provided
below for the purpose, whereupon this letter and your acceptance shall
constitute a binding agreement among the Company and the several Underwriters.
Very truly yours,
ISIS PHARMACEUTICALS, INC.
By:
-----------------------------------
Name:
Title:
Accepted and agreed to as of the date first above written:
UBS WARBURG LLC
ROBERTSON STEPHENS, INC.
NEEDHAM & COMPANY, INC.
FORTIS SECURITIES INC.
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
By: UBS WARBURG LLC
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
31
SCHEDULE A
UNDERWRITER NUMBER OF FIRM SHARES
----------- ---------------------
UBS Warburg LLC.........................................
Robertson Stephens, Inc.................................
Needham & Company, Inc..................................
Fortis Securities Inc...................................
--------------------------------
Total 5,000,000
--------------------------------
1
SCHEDULE B
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
ORASENSE LTD. BERMUDA
HEPASENSE LTD. BERMUDA
1
EXHIBIT C
ISIS PHARMACEUTICALS, INC.
Common Stock
($.001 Par Value)
__________ , 2001
UBS Warburg LLC
Robertson Stephens, Inc.
Needham & Company, Inc.
Fortis Securities Inc.
c/o UBS Warburg LLC
299 Park Avenue
New York, New York 10171
Ladies and Gentlemen:
This Lock-Up Letter Agreement is being delivered to you in
connection with the proposed Underwriting Agreement (the "Underwriting
Agreement") to be entered into by and among Isis Pharmaceuticals, Inc. (the
"Company"), you and the other Underwriters named therein, as representatives of
the several Underwriters, with respect to a public offering (the "Offering") of
5,000,000 shares of Common Stock of the Company, $.001 par value per share (the
"Common Stock").
In order to induce you to enter into the Underwriting
Agreement, the undersigned agrees that for a period of 90 days after the date
of the final prospectus relating to the Offering the undersigned will not,
without the prior written consent of UBS Warburg LLC, (i) sell, offer to
sell, contract to sell, hypothecate, pledge, grant any option to purchase or
otherwise dispose of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of
Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission promulgated thereunder with respect to, any
Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of Common
1
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, whether any such transaction is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise, or (iii)
publicly announce an intention to effect any transaction specified in clause
(i) or (ii). The foregoing sentence shall not apply to (a) the sale of any
Common Stock to the Underwriters pursuant to the Underwriting Agreement, (b)
bona fide gifts, provided the recipient or recipients thereof agree in
writing to be bound by the terms of this Lock-Up Letter Agreement, or (c)
dispositions to any trust for the direct or indirect benefit of the
undersigned and/or the immediate family of the undersigned, provided that
such trust agrees in writing to be bound by the terms of this Lock-Up Letter
Agreement.
In addition, the undersigned hereby waives any rights the
undersigned may have to require registration of Common Stock in connection with
the filing of a registration statement relating to the Offering. The undersigned
further agrees that, for a period of 90 days after the date of the final
prospectus relating to the Offering, the undersigned will not, without the prior
written consent of UBS Warburg LLC, make any demand for, or exercise any right
with respect to, the registration of Common Stock of the Company or any
securities convertible into or exercisable or exchangeable for Common Stock.
If (i) the registration statement filed with the Securities
and Exchange Commission with respect to the Offering is withdrawn or (ii) for
any reason the Underwriting Agreement shall be terminated prior to the time of
purchase (as defined in the Underwriting Agreement), this Lock-Up Letter
Agreement shall be terminated and the undersigned shall be released from its
obligations hereunder.
Yours very truly,
------------------------------
Name:
2
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-71176) and
related Prospectus of Isis Pharmaceuticals, Inc. and to the incorporation by
reference therein of our report dated February 2, 2001, with respect to the
consolidated financial statements of Isis Pharmaceuticals, Inc. included in its
Annual Report (Form 10-K, as amended on April 2, 2001) for the year ended
December 31, 2000, to be filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
---------------------------------------------------
ERNST & YOUNG LLP
San Diego, California
October 19, 2001
