AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 2004
REGISTRATION NO. 333-111821
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LEXICON GENETICS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0474169
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
------------
8800 TECHNOLOGY FOREST PLACE
THE WOODLANDS, TEXAS 77381
(281) 863-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------
ARTHUR T. SANDS, M.D., PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
8800 TECHNOLOGY FOREST PLACE
THE WOODLANDS, TEXAS 77381
(281) 863-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
------------
COPIES TO:
DAVID P. OELMAN JEFFREY L. WADE
VINSON & ELKINS L.L.P. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
1001 FANNIN LEXICON GENETICS INCORPORATED
2300 FIRST CITY TOWER 8800 TECHNOLOGY FOREST PLACE
HOUSTON, TEXAS 77002-6760 THE WOODLANDS, TEXAS 77381
(713) 758-3708 (281) 863-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective,
subject to market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 17, 2004
3,500,000 SHARES
[LEXICON LOGO]
LEXICON GENETICS INCORPORATED
COMMON STOCK
This prospectus relates to the offer and sale of previously issued
shares of our common stock by a selling stockholder. The selling stockholder is
offering up to 3,500,000 shares of our common stock. See "Selling Stockholder"
beginning on page 17.
We will not receive any proceeds from the sale of the shares offered by
the selling stockholder.
The selling stockholder may offer the shares from time to time through
public or private transactions at prevailing market prices, at prices related to
prevailing market prices or at privately negotiated prices.
Our common stock is listed on The Nasdaq National Market under the
symbol "LEXG". The last reported sale price on March 16, 2004 was $6.00 per
share.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 17, 2004.
TABLE OF CONTENTS
PAGE
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Lexicon Genetics Incorporated........................................... 3
Risk Factors............................................................ 5
Special Note Regarding Forward-Looking Statements....................... 17
Use of Proceeds......................................................... 17
Selling Stockholder..................................................... 17
Plan of Distribution.................................................... 18
Legal Matters........................................................... 19
Experts................................................................. 19
Where You Can Find More Information..................................... 20
Documents Incorporated by Reference..................................... 20
LEXICON GENETICS INCORPORATED
GENERAL
Lexicon Genetics is a biopharmaceutical company focused on the
discovery of breakthrough treatments for human disease. We use technology that
enables us to disrupt, or "knock out," the function of a gene to systematically
discover the physiological functions of genes in mice and to identify which
corresponding human genes encode potential targets for pharmaceutical
development, or drug targets. For those targets that we consider to have high
pharmaceutical value, we engage in programs for the discovery and development of
potential small molecule, antibody and protein drugs. Our physiology-based
approach to understanding gene function and our use of mouse models in our drug
discovery efforts allow us to make highly-informed decisions throughout the drug
discovery and development process, which we believe will increase our likelihood
of success in discovering breakthrough therapeutics.
We are using our gene knockout technology to discover the physiological
functions of 5,000 genes from the human genome that belong to gene families that
we consider to be pharmaceutically important. Our state-of-the-art animal
facilities enable us to capitalize on our gene knockout and physiological
analysis technologies by generating knockout mice and analyzing the
physiological function of genes on a large scale. Using this physiological
information, we select targets for our drug discovery programs that, when
knocked out, exhibit favorable therapeutic profiles with potential for
addressing large medical markets. We focus our discovery efforts in six
therapeutic areas - metabolic disorders, cardiovascular disease, cancer, immune
system disorders, neurological disorders and ophthalmic disease - and we have
established significant internal expertise in each of these areas.
To date, we have advanced more than 40 targets into drug discovery
programs. Our most advanced of these programs are in preclinical research. As of
the date of this prospectus, none of our programs had yet advanced into clinical
development.
We are working both independently and through strategic collaborations
and alliances to commercialize our technology and turn our discoveries into
drugs. We have established multiple collaborations with leading pharmaceutical
and biotechnology companies, as well as research institutes and academic
institutions. We are working with Bristol-Myers Squibb Company to discover and
develop small molecule drugs in the neuroscience field. We are working with
Genentech, Inc. to discover the functions of secreted proteins and potential
antibody targets identified through Genentech's internal drug discovery
research. We are working with Abgenix, Inc. to discover and develop antibody
drugs for drug targets identified in our own research. We are also working with
Incyte Corporation to discover and develop protein drugs. In addition, we have
established collaborations and license agreements with many other leading
pharmaceutical and biotechnology companies under which we receive fees and, in
many cases, are eligible to receive milestone and royalty payments, in return
for granting access to some of our technologies and discoveries for use in such
companies' own drug discovery efforts.
Lexicon Genetics was incorporated in Delaware in July 1995, and
commenced operations in September 1995. Our corporate headquarters are located
at 8800 Technology Forest Place, The Woodlands, Texas 77381, and our telephone
number is (281) 863-3000.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are made
available free of charge on our corporate website located at
www.lexicon-genetics.com as soon as reasonably practicable after the filing of
those reports with the Securities and Exchange Commission. Information found on
our website should not be considered part of this prospectus.
RECENT EVENTS
We established a drug discovery alliance with Bristol-Myers Squibb in
December 2003 to discover, develop and commercialize small molecule drugs in the
neuroscience field. In the alliance, we are contributing a number of
neuroscience drug discovery programs at various stages of development. We will
continue to use our gene knockout technology to identify additional drug targets
with promise in the neuroscience field. For those targets that are selected for
the alliance, we and Bristol-Myers Squibb will work together, on an exclusive
basis, to identify, characterize and carry out the preclinical development of
small molecule drugs, and will share equally both in the costs and in the work
attributable to those efforts. As drugs resulting from the alliance enter
clinical trials, Bristol-
3
Myers Squibb will have the first option to assume full responsibility for
clinical development and commercialization.
We received an upfront payment of $36 million under the agreement, and
will receive a minimum of $30 million in research funding during the initial
three years of the agreement. We may receive additional cash payments if we
exceed specified research productivity levels. We will also receive clinical and
regulatory milestone payments for each drug target for which Bristol-Myers
Squibb develops a drug under the alliance and royalties on sales of drugs
commercialized by Bristol-Myers Squibb. The target discovery portion of the
alliance has a term of three years, subject to Bristol-Myers Squibb's option to
extend the discovery portion of the alliance for an additional two years in
exchange for further research funding payments.
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RISK FACTORS
An investment in our common stock involves risks. You should carefully
consider the following risk factors, together with all of the other information
included in, or incorporated by reference into, this prospectus in evaluating an
investment in our common stock. We believe that each of the following risk
factors describe material risks to an investment in our common stock. If any of
the following risks were to occur, our business, financial condition or results
of operations would likely suffer, possibly materially. In that case, the
trading price of our common stock could decline and you could lose all or part
of your investment.
RISKS RELATED TO OUR COMPANY AND BUSINESS
WE HAVE A HISTORY OF NET LOSSES, AND WE EXPECT TO CONTINUE TO INCUR NET
LOSSES AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.
We have incurred net losses since our inception, including net losses
of $35.2 million for the year ended December 31, 2001, $59.7 million for the
year ended December 31, 2002 and $64.2 million for the year ended December 31,
2003. As of December 31, 2003, we had an accumulated deficit of $213.9 million.
We are unsure when we will become profitable, if ever. The size of our net
losses will depend, in part, on the rate of growth, if any, in our revenues and
on the level of our expenses.
We derive substantially all of our revenues from drug discovery
alliances, subscriptions to our LexVision database and our OmniBank library and
collaborations for the development and, in some cases, analysis of the
physiological effects of genes altered in knockout mice and technology licenses,
and will continue to do so for the foreseeable future. Our future revenues from
alliances, database subscriptions and collaborations are uncertain because our
existing agreements have fixed terms or relate to specific projects of limited
duration. Our future revenues from technology licenses are uncertain because
they depend, in part, on securing new agreements. Our ability to secure future
revenue-generating agreements will depend upon our ability to address the needs
of our potential future subscribers, collaborators and licensees, and to
negotiate agreements that we believe are in our long-term best interests. We may
determine that our interests are better served by retaining rights to our
discoveries and advancing our therapeutic programs to a later stage, which could
limit our near-term revenues. Given the early-stage nature of our operations, we
do not currently derive any revenues from sales of pharmaceuticals.
A large portion of our expenses is fixed, including expenses related to
facilities, equipment and personnel. In addition, we expect to spend significant
amounts to fund research and development and to enhance our core technologies.
As a result, we expect that our operating expenses will continue to increase
significantly in the near term and, consequently, we will need to generate
significant additional revenues to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis.
WE WILL NEED ADDITIONAL CAPITAL IN THE FUTURE AND, IF IT IS NOT
AVAILABLE, WE WILL HAVE TO CURTAIL OR CEASE OPERATIONS.
As of December 31, 2003, we had cash, cash equivalents and short-term
investments (net of restricted cash and investments) of $103.5 million. We
anticipate that our existing capital resources and the revenues we expect to
derive from drug discovery alliances, subscriptions to our databases,
collaborations for the development and, in some cases, analysis of the
physiological effects of genes altered in knockout mice and technology licenses
will enable us to fund our currently planned operations for approximately the
next two years. However, we caution you that we may generate less revenues or
incur expenses more rapidly than we currently anticipate.
Although difficult to accurately predict, the amount of our future
capital requirements will be substantial and will depend on many factors,
including:
- our ability to obtain alliance, database subscription,
collaboration and technology license agreements;
- the amount and timing of payments under such agreements;
- the level and timing of our research and development
expenditures;
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- market acceptance of products that we successfully develop and
commercially launch; and
- the resources we devote to developing and supporting such
products.
Our capital requirements will increase substantially to the extent we
advance potential therapeutics into preclinical and clinical development. Our
capital requirements will also be affected by any expenditures we make in
connection with license agreements and acquisitions of and investments in
complementary products and technologies. For all of these reasons, our future
capital requirements cannot easily be quantified.
If our capital resources are insufficient to meet future capital
requirements, we will have to raise additional funds to continue the development
of our technologies and complete the commercialization of products, if any,
resulting from our technologies. We cannot be certain that additional financing,
whether debt or equity, will be available in amounts or on terms acceptable to
us, if at all. We may be unable to raise sufficient additional capital; if so,
we will have to curtail or cease operations.
ANY SALE OF ADDITIONAL EQUITY SECURITIES IN THE FUTURE MAY BE DILUTIVE
TO OUR STOCKHOLDERS.
If we raise additional capital by issuing equity securities, our
then-existing stockholders will experience dilution and the terms of any new
equity securities may have preferences over our common stock.
WE ARE AN EARLY-STAGE COMPANY, AND WE MAY NOT SUCCESSFULLY DEVELOP OR
COMMERCIALIZE ANY THERAPEUTICS OR DRUG TARGETS THAT WE HAVE IDENTIFIED.
Our business strategy of using our technology platform and,
specifically, the discovery of the functions of genes using knockout mice to
select promising drug targets and developing and commercializing drugs based on
our discoveries, in significant part through collaborations and alliances, is
unproven. Our success will depend upon our ability to successfully develop
potential therapeutics for drug targets we consider to have pharmaceutical
value, whether on our own or through collaborations, and to select an
appropriate commercialization strategy for each potential therapeutic we choose
to pursue.
Biotechnology and pharmaceutical companies have successfully developed
and commercialized only a limited number of genomics-derived pharmaceutical
products to date. We have not proven our ability to develop or commercialize
therapeutics or drug targets that we identify, nor have we advanced any drug
candidates to clinical trials. We do not know that any pharmaceutical products
based on our drug target discoveries can be successfully commercialized. In
addition, we may experience unforeseen technical complications in the processes
we use to generate knockout mice, conduct in vivo analyses, generate compound
libraries, develop screening assays for drug targets or conduct screening of
compounds against those drug targets. These complications could materially delay
or limit the use of those resources, substantially increase the anticipated cost
of generating them or prevent us from implementing our processes at appropriate
quality and throughput levels. Finally, the information that we learn from
knockout mice may prove not to be useful in identifying
pharmaceutically-important drug targets or safe and effective therapies.
WE FACE SUBSTANTIAL COMPETITION IN THE DISCOVERY OF THE DNA SEQUENCES
OF GENES AND THEIR FUNCTIONS AND IN OUR DRUG DISCOVERY AND PRODUCT
DEVELOPMENT EFFORTS.
We face significant competition in each of the aspects of our business
from companies such as Human Genome Sciences, Inc., Millennium Pharmaceuticals,
Inc., Exelixis, Inc. and other similar companies that engage in programs for the
discovery and development of drugs utilizing a genetics-based approach to target
discovery and validation.
There are a finite number of genes in the human genome, and we believe
that the majority of such genes have been identified and that virtually all will
be identified within the next few years. We face substantial competition in our
efforts to discover and patent the sequence and other information derived from
such genes from entities using
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alternative, and in some cases higher volume and larger scale, approaches for
the same purpose. These alternative approaches may ultimately prove superior, in
some or all respects, to the use of knockout mice.
We also face competition from other companies in our efforts to
discover the functions of genes. The Human Genome Project and a large number of
universities and other not-for-profit institutions, many of which are funded by
the United States and foreign governments, are also conducting research to
discover the functions of genes. Competitors could discover and establish
patents on genes or gene products that we identify as promising drug targets,
which might hinder or prevent our ability to capitalize on such targets.
We face significant competition from other companies, as well as from
universities and other not-for-profit institutions, in our drug discovery and
product development efforts. Many of our competitors have substantially greater
financial, scientific and human resources than we do. As a result, our
competitors may succeed in developing products earlier than we do, obtaining
regulatory approvals faster than we do and developing products that are more
effective or safer than any that we may develop.
WE RELY HEAVILY ON OUR COLLABORATORS TO DEVELOP AND COMMERCIALIZE
PHARMACEUTICAL PRODUCTS BASED ON GENES THAT WE IDENTIFY AS PROMISING
CANDIDATES FOR DEVELOPMENT AS DRUG TARGETS, AND OUR COLLABORATORS'
EFFORTS MAY FAIL TO YIELD PHARMACEUTICAL PRODUCTS ON A TIMELY BASIS, IF
AT ALL.
It is our strategy to develop drug candidates on our own as well as
developing drug candidates in collaboration with third parties, particularly
when such collaborations enable us to obtain access to technology and expertise
that we do not possess internally or is complementary to our own.
Since we do not currently possess the resources necessary to develop,
obtain approvals for or commercialize potential pharmaceutical products based on
all of the genes that we identify as promising candidates for development as
drug targets, we must enter into collaborative arrangements to develop and
commercialize some of these products. We have limited or no control over the
resources that any collaborator may devote to this effort. Any of our present or
future collaborators may not perform their obligations as expected. These
collaborators may breach or terminate their agreements with us or otherwise fail
to conduct product discovery, development or commercialization activities
successfully or in a timely manner. Further, our collaborators may elect not to
develop pharmaceutical products arising out of our collaborative arrangements or
may not devote sufficient resources to the development, approval, manufacture,
marketing or sale of these products. If any of these events occurs, we may not
be able to develop or commercialize potential pharmaceutical products.
Some of our existing collaboration agreements contain, and
collaborations that we enter into in the future may contain, exclusivity
agreements or other limitations on our activities. These agreements may have the
effect of limiting our flexibility and may cause us to forego attractive
business opportunities.
WE RELY ON SEVERAL KEY COLLABORATORS FOR A SIGNIFICANT PORTION OF OUR
REVENUES, THE LOSS OF ANY OF WHICH WOULD NEGATIVELY IMPACT OUR
BUSINESS TO THE EXTENT SUCH LOSSES ARE NOT OFFSET BY ADDITIONAL
COLLABORATORS.
Most of our revenues in a given year have been derived from a limited
number of collaborators. For the fiscal year ended December 31, 2003, for
example, Incyte Corporation accounted for approximately 23% of our revenues,
Amgen, Inc. accounted for approximately 15% of our revenues and Bristol-Myers
Squibb Company and Genentech, Inc. each accounted for approximately 14% of our
revenues. In general, we cannot predict with certainty which, if any, of our
major collaborators will continue to generate revenues for us. If our
relationship terminates with any of these collaborators, our revenues will be
negatively impacted to the extent such losses are not offset by additional
collaboration agreements.
CANCELLATIONS BY OR CONFLICTS WITH OUR COLLABORATORS COULD HARM OUR
BUSINESS.
Our alliance and collaboration agreements may not be renewed and may be
terminated in the event either party fails to fulfill its obligations under
these agreements. Failures to renew or cancellations by collaborators could mean
a significant loss of revenues and could harm our reputation in the business and
scientific communities.
In addition, we may pursue opportunities in fields that could conflict
with those of our collaborators. Moreover, disagreements could arise with our
collaborators over rights to our intellectual property or our rights to share in
any of the future revenues of compounds or therapeutic approaches developed by
our collaborators. These kinds of disagreements could result in costly and time
consuming litigation. Conflicts with our collaborators could reduce our ability
to obtain future collaboration agreements and could have a negative impact on
our relationship with existing collaborators, materially impairing our business
and revenues. Some of our collaborators are also potential
7
competitors or may become competitors in the future. Our collaborators could
develop competing products, preclude us from entering into collaborations with
their competitors or terminate their agreements with us prematurely. Any of
these events could harm our product development efforts.
WE MAY BE UNSUCCESSFUL IN DEVELOPING AND COMMERCIALIZING PHARMACEUTICAL
PRODUCTS ON OUR OWN.
Our ability to develop and commercialize pharmaceutical products on our
own will depend on our ability to internally develop preclinical, clinical,
regulatory and sales and marketing capabilities, or enter into arrangements with
third parties to provide these functions. It will be expensive and will require
significant time for us to develop these capabilities internally. We may not be
successful in developing these capabilities or entering into agreements with
third parties on favorable terms, or at all. Further, our reliance upon third
parties for these capabilities could reduce our control over such activities and
could make us dependent upon these parties. Our inability to develop or contract
for these capabilities would significantly impair our ability to develop and
commercialize pharmaceutical products.
WE LACK THE CAPABILITY TO MANUFACTURE COMPOUNDS FOR PRECLINICAL
STUDIES, CLINICAL TRIALS OR COMMERCIAL SALES AND WILL RELY ON THIRD
PARTIES TO MANUFACTURE OUR POTENTIAL PRODUCTS, WHICH MAY HARM OR DELAY
OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION EFFORTS.
We currently do not have the manufacturing capabilities or experience
necessary to produce materials for preclinical studies, clinical trials or
commercial sales and intend to rely on collaborators and third-party contractors
to produce such materials. We will rely on selected manufacturers to deliver
materials on a timely basis and to comply with applicable regulatory
requirements, including the current Good Manufacturing Practices of the United
States Food and Drug Administration, or FDA, which relate to manufacturing and
quality control activities. These manufacturers may not be able to produce
material on a timely basis or manufacture material at the quality level or in
the quantity required to meet our development timelines and applicable
regulatory requirements. In addition, there are a limited number of
manufacturers that operate under the FDA's current Good Manufacturing Practices
and that are capable of producing such materials, and we may experience
difficulty finding manufacturers with adequate capacity for our needs. If we are
unable to contract for the production of sufficient quantity and quality of
materials on acceptable terms, our product development and commercialization
efforts may be delayed. Moreover, noncompliance with the FDA's current Good
Manufacturing Practices can result in, among other things, fines, injunctions,
civil and criminal penalties, product recalls or seizures, suspension of
production, failure to obtain marketing approval and withdrawal, suspension or
revocation of marketing approvals.
WE MAY ENGAGE IN FUTURE ACQUISITIONS, WHICH MAY BE EXPENSIVE AND TIME
CONSUMING AND FROM WHICH WE MAY NOT REALIZE ANTICIPATED BENEFITS.
We may acquire additional businesses, technologies and products if we
determine that these businesses, technologies and products complement our
existing technology or otherwise serve our strategic goals. We currently have no
commitments or agreements with respect to any acquisitions. If we do undertake
any transactions of this sort, the process of integrating an acquired business,
technology or product may result in operating difficulties and expenditures and
may not be achieved in a timely and non-disruptive manner, if at all, and may
absorb significant management attention that would otherwise be available for
ongoing development of our business. If we fail to integrate acquired
businesses, technologies or products effectively or if key employees of an
acquired business leave, the anticipated benefits of the acquisition would be
jeopardized. Moreover, we may never realize the anticipated benefits of any
acquisition, such as increased revenues and earnings or enhanced business
synergies. Future acquisitions could result in potentially dilutive issuances of
our equity securities, the incurrence of debt and contingent liabilities and
amortization expenses related to intangible assets, which could materially
impair our results of operations and financial condition.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN
ADDITIONAL PERSONNEL, WE MAY BE UNABLE TO PURSUE COLLABORATIONS OR
DEVELOP OUR OWN PRODUCTS.
We are highly dependent on Arthur T. Sands, M.D., Ph.D., our president
and chief executive officer, as well as other principal members of our
management and scientific staff. We do not carry key man insurance on Dr. Sands
or any other key personnel. The loss of any of these personnel could negatively
impact our business, financial condition or results of operations and could
inhibit our product development and commercialization efforts.
8
Although we have entered into employment agreements with some of our key
personnel, including Dr. Sands, these employment agreements are all at will. In
addition, not all key personnel have employment agreements.
Recruiting and retaining qualified scientific personnel to perform
future research and development work will be critical to our success.
Competition for experienced scientists is intense. Failure to recruit and retain
scientific personnel on acceptable terms could prevent us from achieving our
business objectives.
BECAUSE ALL OF OUR TARGET VALIDATION OPERATIONS ARE LOCATED AT A SINGLE
FACILITY, THE OCCURRENCE OF A DISASTER COULD SIGNIFICANTLY DISRUPT OUR
BUSINESS.
Our OmniBank mouse clone library and its backup are stored in liquid
nitrogen freezers located at our facility in The Woodlands, Texas, and our
knockout mouse research operations are carried out entirely at the same
facility. While we have developed redundant and emergency backup systems to
protect these resources and the facilities in which they are stored, they may be
insufficient in the event of a severe fire, flood, hurricane, tornado,
mechanical failure or similar disaster. If such a disaster significantly damages
or destroys the facility in which these resources are maintained, our business
could be disrupted until we could regenerate the affected resources and, as a
result, our stock price could decline. Our business interruption insurance may
not be sufficient to compensate us in the event of a major interruption due to
such a disaster.
OUR QUARTERLY OPERATING RESULTS HAVE BEEN AND LIKELY WILL CONTINUE TO
FLUCTUATE, AND WE BELIEVE THAT QUARTER-TO-QUARTER COMPARISONS OF OUR
OPERATING RESULTS ARE NOT A GOOD INDICATION OF OUR FUTURE PERFORMANCE.
Our operating results and, in particular, our ability to generate
additional revenues are dependent on many factors, including:
- our ability to establish new database subscriptions, research
collaborations and technology licenses, and the timing of such
arrangements;
- the expiration or other termination of database subscriptions
and research collaborations with our collaborators, which may
not be renewed or replaced;
- the success rate of our discovery efforts leading to
opportunities for new research collaborations and licenses, as
well as milestone payments and royalties;
- the timing and willingness of our collaborators to
commercialize pharmaceutical products that would result in
milestone payments and royalties; and
- general and industry-specific economic conditions, which may
affect our and our collaborators' research and development
expenditures.
Because of these and other factors, including the risks and
uncertainties described in this section, our quarterly operating results have
fluctuated in the past and are likely to do so in the future. Due to the
likelihood of fluctuations in our revenues and expenses, we believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance.
RISKS RELATED TO OUR INDUSTRY
OUR ABILITY TO PATENT OUR INVENTIONS IS UNCERTAIN BECAUSE PATENT LAWS
AND THEIR INTERPRETATION ARE HIGHLY UNCERTAIN AND SUBJECT TO CHANGE.
The patent positions of biotechnology firms generally are highly
uncertain and involve complex legal and factual questions that will determine
who has the right to develop or use a particular technology or product. No clear
policy has emerged regarding the scope of protection provided in biotechnology
patents. The biotechnology patent situation outside the United States is
similarly uncertain. Changes in, or different interpretations of, patent laws in
the United States or other countries might allow others to use our inventions or
to develop and commercialize any technologies or products that we may develop
without any compensation to us. We anticipate that these uncertainties will
continue for a significant period of time.
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OUR PATENT APPLICATIONS MAY NOT RESULT IN PATENT RIGHTS AND, AS A
RESULT, THE PROTECTION AFFORDED TO OUR SCIENTIFIC DISCOVERIES MAY BE
INSUFFICIENT.
Our disclosures in our patent applications may not be sufficient to
meet the statutory requirements for patentability. Our ability to obtain patent
protection based on genes or gene sequences will depend, in part, upon
identification of a use for the gene or gene sequences sufficient to meet the
statutory requirements that an invention have utility and that a patent
application enable one to make and use the invention. While the United States
Patent and Trademark Office has issued guidelines for the examination of patent
applications claiming gene sequences, their therapeutic uses and novel proteins
encoded by such genes, the impact of these guidelines is uncertain and may delay
or negatively affect our patent position. Furthermore, biologic data in addition
to that obtained by our current technologies may be required for issuance of
patents covering any potential human therapeutic products that we may develop.
If required, obtaining such biologic data could delay, add substantial costs to,
or affect our ability to obtain patent protection for such products. There can
be no assurance that the disclosures in our current or future patent
applications, including those we may file with our collaborators, will be
sufficient to meet these requirements. Even if patents are issued, there may be
current or future uncertainty as to the scope of the coverage or protection
provided by any such patents.
Some court decisions indicate that disclosure of a partial sequence may
not be sufficient to support the patentability of a full-length sequence. These
decisions have been confirmed by recent pronouncements of the United States
Patent and Trademark Office. We believe that these court decisions and the
uncertain position of the United States Patent and Trademark Office present a
significant risk that the United States Patent and Trademark Office will not
issue patents based on patent disclosures limited to partial gene sequences. In
addition, we are uncertain about the scope of the coverage, enforceability and
commercial protection provided by any patents issued primarily on the basis of
gene sequence information.
IF OTHER COMPANIES AND INSTITUTIONS OBTAIN PATENTS RELATING TO OUR DRUG
TARGET OR PRODUCT CANDIDATE DISCOVERIES, WE MAY BE UNABLE TO OBTAIN
PATENTS FOR OUR INVENTIONS BASED UPON THOSE DISCOVERIES AND MAY BE
BLOCKED FROM USING OR DEVELOPING SOME OF OUR TECHNOLOGIES AND PRODUCTS.
Many other entities have filed or may file patent applications on genes
or gene sequences, uses of those genes or gene sequences, gene products and drug
targets, assays for identifying potential therapeutic products, potential
therapeutic products and methods of treatment which are identical or similar to
some of our filings. Some of these applications attempt to assign biologic
function to the genes and proteins based on predictions of function based upon
similarity to other genes and proteins or patterns of gene expression. There is
the significant possibility that patents claiming the functional uses of such
genes and gene products will be issued to our competitors based on such
information. If any such patents are issued to other entities, we will be unable
to obtain patent protection for the same or similar discoveries that we make.
Moreover, we may be blocked from using or developing some of our existing or
proposed technologies and products, or may be required to obtain a license that
may not be available on reasonable terms, if at all.
Alternatively, the United States Patent and Trademark Office could
decide competing patent claims in an interference proceeding. Any such
proceeding would be costly, and we may not prevail. In this event, the
prevailing party may require us or our collaborators to stop using a particular
technology or pursuing a potential product or may require us to negotiate a
license arrangement to do so. We may not be able to obtain a license from the
prevailing party on acceptable terms, or at all.
The Human Genome Project, as well as many companies and institutions,
have identified genes and deposited partial gene sequences in public databases
and are continuing to do so. The entire human genome and the entire mouse genome
are now publicly known. These public disclosures might limit the scope of our
claims or make unpatentable subsequent patent applications on partial or
full-length genes or their uses.
ISSUED OR PENDING PATENTS MAY NOT FULLY PROTECT OUR DISCOVERIES, AND
OUR COMPETITORS MAY BE ABLE TO COMMERCIALIZE TECHNOLOGIES OR PRODUCTS
SIMILAR TO THOSE COVERED BY OUR ISSUED OR PENDING PATENTS.
Pending patent applications do not provide protection against
competitors because they are not enforceable until they issue as patents. Issued
patents may not provide commercially meaningful protection. If anyone infringes
upon our or our collaborators' patent rights, enforcing these rights may be
difficult, costly and time-consuming and, as a result, it may not be
cost-effective or otherwise expedient to pursue litigation to enforce those
patent rights. Others
10
may be able to design around these patents or develop unique products providing
effects similar to any products that we may develop. Other companies or
institutions may challenge our or our collaborators' patents or independently
develop similar products that could result in an interference proceeding in the
United States Patent and Trademark Office or a legal action.
In addition, others may discover uses for genes, drug targets or
therapeutic products other than those covered in our issued or pending patents,
and these other uses may be separately patentable. Even if we have a patent
claim on a particular gene, drug target or therapeutic product, the holder of a
patent covering the use of that gene, drug target or therapeutic product could
exclude us from selling a product that is based on the same use of that product.
WE MAY BE INVOLVED IN PATENT LITIGATION AND OTHER DISPUTES REGARDING
INTELLECTUAL PROPERTY RIGHTS AND MAY REQUIRE LICENSES FROM THIRD
PARTIES FOR OUR DISCOVERY AND DEVELOPMENT AND PLANNED COMMERCIALIZATION
ACTIVITIES. WE MAY NOT PREVAIL IN ANY SUCH LITIGATION OR OTHER DISPUTE
OR BE ABLE TO OBTAIN REQUIRED LICENSES.
Our discovery and development efforts as well as our potential products
and those of our collaborators may give rise to claims that they infringe the
patents of others. This risk will increase as the biotechnology industry expands
and as other companies and institutions obtain more patents covering the
sequences, functions and uses of genes and the drug targets they encode. We are
aware that other companies and institutions have conducted research on many of
the same targets that we have identified and have filed patent applications
potentially covering many of the genes and encoded drug targets that are the
focus of our drug discovery programs. In some cases, patents have issued from
these applications. In addition, many companies and institutions have
well-established patent portfolios directed to common techniques, methods and
means of developing, producing and manufacturing pharmaceutical products. Other
companies or institutions could bring legal actions against us or our
collaborators for damages or to stop us or our collaborators from engaging in
certain discovery or development activities or from manufacturing and marketing
any resulting therapeutic products. If any of these actions are successful, in
addition to our potential liability for damages, these entities would likely
require us or our collaborators to obtain a license in order to continue
engaging in the infringing activities or to manufacture or market the resulting
therapeutic products or may force us to terminate such activities or
manufacturing and marketing efforts.
We may need to pursue litigation against others to enforce our patents
and intellectual property rights and may be the subject of litigation brought by
third parties to enforce their patent and intellectual property rights. In
addition, we may become involved in litigation based on intellectual property
indemnification undertakings that we have given to certain of our collaborators.
Patent litigation is expensive and requires substantial amounts of management
attention. The eventual outcome of any such litigation is uncertain and involves
substantial risks.
We believe that there will continue to be significant litigation in our
industry regarding patent and other intellectual property rights. We have
expended and many of our competitors have expended and are continuing to expend
significant amounts of time, money and management resources on intellectual
property litigation. If we become involved in future intellectual property
litigation, it could consume a substantial portion of our resources and could
negatively affect our results of operations.
Furthermore, in light of recent United States Supreme Court precedent,
our ability to enforce our patents against state agencies, including state
sponsored universities and research laboratories, is limited by the Eleventh
Amendment to the United States Constitution. In addition, opposition by
academicians and the government may hamper our ability to enforce our patents
against academic or government research laboratories. Finally, enforcement of
our patents may cause our reputation in the academic community to be injured.
WE USE INTELLECTUAL PROPERTY THAT WE LICENSE FROM THIRD PARTIES. IF WE
DO NOT COMPLY WITH THESE LICENSES, WE COULD LOSE OUR RIGHTS UNDER THEM.
We rely, in part, on licenses to use certain technologies that are
important to our business, such as certain gene targeting technology licensed
from GenPharm International, Inc. and conditional knockout technology licensed
from DuPont Pharmaceuticals Company. We do not own the patents that underlie
these licenses. Most of these licenses, however, including those from GenPharm
and DuPont, have terms that extend for the life of the licensed patents. Our
rights to use these technologies and practice the inventions claimed in the
licensed patents are subject to our abiding by the terms of those licenses and
the licensors not terminating them. We are currently in compliance with all
requirements of these licenses. In many cases, we do not control the filing,
prosecution or
11
maintenance of the patent rights to which we hold licenses and rely upon our
licensors to prosecute infringement of those rights. The scope of our rights
under our licenses may be subject to dispute by our licensors or third parties.
WE HAVE NOT SOUGHT PATENT PROTECTION OUTSIDE OF THE UNITED STATES FOR
SOME OF OUR INVENTIONS, AND SOME OF OUR LICENSED PATENTS ONLY PROVIDE
COVERAGE IN THE UNITED STATES. AS A RESULT, OUR INTERNATIONAL
COMPETITORS COULD BE GRANTED FOREIGN PATENT PROTECTION WITH RESPECT TO
OUR DISCOVERIES.
We have decided not to pursue patent protection with respect to some of
our inventions outside the United States, both because we do not believe it is
cost-effective and because of confidentiality concerns. Accordingly, our
international competitors could develop, and receive foreign patent protection
for, genes or gene sequences, uses of those genes or gene sequences, gene
products and drug targets, assays for identifying potential therapeutic
products, potential therapeutic products and methods of treatment for which we
are seeking United States patent protection. In addition, most of our gene
trapping patents and our licensed gene targeting patents cover only the United
States and do not apply to discovery activities conducted outside of the United
States or, in some circumstances, to importing into the United States products
developed using this technology.
WE MAY BE UNABLE TO PROTECT OUR TRADE SECRETS.
Significant aspects of our intellectual property are not protected by
patents. As a result, we seek to protect the proprietary nature of this
intellectual property as trade secrets through proprietary information
agreements and other measures. While we have entered into proprietary
information agreements with all of our employees, consultants, advisers and
collaborators, we may not be able to prevent the disclosure of our trade
secrets. In addition, other companies or institutions may independently develop
substantially equivalent information and techniques.
OUR EFFORTS TO DISCOVER, EVALUATE AND VALIDATE POTENTIAL TARGETS FOR
DRUG INTERVENTION AND OUR DRUG DISCOVERY PROGRAMS ARE SUBJECT TO
EVOLVING DATA AND OTHER RISKS INHERENT IN THE DRUG DISCOVERY PROCESS.
We are employing our knockout technology and integrated drug discovery
platform to systematically discover, evaluate and validate potential targets for
drug intervention and to develop drugs to address those targets. The drug
discovery and development process involves significant risks of delay or failure
due, in part, to evolving data and the uncertainties involved with the
applications of new technologies. As we refine and advance our efforts, it is
likely that the resulting data will cause us to change our targets from time to
time and, therefore, that the targets that we believe at any time to be
promising may prove not to be so. These developments can occur at any stage of
the drug discovery and development process.
OUR INDUSTRY IS SUBJECT TO EXTENSIVE AND UNCERTAIN GOVERNMENT
REGULATORY REQUIREMENTS, WHICH COULD SIGNIFICANTLY HINDER OUR ABILITY,
OR THE ABILITY OF OUR COLLABORATORS, TO OBTAIN, IN A TIMELY MANNER OR
AT ALL, GOVERNMENT APPROVAL OF PRODUCTS BASED ON GENES THAT WE
IDENTIFY, OR TO COMMERCIALIZE SUCH PRODUCTS.
We or our collaborators must obtain approval from the FDA in order to
conduct clinical trials and sell our future product candidates in the United
States and from foreign regulatory authorities in order to conduct clinical
trials and sell our future product candidates in other countries. In order to
obtain regulatory approvals for the commercial sale of any products that we may
develop, we will be required to complete extensive clinical trials in humans to
demonstrate the safety and efficacy of our drug candidates. We or our
collaborators may not be able to obtain authority from the FDA or other
equivalent foreign regulatory agencies to initiate or complete any clinical
trials. In addition, we have limited internal resources for making regulatory
filings and dealing with regulatory authorities.
The results from preclinical testing of a drug candidate that is under
development may not be predictive of results that will be obtained in human
clinical trials. In addition, the results of early human clinical trials may not
be predictive of results that will be obtained in larger scale, advanced stage
clinical trials. A number of companies in the pharmaceutical industry have
suffered significant setbacks in advanced clinical trials, even after achieving
positive results in earlier trials. Negative or inconclusive results from a
preclinical study or a clinical trial could cause us, one of our collaborators
or the FDA to terminate a preclinical study or clinical trial or require that we
repeat it. Furthermore, we, one of our collaborators or a regulatory agency with
jurisdiction over the trials may suspend clinical trials at any time if the
subjects or patients participating in such trials are being exposed to
unacceptable health risks or for other reasons.
12
Any preclinical or clinical test may fail to produce results
satisfactory to the FDA or foreign regulatory authorities. Preclinical and
clinical data can be interpreted in different ways, which could delay, limit or
prevent regulatory approval. The FDA or institutional review boards at the
medical institutions and healthcare facilities where we sponsor clinical trials
may suspend any trial indefinitely if they find deficiencies in the conduct of
these trials. Clinical trials must be conducted in accordance with the FDA's
current Good Clinical Practices. The FDA and these institutional review boards
have authority to oversee our clinical trials, and the FDA may require large
numbers of test subjects. In addition, we must manufacture, or contract for the
manufacture of, the product candidates that we use in our clinical trials under
the FDA's current Good Manufacturing Practices.
The rate of completion of clinical trials is dependent, in part, upon
the rate of enrollment of patients. Patient accrual is a function of many
factors, including the size of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the study, the nature of the
study, the existence of competitive clinical trials and the availability of
alternative treatments. Delays in planned patient enrollment may result in
increased costs and prolonged clinical development, which in turn could allow
our competitors to bring products to market before we do and impair our ability
to commercialize our products or potential products.
We or our collaborators may not be able to successfully complete any
clinical trial of a potential product within any specified time period. In some
cases, we or our collaborators may not be able to complete the trial at all.
Moreover, clinical trials may not show our potential products to be both safe
and effective. Thus, the FDA and other regulatory authorities may not approve
any products that we develop for any indication or may limit the approved
indications or impose other conditions.
IF OUR POTENTIAL PRODUCTS RECEIVE REGULATORY APPROVAL, WE OR OUR
COLLABORATORS WILL REMAIN SUBJECT TO EXTENSIVE AND RIGOROUS ONGOING
REGULATION.
If we or our collaborators obtain initial regulatory approvals from the
FDA or foreign regulatory authorities for any products that we may develop, we
or our collaborators will be subject to extensive and rigorous ongoing domestic
and foreign government regulation of, among other things, the research,
development, testing, manufacture, labeling, promotion, advertising,
distribution and marketing of our products and product candidates. The failure
to comply with these requirements or the identification of safety problems
during commercial marketing could lead to the need for product marketing
restrictions, product withdrawal or recall or other voluntary or regulatory
action, which could delay further marketing until the product is brought into
compliance. The failure to comply with these requirements may also subject us or
our collaborators to stringent penalties.
Moreover, several of our product development areas involve relatively
new technology and have not been the subject of extensive product testing in
humans. The regulatory requirements governing these products and related
clinical procedures remain uncertain and the products themselves may be subject
to substantial review by foreign governmental regulatory authorities that could
prevent or delay approval in those countries. Regulatory requirements ultimately
imposed on any products that we may develop could limit our ability to test,
manufacture and, ultimately, commercialize such products.
THE UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT MAY
DECREASE THE COMMERCIAL POTENTIAL OF ANY PRODUCTS THAT WE OR OUR
COLLABORATORS MAY DEVELOP AND AFFECT OUR ABILITY TO RAISE CAPITAL.
Our ability and the ability of our collaborators to successfully
commercialize pharmaceutical products will depend, in part, on the extent to
which reimbursement for the cost of such products and related treatment will be
available from government health administration authorities, private health
coverage insurers and other organizations. The pricing, availability of
distribution channels and reimbursement status of newly approved pharmaceutical
products is highly uncertain. As a result, adequate third-party coverage may not
be available for us to maintain price levels sufficient for realization of an
appropriate return on our investment in product discovery and development.
In certain foreign markets, pricing or profitability of healthcare
products is subject to government control. In the United States, there have
been, and we expect that there will continue to be, a number of federal and
state proposals to implement similar governmental control. In addition, an
increasing emphasis on managed care in the United States has increased and will
continue to increase the pressure on pharmaceutical pricing. While we cannot
predict the adoption of any such legislative or regulatory proposals or the
effect such proposals or managed care efforts may have on our business, the
announcement of such proposals or efforts could harm our ability to raise
13
capital, and the adoption of such proposals or efforts could harm our results of
operations. Further, to the extent that such proposals or efforts harm other
pharmaceutical companies that are our prospective collaborators, our ability to
establish corporate collaborations would be impaired. In addition, third-party
payers are increasingly challenging the prices charged for medical products and
services. We do not know whether consumers, third-party payers and others will
consider any products that we or our collaborators develop to be cost-effective
or that reimbursement to the consumer will be available or will be sufficient to
allow us or our collaborators to sell such products on a profitable basis.
WE USE HAZARDOUS CHEMICALS AND RADIOACTIVE AND BIOLOGICAL MATERIALS IN
OUR BUSINESS; ANY DISPUTES RELATING TO IMPROPER HANDLING, STORAGE OR
DISPOSAL OF THESE MATERIALS COULD BE TIME CONSUMING AND COSTLY.
Our research and development processes involve the use of hazardous
materials, including chemicals and radioactive and biological materials. Our
operations also produce hazardous waste products. We cannot eliminate the risk
of accidental contamination or discharge or any resultant injury from these
materials. Federal, state and local laws and regulations govern the use,
manufacture, storage, handling and disposal of these materials. We could be
subject to civil damages in the event of an improper or unauthorized release of,
or exposure of individuals to, these hazardous materials. In addition, claimants
may sue us for injury or contamination that results from our use or the use by
third parties of these materials, and our liability may exceed our total assets.
Compliance with environmental laws and regulations may be expensive, and current
or future environmental regulations may impair our research, development or
production efforts. We do not currently maintain insurance coverage that would
cover these types of environmental liabilities.
WE MAY BE SUED FOR PRODUCT LIABILITY.
We or our collaborators may be held liable if any product that we or
our collaborators develop, or any product that is made with the use or
incorporation of any of our technologies, causes injury or is found otherwise
unsuitable during product testing, manufacturing, marketing or sale. Although we
currently have and intend to maintain product liability insurance, this
insurance may become prohibitively expensive or may not fully cover our
potential liabilities. Our inability to obtain sufficient insurance coverage at
an acceptable cost or otherwise to protect against potential product liability
claims could prevent or inhibit the commercialization of products developed by
us or our collaborators. If we are sued for any injury caused by our or our
collaborators' products, our liability could exceed our total assets.
PUBLIC PERCEPTION OF ETHICAL AND SOCIAL ISSUES MAY LIMIT OR DISCOURAGE
THE USE OF OUR TECHNOLOGIES, WHICH COULD REDUCE OUR REVENUES.
Our success will depend, in part, upon our ability to develop products
discovered through our knockout mouse technologies. Governmental authorities
could, for ethical, social or other purposes, limit the use of genetic processes
or prohibit the practice of our knockout mouse technologies. Claims that
genetically engineered products are unsafe for consumption or pose a danger to
the environment may influence public perceptions. The subject of genetically
modified organisms, like knockout mice, has received negative publicity and
aroused public debate in some countries. Ethical and other concerns about our
technologies, particularly the use of genes from nature for commercial purposes
and the products resulting from this use, could reduce the likelihood of
maintaining market acceptance of our technologies.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE, AND YOU MAY NOT BE ABLE TO
RESELL YOUR SHARES AT OR ABOVE YOUR PURCHASE PRICE.
The stock market has experienced significant price and volume
fluctuations, and the market prices of technology companies, particularly life
science companies such as ours, have been highly volatile. Since January 1,
2001, the market price of our common stock has ranged from a high of $17.25 on
January 2, 2001 to a low of $2.97 on October 7, 2002. In addition, broad market
and industry fluctuations that are not within our control may significantly
lower the trading price of our common stock. As a result, you may not be able to
resell your shares at or above your purchase price.
14
CONCENTRATION OF OWNERSHIP AMONG OUR DIRECTORS AND EXECUTIVE OFFICERS
ENABLES THEM TO SIGNIFICANTLY INFLUENCE IMPORTANT CORPORATE DECISIONS.
Our directors and executive officers beneficially own, or have voting
rights with respect to, approximately 12.8% of our outstanding common stock.
These stockholders as a group will be able to exert significant influence on the
election of our directors and officers, the management and affairs of our
company and the outcome of most matters requiring the approval of our
stockholders, including any merger, consolidation or sale of all or
substantially all of our assets and any other significant corporate transaction.
This concentration of ownership may also prevent a change of control of our
company at a premium price if these stockholders oppose it.
PROVISIONS CONTAINED IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY
PREVENT OR FRUSTRATE ATTEMPTS BY OUR STOCKHOLDERS TO CHANGE OUR
MANAGEMENT AND MAY INHIBIT A TAKEOVER ATTEMPT, WHICH COULD REDUCE OR
ELIMINATE THE LIKELIHOOD OF A CHANGE OF CONTROL TRANSACTION AND,
THEREFORE, THE ABILITY OF OUR STOCKHOLDERS TO SELL THEIR SHARES FOR A
PREMIUM.
Provisions in our corporate charter and bylaws and applicable
provisions of the Delaware General Corporation Law may make it more difficult
for a third party to acquire control of us without the approval of our board of
directors. These provisions may also prevent or frustrate attempts by our
stockholders to replace or remove our management. These provisions include:
- a classified board of directors;
- limitations on the removal of directors;
- limitations on stockholder proposals at meetings of
stockholders;
- the inability of stockholders to act by written consent or to
call special meetings; and
- the ability of our board of directors to designate the terms
of and issue new series of preferred stock without stockholder
approval.
These provisions may discourage transactions that otherwise could involve the
payment of a premium over prevailing market prices of our common stock. In
addition, any efforts by stockholders to replace or remove the members of our
board of directors would take a minimum of three years.
THE AVAILABILITY OF SHARES OF OUR COMMON STOCK FOR FUTURE SALE COULD
DEPRESS OUR STOCK PRICE.
As of December 31, 2003, we had outstanding an aggregate of 62,826,345
shares of common stock, assuming no exercise of outstanding options or warrants.
Of these shares, 56,262,954 shares are freely tradable or may be sold under an
effective registration statement. The holders of the remaining 6,563,391 shares
have demand and piggyback registration rights with respect to such shares.
Sales of a substantial number of shares of our common stock in the
public markets following this offering, or the perception that such sales might
occur, could significantly lower the price of our common stock or could impair
our future ability to obtain capital through offerings of our equity securities.
OUR FORMER INDEPENDENT PUBLIC ACCOUNTANT, ARTHUR ANDERSEN LLP, WAS
FOUND GUILTY OF A FEDERAL OBSTRUCTION OF JUSTICE CHARGE, AND YOU MAY BE
UNABLE TO EXERCISE EFFECTIVE REMEDIES AGAINST IT IN ANY LEGAL ACTION.
Our former independent public accountant, Arthur Andersen LLP, provided
us with auditing services for prior fiscal periods through December 31, 2001,
including issuing an audit report with respect to our audited consolidated
financial statements for the year ended December 31, 2001 included in our Annual
Report on Form 10-K for the year ended December 31, 2003 and incorporated by
reference in this prospectus. On June 15, 2002, a jury in Houston, Texas found
Arthur Andersen LLP guilty of a federal obstruction of justice charge arising
from the federal government's investigation of Enron Corp. On August 31, 2002,
Arthur Andersen LLP ceased practicing before the Securities and Exchange
Commission, or the SEC.
We were unable to obtain Arthur Andersen LLP's consent to include its
report with respect to our audited consolidated financial statements for the
year ended December 31, 2001 in our Annual Report on Form 10-K for the year
ended December 31, 2003 or to incorporate by reference such report in this
15
prospectus. Rule 437a under the Securities Act of 1933, or the Securities Act,
permits us to dispense with the requirement to file their consent. As a result,
you may not have an effective remedy against Arthur Andersen LLP in connection
with a material misstatement or omission with respect to our audited
consolidated financial statements that are incorporated by reference in this
prospectus or any other filing we may make with the SEC, including, with respect
to this offering or any other offering registered under the Securities Act, any
claim under Section 11 of the Securities Act. In addition, even if you were able
to assert such a claim, as a result of its conviction and other lawsuits, Arthur
Andersen LLP may fail or otherwise have insufficient assets to satisfy claims
made by investors or by us that might arise under federal securities laws or
otherwise relating to any alleged material misstatement or omission with respect
to our audited consolidated financial statements.
16
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain certain information regarding our financial projections,
plans and strategies that are forward-looking statements within the meaning of
Section 27A of the Securities Act and 21E of the Securities Exchange Act of
1934. We have attempted to identify forward-looking statements by terminology
including "anticipate," "believe," "can," "continue," "could," "estimate,"
"expect," "intend," "may," "plan," "potential," "predict," "should" or "will" or
the negative of these terms or other comparable terminology. These statements,
which are only predictions and involve known and unknown risks, uncertainties
and other important factors may include, among other things, statements which
address our strategy and operating performance, events or developments that we
expect or anticipate will occur in the future, such as projections of our future
results of operations or of our financial condition, the status of any
collaborative agreements, our research and development efforts and anticipated
trends in our business.
We have based these forward-looking statements on our current
expectations and projections about future events. However, there may be events
in the future that we are not able to predict accurately or which we do not
fully control that could cause actual results to differ materially from those
expressed or implied in our forward-looking statements. Many important factors
could cause actual results to differ materially from those expressed or implied
by these forward-looking statements, including those discussed under "Risk
Factors" in this prospectus and other sections of the documents incorporated by
reference into this prospectus. We undertake no obligation to publicly release
any revisions to the forward-looking statements or reflect events or
circumstances after the date of this prospectus.
USE OF PROCEEDS
All of the shares offered by this prospectus are being offered and sold
by the selling stockholder. We will not receive any proceeds from the sale of
the shares of common stock offered by the selling stockholder.
We will pay all expenses for the registration of the selling
stockholder's offer and sale of the shares of common stock covered by this
prospectus, including registration fees, the costs and expenses of our counsel
and independent public accountants and the reasonable fees of one counsel for
the selling stockholder. The selling stockholder will pay any underwriting
discounts and commissions, brokerage fees and other similar expenses which it
incurs in selling shares of our common stock.
SELLING STOCKHOLDER
We issued the shares of common stock covered by this prospectus in
private placements to Gordon A. Cain completed in the period from September 1995
to July 1997. Mr. Cain, who served as a member of our board of directors until
his death in October 2002, subsequently transferred some of the shares by gift
to The Gordon and Mary Cain Foundation. On December 23, 2003 and January 7,
2004, Acqua Wellington Opportunity I Limited purchased the shares offered by
this prospectus from the Estate of Gordon A. Cain and The Gordon and Mary Cain
Foundation in private placements that were exempt from registration under the
Securities Act of 1933.
The selling stockholder exercised its rights to cause us to register
the offer and sale of the shares of common stock described in this prospectus
under a registration rights agreement in which we agreed to use commercially
reasonable best efforts to keep the registration statement effective for five
years or until the distribution contemplated by the registration statement is
complete. All of the shares to be offered by the selling stockholder using this
prospectus were originally issued by us in transactions exempt from the
registration requirements of the Securities Act of 1933.
The selling stockholder, or its donees of 500 or fewer shares, may
offer the shares of common stock covered by this prospectus from time to time.
Our registration of the selling stockholder's offer and sale of such shares does
not necessarily mean that the selling stockholder will sell any or all of its
shares. We do not know when or in what amounts the selling stockholder may offer
shares for sale. Because the selling stockholder may offer all or some of the
shares pursuant to this offering, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares, we
cannot estimate the number of the shares that will be held by the selling
stockholder after completion of the offering.
17
If the selling stockholder transfers more than 500 shares of common
stock by gift, pledge or other non-sale transfer after the effective date of the
registration statement of which this prospectus is a part, the donee, pledgee or
transferee may make no offer or sale under this prospectus unless and until a
supplement to this prospectus has been filed or an amendment to the related
registration statement has become effective.
The table below sets forth the beneficial ownership of all common stock
held by the selling stockholder as of January 7, 2004 and the number of such
shares of common stock offered by this prospectus. Percentage of ownership is
based on 62,826,345 shares of common stock outstanding on December 31, 2003.
We prepared this table based on information supplied to us by the
selling stockholder named in the table, and we have not sought to independently
verify such information.
BENEFICIAL OWNERSHIP
PRIOR TO OFFERING
------------------------------
NUMBER OF
SHARES SHARES
BENEFICIALLY PERCENTAGE OFFERED
NAME OF SELLING STOCKHOLDER OWNED OWNERSHIP HEREBY
--------------------------- ----- --------- ------
Acqua Wellington Opportunity I Limited 3,500,000 5.6% 3,500,000
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time by the selling stockholder. The term "selling stockholder" includes
donees selling 500 or fewer shares received from the selling stockholder as a
gift after the effective date of the registration statement of which this
prospectus is a part. The selling stockholder will act independently of us in
making decisions with respect to the timing, manner and size of each sale. Such
sales may be made on one or more exchanges or in the over-the-counter market or
otherwise, at prices and under terms then prevailing or at prices related to the
then current market price or in negotiated transactions. The selling stockholder
has advised us that it may offer and sell the shares of common stock offered by
this prospectus in one or more of, or a combination of, the following methods:
- purchases by a broker-dealer as principal and resale
by such broker-dealer for its own account pursuant to this
prospectus;
- ordinary brokerage transactions and transactions in
which the broker solicits purchasers;
- block trades in which the broker-dealer so engaged
will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- an over-the-counter distribution in accordance with
the rules of the Nasdaq National Market;
- through the Nasdaq National Market or any other
securities exchange or association that quotes the common
stock;
- in privately negotiated transactions; and
- in options transactions.
In addition, the selling stockholder has advised us that it may sell
shares of common stock in compliance with Rule 144, if available, or pursuant to
other available exemptions from the registration requirements under the
Securities Act, rather than pursuant to this prospectus.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the shares or otherwise, the selling stockholder has
advised us that it may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
common stock in the course of hedging the positions they assume with the selling
stockholder. The selling stockholder has advised us that it may also sell the
common stock short and redeliver the shares to close out such
18
short positions. The selling stockholder has advised us that it may also enter
into option or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). The selling
stockholder has advised us that it may also pledge shares to a broker-dealer or
other financial institution, and, upon a default, such broker-dealer or other
financial institution may effect sales of the pledged shares pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
In effecting sales, broker-dealers or agents engaged by the selling
stockholder may arrange for other broker-dealers to participate. Broker-dealers
or agents may receive commissions, discounts or concessions from the selling
stockholder in amounts to be negotiated immediately prior to the sale.
In offering the shares covered by this prospectus, the selling
stockholder and any broker-dealers who execute sales for such selling
stockholder may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. Any profits realized by the
selling stockholder and the compensation of any broker-dealer may be deemed to
be underwriting discounts and commissions.
In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The selling stockholder has advised us that it may sell its shares at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices and that the
transactions listed above may include cross or block transactions.
We have advised the selling stockholder that the anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934 may apply to its
sales of common stock and to the activities of the selling stockholder and its
affiliates. In addition, we will make copies of this prospectus available to the
selling stockholder for the purpose of satisfying the prospectus delivery
requirements of the Securities Act of 1933. The selling stockholder has advised
us that it may indemnify any broker-dealer that participates in transactions
involving the sale of the shares against certain liabilities, including
liabilities arising under the Securities Act.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
We have agreed to indemnify the selling stockholder against certain
liabilities, including certain liabilities under the Securities Act.
All shares offered by this prospectus by the selling stockholder will
be sold subject to the terms and conditions of the registration rights agreement
described in the section entitled "Selling Stockholder."
LEGAL MATTERS
The validity of the common stock offered by this prospectus has been
passed upon for us by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Lexicon Genetics Incorporated
included in our annual report on Form 10-K for the years ended December 31, 2003
and 2002 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon (which contains one explanatory paragraph
describing the audit procedures relating to a revision to the 2001 financial
statements for a reclassification adjustment that was applied to revise the 2001
financial statements described in Note 4 to the consolidated financial
statements; the 2001 financial statements were
19
audited by other auditors who have ceased operations and for which Ernst & Young
LLP has expressed no opinion or other form of assurance on the 2001 financial
statements taken as a whole), included therein and incorporated herein by
reference. Such financial statements have been incorporated herein by reference
in reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The financial statements for the year ended December 31, 2001,
incorporated by reference in this prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing. Arthur Andersen LLP has not
consented to the inclusion of their report in this prospectus, and we have not
obtained their consent to do so in reliance upon Rule 437a of the Securities
Act. Because Arthur Andersen LLP has not consented to the inclusion of their
report in this prospectus, you will not be able to recover against Arthur
Andersen LLP under Section 11(a) of the Securities Act for any untrue statement
of a material fact contained in the financial statements audited by Arthur
Andersen LLP or any omission to state a material fact required to be stated
therein.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933 regarding the offer and sale of shares of common
stock by the selling stockholder. This prospectus, which constitutes a part of
the registration statement, does not contain all of the information contained in
the registration statement, some items of which are contained in exhibits to the
registration statement as permitted by the rules and regulations of the SEC. For
further information about us and our common stock, please review the
registration statement and the exhibits filed as a part of it. Statements made
in this prospectus that describe documents may not necessarily be complete. We
recommend that you review the documents that we have filed with the registration
statement to obtain a more complete understanding of these documents. A copy of
the registration statement, including the exhibits filed as a part of it, may be
inspected without charge at the SEC's Public Reference Room, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the SEC upon the payment of fees prescribed by
it. You may obtain information on the Public Reference Room by calling the SEC
at 1-800-SEC-0330. The SEC maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding companies that file electronically with it.
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934 and will file periodic reports, proxy statements
and other information with the SEC. You may inspect any of these documents as
described in the preceding paragraph. These reports, proxy statements and other
information may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus
information that we file with the SEC in other documents. This means that we can
disclose important information to you by referring to other documents that
contain that information. The information incorporated by reference is
considered to be part of this prospectus, except for information superseded by
information in this prospectus. We incorporate by reference the documents listed
below that we have previously filed with the SEC and any future filings we make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 (other than information furnished to the SEC under Items 9 or 12 of
Form 8-K), prior to the termination of the offering of the securities covered by
this prospectus:
- our annual report on Form 10-K for the year ended
December 31, 2003; and
- the description of our common stock contained in our
registration statement on Form 8-A filed with the Commission
on March 27, 2000 pursuant to Section 12 of the Securities
Exchange Act of 1934, including any amendments and reports
filed for the purpose of updating such description.
20
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this prospectus modifies
or supersedes that statement. Any statement that is modified or superseded will
not constitute a part of this prospectus, except as modified or superseded. You
may rely on any statement contained in this prospectus or in documents
incorporated or deemed to be incorporated in this prospectus, unless that
statement has been subsequently modified or superseded as described above prior
to the time you make your investment decision.
Upon your written or oral request, we will provide you at no cost a
copy of any or all of the documents incorporated by reference in this
prospectus, other than the exhibits to those documents, unless the exhibits are
specifically incorporated by reference into this prospectus. You may request a
copy of these documents by contacting:
Investor Relations
Lexicon Genetics Incorporated
8800 Technology Forest Place
The Woodlands, Texas 77381
Telephone: (281) 863-3000
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
AND DOCUMENTS INCORPORATED INTO THIS PROSPECTUS BY REFERENCE. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
IN THIS PROSPECTUS OR THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. THIS
PROSPECTUS MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION CONTAINED IN THIS PROSPECTUS, THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND ANY SUPPLEMENTS TO THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATES OF THEIR RESPECTIVE COVERS OR EARLIER DATES AS SPECIFIED THEREIN,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR ANY SUPPLEMENT TO THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
In this prospectus, "Lexicon," "Lexicon Genetics," "we," "us" and "our"
refer to Lexicon Genetics Incorporated and its subsidiary.
The Lexicon name and logo, LexVision(R) and OmniBank(R) are registered
trademarks and Genome5000(TM) and e-Biology(TM) are trademarks of Lexicon
Genetics Incorporated.
21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered (other than
underwriting discounts and commissions) are as follows:
SEC Registration Fee................................. $ 1,699
Printing Expenses.................................... 5,000
Accounting Fees and Expenses......................... 27,500
Legal Fees and Expenses.............................. 7,500
Transfer Agent and Registrar Fees.................... --
Miscellaneous Expenses............................... 3,301
--------
Total...................................... $ 45,000
========
The reasonable fees of one counsel for the selling stockholder is
included under "Legal Fees and Expenses" in the foregoing table. The selling
stockholder will pay any underwriting discounts and commissions, brokerage fees
and other similar expenses, which discounts, commissions, fees and expenses are
not included in the foregoing table.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Lexicon's certificate of incorporation and bylaws provide that
indemnification shall be to the fullest extent permitted by the DGCL for all
current or former directors or officers. As permitted by the DGCL, the
certificate of incorporation provides that directors of Lexicon shall have no
personal liability to Lexicon or its stockholders for monetary damages for
breach of fiduciary duty as a director, except (1) for any breach of the
director's duty of loyalty to Lexicon or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (3) under Section 174 of the DGCL or (4) for any transaction
from which a director derived an improper personal benefit.
Lexicon has entered into indemnification agreements with each of its
officers and directors. These agreements, among other things, require Lexicon to
indemnify each officer and director for all expenses, including attorneys'
II-1
fees, liabilities, judgments, fines, penalties, excise taxes and settlement
amounts incurred by any such person in any claim, action, suit or proceeding,
including any action by or in the right of Lexicon, arising out of the person's
services as a director, officer, employee, agent or fiduciary to Lexicon, any
subsidiary of Lexicon or to any other company or enterprise for which the person
provides services at Lexicon's request.
At present, there is no pending litigation or proceeding involving a
director or officer of Lexicon as to which indemnification is being sought nor
is Lexicon aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 -- Restated Certificate of Incorporation (filed as Exhibit 3.1 to
the Company's Registration Statement on Form S-1 (Registration
No. 333-96469) and incorporated by reference herein).
3.2 -- Restated Bylaws (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No.
333-96469) and incorporated by reference herein).
4.1 -- Amended and Restated Registration Rights Agreement dated as
of May 7, 1998 by and among the Company and the stockholders
named therein (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (Registration No.
333-67294) and incorporated by reference herein).
5.1** -- Opinion of Vinson & Elkins L.L.P.
23.1* -- Consent of Ernst & Young LLP
23.2** -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)
24.1** -- Power of Attorney (contained in signature page)
-------------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) 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, as amended (the
"Securities Act");
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this 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 this
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if
the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in this Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in this Registration Statement.
II-2
(b) 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.
(c) 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 Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
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 public 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 Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of The Woodlands, in the State of Texas, on March 17,
2004.
Lexicon Genetics Incorporated
By: *
-------------------------------------------
Arthur T. Sands, M.D., Ph.D.
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED BELOW.
SIGNATURE TITLE DATE
--------- ----- ----
* President, Chief Executive March 17, 2004
--------------------------- Officer and Director (principal
Arthur T. Sands, M.D., Ph.D. executive officer)
* Executive Vice President, March 17, 2004
--------------------------- Corporate Development and Chief
Julia P. Gregory Financial Officer (principal
financial and accounting officer)
* Chairman of the Board of Directors March 17, 2004
---------------------------
C. Thomas Caskey, M.D.
* Director March 17, 2004
---------------------------
Sam L. Barker, Ph.D.
* Director March 17, 2004
---------------------------
Patricia M. Cloherty
* Director March 17, 2004
---------------------------
Robert J. Lefkowitz, M.D.
* Director March 17, 2004
---------------------------
Alan S. Nies, M.D.
* By: /s/ Jeffrey L. Wade
---------------------------------------------------
Jeffrey L. Wade, J.D.
Pursuant to powers-of-attorney filed with the
Registration Statement on Form S-3 (333-111821) on
January 9, 2004.
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 -- Restated Certificate of Incorporation (filed as Exhibit 3.1 to
the Company's Registration Statement on Form S-1 (Registration
No. 333-96469) and incorporated by reference herein).
3.2 -- Restated Bylaws (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No.
333-96469) and incorporated by reference herein).
4.1 -- Amended and Restated Registration Rights Agreement dated as
of May 7, 1998 by and among the Company and the stockholders
named therein (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (Registration No.
333-67294) and incorporated by reference herein).
5.1** -- Opinion of Vinson & Elkins L.L.P.
23.1* -- Consent of Ernst & Young LLP
23.2** -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1)
24.1** -- Power of Attorney (contained in signature page)
--------------------------
* Filed herewith.
** Previously filed.