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ALEXION PHARMACEUTICALS, INC.
960,831 Shares
Common Stock
This Prospectus relates to the resale of shares of Common Stock, $.0001 par
value per share (the "Common Stock") of Alexion Pharmaceuticals, Inc. (the
"Company" or "Alexion") from time to time for the account of the Selling
Stockholders (the "Selling Stockholders"). Certain of the shares of Common Stock
registered hereby are issuable upon the exercise of warrants (the "Warrants")
owned by certain of the Selling Stockholders. The Company will not receive any
of the proceeds from the sale of the Common Stock by the Selling Stockholders.
The proceeds from the exercise of the Warrants, if any, will be received by the
Company. See "Use of Proceeds."
Of the 960,831 shares of Common Stock offered hereby, 670,000 were issued
by the Company in connection with a private placement in March 1998, 70,831
shares of Common Stock were issued as a dividend on the Company's Series B
Convertible Preferred Stock, $.0001 par value per share (the "Series B Preferred
Stock") and the remaining 220,000 shares of Common Stock are issuable upon the
exercise of the Warrants at an exercise price of $9.90. The Warrants were
originally issued to Josepthal Lyon & Ross Incorporated in connection with their
acting as underwriters of the Company's initial public offering and were later
distributed to certain employees of the underwriter.
The distribution of the Common Stock by the Selling Stockholders may be
effected from time to time in one or more transactions (which may involve block
transactions) in the over-the-counter market (including the Nasdaq National
Market) or any exchange on which the Common Stock may then be listed, in
negotiated transactions, through the writing of options on shares (whether such
options are listed on an options exchange or otherwise), or a combination of
such methods of sale, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholders
and/or purchasers of shares for whom they may act as agent (which compensation
may be in excess of customary commissions). The Selling Stockholders may also
sell the shares of Common Stock pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), or may pledge shares
as collateral for margin accounts and such shares could be resold pursuant to
the terms of such accounts. The Selling Stockholders and any broker-dealers that
act in connection with the sale of Common Stock might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commissions received by them and any profit on the resale of the shares might be
deemed to be underwriting discounts or commissions under the Securities Act. The
Selling Stockholders may agree to indemnify any agent, dealer or broker-dealer
that participates in transactions involving sales of the Common Stock against
certain liabilities, including liabilities arising under the Securities Act.
The Company's Common Stock trades on the Nasdaq National Market under the
symbol "ALXN." On March 6, 1998, the closing sale price of the Common Stock was
$15.00 per share.
All expenses of the registration of securities covered by this Prospectus
are to be borne by the Company, except that the Selling Stockholders will pay
underwriting discounts, selling commissions, and fees and the expenses, if any,
of counsel or other advisers to the Selling Stockholders.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" LOCATED ON PAGE 5.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is March 17, 1998
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No person is authorized in connection with the offering made hereby to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus, and any information or representation not
contained or incorporated herein must not be relied upon as having been
authorized by the Company or the Selling Stockholders. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy by any person
in any jurisdiction in which it is unlawful for such person to make such offer
or solicitation. Neither the delivery of this Prospectus at any time nor any
sale made hereunder shall under any circumstance imply that the information
contained herein is correct as of any date subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Proxy statements, reports and other information
concerning the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048, and
500 West Madison Street, Chicago, Illinois 60661, and copies of such material
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in New
York, New York and Chicago, Illinois, at prescribed rates. Copies of such
information may also be inspected at the reading room of the library of the
National Association of Securities Dealers, Inc., 1735 K Street, Washington,
D.C. 20006. This Prospectus does not contain all of the information set forth in
the Registration Statement of which this Prospectus is a part and exhibits
thereto which the Company has filed with the Commission under the Securities Act
of 1933 as amended (the "Securities Act") and to which reference is hereby made.
The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding the Company and other registrants that file
electronically with the Commission.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any contract, agreement or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement or other document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. Copies of the Registration
Statement together with exhibits may be inspected at the offices of the
Commission as indicated above without charge and copies thereof may be obtained
therefrom upon payment of a prescribed fee.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
This Prospectus (including the documents incorporated by reference herein)
contains certain forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) and information relating to
Alexion that are based on the beliefs of the management of Alexion, as well as
assumptions made by and information currently available to the management of
Alexion. When used in this Prospectus, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect" and similar expressions are intended
to identify forward-looking statements. Such statements reflect the current
views of Alexion with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in such forward-looking statements. For a discussion of such risks,
see "Risk Factors." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. Alexion does
not undertake any obligation to publicly release any revisions to these forward
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Alexion Pharmaceuticals, Inc. are
incorporated herein by reference and made a part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended July
31, 1997, as amended by Form 10-K/A, dated November 14, 1997.
2. The Company's Quarterly Report on Form 10-Q for the quarterly period
ended October 31, 1997, dated December 9, 1997.
3. The Company's Quarterly Report on Form 10-Q for the quarterly period
ended January 31, 1998, dated March 13, 1998.
4. The Company's Current Report on Form 8-K, dated March 6, 1998.
In addition to the foregoing, all documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, prior to the filing of a post-effective amendment
indicating that all of the securities offered hereunder have been sold or
deregistering all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Registration Statement and to be part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated by reference in this Registration Statement shall be deemed to be
modified or superseded for purposes of this Registration Statement to the extent
that a statement contained herein or in any subsequently filed document that is
also incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from:
Alexion Pharmaceuticals, Inc., 25 Science Park, New Haven, CT 06511, Attention:
David W. Keiser, Executive Vice President and Chief Operating Officer, (203)
776-1790. The Company undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon written or oral request of such person,
a copy of any or all of the foregoing documents incorporated by reference
herein, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere or incorporated by reference
in this Prospectus. Investors should carefully consider the information set
forth under the heading "Risk Factors."
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in, or incorporated
by reference in, this Prospectus.
THE COMPANY
Alexion Pharmaceuticals, Inc. ("Alexion" or the "Company") is a
biopharmaceutical company engaged in research and the development of proprietary
immunoregulatory compounds for the treatment of autoimmune and cardiovascular
diseases. The Company is developing C5 complement inhibitors ("C5 Inhibitors")
and Apogens ("Apogens"), two classes of potential therapeutic compounds designed
to selectively target specific disease-causing segments of the immune system.
The Company believes that its C5 Inhibitors and Apogens, which are based upon
distinct immunoregulatory technologies, may have the advantage of achieving a
higher level of efficacy with the potential for reduced side effects when
compared to existing therapeutic approaches. In recent Phase I/II and Phase IIa
clinical trials involving 35 cardiopulmonary bypass patients, Alexion's lead C5
Inhibitor, 5G1.1-SC, has been demonstrated to significantly block complement
activation and provide a substantial anti-inflammatory effect. The Company also
filed two Investigational New Drug ("IND") applications for its second C5
Inhibitor, 5G1.1, in December 1997 so as to commence clinical studies in
rheumatoid arthritis and lupus patients. In early 1998, the Company filed an IND
application for its lead Apogen product candidate, MP4, for the treatment of
multiple sclerosis patients which is expected to enter clinical trials in the
first half of 1998. The Company will need to undertake and complete further
tests in order to confirm its belief regarding the safety and efficacy of its
product candidates, and there can be no assurance as to the results of any such
tests, or that such tests will commence on the expected date.
As an outgrowth of its core immunoregulatory technologies, the Company is
developing immunoprotected materials for transplantation and gene therapy. In
collaboration with United States Surgical Corporation ("US Surgical"), Alexion
is developing non-human cell and organ UniGraft products which are designed for
transplantation into humans. Further, in a collaboration with Genetic Therapy
Inc., a subsidiary of Novartis ("GTI/Novartis"), which was initiated in December
1996, Alexion is developing immunoprotected gene transfer systems which are
designed to enable the injectable delivery of therapeutic genes to patients'
cells. See "Recent Developments" below.
The Human Immune System. The role of the human immune system is to defend
the body from attack or invasion by infectious agents or pathogens. This is
accomplished through a complex system of proteins and cells, primarily
complement proteins, antibodies and various types of white blood cells, each
with a specialized function. Under normal circumstances, complement proteins,
together with antibodies and white blood cells, act beneficially to protect the
body by removing pathogenic microorganisms, cells containing antigens (foreign
proteins), and disease-causing immune complexes (combinations of antigens and
antibodies). However, any number of stimuli, including antibodies, pathogenic
microorganisms, injured tissue, normal tissue, proteases (inflammatory enzymes)
and artificial surfaces can locally activate complement proteins in a cascade of
enzymatic and biochemical reactions (the "complement cascade") to form
inflammatory byproducts leading, for example, in the case of rheumatoid
arthritis, to severe joint inflammation and, in the case of cardiovascular
disorders such as myocardial infarction (death of heart tissue), to additional
significant damage to the heart tissue. T-cells, a type of white blood cell,
play a critical role in the normal immune response by recognizing cells
containing antigens, initiating the immune response, attacking the
antigen-containing tissue and directing the production of antibodies directed at
the antigens, all of which lead to the elimination of the antigen-bearing
foreign organism. When a T-cell mistakenly attacks host tissue, the T-cell may
cause an inflammatory response resulting in tissue destruction and severe
autoimmune disease leading, for example, in the case of multiple sclerosis, to
severe and crippling destruction of nerve fibers in the brain.
C5 Inhibitors. Alexion is developing specific and potent biopharmaceutical
C5 Inhibitors which are designed to intervene in the complement cascade at what
the Company believes to be the optimal point so that the disease-causing actions
of complement proteins generally are inhibited while the normal
disease-preventing functions of complement proteins generally remain intact. In
laboratory and animal models of human disease, Alexion has shown that C5
Inhibitors are effective in substantially preventing inflammation during
cardiopulmonary bypass ("CPB"), limiting myocardial infarction during coronary
ischemia and reperfusion, enhancing survival in lupus and preserving kidney
function in nephritis (kidney inflammation) and reducing the incidence and
severity of inflammation and joint damage in rheumatoid arthritis. The Company
is developing two C5 Inhibitors, a short acting humanized (compatible for human
use) single chain antibody (5G1.1-SC) designed for acute therapeutic settings
such as in CPB procedures and in treating myocardial infarctions, and a long
acting humanized monoclonal antibody (5G1.1) designed for treating chronic
disorders such as rheumatoid arthritis and lupus nephritis. In addition to
studies in normal volunteers, 5G1.1-SC has been recently studied in 35 patients
undergoing CPB in Phase I/II and Phase IIa clinical trials. In these studies,
5G1.1-SC administration reduced an increase of over 1000% in complement
activation observed in patients treated with placebo in a dose-dependent manner
such that there was no detectable increase in complement at the higher doses. In
the same studies, 5G1.1-SC reduced the peak white blood cell activation observed
in CPB patients treated with placebo by more than 60%. The Company filed two
INDs during December 1997 for the Company's long acting monoclonal antibody,
5G1.1, so as to commence clinical studies in rheumatoid arthritis and lupus.
Apogens. The Company's Apogen compounds are based upon discoveries at the
National Institutes of Health ("NIH") which are exclusively licensed to Alexion
and upon further discoveries by Alexion. These discoveries involve a mechanism
by which substantially all disease-causing T-cells are selectively eliminated in
vivo in animal models of disease. The highly specific recombinant Apogens under
development by the Company are designed to selectively eliminate disease-causing
T-cells in patients with certain autoimmune diseases including multiple
sclerosis and diabetes mellitus. The Company has demonstrated that its lead
proprietary Apogen, MP4 ("MP4"), is effective at preventing neurologic disease
and in ameliorating established disease in animal models of multiple sclerosis.
The Company filed an IND for MP4 for the treatment of multiple sclerosis
patients in early 1998.
UniGraft Program. The Company's UniGraft program, in collaboration with US
Surgical, is focused on developing non-human cell and organ products designed
for transplantation into humans without clinical rejection. Alexion has tested
genetically engineered pig hearts, livers and lungs in primates and has
demonstrated transplant organ function substantially longer than for
transplanted non-genetically engineered porcine organs. In September 1997,
Alexion and US Surgical Corporation amended the agreement such that US Surgical
made an additional $6.5 million payment to Alexion for equity, exclusive
licensing rights and certain manufacturing assets. Further, Alexion and US
Surgical agreed that preclinical milestone payments in the original agreement
are considered to have been satisfied.
Gene Transfer Systems. Alexion is developing, in collaboration with
GTI/Novartis, immunoprotected retroviral vector particles and producer cells
which are designed to resist rejection and therefore may be able to be used for
direct injectable delivery of therapeutic genes to patients' cells. Such
particles and producer cells are being engineered by Alexion for subsequent
preclinical evaluation by GTI.
The Company was founded in New Haven, Connecticut in January 1992 with
scientific founders largely drawn from the faculty of Yale University. The
Company's principal executive offices are at 25 Science Park, New Haven,
Connecticut 06511, and its telephone number is (203) 776-1790.
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THE OFFERING
Common Stock offered by the Selling
Stockholders.............................. 960,831 shares
NASDAQ symbol................................ ALXN
Risk factors................................. See "Risk Factors" for a
discussion of certain factors to
be considered by prospective
investors.
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RECENT DEVELOPMENTS
Private Placement of Common Stock
The Company has entered into a Stock Purchase Agreement, dated as of March
4, 1998 (the "Stock Purchase Agreement"), with Biotech Target S.A., an
institutional investor, pursuant to which the investor has committed to purchase
670,000 shares of the Common Stock of the Company at a price of $13.175 per
share, subject to the effectiveness of the Registration Statement of which this
Prospectus is a part. The offer and sale by the Company of the Common Stock to
the investor pursuant to the Stock Purchase Agreement was made pursuant to an
exemption from the registration requirements of the Securities Act provided by
Section 4(2) thereof. The Stock Purchase Agreement contains representations and
warranties as to the investor's status as an "accredited investor" as such term
is defined in Rule 501 promulgated under the Securities Act.
If the Registration Statement is declared effective on or prior to June 8,
1998, the investor will purchase the shares of Common Stock at a price per share
of $13.175, resulting in gross proceeds to the Company of $8,827,250. See
"Selling Stockholders."
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RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should consider carefully the following risk
factors, as well as the other information set forth in this Prospectus, in
connection with an investment in the Common Stock offered hereby. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors," as well as those discussed elsewhere in this Prospectus.
Operating Losses; Uncertainty of Future Profitability. Alexion has
generated no revenues from product sales and is dependent upon its research and
development contracts, including the agreements with US Surgical and
GTI/Novartis, external financing, other research and development contracts and
research and development grants to the extent that they can be obtained and
interest income to pursue its intended business activities. The Company has
incurred losses since inception and has cumulative net losses of $33.0 million
through January 31, 1998. Losses have resulted principally from costs incurred
in research activities aimed at identifying and developing the Company's product
candidates and from general and administrative costs. The Company expects to
incur substantial additional operating losses over the next several years and
expects losses to increase as the Company's research and development efforts
expand and clinical trials continue and potentially expand. The Company's
ability to achieve profitability is dependent on its ability to obtain patent
protection and regulatory approval for its products, to obtain licenses from
third parties to use technology which it may need, to enter into agreements for
product development and commercialization with corporate partners and to develop
the capacity to manufacture and sell products. There can be no assurance that
the Company will successfully develop, commercialize, manufacture or market any
of its potential products, obtain required regulatory approvals, patents or
third party licenses to technology or ever achieve profitability.
Early Stage of Product Development; Risks of Clinical Trials. The Company's
research and development programs are at an early stage. There can be no
assurance that the Company's drug discovery efforts will result in the timely
commencement of clinical studies or the development of commercially successful
therapeutic drugs. Potential products which have been identified will require
significant additional development, preclinical and clinical testing, regulatory
approval, and additional investment prior to their commercialization, which may
never be achieved. Potential products may be found to be ineffective or cause
harmful side effects during preclinical testing or clinical trials, fail to
receive necessary regulatory approvals, be difficult to manufacture on a large
scale, fail to achieve market acceptance, be uneconomical or be precluded from
commercialization by proprietary rights of third parties. The results from
preclinical studies and early clinical trials may not be predictive of results
that will be obtained in large-scale clinical trials and do not necessarily
predict or prove safety or efficacy in humans.
In addition, the Company has commenced clinical development of three of its
product candidates. There can be no assurance that clinical trials of the
Company's product candidates will demonstrate sufficient safety and efficacy to
obtain the requisite regulatory approvals or will result in marketable products.
Clinical trials are often conducted with patients that are critically ill.
During the course of treatment, these patients can die or suffer other adverse
medical effects for reasons that may not be related to the pharmaceutical agent
being tested but which can nevertheless affect clinical trial results. A number
of companies in the pharmaceutical industry have suffered significant setbacks
in advanced clinical trials, even after promising results in earlier trials. Any
such setback could have a material adverse effect on the Company's business,
financial condition and results of operations. The completion of clinical trials
of the Company's product candidates may be delayed by many factors and there can
be no assurance that delays or terminations will not occur. One such factor is
the rate of enrollment of patients, which generally varies throughout the course
of a clinical trial and which depends on multiple factors, including but not
limited to the size of the patient population, the number of clinical trial
sites, the proximity of patients to clinical trial sites, the eligibility
criteria for the trial and the existence of competing clinical trials. The
Company cannot control the rate at which patients present themselves for
enrollment, and there can be no assurance that the rate of patient enrollment
will be consistent with the Company's expectations or be sufficient to enable
clinical trials of the Company's product candidates to
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be completed in a timely manner. Further, there can be no assurance that
materials for clinical trials will be produced in a timely manner, if at all.
Need for Additional Funds. The Company will require substantial additional
funds for its research and product development programs, for operating expenses,
for pursuing regulatory approval and for developing required production, sales
and marketing capabilities. With the exception of the Company's agreements with
US Surgical and GTI/Novartis and certain research grants, the Company does not
have any commitments or arrangements to obtain any such funds and there can be
no assurance that funds for these purposes, whether through additional sales of
securities or collaborative or other arrangements with corporate partners or
from other sources, will be available to the Company when needed or on terms
favorable to the Company. The unavailability of additional financing could
require the Company to delay, scale back or eliminate certain of its research
and product development programs or to license third parties to commercialize
products or technologies that the Company would otherwise undertake itself, any
of which would have a material adverse effect on the Company. The Company
believes that its existing available resources, together with anticipated future
funding from US Surgical and GTI/Novartis and certain research grants, and
interest income should be sufficient to fund its operating expenses and capital
requirements as currently planned for at least 18 months. However, the Company's
cash requirements may vary materially from those now planned because of results
of research and development, results of product testing, relationships with
strategic partners, changes in the focus and direction of the Company's research
and development programs, competitive and technological factors, developments in
the regulatory process and other factors, none of which can be predicted.
Rapid Technological Change. The Company is engaged in pharmaceutical fields
characterized by extensive research efforts, rapidly evolving technology and
intense competition from numerous organizations, including pharmaceutical
companies, biotechnology firms, academic institutions and others. New
developments are expected to continue at a rapid pace in both industry and
academia. There can be no assurance that research and discoveries by others will
not render any of the Company's programs or potential products obsolete or
uneconomical. In order to compete successfully, the Company will need to
complete development of and obtain regulatory approval of products that keep
pace with technological developments on a timely basis. Any failure by the
Company to anticipate or respond adequately to technological developments will
have a material adverse effect on the Company's business, financial condition
and results of operations.
Patent, License and Proprietary Rights Uncertainties. The Company's success
will depend in part on its ability to obtain United States and foreign patent
protection for its products, preserve its trade secrets and proprietary rights,
and operate without infringing on the proprietary rights of third parties or
having third parties circumvent the Company's rights. Because of the length of
time and expense associated with bringing new products through development and
regulatory approval to the marketplace, the health care industry has
traditionally placed considerable importance on obtaining patent and trade
secret protection for significant new technologies, products and processes.
There can be no assurance that any patents will issue from any of the patent
applications owned by or licensed to the Company. Further, even if patents were
to issue, there can be no assurance that they will provide the Company with
significant protection against competitive products or otherwise be commercially
valuable. In addition, patent law relating to certain of the Company's fields of
interest, particularly as to the scope of claims in issued patents, is still
developing and it is unclear how this uncertainty will affect the Company's
patent rights. Litigation, which could be costly and time consuming, may be
necessary to enforce patents issued to the Company and/or to determine the scope
and validity of others' proprietary rights, in either case in judicial or
administrative proceedings. The Company's competitive position is also dependent
upon unpatented trade secrets which generally are difficult to protect. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information and techniques or otherwise gain access to
the Company's trade secrets, that the Company's trade secrets will not be
disclosed or that the Company can effectively protect its rights to unpatented
trade secrets. As the biotechnology industry expands and more patents are
issued, the risk increases that the Company's potential products may give rise
to claims that they infringe the patents of others. Any such infringement
litigation would be costly and time consuming to the Company.
The Company is aware of broad patents owned by third parties relating to
the manufacture, use, and sale of recombinant humanized antibodies, recombinant
humanized single chain antibodies and
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genetically engineered animals. The Company has received notice from one company
regarding the existence of a patent which the owners claim may be relevant to
the development and commercialization of certain of the Company's proposed
UniGraft organ transplantation products. The Company has identified and is
testing various approaches which it believes should not infringe this patent and
which should permit commercialization of its products. There can be no assurance
that the owner of this patent will not seek to enforce the patent against the
Company's so-modified commercial products or against the development activities
related to the non-modified products. To the extent it becomes necessary, there
can be no assurance that the Company will be able to obtain a license on
commercially reasonable terms. If the Company does not obtain necessary
licenses, it could encounter delays in product market introductions while it
attempts to design around such patent, or could find that the development,
manufacture or sale of products requiring such a license could be foreclosed.
Further, there can be no assurance that owners of patents that the Company does
not believe are relevant to the Company's product development and
commercialization will not seek to enforce their patents against the Company.
Such action could result in litigation which would be costly and time consuming.
There can be no assurance that the Company would be successful in such
litigations. The Company is currently unaware of any such threatened action.
Certain of the licenses by which the Company obtained its rights in and to
certain technologies require the Company to diligently commercialize or attempt
to commercialize such technologies. There can be no assurance that the Company
will meet such requirements, and failure to do so for a particular technology
could result in the Company losing its rights to that technology.
Currently, the Company has not sought to register its potential trademarks
and there can be no assurance that the Company will be able to obtain
registration for such trademarks.
No Assurance of FDA Approval; Government Regulation. The preclinical and
clinical testing, manufacturing, and marketing of the Company's products are
subject to extensive regulation by numerous government authorities in the United
States and other countries, including, but not limited to, the FDA. Among other
requirements, FDA approval of the Company's products, including a review of the
manufacturing processes and facilities used to produce such products, will be
required before such products may be marketed in the United States. Similarly,
marketing approval by a foreign governmental authority is typically required
before such products may be marketed in a particular foreign country. In order
to obtain FDA approval of a product, the Company must, among other things,
demonstrate to the satisfaction of the FDA that the product is safe and
effective for its intended uses and that the Company is capable of manufacturing
the product with procedures that conform to the FDA's then current good
manufacturing practice ("cGMP") regulations, which must be followed at all
times. The process of seeking FDA approvals can be costly, time consuming, and
subject to unanticipated and significant delays. There can be no assurance that
such approvals will be granted to the Company on a timely basis, or at all. Any
delay in obtaining or any failure to obtain such approvals would adversely
affect the Company's ability to introduce and market products and to generate
product revenue.
The Company's research and development processes involve the controlled use
of hazardous materials. The Company is subject to federal, state and local laws
and regulations governing the use, manufacture, storage, handling and disposing
of such materials and certain waste products. In the event of such an accident,
the Company could be held liable for any damages that result and any such
liability could exceed the resources of the Company. There can be no assurance
that the Company will not be required to incur significant costs to comply with
the environmental laws and regulations in the future, or that the business,
financial condition and results of operations of the Company will not be
materially adversely affected by current or future environmental laws or
regulations.
Substantial Competition. The pharmaceutical and biotechnology industries
are characterized by intense competition. Many companies, including major
pharmaceutical and chemical companies, as well as specialized biotechnology
companies, are engaged in activities similar to those of the Company. Certain of
these companies have substantially greater financial and other resources, larger
research and development staffs, and more extensive marketing and manufacturing
organizations than the Company. Many of these companies have significant
experience in preclinical testing, human clinical trials, product manufacturing,
marketing and distribution and other regulatory approval procedures. In
addition, colleges, universities, governmental agencies and other public and
private research organizations conduct
-7-
research and may market commercial products on their own or through joint
ventures. These institutions are becoming more active in seeking patent
protection and licensing arrangements to collect royalties for use of technology
that they have developed. These institutions also compete with the Company in
recruiting and retaining highly qualified scientific personnel.
In particular, T-Cell Sciences, Inc. and Chiron Corporation have both
publicly announced intentions to develop complement inhibitors to treat diseases
related to trauma and inflammation indications and the Company is aware that
SmithKline Beecham Plc, Merck & Co., Inc. and CytoMed Inc. are attempting to
develop similar therapies. In addition, each of Bayer A.G. ("Bayer"), Immunex
Corporation, Pharmacia & Upjohn and Rhone-Poulenc Rorer, Inc. sells a product
which is used to reduce surgical bleeding during CPB. The Company is also aware
of announced and ongoing clinical trials of certain companies, including
Autoimmune, Inc., ImmuLogic Pharmaceutical Corporation, Neurocrine Biosciences,
Inc., and Anergen, Inc. employing T-cell specific tolerance technologies and
addressing patients with multiple sclerosis or diabetes mellitus. Baxter
Healthcare Corporation and Novartis, Inc., in collaboration with Biotransplant
Inc., have publicly announced intentions to commercially develop xenograft
organs and the Company is aware that Diacrin Inc. is also working in this field.
These companies may succeed in developing products that are more effective or
less costly than any that may be developed by Alexion and may also prove to be
more successful than Alexion in production and marketing. Competition may
increase further as a result of potential advances in the commercial
applicability of biotechnology and greater availability of capital for
investment in these fields.
Dependence on Qualified Personnel. The Company is highly dependent upon the
efforts of its senior management and scientific personnel including its
consultants, generally, and Dr. Leonard Bell, its President and Chief Executive
Officer, in particular. The Company and Dr. Bell are parties to an employment
agreement which expires on April 1, 2000. The loss of the services of one or
more of these individuals could have a material adverse effect on the Company's
ability to achieve its development objectives on a timely basis or at all. The
Company has a $2,000,000 key man life insurance policy on the life of Dr. Bell
of which the Company is the beneficiary. Because of the specialized scientific
nature of its business, Alexion is also highly dependent upon its ability to
continue to attract and retain qualified scientific and technical personnel.
There is intense competition for qualified personnel in the areas of the
Company's activities, and there can be no assurance that Alexion will be able to
continue to attract and retain the qualified personnel necessary for the
development of its business. Loss of the services of, or failure to recruit, key
scientific and technical personnel would be significantly detrimental to the
Company's product development programs.
All members of the Company's Board of Scientific Advisors and the Company's
other scientific consultants are employed on a full-time basis by academic or
research institutions. Accordingly, such advisors and consultants will be able
to devote only a small portion of their time to the Company. In addition, in
certain circumstances, inventions or processes discovered by them may not become
the property of the Company but may be the property of their full-time employers
or of other companies and institutions for which they now consult. There can be
no assurance that the interests and motivations of the Company's collaborators
are or will remain consistent with those of the Company. Furthermore, there can
be no assurance that the Company will be able to successfully negotiate license
rights to the results of collaborations or that such licenses will be on
commercially reasonable terms.
Dependence on Outside Parties and Collaborators. The Company's strategy for
the research, development, manufacture and commercialization of certain of its
products contemplates that it will enter into various arrangements with
corporate partners, licensors, licensees, outside researchers, consultants and
others and, therefore, the success of the Company is, and will be, dependent in
part upon the efforts of outside parties. There can be no assurance that the
Company will be able to negotiate acceptable collaborative arrangements to
develop or commercialize its products, that arrangements or other collaborations
entered into, if any, will be successful, or that current or potential
collaborators will not pursue treatments for other diseases or seek alternative
means of developing treatments for the diseases targeted by programs with the
Company. The Company has entered into research and development agreements with
US Surgical and GTI/Novartis to commercialize potential products to be developed
in the UniGraft program and for gene therapy. The amount and timing of resources
which US Surgical, GTI/Novartis or any other potential parties to collaboration
arrangements devote to these activities may not be within the control of the
Company. There can be no assurance that outside parties and
-8-
collaborators will perform their obligations as expected or that any revenue
will be derived from outside arrangements. The Joint Development Agreement with
US Surgical may be terminated by US Surgical for any or no reason effective on
or after January 1, 1998, if notice is given by US Surgical at least six months
prior thereto. If any of the Company's collaborators breaches or terminates its
agreement with the Company or otherwise fails to conduct its collaborative
activities in a timely manner, the development or commercialization of the
product candidate or the research program which is the subject of the agreement
may be delayed and the Company may be required to undertake unforeseen
additional responsibilities or to devote additional resources to development or
commercialization or terminate the development or commercialization. This could
have a material adverse effect on the Company's prospects, financial condition,
intellectual property position and results of operations.
Limited Manufacturing, Marketing, Sales, Clinical Testing and Regulatory
Compliance Capability. The Company has not invested in the development of
commercial manufacturing, marketing, distribution or sales capabilities.
Moreover, the Company has insufficient capacity to manufacture more than one
product candidate at a time or to manufacture its product candidates for later
stage clinical development or commercialization. If the Company is unable to
develop or contract for additional manufacturing capabilities on acceptable
terms, the Company's ability to conduct human clinical testing will be
materially adversely affected, resulting in delays in the submission of products
for regulatory approval and in the initiation of new development programs, which
could have a material adverse effect on the Company's competitive position and
the Company's prospects for achieving profitability. In addition, as the
Company's product development efforts progress, the Company will need to hire
additional personnel skilled in clinical testing, regulatory compliance, and, if
the Company develops products with commercial potential, marketing and sales.
There can be no assurance that the Company will be able to acquire, or establish
third-party relationships to provide, any or all of these resources or be able
to obtain required personnel and resources to manufacture, or perform testing or
engage in marketing, distribution and sales on its own.
Uncertainty of Availability of Health Care Reimbursement. The Company's
ability to commercialize its products successfully may depend in part on the
extent to which reimbursement for the cost of such products and related
treatments will be available from government health administration authorities,
private health insurers and other organizations. Third-party payors are
attempting to control costs by limiting coverage of products and treatments and
the level of reimbursement for medical products and services. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and if the Company succeeds in bringing one or more products to
market, there can be no assurance that these products will be considered
cost-effective, that reimbursement will be available, or, if available, that the
payor's reimbursement policies will not materially adversely affect the
Company's ability to sell its products on a profitable basis.
Product Liability; Potential Liability for Human Clinical Trials. The
Company's business exposes it to potential product liability risks which are
inherent in the testing, manufacturing, marketing and sale of human therapeutic
products and there can be no assurance that the Company will be able to avoid
significant product liability exposure. With respect to the Company's UniGraft
program, little is known about the potential long-term health risks of
transplanting non-human tissue into humans. In addition to product liability
risks associated with sales of products, the Company may be liable to the claims
of individuals who participate in human clinical trials of its products. While
the Company has obtained, and will seek, waivers of liability from all persons
who participated or may in the future participate in human clinical trials
conducted by or on behalf of the Company, there can be no assurance that waivers
will be effective to protect the Company from liability or the costs of product
liability litigation. The Company currently has product liability insurance to
cover certain liabilities relating to the conduct of human clinical trials.
However, there can be no assurance that it will be able to maintain such
insurance on acceptable terms or that the insurance will provide adequate
protection against potential liabilities. An inability to maintain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or limit the commercialization
of products developed by the Company. Furthermore, a product liability related
claim or recall could have a material adverse effect on the business, financial
condition and results of operations of the Company.
Volatility of Share Price. The market prices for securities of
biopharmaceutical companies have been volatile. Factors such as announcements of
technological innovations or new commercial products
-9-
by the Company or its competitors, government regulation, patent or proprietary
rights developments, public concern as to the safety or other implications of
biopharmaceutical products, results of preclinical or clinical trials, positive
or negative developments related to the Company's collaborators and market
conditions in general may have a significant impact on the market price of the
Company's Common Stock.
Dilutive Effect of Stock Issuances, Grants, Options and Warrants. As of
March 4, 1998, Alexion has granted options to purchase an aggregate of
approximately 1,599,586 shares of the Company's Common Stock under certain stock
option plans. Warrants to purchase an aggregate of approximately 220,000 of the
Company's Common Stock are also outstanding. Many of these options and warrants
have exercise prices below the current market price of the Company's Common
Stock. In addition, the Company may issue additional stock, warrants and/or
options to raise capital in the future. The Company regularly examines
opportunities to expand its technology base through means such as licenses,
joint ventures and acquisition of assets or ongoing businesses and may issue
securities in connection with such transactions. The Company may also issue
additional securities in connection with its stock option plans. During the
terms of such options and warrants, the holders thereof are given the
opportunity to profit from a rise in the market price of the Company's Common
Stock. The exercise of such options and warrants may have an adverse effect on
the market value of the Company's Common Stock. The existence of such options
and warrants may adversely affect the terms on which the Company can obtain
additional equity financing. To the extent the exercise prices of such options
and warrants are less than the net tangible book value of the Company's Common
Stock at the time such options and warrants are exercised, the Company's
stockholders will experience an immediate dilution in the net tangible book
value of their investment.
No Dividends. The Company has not paid dividends on its Common Stock since
its inception and does not expect to pay cash or stock dividends on its Common
Stock in the foreseeable future.
Possible Adverse Impact on Holders of Common Stock; Anti-takeover
Provisions; Rights Plan. The Board of Directors may issue one or more series of
Preferred Stock, without any action on the part of the stockholders of the
Company, the terms of which may adversely affect the rights of holders of Common
Stock. Issuance of Preferred Stock, which may be accomplished through a public
offering or a private placement, may dilute the voting power of holders of
Common Stock (such as by issuing Preferred Stock with super voting rights) and
may render more difficult the removal of current management, even if such
removal may be in the stockholders' best interests. Further, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the stockholders. On February 14, 1997, the Board of Directors of
Alexion declared a dividend distribution of one preferred stock purchase right
(a "Right") for each outstanding share of Common Stock of the Company. The
Rights are not exercisable until the date of the earlier to occur of (i) ten
business days following the time of a public announcement or notice to the
Company that a person or group of affiliated or associated persons has acquired
beneficial ownership of 20% or more of the outstanding shares of Common Stock of
the Company (such 20% beneficial owner, an "Acquiring Person"), or (ii) ten
business days, or such later date as may be determined by the Board of Directors
of the Company, after the date of the commencement or announcement by a person
of an intention to make a tender offer or exchange offer for an amount of Common
Stock which, together with the shares of such stock already owned by such
person, constitutes 20% or more of the outstanding shares of such Common Stock.
The Rights and the Rights Agreement, as well as certain provisions of Delaware
law are designed to prevent any unsolicited acquisitions of the Company's Common
Stock. These provisions and any issuance of Preferred Stock could prevent the
holders of Common Stock from realizing a premium on their shares.
Ownership by Management and Principal Stockholders. On March 4, 1998,
directors and officers of the Company and certain principal stockholders and
their affiliates beneficially owned in the aggregate approximately 6,080,000
shares of Common Stock, representing 54% of the outstanding shares of Common
Stock. Accordingly, they have the ability to influence significantly the affairs
of the Company and matters requiring a stockholder vote, including the election
of the Company's directors, the amendment of the Company's charter documents,
the merger or dissolution of the Company and the sale of all or substantially
all of the Company's assets. The voting power of these holders may also
discourage or prevent any proposed takeover of the Company pursuant to a tender
offer.
-10-
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares of
Common Stock by the Selling Stockholders. The proceeds, if any, received by the
Company upon the exercise of the Warrants will be utilized by the Company for
working capital purposes.
SELLING STOCKHOLDERS
The following table sets forth certain information, as of March 4, 1998
regarding the beneficial ownership of Common Stock of each Selling Stockholder
and as adjusted to give effect to the sale of the Shares offered hereby. The
Shares are being registered to permit public secondary trading of the Shares,
and the Selling Stockholders may offer the Shares for resale from time to time.
See "Plan of Distribution."
-11-
Amount of Amount of
Beneficial Beneficial
Ownership Ownership
Prior to Offering After Offering
--------------------------- ----------------------------
Number of
Number Shares Number Percent
Name of of Common Percent Being of Common of Common
Selling Stockholder Shares of Class Offered Shares Shares
------------------- --------- -------- --------- --------- ---------
Biotech Target S.A. (1) 1,824,113 16.3% 740,831 1,083,732 9.7%
Matthew Balk (2) 8,452 * 8,452 0 *
Franklin Berger (3) 25,126 * 17,826 7,300 *
Lawrence Borgman (2) 226 * 226 0 *
Dennis Burke (2) 226 * 226 0 *
Paul Fitzgerald (2) 20,403 * 20,403 0 *
Anthony Guzzi (2) 97 * 97 0 *
Josepthal Holdings (2) 10,000 * 10,000 0 *
Steve Kowitski (2) 226 * 226 0 *
Sherwood P. Larkin (4) 19,642 * 18,642 1,000 *
Michael Loew (2) 2,887 * 2,887 0 *
Raymond Mando (2) 65 * 65 0 *
James Raphalian (2) 5,000 * 5,000 0 *
Charles Roden (2) 7,694 * 7,694 0 *
Lawrence Rice (2) 10,871 * 10,871 0 *
Dan Purjes (2) 84,886 * 84,886 0 *
Scott A. Weisman (5) 22,080 * 21,580 500 *
WBM, LLC (2) 10,919 * 10,919 0 *
- ----------
* Less than one percent
(1) Of the 740,831 shares being offered by this Selling Stockholder, 670,000
shares were issued by the Company in connection with a private placement in
March 1998 and the remaining 70,831 shares of Common Stock were issued as a
dividend on the Company's Series B Preferred Stock.
(2) The shares of Common Stock attributable to such Selling Stockholder
represent shares issuable upon exercise of Warrants.
(3) The 17,826 shares being offered by this Selling Stockholder are issuable
upon the exercise of Warrants.
(4) The 18,642 shares being offered by this Selling Stockholder are issuable
upon the exercise of Warrants.
(5) The 21,580 shares being offered by this Selling Stockholder are issuable
upon the exercise of Warrants.
-12-
PLAN OF DISTRIBUTION
The distribution of the shares of Common Stock by the Selling Stockholders
may be effected from time to time in one or more transactions (which may involve
block transactions) in the over-the-counter market or on NASDAQ (or any exchange
on which the Common Stock may then be listed) in negotiated transactions,
through the writing of options (whether such options are listed on an options
exchange or otherwise), or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling shares to or through broker-dealers, and such
broker-dealer may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Stockholders and/or purchasers of
shares for whom they may act as agent (which compensation may be in excess of
customary commissions). The Selling Stockholders may also sell such shares
pursuant to Rule 144 promulgated under the Securities Act, or may pledge shares
as collateral for margin accounts and such shares could be resold pursuant to
the terms of such accounts. The Selling Stockholders and any broker-dealers that
act in connection with the sale of the Common Stock might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of the shares of Common
Stock as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. The Selling Stockholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because the Selling Stockholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the Selling Stockholders
will be subject to prospectus delivery requirements under the Securities Act.
Furthermore, in the event of a "distribution" of the shares, such Selling
Stockholders, any selling broker or dealer and any "affiliated purchasers" may
be subject to Rule 10b-6 under the Exchange Act or Regulation M promulgated
thereunder, which prohibits, with certain exceptions, any such person from
bidding for or purchasing any security which is the subject of such distribution
until his participation in that distribution is completed. In addition, Rule
10b-7 under the Exchange Act or Regulation M promulgated thereunder, prohibits
any "stabilizing bid" or "stabilizing purchase" for the purpose of pegging,
fixing or stabilizing the price of Common Stock in connection with this
offering.
In order to comply with certain state securities laws, if applicable, the
Common Stock will not be sold in a particular state unless such securities have
been registered or qualified for sale in such state or any exemption from
registration or qualification is available and complied with.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. The proceeds, if any, from the exercise of
the Warrants will be received by the Company; no brokerage commissions or
discounts will be paid in connection therewith.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fulbright & Jaworski L.L.P., New York,
New York.
EXPERTS
The audited financial statements incorporated by reference in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and is incorporated herein in reliance upon the
authority of said firm as experts in giving said report.
-13-