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As filed with the Securities and Exchange Commission on September 16, 2005 Registration No. 333-128093
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment
No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MANNKIND CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation or organization)
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2834
(Primary standard industrial Classification code number)
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13-3607736
(I.R.S. Employer Identification Number) |
28903 North Avenue Paine
Valencia, CA 91355
(661) 775-5300
(Address, including zip code, and telephone number, including area
code, of registrants principal executive offices)
Alfred E. Mann
Chief Executive Officer and Chairman
MannKind Corporation
28903 North Avenue Paine
Valencia, CA 91355
(661) 775-5300
(Name, address, including zip code, and telephone number, including area code, of agent for
service)
Copies to:
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David Thomson, Esq.
MannKind Corporation
28903 North Avenue Paine
Valencia, CA 91355
(661) 775-5300
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D. Bradley Peck, Esq.
Cooley Godward LLP
4401 Eastgate Mall
San Diego, CA 92121
(858) 550-6000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable
after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box:o
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:þ
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: o
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:o
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the
following box: o
CALCULATION OF REGISTRATION FEE
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Title of each class |
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Amount to be |
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Proposed maximum |
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Proposed maximum |
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Amount of |
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of securities to be registered |
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registered (1) |
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offering price per share (2) |
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aggregate offering price (2) |
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registration fee (3) |
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Common Stock, $0.01 par value per share |
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17,131,682 shares |
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$12.38 |
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$212,090,223 |
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$24,963 |
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Common Stock, $0.01 par value per
share, issuable upon the exercise of
warrants |
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3,426,340 shares |
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$12.38 |
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$42,418,089 |
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$4,993 |
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Total |
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20,558,022 shares |
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$254,508,312 |
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$29,956 |
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(1) |
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Based upon the estimated maximum number of shares of common stock that may be sold by the
selling stockholders. Pursuant to Rule 415 under the Securities Act of 1933, as amended, or
the Securities Act, this registration statement also registers such additional shares of the
Registrants common stock as may hereafter be offered or issued to prevent dilution resulting
from stock splits, stock dividends, recapitalizations or certain other capital adjustments. |
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(2) |
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Estimated solely for the purpose of computing the amount of the registration fee pursuant to
Rule 457(c) of the Securities Act. The price per share and aggregate offering price are based
upon the average of the high and low sales prices of the Registrants common stock on August
26, 2005, as reported on The Nasdaq National Market. |
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(3) |
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Previously paid. |
The registrant hereby amends this registration statement on such date or dates as may be
necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
The information in this prospectus is not complete and may be changed. The selling stockholders may
not sell the securities under this prospectus until the Registration Statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer to sell these
securities and the registrant is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED SEPTEMBER 16, 2005
PROSPECTUS
20,558,022 Shares
Common Stock
The selling stockholders identified in this prospectus are offering for sale from time to time
up to 20,558,022 shares of our common stock, $0.01 par value per share, which includes 17,131,682
shares of our common stock held by the selling stockholders and 3,426,340 shares of our common
stock issuable to the selling stockholders upon the exercise of warrants. The selling stockholders
acquired their shares and the warrants from us in a private placement that closed on August 5, 2005
and is more fully described on page 23 of this prospectus under the heading Selling Stockholders.
We will not receive any of the proceeds from the sale of the shares of our common stock by the
selling stockholders.
The selling stockholders or their pledgees, donees, transferees or other
successors-in-interest, may offer the shares from time to time through public or private
transactions, at prevailing market prices or at privately negotiated prices, or through any other
means described in this prospectus under Plan of Distribution.
Our
common stock is quoted on the Nasdaq National Market under the symbol
MNKD. On September 15, 2005, the last reported sale price for our common stock on the Nasdaq National Market was $12.57
per share.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISKS.
SEE
RISK FACTORS BEGINNING ON PAGE 3 OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU
SHOULD CONSIDER IN CONNECTION WITH PURCHASING OUR
COMMON STOCK.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
The
date of this prospectus is
, 2005.
You should rely only on the information contained or incorporated by reference in this prospectus
and any applicable prospectus supplement. We have not, and the selling stockholders have not,
authorized anyone to provide you with additional information or information different from that
contained or incorporated by reference in this prospectus and any applicable prospectus supplement.
The selling stockholders are offering to sell, and seeking offers to buy, shares of our common
stock only in jurisdictions where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus and information appearing in any
applicable prospectus supplement is accurate only as of the date of the applicable prospectus
supplement. Additionally, information from other documents incorporated by reference in this
prospectus or any applicable prospectus supplement is accurate only as of the date of the document
incorporated by reference, regardless of the time of delivery of the prospectus or prospectus
supplement or any sale of our common stock.
Table of Contents
Technosphere® and MedTone® are our registered trademarks in the United States. We have also applied
for or registered company trademarks in other jurisdictions, including Europe and Japan. This
document also contains trademarks and service marks of other companies that are the property of
their respective owners.
2.
PROSPECTUS SUMMARY
The following summary provides an overview of selected information relating to this offering
and does not contain all the information that you should consider before investing in our common
stock. You should carefully read this prospectus, especially the risks of investing in our common
stock discussed under the section RISK FACTORS below, all documents incorporated by reference,
any prospectus supplement, and the additional information described under the caption WHERE YOU
CAN FIND MORE INFORMATION, beginning on page 32, before buying securities in this offering.
Reference to we, us, our, our company and MannKind refers to MannKind Corporation and its
subsidiary, unless the context requires otherwise.
We are a biopharmaceutical company focused on the discovery, development and commercialization
of therapeutic products for diseases such as diabetes and cancer. We are currently in Phase 3
clinical trials in the United States and Europe of our lead product, the Technosphere Insulin
System, to study its safety and efficacy in the treatment of diabetes. This therapy consists of a
proprietary dry powder Technosphere formulation of insulin that is inhaled into the deep lung using
our proprietary MedTone inhaler. We believe that the combination of unique performance
characteristics, including the rapid transfer of the insulin into the blood and the significantly
higher bioavailability, and the convenience and ease of use of the Technosphere Insulin System may
have the potential to change the way diabetes is treated.
Our other products candidates are in research and pre-clinical development. We are developing
additional applications for our proprietary Technosphere platform technology by formulating other
drugs for pulmonary delivery, primarily for metabolic and immunological diseases. We are also
developing therapies for the treatment of solid-tumor cancers.
We were incorporated in the State of Delaware on February 14, 1991. Our principal executive
offices are located at 28903 North Avenue Paine, Valencia, California 91355, and our telephone
number at that address is (661) 775-5300. Our website address is http://www.mannkindcorp.com. Our
filings with the Securities and Exchange Commission, or SEC, including our annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those
reports are available free of charge through our website as soon as reasonably practicable after
being filed with or furnished to the SEC. The information on our website and other information that
can be accessed through our website are not part of this prospectus.
RISK FACTORS
An investment in our common stock involves a high degree of risk. Prior to making a decision about
investing in our common stock, you should carefully consider the following risks factors and the
risk factors described in any applicable prospectus supplement, together with all of the other
information contained in this prospectus and any prospectus supplement or appearing or incorporated
by reference in the registration statement of which this prospectus is a part. The risks described
below are not the only risks we face. Additional risks that we do not currently think are material
may also impair our business operations. If any of the events or circumstances described in the
following risks actually occur, our business, financial condition or results of operations could
suffer, the trading price of our common stock could decline and you might lose all or part of your
investment in our common stock.
RISKS RELATED TO OUR BUSINESS
We have a history of operating losses, we expect to continue to incur losses, and we may never
become profitable.
We are a development stage company with no commercial products. All of our product candidates are
still being developed, and all but our Technosphere Insulin System are still in early stages of
development. Our product candidates will require significant additional development, clinical
trials, regulatory clearances and additional investment before they can be commercialized. We
anticipate that our Technosphere Insulin System will not be commercially available for several
years, if at all.
We have never been profitable, and, as of June 30, 2005, we had an accumulated deficit of $492.3
million. The accumulated deficit has resulted principally from costs incurred in our research and
development programs, the write-off of goodwill and general operating expenses. We expect to make
substantial expenditures and to incur increasing operating losses in the future in order to further
develop and commercialize our product candidates, including costs and expenses to complete clinical
trials, seek regulatory approvals and market our product candidates. This accumulated deficit may
increase significantly as we expand development and clinical trial efforts.
3.
Our losses have had, and are expected to continue to have, an adverse impact on our working
capital, total assets and stockholders equity. Our ability to achieve and sustain profitability
depends upon obtaining regulatory approvals for and successfully commercializing our Technosphere
Insulin System, either alone or with third parties. We do not currently have the required approvals
to market any of our product candidates, and we may not receive them. We may not be profitable even
if we succeed in commercializing any of our product candidates. As a result, we cannot be sure when
we will become profitable, if at all.
If we fail to raise additional capital, our financial condition and business will suffer.
It is costly to develop therapeutic products and conduct clinical trials for these products.
Although we currently are focusing on our Technosphere Insulin System as our lead product
candidate, we may in the future conduct clinical trials for a number of additional product
candidates. Our future revenues may not be sufficient to support the expense of these activities.
Based upon our current expectations, we believe that our existing capital resources, including the
net proceeds from our private placement in August 2005, will enable us to continue planned
operations into the third quarter of 2006. However, we cannot assure you that our plans will not
change or that changed circumstances will not result in the depletion of our capital resources more
rapidly than we currently anticipate. Accordingly, we expect that we will need to raise additional
capital, either through the sale of equity and/or debt securities, a strategic business
collaboration or the establishment of other funding facilities, in order to continue the
development and commercialization of our Technosphere Insulin System and other product candidates
and to support our other ongoing activities. The amount of additional funds we need will depend on
a number of factors, including:
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the rate of progress and costs of our clinical trials and research and development activities, including
costs of procuring clinical materials and expanding our own manufacturing facilities; |
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actions taken by the FDA and other regulatory authorities affecting our products and competitive products; |
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our success in establishing strategic business collaborations; |
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the timing and amount of milestone or other payments we might receive from potential third parties; |
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the timing and amount of payments we might receive from potential licensees; |
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our degree of success in commercializing our Technosphere Insulin System or our other product candidates; |
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the emergence of competing technologies and products and other adverse market developments; |
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the costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other
intellectual property rights or defending against claims of infringement by others; and |
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the costs of discontinuing projects and technologies or decommissioning existing facilities, if we
undertake those activities. |
We have raised capital in the past primarily through the sale of equity securities. We may in the
future pursue the sale of equity and/or debt securities, or the establishment of other funding
facilities. Issuances of debt or additional equity could impact your rights as a holder of our
common stock, may dilute your ownership percentage and may impose restrictions on our operations.
These restrictions could include limitations on additional borrowing and specific restrictions on
the use of our assets, as well as prohibitions on our ability to create liens, pay dividends,
redeem our stock or make investments.
We also may seek to raise additional capital by pursuing opportunities for the licensing, sale or
divestiture of certain intellectual property and other assets, including our Technosphere
technology platform. We cannot assure you, however, that any strategic collaborations, sales of
securities or sale or license of assets will be available to us on a timely basis or on acceptable
terms, if at all. We may be required to enter into relationships with third parties to develop or
commercialize products or technologies that we otherwise would have sought to develop
independently, and any such relationships may not be on terms as commercially favorable to us as
might otherwise be the case.
In the event that sufficient additional funds are not obtained through strategic collaboration
opportunities, licensing arrangements, sales of securities and/or asset sales on a timely basis, we
may be required to reduce expenses through the delay, reduction or curtailment of our projects,
including our Technosphere Insulin System development activities, or further reduction of costs for
facilities and administration.
4.
We depend heavily on the successful development and commercialization of our lead product
candidate, the Technosphere Insulin System, which is still under development, and our other product
candidates, which are in early stages of preclinical development.
To date, we have not completed the development of any products through to commercialization. Only
our Technosphere Insulin System is currently undergoing clinical trials, while our other product
candidates are in research or preclinical development. We anticipate that in the near term our
ability to generate revenues will depend solely on the successful development and commercialization
of our Technosphere Insulin System.
We have expended significant time, money and effort in the development of our lead product
candidate, the Technosphere Insulin System, which has not yet received regulatory approval and
which may never be commercialized. Before we can market and sell our Technosphere Insulin System,
we will need to advance our Technosphere Insulin System through Phase 3 clinical trials and
demonstrate in these trials that our Technosphere Insulin System is safe and effective. We
currently anticipate conducting several pivotal Phase 3 clinical trials as well as several special
population studies involving, in total, more than 3,000 patients, which will require the
expenditure of additional time and resources. We must also receive the necessary approvals from the
FDA and similar foreign regulatory agencies before this product can be marketed in the United
States or elsewhere. Even if we were to receive regulatory approval, we ultimately may be unable to
gain market acceptance of our Technosphere Insulin System for a variety of reasons, including the
treatment and dosage regimen, potential adverse effects, the availability of alternative treatments
and cost effectiveness. If we fail to commercialize our Technosphere Insulin System, our business,
financial condition and results of operations will be materially and adversely affected.
We are seeking to develop and expand our portfolio of product candidates through our internal
research programs and through licensing or otherwise acquiring the rights to therapeutics in the
areas of cancer and immunology. All of these product candidates will require additional research
and development and significant preclinical, clinical and other testing prior to seeking regulatory
approval to market them. Accordingly, these product candidates will not be commercially available
for many years, if at all.
A significant portion of the research that we are conducting involves new and unproven compounds
and technologies, including our Technosphere Insulin System, Technosphere platform technology and
immunotherapy product candidates. Research programs to identify new product candidates require
substantial technical, financial and human resources. Even if our research programs identify
candidates that initially show promise, these candidates may fail to progress to clinical
development for any number of reasons, including discovery upon further research that these
candidates have adverse effects or other characteristics that indicate they are unlikely to be
effective drugs or therapeutics. In addition, the clinical results we obtain at one stage are not
necessarily indicative of future testing results. If we fail to successfully complete the
development and commercialization of our Technosphere Insulin System or develop or expand our other
product candidates, or are significantly delayed in doing so, our business and results of
operations will be harmed and the value of our stock could decline.
If we do not achieve our projected development goals in the timeframes we announce and expect, the
commercialization of our product candidates may be delayed and our business will be harmed.
For planning purposes, we estimate the timing of the accomplishment of various scientific,
clinical, regulatory and other product development goals, which we sometimes refer to as
milestones. These milestones may include the commencement or completion of scientific studies and
clinical trials and the submission of regulatory filings. From time to time, we publicly announce
the expected timing of some of these milestones. All of these milestones are based on a variety of
assumptions. The actual timing of the achievement of these milestones can vary dramatically
compared to our estimatesin many cases for reasons beyond our controldepending on numerous
factors, including:
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the rate of progress, costs and results of our clinical trial and research and development
activities, which will be impacted by the level of proficiency and experience of our clinical
staff;
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our ability to identify and enroll patients who meet clinical trial eligibility criteria; |
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the extent of scheduling conflicts with participating clinicians and clinical institutions; |
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the receipt of approvals by our competitors and by us from the FDA and other regulatory agencies; |
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other actions by regulators; |
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our ability to access sufficient, reliable and affordable supplies of components used in the
manufacture of our |
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product candidates, including insulin and other materials for our
Technosphere Insulin System; and |
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the costs of expanding and maintaining manufacturing operations, as necessary. |
In addition, if we do not obtain sufficient additional funds through sales of securities,
strategic collaborations or the sale or license of our assets on a timely basis, we may be required
to reduce expenses by delaying, reducing or curtailing our Technosphere Insulin System or other
product development activities, which would impact our ability to meet milestones. If we fail to
commence or complete, or experience delays in or are forced to curtail, our proposed clinical
programs or otherwise fail to adhere to our projected development goals in the timeframes we
announce and expect, our business and results of operations will be harmed and the market price of
our common stock may decline.
We face substantial competition in the development of our product candidates and may not be able to
compete successfully, and our product candidates may be rendered obsolete by rapid technological
change.
We initially are focusing on the development of the Technosphere Insulin System for the treatment
of diabetes, and we face intense competition in this area. Pfizer, Inc. and Sanofi-Aventis, in
collaboration with Nektar Therapeutics, have been conducting Phase 3 clinical trials for the
Exubera product. In March 2004, these collaborators filed a submission seeking regulatory approval
in Europe, and in March 2005, their new drug application, or NDA, was accepted by the FDA. Novo
Nordisk A.S. has a pulmonary insulin product in development. In July 2005, Eli Lilly and Company,
in collaboration with Alkermes, Inc., initiated a Phase 3 clinical trial required for registration
of their inhaled insulin system and to define the safety and efficacy of the Lilly/Alkermes
product. In addition, a number of established pharmaceutical companies have or are developing
proprietary technologies or have entered into arrangements with, or acquired, companies with
technologies for the treatment of diabetes. We also face substantial competition for the
development of our other product candidates.
Many of our existing or potential competitors have, or have access to, substantially greater
financial, research and development, production and sales and marketing resources than we do and
have a greater depth and number of experienced managers. As a result, our competitors may be better
equipped than we are to develop, manufacture, market and sell competing products.
The rapid rate of scientific discoveries and technological changes could result in one or more of
our products becoming obsolete or noncompetitive. Our competitors may develop or introduce new
products that would render our technology and our Technosphere Insulin System less competitive,
uneconomical or obsolete. The fact that another company will likely be the first to commercialize a
pulmonary insulin system may give that company an advantage in terms of being able to gain
reputation and market share as well as set parameters for the pulmonary insulin market such as
pricing. Our future success will depend not only on our ability to develop our products but to
improve them and to keep pace with emerging industry developments. We cannot assure you that we
will be able to do so.
We also expect to face increasing competition from universities and other non-profit research
organizations. These institutions carry out a significant amount of research and development in the
areas of diabetes and cancer. These institutions are becoming increasingly aware of the commercial
value of their findings and are more active in seeking patent and other proprietary rights as well
as licensing revenues.
If we fail to enter into a strategic collaboration with respect to our Technosphere Insulin System,
our most clinically advanced program, we may not be able to execute on our business model.
Our current strategy for developing, manufacturing and commercializing our product candidates
includes evaluating the potential for collaborating with pharmaceutical and biotechnology companies
at some point in the drug development process and for these collaborators to undertake the advanced
clinical development and commercialization of our product candidates. It may be difficult for us to
find third parties that are willing to enter into collaborations on economic terms that are
favorable to us, or at all.
If we are not able to enter into a collaboration on terms that are favorable to us for our
products, we could be required to undertake and fund product development, clinical trials,
manufacturing and marketing activities solely at our own expense. For example, we are currently
evaluating potential collaborations with respect to our Technosphere Insulin System. We currently
estimate that the cost of a self-funded Phase 3 program over the next 12 months would be in the
range of $150 to $175 million. However, this estimate may change based on how the program proceeds.
Failure to enter into a collaboration with respect to our Technosphere Insulin System following
initial Phase 3 clinical trials or with respect to any other product candidate could substantially
increase our
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requirements for capital, which might not be available on favorable terms, if at all.
Alternatively, we would have to substantially reduce our development efforts, which would delay or
otherwise impede the commercialization of our product candidates.
If we enter into collaborative agreements and if our third-party collaborators do not perform
satisfactorily or if our collaborations fail, development or commercialization of our product
candidates may be delayed and our business could be harmed.
We currently rely on clinical research organizations and hospitals to conduct, supervise or monitor
some or all aspects of clinical trials involving our product candidates, including our Technosphere
Insulin System. Further, we may also enter into license agreements, partnerships or other
collaborative arrangements to support financing, development and marketing of our Technosphere
Insulin System. We may also license technology from others to enhance or supplement our
technologies. These various collaborators may enter into arrangements that would make them
potential competitors. These various collaborators also may breach their agreements with us and
delay our progress or fail to perform under their agreements, which could harm our business.
If we enter into collaborative arrangements, we will have less control over the timing, planning
and other aspects of our clinical trials, and the sale and marketing of our product candidates. We
cannot assure you that we will be able to enter into satisfactory arrangements with third parties
as contemplated or that any of our existing or future collaborations will be successful.
Testing of a particular product candidate may not yield successful results, and even if it does, we
may still be unable to commercialize that product candidate.
Our research and development programs are designed to test the safety and efficacy of our product
candidates through extensive preclinical and clinical testing. We may experience numerous
unforeseen events during, or as a result of, the testing process that could delay or prevent
commercialization of our Technosphere Insulin System or any of our other product candidates,
including the following:
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safety and efficacy results obtained in our preclinical and initial
clinical testing may be inconclusive or may not be predictive of
results obtained in later-stage clinical trials or following
long-term use, and we may as a result be forced to stop developing
product candidates that we currently believe are important to our
future; |
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the data collected from clinical trials of our product candidates
may not be sufficient to support FDA or other regulatory approval; |
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after reviewing test results, we or any potential collaborators may
abandon projects that we previously believed were promising; and |
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our product candidates may not produce the desired effects or may
result in adverse health effects or other characteristics that
preclude regulatory approval or limit their commercial use if
approved. |
We have initiated the second of our Phase 3 studies, a pivotal safety study of our Technosphere
Insulin System, primarily to evaluate pulmonary function during long term use. Our Technosphere
Insulin System is intended for multiple uses per day. Due to the size and time frame over which the
clinical trials are conducted, the results of clinical trials may not be indicative of the effects
of long-term use. If long-term use of our product results in adverse health effects or reduced
efficacy or both, the FDA or other regulatory agencies may terminate our ability to market and sell
our Technosphere Insulin System, may narrow the approved indications for use or otherwise require
restrictive product labeling or marketing, or may require further clinical trials, which may be
time-consuming and expensive, and may not produce favorable results.
As a result of any of these events, the FDA, other regulatory authorities, any collaborator or we
may suspend or terminate clinical trials or marketing of our Technosphere Insulin System at any
time. Any suspension or
termination of our clinical trials or marketing activities may harm our business and results of
operations and the market price of our common stock may decline.
If third-party payors do not reimburse customers for our products, they might not be used or
purchased, which would adversely affect our revenues.
Our revenues and profitability may be affected by the continuing efforts of governments and
third-party payors to contain or reduce the costs of healthcare through various means. For example,
in certain foreign markets the pricing
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or profitability of prescription pharmaceuticals is subject
to governmental control. In the United States, there has been, and we expect that there will
continue to be, a number of federal and state proposals to implement similar governmental controls.
We cannot be certain what legislative proposals will be adopted or what actions federal, state or
private payors for healthcare goods and services may take in response to any healthcare reform
proposals or legislation. Such reforms may make it difficult to complete the development and
testing of our product candidates, and therefore may limit our ability to generate revenues from
sales of our product candidates and achieve profitability. Further, to the extent that such reforms
have a material adverse effect on the business, financial condition and profitability of other
companies that are prospective collaborators for some of our product candidates, our ability to
commercialize our product candidates under development may be adversely affected.
In the United States and elsewhere, sales of prescription pharmaceuticals still depend in large
part on the availability of reimbursement to the consumer from third-party payors, such as
governmental and private insurance plans. Third-party payors are increasingly challenging the
prices charged for medical products and services. In addition, because each third-party payor
individually approves reimbursement, obtaining these approvals is a time-consuming and costly
process that will require us to provide scientific and clinical support for the use of each of our
products to each third-party payor separately with no assurance that approval will be obtained.
This process could delay the market acceptance of new products and could have a negative effect on
our revenues and operating results. Even if we succeed in bringing one or more products to market,
we cannot be certain that these products will be considered cost-effective or that reimbursement to
the consumer will be available, in which case our business and results of operations will be harmed
and the market price of our common stock may decline.
If we are unable to transition successfully from an early-stage development company to a company
that commercializes therapeutics, our operations will suffer.
We are reaching a critical juncture in our development, transitioning from an early-stage
development company to one with multiple Phase 3 clinical trials moving toward commercializing a
product. Phase 3 development of the Technosphere Insulin System will be far more complex than the
earlier phases. Overall, we plan to support a significant number of studies in the near term. We
have not previously implemented the range of studies contemplated for our Phase 3 clinical program.
Moreover, as a company, we have no previous experience in the Phase 3-through-NDA stage of product
development.
We require a well-structured plan to make this transition. We are in the process of implementing
the following measures, among others, to accommodate our transition and successfully implement our
commercialization strategy for our Technosphere Insulin System:
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add a significant number of new personnel, particularly in clinical development, regulatory and
manufacturing production, including personnel with significant Phase 3-to-commercialization
experience; |
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expand our manufacturing capabilities; |
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develop comprehensive and detailed commercialization, clinical development and regulatory plans; |
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implement standard operating procedures, including those for protocol development; and |
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align our management structure to accommodate the increasing complexity of our operations. |
If we are unable to accomplish these measures in a timely manner, we would be at considerable risk
of failing to:
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complete our Phase 3 clinical trial program in a deliberate fashion, on time and within budget; and
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develop through our Phase 3 trials the key clinical data needed to obtain regulatory approval and
compete successfully in the marketplace. |
We have never manufactured any of our product candidates in commercial quantities, and if we fail
to develop an effective manufacturing capability for our product candidates or to engage
third-party manufacturers with this capability, we may be unable to commercialize these products.
We currently use our Danbury, Connecticut facility to manufacture raw Technosphere material,
formulate Technosphere Insulin, fill plastic cartridges with Technosphere Insulin and blister
package the cartridges for our clinical trials. We presently intend to increase our formulation,
fill and finishing capabilities at Danbury in order to accommodate our activities through initial
commercialization. This expansion will involve a number of third-party
8.
suppliers of equipment and
materials as well as engineering and construction services. Our suppliers may not deliver all of
the required equipment, materials and services in a timely manner or at reasonable prices. If we
encounter difficulties in our relationships with these suppliers, or if a supplier becomes unable
to provide us with goods or services at the agreed-upon price, our facilities expansion could be
delayed or its costs increased.
We have never manufactured any of our product candidates in commercial quantities. As our product
candidates move through the regulatory process, we will need to either develop the capability of
manufacturing on a commercial scale or engage third-party manufacturers with this capability, and
we cannot assure you that we will be able to do either successfully. The manufacture of
pharmaceutical products requires significant expertise and capital investment, including the
development of advanced manufacturing techniques and process controls. Manufacturers of
pharmaceutical products often encounter difficulties in production, especially in scaling up
initial production. These problems include difficulties with production costs and yields, quality
control and assurance and shortages of qualified personnel, as well as compliance with strictly
enforced federal, state and foreign regulations. In addition, before we would be able to produce
commercial quantities of Technosphere Insulin at our Danbury facility, it will have to undergo a
pre-approval inspection by the FDA. The expansion process and preparation for the FDAs
pre-approval inspection for commercial production at the Danbury facility could take an additional
six months or longer. If we use a third-party supplier to formulate Technosphere Insulin or produce
its raw material, the transition could also require significant start-up time to qualify and
implement the manufacturing process. If we engage a third-party manufacturer, our third-party
manufacturer may not perform as agreed or may terminate its agreement with us.
Any of these factors could cause us to delay or suspend clinical trials, regulatory submissions,
required approvals or commercialization of our product candidates, entail higher costs and result
in our being unable to effectively commercialize our products. Furthermore, if we or our potential
third-party manufacturers fail to deliver the required commercial quantities of our products on a
timely basis and at commercially reasonable prices, and we were unable to promptly find one or more
replacement manufacturers capable of production at a substantially equivalent cost, in
substantially equivalent volume and on a timely basis, we would likely be unable to meet demand for
our products and we would lose potential revenues.
If our suppliers fail to deliver materials and services needed for the production of our
Technosphere Insulin System in a timely and sufficient manner, or they fail to comply with
applicable regulations, our business and results of operations will be harmed and the market price
of our common stock may decline.
For our Technosphere Insulin System to be commercially viable, we need access to sufficient,
reliable and affordable supplies of insulin, our MedTone inhaler, the related cartridges and other
materials. We currently have a long-term supply agreement with Diosynth B.V., an independent
supplier of insulin and a subsidiary of Akzo Nobel, which is currently our sole supplier for
insulin. We are aware of at least five other suppliers of bulk insulin but to date we have not
entered into a commercial relationship with any of the five. Currently, we manufacture the raw
Technosphere material, but we are in the process of qualifying a secondary manufacturer to supply
us with commercial quantities of this raw material. We recently entered into a long-term supply
agreement with Vaupell, Inc., the supplier of our MedTone inhaler and cartridges. We must rely on
our suppliers to comply with relevant regulatory and other legal requirements, including the
production of insulin in accordance with current drug Good Manufacturing Practices, or cGMP, and
the production of MedTone inhaler and related cartridges in accordance with device Quality System
Regulations, or QSR. The supply of all of these materials may be limited or the manufacturer may
not meet relevant regulatory requirements, and if we are unable to obtain these materials in
sufficient amounts, in a timely manner and at reasonable prices, or if we should encounter delays
or difficulties in our relationships with manufacturers or suppliers, our development or
manufacturing may be delayed. Any such events would delay the submission of our product candidates
for regulatory approval or market introduction and subsequent sales and, if so, our business and
results of operations will be harmed and the market price of our common stock may decline.
If we fail to enter into collaborations with third parties, we will be required to establish our
own sales, marketing and distribution capabilities, which could delay the commercialization of our
products and harm our business.
A broad base of physicians and specialists treat patients with diabetes. A large sales force will
be required in order to educate and support these physicians and specialists. Therefore, we plan to
enter into collaborations with one or more pharmaceutical companies to sell, market and distribute
our Technosphere Insulin System. If we fail to enter into collaborations, we will be required to
establish our own direct sales, marketing and distribution capabilities. Establishing these
capabilities can be time-consuming and expensive and we estimate that establishing a specialty
sales force would cost more than $20 million. Because of our size, we would be at a disadvantage to
our potential competitors, all of which have collaborated with large pharmaceutical companies that
have substantially more resources than we do. As a result, we would not initially be able to field
a sales force as large as our competitors or
9.
provide the same degree of market research or
marketing support. In addition, our competitors would have a greater ability to devote research
resources toward expansion of the indications for their products. We cannot assure you that we will
succeed in entering into acceptable collaborations, that any such collaboration will be successful
or, if not, that we will successfully develop our own sales, marketing and distribution
capabilities.
If our products do not become widely accepted by physicians, patients, third-party payors and the
healthcare community, we may be unable to generate significant revenue, if any.
Our product candidates are new and unproven. Even if our product candidates obtain regulatory
approvals, they may not gain market acceptance among physicians, patients, third-party payors and
the healthcare community. Failure to achieve market acceptance would limit our ability to generate
revenue and would adversely affect our results of operations.
The degree of market acceptance of our product candidates will depend on many factors, including:
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the claims for which FDA approval can be obtained, including superiority claims; |
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the perceived advantages and disadvantages of competitive products; |
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the willingness and ability of patients and the healthcare community to adopt new technologies; |
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the ability to manufacture the product in sufficient quantities with acceptable quality and at an
acceptable cost; |
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the perception of patients and the healthcare community, including third-party payors, regarding the
safety, efficacy and benefits of the product compared to those of competing products or therapies; |
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the convenience and ease of administration of the products relative to existing treatment methods; |
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the pricing and reimbursement of our products relative to existing treatment therapeutics and methods; and |
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marketing and distribution support for our products. |
Physicians will not recommend our products until clinical data or other factors demonstrate the
safety and efficacy of our products as compared to other treatments. Even if the clinical safety
and efficacy of our product candidates is established, physicians may elect not to recommend these
product candidates for a variety of factors, including the reimbursement policies of government and
third-party payors and the effectiveness of our competitors in marketing their therapies. Because
of these and other factors, our products may not gain market acceptance, which would materially
harm our business, financial condition and results of operations.
If product liability claims are brought against us, we may incur significant liabilities and suffer
damage to our reputation.
The testing, manufacturing, marketing and sale of our various product candidates, including the
Technosphere Insulin System, expose us to potential product liability claims. A product liability
claim may result in substantial judgments as well as consume significant financial and management
resources and result in adverse publicity, decreased demand for a product, injury to our
reputation, withdrawal of clinical trial volunteers and loss of revenues. We currently carry
worldwide liability insurance in the amount of $5 million. We believe these limits are reasonable
to cover us from potential damages arising from current and previous clinical trials of our
Technosphere Insulin System. In addition, we carry local policies per trial in each country in
which we conduct clinical trials that requires us to carry local coverage. We intend to obtain
product liability coverage for commercial sales in the future. However, we may not be able to
obtain insurance coverage that will be adequate to satisfy any liability that may arise, and
because insurance coverage in our industry can be very expensive and difficult to obtain, we cannot
assure you that we will be able to obtain sufficient coverage at an acceptable cost, if at all. If
losses from such claims exceed our liability insurance coverage, we may ourselves incur substantial
liabilities. If we are required to pay a product liability claim, we may not have sufficient
financial resources to complete development or commercialization of any of our product candidates
and, if so, our business and results of operations will be harmed and the market price of our
common stock may decline.
10.
We deal with hazardous materials and must comply with environmental laws and regulations, which can
be expensive and restrict how we do business.
Our research and development work involves the controlled storage and use of hazardous materials,
including chemical, radioactive and biological materials. In addition, our manufacturing operations
involve the use of CBZ-lysine, which is stable and non-hazardous under normal storage conditions,
but may form an explosive mixture under certain conditions. Our operations also produce hazardous
waste products. We are subject to federal, state and local laws and regulations governing how we
use, manufacture, store, handle and dispose of these materials. Moreover, the risk of accidental
contamination or injury from hazardous materials cannot be completely eliminated, and in the event
of an accident, we could be held liable for any damages that may result, and any liability could
fall outside the coverage or exceed the limits of our insurance. Currently, our general liability
policy provides coverage up to $1 million per occurrence and $2 million in the aggregate and is
supplemented by an umbrella policy that provides a further $4 million of coverage; however, our
insurance policy excludes pollution coverage and we do not carry a separate hazardous materials
policy. In addition, we could be required to incur significant costs to comply with environmental
laws and regulations in the future. Finally, current or future environmental laws and regulations
may impair our research, development or production efforts.
When we purchased the facilities located in Danbury, Connecticut, there was a soil cleanup plan in
process. As part of the purchase, we obtained an indemnification from the seller related to the
remediation of the soil for all known environmental conditions that existed at the time the seller
acquired the property. The seller is, in turn, indemnified for these known environmental conditions
by the previous owner. We estimate that the cost to complete the soil cleanup plan for industrial
use is $1.5 to $3.0 million over the next 18 to 24 months. We also received an indemnification from
the seller for environmental conditions created during its ownership of the property and for
environmental problems unknown at the time that the seller acquired the property. These additional
indemnities are limited to the purchase price that we paid for the Danbury facilities. In the event
that any cleanup costs are imposed on us and we are unable to collect the full amount of these
costs and expenses from the seller or the party responsible for the contamination, we may be
required to pay these costs and our business and results of operations may be harmed.
If we lose any key employees or scientific advisors, our operations and our ability to execute our
business strategy could be materially harmed.
In order to commercialize our product candidates successfully, we will be required to expand our
work force, particularly in the areas of manufacturing, clinical trials management, regulatory
affairs, business development, and sales and marketing. These activities will require the addition
of new personnel, including management, and the development of additional expertise by existing
personnel. We face intense competition for qualified employees among companies in the biotechnology
and biopharmaceutical industries. Our success depends upon our ability to attract, retain and
motivate highly skilled employees. We may be unable to attract and retain these individuals on
acceptable terms, if at all.
The loss of the services of any principal member of our management and scientific staff could
significantly delay or prevent the achievement of our scientific and business objectives. All of
our employees are at will and we currently do not have employment agreements with any of the
principal members of our management or scientific staff, and we do not have key person life
insurance to cover the loss of any of these individuals. Replacing key employees may be difficult
and time-consuming because of the limited number of individuals in our industry with the skills and
experience required to develop, gain regulatory approval of and commercialize our product
candidates successfully. In May 2005, we terminated the
employment of Dr. Wendell Cheatham, our former Chief Medical Officer. Although Mr. Edstrom
has assumed Dr. Cheathams management responsibilities while we search for a senior executive to
lead our development operations, there can be no assurance that we will be able to recruit such an
individual with the appropriate skills and experience.
We have relationships with scientific advisors at academic and other institutions to conduct
research or assist us in formulating our research, development or clinical strategy. These
scientific advisors are not our employees and may have commitments to, and other obligations with,
other entities that may limit their availability to us. We have limited control over the activities
of these scientific advisors and can generally expect these individuals to devote only limited time
to our activities. Failure of any of these persons to devote sufficient time and resources to our
programs could harm our business. In addition, these advisors are not prohibited from, and may have
arrangements with, other companies to assist those companies in developing technologies that may
compete with our product candidates.
11.
If our Chief Executive Officer is unable to devote sufficient time and attention to our business,
our operations and our ability to execute our business strategy could be materially harmed.
Alfred Mann, our Chairman and Chief Executive Officer, is also serving as the Chairman and Co-Chief
Executive Officer of Advanced Bionics Corporation, which was acquired by Boston Scientific
Corporation. Mr. Mann is involved in many other business and charitable activities. As a result,
the time and attention Mr. Mann devotes to the operation of our business varies and he may not
expend the same time or focus on our activities as other, similarly situated chief executive
officers. Mr. Mann typically devotes anywhere between 25 and 50 hours a week to our business. If
Mr. Mann is unable to devote the time and attention necessary to running our business, we may not
be able to execute our business strategy and our business could be materially harmed.
We have been sued by our former Chief Medical Officer. As a result of this litigation, we may incur
material costs and suffer other consequences, which may adversely affect us.
In May 2005, Dr. Cheatham filed a complaint against us in the California Superior Court. The
complaint alleges causes of action for wrongful termination in violation of public policy, breach
of contract and retaliation in connection with the termination of Dr. Cheathams employment. In the
complaint, Dr. Cheatham seeks compensatory, punitive and exemplary damages in excess of $2.0
million as well as reimbursement of attorneys fees. In June 2005, we answered the complaint and
also filed a cross-complaint against Dr. Cheatham, alleging claims for libel per se, trade libel,
breach of contract, breach of the implied covenant of good faith and fair dealing and breach of the
duty of loyalty. In July 2005, Dr. Cheatham filed a demurrer and motion to strike our
cross-complaint under Californias anti-SLAPP statute, the
hearing for which is scheduled for September 28, 2005.
The litigation will result in costs and divert managements attention and resources, any of which
could adversely affect our business, results of operations or financial position. We are also
concerned that, despite the findings by an independent counsel following an investigation and
despite the endorsement of the independent counsels report by our board of directors, investors
could give undue weight to Dr. Cheathams allegations, resulting in damage to our reputation, or
the FDA could begin an investigation, either of which could adversely affect the trading price of
our common stock. If we are not successful in this litigation, we could be forced to make a
significant settlement or judgment payment to Dr. Cheatham, which could adversely affect our
business, results of operations or financial position.
Our facilities that are located in Southern California may be affected by natural disasters.
Our headquarters and some of our research and development activities are located in Southern
California, where they are subject to an enhanced risk of natural and other disasters such as power
and telecommunications failures, mudslides, fires and earthquakes. A fire, earthquake or other
catastrophic loss that causes significant damage to our facilities or interruption of our business
could harm our business. We do not carry insurance to cover losses caused by earthquakes, and the
insurance coverage that we carry for fire damage and for business interruption may be insufficient
to compensate us for any losses that we may incur.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
We are in the process of documenting and testing our internal control procedures in order to
satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which, beginning with our fiscal
year ending December 31, 2005, will require annual management assessments of the effectiveness of
our internal controls over financial reporting and a report by our independent auditors that both
addresses managements assessments and provides for the independent auditors assessment of the
effectiveness of our internal controls. During the course of our testing, we may identify
deficiencies which we may not be able to remediate in time to meet the deadline for compliance with
Section 404. Testing and maintaining internal controls also involves significant costs and can
divert our managements attention from other matters that are important to our business. We may not
be able to conclude on an ongoing basis that we
have effective internal controls over financial reporting in accordance with Section 404, and our
independent auditors may not be able or willing to issue a favorable assessment of our conclusions.
Failure to achieve and maintain an effective internal control environment could harm our operating
results and could cause us to fail to meet our reporting obligations. Ineffective internal controls
could also cause investors to lose confidence in our reported financial information, which could
have a negative effect on the trading price of our stock.
12.
RISKS RELATED TO REGULATORY APPROVALS
Our product candidates must undergo rigorous preclinical and clinical testing and we must obtain
regulatory approvals, which could be costly and time-consuming and subject us to unanticipated
delays or prevent us from marketing any products.
Our research and development activities, as well as the manufacturing and marketing of our product
candidates, including our Technosphere Insulin System, are subject to regulation, including
regulation for safety, efficacy and quality, by the FDA in the United States and comparable
authorities in other countries. FDA regulations are wide-ranging and govern, among other things:
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product design, development, manufacture and testing; |
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product labeling; |
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product storage and shipping; |
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pre-market clearance or approval; |
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advertising and promotion; and |
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product sales and distribution. |
Clinical testing can be costly and take many years, and the outcome is uncertain and susceptible to
varying interpretations. We expect, based on our discussions with the FDA and on our understanding
of the interactions between the FDA and other pharmaceutical companies developing pulmonary insulin
delivery systems, that we will need safety data covering at least two years from patients treated
with our Technosphere Insulin System and that we must complete a two-year carcinogenicity study of
Technosphere Insulin in rodents to obtain approval, among other requirements. We cannot be certain
when or under what conditions we will undertake further clinical trials. The clinical trials of our
product candidates may not be completed on schedule, the FDA or foreign regulatory agencies may
order us to stop or modify our research, or these agencies may not ultimately approve any of our
product candidates for commercial sale. The data collected from our clinical trials may not be
sufficient to support regulatory approval of our various product candidates, including our
Technosphere Insulin System. Even if we believe the data collected from our clinical trials are
sufficient, the FDA has substantial discretion in the approval process and may disagree with our
interpretation of the data. Our failure to adequately demonstrate the safety and efficacy of any of
our product candidates would delay or prevent regulatory approval of our product candidates, which
could prevent us from achieving profitability.
The requirements governing the conduct of clinical trials and manufacturing and marketing of our
product candidates, including our Technosphere Insulin System, outside the United States vary
widely from country to country. Foreign approvals may take longer to obtain than FDA approvals and
can require, among other things, additional testing and different clinical trial designs. Foreign
regulatory approval processes include all of the risks associated with the FDA approval processes.
Some of those agencies also must approve prices of the products. Approval of a product by the FDA
does not ensure approval of the same product by the health authorities of other countries. In
addition, changes in regulatory policy in the United States or in foreign countries for product
approval during the period of product development and regulatory agency review of each submitted
new application may cause delays or rejections.
The process of obtaining FDA and other required regulatory approvals, including foreign approvals,
is expensive, often takes many years and can vary substantially based upon the type, complexity and
novelty of the products involved. To our knowledge, no pulmonary insulin product has yet been
approved for marketing, and we are not aware of any precedent for the successful commercialization
of products based on our technology or technologies similar to ours. However, an application for
approval for another pulmonary insulin product candidate was recently filed in the United States,
and we believe a decision could be made by the FDA in early 2006. The FDA has advised
us that it will regulate our Technosphere Insulin System as a combination product because of the
complex nature of the system that includes the combination of a new drug (Technosphere Insulin) and
a new medical device (the MedTone inhaler used to administer the insulin). The FDA indicated that
the review of a future drug marketing application for our Technosphere Insulin System will involve
three separate review groups of the FDA: (1) the Metabolic and Endocrine Drug Products Division;
(2) the Pulmonary Drug Products Division; and (3) the Center for Devices and Radiological Health
within the FDA that reviews medical devices. We currently understand that the Metabolic and
Endocrine Drug Products Division will be the lead group and will obtain consulting reviews from the
other two FDA groups. The FDA has not made an official final decision in this regard, however, and
we can make no assurances at this time about what impact FDA review by multiple groups will have on
the review and approval of our product or whether we are correct in our understanding of how the
Technosphere Insulin System will be reviewed and approved.
Also, recent events regarding questions about the safety of marketed drugs, including pertaining to
the lack of adequate labeling, may result in increased cautiousness by the FDA in reviewing new
drugs based on safety, efficacy, or other regulatory considerations and may result in significant
delays in obtaining regulatory approvals. Such regulatory considerations may also result in the
imposition of more restrictive drug labeling or marketing
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requirements as conditions of approval,
which may significantly affect the marketability of our drug products. FDA review of our
Technosphere Insulin System as a combination product therapy may lengthen the product development
and regulatory approval process, increase our development costs and delay or prevent the
commercialization of our Technosphere Insulin System.
We are developing our Technosphere Insulin System as a new treatment for diabetes utilizing unique,
proprietary components. As a
combination product, any changes to either the MedTone inhaler, the Technosphere material or the
insulin, including new suppliers, could possibly result in FDA requirements to repeat certain
clinical studies. This means, for example, that switching to an alternate delivery system could
require us to undertake additional clinical trials and other studies, which could significantly
delay the development and commercialization of our Technosphere Insulin System. Our product
candidates that are currently in development for the treatment of cancer also face similar
obstacles and costs.
We currently expect that our inhaler will be reviewed for approval as part of the NDA for our Technosphere
Insulin System. No assurances exist that we will not be required to obtain separate device
clearances or approval for use of our inhaler with our Technosphere Insulin System. This may result
in our being subject to medical device review user fees and to other device requirements to market
our inhaler and may result in significant delays in commercialization. Even if the device component
is approved as part of our NDA for the Technosphere Insulin System, numerous device regulatory
requirements still apply to the device part of the drug-device combination.
We have only limited experience in filing and pursuing applications necessary to gain regulatory
approvals, which may impede our ability to obtain timely approvals from the FDA or foreign
regulatory agencies, if at all.
We will not be able to commercialize our Technosphere Insulin System and other product candidates
until we have obtained regulatory approval. We have no experience as a company in late-stage
regulatory filings, such as preparing and submitting NDAs, which may place us at risk of delays,
overspending and human resources inefficiencies. Any delay in obtaining, or inability to obtain,
regulatory approval could harm our business.
If we do not comply with regulatory requirements at any stage, whether before or after marketing
approval is obtained, we may be subject to criminal prosecution, fined or forced to remove a
product from the market or experience other adverse consequences, including restrictions or delays
in obtaining regulatory marketing approval.
Even if we comply with regulatory requirements, we may not be able to obtain the labeling claims
necessary or desirable for product promotion. We may also be required to undertake post-marketing
trials. In addition, if we or other parties identify adverse effects after any of our products are
on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and a
reformulation of our products, additional clinical trials, changes in labeling of, or indications
of use for, our products and/or additional marketing applications may be required. If we encounter
any of the foregoing problems, our business and results of operations will be harmed and the market
price of our common stock may decline.
Even if we obtain regulatory approval for our product candidates, such approval may be limited and
we will be subject to stringent, ongoing government regulation.
Even if regulatory authorities approve any of our product candidates, they could approve less than
the full scope of uses or labeling that we seek or otherwise require special warnings or other
restrictions on use or marketing. Regulatory authorities may limit the segments of the diabetes
population to which we or others may market our Technosphere Insulin System or limit the target
population for our other product candidates. Based on currently available clinical studies, we
believe that our Technosphere Insulin System may have certain advantages over currently approved
insulin products or pulmonary insulin products in development, including its approximation of the
natural first-phase insulin release spike. Nonetheless, there are no assurances that these and
other advantages, if any, of the Technosphere Insulin System have clinical significance or can be
confirmed in head-to-head clinical trials against appropriate approved comparator insulin drug
products. Such comparative clinical trials are required to make these types of superiority claims
in labeling or advertising. These aforementioned observations and others may therefore not be
capable of substantiation in comparative clinical trials prior to our NDA submission, if at all, or
otherwise may not be suitable for inclusion in product labeling or advertising and, as a result,
our Technosphere Insulin System may not have competitive advantages when compared to other insulin
products.
The manufacture, marketing and sale of these product candidates will be subject to stringent and
ongoing government regulation. The FDA may also withdraw product approvals if problems concerning
safety or efficacy of
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the product occur following approval. In response to recent events regarding
questions about the safety of certain approved prescription products, including the lack of
adequate warnings, the FDA and Congress are currently considering new regulatory and legislative
approaches to advertising, monitoring and assessing the safety of marketed drugs, including
legislation providing the FDA with authority to mandate labeling changes for approved
pharmaceutical products, particularly those related to safety. We also cannot be sure that the
current Congressional and FDA initiatives pertaining to ensuring the safety of marketed drugs or
other developments pertaining to the pharmaceutical industry will not adversely affect our
operations.
We also are required to register our establishments and list our products with the FDA and certain
state agencies. We and any third-party manufacturers or suppliers must continually adhere to
federal regulations setting forth requirements, known as cGMP (for drugs) and QSR (for medical
devices), and their foreign equivalents, which are enforced by the FDA and other national
regulatory bodies through their facilities inspection programs. If our facilities, or the
facilities of our manufacturers or suppliers, cannot pass a preapproval plant inspection, the FDA
will not approve the marketing of our product candidates. In complying with cGMP and foreign
regulatory requirements, we and any of our potential third-party manufacturers or suppliers will be
obligated to expend time, money and effort in production, record-keeping and quality control to
ensure that our products meet applicable specifications and other requirements. QSR requirements
also impose extensive testing, control and documentation requirements. State regulatory agencies
and the regulatory agencies of other countries have similar requirements. In addition, we will be
required to comply with regulatory requirements of the FDA, state regulatory agencies and the
regulatory agencies of other countries concerning the reporting of adverse events and device
malfunctions, corrections and removals (e.g., recalls), promotion and advertising and general
prohibitions against the manufacture and distribution of adulterated and misbranded devices.
Failure to comply with these regulatory requirements could result in civil fines, product seizures,
injunctions and/or criminal prosecution of responsible individuals and us. Any such actions would
have a material adverse effect on our business and results of operations.
Our insulin supplier does not yet supply human recombinant insulin for an FDA-approved product and
will likely be subject to an FDA preapproval inspection before the agency will approve a future
marketing application for our Technosphere Insulin System.
We can make no assurances that our insulin supplier will be acceptable to the FDA. If we were
required to find a new or additional supplier of insulin, we would be required to evaluate the new
suppliers ability to provide insulin that meets our specifications and quality requirements, which
would require significant time and expense and could delay the manufacturing and future
commercialization of our Technosphere Insulin System. We also depend on suppliers for other
materials that comprise our Technosphere Insulin System, including our MedTone inhaler and
cartridges. All of our device suppliers must comply with relevant regulatory requirements including
QSR. It also is likely that major suppliers will be subject to FDA preapproval inspections before
the agency will approve a future marketing application for our Technosphere Insulin System. At the
present time our insulin supplier is certified to the ISO9001:2000 Standard. There can be no
assurance, however, that if the FDA were to conduct a preapproval inspection of our insulin
supplier or other suppliers, that the agency would find that the supplier substantially comply with
the QSR or cGMP requirements, where applicable. If we or any potential third-party manufacturer or
supplier fails to comply with these requirements or comparable requirements in foreign countries,
regulatory authorities may subject us to regulatory action, including criminal prosecutions, fines
and suspension of the manufacture of our products.
Any regulatory approvals that we receive for our product candidates may also be subject to
limitations on the indicated uses for which the product candidate may be marketed or contain
requirements for potentially costly post-marketing follow-up clinical trials.
Reports of side effects or safety concerns in related technology fields or in other companies
clinical trials could delay or prevent us from obtaining regulatory approval or negatively impact
public perception of our product candidates.
At present, there are a number of clinical trials being conducted by us and other pharmaceutical
companies involving insulin delivery systems. If we discover that our product is associated with a
significantly increased frequency of adverse events, or if other pharmaceutical companies announce
that they observed frequent adverse events in their trials involving the pulmonary delivery of
insulin, we could encounter delays in the timing of our clinical trials or difficulties in
obtaining the approval of our Technosphere Insulin System. As well, the public perception of our
products might be adversely affected, which could harm our business and results of operations and
cause the market price of our common stock to decline, even if the concern relates to another
companys product.
For example, in August 2004, an analyst reported that the United Kingdom Committee on the Safety of
Medicines had expressed concern that a European application for approval of a drug for the
treatment of diabetes was not
15.
licensable at the time. Earlier in 2004, Sanofi-Aventis, on behalf of
Pfizer and Nektar, filed for regulatory approval in Europe of Exubera. Although the identity of the
drug was not disclosed in the analysts report, the news nonetheless triggered temporary but sharp
declines in the market prices of Nektars common stock as well as our common stock.
There are also a number of clinical trials being conducted by other pharmaceutical companies
involving compounds similar to, or competitive with, our other product candidates. Adverse results
reported by these other companies in their clinical trials could delay or prevent us from obtaining
regulatory approval or negatively impact public perception of our product candidates, which could
harm our business and results of operations and cause the market price of our common stock to
decline.
RISKS RELATED TO INTELLECTUAL PROPERTY
If we are unable to protect our proprietary rights, we may not be able to compete effectively, or
operate profitably.
Our commercial success depends, in large part, on our ability to obtain and maintain intellectual
property protection for our technology. Our ability to do so will depend on, among other things,
complex legal and factual questions, and it should be noted that the standards regarding
intellectual property rights in our fields are still evolving. We attempt to protect our
proprietary technology through a combination of patents, trade secrets, know-how and
confidentiality agreements. We own a number of domestic and international patents, have a number of
domestic and international patent applications pending and have licenses to additional patents. We
cannot assure you that our patents and licenses will successfully preclude others from using our
technologies, and we could incur substantial costs in seeking enforcement of our proprietary rights
against infringement. Even if issued, the patents may not give us an advantage over competitors
with similar technologies.
Moreover, the issuance of a patent is not conclusive as to its validity or enforceability and it is
uncertain how much protection, if any, will be afforded by our patents if we attempt to enforce
them and they are challenged in court or in other proceedings, such as oppositions, which may be
brought in US or foreign jurisdictions to challenge the validity of a patent. A third party may
challenge the validity or enforceability of a patent after its issuance by the US Patent and
Trademark Office, or USPTO.
We also rely on unpatented technology, trade secrets, know-how and confidentiality agreements. We
require our officers, employees, consultants and advisors to execute proprietary information and
invention and assignment agreements upon commencement of their relationships with us. We also
execute confidentiality agreements with outside collaborators. There can be no assurance, however,
that these agreements will provide meaningful protection for our inventions, trade secrets or other
proprietary information in the event of unauthorized use or disclosure of such information. If any
trade secret, know-how or other technology not protected by a patent were to be disclosed to or
independently developed by a competitor, our business, results of operations and financial
condition could be adversely affected.
If we become involved in lawsuits to protect or enforce our patents or the patents of our
collaborators or licensors, we would be required to devote substantial time and resources to
prosecute or defend such proceedings.
Competitors may infringe our patents or the patents of our collaborators or licensors. To counter
infringement or unauthorized use, we may be required to file infringement claims, which can be
expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a
patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using
the technology at issue on the grounds that our patents do not cover its technology. An adverse
determination of any litigation or defense proceedings could put one or more of our patents at risk
of being invalidated or interpreted narrowly and could put our patent applications at risk of not
issuing.
Interference proceedings brought by the USPTO may be necessary to determine the priority of
inventions with respect to our patent applications or those of our collaborators or licensors.
Litigation or interference proceedings may fail and, even if successful, may result in substantial
costs and be a distraction to our management. We may not be able, alone or with our collaborators
and licensors, to prevent misappropriation of our proprietary rights, particularly in countries
where the laws may not protect such rights as fully as in the United States. We may not prevail in
any litigation or interference proceeding in which we are involved. Even if we do prevail, these
proceedings can be very expensive and distract our management.
16.
Furthermore, because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our confidential information could
be compromised by disclosure during this type of litigation. In addition, during the course of this
kind of litigation, there could be public announcements of the results of hearings, motions or
other interim proceedings or developments. If securities analysts or investors perceive these
results to be negative, the market price of our common stock may decline.
If our technologies conflict with the proprietary rights of others, we may incur substantial costs
as a result of litigation or other proceedings and we could face substantial monetary damages and
be precluded from commercializing our products, which would materially harm our business.
Over the past three decades the number of patents issued to biotechnology companies has expanded
dramatically. As a result it is not always clear to industry participants, including us, which
patents cover the multitude of biotechnology product types. Ultimately, the courts must determine
the scope of coverage afforded a patent and the courts do not always arrive at uniform conclusions.
A third party may claim that we are using inventions covered by such third partys patents and may
go to court to stop us from engaging in our normal operations and activities. These lawsuits can be
expensive and would consume time and other resources. There is a risk that a court would decide
that we are infringing a third partys patents and would order us to stop the activities covered by
the patents, including the commercialization of our products. In addition, there is a risk that we
would have to pay the other party damages for having violated the other partys patents (which
damages may be increased, as well as attorneys fees ordered paid, if infringement is found to be
willful), or that we will be required to obtain a license from the other party in order to continue
to commercialize the affected products, or to design our products in a manner that does not
infringe a valid patent. We may not prevail in any legal action, and a required license under the
patent may not be available on acceptable terms or at all, requiring cessation of activities that
were found to infringe a valid patent. We also may not be able to develop a non-infringing product
design on commercially reasonable terms, or at all.
Although we own a number of domestic and foreign patents and patent applications relating to our
Technosphere Insulin System and cancer vaccine products under development, we have identified
certain third-party patents that a court may interpret to restrict our freedom to operate (that is,
to cover our products) in the areas of Technosphere formulations, pulmonary insulin delivery and
the treatment of cancer. Specifically, we have identified certain third-party patents having claims
relating to chemical compositions of matter and pulmonary insulin delivery that may trigger an
allegation of infringement upon the commercial manufacture and sale of our Technosphere Insulin
System. We have also identified third-party patents disclosing methods of use and compositions of
matter related to DNA-based vaccines that also may trigger an allegation of infringement upon the
commercial manufacture and sale of our cancer therapy. If a court were to determine that our
insulin products or cancer therapies were infringing any of these patent rights, we would have to
establish with the court that these patents were invalid or unenforceable in order to avoid legal
liability for infringement of these patents. However, proving patent invalidity or unenforceability
can be difficult because issued patents are presumed valid. Therefore, in the event that we are
unable to prevail in an infringement or invalidity action we will have to either acquire the
third-party patents outright or seek a royalty-bearing license. Royalty-bearing licenses
effectively increase production costs and therefore may materially affect product profitability.
Furthermore, should the patent holder refuse to either assign or license us the infringed patents,
it may be necessary to cease manufacturing the product entirely and/or design
around the patents, if possible. In either event, our business would be harmed and our
profitability could be materially adversely impacted.
Furthermore, because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our confidential information could
be compromised by disclosure during this type of litigation. In addition, during the course of this
kind of litigation, there could be public announcements of the results of hearings, motions or
other interim proceedings or developments. If securities analysts or investors perceive these
results to be negative, the market price of our common stock may decline.
Patent litigation is costly and time-consuming. Among other things, such litigation may divert the
attention of key personnel and we may not have sufficient resources to bring these actions to a
successful conclusion. At the same time, some of our competitors may be able to sustain the costs
of complex patent litigation more effectively than we can because they have substantially greater
resources. Although patent and intellectual property disputes in the pharmaceutical area have often
been settled for licensing or similar arrangements, associated costs may be substantial and could
include ongoing royalties. An adverse determination in a judicial or administrative proceeding or
failure to obtain necessary licenses could prevent us from manufacturing and selling our products
or result in substantial monetary damages, which would adversely affect our business and results of
operations and cause the market price of our common stock to decline.
17.
We may not obtain trademark registrations for our potential trade names.
We have not selected trade names for some of our products and product candidates; therefore, we
have not filed trademark registrations for our potential trade names for those products in any
jurisdiction, including the United States. Although we intend to defend any opposition to our
trademark registrations, no assurance can be given that any of our trademarks will be registered in
the United States or elsewhere or that the use of any of our trademarks will confer a competitive
advantage in the marketplace. Furthermore, even if we are successful in our trademark
registrations, the FDA has its own process for drug nomenclature and its own views concerning
appropriate proprietary names. It also has the power, even after granting market approval, to
request a company to reconsider the name for a product because of evidence of confusion in the
marketplace. We cannot assure you that the FDA or any other regulatory authority will approve of
any of our trademarks or will not request reconsideration of one of our trademarks at some time in
the future.
RISKS RELATED TO OUR COMMON STOCK
We expect that our stock price will fluctuate significantly.
We completed our initial public offering on August 2, 2004. Prior to that, our stockholders could
not buy or sell our common stock publicly. An active public market for our common stock may not
continue to develop or be sustained. The stock market, particularly in recent years, has
experienced significant volatility particularly with respect to pharmaceutical and biotechnology
stocks. Since August 2, 2004, the high and low sales price of our common stock has varied
significantly, from a low of $8.42 to a high of
$24.31. The volatility of pharmaceutical
and biotechnology stocks often does not relate to the operating performance of the companies
represented by the stock. Our business and the market price of our common stock may be influenced
by a large variety of factors, including:
|
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the progress and results of our clinical trials; |
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announcements by us or our competitors concerning their clinical trial results,
acquisitions, strategic alliances, technological innovations and newly approved
commercial products; |
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the availability of critical materials used in developing and manufacturing our
Technosphere Insulin System or other product candidates; |
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|
|
developments concerning our patents, proprietary rights and potential infringement claims; |
|
|
|
the expense and time associated with, and the extent of our ultimate success in, securing
regulatory approvals; |
|
|
|
changes in securities analysts estimates of our financial and operating performance; |
|
|
|
sales of large blocks of our common stock, including sales by our executive officers,
directors and significant stockholders; and |
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discussion of our Technosphere Insulin System, our other product candidates, competitors
products, or our stock price by the financial and scientific press, the healthcare
community and online investor communities such as chat rooms. |
Any of these risks, as well as other factors, could cause the market price of our common stock to
decline.
If other biotechnology and biopharmaceutical companies or the securities markets in general
encounter problems, the market price of our common stock could be adversely affected.
Public companies in general and companies included on The Nasdaq National Market in particular have
experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those companies. There has been particular
volatility in the market prices of securities of biotechnology and other life sciences companies,
and the market prices of these companies have often fluctuated because of problems or successes in
a given market segment or because investor interest has shifted to other segments. These broad
market and industry factors may cause the market price of our common stock to decline, regardless
of our operating performance. We have no control over this volatility and can only focus our
efforts on our own operations, and even these may be affected due to the state of the capital
markets.
18.
In the past, following periods of large price declines in the public market price of a
companys securities, securities class action litigation has often been initiated against that
company. Litigation of this type could result in substantial costs and diversion of managements
attention and resources, which would hurt our business. Any adverse determination in litigation
could also subject us to significant liabilities.
Our Chief Executive Officer and principal stockholder can individually control our direction and
policies, and his interests may be adverse to the interests of our other stockholders. After his
death, his stock will be left to his funding foundations for distribution to various charities, and
we cannot assure you of the manner in which those entities will manage their holdings.
Mr. Mann has been our primary source of financing to date. Following the close of our private
placement on August 5, 2005, Mr. Mann beneficially owned approximately 48.7% of our outstanding
shares of capital stock. Members of Mr. Manns family beneficially owned at least an additional
1.6% of our outstanding shares of common stock, although Mr. Mann does not have voting or
investment power with respect to these shares. By virtue of his holdings, Mr. Mann can and will
continue to be able to effectively control the election of the members of our board of directors,
our management and our affairs and prevent corporate transactions such as mergers, consolidations
or the sale of all or substantially all of our assets that may be favorable from our standpoint or
that of our other stockholders or cause a transaction that we or our other stockholders may view as
unfavorable.
Subject to compliance with federal and state securities laws, Mr. Mann is free to sell the shares
of our stock he holds at any time. Upon his death, we have been advised by Mr. Mann that his shares
of our capital stock will be left to the Alfred E. Mann Medical Research Organization, or AEMMRO,
and AEM Foundation for Biomedical Engineering, or AEMFBE, not-for-profit medical research
foundations that serve as funding organizations for Mr. Manns various charities, including the
Alfred Mann Foundation, or AMF, and the Alfred Mann Institute for
Biomedical Engineering at the University of Southern
California, and that may serve as funding organizations for any other charities that he may
establish. The AEMMRO is a membership foundation consisting of six members, including Mr. Mann,
four of his children and Dr. Joseph Schulman, the director of AMF. The AEMFBE is a membership
foundation consisting of five members, including Mr. Mann and the same four of his children.
Although we understand that the members of AEMMRO and AEMFBE have been advised of Mr. Manns
objectives for these foundations, once Mr. Manns shares of our capital stock become the property
of the foundations, we cannot assure you as to how those shares will be distributed or how they
will be voted.
The future sale of our common stock could negatively affect our stock price.
As of
August 15, 2005, we had approximately 50.2 million shares
of common stock outstanding. Substantially all of these shares are available for public sale, subject in some
cases to volume and other limitations and, in the case of the shares
covered by the registration statement of which this prospectus is a
part, to compliance with prospectus delivery requirements.
If our common stockholders, including the selling stockholders identified in this prospectus, sell
substantial amounts of common stock in the public market, or the market perceives that such sales
may occur, the market price of our common stock may decline. Furthermore, if we were to include in
a company-initiated registration statement shares held by our stockholders pursuant to the exercise
of their registrations rights, the sale of those shares could impair our ability to raise needed
capital by depressing the price at which we could sell our common stock.
In addition, we will need to raise substantial additional capital in the future to fund our
operations. If we raise additional funds by issuing equity securities, the market price of our
common stock may decline and our existing stockholders may experience significant dilution.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition
of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our
stockholders to replace or remove our current management.
Our amended and restated certificate of incorporation and bylaws include anti-takeover provisions,
such as a prohibition on stockholder actions by written consent, the authority of our board of
directors to issue preferred stock without stockholder approval, and supermajority voting
requirements for specified actions. In addition, because we are incorporated in Delaware, we are
governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally
prohibits stockholders owning 15% or more of our outstanding voting stock from merging or combining
with us in certain circumstances. These provisions may delay or prevent an acquisition of us,
19.
even if the acquisition may be considered beneficial by some of our stockholders. In addition, they
may frustrate or prevent any attempts by our stockholders to replace or remove our current
management by making it more difficult for stockholders to replace members of our board of
directors, which is responsible for appointing the members of our management.
Because we do not expect to pay dividends in the foreseeable future, you must rely on stock
appreciation for any return on your investment.
We have paid no cash dividends on any of our capital stock to date, and we currently intend to
retain our future earnings, if any, to fund the development and growth of our business. As a
result, we do not expect to pay any cash dividends in the foreseeable future, and payment of cash
dividends, if any, will also depend on our financial condition, results of operations, capital
requirements and other factors and will be at the discretion of our board of directors.
Furthermore, we may in the future become subject to contractual restrictions on, or prohibitions
against, the payment of dividends. Accordingly, the success of your investment in our common stock
will likely depend entirely upon any future appreciation. There is no guarantee that our common
stock will appreciate in value after the offering or even maintain the price at which you purchased
your shares, and you may not realize a return on your investment in our common stock.
20.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus and the documents incorporated by reference herein contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the
Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act. These statements include, but are not limited to, statements about: the progress or success of
our research, development and clinical programs, the timing of the development and
commercialization of our Technosphere Insulin System, or any other products or therapies that we
may develop; our ability to market, commercialize and achieve market acceptance for our
Technosphere Insulin System, or any other products or therapies that we may develop; our ability to
protect our intellectual property and operate our business without infringing upon the intellectual
property rights of others; our estimates for future performance; and our estimates regarding
anticipated operating losses, future revenues, capital requirements and our needs for additional
financing. In some cases, you can identify forward-looking statements by terms such as
anticipates, believes, could, estimates, expects, intends, may, plans, potential,
predicts, projects, should, will, would, goal, and similar expressions intended to
identify forward-looking statements. For these statements, we claim the protection of the safe
harbors for forward-looking statements as provided in the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are only predictions based on current information and
expectations and involve a number of risks and uncertainties. The underlying information and
expectations are likely to change over time. Actual events or results may differ materially from
those projected in the forward-looking statements due to various factors, including, but not
limited to, those set forth under the caption RISK FACTORS, beginning on page 3, and elsewhere in
this prospectus and any applicable prospectus supplement. Because the factors discussed in this
prospectus or incorporated by reference could cause actual results or outcomes to differ materially
from those expressed in any forward-looking statements made by us or on our behalf, you should not
place undue reliance on any such forward-looking statements.
Any forward-looking statement speaks only as of the date on which it is made, or if no date is
stated, as of the date of this prospectus. New factors emerge from time to time, and it is not
possible for us to predict which factors will arise. In addition, we cannot assess the impact of
each factor on our business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any forward-looking statements.
You should read this prospectus, the registration statement of which this prospectus is a
part, and the documents incorporated by reference herein completely and with the understanding that
our actual future results may be materially different from what we expect. We qualify all of the
forward-looking statements in this prospectus by these cautionary statements. EXCEPT AS REQUIRED BY
LAW, WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR ANY OTHER REASON.
21.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of our common stock by the selling
stockholders. The proceeds from the sale of the common stock offered pursuant to this prospectus
are solely for the accounts of the selling stockholders.
The selling stockholders will pay any underwriting discounts and commissions and expenses
incurred by the selling stockholders for brokerage, accounting, tax or legal services or any other
expenses incurred by the selling stockholders in disposing of the shares. We will bear all other
costs, fees and expenses incurred in effecting the registration of the shares covered by this
prospectus, including, without limitation, all registration and filing fees, Nasdaq National Market
listing fees and fees and expenses of our counsel and our accountants.
A portion of the shares covered by this prospectus are issuable upon exercise of warrants to
purchase our common stock. Upon any exercise for cash of the warrants, the selling stockholders
will pay us the exercise price of the warrants. The cash exercise price of the warrants is $12.228
per share of our common stock. The warrants are also exercisable on a cashless basis. We will not
receive any cash payment from the selling stockholders upon any exercise of the warrants on a
cashless basis.
22.
SELLING STOCKHOLDERS
We issued an aggregate of 17,131,682 shares of our common stock and issued warrants to
purchase up to 3,426,340 shares of our common stock to the selling stockholders named in the
selling stockholder table below in a private placement of securities that closed on August 5, 2005.
The warrants issued to the selling stockholders are exercisable at any time in whole or in part
beginning February 2, 2006 and ending August 5, 2010 at an exercise price of $12.228 per share. The
private placement transaction was exempt from the registration requirements of the Securities Act.
We agreed with each selling stockholder to file the registration statement of which this
prospectus is a part to register for resale the shares of our common stock sold in the private
placement transaction, and the shares of our common stock underlying the warrants we issued in the
private placement transaction. Throughout this prospectus, when we refer to the selling
stockholders, we mean the persons listed in the table below, as well as the pledgees, donees,
assignees, transferees, successors and others who later hold any of the selling stockholders
interests, and when we refer to the shares of our common stock being registered on behalf of the
selling stockholders, we are referring to the shares of our common stock sold and the shares of our
common stock issuable upon the exercise of the warrants issued in the private placement
transaction, collectively, unless otherwise indicated.
The selling stockholders may sell some, all or none of their shares. We do not know how long
the selling stockholders will hold the shares before selling them. We currently have no agreements,
arrangements or understandings with the selling stockholders regarding the sale of any of the
shares other than the securities purchase agreement pursuant to which the selling stockholders
purchased their shares from us. The shares offered by this prospectus may be offered from time to
time by the selling stockholders, although the warrant shares will not be eligible to be offered
pursuant to this prospectus until the related warrants become exercisable and are exercised.
The following table sets forth the name of each selling stockholder, the number of shares
owned by each selling stockholder prior to this offering (including shares that such selling
stockholder can acquire upon exercise of the warrants issued in the private placement), the number
of shares that may be offered under this prospectus and the number of shares of our common stock to
be owned by each selling stockholder after this offering is completed, assuming that all offered
shares are sold as contemplated herein and thereafter none of the offered shares will be held by the selling
stockholders.
Except as noted in the footnotes below, none of the selling stockholders has held any position
or office with us or any of our predecessors or affiliates within the last three years or has had a
material relationship with us or any of our predecessors or affiliates within the past three years
other than as a result of the ownership of our shares or other securities.
The information in the table below is based on information provided by or on behalf of the
selling stockholders, Schedules 13D and 13G and other public documents filed with the SEC. This
information is only accurate as of the date that such information was provided to us or the SEC and
may change. Beneficial ownership is determined in accordance with the rules of the SEC, and
generally includes voting or investment power with respect to the securities. In computing the
number of shares beneficially owned by a person and the percentage ownership of that person, shares
of common stock that could be issued upon the exercise of outstanding options and warrants held by
that person that are currently exercisable or exercisable within 60 days of August 15, 2005 are
considered outstanding. These shares, however, are not considered outstanding as of August 15, 2005
when computing the percentage ownership of each other person. Although the warrants held by the
selling stockholders are not exercisable until February 2, 2006, the shares of our common stock
issuable upon the exercise of such warrants are shown as beneficially owned by the selling
stockholders included in the table below since those shares of our common stock are being offered
in this prospectus. Each selling stockholders percentage of shares owned after the offering is
based on 50,190,600 shares of our common stock outstanding as of August 15, 2005. Unless otherwise
indicated in the footnotes to this table, to our knowledge, all persons named in the table have
sole voting and investment power with respect to their shares of common stock, except to the extent
authority is shared by spouses under applicable law. The inclusion of any shares in this table does
not constitute an admission of beneficial ownership for the person named below.
The selling stockholders may have sold or transferred, in transactions exempt from the
registration requirements of the Securities Act, some or all of their shares since the date on
which the information in the table is presented. Information about the selling stockholders may
change over time.
23.
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Number of |
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Number of Shares of |
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Shares of |
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Shares of Common Stock |
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Common Stock |
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Common |
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to be Beneficially Owned |
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Beneficially Owned Prior |
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Stock Being |
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After Offering |
Name of Selling Stockholder |
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to Offering |
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Offered |
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Number |
|
Percentage |
Adage Capital Partners, L.P. (1) |
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1,292,218 |
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1,292,218 |
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Alfred E. Mann and affiliates (2) |
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26,314,392 |
|
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10,260,537 |
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16,053,855 |
|
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29.8 |
% |
Amaranth LLC (3) |
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4,870,045 |
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370,045 |
|
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4,500,000 |
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|
|
8.4 |
% |
Amaranth Global Equities Master Fund Limited (3) |
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541,116 |
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41,116 |
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500,000 |
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* |
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Atlas Master Fund, Ltd. (4) |
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352,423 |
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352,423 |
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Brookside Capital Partners Fund, L.P. (5) |
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1,527,167 |
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|
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1,527,167 |
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D3 Capital Management, LLC and affiliates (6) |
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234,949 |
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234,949 |
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Deerfield International Limited (7) |
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488,694 |
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488,694 |
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|
Deerfield Partners, L.P. (8) |
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451,102 |
|
|
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451,102 |
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|
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|
|
|
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FMR Corp. and affiliates (9) |
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3,351,225 |
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|
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2,525,698 |
|
|
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825,527 |
|
|
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1.5 |
% |
Hakan Edstrom (10) |
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330,090 |
|
|
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5,874 |
|
|
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324,216 |
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|
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* |
|
Kent Kresa (11) |
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50,100 |
|
|
|
12,600 |
|
|
|
37,500 |
|
|
|
* |
|
Kings Road Investments Ltd. (12) |
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469,898 |
|
|
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469,898 |
|
|
|
|
|
|
|
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Narragansett I, L.P. and affiliates (13) |
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939,796 |
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939,796 |
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Oracle U.S. Partners LLC (14) |
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873,465 |
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528,635 |
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344,830 |
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* |
|
Aries Domestic Fund, L.P. and affiliates (15) |
|
|
176,212 |
|
|
|
176,212 |
|
|
|
|
|
|
|
|
|
T. Rowe Price Associates, Inc. and affiliates (16) |
|
|
813,009 |
|
|
|
646,109 |
|
|
|
166,900 |
|
|
|
* |
|
Tang Capital Partners, LP (17) |
|
|
234,949 |
|
|
|
234,949 |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than one percent. |
|
(1) |
|
Comprises 1,076,848 shares of common stock and 215,370 shares of common
stock underlying a warrant, all of which shares are being offered
pursuant to this prospectus. |
|
(2) |
|
Includes the following securities held by the following selling stockholders: |
|
|
|
Alfred E. Mann Living Trust: 17,980,598 shares of common stock
(including 6,944,963 shares of common stock being offered pursuant to this
prospectus) and 1,388,993 shares of common stock underlying warrants (all being
offered pursuant to this prospectus); and |
|
|
|
|
Biomed Partners, LLC: 4,025,979 shares of common stock (including
1,605,483 shares of common stock being offered pursuant to this prospectus) and
321,098 shares of common stock underlying warrants (all being offered pursuant
to this prospectus). |
|
|
|
Also includes the following securities held by the following stockholders: |
24.
|
|
|
Alfred E. Mann: 180,729 shares of common stock issuable upon the
exercise of options within 60 days of August 15, 2005; |
|
|
|
|
Mannco LLC: 10,968 shares of common stock; and |
|
|
|
|
Biomed Partners II, LLC: 2,406,027 shares of common stock. |
|
|
The Alfred E. Mann Living Trust and Minimed Infusion, Inc. are the
managing members of each of Biomed Partners, LLC and Biomed Partners II, LLC.
Alfred E. Mann, as trustee of the Alfred E. Mann Living Trust and through his control of Mannco
LLC and Minimed Infusion, Inc., has voting and dispositive power over
the shares held by the Alfred E. Mann Living Trust, Biomed
Partners, LLC, Biomed Partners II, LLC and Mannco LLC. Alfred E. Mann is our Chief
Executive Officer and Chairman of our Board of Directors. |
|
(3) |
|
Comprises the following securities held by the following selling stockholders: |
|
|
|
Amaranth Global Equities Master Fund Limited: 534,263 shares of
common stock (including 34,263 shares of common stock being offered pursuant
to this prospectus) and 6,853 shares of common stock underlying warrants (all
being offered pursuant to this prospectus); and |
|
|
|
|
Amaranth LLC: 4,808,371 shares of common stock (including 308,371
shares of common stock being offered pursuant to this prospectus) and 61,674
shares of common stock underlying warrants (all being offered pursuant to
this prospectus). |
|
|
Amaranth Advisors L.L.C. is the trading advisor to both Amaranth Global
Equities Master Fund Limited and Amaranth LLC and has voting and investment
control over the securities held by both entities. Nicholas M. Maounis is the
managing member of Amaranth Advisors L.L.C. Each of Amaranth Securities
L.L.C. and Amaranth Global Securities Inc. is a broker-dealer registered
pursuant to Section 15(b) of the Exchange Act and is a member of the National
Association of Securities Dealers, Inc. (the NASD). Each such broker-dealer
may be deemed to be an affiliate of Amaranth Advisors L.L.C. Neither Amaranth Securities L.L.C. nor
Amaranth Global Securities Inc. is authorized by the NASD to engage in
securities offerings either as an underwriter or as a selling group
participant and neither Amaranth Securities L.L.C. nor Amaranth Global
Securities Inc. actually engages in any such activity. See Footnote 18. |
|
(4) |
|
Comprises 293,686 shares of common stock and 58,737 shares of common
stock underlying warrants, all of which shares are being offered
pursuant to this prospectus. Balyasny Asset Management and Jacob
Gottlieb share voting and investment control over the securities held
by Atlas Master Fund, Ltd. |
|
(5) |
|
Comprises 1,272,639 shares of common stock and 254,528 shares of
common stock underlying warrants, all of which shares are being
offered pursuant to this prospectus. Domenic Ferrante is the sole
managing member of Brookside Capital Management, LLC, which in turn,
is the general partner of Brookside Capital Investors, L.P., which in
turn, is the sole general partner of Brookside Capital Partners Fund,
L.P. Mr. Ferrante, Brookside Capital Management, LLC and Brookside
Capital Investors, L.P. may each be deemed to share voting or
investment control over the securities held by Brookside Capital
Partners Fund, L.P. and disclaim beneficial ownership of such
securities except to the extent of their pecuniary interests therein. |
|
(6) |
|
Comprises the following securities held by the following selling
stockholders, all of which are being offered pursuant to this
prospectus: |
|
|
|
D3 LifeScience Ltd.: 105,554 shares of common stock and
21,111 shares of common stock underlying warrants; |
|
|
|
|
D3 LifeScience Market Neutral Ltd.: 58,900 shares of common
stock and 11,780 shares of common stock underlying warrants; and |
|
|
|
|
D3 LifeScience Select Ltd.: 31,337 shares of common stock and
6,267 shares of common stock underlying warrants. |
|
|
D3 Capital Management, LLC is the investment manager of each of D3
LifeScience Ltd., D3 LifeScience Market Neutral Ltd. and D3
LifeScience Select Ltd. and has voting and investment control over the
securities held by each of the foregoing entities. Nathan Fischel, MD,
CFA is the managing member of D3 Capital Management, LLC. |
|
(7) |
|
Includes 407,245 shares of common stock and 81,449 shares of common
stock underlying warrants, all of which shares are being offered
pursuant to this prospectus. |
|
(8) |
|
Includes 375,918 shares of common stock and 75,184 shares of common
stock underlying warrants, all of which shares are being offered
pursuant to this prospectus. |
25.
(9) |
|
Comprises the following securities held by the following selling stockholders: |
|
|
|
Fidelity Contrafund (Contrafund): 2,118,528 shares of common stock
(including 1,521,689 shares of common stock being offered pursuant to this
prospectus) and 304,338 shares of common stock underlying warrants (all being
offered pursuant to this prospectus); |
|
|
|
|
Fidelity Contrafund: Fidelity Advisor New Insights Fund (New
Insights Fund): 208,006 shares of common stock (including 149,406 shares of
common stock being offered pursuant to this prospectus) and 29,881 shares of
common stock underlying warrants (all being offered pursuant to this
prospectus); and |
|
|
|
|
Variable Insurance Products Fund II: Contrafund Portfolio (Variable
Insurance Fund): 603,741 shares of common stock (including 433,653 shares
of common stock being offered pursuant to this prospectus) and 86,731 shares
of common stock underlying warrants (all being offered pursuant to this
prospectus). |
|
|
Contrafund, New Insights Fund and Variable Insurance Fund (collectively the
Funds and each individually a Fund) are each a registered investment fund
advised by Fidelity Management & Research Company (Fidelity), a wholly
owned subsidiary of FMR Corp. and an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940. Fidelity is the
beneficial owner of 3,351,225 shares of our common stock as a result of
acting as investment advisor to various investment companies registered under
Section 8 of the Investment Company Act of 1940, including each of the Funds.
Edward C. Johnson 3d, FMR Corp. through its control of Fidelity and each
Fund, each has sole power to dispose of the securities owned by each Fund.
Neither FMR Corp. nor Mr. Johnson has the sole power to vote or direct the
voting of the shares owned directly by each Fund, which power resides with
the applicable Funds Board of Trustees. Each Fund is an
affiliate of a broker-dealer. See Footnote 18. |
|
(10) |
|
Comprises: |
|
|
|
14,895 shares of common stock held by the Edstrom Family
Trust (including 4,895 shares of common stock being offered pursuant
to this prospectus) and 979 shares of common stock underlying
warrants held by the Edstrom Family Trust (all being offered pursuant
to this prospectus); |
|
|
|
|
3,228 shares of common stock held by Hakan Edstrom; and |
|
|
|
|
310,988 shares of common stock issuable upon the exercise of
options within 60 days of August 15, 2005 by Hakan Edstrom. |
|
|
Hakan Edstrom is our President and Chief Operating Officer and voting
and investment control over the securities held by the Edstrom Family
Trust. |
|
(11) |
|
Comprises: |
|
|
|
30,500 shares of common stock (including 10,500 shares of
common stock being offered pursuant to this prospectus) held by the
Kresa Family Trust and 2,100 shares of common stock underlying
warrants held by the Kresa Family Trust (all being offered pursuant
to this prospectus); and |
|
|
|
|
17,500 shares of common stock issuable upon the exercise of
options within 60 days of August 15, 2005 by Kent Kresa. |
|
|
Kent Kresa is a member of the Compensation Committee of our Board of
Directors. As trustee of the Kresa Family Trust, Mr. Kresa has
voting and investment control over the securities held by the trust. |
|
(12) |
|
Comprises 391,582 shares of common stock and 78,316 shares of common
stock underlying warrants, all of which shares are being offered
pursuant to this prospectus. Kings Road Investments Ltd. is a
wholly-owned subsidiary of Polygon Global Opportunities Master Fund.
Polygon Investment Partners LLP, Polygon Investment Partners LP and
Polygon Investments Ltd., as investment managers; Polygon Global
Opportunities Master Fund; Alexander Jackson; Reade Griffith; and
Paddy Dear share voting and investment control over the securities
held by Kings Road Investments Ltd. Alexander Jackson, Reade Griffith
and Paddy Dear control Polygon Investment Partners LLP, Polygon
Investment Partners LP and Polygon Investments Ltd. Polygon
Investment Partners LLP, Polygon Investment Partners LP and Polygon
Investments Ltd. disclaim beneficial ownership of the securities held
by Kings Road Investments Ltd. |
|
(13) |
|
Comprises the following securities held by the following selling
stockholders, all of which are being offered pursuant to this
prospectus: |
26.
|
|
|
Narragansett I, LP: 297,602 shares of common stock and
59,521 shares of common stock underlying warrants; and |
|
|
|
|
Narragansett Offshore, Ltd: 485,561 shares of common stock
and 97,112 shares of common stock underlying warrants. |
|
|
Narragansett Management, LP is the investment manager of
Narragansett I, LP and Narragansett Offshore, Ltd. and has voting and
investment control over the securities held by each of the foregoing
entities. Joseph L. Dowling, III is the managing member of the
general partner of Narragansett Management, LP. |
|
(14) |
|
Includes 785,359 shares of common stock (including 440,529 shares of
common stock being offered pursuant to this prospectus) held by
Oracle U.S. Partners, LLC and 88,106 shares of common stock
underlying warrants held by Oracle U.S. Partners, LLC (all being
offered pursuant to this prospectus). Larry N. Feinberg is the
managing member of Oracle U.S. Partners, LLC and has voting and
investment control over the securities held by Oracle U.S. Partners,
LLC. Alfred E. Mann is an investor in Oracle U.S. Partners, LLC. |
|
(15) |
|
Comprises the following securities held by the following selling
stockholders, all of which are being offered pursuant to this
prospectus: |
|
|
|
Aries Domestic Fund, L.P.: 41,850 shares of common stock and
8,370 shares of common stock underlying warrants; |
|
|
|
|
Aries Domestic Fund II, L.P.: 7,342 shares of common stock
and 1,468 shares of common stock underlying warrants; |
|
|
|
|
Aries Master Fund II: 24,229 shares of common stock and
4,846 shares of common stock underlying warrants; and |
|
|
|
|
RAQ, LLC: 73,422 shares of common stock and 14,685 shares of
common stock underlying warrants. |
|
|
Lindsay A. Rosenwald, M.D. is the sole stockholder, Chairman and
Chief Executive Officer of Paramount BioCapital Asset Management,
Inc. and managing member of RAQ, LLC. Paramount BioCapital Asset
Management, Inc. is the general partner to each of Aries Domestic
Fund, L.P. and Aries Domestic Fund II, L.P., and investment manager
of the Aries Master Fund II. Dr. Rosenwald has voting and investment
control over the securities held by Aries Domestic Fund, L.P., Aries
Domestic Fund II, L.P., Aries Master Fund II and RAQ, LLC. Dr.
Rosenwald is also Chairman, Chief Executive Officer and sole
stockholder of Paramount BioCapital, Inc., a NASD member
broker-dealer. See Footnote 18. |
|
(16) |
|
Comprises the following securities held by the following selling stockholders: |
|
|
|
John Hancock Trust Health Sciences Trust: 37,700 shares of common
stock (including 21,000 shares of common stock being offered pursuant to this
prospectus) and 4,200 shares of common stock underlying warrants (all being
offered pursuant to this prospectus); |
|
|
|
|
Raytheon Company Combined DB/DC Master Trust Health Sciences:
8,800 shares of common stock (including 4,900 shares of common stock being
offered pursuant to this prospectus) and 980 shares of common stock
underlying warrants (all being offered pursuant to this prospectus); |
|
|
|
|
T. Rowe Price New Horizons Fund, Inc.: 314,000 shares of common
stock and 62,800 shares of common stock underlying warrants (all being
offered pursuant to this prospectus); |
|
|
|
|
T. Rowe Price Health Sciences Fund, Inc.: 230,000 shares of common
stock (including 130,000 shares of common stock being offered pursuant to
this prospectus) and 26,000 shares of common stock underlying warrants (all
being offered pursuant to this prospectus); |
|
|
|
|
T. Rowe Price Health Sciences Portfolio, Inc.: 1,600 shares of
common stock (including 900 shares of common stock being offered pursuant to
this prospectus) and 180 shares of common stock underlying warrants (all
being offered pursuant to this prospectus); |
|
|
|
|
TA IDEX T. Rowe Price Health Sciences: 55,124 shares of common
stock (including 30,624 shares of common stock being offered pursuant to this
prospectus) and 6,125 shares of common stock underlying warrants (all being
offered pursuant to this prospectus); |
|
|
|
|
TD Mutual Funds TD Health Sciences Fund: 30,800 shares of common
stock (including 22,000 shares of common stock being offered pursuant to this
prospectus) and 4,400 shares of common stock underlying warrants (all being
offered pursuant to this prospectus); and |
|
|
|
|
VALIC Company I Health Sciences Fund : 27,300 shares of common
stock (including 15,000 shares of common stock being offered pursuant to this
prospectus) and 3,000 shares of common stock underlying warrants (all being
offered pursuant to this prospectus). |
T. |
|
Rowe Price Associates, Inc. serves as investment advisor with power |
27.
|
|
to
direct investments and/or sole power to vote the shares owned by the
foregoing funds, as well as shares owned by certain other individual and
institutional investors. For purposes of the reporting requirements of the
Exchange Act, T. Rowe Price Associates, Inc. may be deemed to be the
beneficial owner of all of the shares set forth next to name on the table
above; however, T. Rowe Price Associates, Inc. expressly disclaims all
beneficial ownership of such securities. T. Rowe Price Associates, Inc. is a
wholly owned subsidiary of T. Rowe Price Group, Inc., which is a publicly
traded financial services holding company. |
|
(17) |
|
Comprises 195,791 shares of common stock and 39,158 shares of common
stock underlying warrants, all of which shares are being offered
pursuant to this prospectus. Kevin C. Tang, as managing member, has
voting and investment control over the securities held by Tang
Capital Partners, LP. |
|
(18) |
|
Selling stockholders who are registered broker-dealers are deemed to
be underwriters within the meaning of the Securities Act. In
addition, selling stockholders who are affiliates of registered
broker-dealers may be deemed to be underwriters within the meaning
of the Securities Act if such selling stockholder (a) did not acquire
its shares being offered in the ordinary course of business or (b)
had any agreement or understanding, directly or indirectly, with any
person to distribute the securities. To our knowledge, no selling
stockholder who is a registered broker-dealer or an affiliate of a
registered broker-dealer received any securities as underwriting
compensation. Each selling stockholder purchased the shares of common
stock and the warrants in the private placement in the ordinary
course of such stockholders business and, at the time of the
purchase of such securities did not have any agreements or
understandings, directly or indirectly, with any person to distribute
the shares or warrants. |
28.
PLAN OF DISTRIBUTION
The selling stockholders, which as used herein includes donees, pledgees, transferees or other
successors-in-interest selling shares of common stock or interests in shares of common stock
received after the date of this prospectus from a selling stockholder as a gift, pledge,
partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock or interests in shares of common stock on any
stock exchange, automated interdealer quotation system, market or trading facility on which the
shares are traded, in the over-the-counter market, or in private transactions. These dispositions
may be at fixed prices that may be changed, at market prices prevailing at the time of sale, at
prices related to prevailing market prices, at varying prices determined at the time of sale or at
prices otherwise negotiated. The selling stockholders will act independently of us in making
decisions with respect to the timing, manner and size of each sale. The selling stockholders may
sell the securities using one or more, or a combination of the following methods:
|
|
|
on The Nasdaq National Market (or any other exchange on which the shares may be listed); |
|
|
|
|
on the over-the-counter market; |
|
|
|
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
|
|
|
block trades in which the broker-dealer will attempt to
sell the shares as agent, but may position and resell a
portion of the block as principal to facilitate the
transaction; |
|
|
|
|
purchases by a broker-dealer as principal and resale by the broker or dealer for its account; |
|
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|
|
an exchange distribution in accordance with the rules of the applicable exchange; |
|
|
|
|
privately negotiated transactions; |
|
|
|
|
short sales; |
|
|
|
|
through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise; |
|
|
|
|
through the distribution of the common stock by any selling
stockholders to its partners, members or stockholders; |
|
|
|
|
through one or more underwritten offerings on a firm commitment or best efforts basis; |
|
|
|
|
broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share; |
|
|
|
|
a combination of any such methods of sale; and |
|
|
|
|
any other method permitted pursuant to applicable law |
In addition, any shares that qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than pursuant to this prospectus.
The selling stockholders may, from time to time, pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock,
from time to time, under this prospectus, or under a supplement to this prospectus under Rule
424(b) or under any applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors-in-interest as selling
stockholders under this prospectus. The selling stockholders also may transfer the shares of common
stock in other circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of 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 of our common stock or interests therein, the
selling stockholders, other than entities affiliated with Alfred E. Mann, may enter into hedging transactions with broker-dealers or other financial
institutions, which institutions may, in turn, engage in short sales of shares of our common stock
in the course of hedging the positions they assume with the selling stockholders. The selling
stockholders may also sell the shares of our common stock
29.
short and redeliver these shares to close out the selling stockholders short positions, or loan or
pledge shares of our common stock to broker-dealers that may in turn sell these securities. The
selling stockholders may also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities which require the
delivery to such broker-dealer or other financial institution of shares of our common stock 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 aggregate proceeds to the selling stockholders from the sale of the shares of common stock
offered by them will be the purchase price of the shares less discounts or commissions, if any.
Each of the selling stockholders reserves the right to accept and, together with their agents from
time to time, to reject, in whole or in part, any proposed purchase of common stock to be made
directly or through agents. We will not receive any of the proceeds from this offering. Upon any
exercise of the warrants by payment of cash, however, we will receive the exercise price of the
warrants.
The selling stockholders may engage brokers and dealers, and any brokers or dealers may
arrange for other brokers or dealers to participate in effecting sales of the securities. These
brokers, dealers or underwriters may act as principals, or as an agent of a selling securityholder.
Broker-dealers may agree with a selling stockholder to sell a specified number of the securities at
a stipulated price per security. If the broker-dealer is unable to sell securities acting as agent
for a selling stockholder, it may purchase as principal any unsold securities at the stipulated
price. Broker-dealers who acquire securities as principals may thereafter resell the securities
from time to time in transactions in any stock exchange or automated interdealer quotation system
on which the securities are then listed, at prices and on terms then prevailing at the time of
sale, at prices related to the then-current market price or in negotiated transactions.
Broker-dealers may use block transactions and sales to and through broker-dealers, including
transactions of the nature described above.
To the extent required under the Securities Act of 1933, the aggregate amount of selling
stockholders securities being offered and the terms of the offering, the names of any agents,
brokers, dealers or underwriters and any applicable commission with respect to a particular offer
will be set forth in an accompanying prospectus supplement. Any underwriters, dealers, brokers or
agents participating in the distribution of the securities may receive compensation in the form of
underwriting discounts, concessions, commissions or fees from a selling stockholder and/or
purchasers of selling stockholders securities of securities, for whom they may act (which
compensation as to a particular broker-dealer might be in excess of customary commissions).
The selling stockholders and any underwriters, broker-dealers or agents that participate in
the sale of the shares of common stock or interests therein may be underwriters within the
meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit
they earn on any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling stockholders who are underwriters within the meaning of Section 2(11) of
the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.
The selling stockholders 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.
We will bear substantially all of the costs, expenses and fees in connection with the
registration of the shares of common stock, other than any commissions, discounts or other fees
payable to broker-dealers in connection with any sale of shares, which will be borne by the selling
stockholder selling such shares of common stock. We have agreed to indemnify the selling
stockholders against certain liabilities, including liabilities under the Securities Act and state
securities laws, relating to the registration of the shares offered by this prospectus.
In order to comply with the securities laws of some states, if applicable, the shares of
common stock may be sold in these jurisdictions only through registered or licensed brokers or
dealers. In addition, in some states the shares may not be sold unless it has been registered or
qualified for sale or an exemption from registration or qualification requirements is available and
is complied with.
We have advised the selling stockholders that the anti-manipulation rules of Regulation M
under the Exchange Act may apply to sales of shares of our common stock in the market and to the
activities of the selling stockholders. These rules may limit the timing of purchases and sales of
the shares by such selling stockholders.
We will make copies of this prospectus (as it may be supplemented or amended from time to
time) available to the selling stockholders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act.
30.
We have agreed with each selling stockholder to keep the registration statement of which this
prospectus constitutes a part effective with respect to its shares of our common stock until the
earlier of (1) August 5, 2007 and
(2) the date on which all shares purchased from us, or acquirable upon exercise of warrants
purchased from us, during any 90 day period by such selling stockholder in the private placement
may be sold pursuant to Rule 144 of the Securities Act.
LEGAL MATTERS
Cooley Godward LLP, San Diego, California, has given its opinion to us as to certain legal
matters relating to the validity of the shares of our common stock offered by the selling
stockholders in this prospectus
EXPERTS
The financial statements as of December 31, 2004 and 2003 and for each of the three years
ending in the period ended December 31, 2004 and for the period from February 14, 1991 (date of
inception) to December 31, 2004, incorporated in this prospectus by reference from the Companys
Annual Report on Form 10-K for the year ended December 31, 2004 have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
31.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and we file annual, quarterly and current reports, proxy statements
and other information with the SEC. We have filed with the SEC a registration statement under the
Securities Act with respect to the common stock offered hereby. This prospectus, which constitutes
a part of the registration statement, does not contain all of the information set forth in the
registration statement or the exhibits and schedules which are part of the registration statement.
For further information with respect to us and the common stock offered by this prospectus by the
selling stockholders, we refer you to the registration statement and the exhibits and schedules
filed as part of the registration statement. You may read and copy any document we file at the
SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our
SEC filings are also available to the public from the SECs website at http://www.sec.gov. We
maintain a website at www.mannkindcorp.com.
The SEC allows us to incorporate by reference the information we file with it, which
means that we can disclose important information to you by referring to those documents. The
information incorporated by reference is an important part of this prospectus, and information that
we file later with the SEC will automatically update and supersede this information. We incorporate
by reference the following documents we filed with the SEC pursuant to Section 13 of the Exchange
Act:
|
|
|
Annual Report on Form 10-K for the fiscal year
ended December 31, 2004 (including information
specifically incorporated by reference into our Form
10-K from our Proxy Statement for our 2005 Annual
Meeting of Stockholders); |
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|
Quarterly Reports on Form 10-Q for the quarters ended June 30, 2005 and March 31, 2005; |
|
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|
Current Reports on Form 8-K filed on February 23,
2005, March 21, 2005, June 8, 2005, June 23, 2005,
August 5, 2005, and August 18, 2005; |
|
|
|
|
Description of our common stock contained in our
registration statement on Form 8-A dated July 23, 2004;
and |
|
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|
|
All documents subsequently filed by us with the
SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act prior to the termination of this
offering. |
You may access our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, proxy statement, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at the SECs website or
our website as soon as reasonably practicable after such material is electronically filed with, or
furnished to, the SEC. The reference to our website does not constitute incorporation by reference
of the information contained in our website. We do not consider information contained on, or that
can be accessed through, our website to be part of this prospectus.
You may request a copy of our SEC filings at no cost, by writing or telephoning us at the
following address:
Investor Relations
MannKind Corporation
28903 North Avenue Paine
Valencia, CA 91355
(661) 775-5300
32.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various costs and expenses, payable by us in connection
with the offering of common stock being registered. All the amounts shown are estimates except for
the SEC registration fee.
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Amount to |
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Be Paid |
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Registration fee |
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$ |
29,956 |
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Legal fees and expenses |
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30,000 |
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Accounting fees and expenses |
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40,000 |
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Printing and engraving expenses |
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5,500 |
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Miscellaneous |
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4,544 |
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Total |
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$ |
110,000 |
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Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, or DGCL, generally provides that a
Delaware corporation may indemnify any person who is, 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 such corporation), by
reason of the fact that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as an officer, director,
employee or agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or proceeding, provided
that such person acted in good faith and in a manner he or she reasonably believed to be in or not
opposed to the corporations best interests and, with respect to any criminal action or proceeding,
had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may
also indemnify any person who is, 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 by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the corporations best interests, except that no indemnification is permitted
without judicial approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the expenses which such
officer or director has actually and reasonably incurred. The registrants amended and restated
certificate of incorporation and amended and restated bylaws provide for the indemnification of
directors and officers of the registrant to the fullest extent permitted under the DGCL.
Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be personally liable to the corporation
or its stockholders for monetary damages for breach of fiduciary duties as a director, except for
liability:
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for any transaction from which the director derives an improper personal benefit; |
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for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; |
33.
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for improper payment of dividends or redemptions of shares; or |
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for any breach of a directors duty of loyalty to the corporation or its stockholders. |
The registrants amended and restated certificate of incorporation and amended and restated
bylaws include such a provision. Expenses incurred by any officer or director in defending any such
action, suit or proceeding in advance of its final disposition shall be paid by the registrant upon
delivery to the registrant of an undertaking, by or on behalf of such director or officer, to repay
all amounts so advanced if it shall ultimately be determined that such director or officer is not
entitled to be indemnified by the registrant.
As permitted by Delaware law, the registrant has entered into indemnity agreements with each
of its directors and executive officers that require the Registrant to indemnify such persons
against any and all expenses (including attorneys fees), witness fees, damages, judgments, fines,
settlements and other amounts incurred (including expenses of a derivative action) in connection
with any action, suit or proceeding, whether actual or threatened, to which any such person may be
made a party by reason of the fact that such person is or was a director, an officer or an employee
of the registrant or any of its affiliated enterprises, provided that such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to the best interests
of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The indemnification agreements also set forth certain procedures
that will apply in the event of a claim for indemnification thereunder.
Item 16. Exhibits.
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Exhibit |
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Number |
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Description |
4.1
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Form of common stock certificate of registrant (incorporated by reference to Exhibit 4.1 to
Registration Statement No. 333-115020). |
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4.2
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Form of Warrant to Purchase Common Stock issued to purchasers in private placement on August 5,
2005 (incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed August 5, 2005). |
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5.1
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Opinion of Cooley Godward LLP (previously filed). |
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23.1
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Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. |
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23.2
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Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this Registration Statement on
Form S-3 (previously filed). |
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24.1
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Power of Attorney (previously filed). |
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability under the Securities Act of 1933, each filing
of the registrants annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plans annual
report pursuant to section 15(d) of the Securities
34.
Exchange Act of 1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
35.
SIGNATURES
Pursuant to the
requirements the Securities Act of 1933, as amended, the registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
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MANNKIND CORPORATION |
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By:
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/s/ Alfred E. Mann |
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Alfred E. Mann |
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Date: September 16, 2005
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Chief Executive Officer and Chairman |
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POWER OF ATTORNEY
Pursuant to
the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration
Statement has been signed below by the following persons in the capacities and on the dates
indicated.
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Signature |
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Title |
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Date |
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/s/ Alfred E. Mann
Alfred E. Mann
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Chief Executive Officer and Chairman of the
Board of Directors (Principal Executive
Officer)
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September 16, 2005 |
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President, Chief Operating Officer and Director
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September 16, 2005 |
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Corporate Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
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September 16, 2005 |
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*
Kathleen Connell, Ph.D.
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Director
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September 16, 2005 |
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Director
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September 16, 2005 |
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*
Llew Keltner M.D., Ph.D.
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Director
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September 16, 2005 |
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Director
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September 16, 2005 |
36.
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Signature |
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Title |
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Date |
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Director
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September 16, 2005 |
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Director
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September 16, 2005 |
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Director
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September 16, 2005 |
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*By: |
/s/ David Thomson
David Thomson
Attorney-in-Fact
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37.
EXHIBIT INDEX
|
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Exhibit |
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|
Number |
|
Description |
4.1
|
|
Form of common stock certificate of registrant (incorporated by reference to Exhibit 4.1 to
Registration Statement No. 333-115020). |
|
|
|
4.2
|
|
Form of Warrant to Purchase Common Stock issued to purchasers in private placement on August 5,
2005 (incorporated by reference to Exhibit 99.1 to Current Report on Form 8-K filed August 5, 2005). |
|
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5.1
|
|
Opinion of Cooley Godward LLP (previously filed). |
|
|
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23.1
|
|
Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. |
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23.2
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Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this Registration Statement on
Form S-3 (previously filed). |
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24.1
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Power of Attorney (previously filed). |
38.