Filed pursuant to Rule 424(b)(5)
Registration No. 333-119928
PRELIMINARY PROSPECTUS SUPPLEMENT SUBJECT TO COMPLETION DATED JANUARY 19, 2005
--------------------------------------------------------------------------------
(TO PROSPECTUS DATED JANUARY 5, 2005)
7,000,000 SHARES
[Bioenvision Logo]
COMMON STOCK
Bioenvision, Inc. is offering all of the 7,000,000 shares of its common
stock offered by this prospectus supplement.
Our common stock is included for quotation on the NASDAQ National Market
under the symbol "BIVN." On January 13, 2005, the last reported sales price of
shares of our common stock on the NASDAQ National Market was $8.00 per share.
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS AND THOSE RISKS DISCUSSED
BEGINNING ON PAGE S-8 OF THIS PROSPECTUS SUPPLEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PER SHARE TOTAL
----------- -----------
Public offering price ............................. $ $
Underwriting discounts and commissions ............ $ $
Proceeds, before expenses, to us .................. $ $
The underwriters may also purchase up to an additional 1,050,000 shares of
our common stock at the public offering price, less underwriting discounts and
commissions payable by us, to cover over-allotments, if any, within 30 days
from the date of this prospectus supplement. If the underwriters exercise this
option in full, the total underwriting discounts and commissions will be
$ , and the total proceeds, before expenses, to us will be $ .
The underwriters are offering our common stock as set forth under
"Underwriting." Delivery of the shares will be made on or about , 2005.
JPMORGAN UBS INVESTMENT BANK
CIBC WORLD MARKETS FRIEDMAN BILLINGS RAMSEY
, 2005
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND
MAY BE CHANGED. THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES, AND WE
ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE
THE OFFER OR SALE IS NOT PERMITTED.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
About this Prospectus Supplement ........................................ S-ii
Prospectus Supplement Summary ........................................... S-1
The Offering ............................................................ S-6
Summary Financial Data .................................................. S-7
Risk Factors ............................................................ S-8
Forward-Looking Statements .............................................. S-11
Use of Proceeds ......................................................... S-12
Price Range of Common Stock and Dividend Policy ......................... S-13
Capitalization .......................................................... S-14
U.S. Federal Tax Considerations to Non-U.S. Holders ..................... S-15
Underwriting ............................................................ S-17
Legal Matters ........................................................... S-20
Experts ................................................................. S-20
Where You Can Find More Information ..................................... S-20
Incorporation by Reference .............................................. S-20
PROSPECTUS
About this Prospectus ................................................... 1
Bioenvision, Inc. ....................................................... 1
Risk Factors ............................................................ 3
Forward-Looking Statements .............................................. 14
Use of Proceeds ......................................................... 15
Description of Capital Stock ............................................ 15
Plan of Distribution .................................................... 16
Legal Matters ........................................................... 18
Experts ................................................................. 19
Where You Can Find More Information ..................................... 19
Incorporation by Reference .............................................. 19
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities............................................................ 20
S-i
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus supplement,
which describes the terms of this offering of common stock and also adds to
and updates information contained in the accompanying prospectus and the
documents incorporated by reference. The second part is the accompanying
prospectus, which gives more general information, some of which may not apply
to this offering of common stock. To the extent the information contained in
this prospectus supplement differs or varies from the information contained in
the accompanying prospectus or any document incorporated by reference, the
information in this prospectus supplement shall control.
In this prospectus supplement and the accompanying prospectus, references to
"Bioenvision," "we," "us," "our" and "the Company" refer to Bioenvision, Inc.
and Bioenvision Limited, our wholly-owned subsidiary.
"Modrenal," "Velostan" and "Virostat" are our proprietary marks. All other
product names, trademarks and trade names referred to in this prospectus
supplement and the accompanying prospectus are the property of their
respective owners.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN, OR INCORPORATED BY
REFERENCE INTO, THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO
SELL OR SOLICITATION OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY
CIRCUMSTANCES UNDER WHICH THE OFFER OR SOLICITATION IS UNLAWFUL. YOU SHOULD
NOT ASSUME THAT THE INFORMATION WE HAVE INCLUDED IN THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE
OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR THAT ANY
INFORMATION WE HAVE INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE OF THE DOCUMENT INCORPORATED BY REFERENCE REGARDLESS OF THE TIME
OF DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR OF ANY SHARES OF OUR COMMON
STOCK.
S-ii
PROSPECTUS SUPPLEMENT SUMMARY
The following summary highlights selected information contained elsewhere or
incorporated by reference into this prospectus supplement and the accompanying
prospectus. This summary does not contain all the information that you should
consider before investing in our common stock. You should read this entire
prospectus supplement and the accompanying prospectus carefully, including the
risk factors and financial statements included or incorporated by reference
herein, before making an investment decision.
OUR COMPANY
We are a product-focused biopharmaceutical company with two approved cancer
therapeutics. The FDA recently approved our lead cancer product, clofarabine,
for the treatment of pediatric acute lymphoblastic leukemia, or ALL. We
believe clofarabine is the first new medicine initially approved in the United
States for children with leukemia in more than a decade. Clofarabine has
received Orphan Drug designation in the U.S. and the European Union. Genzyme
Corporation, our co-development partner, currently holds marketing rights in
the U.S. and Canada for clofarabine for all cancer indications and controls
U.S. development of clofarabine in these indications. Genzyme is marketing
clofarabine under the brand name Clolar in the U.S. In Europe, we have filed
for approval of clofarabine in pediatric ALL and acute myelogenous leukemia,
or AML, with the European Medicines Evaluation Agency, or EMEA. If approved,
we anticipate commencing sales in Europe during the second half of calendar
2005 through a dedicated European sales force.
We are selling our second product, Modrenal, in the United Kingdom, through
our sales force of eight sales specialists. Modrenal is approved in the U.K.
for the treatment of post-menopausal advanced breast cancer following relapse
to initial hormone therapy, and we have initiated the filing process for
mutual recognition in the E.U. on a country-by-country basis.
If we receive additional European approvals for our products, we intend to
expand our sales force by adding up to six to 10 sales specialists in each of
five other key regions within the E.U. which include the countries of France,
Germany, Italy, Spain, Portugal, Netherlands, Austria, Belgium, Denmark and
Sweden. In addition to clofarabine and Modrenal, we are developing Velostan
for bladder cancer and Virostat for Hepatitis C.
PRODUCTS AND PIPELINE
CANDIDATE INDICATION STATUS U.S./CANADA RIGHTS EX-U.S./CANADA RIGHTS
--------------------------------------------------------------------------------------------------------------------------------
Clofarabine Relapsed or Marketed in U.S. Genzyme Bioenvision
(Clolar) Refractory Acute (pediatric); Filed in E.U.
Lymphoblastic (pediatric)
Leukemia
Acute Myelogenous Filed in E.U. (pediatric); Genzyme Bioenvision
Leukemia Phase II in E.U. (adult)
Refractory Chronic Phase II in U.S. (adult) Genzyme Bioenvision
Lymphocytic Leukemia
Solid Tumors Phase I in U.S. (Intravenous) Genzyme Bioenvision
Solid Tumors Phase I in U.S. (Oral) Genzyme Bioenvision
Non-Cancer Developmental Bioenvision Bioenvision
--------------------------------------------------------------------------------------------------------------------------------
Modrenal Breast Cancer Marketed in U.K.; Bioenvision Bioenvision
Phase IV in U.K.;
Phase II in E.U.
Prostate Cancer Phase II in U.S. Bioenvision Bioenvision
--------------------------------------------------------------------------------------------------------------------------------
Velostan Bladder Cancer IRB approval pending (1) Bioenvision Bioenvision
--------------------------------------------------------------------------------------------------------------------------------
Virostat Hepatitis C Investigator Bioenvision Bioenvision
Sponsored Phase II in
Europe and Middle East (2)
--------------------------------------------------------------------------------------------------------------------------------
---------------
(1) An internationally recognized cancer center in the U.K. has agreed to
conduct a Phase I/II trial of Velostan in cancer patients. Ethics Committee
Independent Review Board (IRB) approval is pending.
(2) This trial is a pilot study and is not a pivotal regulatory study.
S-1
OUR PRODUCTS
CLOFARABINE (CLOLAR)
On December 28, 2004, clofarabine was approved by the FDA after a "fast
track" review for the treatment of pediatric patients, ages one to 21, with
relapsed or refractory ALL after at least two prior regimens. Genzyme
currently maintains rights to market the drug for all cancer indications in
the U.S. and Canada and we will receive a royalty on these sales. Genzyme is
marketing clofarabine under the brand name Clolar. We also submitted a
Marketing Authorization Application, or MAA, the European equivalent of a U.S.
new drug application, or NDA, with the EMEA in July 2004 for European approval
of clofarabine in relapsed or refractory pediatric acute leukemia. We expect
an opinion from the EMEA in mid-2005. Clofarabine received Orphan Drug
designation in the U.S. and in Europe, which provides ten years of marketing
exclusivity in Europe and seven years of marketing exclusivity in the U.S.
Further, in August 2004, the FDA granted a six-month extension of the
marketing exclusivity for clofarabine in pediatric ALL under the federal Best
Pharmaceuticals for Children Act.
Pediatric leukemia is the most prevalent form of cancer among children up to
age 19 in the U.S. It is estimated that approximately 3,400 children were
diagnosed with leukemias in the U.S. in 2004, with ALL accounting for over 75%
of the incidence rate. Although survival rates for childhood leukemia have
improved significantly since the early 1970's, approximately 20% of pediatric
patients with ALL and 60% of pediatric patients with AML do not achieve long-
term survival and we believe there is a medical need for new agents to treat
this population of patients. Clofarabine is approved for the treatment of
pediatric patients, ages one to 21, with relapsed or refractory ALL after at
least two prior regimens. The adult leukemia market represents a potentially
significantly larger commercial opportunity with over 11,500 patients with AML
and over 8,000 patients with chronic lymphocytic leukemia, or CLL, diagnosed
each year within the U.S. Based on population and incidence rates data, we
believe that the E.U. patient population with pediatric leukemias and adult
AML and CLL approximates that of the U.S.
Clofarabine is a purine nucleoside analog, which is a small molecule, that
we are developing with Genzyme, our co-development partner, for the treatment
of acute and chronic leukemias, lymphomas and solid tumors. Clofarabine
attacks cancer cells by damaging DNA in cancer cells, preventing DNA repair by
damaged cancer cells, damaging the cancer cell's important control structures,
and initiating the process of programmed cell death, or apoptosis, in cancer
cells. Clofarabine appears to combine many of the favorable properties of the
two most commonly used purine nucleoside analog drugs, fludarabine and
cladribine, but appears to have greater potency at damaging the DNA of
leukemia cells and a broader range of clinical activity.
In the U.S., pivotal Phase II clinical trials were conducted for the
treatment of relapsed or refractory acute leukemia in children and an NDA was
filed by Genzyme with the FDA in March 2004, based upon the interim results of
70 patients enrolled in these two trials. In August of 2004, clinical data on
an additional cohort of 14 patients were submitted to the FDA and of the
aggregate ALL group of 49 patients, a 31% overall response rate was achieved,
and of the aggregate AML group of 35 patients, a 26% overall response rate was
achieved.
In Europe, we facilitated an investigator sponsored trial, or an IST, of
clofarabine as first line therapy for older adult patients with AML who were
unsuitable for intensive chemotherapy. The IST was closed to recruitment in
August 2004 because a 67% overall response rate was achieved. This response
rate was more than three times greater than the expected response rate under
the current standard of care for this patient population and the investigator
determined that these positive results warranted accelerated initiation of the
pivotal Phase II regulatory study of clofarabine as a first-line treatment for
older adult patients newly diagnosed with AML. We expect to complete the Phase
II trial in mid-2005 and anticipate that it will form the basis for an E.U.
regulatory submission for approval in this indication.
On December 1, 2004 the FDA's Oncologic Drug Advisory Committee, or ODAC,
convened to determine if clinical data from Phase II trials in relapsed and
refractory pediatric ALL and AML
S-2
demonstrated a durable clinical response that would predicate a clinical
benefit in future clinical administration. The panel voted in favor of the
approval of clofarabine for pediatric ALL under its accelerated approval
pathway and voted against immediate use in pediatric AML, requesting
additional information. In connection with the approval that was granted by
the FDA, Genzyme is required to conduct further control studies of clofarabine
to verify and describe its clinical benefit.
Clofarabine is currently being evaluated in an IST Phase II clinical trial
for refractory CLL in the U.S. In addition, in 2005 we intend to investigate
clofarabine in European Phase II clinical trials for CLL and indolent
lymphoma.
In pre-clinical studies, clofarabine has shown anti-tumor activity against
several human cancers, including cancers of the lung, colon, kidney, breast,
pancreas and prostate, as well as its action against leukemia cells. The
initial data from the Phase I clinical trials indicate activity for
clofarabine in certain solid tumor types. We believe this level of activity
against solid tumors distinguishes clofarabine from other purine nucleoside
analogs. We intend to develop clofarabine as a potential drug for the
treatment of certain solid tumors, such as colon, pancreatic, lung, breast and
prostate cancer. Currently, we anticipate the initial Phase I clinical trials
for clofarabine, using both the oral and intravenous formulations, in solid
tumors will be completed by end of the first calendar quarter of 2005.
Pursuant to the terms of our co-development agreement with Genzyme, the
successor-in-interest to ILEX Oncology, Inc., both parties are required to
share promptly all information, including clinical data, generated under the
co-development program and Genzyme is obligated to pay all of the U.S. and
Canadian research and development costs and 50% of all approved ex-U.S. and
Canada research and development costs (except for Japan and Southeast Asia).
If additional resources are required above the agreed upon costs, we may elect
to pay these additional costs and certain of these payments will be credited
against future royalty payments to Genzyme at the rate of $1.50 for every
$1.00 of additional expenditures. Under the co-development agreement with
Genzyme, we receive royalties on Genzyme's annual net sales on a sliding scale
based on the level of annual net sales. Similarly, we pay a royalty to Genzyme
and Southern Research Institute, the inventor of clofarabine, on our European
annual net sales.
Pursuant to the terms of our co-development agreement with Southern Research
Institute, we have the exclusive license to market and distribute clofarabine
throughout the world for all human applications except for U.S. and Canadian
cancer indications and except for any indications in Japan and Southeast Asia.
Our exclusive license expires upon the last to expire of the patents used or
useful in connection with the development and marketing of clofarabine, which
we expect to expire in 2021. In addition, we hold an exclusive option from
Southern Research Institute to market and distribute clofarabine in Japan and
Southeast Asia for all human applications. We intend to convert the option to
a license upon sourcing an appropriate co-marketing partner to develop these
rights in Japan and Southeast Asia.
MODRENAL
We currently market Modrenal (trilostane) in the U.K. for the treatment of
post-menopausal advanced breast cancer following relapse to initial hormone
therapy. We have a team of eight sales specialists and two marketing
executives selling and marketing Modrenal in the U.K.
Modrenal's licensed indication enables us to promote Modrenal for use
immediately after relapse to initial hormone therapy such as tamoxifen or one
of a class of drugs known as aromatase inhibitors. However, we are initially
positioning Modrenal as a third or fourth line treatment option in post-
menopausal advanced breast cancer. In the five largest E.U. countries (France,
Germany, Italy, Spain and the U.K.), we believe approximately 520,000 women
are currently living with post-menopausal advanced breast cancer of which over
a third require third or fourth line agents following prior treatment failure.
Modrenal has been extensively studied in clinical trials in the U.S., Europe
and Australia, and an analysis, known as a meta-analysis, of a series of these
clinical studies, that included 714 patients with post-
S-3
menopausal advanced breast cancer who received Modrenal has been conducted.
Overall, a clinical benefit rate of 35% was achieved in patients with both
hormone-sensitive and hormone-insensitive breast cancers. Generally, a
clinical benefit is achieved when a patient's disease disappears, is decreased
by greater than fifty percent or is stabilized for at least six months. In a
sub-set analysis of these clinical trial data, a clinical benefit rate of 46%
was achieved for 351 patients with hormone-sensitive breast cancer who had
responded to one or more prior hormonal therapies and were given Modrenal upon
relapse of the cancer. In one of the studies which was conducted in Australia,
a clinical benefit rate of 55% was achieved for 64 patients who received
Modrenal having previously responded to tamoxifen and subsequently relapsed.
We believe these data compare favorably to currently marketed aromatase
inhibitors and other agents given as second line or subsequent therapies.
Furthermore, Modrenal has an acceptable side-effect profile. On the basis of
these data, Modrenal was granted a product license in the U.K. for the
treatment of post-menopausal advanced breast cancer following relapse to
initial hormone therapy.
We began marketing Modrenal in May 2003 in the U.K. for the treatment of
post-menopausal advanced breast cancer following relapse to initial hormone
therapy. We also intend to seek regulatory approval for Modrenal in the U.S.
as a therapy for hormone-sensitive breast cancers and hormone independent
prostate cancers, but this strategy is dependent upon the results of the
ongoing clinical trials and the resource capability of the Company. Our
ongoing clinical trials in breast cancer target patients that have hormone-
sensitive cancers and have become refractory to prior hormone treatments, such
as tamoxifen or any of the aromatase inhibitors. In addition, there is an
ongoing Phase II clinical trial of Modrenal in the U.S. that is focused on
patients who have androgen independent prostate cancer and have a rising
prostate specific antigen, or PSA, level.
In the first calendar quarter of 2005, we intend to commence in the U.K. a
Phase IV study in post-menopausal advanced breast cancer, a Phase II study in
pre-menopausal breast cancer and a Phase II study in neo-adjuvent, pre-
operative breast cancer. In Europe, we have initiated the filing process for
mutual recognition for approval of Modrenal on a country-by-country basis.
Each such approval, if granted, would be based upon Modrenal's approval in the
U.K. for post-menopausal advanced breast cancer following relapse to initial
hormone therapy. The Company anticipates such approvals would be granted, on a
country-by-country basis, within nine to 12 months following each such filing,
but grant of any such approval is entirely within the control of the
individual regulatory authorities.
We have the exclusive right to market and distribute Modrenal throughout the
world for all human applications, except for South Africa and Japan where the
drug is marketed for the treatment of low-renin hypertension. Our exclusive
license expires upon the last to expire of the patents used or useful in
connection with the marketing of Modrenal. Given that we have new patent
applications filed, which are subject to issuance, we expect the last of our
underlying patents to expire in 2020.
OTHER PRODUCTS AND TECHNOLOGIES
VELOSTAN
Velostan is a cytostatic drug we are investigating in Europe for bladder
cancer. Velostan is the first compound in a group of chemically related
compounds that are believed to work by blocking cell division and reversing
the malignant process in the cancer cell. We believe the optical isomer we
have developed is more active and less toxic than its parent compound. We
expect that our planned Phase I/II trial will commence in the first calendar
quarter of 2005 and will be conducted with Velostan in patients with
urological cancers.
VIROSTAT
Virostat is currently used in several European countries to inactivate
pathogens, notably certain viruses, in fresh frozen plasma. Virostat,
especially when irradiated by light, acts by preventing replication of nucleic
acid (DNA and RNA) in pathogens. Investigator sponsored Phase II clinical
trials have been initiated in Europe and the Middle East to study Virostat's
use in treating Hepatitis C.
S-4
Blood transfusions are required to treat a variety of medical conditions
and, to meet that need, over 90 million blood donations occur each year. Of
these, approximately 39 million donations occur in North America, Western
Europe and Japan. We licensed from Oklahoma Medical Research Foundation the
rights to use a range of thiazine dyes, including Virostat, for their use in
in vitro and in vivo inactivation of pathogens in biological fluids.
CORPORATE INFORMATION
We were incorporated as Express Finance, Inc. under the laws of the State of
Delaware on August 16, 1996, and changed our name to Ascot Group, Inc. in
August 1998 and further to Bioenvision, Inc. in January 1999. Our principal
executive offices are located at 345 Park Avenue, 41st Floor, New York, New
York 10154. Our telephone number is (212) 750-6700 and our fax number is (212)
750-6777. Our website is www.bioenvision.com. Information included or referred
to on our website is not incorporated by reference in or otherwise a part of
this prospectus supplement. Our website address is included in this prospectus
supplement as an inactive textual reference only.
S-5
THE OFFERING
COMMON STOCK WE ARE OFFERING. . . . . . . 7,000,000 shares
COMMON STOCK TO BE OUTSTANDING AFTER
THIS OFFERING. . . . . . . . . . . . . . 39,748,845 shares
USE OF PROCEEDS . . . . . . . . . . . . . We intend to use the net proceeds
from the sale of the shares of
common stock in this offering for
further development of our lead
products and sales and marketing
expenses related to the commercial
launch of our products, for working
capital and other general corporate
purposes. See "Use of Proceeds."
NASDAQ NATIONAL MARKET SYMBOL . . . . . . BIVN
The share amounts listed here are based on shares of common stock
outstanding as of January 13, 2005 and exclude:
o 4,500,000 shares of common stock issuable upon the conversion of
2,250,000 shares of outstanding Series A convertible preferred stock;
o 7,195,809 shares of common stock issuable upon the conversion of
outstanding warrants at a weighted average exercise price of $2.33 per
share;
o 4,550,500 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $2.97
per share; and
o 1,662,000 shares of common stock reserved for issuance under the
Company's 2003 Stock Incentive Plan, as amended.
Unless otherwise indicated, the information in this prospectus supplement
assumes that the underwriters' over-allotment option will not be exercised.
S-6
SUMMARY FINANCIAL DATA
The following summary consolidated financial data as of and for the fiscal
years ended June 30, 2002, 2003 and 2004 was derived from our audited
consolidated financial statements included in our Annual Reports on Form 10-
KSB for each of the years presented. The summary consolidated financial data
as of September 30, 2004 and for the three months ended September 30, 2003 and
2004 were derived from our unaudited consolidated financial statements
included in our Quarterly Reports on Form 10-QSB for each of the periods
presented, and, in the opinion of management, have been prepared on the same
basis as our audited consolidated financial statements and reflect all
adjustments, consisting of normal accruals, necessary for a fair presentation
of the data for such periods. Results for the three months ended September 30,
2003 and 2004 are not necessarily indicative of results that may be expected
for the entire year. The summary financial data set forth below as of and for
the fiscal years ended June 30, 2003 and 2004 and as of September 30, 2004 and
for the three months ended September 30, 2003 and 2004 is qualified in its
entirety by, and should be read in conjunction with, "Management's discussion
and analysis or plan of operation" and the financial statements and notes
thereto incorporated by reference in this prospectus supplement. The summary
financial data set forth below as of and for the fiscal year ended June 30,
2002 is qualified in its entirety by, and should be read in conjunction with,
"Management's discussion and analysis or plan of operation" and the financial
statements and notes thereto included in our Annual Report on Form 10-KSB for
the fiscal year ended June 30, 2002. The as adjusted balance sheet data give
effect to the issuance and sale by us of 7,000,000 shares of our common stock
in this offering at an assumed public offering price of $8.00 per share, after
deducting the underwriting discounts and commissions and estimated offering
expenses payable by us.
THREE MONTHS
FISCAL YEARS ENDED JUNE 30, ENDED SEPTEMBER 30,
------------------------------------------- ----------------------------
2002 2003 2004 2003 2004
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
CONSOLIDATED STATEMENT OF OPERATIONS:
Revenues:
Licensing and royalty revenue..................... $ 802,965 $ 504,857 $ 1,187,212 $ 54,041 $ 363,182
Research and development contract revenue......... -- -- 1,915,002 775,000 722,146
------------ ------------ ------------ ------------ ------------
Total revenues.................................... 802,965 504,857 3,102,214 829,041 1,085,328
------------ ------------ ------------ ------------ ------------
Cost and expenses:
Research and development.......................... 1,912,258 1,689,278 4,882,574 803,900 2,138,897
Selling, general and administrative............... 2,127,664 4,567,413 9,082,420 2,438,088 1,756,713
Depreciation and amortization..................... 579,342 1,344,969 1,348,064 339,621 339,706
------------ ------------ ------------ ------------ ------------
Total costs and expenses.......................... 4,619,264 7,601,660 15,313,058 3,581,609 4,235,316
------------ ------------ ------------ ------------ ------------
Loss from operations.............................. (3,816,299) (7,096,803) (12,210,844) (2,752,568) (3,149,988)
Interest income (expense)......................... (2,172,682) (186,426) 99,763 19,037 55,437
Income tax benefit................................ 253,000 536,903 536,903 134,226 134,226
------------ ------------ ------------ ------------ ------------
Net loss.......................................... (5,735,981) (6,746,326) (11,574,178) (2,599,305) (2,960,325)
Preferred stock dividend.......................... (131,328) (877,818) (856,776) (223,710) (126,341)
Beneficial conversion preferred stock dividend.... (9,351,339) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss available to common stockholders......... $(15,218,648) $ (7,624,144) $(12,430,954) $ (2,823,015) $ (3,086,666)
============ ============ ============ ============ ============
Basic and diluted net loss per share of common
stock to common stock........................... $ (1.25) $ (0.45) $ (0.61) $ (0.16) $ (0.11)
============ ============ ============ ============ ============
Weighted average shares used in computing basic
and diluted net loss per common share........... 12,184,152 16,920,939 20,257,482 17,188,295 28,516,450
============ ============ ============ ============ ============
JUNE 30, SEPTEMBER 30, 2004
------------------------------------------- ----------------------------
2002 2003 2004 ACTUAL AS ADJUSTED
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 12,882,521 $ 7,929,686 $ 18,875,675 $ 17,662,989 $ 69,552,989
Working capital................................... 10,668,927 6,108,493 18,828,164 16,395,911 68,285,911
Total assets...................................... 34,743,091 28,535,675 44,533,387 41,337,877 93,227,877
Accumulated deficit............................... (21,027,299) (28,651,443) (41,082,397) (44,169,063) (44,169,063)
Total stockholders' equity........................ 24,639,406 18,828,392 27,382,571 24,866,709 76,756,709
S-7
RISK FACTORS
An investment in our common stock involves various risks. You should
carefully consider the risk factors beginning on page 3 of the accompanying
prospectus and the following risk factors in conjunction with the other
information contained and incorporated by reference into this prospectus
supplement and the accompanying prospectus before purchasing our common stock.
If any of the risks discussed in this prospectus supplement or the
accompanying prospectus actually occur, our business, operating results,
prospects and/or financial condition could be adversely impacted. This could
cause the market price of our common stock to decline and could cause you to
lose all or part of your investment.
WE MAY NEED TO IMPROVE OUR FINANCIAL CONTROL PROCEDURES.
We may need to add additional personnel in the area of financial management.
In connection with its review of our consolidated financial statements as of
and for the three and nine month periods ended March 31, 2004, Grant Thornton
LLP, our registered independent public accounting firm, advised the Audit
Committee and management of certain significant internal control deficiencies
that they considered to be, in the aggregate, a material weakness, under
standards established by the American Institute of Certified Public
Accountants, including, inadequate staffing and supervision leading to the
untimely identification and resolution of certain accounting matters, failure
to perform timely reviews, substantiation and evaluation of certain general
ledger account balances, lack of procedures or expertise needed to prepare all
required disclosures and evidence that employees lack the qualifications and
training to fulfill their assigned functions. A material weakness is a
significant deficiency in one or more of the internal control components that
alone or in the aggregate precludes the entity's internal control from
reducing to an appropriately low level the risk that material misstatements in
the financial statements will not be prevented or detected on a timely basis.
In response to the observations made by Grant Thornton LLP, we undertook a re-
evaluation of our internal controls and procedures relating to those
observations and implemented such enhancements as the review suggested were
appropriate. While we have taken measures designed to address the matters
raised by Grant Thornton LLP, we may need to implement additional measures to
further enhance our internal controls and procedures.
WE ARE EXPOSED TO POTENTIAL RISKS FROM RECENT LEGISLATION REQUIRING COMPANIES
TO EVALUATE THEIR INTERNAL CONTROL OVER FINANCIAL REPORTING UNDER SECTION 404
OF THE SARBANES-OXLEY ACT OF 2002.
We are evaluating our internal controls systems in order to allow management
to report on the effectiveness of our internal control over financial
reporting and our registered independent public accounting firm to attest to
this report, as required by Section 404 of the Sarbanes-Oxley Act. We are
performing the system and process evaluation and testing, and implementing any
necessary remediation, required in an effort to comply with the management
report and public accounting firm attestation requirements and continue to
incur additional expenses and devote significant management time towards
completing actions required for management's evaluation. The evaluation and
attestation processes required by Section 404 are new and neither public
companies nor public accounting firms have significant experience in testing
or complying with these requirements. While we have developed and are
implementing plans to fully implement the requirements relating to internal
controls and all other aspects of Section 404 in a timely fashion, we cannot
be certain as to the timing of completion of our evaluation, testing and
remediation actions or the impact of the same on our operations since, like
other public companies, we and our registered independent public accounting
firm are undergoing the process for the first time in a regulatory environment
where the standards to assess adequacy of compliance are under development. We
cannot assure you that there may not be significant deficiencies or material
weaknesses that would be required to be reported as a result of the process.
WE DEPEND ON PATENT AND PROPRIETARY RIGHTS TO DEVELOP AND PROTECT OUR
TECHNOLOGIES AND PRODUCTS, WHICH RIGHTS MAY NOT OFFER US SUFFICIENT
PROTECTION.
The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and
processes. Our success will depend on our ability to obtain and
S-8
enforce protection for products that we develop under U.S. and foreign patent
laws and other intellectual property laws, preserve the confidentiality of our
trade secrets and operate without infringing the proprietary rights of third
parties. Through our current license agreements, we have acquired the right to
utilize the technology covered by issued patents and patent applications, as
well as additional intellectual property and know-how that could be the
subject of further patent applications in the future. Several of the original
patents to Modrenal have expired in the U.S. and foreign countries. Thus, we
and our licensors are pursuing patent applications to specific uses,
combination therapy and dosages or formulations of Modrenal. We cannot
guarantee that such applications will result in issued patents or that such
patents if issued will provide adequate protection against competitors.
Patents may not be issued from these applications and issued patents may not
give us adequate protection or a competitive advantage. Issued patents may be
challenged, invalidated, infringed or circumvented, and any rights granted
thereunder may not provide us with competitive advantages. Parties not
affiliated with us have obtained or may obtain U.S. or foreign patents or
possess or may possess proprietary rights relating to products being developed
or to be developed by us. Patents now in existence or hereafter issued to
others may adversely affect the development or commercialization of products
developed or to be developed by us. Our planned activities may infringe
patents owned by others. Our patents to clofarabine are licensed from Southern
Research Institute. The current projected expiration date of the license is
March 2021. These patents cover pharmaceutical compositions and methods of
using clofarabine. We cannot guarantee that these patents would survive an
attack on their validity or that they will provide a competitive advantage
over our competitors. Moreover, we cannot guarantee that Southern Research
Institute was the first to invent the subject matter of these patents. In
addition, we are aware of a third party U.S. patent which is directed to the
treatment of chronic myeloid leukemia, or CML, using specific doses of
clofarabine. We believe that our development and marketing of clofarabine for
treatment of acute leukemias will not infringe any of the claims of this U.S.
patent. Further, we believe that our development and marketing of clofarabine
for treatment of chronic lymphocytic leukemia will not infringe any of the
claims of this U.S. patent. If this patent is asserted against us, even though
we may be successful in defending against such an assertion, our defense would
require substantial financial and human resources. In addition, we may need a
license to this patent to use the claimed dose in the treatment of CML.
However, we do not know if such a license is available at commercially
reasonable terms, if at all.
We could incur substantial costs in defending infringement suits brought
against us or any of our licensors or in asserting any infringement claims
that we may have against others. We could also incur substantial costs in
connection with any suits relating to matters for which we have agreed to
indemnify our licensors or distributors. An adverse outcome in any litigation
could have a material adverse effect on our ability to sell products or use
patents in the future. In addition, we could be required to obtain licenses
under patents or other proprietary rights of third parties. These licenses may
not be made available on terms acceptable to us, or at all. If we are required
to, and do not obtain any required licenses, we could be prevented from, or
encounter delays in, developing, manufacturing or marketing one or more
products.
We also rely upon trade secret protection for our confidential and
proprietary information. Others may independently develop substantially
equivalent proprietary information and techniques or gain access to our trade
secrets or disclose our technology. We may not be able to meaningfully protect
our trade secrets which could limit our ability to exclusively produce
products.
We require our employees, consultants, members of the scientific advisory
board and parties to collaborative agreements to execute confidentiality
agreements upon the commencement of employment or consulting relationships or
a collaboration with us. These agreements may not provide meaningful
protection of our trade secrets or adequate remedies in the event of
unauthorized use or disclosure of confidential and proprietary information.
S-9
ANTI-TAKEOVER LAWS, OUR SHAREHOLDER RIGHTS PLAN, AND PROVISIONS OF OUR
CERTIFICATE OF INCORPORATION MAY DISCOURAGE, DELAY, OR PREVENT A MERGER OR
ACQUISITION THAT OUR STOCKHOLDERS MAY CONSIDER FAVORABLE.
Section 203 of the Delaware General Corporation Law contains provisions that
we have not opted out of which may delay or prevent an attempt by a third
party to acquire control of us, even if doing so might be beneficial to our
stockholders by providing them an opportunity to sell their shares at a
premium to the then current market price. In general, Section 203 prohibits
designated types of business combinations, including mergers, for a period of
three years between us and any third party who owns 15% or more of our common
stock. This provision does not apply if:
o our Board of Directors approves of the transaction before the third party
acquires 15% of our common stock;
o the third party acquires at least 85% of our common stock at the time its
ownership goes past the 15% level; or
o our Board of Directors and two-thirds of the shares of our common stock
not held by the third party vote in favor of the transaction.
We also adopted a shareholder rights plan on November 17, 2004 intended to
deter hostile or coercive attempts to acquire us. Under the plan, if any
person or group acquires more than 15% of our common stock without approval of
the Board of Directors under specified circumstances, our other stockholders
have the right to purchase shares of our common stock, or shares of the
acquiring company, at a substantial discount to the public market price. The
plan makes an acquisition much more costly to a potential acquirer, deterring
an acquisition.
Our certificate of incorporation also authorizes us to issue up to
20,000,000 shares of preferred stock in one or more different series with
terms fixed by the Board of Directors. Stockholder approval is not necessary
to issue preferred stock in this manner. Thus, our board of directors can
authorize and issue shares of preferred stock with voting or conversion rights
that could adversely affect the voting or other rights of holders of our
common stock and thereby reduce its value. These rights could have the effect
of making it more difficult for a person or group to acquire control of us, as
well as prevent or frustrate any attempt by stockholders to change our
direction or management. While our Board of Directors has no current
intentions or plans to issue any preferred stock, issuance of these shares
could also be used as an anti-takeover device.
MANAGEMENT MAY INVEST OR SPEND THE PROCEEDS OF THIS OFFERING IN WAYS WITH
WHICH STOCKHOLDERS MAY NOT AGREE AND IN WAYS THAT MAY NOT YIELD A RETURN TO
OUR STOCKHOLDERS.
We will retain broad discretion over the use of proceeds from this offering.
Stockholders may not deem such uses desirable, and our use of the proceeds may
not yield a significant return or any return at all for our stockholders. We
expect to use the net proceeds from this offering for further development of
our lead products and sales and marketing expenses related to the commercial
launch of our products, for working capital and other general corporate
purposes. A number of variables will influence our actual use of the proceeds
from this offering, and our actual uses of the proceeds of this offering may
vary substantially from our currently planned uses. Pending the use of the net
proceeds, we intend to invest the net proceeds from this offering in short-
term marketable securities.
S-10
FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this prospectus supplement and the
accompanying prospectus, including the information incorporated by reference
herein and therein, contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements describe our
current expectations, plans, objectives and forecasts of future events. Words
such as "may," "will," "believe," "estimate," "anticipate," "plan," "expect,"
"may affect," and "intend," or statements concerning "potential" or
"opportunity" and similar expressions or the negative thereof, are intended to
identify forward-looking statements, but the absence of these words does not
mean that a statement is not forward-looking. Forward-looking statements
include, without limitation:
o statements about our drug development and commercialization goals and
expectations;
o potential regulatory approvals;
o our plans for and anticipated results of our clinical development
activities;
o the potential advantage of our drug candidates;
o statements about our future capital requirements, the sufficiency of our
capital resources to meet those requirements and the expected composition
of our capital resources; and
o other statements that are not historical facts.
Forward-looking statements are based on the judgment of management at the
time the statements are made. Inaccurate assumptions and known and unknown
risks and uncertainties can affect the accuracy of forward-looking statements.
Our actual results could differ materially from those stated in or implied by
forward-looking statements for a number of reasons, including the risks
described in the sections of this prospectus supplement and the accompanying
prospectus entitled "Risk Factors," in our other public filings, press
releases and statements by our management. Other factors besides those
described in this prospectus supplement, the accompanying prospectus
supplement and in our other public filings, press releases and statements by
our management could also affect actual results.
You should not unduly rely on these forward-looking statements, which speak
only as of the date of this prospectus supplement or the accompanying
prospectus. We undertake no obligation to publicly update any forward-looking
statement to reflect new information, events or circumstances, whether
anticipated or unanticipated, or to conform the statement to actual results or
changes in our expectations. You should, however, review the factors, risks
and other information we provide in the reports we file from time to time with
the SEC.
S-11
USE OF PROCEEDS
We estimate that the net proceeds from this offering will be approximately
$51.9 million at an assumed offering price of $8.00 per share, the last
reported sales price of our common stock on the NASDAQ National Market on
January 13, 2005, or approximately $59.8 if the underwriters exercise their
over-allotment option in full, after deducting underwriting discounts and
commissions and expenses of this offering. We intend to use the net proceeds
for further development of our lead products and sales and marketing expenses
related to the commercial launch of our products, for working capital and
other general corporate purposes.
Our management will have considerable discretion in the application of the
net proceeds of this offering and may spend the net proceeds in a manner and
at times other than as set forth above. As a result, you will not have the
opportunity, as part of your investment decision, to assess how and when the
net proceeds will be used.
Pending such uses, the net proceeds may be invested in short-term marketable
securities.
S-12
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is listed on the NASDAQ National Market under the symbol
"BIVN." Prior to August 21, 2004, our common stock was traded on the American
Stock Exchange and prior to September 8, 2003, our common stock was included
for quotation on the over-the-counter bulletin board. The following table sets
forth, for the periods indicated, the high and low sales prices per share of
our common stock on the NASDAQ National Market.
HIGH LOW
------ -----
FISCAL YEAR ENDED JUNE 30, 2003
First Quarter ................................................ $ 2.55 $1.35
Second Quarter ............................................... 2.25 1.10
Third Quarter ................................................ 1.55 0.39
Fourth Quarter ............................................... 2.89 0.77
FISCAL YEAR ENDED JUNE 30, 2004
First Quarter ................................................ $ 5.20 $1.70
Second Quarter ............................................... 5.40 3.13
Third Quarter ................................................ 10.25 3.74
Fourth Quarter ............................................... 12.00 8.00
FISCAL YEAR ENDED JUNE 30, 2005
First Quarter ................................................ $ 9.24 $5.90
Second Quarter ............................................... 11.74 6.86
Third Quarter (through January 13, 2005) .................... 9.18 7.75
On January 13, 2005, the last reported sale price on the NASDAQ National
Market for our common stock was $8.00. As of January 13, 2005, there were
approximately 166 holders of record of our common stock.
We have never paid cash dividends on our common stock. We do not expect to
declare cash dividends on our common stock in the future and expect to retain
all earnings for business development. Holders of our Series A convertible
preferred stock are entitled to an annual 5% dividend which may be paid in
cash or additional shares of common stock in our sole discretion.
S-13
CAPITALIZATION
The following table sets forth our cash and cash equivalents, stockholders'
equity and total capitalization as of September 30, 2004, assuming that the
underwriters do not exercise their over-allotment option to purchase
additional shares of common stock:
o on an actual basis; and
o as adjusted to give effect to the sale by us of 7,000,000 shares of our
common stock in this offering at an assumed public offering price of
$8.00 per share, after deducting underwriting discounts and commissions
and estimated offering expenses payable by us.
SEPTEMBER 30, 2004
---------------------------
ACTUAL AS ADJUSTED
------------ ------------
(UNAUDITED)
CASH AND CASH EQUIVALENTS ....................... $ 17,662,989 $ 69,552,989
============ ============
STOCKHOLDERS' EQUITY:
Preferred stock -- $0.001 par value, 20,000,000
shares authorized; 3,341,666 shares issued and
outstanding (liquidation preference
$10,024,998).................................. $ 3,342 $ 3,342
Common stock -- par value $0.001; 70,000,000
shares authorized; 28,597,172 shares issued
and outstanding -- actual; 35,597,172 shares
issued and outstanding -- as adjusted (1)..... 28,597 35,597
Deferred compensation .......................... (201,927) (201,927)
Additional paid-in capital ..................... 69,066,456 120,949,456
Accumulated deficit ............................ (44,169,063) (44,169,063)
Accumulated other comprehensive income ......... 139,304 139,304
------------ ------------
Total stockholders' equity ..................... 24,866,709 76,756,709
------------ ------------
TOTAL CAPITALIZATION ............................ $ 24,866,709 $ 76,756,709
============ ============
---------------
(1) The number of shares of common stock issued and outstanding does not
include: (a) 4,441,000 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted average exercise price of $1.86 per
share; (b) 8,542,534 shares of common stock issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $2.36 per
share; (c) 885,000 shares of common stock available for future issuance
under our 2003 Stock Incentive Plan; and (d) 6,683,332 shares of common
stock issuable upon conversion of 3,341,666 shares of our Series A
convertible preferred stock.
At our annual stockholders meeting on December 17, 2004, our stockholders
approved, among other things, an amendment to our 2003 Stock Incentive Plan to
increase the number of shares that may be granted under the plan from
3,000,000 to 4,500,000.
S-14
U.S. FEDERAL TAX CONSIDERATIONS TO NON-U.S. HOLDERS
The following is a summary of the material U.S. federal income tax
considerations with respect to the ownership and disposition of our common
stock by a non-U.S. holder (as defined below) as of the date hereof. This
summary deals only with non-U.S. holders that hold our common stock as a
capital asset.
For purposes of this summary, a "non-U.S. holder" means a beneficial owner
of our common stock that is not treated as a partnership for U.S. federal
income tax purposes and is not any of the following for U.S. federal income
tax purposes: (i) a citizen or resident of the U.S., (ii) a corporation,
including any entity treated as a corporation for U.S. federal income tax
purposes, created or organized in or under the laws of the U.S., any state
thereof, or the District of Columbia, (iii) an estate the income of which is
subject to U.S. federal income taxation regardless of its source, or (iv) a
trust if (1) its administration is subject to the primary supervision of a
court within the U.S. and one or more U.S. persons have the authority to
control all of its substantial decisions, or (2) it has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a U.S.
person.
This summary is based upon provisions of the Internal Revenue Code of 1986,
as amended, and regulations, rulings and judicial decisions as of the date
hereof. Those authorities may be changed, perhaps retroactively, or be subject
to differing interpretations, so as to result in U.S. federal tax
considerations different from those summarized below. This summary does not
represent a detailed description of the U.S. federal tax considerations to you
in light of your particular circumstances. In addition, it does not represent
a description of the U.S. federal tax considerations to you if you are subject
to special treatment under the U.S. federal tax laws (including if you are a
U.S. expatriate, "controlled foreign corporation" or "passive foreign
investment company"), and it generally does not address any U.S. taxes other
than the federal income tax. We cannot assure you that a change in law will
not alter significantly the tax considerations that we describe in this
summary.
If an entity classified as a partnership for U.S. federal income tax
purposes holds our common stock, the tax treatment of a partner will generally
depend on the status of the partner and the activities of the partnership. If
you are a partnership holding our common stock, or a partner in such a
partnership, you should consult your tax advisors.
IF YOU ARE CONSIDERING THE PURCHASE OF OUR COMMON STOCK, YOU SHOULD CONSULT
YOUR OWN TAX ADVISORS CONCERNING THE PARTICULAR U.S. FEDERAL TAX CONSEQUENCES
TO YOU OF THE OWNERSHIP AND DISPOSITION OF THE COMMON STOCK, AS WELL AS THE
CONSEQUENCES TO YOU ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION,
INCLUDING ANY STATE, LOCAL OR FOREIGN TAX CONSEQUENCES.
DIVIDENDS
We have never declared or paid any cash dividends on our common stock and do
not currently anticipate paying any cash dividends on our common stock. If we
were to pay dividends in the future on our common stock, they would be subject
to U.S. federal income tax in the manner described below.
Dividends paid to a non-U.S. holder of our common stock generally will be
subject to withholding of U.S. federal income tax at a 30% rate or such lower
rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or
business by a non-U.S. holder within the U.S. and, where an income tax treaty
applies, are attributable to a U.S. permanent establishment of the non-U.S.
holder, are not subject to this withholding tax, but instead are subject to
U.S. federal income tax on a net income basis at applicable individual or
corporate rates. Certain certification and disclosure requirements must be
complied with in order for effectively connected dividends to be exempt from
this withholding tax. Any such effectively connected dividends received by a
foreign corporation may be subject to an additional "branch profits tax" at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty.
S-15
A non-U.S. holder of our common stock who is entitled to and wishes to claim
the benefits of an applicable treaty rate (and avoid backup withholding as
discussed below) for dividends, will be required to (i) complete Internal
Revenue Service, or IRS, Form W-8BEN (or successor form) and make certain
certifications, under penalty of perjury, to establish its status as a non-
U.S. person and its entitlement to treaty benefits (which may also require, in
certain circumstances, the provision of a U.S. taxpayer identification number)
or (ii) if the common stock is held through certain foreign intermediaries,
satisfy the relevant certification requirements of applicable U.S. Treasury
regulations. Special certification and other requirements apply to certain
non-U.S. holders that are entities rather than individuals.
A non-U.S. holder of our common stock eligible for a reduced rate of U.S.
federal withholding tax pursuant to an income tax treaty may obtain a refund
of any excess amounts withheld by timely filing an appropriate claim for
refund with the IRS.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
with respect to gain recognized on a sale or other disposition of our common
stock unless (i) the gain is effectively connected with a trade or business of
the non-U.S. holder in the U.S. and, where a tax treaty applies, is
attributable to a U.S. permanent establishment of the non-U.S. holder (in
which case, for a non-U.S. holder that is a foreign corporation, the branch
profits tax described above may also apply), (ii) in the case of a non-U.S.
holder who is an individual, such holder is present in the U.S. for 183 or
more days in the taxable year of the sale or other disposition and certain
other conditions are met, or (iii) we are or have been a "U.S. real property
holding corporation" for U.S. federal income tax purposes.
We believe we have not been and currently are not, and we do not anticipate
becoming, a "U.S. real property holding corporation" for U.S. federal income
tax purposes.
FEDERAL ESTATE TAX
Common stock held by an individual non-U.S. holder at the time of death will
be included in such holder's gross estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the IRS and to each non-U.S. holder the amount of
dividends paid to such holder and the tax withheld (if any) with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and any withholding may also be
made available to the tax authorities in the country in which the non-U.S.
holder resides under the provisions of an applicable income tax treaty. In
addition, dividends paid to a non-U.S. holder generally will be subject to
backup withholding unless applicable certification requirements are met.
Payment of the proceeds of a sale of our common stock within the U.S. or
conducted through certain U.S.-related financial intermediaries is subject to
information reporting and, depending on the circumstances, backup withholding
unless the beneficial owner certifies under penalties of perjury that it is
not a U.S. person (and the payor does not have actual knowledge or reason to
know that the beneficial owner is a U.S. person) or the holder otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is timely furnished to the IRS.
S-16
UNDERWRITING
We are offering the shares of common stock described in this prospectus
supplement and the accompanying prospectus through the underwriters named
below. J.P. Morgan Securities Inc. and UBS Securities LLC are acting as joint
book-running managers of the offering and as representatives of the
underwriters. We have entered into an underwriting agreement with the
underwriters. Subject to the terms and conditions of the underwriting
agreement, we have agreed to sell to the underwriters, and each underwriter
has severally agreed to purchase, at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus supplement, the number of shares of common stock listed next to its
name in the following table:
NUMBER OF
NAME SHARES
---- ---------
J.P. Morgan Securities Inc. ........................................
UBS Securities LLC .................................................
CIBC World Markets Corp. ...........................................
Friedman, Billings, Ramsey & Co., Inc. .............................
---------
Total ........................................................... 7,000,000
=========
The underwriters are committed to purchase all the shares of common stock
offered by us if they purchase any shares. The underwriting agreement also
provides that if an underwriter defaults, the purchase commitments of non-
defaulting underwriters may also be increased or the offering may be
terminated.
The underwriters propose to offer the shares of common stock directly to the
pubic at the public offering price set forth on the cover page of this
prospectus supplement and to certain dealers at that price less a concession
not in excess of $ per share. Any such dealers may resell shares to
certain other brokers or dealers at a discount of up to $ per share from
the public offering price. After the public offering of the shares, the
offering price and other selling terms may be changed by the underwriters.
Sales of shares made outside of the U.S. may be made by affiliates of the
underwriters.
The underwriters have an option to buy up to 1,050,000 additional shares of
common stock from us to cover sales of shares by the underwriters which exceed
the number of shares specified in the table above. The underwriters have 30
days from the date of this prospectus supplement to exercise this over-
allotment option. If any shares are purchased with this over-allotment option,
the underwriters will purchase shares in approximately the same proportion as
shown in the table above. If any additional shares of common stock are
purchased, the underwriters will offer the additional shares on the same terms
as those on which the shares are being offered.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters assuming both no exercise and full
exercise of the underwriters' option to purchase additional shares of common
stock.
WITHOUT WITH FULL
OVER-ALLOTMENT OVER-ALLOTMENT
EXERCISE EXERCISE
-------------- --------------
Per Share ................................... $ $
Total..................................... $ $
We estimate that the total expenses of this offering payable by us, not
including the underwriting discounts and commissions, will be approximately
$750,000.
In connection with this offering, certain of the underwriters or securities
dealers may distribute prospectuses electronically. A prospectus supplement
accompanied by a prospectus in electronic format may be made available on the
web sites maintained by one or more underwriters, or selling group members, if
S-17
any, participating in the offering. The underwriters may agree to allocate a
number of shares to underwriters and selling group members for sale to their
online brokerage account holders. Internet distributions will be allocated by
the representatives to underwriters and selling group members that may make
Internet distributions on the same basis as other allocations.
We have agreed that we will not (1) offer, pledge, announce the intention to
sell, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
shares of our common stock or any securities convertible into or exercisable
or exchangeable for our common stock or (2) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic
consequences of ownership of our common stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of common
stock or such other securities, in cash or otherwise, without the prior
written consent of J.P. Morgan Securities Inc. and UBS Securities LLC for a
period of 90 days after the date of this prospectus supplement, other than any
shares of our common stock issued upon the exercise of options granted under
existing employee stock option plans.
Our directors and executive officers, and certain of our significant
stockholders have entered into lock-up agreements with the underwriters prior to
the commencement of this offering pursuant to which each of these persons or
entities, with limited exceptions, for periods ranging from 45 to 90 days after
the date of this prospectus supplement, may not, without the prior written
consent of J.P. Morgan Securities Inc. and UBS Securities LLC, (1) offer,
pledge, announce the intention to sell, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for common stock (including,
without limitation, common stock which may be deemed to be beneficially owned by
such directors, executive officers and stockholders in accordance with the rules
and regulations of the SEC and securities which may be issued upon exercise of a
stock option or warrant) or (2) enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of ownership of
the common stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of common stock or such other securities, in
cash or otherwise. All of the shares of common stock beneficially owned by our
directors and executive officers are subject to 90 day lock-up agreements and
approximately 14.3 million shares of common stock beneficially owned by certain
of our significant stockholders (including shares of common stock which may be
issued upon exercise of stock options and warrants and shares of common stock
which may be issued upon conversion of our preferred stock) are subject to 45
day lock-up agreements.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
Our common stock is quoted on the NASDAQ National Market under the symbol
"BIVN."
In connection with this offering, the underwriters may engage in stabilizing
transactions, which involves making bids for, purchasing and selling shares of
common stock in the open market for the purpose of preventing or retarding a
decline in the market price of the common stock while this offering is in
progress. These stabilizing transactions may include making short sales of the
common stock, which involves the sale by the underwriters of a greater number
of shares of common stock than they are required to purchase in this offering,
and purchasing shares of common stock on the open market to cover positions
created by short sales. Short sales may be "covered" shorts, which are short
positions in an amount not greater than the underwriters' over-allotment
option referred to above, or may be "naked" shorts, which are short positions
in excess of that amount. The underwriters may close out any covered short
position either by exercising their over-allotment option, in whole or in
part, or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other things, the price
of shares available for purchase in the open market compared to the price at
which the underwriters may purchase shares through the over-allotment option.
A naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the common stock
in the open market that could adversely affect investors who purchase in this
offering. To the extent that the underwriters create a naked short position,
they will purchase shares in the open market to cover the position.
S-18
The underwriters have advised us that, pursuant to Regulation M of the
Securities Act of 1933, they may also engage in other activities that
stabilize, maintain or otherwise affect the price of the common stock,
including the imposition of penalty bids. This means that if the
representatives of the underwriters purchase common stock in the open market
in stabilizing transactions or to cover short sales, the representatives can
require the underwriters that sold those shares as part of this offering to
repay the underwriting discount received by them.
These activities may have the effect of raising or maintaining the market
price of the common stock or preventing or retarding a decline in the market
price of the common stock, and, as a result, the price of the common stock may
be higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the NASDAQ National
Market, in the over-the-counter market or otherwise.
Certain of the underwriters and their affiliates have provided in the past
to us and our affiliates and may provide from time to time in the future
certain commercial banking, financial advisory, investment banking and other
services for us and such affiliates in the ordinary course of their business,
for which they have received and may continue to receive customary fees and
commissions. In addition, from time to time, certain of the underwriters and
their affiliates may effect transactions for their own account or the account
of customers, and hold on behalf of themselves or their customers, long or
short positions in our debt or equity securities or loans, and may do so in
the future.
S-19
LEGAL MATTERS
The validity of the shares of common stock offered hereby and certain other
matters relating to this offering will be passed on by Paul, Hastings,
Janofsky & Walker LLP, New York, New York. Certain legal matters related to
this offering will be passed upon for the underwriters by Morgan, Lewis &
Bockius LLP, New York, New York.
EXPERTS
Our auditors are Grant Thornton LLP. Our consolidated financial statements
as of and for the years ended June 30, 2004 and June 30, 2003 included in our
annual report on Form 10-KSB for the year ended June 30, 2004 and incorporated
by reference herein, have been incorporated by reference herein in reliance
upon the report of Grant Thornton LLP, independent registered public
accountants, given on the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any materials we have filed
with the SEC at the SEC's public reference rooms. The SEC also maintains a web
site (http://www.sec.gov) that contains reports, proxy statements and other
information concerning us. Please call the SEC at 1-800-SEC-0330 for
information concerning the operations of the public reference rooms or visit
the SEC at the following locations:
Public Reference Room Midwest Regional Office
450 Fifth Street, N.W. Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois 60661-2511
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act to register the common stock being offered in this prospectus
supplement. This prospectus supplement and the accompanying prospectus, which
form part of the registration statement, do not contain all of the information
set forth in the registration statement or the exhibits and schedules to the
registration statement. For further information regarding Bioenvision and the
common stock offered in this prospectus supplement and the accompanying
prospectus, please refer to the registration statement and the documents filed
or incorporated by reference as exhibits to the registration statement. You
may obtain the registration statement and its exhibits from the SEC as
indicated above or from us. Statements contained in this prospectus supplement
or the accompanying prospectus as to the contents of any contract or other
document that is filed or incorporated by reference as an exhibit to the
registration statement are not necessarily complete and we refer you to the
full text of the contract or other document filed or incorporated by reference
as an exhibit to the registration statement.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to those filed documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information.
The following documents, which have been filed with the SEC (File No. 001-
31787), are hereby incorporated by reference:
S-20
o our definitive proxy statement dated October 28, 2004, relating to our
December 2004 annual meeting of stockholders, filed on October 28, 2004;
o our annual report on Form 10-KSB for the year ended June 30, 2004, filed
on September 24, 2004;
o our quarterly report on Form 10-QSB for the quarter ended September 30,
2004, filed on November 15, 2004; and
o our current report on Form 8-K, filed on November 18, 2004.
All other reports and documents subsequently filed by us with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
after the date of this prospectus supplement and prior to the termination of
this offering are deemed incorporated by reference into this prospectus
supplement and a part hereof from the date of filing of those documents. Any
statement contained in the accompanying prospectus or any document
incorporated by reference herein shall be deemed to be amended, modified or
superseded for the purposes of this prospectus supplement to the extent that a
statement contained in this prospectus supplement, any additional prospectus
supplement or a later document that is or is considered to be incorporated by
reference herein amends, modifies or supersedes such statement. Any statements
so amended, modified or superseded shall not be deemed to constitute a part of
this prospectus supplement, except as so amended, modified or superseded.
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus supplement is delivered, upon written or oral
request of such person, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference into this prospectus
supplement (other than the exhibits to such documents). Requests for such
documents should be directed to Bioenvision Inc., 345 Park Avenue, 41st floor,
New York, New York 10154, Attention: David P. Luci (telephone: (212) 750-
6700).
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus supplement.
You should not rely on any unauthorized information. This prospectus
supplement does not offer to sell or solicit an offer to buy any shares in any
jurisdiction in which it is unlawful. The information in this prospectus
supplement is current as of the date on the cover.
S-21
PROSPECTUS
[Bioenvision Logo]
BIOENVISION, INC.
$90,000,000
COMMON STOCK
From time to time, we may sell our common stock, par value $.001 per share
(the "Common Stock"), in one or more offerings. The specific terms and number
of shares of Common Stock so offered will be fully described in supplements to
this prospectus. Please read any prospectus supplements and this prospectus
carefully before you invest. This prospectus may not be used to sell shares of
Common Stock unless accompanied by a prospectus supplement.
Our Common Stock is included for quotation on the Nasdaq National Market
under the symbol "BIVN". The last reported sales price of shares of our common
stock on December 31, 2004 was $8.96 per share.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING ON PAGE 3
WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMMON
STOCK BEFORE YOU MAKE YOUR INVESTMENT DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The shares of Common Stock may be sold directly by us to investors, through
agents designated from time to time or to or through underwriters or dealers.
See "Plan of Distribution". If any underwriters are involved in the sale of
any shares of Common Stock in respect of which this prospectus is being
delivered, the names of such underwriters and any applicable commissions or
discounts will be set forth in a prospectus supplement. The net proceeds we
expect to receive from such sale also will be set forth in a prospectus
supplement.
THE DATE OF THIS PROSPECTUS IS JANUARY 5, 2005.
TABLE OF CONTENTS
PAGE
----
ABOUT THIS PROSPECTUS ................................................... 1
BIOENVISION, INC. ....................................................... 1
RISK FACTORS ............................................................ 3
FORWARD-LOOKING STATEMENTS .............................................. 14
USE OF PROCEEDS ......................................................... 15
DESCRIPTION OF CAPITAL STOCK ............................................ 15
PLAN OF DISTRIBUTION .................................................... 16
LEGAL MATTERS ........................................................... 18
EXPERTS ................................................................. 19
WHERE YOU CAN FIND MORE INFORMATION ..................................... 19
INCORPORATION BY REFERENCE .............................................. 19
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES......................... 20
ABOUT THIS PROSPECTUS
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the Securities and Exchange Commission utilizing a "shelf"
registration process. Under this shelf process, we may from time to time offer
Common Stock described in this prospectus in one or more offerings up to a
total dollar amount of $90,000,000. Each time we use this prospectus to offer
shares of Common Stock, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
together with additional information described below under the heading "Where
You Can Find More Information".
In this prospectus, "Bioenvision", "we", "us, and "our" and "the Company"
refer to Bioenvision, Inc.
BIOENVISION, INC.
You should read the following summary together with the more detailed
information, including the consolidated financial statements and the notes
thereto and other information, included, or incorporated by reference, in this
prospectus.
We are an emerging biopharmaceutical company that develops and markets drugs
to treat cancer. Our two lead drugs are clofarabine and Modrenal(R), although
we have several other products and technologies under development. As of
December 31, 2004, our internal staff consisted of 21 employees based in New
York, New York and Edinburgh, Scotland.
Clofarabine is a small molecule, purine nucleoside analogue, which we
believe is effective in the treatment of leukemia, based upon our own clinical
studies and studies conducted by others on our behalf. Clofarabine may also be
an effective agent to treat patients with solid tumors, based on preclinical
studies and Phase I clinical trials performed to date.
Modrenal(R) is a hormonal agent with a novel mode of action that makes it an
effective agent in patients with advanced breast cancer who have acquired
resistance to other hormonal agents. We launched Modrenal(R) in May 2003 in
the United Kingdom, where we have received regulatory approval for its use in
the treatment of post-menopausal breast cancer. In the second quarter of 2005,
we intend to apply for mutual recognition in another four large European
territories in an effort to gain approval for Modrenal(R) in each such
territory. We anticipate receiving approval in each such territory during
calendar 2005, but such approval is subject to the appropriate regulatory
decisions.
Our primary business strategy relates to our two lead drugs, clofarabine and
Modrenal(R). With clofarabine, our strategy is to complete drug development in
Europe and obtain marketing authorization from the European regulatory
authorities to market and distribute clofarabine in Europe for the treatment
of pediatric and adult acute leukemias (ALL and AML). We anticipate launching
clofarabine in Europe in mid-2005, subject to our obtaining from the European
regulatory authorities the first approval for clofarabine which is expected to
be for pediatric acute leukemias. We intend to continue clinical trials in
other indications with the intention of aggressively seeking label extensions
after clofarabine's first approval, including our Pivotal Phase II trial of
clofarabine in adults with Acute Myeloid Leukemia (AML) which commenced in
August 2004 and is ongoing. Following this strategy, throughout the world,
approximately two-thirds of the cancer patients dosed with clofarabine to date
fall outside of the pediatric acute leukemias.
In July 2004, we filed for approval of clofarabine in Europe to treat
children with pediatric acute leukemia (ALL and AML). Further, we are
conducting a Pivotal Phase II clinical trial of clofarabine, as first line
therapy for the treatment of adults with Acute Myeloid Leukemia (AML). Also in
Europe, at our direction, an Investigator Sponsored Trial of clofarabine as
first-line therapy for adults with AML was completed ahead of schedule and an
interim analysis indicates a 64% complete response rate observed in this
patient population. In January, 2002, the European orphan drug application for
use of clofarabine to treat acute leukemia in adults was approved. Orphan Drug
Designation provides the Company with ten years of market exclusivity in
Europe for clofarabine, upon grant of marketing authorization. The drug has
also been
-1-
granted orphan drug status and "fast track" treatment by the FDA. Further, in
July 2004, the FDA granted six months of extended market exclusivity to
clofarabine under the Best Pharmaceuticals for Children Act.
In the U.S., ILEX Oncology, Inc., which was our sub-licensor of U.S. and
Canadian cancer marketing rights until it was acquired by Genzyme Corporation
on December 21, 2004, filed a New Drug Application ("NDA") in March 2004 for
approval of clofarabine to treat children with acute leukemias (ALL or AML).
The NDA was based upon results of two Pivotal Phase II clinical trials
completed by ILEX prior to the NDA filing. In connection with the NDA, the
United States Food and Drug Administration (the "FDA") has set a Prescription
Drug User Fee Act ("PDUFA") response date at December 30, 2004. A PDUFA date
is the is the date by which the FDA is expected to review and act upon an NDA
submission. Clofarabine will be reviewed by the FDA Oncologic Drug Advisory
Committee ("ODAC") on December 1, 2004.
In August 2003, we obtained the exclusive, irrevocable option to sell,
market and distribute clofarabine in Japan and Southeast Asia from the
inventor of clofarabine. These rights were not previously granted by Southern
Research Institute and fall outside the scope of our then current licensing
and development contracts with respect to clofarabine. We originally obtained
an exclusive license from Southern Research Institute to sell, market and
distribute clofarabine throughout the world, except for Japan and Southeast
Asia, for all human applications, pursuant to a co-development agreement,
dated August 31, 1998, between the Company and Southern Research Institute. On
March 12, 2001, we granted an exclusive option to sell, market and distribute
clofarabine in the U.S. and Canada to ILEX Oncology, Inc, which was acquired
by Genzyme Corporation on December 21, 2004. We converted Genzyme's option to
an exclusive sublicense on December 30, 2003. Accordingly, we do not possess
the rights to sell, market and distribute clofarabine for cancer indications
in the U.S.
With Modrenal(R), our strategy is to expand sales in the United Kingdom and
apply for mutual recognition to obtain the right to market and distribute
Modrenal(R) in the major European markets. We anticipate receiving mutual
recognition from major European Community member states by the third quarter
of calendar 2005. We intend to further U.S. development of Modrenal(R) in
prostate and breast cancer indications, subject to the ongoing results of our
clinical trials we are currently conducting in the U.S. and Europe.
In the U.S., we filed an IND to conduct Modrenal(R) clinical trials for
prostate cancer in February 2004 and commenced enrolling patients in this
clinical trial in July 2004. Further, we intend to seek regulatory approval
for Modrenal(R) in the United States as salvage therapy for hormone-sensitive
breast cancer upon completion of additional clinical studies. We originally
obtained an exclusive license from Stegram Pharmaceuticals Ltd. to sell,
market and distribute Modrenal(R) throughout the world, except for South
Africa, for all human and animal health applications, pursuant to a co-
development agreement dated July 15, 1998.
Our secondary business strategy is to continue to develop our portfolio of
ancillary products and technologies. We anticipate that revenues derived from
clofarabine and Modrenal(R) and milestone payments and royalties from the
ancillary products will permit us to further develop our portfolio of
ancillary products and technologies.
We were incorporated as Express Finance, Inc. under the laws of the State of
Delaware on August 16, 1996, and changed our name to Ascot Group, Inc. in
August 1998 and further to Bioenvision, Inc. in December 1998. Our principal
executive offices are located at 345 Park Avenue, 41st Floor , New York, New
York 10154. Our telephone number is (212) 750-6700 and our fax number is (212)
750-6777. Our website is www.bioenvision.com. Information contained on our
website does not constitute, and shall not be deemed to constitute, part of
this prospectus.
-2-
RISK FACTORS
You should carefully consider the following risks before you decide to buy
our Common Stock. All known risks are presented in this prospectus. These
risks may adversely affect our business, financial condition or operating
results. If any of the events we have identified occur, the trading price of
our Common Stock could decline, and you may lose all or part of the money you
paid to buy our Common Stock.
WE HAVE A LIMITED OPERATING HISTORY, WHICH MAKES IT DIFFICULT TO EVALUATE OUR
BUSINESS AND TO PREDICT OUR FUTURE OPERATING RESULTS
Since our inception, August of 1996, we have been primarily engaged in
organizational activities, including developing a strategic operating plan,
entering into various collaborative agreements for the development of products
and technologies, hiring personnel and developing and testing our products. We
have not generated any material revenues to date. Accordingly, we have no
relevant operating history upon which an evaluation of our performance and
prospects can be made.
WE HAVE INCURRED NET LOSSES SINCE COMMENCING BUSINESS AND EXPECT FUTURE LOSSES
To date, we have incurred significant net losses, including net losses of
approximately $11,574,000 for the fiscal year ended June 30, 2004 and
$2,960,325 for the three months ended September 30, 2004. At September 30,
2004, we had an accumulated deficit of approximately $44,169,063. We
anticipate that we may continue to incur significant operating losses for the
foreseeable future. We may never generate material revenues or achieve
profitability and, if we do achieve profitability, we may not be able to
maintain profitability.
CLINICAL TRIALS FOR OUR PRODUCTS WILL BE EXPENSIVE AND MAY BE TIME CONSUMING,
AND THEIR OUTCOME IS UNCERTAIN, BUT WE MUST INCUR SUBSTANTIAL EXPENSES THAT
MAY NOT RESULT IN ANY VIABLE PRODUCTS
Before obtaining regulatory approval for the commercial sale of a product,
we must demonstrate through pre-clinical testing and clinical trials that a
product candidate is safe and effective for use in humans. Conducting clinical
trials is a lengthy, time-consuming and expensive process. We will incur
substantial expense for, and devote a significant amount of time to pre-
clinical testing and clinical trials. Even with Modrenal(R), which is approved
and marketed by us in the U.K. for the treatment of advanced, post-menopausal
breast cancer, we are conducting a Phase II Clinical Trial in the U.S. in
prostate cancer and a Phase II Clinical Trial in the U.K. for the treatment of
pre-menopausal breast cancer, each of which is a new potential indication for
this approved drug.
Historically, the results from pre-clinical testing and early clinical
trials have often not been predictive of results obtained in later clinical
trials. A number of new drugs have shown promising results in clinical trials,
but subsequently failed to establish sufficient safety and efficacy data to
obtain necessary regulatory approvals. Data obtained from pre-clinical and
clinical activities are susceptible to varying interpretations, which may
delay, limit or prevent regulatory approval. Regulatory delays or rejections
may be encountered as a result of many factors, including changes in
regulatory policy during the period of product development. Regulatory
authorities may require additional clinical trials, which could result in
increased costs and significant development delays. Clofarabine currently is
at a pivotal stage of its development, but many of our other products and
technologies are at various less mature stages of development including l-
gossypol for which we have just commenced a Phase I clinical trial in the U.K.
and gene therapy which is currently in pre-clinical and phase I clinical
testing.
Completion of clinical trials for any product may take several years or
more. The length of time generally varies substantially according to the type,
complexity, novelty and intended use of the product candidate. Our
commencement and rate of completion of clinical trials may be delayed by many
factors, including:
o inability of vendors to manufacture sufficient quantities of materials
for use in clinical trials;
-3-
o slower than expected rate of patient recruitment or variability in the
number and types of patients in a study;
o inability to adequately follow patients after treatment;
o unforeseen safety issues or side effects;
o lack of efficacy during the clinical trials; or
o government or regulatory delays.
OUR INTANGIBLE ASSETS CONSTITUTE A SIGNIFICANT PORTION OF OUR ASSETS AND
RELATE TO ANCILLARY PRODUCTS WHICH MAY NOT BE SUCCESSFULLY COMMERCIALIZED
Our ancillary products include OLIGON and Methylene Blue which are anti-
microbial agents that we acquired in February 2002. As of September 30, 2004,
our intangible assets associated with these products amounted to approximately
$14.3 million and constituted approximately 35% of our total assets and
approximately 57% of our stockholders' equity. We amortize approximately
$1.3 million of this amount each year for the estimated useful life of these
products of approximately 13 years.
We do not currently devote any significant time or resources to the research
and development of OLIGON and Methylene Blue and only intend to do so if and
to the extent we successfully commercialize our lead drugs, clofarabine and
Modrenal(R), over the next two years. If at any time in the future management
determines that the carrying amount of these assets is not recoverable, we
would need to write down the value of these assets. Based on the estimated
useful life of these assets of approximately 13 years and market
considerations, no assurance can be given that there will not be an impairment
of these assets in the future. Any impairment of these assets could result in
a material impact on our future results of operations.
IF OUR DEVELOPMENT AGREEMENT WITH GENZYME DOES NOT PROCEED AS PLANNED WE MAY
INCUR DELAY IN THE COMMERCIALIZATION OF CLOFARABINE, WHICH WOULD DELAY OUR
ABILITY TO GENERATE SALES AND CASH FLOW FROM THE SALE OF CLOFARABINE
Genzyme, and any third party to which Genzyme may grant a sublicense or in
any way transfer its obligations, has primary responsibility for conducting
clinical trials and administering regulatory compliance and approval matters
in the United States and Canada pursuant to the terms of our co-development
agreement with Genzyme. While there are target dates for completion, that
agreement allows Genzyme time to continue working beyond those dates under
certain circumstances. For example, under the co-development agreement, ILEX
(Genzyme's predecessor in interest) was required to complete Pivotal Phase II
Trials not later than December 31, 2002, but ILEX failed to do so. In this
situation the co-development agreement provides that the milestone shall be
adjusted such that Genzyme (successor in interest to ILEX) receives more time
to complete the pivotal trials if the trials are ongoing at December 31, 2002
and progressing to completion within a reasonable time thereafter. Further,
ILEX was required under the co-development agreement to have filed a New Drug
Application by August 31, 2003, subject to extension if ILEX continues to use
its reasonable efforts to promptly complete the filing after August 31, 2003.
ILEX continued to use its reasonable efforts to complete the filing after
August 31, 2003 and in October 2003, Ilex filed the first part of a "rolling
NDA" with the FDA.
If Genzyme fails to meet its obligations under the co-development agreement,
we could lose valuable time in developing clofarabine for commercialization
both in the U.S. and in Europe. We can not provide assurance that Genzyme will
not fail to meet its obligations under the co-development agreement.
Development of compounds to the stage of approval includes inherent risk at
each stage of development that FDA, in its discretion, will mandate a
requirement not foreseeable by us or by Genzyme. There would also be testing
delays if, for example, our sources of drug supply could not produce enough
clofarabine to support the then ongoing clinical trials being conducted. If
this were to occur, it could have a material adverse effect on our ability to
develop clofarabine, obtain necessary regulatory approvals, and generate sales
and cash flow from the sale of clofarabine.
-4-
If delays in completion constitute a breach by Genzyme or there are certain
other breaches of the co-development agreement by Genzyme, then, at our
discretion, the primary responsibility for completion would revert to us, but
there is no assurance that we would have the financial, managerial or
technical resources to complete such tasks in timely fashion or at all.
WE HAVE LIMITED EXPERIENCE IN DEVELOPING PRODUCTS AND MAY BE UNSUCCESSFUL IN
OUR EFFORTS TO DEVELOP PRODUCTS
To achieve profitable operations, we, alone or with others, must
successfully develop, clinically test, market and sell our products. We are
developing clofarabine with Genzyme, our U.S. co-development partner since its
acquisition of ILEX Oncology, which occurred on December 21, 2004. No
assurance can be given that the operational and managerial relations with
Genzyme will proceed favorably or that the timeline for development of
clofarabine will not be elongated now that Genzyme has replaced ILEX as our US
cancer marketing partner. If the U.S. regulatory timeline is elongated, this
could materially and adversely affect the European regulatory timeline for the
approval of clofarabine.
With respect to our co-lead drug, Modrenal(R), we currently have an
Investigational New Drug Application filed with FDA to conduct a Phase II
Clinical Trial in the U.S. to determine efficacy of Modrenal(R) in prostate
cancer patients. This Phase II Clinical Trial is being conducted at the Mass
General Hospital in Boston, MA. To our knowledge, Modrenal(R) has not been
tested in this indication in the past and there can be no assurance that
Modrenal(R) will be an effective therapy in prostate cancer. Further, our
long-term drug development objectives for Modrenal(R) include attempting to
test the drug and get approval in the U.S. for treatment of advanced post-
menopausal breast cancer patients. These trials will take significant time and
resource and no assurance can be given that developing the drug in this
indication will result in a U.S. approval for Modrenal(R) in advanced post-
menopausal breast cancer patients.
Generally, most products resulting from our or our collaborative partners'
product development efforts are not expected to be available for sale for at
least several years, if at all. Potential products that appear to be promising
at early stages of development may not reach the market for a number of
reasons, including:
o discovery during pre-clinical testing or clinical trials that the
products are ineffective or cause harmful side effects;
o failure to receive necessary regulatory approvals;
o inability to manufacture on a large or economically feasible scale;
o failure to achieve market acceptance; or
o preclusion from commercialization by proprietary rights of third parties.
Most of the existing and future products and technologies developed by us
will require extensive additional development, including pre-clinical testing
and clinical trials, as well as regulatory approvals, prior to
commercialization. Our product development efforts may not be successful. We
may fail to receive required regulatory approvals from U.S. or foreign
authorities for any indication. Any products, if introduced, may not be
capable of being produced in commercial quantities at reasonable costs or
being successfully marketed. The failure of our research and development
activities to result in any commercially viable products or technologies would
materially adversely affect our future prospects.
OUR INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND OUR PRODUCTS
REQUIRE OTHER REGULATORY APPROVALS WHICH MAKES IT MORE EXPENSIVE TO OPERATE
OUR BUSINESS
Regulation in General. Virtually all aspects of our business are regulated
by federal and state statutes and governmental agencies in the United States
and other countries. Failure to comply with applicable statutes and government
regulations could have a material adverse effect on our ability to develop and
sell products which would have a negative impact on our cash flow. The
development, testing, manufacturing, processing, quality, safety, efficacy,
packaging, labeling, record-keeping, distribution, storage and advertising of
pharmaceutical products, and disposal of waste products arising from these
activities, are subject to regulation by one or more federal agencies. These
activities are also regulated by similar state and local
-5-
agencies and equivalent foreign authorities. In our material contracts with
vendors providing any portion of these types of services, we seek assurances
that our vendors comply and will continue to maintain compliance with all
applicable rules and regulations. This is the case, for example, with respect
to our contracts with Ferro Pfanstiehl and Penn Pharmaceuticals. No assurance
can be given that our most significant vendors will continue to comply with
these rules and regulations.
FDA Regulation. All pharmaceutical manufacturers in the United States are
subject to regulation by the FDA under the authority of the Federal Food,
Drug, and Cosmetic Act. Under the Act, the federal government has extensive
administrative and judicial enforcement powers over the activities of
pharmaceutical manufacturers to ensure compliance with FDA regulations. Those
powers include, but are not limited to the authority to:
o initiate court action to seize unapproved or non-complying products;
o enjoin non-complying activities;
o halt manufacturing operations that are not in compliance with current
good manufacturing practices prescribed by the FDA;
o recall products which present a health risk; and
o seek civil monetary and criminal penalties.
Other enforcement activities include refusal to approve product applications
or the withdrawal of previously approved applications. Any enforcement
activities, including the restriction or prohibition on sales of products
marketed by us or the halting of manufacturing operations of us or our
collaborators, would have a material adverse effect on our ability to develop
and sell products which would have a negative impact on our cash flow. In
addition, product recalls may be issued at our discretion or by the FDA or
other domestic and foreign government agencies having regulatory authority for
pharmaceutical product sales. Recalls may occur due to disputed labeling
claims, manufacturing issues, quality defects or other reasons. Recalls of
pharmaceutical products marketed by us may occur in the future. Any product
recall could have a material adverse effect on our revenue and cash flow.
FDA Approval Process. We have a variety of products under development,
including line extensions of existing products, reformulations of existing
products and new products. All "new drugs" must be the subject of an FDA-
approved new drug application before they may be marketed in the United
States. All generic equivalents to previously approved drugs or new dosage
forms of existing drugs must be the subject of an FDA-approved abbreviated new
drug application before they may by marketed in the United States. In both
cases, the FDA has the authority to determine what testing procedures are
appropriate for a particular product and, in some instances, has not published
or otherwise identified guidelines as to the appropriate procedures. The FDA
has the authority to withdraw existing new drug application and abbreviated
application approvals and to review the regulatory status of products marketed
under the enforcement policy. The FDA may require an approved new drug
application or abbreviated application for any drug product marketed under the
enforcement policy if new information reveals questions about the drug's
safety or effectiveness. All drugs must be manufactured in conformity with
current good manufacturing practices and drugs subject to an approved new drug
application or abbreviated application must be manufactured, processed,
packaged, held and labeled in accordance with information contained in the new
drug application or abbreviated application.
The required product testing and approval process can take a number of years
and require the expenditure of substantial resources. Testing of any product
under development may not result in a commercially-viable product. Further, we
may decide to modify a product in testing, which could materially extend the
test period and increase the development costs of the product in question.
Even after time and expenses, regulatory approval by the FDA may not be
obtained for any products we develop. In addition, delays or rejections may be
encountered based upon changes in FDA policy during the period of product
development and FDA review. Any regulatory approval may impose limitations in
the indicated use for the product. Even if regulatory approval is obtained, a
marketed product, its manufacturer and its manufacturing facilities are
subject to continual review and periodic inspections. Subsequent discovery of
previously
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unknown problems with a product, manufacturer or facility may result in
restrictions on the product or manufacturer, including withdrawal of the
product from the market.
Foreign Regulatory Approval. Even if required FDA approval has been
obtained with respect to a product, foreign regulatory approval of a product
must also be obtained prior to marketing the product internationally. Foreign
approval procedures vary from country to country and the time required for
approval may delay or prevent marketing. In certain instances, we or our
collaborative partners may seek approval to market and sell some of our
products outside of the United States before submitting an application for
approval to the FDA. The clinical testing requirements and the time required
to obtain foreign regulatory approvals may differ from that required for FDA
approval. Although there is now a centralized European Union approval
mechanism for new pharmaceutical products in place, each European Union
country may nonetheless impose its own procedures and requirements, many of
which are time consuming and expensive, and some European Union countries
require price approval as part of the regulatory process. Thus, there can be
substantial delays in obtaining required approval from both the FDA and
foreign regulatory authorities after the relevant applications are filed.
Changes in Requirements. The regulatory requirements applicable to any
product may be modified in the future. We cannot determine what effect changes
in regulations or statutes or legal interpretations may have on our business
in the future. Changes could require changes to manufacturing methods,
expanded or different labeling, the recall, replacement or discontinuation of
certain products, additional record keeping and expanded documentation of the
properties of certain products and scientific substantiation. Any changes or
new legislation could have a material adverse effect on our ability to develop
and sell products and, therefore, generate revenue and cash flow.
The products under development by us may not meet all of the applicable
regulatory requirements needed to receive regulatory marketing approval. Even
after we expend substantial resources on research, clinical development and
the preparation and processing of regulatory applications, we may not be able
to obtain regulatory approval for any of our products. Moreover, regulatory
approval for marketing a proposed pharmaceutical product in any jurisdiction
may not result in similar approval in other jurisdictions. Our failure to
obtain and maintain regulatory approvals for products under development would
have a material adverse effect on our ability to develop and sell products
and, therefore, generate revenue and cash flow.
WE MAY NOT BE SUCCESSFUL IN RECEIVING ORPHAN DRUG STATUS FOR CERTAIN OF OUR
PRODUCTS OR, IF THAT STATUS IS OBTAINED, FULLY ENJOYING THE BENEFITS OF ORPHAN
DRUG STATUS
Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a rare disease or condition. A disease or condition
that affects populations of fewer than 200,000 people in the United States
generally constitutes a rare disease or condition. We may not be successful in
receiving orphan drug status for certain of our products. Orphan drug
designation must be requested before submitting a new drug application. After
the FDA grants orphan drug designation, the generic identity of the
therapeutic agent and its potential orphan use are publicized by the FDA.
Under current law, orphan drug status is conferred upon the first company to
receive FDA approval to market the designated drug for the designated
indication. Orphan drug status also grants marketing exclusivity in the United
States for a period of seven years following approval of the new drug
application, subject to limitations. Orphan drug designation does not provide
any advantage in, or shorten the duration of, the FDA regulatory approval
process. Although obtaining FDA approval to market a product with orphan drug
status can be advantageous, the scope of protection or the level of marketing
exclusivity that is currently afforded by orphan drug status and marketing
approval may not remain in effect in the future.
Our business strategy involves obtaining orphan drug designation for certain
of the oncology products we have under development. Although clofarabine has
received orphan drug designation with the FDA and EMEA, we do not know whether
any of our other products will receive an orphan drug designation. Orphan drug
designation does not prevent other manufacturers from attempting to develop
similar drugs for the designated indication or from obtaining the approval of
a new drug application for their drug prior to the approval of our new drug
application. If another sponsor's new drug application for a competing drug in
the same indication is approved first, that sponsor is entitled to exclusive
marketing rights if that sponsor has
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received orphan drug designation for its drug. In that case, the FDA would
refrain from approving an application by us to market our competing product
for seven years, subject to limitations. Competing products may receive orphan
drug designations and FDA marketing approval before the products under
development by us.
New drug application approval for a drug with an orphan drug designation
does not prevent the FDA from approving the same drug for a different
indication, or a molecular variation of the same drug for the same indication.
Because doctors are not restricted by the FDA from prescribing an approved
drug for uses not approved by the FDA, it is also possible that another
company's drug could be prescribed for indications for which products
developed by us have received orphan drug designation and new drug application
approval and the same is true with the EMEA in Europe. Prescribing of approved
drugs for unapproved uses, commonly referred to as "off label" sales, could
adversely affect the marketing potential of products that have received an
orphan drug designation and new drug application approval. In addition, new
drug application approval of a drug with an orphan drug designation does not
provide any marketing exclusivity in foreign markets.
The possible amendment of the Orphan Drug Act by the United States Congress
has been the subject of frequent discussion. Although no significant changes
to the Orphan Drug Act have been made for a number of years, members of
Congress have from time to time proposed legislation that would limit the
application of the Orphan Drug Act. The precise scope of protection that may
be afforded by orphan drug designation and marketing approval may be subject
to change in the future.
THE USE OF OUR PRODUCTS MAY BE LIMITED OR ELIMINATED BY PROFESSIONAL
GUIDELINES WHICH WOULD DECREASE OUR SALES OF THESE PRODUCTS AND, THEREFORE,
OUR REVENUE AND CASH FLOWS
In addition to government agencies, private health/science foundations and
organizations involved in various diseases may also publish guidelines or
recommendations to the healthcare and patient communities. These private
organizations may make recommendations that affect the usage of therapies,
drugs or procedures, including products developed by us. These recommendations
may relate to matters such as usage, dosage, route of administration and use
of concomitant therapies. Recommendations or guidelines that are followed by
patients and healthcare providers and that result in, among other things,
decreased use or elimination of products developed by us could have a material
adverse effect on our revenue and cash flows. For example, if clofarabine is
definitively determined in clinical trials to be an active agent to treat
solid tumor cancer patients, but the required dose is high, private
healthcare/science foundations could recommend various other regimens of
treatment which may from time to time show activity at lower doses.
GENERIC PRODUCTS WHICH THIRD PARTIES MAY DEVELOP MAY RENDER OUR PRODUCTS
NONCOMPETITIVE OR OBSOLETE
An increase in competition from generic pharmaceutical products could have
a material adverse effect on our ability to generate revenue and cash flow.
For example, many of the indications in which clofarabine and Modrenal(R), our
co-lead drugs, have demonstrated activity are areas of unmet clinical need,
such as clofarabine's application to pediatric acute leukemias in which,
initially, the drug will be used as a salvage therapy, after other regimens of
treatment have failed. Our lead investigators, who have assisted with the
development of Modrenal(R), envision, initially, that Modrenal(R) would be
used as second or third line therapy, only after patients with advanced post-
menopausal breast cancer receive regimens of tamoxifen and/or aromatase
inhibitors (or similar drug) treatments. If generic drug companies develop a
compound which is more effective than either clofarabine or Modrenal(R) in
these areas of unmet clinical need, or equally as effective but at lower
doses, it could adversely affect our market and/or render our drugs obsolete.
BECAUSE MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER CAPABILITIES AND
RESOURCES, THEY MAY BE ABLE TO DEVELOP PRODUCTS BEFORE US OR DEVELOP MORE
EFFECTIVE PRODUCTS OR MARKET THEM MORE EFFECTIVELY WHICH WOULD LIMIT OUR
ABILITY TO GENERATE REVENUE AND CASH FLOW
Competition in our industry is intense. Potential competitors in the United
States and Europe are numerous and include pharmaceutical, chemical and
biotechnology companies, most of which have substantially greater capital
resources, marketing experience, research and development staffs and
facilities
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than us. Potential competitors for certain indications of our lead drugs
include, with respect to clofarabine, Schering AG, which markets fludarabine,
and certain generic drug companies in Europe which could market fludarabine
upon expiry of the patent protections held by Schering. Potential competitors
with respect to Modrenal(R) include Astra-zeneca and Novartis, which market
tamoxifen and other aromatase inhibitors, which could be used by clinicians as
first and second line therapies in patients with hormone sensitive, advanced,
post-menopausal breast cancer prior to a Modrenal(R) regimen of treatment. No
assurance can be given that the ongoing business activities of our competitors
will not have a material adverse effect on our business prospects and
projections going forward.
Although we seek to limit potential sources of competition by developing
products that are eligible for orphan drug designation and new drug
application approval or other forms of protection, our competitors may develop
similar technologies and products more rapidly than us or market them more
effectively. Competing technologies and products may be more effective than
any of those that are being or will be developed by us. The generic drug
industry is intensely competitive and includes large brand name and multi-
source pharmaceutical companies. Because generic drugs do not have patent
protection or any other market exclusivity, our competitors may introduce
competing generic products, which may be sold at lower prices or with more
aggressive marketing. Conversely, as we introduce branded drugs into our
product portfolio, we will face competition from manufacturers of generic
drugs which may claim to offer equivalent therapeutic benefits at a lower
price. The aggressive pricing activities of our generic competitors could have
a material adverse effect on our operations, revenue and cash flow.
IF WE FAIL TO KEEP UP WITH RAPID TECHNOLOGICAL CHANGE AND EVOLVING THERAPIES,
OUR TECHNOLOGIES AND PRODUCTS COULD BECOME LESS COMPETITIVE OR OBSOLETE
The pharmaceutical industry is characterized by rapid and significant
technological change. We expect that pharmaceutical technology will continue
to develop rapidly, and our future success will depend on our ability to
develop and maintain a competitive position. Technological development by
others may result in products developed by us, branded or generic, becoming
obsolete before they are marketed or before we recover a significant portion
of the development and commercialization expenses incurred with respect to
these products. Alternative therapies or new medical treatments could alter
existing treatment regimes, and thereby reduce the need for one or more of the
products developed by us, which would adversely affect our revenue and cash
flow. See also "--Generic products which third parties may develop may render
our products noncompetitive or obsolete" above.
WE DEPEND ON OTHERS FOR CLINICAL TESTING OF OUR PRODUCTS WHICH COULD DELAY OUR
ABILITY TO DEVELOP PRODUCTS
We do not currently have any internal product testing capabilities. Our
inability to retain third parties for the clinical testing of products on
acceptable terms would adversely affect our ability to develop products. Any
failures by third parties to adequately perform their responsibilities may
delay the submission of products for regulatory approval, impair our ability
to deliver products on a timely basis or otherwise impair our competitive
position. Our dependence on third parties for the development of products may
adversely affect our potential profit margins and our ability to develop and
deliver products on a timely basis.
WE DEPEND ON OTHERS TO MANUFACTURE OUR PRODUCTS AND HAVE NOT MANUFACTURED THEM
IN SIGNIFICANT QUANTITIES
We have never manufactured any products in commercial quantities, and the
products being developed by us may not be suitable for commercial
manufacturing in a cost-effective manner. Manufacturers of products developed
by us will be subject to current good manufacturing practices prescribed by
the FDA or other rules and regulations prescribed by foreign regulatory
authorities. We may not be able to enter into or maintain relationships either
domestically or abroad with manufacturers whose facilities and procedures
comply or will continue to comply with current good manufacturing practices or
applicable foreign requirements. Failure by a manufacturer of our products to
comply with current good manufacturing practices or applicable foreign
requirements could result in significant time delays or our inability to
commercialize or continue to market a product and could have a material
adverse effect on our sales of products and, therefore,
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our cash flow. In the United States, failure to comply with current good
manufacturing practices or other applicable legal requirements can lead to
federal seizure of violative products, injunctive actions brought by the
federal government, and potential criminal and civil liability on the part of
a company and our officers and employees.
WE HAVE LIMITED SALES AND MARKETING CAPABILITY, AND MAY NOT BE SUCCESSFUL IN
SELLING OR MARKETING OUR PRODUCTS
The creation of infrastructure to commercialize oncology products is a
difficult, expensive and time-consuming process. We may not be able to
establish direct or indirect sales and distribution capabilities outside of
the UK or be successful in gaining market acceptance for proprietary products
or for other products. We currently have very limited sales and marketing
capabilities outside of the UK. We currently employ six full-time sales
employees and two full-time marketing employees. To market any products
directly, we will need to develop a more fulsome marketing and sales force
with technical expertise and distribution capability or contract with other
pharmaceutical and/or health care companies with distribution systems and
direct sales forces. To the extent that we enter into co-promotion or other
licensing arrangements, any revenues to be received by us will be dependent on
the efforts of third parties. The efforts of third parties may not be
successful. Our failure to establish marketing and distribution capabilities
or to enter into marketing and distribution arrangements with third parties
could have a material adverse effect on our revenue and cash flows.
IF WE LOSE KEY MANAGEMENT OUR BUSINESS WILL SUFFER
We are highly dependent on our Chief Executive Officer to develop our lead
drug. Dr. Wood has an employment agreement with the Company, dated December 31,
2002, for an initial term of one year which automatically extends for an
additional one year periods until either party gives the other written notice
of termination at least 90 days prior to the end of the current term. Dr. Wood
is not near retirement age and he does not, to our knowledge, plan on leaving
the Company in the near future. Dr. Wood is one of the founders of the company
and he is intimately familiar with the science that underlies our lead drugs
and ancillary technologies. He also maintains a position on the clofarabine
management team that is responsible for all drug development activities
relating to that lead drug, and has been instrumental in the development and
maintenance of our key relationships within the scientific research and
medical communities, and those with our vendors, inventors, co-development
partners and licensors. If Dr. Wood was no longer employed by the company, the
development of our drugs would be significantly delayed and otherwise would be
adversely impacted, and we may be unable to maintain and develop these
important relationships.
NEED FOR ADDITIONAL PERSONNEL
The Company will be required to hire additional qualified scientific and
technical personnel, as well as personnel with expertise in clinical testing
and government regulation to expand our research and development programs and
pursue our product development and marketing plans. There is intense
competition for qualified personnel in the areas of the Company's activities,
and there can be no assurance that the Company will be able to attract and
retain the qualified personnel necessary for the development of its business.
The Company faces competition for qualified individuals from numerous
pharmaceutical and biotechnology companies, universities and research
institutions. The failure to attract and retain key scientific, marketing and
technical personnel would have a material adverse effect on the development of
the Company's business and our ability to develop, market and sell our
products. See also "-- We have limited sales and marketing capability, and may
not be successful in selling or marketing our products" above.
OUR MANAGEMENT AND INTERNAL SYSTEMS MIGHT BE INADEQUATE TO HANDLE OUR
POTENTIAL GROWTH
Our success will depend in significant part on the expansion of our
operations and the effective management of growth. This growth has and will
continue to place a significant strain on our management and information
systems and resources and operational and financial systems and resources. To
manage future growth, our management must continue to improve our operational
and financial systems and expand, train, retain and manage our employee base.
Our management may not be able to manage our growth effectively. If
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our systems, procedures, controls, and resources are inadequate to support our
operations, our expansion would be halted or delayed and we could lose our
opportunity to gain significant market share or the timing with which we would
otherwise gain significant market share. Any inability to manage growth
effectively may harm our ability to institute our business plan. The strain on
our systems, procedures, controls and resources is further heightened by the
fact that our executive office and operational development facilities are
located in separate time zones (New York, New York and Edinburgh, Scotland,
respectively).
WE DEPEND ON PATENT AND PROPRIETARY RIGHTS TO DEVELOP AND PROTECT OUR
TECHNOLOGIES AND PRODUCTS, WHICH RIGHTS MAY NOT OFFER US SUFFICIENT PROTECTION
The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and
processes. Our success will depend on our ability to obtain and enforce
protection for products that we develop under United States and foreign patent
laws and other intellectual property laws, preserve the confidentiality of our
trade secrets and operate without infringing the proprietary rights of third
parties. Through our current license agreements, we have acquired the right to
utilize the technology covered by issued patents and patent applications, as
well as additional intellectual property and know-how that could be the
subject of further patent applications in the future. Several of the original
patents to Modrenal(R) have expired in the United States and foreign
countries. Thus, we and our licensors are pursuing patent applications to
specific uses, combination therapy and dosages or formulations of Modrenal(R).
We cannot guarantee that such applications will result in issued patents or
that such patents if issued will provide adequate protection against
competitors. Patents may not be issued from these applications and issued
patents may not give us adequate protection or a competitive advantage. Issued
patents may be challenged, invalidated, infringed or circumvented, and any
rights granted thereunder may not provide us with competitive advantages.
Parties not affiliated with us have obtained or may obtain United States or
foreign patents or possess or may possess proprietary rights relating to
products being developed or to be developed by us. Patents now in existence or
hereafter issued to others may adversely affect the development or
commercialization of products developed or to be developed by us. Our planned
activities may infringe patents owned by others. Our patents to clofarabine
are licensed from Southern Research Institute. The current projected
expiration date of the license is March 2021. These patents cover
pharmaceutical compositions and methods of using clofarabine. We cannot
guarantee that these patents would survive an attack on their validity or that
they will provide a competitive advantage over our competitors. Moreover, we
cannot guarantee that Southern Research Institute was the first to invent the
subject matter of these patents. In addition, we are aware of a third party
patent which is directed to the treatment of chronic myeloid leukemia ("CML")
using specific doses of clofarabine. We do not believe that we will infringe
this patent. If this patent is asserted against us, even though we may be
successful in defending against such an assertion, our defense would require
substantial financial and human resources. And, we may need a license to this
patent to use the claimed dose in the treatment of CML. However, we do not
know if such a license is available at commercially reasonable terms, if at
all.
We could incur substantial costs in defending infringement suits brought
against us or any of our licensors or in asserting any infringement claims
that we may have against others. We could also incur substantial costs in
connection with any suits relating to matters for which we have agreed to
indemnify our licensors or distributors. An adverse outcome in any litigation
could have a material adverse effect on our ability to sell products or use
patents in the future. In addition, we could be required to obtain licenses
under patents or other proprietary rights of third parties. These licenses may
not be made available on terms acceptable to us, or at all. If we are required
to, and do not obtain any required licenses, we could be prevented from, or
encounter delays in, developing, manufacturing or marketing one or more
products.
We also rely upon trade secret protection for our confidential and
proprietary information. Others may independently develop substantially
equivalent proprietary information and techniques or gain access to our trade
secrets or disclose our technology. We may not be able to meaningfully protect
our trade secrets which could limit our ability to exclusively produce
products.
We require our employees, consultants, members of the scientific advisory
board and parties to collaborative agreements to execute confidentiality
agreements upon the commencement of employment or consulting relationships or
a collaboration with us. These agreements may not provide meaningful
protection
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of our trade secrets or adequate remedies in the event of unauthorized use or
disclosure of confidential and proprietary information.
BECAUSE WE HAVE INTERNATIONAL OPERATIONS, WE WILL BE SUBJECT TO RISKS OF
CONDUCTING BUSINESS IN FOREIGN COUNTRIES
We have the right to manufacture, market and distribute our lead drugs,
clofarabine and Modrenal(R), in territories outside of the U.S. Specifically,
we currently market Modrenal(R) in the United Kingdom and upon receiving
European approval for clofarabine, we intend to market the drug throughout
Europe. Further, nearly half of our employees are employed by Bioenvision
Limited, our wholly-owned subsidiary with offices in Edinburgh, Scotland.
Because we have international operations in the conduct of our business, we
are subject to the risks of conducting business in foreign countries,
including:
o difficulty in establishing or managing distribution relationships;
o different standards for the development, use, packaging, pricing and
marketing of our products and technologies;
o our inability to locate qualified local employees, partners, distributors
and suppliers;
o the potential burden of complying with a variety of foreign laws, trade
standards and regulatory requirements, including the regulation of
pharmaceutical products and treatment; and
o general geopolitical risks, such as political and economic instability,
changes in diplomatic and trade relations, and foreign currency risks.
We do not engage in forward currency transactions which means we are
susceptible to fluctuations in the U.S. dollar against foreign currencies such
as the pound sterling. Accordingly, as the value of the dollar becomes weaker
against the pound sterling, ongoing services provided by our UK employees,
Cancer Research Organizations and other service providers become more
expensive to us. No assurance can be given that the U.S. dollar will not
continue to weaken which could have a material adverse effect on the costs
associated with our drug development activities.
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS AND WE MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING WHICH COULD AFFECT OUR ABILITY TO OPERATE AS A GOING
CONCERN
As of September 30, 2004, we had stockholders' equity of approximately
$24,867,000 and net working capital of approximately $16,396,000. However, we
may need additional financing to continue to fund the research and development
and marketing programs for our products and to generally expand and grow our
business. For example, we will need to employ a European sales force within
the next twelve months to capitalize on the commercial potential for
clofarabine and Modrenal(R) if and to the extent our lead drugs are at market
in Europe by mid-2005. To the extent that we will be required to fund
operating losses, our financial position would deteriorate. There can be no
assurance that we will be able to find significant additional financing at all
or on terms favorable to us. If equity securities are issued in connection
with a financing, dilution to our stockholders would result, and if additional
funds are raised through the incurrence of debt, we may be subject to
restrictions on our operations and finances. Furthermore, if we do incur debt,
we may be limiting our ability to repurchase capital stock, engage in mergers,
consolidations, acquisitions and asset sales, or alter our lines of business
or accounting methods, even though these actions would otherwise benefit our
business.
If adequate financing is not available, we may be required to delay, scale
back or eliminate some of our research and development programs, to relinquish
rights to certain technologies or products, or to license third parties to
commercialize technologies or products that we would otherwise seek to
develop. Any inability to obtain additional financing, if required, would have
a material adverse effect on our ability to continue our operations and
implement our business plan.
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THE PRICES WE CHARGE FOR OUR PRODUCTS AND THE LEVEL OF THIRD-PARTY
REIMBURSEMENT MAY DECREASE AND OUR REVENUES COULD DECREASE
Our ability to commercialize products successfully depends in part on the
price we may be able to charge for our products and on the extent to which
reimbursement for the cost of our products and related treatment will be
available from government health administration authorities, private health
insurers and other third-party payors. We believe that Government officials
and private health insurers are increasingly challenging the price of medical
products and services. Significant uncertainty exists as to the pricing
flexibility which distributors will have with respect to newly approved health
care products as well as the reimbursement status for such approved healthcare
products.
Third-party payors may attempt to control costs further by selecting
exclusive providers of their pharmaceutical products. If third-party payors
were to make this type of arrangement with one or more of our competitors,
they would not reimburse patients for purchasing our competing products. For
example, if a third-party payor in the U.K. were to pay patients for regimens
of aromatase inhibitor treatment but not treatments of Modrenal(R), this would
cause a decline in sales of Modrenal(R). This lack of reimbursement would
diminish the market for products developed by us and would have a material
adverse effect on us.
OUR PRODUCTS MAY BE SUBJECT TO RECALL
Product recalls may be issued at our discretion or by the FDA, the FTC or
other government agencies having regulatory authority for product sales.
Product recalls, if any in the future, may harm our reputation and cause us to
lose development opportunities, or customers or pay refunds. Products may need
to be recalled due to disputed labeling claims, manufacturing issues, quality
defects, or other reasons. We do not carry any insurance to cover the risk of
potential product recall. Any product recall could have a material adverse
effect on us, our prospects, our financial condition and results of
operations.
WE MAY FACE EXPOSURE FROM PRODUCT LIABILITY CLAIMS AND PRODUCT LIABILITY
INSURANCE MAY NOT BE SUFFICIENT TO COVER THE COSTS OF OUR LIABILITY CLAIMS
RELATED TO TECHNOLOGIES OR PRODUCTS
We face exposure to product liability claims if the use of our technologies
or products or those we license from third parties is alleged to have resulted
in adverse effects to users of such products. Product liability claims may be
brought by clinical trial participants, although to date, no such claims have
been brought against us. If any such claims were brought against us, the cost
of defending such claims may adversely affect our business. Regulatory
approval for commercial sale of our products does not mitigate product
liability risks. Any precautions we take may not be sufficient to avoid
significant product liability exposure. Although we have obtained product
liability and clinical trial insurance on our technologies and products at
levels with which management deems reasonable, no assurance can be given that
this insurance will cover any particular claim or that we have obtained an
appropriate level of liability insurance coverage for our development
activities. We currently maintain three million dollars per year, claims made
product liability insurance coverage which we believe is adequate. Existing
coverage may not be adequate as we further develop our products. In the
future, adequate insurance coverage or indemnification by collaborative
partners may not be available in sufficient amounts, or at acceptable costs,
if at all. To the extent that product liability insurance, if available, does
not cover potential claims, we will be required to self-insure the risks
associated with those claims. The successful assertion of any uninsured
product liability or other claim against us could limit our ability to sell
our products or could cause monetary damages. In addition, future product
labeling may include disclosure of additional adverse effects, precautions and
contra indications, which may adversely impact product sales. The
pharmaceutical industry has experienced increasing difficulty in maintaining
product liability insurance coverage at reasonable levels, and substantial
increases in insurance premium costs, in many cases, have rendered coverage
economically impractical.
THE PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE AND SUBJECT TO WIDE
FLUCTUATIONS
The market price of the securities of biotechnology companies has been
especially volatile. Thus, the market price of our Common Stock is likely to
be subject to wide fluctuations. For the twelve month period ended December 31,
2004, our closing stock price has ranged from a high of $11.75 to a low of
$4.10. If our
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revenues do not grow or grow more slowly than we anticipate, or, if operating
or capital expenditures exceed our expectations and cannot be adjusted
accordingly, or if some other event adversely affects us, the market price of
our Common Stock could decline. In addition, if the market for pharmaceutical
and biotechnology stocks or the stock market in general experiences a loss in
investor confidence or otherwise fails, the market price of our Common Stock
could fall for reasons unrelated to our business, results of operations and
financial condition. The market price of our stock also might decline in
reaction to events that affect other companies in our industry even if these
events do not directly affect us. In the past, companies that have experienced
volatility in the market price of their stock have been the subject of
securities class action litigation. If we were to become the subject of
securities class action litigation, it could result in substantial costs and a
diversion of management's attention and resources.
CERTAIN EVENTS COULD RESULT IN A DILUTION OF HOLDERS OF OUR COMMON STOCK
As of December 23, 2004, we had 32,482,949 shares of Common Stock
outstanding, 2,250,000 shares of Series A Convertible Preferred Stock
outstanding which are currently convertible into 4,500,000 shares of Common
Stock and common stock equivalents, and warrants and stock options,
convertible or exercisable into 11,389,363 shares of our Common Stock. The
exercise and conversion prices of the common stock equivalents range from
$0.74 to $8.80 per share. We have also reserved for issuance an aggregate of
4,500,000 shares of Common Stock for a stock option plan for our employees.
Historically, from time to time, we have awarded our Common Stock to officers
of the Company, in lieu of cash compensation, although we do not expect to do
so in the future. As of January 3, 2005, (i) we have 30,164,746 shares of
common stock registered under the Securities Act and (ii) the sale of shares
of Common Stock underlying 4,500,000 options are registered under the
Securities Act on Form S-8. The future resale of these shares and shares
underlying stock options and warrants will result in a dilution to your
percentage ownership of our Common Stock and could adversely affect the market
price of our Common Stock.
The terms of our Series A Convertible Preferred Stock include antidilution
protection upon the occurrence of sales of our Common Stock below certain
prices, stock splits, redemptions, mergers and other similar transactions. If
one or more of these events occurs the number of shares of our Common Stock
that may be acquired upon conversion or exercise would increase. If converted
or exercised, these securities will result in a dilution to your percentage
ownership of our Common Stock. The resale of many of the shares of Common
Stock which underlie these options and warrants are registered under this
prospectus and the sale of such shares may adversely affect the market price
of our Common Stock.
FORWARD LOOKING STATEMENTS
Our disclosure and analysis in this prospectus, the applicable prospectus
supplement and the documents incorporated by reference into this prospectus
and the applicable prospectus supplement contain forward-looking statements,
which provide information regarding our current expectations, plans,
objectives and forecasts of future events. Words such as "may," "will,"
"believe," "estimate," "anticipate," "plan," "expect," "may affect," and
"intend", or statements concerning "potential" or "opportunity" and similar
expressions or the negative thereof, are intended to identify forward-looking
statements, but the absence of these words does not mean that a statement is
not forward-looking. Forward-looking statements include, without limitation:
o statements about our drug development and commercialization goals and
expectations;
o potential regulatory approvals;
o our plans for and anticipated results of our clinical development
activities;
o the potential advantage of our drug candidates;
o statements about our future capital requirements, the sufficiency of our
capital resources to meet those requirements and the expected composition
of our capital resources; and
o other statements that are not historical facts.
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Forward looking statements are based on the judgment of management at the
time the statements are made. Inaccurate assumptions and known and unknown
risks and uncertainties can affect the accuracy of forward-looking statements.
Our actual results could differ materially from those stated in or implied by
forward-looking statements for a number of reasons, including the risks
described in the sections of this prospectus and the applicable prospectus
entitled "Risk Factors," in our other public filings, press releases and
statements by our management. Other factors besides those described in this
prospectus, the applicable prospectus supplement and in our other public
filings, press releases and statements by our management could also affect
actual results.
You should not unduly rely on these forward-looking statements, which speak
only as of the date of this prospectus or the applicable prospectus
supplement. We undertake no obligation to publicly update any forward-looking
statement to reflect new information, events or circumstances, whether
anticipated or unanticipated, or to conform the statement to actual results or
changes in our expectations. You should, however, review the factors, risks
and other information we provide in the reports we file from time to time with
the SEC.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we
intend to use any net proceeds from the sale of Common Stock offered by this
prospectus for additional working capital and other general corporate
purposes, including, but not limited to, further development of our lead
products and increased sales and marketing expenses related to the commercial
launch of our products. Until we have used the net proceeds, we may invest
them in short-term marketable securities.
DESCRIPTION OF CAPITAL STOCK
DESCRIPTION OF COMMON STOCK
Number of Authorized and Outstanding Shares. Our Certificate of
Incorporation authorizes the issuance of 70,000,000 shares of common stock,
$.001 par value per share, of which 32,482,949 shares were outstanding on
December 23, 2004. All of the outstanding shares of common stock are fully
paid and non-assessable.
Voting Rights. Holders of shares of common stock are entitled to one vote
for each share on all matters to be voted on by the stockholders. Holders of
common stock have no cumulative voting rights. Accordingly, the holders of a
simple majority of the outstanding common stock and Series A convertible
preferred stock, voting together as a class at a stockholders meeting at which
a quorum is present, can elect all of the directors nominated for election at
the meeting.
Other. Holders of common stock have no preemptive rights to purchase our
common stock. There are no conversion rights or redemption or sinking fund
provisions with respect to the common stock.
Transfer Agent. Shares of common stock are registered at the transfer agent
and are transferable at such office by the registered holder (or duly
authorized attorney) upon surrender of the common stock certificate, properly
endorsed. No transfer shall be registered unless we are satisfied that such
transfer will not result in a violation of any applicable federal or state
securities laws. The transfer agent for our common stock is American Stock
Transfer & Trust Company, 59 Maiden Lane, New York, New York 10038.
DESCRIPTION OF PREFERRED STOCK
Number of Authorized Shares. Our certificate of incorporation authorizes
the issuance of up to 20,000,000 shares of preferred stock, par value $.001
per share, in one or more series with such limitations and restrictions as may
be determined in the sole discretion of our board of directors, with no
further authorization by stockholders required for the creation and issuance
thereof.
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We have designated 5,920,000 shares of our preferred stock as Series A
convertible preferred stock, of which 2,225,000 shares were issued and
outstanding as of December 23, 2004. The holders of the Series A convertible
preferred stock vote as a single class with the common stock, on an as-
converted basis, on all matters upon which the holders of the common stock are
entitled to vote. Each outstanding share of Series A convertible preferred
stock may currently be converted into two shares of common stock, at the
conversion price of $1.50 per share. The shares of Series A convertible
preferred stock shall be automatically convertible into shares of common stock
if the market price of the common stock after one year from the date of
issuance is $10.00 or more for 30 consecutive trading days and the trading
volume is at least 150,000 shares per trading day during such 30-day period.
Holders of Series A convertible preferred stock have a liquidation preference
over holders of common stock of $3.00 per share. Holders of the Series A
convertible preferred stock are entitled to an annual 5% dividend which may be
paid in cash or additional shares of common stock in our sole discretion.
Our charter also authorizes our board of directors to increase the number of
shares of preferred stock we may issue without approval of common
stockholders. Preferred stock may be issued in one or more series, the terms
of which may be determined without further action by common stockholders.
These terms may include preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption. The issuance of any preferred stock could materially
adversely affect the rights of holders of our common stock, and therefore
could reduce its value. In addition, specific rights granted to future holders
of preferred stock could be used to restrict our ability to merge with, or
sell assets to, a third party. The power of the board of directors to issue
preferred stock could make it more difficult, delay, discourage, prevent or
make it more costly to acquire or effect a change in control, thereby
preserving the current stockholders' control.
DELAWARE LAW AND CERTAIN BY-LAW PROVISIONS
Certain provisions of our by-laws are intended to strengthen our board of
directors' position in the event of a hostile takeover attempt. These by-law
provisions have the following effects:
o they provide that only business brought before the annual meeting by our
board of directors or by a stockholder who complies with the procedures
set forth in the by-laws may be transacted at an annual meeting of
stockholders; and
o they establish a procedure for our board of directors to fix the record
date whenever stockholder action by written consent is undertaken.
Furthermore, our Company is subject to the provisions of Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, the
statute prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. For purposes of Section 203, a "business combination"
includes a merger, asset sale or other transaction resulting in a financial
benefit to the interested stockholder, and an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years prior, did own, 15% or more of the corporation's voting stock.
PLAN OF DISTRIBUTION
We may sell our securities from time to time by any method permitted by the
Securities Act of 1933, including in the following ways:
o through one or more underwriters on a firm commitment or best efforts
basis;
o directly to one or more purchasers;
o through agents;
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o through broker-dealers, who may act as agents or principals, including a
block trade in which a broker or dealer so engaged will attempt to sell
the securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
o in privately negotiated transactions; and
o in any combination of these methods of sale.
The applicable prospectus supplement will set forth:
o the specific terms of the offering of our securities, including the name
or names of any underwriters, dealers or agents;
o the purchase price of the securities and the proceeds to us from the
sale;
o any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation;
o the initial offering price to the public and any discounts or concessions
allowed or reallowed or paid to dealers; and
o the name of any securities exchange on which the securities may be
listed.
Any public offering price, discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
We expect that any common stock sold pursuant to a prospectus supplement
will be listed on the Nasdaq National Market.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed), at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices or at negotiated prices.
Offers to purchase our securities may be solicited by agents designated by
us from time to time. Broker-dealers or agents may receive compensation in the
form of commissions, discounts or concessions from us. Broker-dealers or
agents may also receive compensation from the purchasers of the securities for
whom they sell as principals. Each particular broker-dealer will receive
compensation in amounts negotiated in connection with the sale, which might be
in excess of customary commissions. Broker-dealers or agents and any other
participating broker-dealers participating in the distribution of our
securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the securities
may be deemed to be underwriting discounts and commissions.
If required under applicable state securities laws, we will sell the
securities only through registered or licensed brokers or dealers. In
addition, in some states, we may not sell securities unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and complied with.
If the securities are sold by means of an underwritten offering, we will
execute an underwriting agreement with an underwriter or underwriters, and the
names of the specific managing underwriter or underwriters, as well as any
other underwriters, and the terms of the transaction, including commissions,
discounts and any other compensation of the underwriters and dealers, if any,
will be set forth in the applicable prospectus supplement, which will be used
by the underwriters to make resales of the securities. Under agreements into
which we may enter, underwriters, dealers and agents who participate in the
distribution of the securities may be entitled to indemnification by us
against some liabilities, including liabilities under the Securities Act.
If we use underwriters for an offering of securities, the underwriters may
acquire the securities for their own accounts. The underwriters may resell the
securities from time to time in one or more transactions at a fixed price or
prices, which may be changed, at varying prices determined by the underwriters
at the time of sale, or at negotiated prices. We also may, from time to time,
authorize underwriters acting as our agents to offer and sell the securities
upon the terms and conditions as will be set forth in the applicable
prospectus
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supplement. In connection with the sale of the securities, underwriters may be
deemed to have received compensation from us in the form of underwriting
discounts or commissions and also may receive commissions from purchasers of
the securities. Underwriters may sell the securities to or through dealers,
who may receive compensation in the form of discounts, concessions from the
underwriters and/or commissions from the purchasers of the securities.
Any underwriting compensation paid by us to underwriters or agents in
connection with any offering of the securities and any discounts, concessions
or commissions allowed by underwriters to participating dealers will be set
forth in the applicable prospectus supplement. Underwriters, dealers and
agents participating in the distribution of our securities may be deemed to be
underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the securities may be deemed to be
underwriting discounts and commissions.
If so indicated in the applicable prospectus supplement, we may authorize
underwriters, dealers or agents to solicit offers from certain types of
institutions to purchase securities from us at the public offering price set
forth in the applicable prospectus supplement pursuant to delayed delivery
contracts providing for payment and delivery on a future date. Institutions
with which delayed delivery contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions, and other institutions. The
applicable prospectus supplement will set forth the commission payable for
solicitation of such offers.
Our securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by the managing
underwriters. If any underwriters are utilized in the sale of the securities,
the underwriting agreement will provide that the obligations of the
underwriters are subject to specified conditions precedent. If we sell our
securities to one or more underwriters on a firm commitment basis, then the
underwriters will be obligated to purchase all of the securities offered if
any are purchased.
We may grant to the underwriters options to purchase additional securities
to cover over-allotments, if any, at the public offering price with additional
underwriting discounts or commissions, as may be set forth in the applicable
prospectus supplement. If we grant any over-allotment option, the terms of the
over-allotment option will be set forth in the applicable prospectus
supplement.
In connection with any offering, persons participating in the offering, such
as any underwriters, may purchase and sell the securities in the open market.
These transactions may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of bids or purchases for the
purpose of preventing or retarding a decline in the market price of the
securities and syndicate short positions involve the sale by underwriters of a
greater number of securities than they are required to purchase from us in the
offering. Underwriters also may impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the securities sold in the offering for their account may be reclaimed by the
syndicate if the securities are repurchased by the syndicate in stabilizing or
covering transactions. These activities may stabilize, maintain or otherwise
affect the market price of the securities, which may be higher than the price
that might prevail in the open market, and these activities, if commenced, may
be discontinued at any time.
Any underwriters, dealers or agents involved in any distribution or sale of
our securities may be customers of, engage in transactions with or perform
services for us from time to time.
We will bear all costs, expenses and fees in connection with the
registration of the securities as well as the expense of all commissions and
discounts, if any, attributable to the sales of the securities by us.
LEGAL MATTERS
Unless otherwise indicated in the applicable prospectus supplement, the
validity of the shares of common stock offered by this prospectus and other
legal matters relating to this offering will be passed on by Paul, Hastings,
Janofsky & Walker LLP, New York, New York.
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EXPERTS
Our auditors are Grant Thornton LLP. Our consolidated financial statements
as at and for the years ended June 30, 2004 and June 30, 2003 included in our
annual report on Form 10-KSB for the year ended June 30, 2004 and incorporated
by reference herein, have been incorporated by reference herein in reliance
upon the report of Grant Thornton LLP, independent registered public
accountants, given on the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any materials we have filed
with the SEC at the SEC's public reference rooms. The SEC also maintains a web
site (http://www.sec.gov) that contains reports, proxy statements and other
information concerning us. Please call the SEC at 1-800-SEC-0330 for
information concerning the operations of the public reference rooms or visit
the SEC at the following locations:
Public Reference Room Midwest Regional Office
450 Fifth Street, N.W. Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400
Chicago, Illinois 60661-2511
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act to register the securities to be sold in this offering. This
prospectus, which is part of the registration statement, does not contain all
of the information set forth in the registration statement or the exhibits and
schedules to the registration statement. For further information regarding
Bioenvision and our securities, please refer to the registration statement and
the documents filed as exhibits to the registration statement.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to those filed documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information.
The following documents, which have been filed with the SEC, are hereby
incorporated by reference:
o Our definitive proxy statement dated October 28, 2004, relating to our
December 2004 annual meeting of stockholders, filed on October 28, 2004;
o Our annual report on Form 10-KSB for the year ended June 30, 2004 filed
on September 24, 2004; and
o Our quarterly report on Form 10-QSB for the quarter ended September 30,
2004, filed on November 15, 2004.
All other reports and documents subsequently filed by us with the SEC
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
after the date of this prospectus and prior to the termination of the offering
are deemed incorporated by reference into this prospectus and a part hereof
from the date of filing of those documents. Any statement contained in any
document incorporated by reference shall be deemed to be modified or
superseded for the purposes of this prospectus to the extent that a statement
contained in a later document modifies or supersedes such statement. Any
statements so modified or superseded shall not be deemed to constitute a part
of this prospectus, except as modified or superseded.
We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon written or oral request of
such person, a copy of any or all of the documents referred to
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above which have been or may be incorporated by reference into this prospectus
(other than the exhibits to such documents). Requests for such documents
should be directed to Bioenvision Inc., 345 Park Avenue, 41st floor, New York,
New York 10154, Attention: David P. Luci (telephone: (212) 750-6700).
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You should
not rely on any unauthorized information. This prospectus does not offer to
sell or solicit an offer to buy any shares in any jurisdiction in which it is
unlawful. The information in this prospectus is current as of the date on the
cover.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our bylaws provide that directors and officers shall be indemnified by us to
the fullest extent authorized by the Delaware General Corporation Law, against
all expenses and liabilities reasonably incurred in connection with services
for us or on our behalf.
Insofar as indemnification for liabilities arising under the Securities Act
might be permitted to directors, officers or persons controlling our company
under the provisions described above, we have been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
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