AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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JENNER TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA (PRIOR TO REINCORPORATION)
DELAWARE (AFTER REINCORPORATION)
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
2834
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
68-0292466
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
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2010 CROW CANYON PLACE, SUITE 100
SAN RAMON, CALIFORNIA 94583
(510) 824-3150
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINICIPAL EXECUTIVE OFFICES)
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ANTHONY E. MAIDA III, CHIEF EXECUTIVE OFFICER
JENNER TECHNOLOGIES, INC.
2010 CROW CANYON PLACE, SUITE 100
SAN RAMON, CALIFORNIA 94583
(510) 824-3150
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
BLAIR W. STEWART, JR., ESQ. LAWRENCE B. FISHER, ESQ.
TIMOTHY STEVENS, ESQ. ORRICK, HERRINGTON & SUTCLIFFE LLP
WILSON SONSINI GOODRICH & ROSATI 666 Fifth Avenue
Professional Corporation New York, New York 10103-0001
650 Page Mill Road (212) 506-5000
Palo Alto, California 94304
(415) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=============================================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, par
value .001 per
share(3) 2,875,000 $ 8.00 $23,000,000 $ 6,969.70
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Redeemable Common
Stock Purchase
Warrants(4) 2,875,000 $ .10 $ 287,500 $ 87.12
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Common Stock, par
value .001 per share,
issuable on exercise
of Redeemable Common
Stock Purchase
Warrants(5) 2,875,000 $11.20 $32,200,000 $ 9,757.58
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Representative's
Warrants(6) 250,000 $.0001 $ 25 --
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Redeemable Common
Stock Purchase
Warrants issuable upon
exercise of
Representative's
Warrants 250,000 $ .14 $ 35,000 $ 10.61
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Common Stock, par
value .001 per share,
issuable upon exercise
of Redeemable Common
Stock Purchase
Warrants issuable upon
exercise of
Representative's
Warrants 250,000 $11.20 $ 2,800,000 $ 848.48
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Common Stock, par
value .001 per share,
issuable upon exercise
of Representative's
Warrants(7) 250,000 $11.20 $ 2,800,000 $ 848.48
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TOTAL N/A N/A $61,122,525 $ 18,521.97
=============================================================================================================================
(Footnotes appear on following page)
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
(continued from previous page)
(1) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the antidilution provisions of
the Warrants, the Representative's Warrants and the Warrants underlying the
Representative's Warrants.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.
(3) 2,500,000 shares of Common Stock and 2,500,000 Warrants are being registered
under this Registration Statement. For purposes of calculation of the
registration fee, each share of Common Stock has been assumed to have a
proposed maximum offering price of $8.00, and each Warrant has been assumed
to have a proposed maximum offering price of $0.10. Also includes 375,000
shares of Common Stock which the Underwriters have the option to purchase to
cover over-allotments, if any.
(4) Includes 375,000 Warrants which the Underwriters have the option to purchase
to cover over-allotments, if any.
(5) Includes 375,000 shares of Common Stock issuable upon exercise of Warrants
which the Underwriters have the option to purchase to cover over-allotments,
if any.
(6) In connection with the Registrant's sale of the Securities offered hereby,
the Registrant is granting to the Representative of the several Underwriters
(the "Representative") warrants (the "Representative's Warrants") to
purchase 250,000 shares of Common Stock and/or 250,000 Warrants. The
purchase price per Representative's Warrant is $.0001.
(7) The maximum exercise price of the Representative's Warrants will be $11.20
per share of Common Stock and $.14 per Warrant based on the proposed maximum
offering price of $8.00 per share of Common Stock and $0.10 per Warrant.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED FEBRUARY 19, 1997
PROSPECTUS
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[Logo]
JENNER TECHNOLOGIES, INC.
2,500,000 SHARES OF COMMON STOCK AND
2,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Jenner Technologies, Inc. ("Jenner" or the "Company") hereby offers (the
"Offering") 2,500,000 shares (the "Shares") of common stock, $0.001 par value
(the "Common Stock") and 2,500,000 redeemable common stock purchase warrants
(the "Warrants"). The Shares and Warrants are sometimes hereinafter collectively
referred to as the "Securities." The Shares and Warrants may only be purchased
together on the basis of one Share and one Warrant, but will trade separately
immediately upon issuance. Each Warrant entitles the registered holder thereof
to purchase one share of Common Stock at an exercise price of $____ per share
[140% of the initial public offering price per share of Common Stock], subject
to adjustment, at any time during the period commencing on _______________, 1998
[twelve months from the date of the Prospectus] until __________________, 2002
[5 years after the date of this Prospectus]. Commencing ____________________,
1998 [18 months from the date of the Prospectus], the Warrants are subject to
redemption by the Company, in whole but not in part, at $.10 per Warrant on 30
days' prior written notice provided that the average closing sales price of the
Common Stock as reported on the American Stock Exchange ("AMEX") equals or
exceeds $_______ per share [160% of the initial public offering price per share
of Common Stock] for any 20 trading days within a period of 30 consecutive
trading days ending on the fifth trading day prior to the date of the notice of
redemption. See "Description of Securities -- Warrants."
Prior to the Offering, there has been no public market for the Common Stock
or the Warrants, and there can be no assurance that such a market will develop
after completion of the Offering, or if developed, that it will be sustained. It
is currently anticipated that the initial public offering prices will be between
$7.00 and $8.00 per Share and $.10 per Warrant. For information regarding the
factors considered in determining the initial public offering price of the
Shares and Warrants and the terms of the Warrants, see "Risk Factors" and
"Underwriting." It is anticipated that the Shares and Warrants will be included
for quotation on the American Stock Exchange under the symbols JNR and JNRW,
respectively.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" COMMENCING ON PAGE 7 AND "DILUTION."
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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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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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Per Share $ $ $
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Per Warrant $ $ $
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Total(3) $ $ $
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(1) Does not include additional compensation to National Securities
Corporation, the representative of the several Underwriters, (the
"Representative") in the form of a non-accountable expense allowance. In
addition, see "Underwriting" for information concerning indemnification and
contribution arrangements with the Underwriters and other compensation
payable to the Representative.
(2) Before deducting estimated expenses of $600,000 payable by the Company,
excluding the non-accountable expense allowance payable to the
Representative.
(3) The Company has granted to the Representative an option, exercisable within
45 days after the date of this Prospectus, to purchase up to an aggregate
of 375,000 additional shares of Common Stock and/or 375,000 additional
Warrants upon the same terms and conditions as set forth above, solely to
cover over-allotments, if any (the "Over-Allotment Option"). If such
Over-Allotment Option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to the Company will be $______, $______
and $_______, respectively. See "Underwriting."
The Securities are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by the Underwriters, and subject to
approval of certain legal matters by their counsel and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
this Offering and to reject any order in whole or in part. It is expected that
delivery of the Securities offered hereby will be made against payment therefor
at the offices of National Securities Corporation, Seattle, Washington on or
about _______________, 1997.
NATIONAL SECURITIES CORPORATION
THE DATE OF THIS PROSPECTUS IS_____________, 1997.
[INSERT 4/COLOR GRAPHICS HERE]
[Description of Photo and Copy of Text Follows]
JENNER'S APPROACH TO
TREATMENT OF PATIENT WITH MINIMAL TUMOR BURDEN
[Photo of Patient with Cancer in stages with and without Immunotherapy]
Current treatments for cancers that have spread are not very effective. Despite
significant improvements in early diagnosis and in surgical treaments, many
surgically treated patients experience recurrence of cancer. Jenner's principal
product candidates are designed to delay or prevent the recurrence of cancer by
stimulating the body's own immune system to attack microscopic disease remaining
after a patient has undergone tradional therapy.
The Company's products are in a development stage and have not been approved
by the United States Food and Drug Administration ("FDA") or any foreign
regulatory authority for marketing in any country. Such approval is not expected
to be forthcoming for several years, and may not be received at all.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND THE WARRANTS OFFERED HEREBY AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN
STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited by its independent certified public accountants and
quarterly reports containing unaudited interim financial statements for the
first three quarters of each fiscal year.
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PROSPECTUS SUMMARY
This Prospectus contains forward-looking statements. Such forward-looking
statements include, but are not limited to, the Company's expectations regarding
its future financial condition and operating results, product development,
business and growth strategy, market conditions and competitive environment. 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 this Prospectus. The following
summary is qualified in its entirety by the more detailed information and the
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
Unless otherwise indicated, all information in this Prospectus (i) assumes the
Underwriter's over-allotment option is not exercised, (ii) reflects a
1-for-1.7328 reverse stock split of the Company's Common Stock to be effected
prior to the closing of the Offering, (iii) assumes the Warrants and the
warrants to purchase 250,000 shares of Common Stock and/or 250,000 Warrants
issued to the Representative in connection with this Offering (the
"Representative's Warrants") are not exercised, (iv) assumes the reincorporation
of the Company in Delaware prior to the closing of the Offering, and (v) assumes
the conversion of all outstanding shares of the Company's Series A Preferred
Stock and Series B Preferred Stock into 1,510,015 shares of the Company's Common
Stock upon the closing of the Offering.
THE COMPANY
Jenner Technologies, Inc. ("Jenner" or the "Company"), a development stage
company, is engaged in the development of immunotherapies to treat patients with
cancer and certain side effects related to chemotherapy. The Company has four
product candidates under development, two of which are in clinical trials. Three
of the Company's product candidates are designed to delay or prevent the
recurrence of cancer by stimulating the body's own immune system to attack
microscopic disease remaining after a patient has undergone traditional therapy.
The Company's product candidates consist of macrophage activators (ACT and
JT3002) and therapeutic vaccines (OncoVax-P and OncoVax-CL). The Company
acquired the technology related to ACT and JT3002 through an exclusive worldwide
license with Novartis AG (the company resulting from the merger of Ciba-Geigy
Limited and Sandoz, Ltd.) ("Novartis"). In addition, the Company acquired the
rights to produce the antigen related to OncoVax-P through a non-exclusive
license with Research Corporation Technologies, Inc. and the antigen related to
OncoVax-CL through an exclusive worldwide license with Eli Lilly & Company.
ACT is in a nationwide Phase III clinical trial as a therapy for patients
with osteogenic sarcoma (bone cancer). The study calls for a total of 645
patients to be treated under the protocol and, as of December 31, 1996,
approximately 540 patients had entered the study. ACT utilizes a small molecule
that has the capacity to activate macrophages, which are scavenger cells that
are part of the immune system. Once activated, macrophages acquire the ability
to seek out and destroy tumor cells. ACT utilizes a proprietary liposomal
formulation to deliver its active ingredients (liposomes are spheres of
subcellular size composed primarily of fat molecules). JT3002 is in preclinical
evaluation as a therapy for mucositis (damage to the gastrointestinal mucosa or
lining of the gut), a side effect commonly associated with chemotherapy. The
Company intends to file an Investigational New Drug application ("IND") with the
United States Food and Drug Administration ("FDA") in late 1997 or early 1998 to
commence Phase I clinical trials of JT3002, subject to the results of the
preclinical evaluation.
OncoVax-P is in limited Phase I/II clinical trials in patients with prostate
cancer. The Company intends to commence a limited Phase I/II clinical trial for
OncoVax-CL in patients with colorectal cancer in the first quarter of 1997. The
Company's Phase I/II clinical trials are conducted in a small number of patients
(5-6) to gain preliminary information regarding safety of the vaccine and
ability to generate an immune response. OncoVax-P and OncoVax-CL each include a
genetically engineered version of a tumor associated antigen which represents
the "identity tag" of the cancer cell combined with an adjuvant which enhances
the body's immune response. The antigen and adjuvant are packaged in liposomes
which are taken up by antigen
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3
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presenting cells. The Company believes this approach will induce a more robust
relevant immune response than if the liposomal delivery system is not used.
Based on preclinical data, the Company believes that OncoVax-CL may have the
potential for application in cancer indications other than colorectal cancer,
such as lung, pancreatic and ovarian cancer.
In an effort to leverage the Company's resources and better manage the risks
and costs inherent in scientific research and new product development, Jenner
has followed a business strategy of (i) in-licensing promising proprietary
technologies for which substantial preclinical and/or clinical studies have been
undertaken, (ii) focusing on human clinical trials to gain relevant information
rather than developing animal models, and (iii) engaging qualified
subcontractors to perform research and development functions. Through this
business strategy, the Company has expended only approximately $4.0 million in
cash through December 31, 1996 to develop its current product candidates and
believes it has extended its research efforts to a larger number of applications
than would otherwise be the case given its limited resources.
The Company believes that its business strategy and management capabilities
may enable it to shorten the time frame for commercializing its products. As the
Company's product candidates advance through the regulatory process, the Company
generally intends to establish strategic alliances with pharmaceutical companies
and other corporate partners with large distribution systems to market and sell
the Company's products worldwide. In some cases, however, where the customers
for a product are easily identified and concentrated, the Company intends to
market and distribute the product through a direct sales force.
Jenner was incorporated as a California corporation in December 1992 and
expects to reincorporate in Delaware prior to consummation of this Offering. The
Company's principal offices are located at 2010 Crow Canyon Place, Suite 100,
San Ramon, California 94583, and its telephone number is (510) 824-3150.
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4
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THE OFFERING
Securities Offered....... 2,500,000 Shares of Common Stock and 2,500,000
Warrants. The Shares and the Warrants will be
separately transferable immediately following the
completion of this Offering.
Exercise Price of
Warrants............... Each Warrant entitles the registered holder thereof
to purchase, at any time over a four (4) year period
commencing one (1) year after the date of this
Prospectus, one share of Common Stock at a price of
$ per share [140% of the initial public offering
price per Share]. The Warrant exercise price is
subject to adjustment under certain circumstances.
See "Description of Securities."
Redemption of Warrants... Commencing eighteen (18) months after the date of
this Prospectus, the Warrants are subject to
redemption by the Company at $0.10 per Warrant on
thirty (30) days' prior written notice to the
warrant holders if the average closing sales price
of the Common Stock equals or exceeds $ per share
[160% of the initial public offering price per Share
of Common Stock] for any twenty (20) trading days
within a period of thirty (30) consecutive trading
days ending on the fifth trading day prior to the
date of the notice of redemption. See "Description
of Securities."
Common Stock Outstanding
Prior to the Offering(1). 4,621,886 Shares
Common Stock Outstanding
After the Offering(1)... 7,121,886 Shares
Use of Proceeds........... For research and development, clinical trials,
purchase of equipment, working capital and general
corporate purposes. See "Use of Proceeds."
Risk Factors and Dilution. An investment in the securities offered hereby
involves a high degree of risk and immediate and
substantial dilution to the purchasers in this
Offering. See "Risk Factors" and "Dilution."
Proposed AMEX Symbols(2):
Common Stock ........... JNR
Warrants ............... JNRW
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(1) Excludes 378,114 shares of Common Stock issuable upon exercise of
outstanding non-plan stock options and outstanding stock options granted
under the Company's 1993 Incentive Stock Plan as of January 31, 1997 at a
weighted average exercise price of $0.90 per share, and 350,000 shares of
Common Stock reserved for issuance under the Company's 1997 Stock Plan. See
"Management -- Employee Benefit Plans."
(2) Application has been made for listing of the Common Stock and the
Warrants on AMEX.
Jenner(tm) and ACT (tm) are trademarks of the Company. The Company has filed
an application to register JennerTech(tm) as a trademark of the Company.
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5
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SUMMARY FINANCIAL INFORMATION
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(DECEMBER 8, (DECEMBER 8,
1992) TO YEAR ENDED DECEMBER 31, 1992) TO
DECEMBER 31, ---------------------------------- DECEMBER 31,
1993 1994 1995 1996 1996
---- ---- ---- ---- ----
STATEMENT OF OPERATIONS DATA:
Revenues $ -- $ -- $ -- $ -- $ --
Research and development expenses 338,626 499,366 698,303 2,206,900 3,743,195
General and administrative expenses 137,325 228,114 195,663 339,948 901,050
--------- --------- --------- ----------- -----------
Loss from operations (475,951) (727,480) (893,966) (2,546,848) (4,644,245)
Interest income (expense) 9,037 22,369 17,100 (140,987) (92,481)
--------- --------- --------- ----------- -----------
Net loss $(466,914) $(705,111) $(876,866) $(2,687,835) $(4,736,726)
========= ========= ========= =========== ===========
Pro forma net loss per share(1) $ (0.56)
===========
Shares used to compute pro forma net loss
per share(1) 4,785,863
===========
DECEMBER 31, 1996
-------------------------
AS
ACTUAL ADJUSTED(2)
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BALANCE SHEET DATA:
Working capital $ 1,317,447 $ 17,697,447
Total assets 1,563,392 17,943,392
Note payable to principal stockholder 3,000,000 3,000,000
Deficit accumulated during the development stage (4,736,726) (4,736,726)
Total stockholders' equity (deficit) (1,852,170) 14,527,830
- ----------
(1) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used to compute pro forma net loss
per share.
(2) Adjusted to give effect to the receipt of the estimated net proceeds
of the Offering based upon an assumed initial public offering price
of $7.50 per Share and $.10 per Warrant. See "Use of Proceeds" and
"Capitalization."
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6
RISK FACTORS
An investment in the Securities offered hereby involves a high degree of
risk. In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the Securities offered hereby. Prospective
investors should be in a position to risk the loss of their entire investment.
This Prospectus contains forward-looking statements. Such forward-looking
statements include, but are not limited to, the Company's expectations regarding
its future financial condition and operating results, product development,
business and growth strategy, market conditions and competitive environment. 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
in the following risk factors and elsewhere in this Prospectus.
DEVELOPMENT STAGE COMPANY; LIMITED OPERATING HISTORY; NO REVENUES AND NO
ASSURANCE OF PROFITABILITY
The Company is in the development stage and is subject to all business risks
associated with a new enterprise, including uncertainties regarding product
development, constraints on the Company's financial and personnel resources, and
dependence on and need for third party relationships. At December 31, 1996, the
Company had an accumulated deficit of approximately $4.7 million. The Company
anticipates that it will continue to incur substantial additional operating
losses for at least the next several years and expects cumulative losses to
increase as the Company's research and development efforts expand. The Company
has a limited history of operations consisting primarily of development of its
products and sponsorship of research and clinical trials. The Company has not
generated any revenue to date, whether from product sales, license fees or
research funding, and there can be no assurance as to when or whether it will be
able to develop sources of revenue or that its operations will become
profitable, even if it is able to commercialize any products. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT OR COMMERCIALIZATION;
UNCERTAINTIES RELATED TO CLINICAL TRIALS
The Company's research and development programs are at various stages of
development, ranging from the preclinical stage to Phase III clinical trials.
Substantial additional research and development will be necessary in order for
the Company to develop and obtain regulatory approval for its product
candidates, and there can be no assurance that the Company's research and
development will lead to development of products that are shown to be safe and
effective in clinical trials and that are commercially viable. In addition to
further research and development, the Company's product candidates will require
clinical testing, regulatory approval and development of marketing and
distribution channels, all of which are expected to require substantial
additional investment prior to commercialization. There can be no assurance that
the Company's products will be successfully developed, prove to be safe and
efficacious in clinical trials, meet applicable regulatory standards, be capable
of being produced in commercial quantities at acceptable costs, be eligible for
third party reimbursement from governmental or private insurers, be successfully
marketed or achieve market acceptance. Further, the Company's products may prove
to have undesirable or unintended side effects that may prevent or limit their
commercial use.
The Company may find, at any stage of its research and development, that
products which appeared promising in preclinical studies or Phase I and Phase II
clinical trials do not demonstrate efficacy in larger-scale Phase III clinical
trials and do not receive regulatory approvals. The results from preclinical
testing and early clinical trials may not be predictive of results obtained in
later clinical trials and large-scale testing. Companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in various
stages of clinical trials, even in advanced clinical trials after promising
results had been obtained in earlier trials. Accordingly, any product
development program undertaken by the Company may be curtailed, redirected or
eliminated at any time. The rate of completion of the Company's clinical trials
may be delayed by many factors, including slower than anticipated patient
enrollment, difficulty in securing sufficient supplies of clinical trial
materials or adverse events occurring during the clinical trials. Completion
7
of testing, studies and trials may take several years, and the length of time
varies substantially with the type, complexity, novelty and intended use of the
product. In addition, data obtained from preclinical and clinical activities are
susceptible to varying interpretations, which could delay, limit or prevent
regulatory approval. Delays or rejections may be encountered based upon many
factors, including changes in regulatory policy during the period of product
development. No assurance can be given that any of the Company's development
programs will be successfully completed, that any Investigational New Drug
application ("IND") will become effective or that additional clinical trials
will be allowed by the United States Food and Drug Administration ("FDA") or
other regulatory authorities or that clinical trials will commence as planned.
In addition, there have been delays in the Company's testing and development
schedules to date and there can be no assurance that the Company's expected
testing and development schedules will be met which could have a material
adverse effect on the Company. See "Business -- Jenner's Product Candidates and
Clinical Trials."
DEPENDENCE ON THIRD PARTY MANUFACTURING; RISKS OF CHANGING MANUFACTURING
SOURCES
The Company relies on third parties for the manufacture of products used in
clinical trials. The Company anticipates that current manufacturers of its
product candidates will not necessarily manufacture these products for
subsequent clinical trials, and will not manufacture the products for commercial
use should the clinical trials be successful and regulatory approval be
obtained. As a result, the Company will need to obtain alternate manufacturing
sources for its products. Applicable regulations require that, if the
manufacturing source of products such as the Company's vaccines or macrophage
activators is changed, equivalency must be demonstrated before patients can be
treated with product from the new manufacturer. The demonstration of such
equivalency may require that additional clinical trials be conducted. There is
no assurance that the Company will be able to demonstrate equivalency and the
effort to do so may require significant expenditures of money and time which
could have a material adverse effect on the Company. See "Business --
Manufacturing and Supply."
DEPENDENCE ON AND NEED FOR THIRD PARTY RELATIONSHIPS
The Company follows a business strategy of utilizing the expertise and
resources of third parties in a number of areas, including the manufacture of
vaccines and macrophage activators and their components, and the conduct of
preclinical and clinical trials. This strategy creates risks to the Company by
placing critical aspects of the Company's business in the hands of third parties
whom the Company may not be able to control as effectively as its own
operations. Moreover, in reliance on these relationships, the Company has not
developed its own resources to the extent these activities have been contracted
to third parties. Currently, the Company relies on these third parties as the
sources of supply for their respective products or services. If these third
parties do not perform in a timely and satisfactory manner, the Company may
incur additional costs and lose time in the conduct of its development and
clinical programs as it seeks alternate sources of such products and services,
if available. The effect of such costs and delays may have a material adverse
effect on the Company. See "Business -- Business Strategy."
The Company may seek additional third party relationships in certain areas,
particularly in situations in which the Company believes that the clinical
testing, marketing, manufacturing and other resources of a pharmaceutical
company collaborator will enable the Company to develop particular products or
geographic markets which are otherwise beyond the Company's resources and/or
capabilities. There is no assurance that the Company will be able to obtain any
such collaboration, or any other research and development, manufacturing, or
clinical trial agreement. The inability of the Company to obtain and maintain
satisfactory relationships with third parties may have a material adverse effect
on the Company.
NEED FOR SUBSTANTIAL ADDITIONAL FUNDS
The Company's operations to date have consumed substantial and increasing
amounts of cash. The negative cash flow from operations is expected to continue
and to accelerate in the foreseeable future. The Company will require
substantial funds of its own, or from third parties, to conduct research and
development, preclinical and clinical testing and to manufacture (or have
manufactured) and market (or have marketed) its product candidates. The Company
estimates that its current cash resources and the
8
net proceeds of the Offering will be sufficient to meet its operating and
capital requirements for at least 12 months following the closing of the
Offering. However, the Company's cash requirements may vary materially from
those now planned because of results of research and development, results of
preclinical and clinical testing, relationships with possible strategic
partners, changes in the focus and direction of the Company's research and
development programs, competitive and technological advances, the FDA regulatory
process and other factors. The net proceeds of this Offering are not expected to
be sufficient to fund the Company's operations through the commercialization of
one or more products yielding sufficient revenues to support the Company's
operations; therefore, the Company is likely to need to raise additional funds.
The Company may seek to satisfy its future funding requirements through public
or private offerings of securities, with collaborative or other arrangements
with major pharmaceutical companies or from other sources. Additional financing
may not be available when needed or on terms acceptable to the Company. If
adequate financing is not available, the Company may not be able to continue as
a going concern, or may be required to delay, scale back or eliminate certain of
its research and development programs, to relinquish rights to certain of its
technologies or product candidates, to forego desired opportunities, or to
license third parties to commercialize products or technologies that the Company
would otherwise seek to develop itself. To the extent the Company raises
additional capital by issuing equity securities, ownership dilution to the
investors in this Offering will result. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 1 of Notes
to Financial Statements.
NO MANUFACTURING, MARKETING OR SALES
The Company currently has no marketing and sales resources or personnel. In
the event the Company successfully completes the regulatory process for the
introduction of a vaccine or macrophage activator product, the Company will need
to establish distribution, marketing and sales resources in order to
commercialize such product. Depending upon the product, the Company may seek to
develop its own distribution, marketing and sales resources, or may seek to
enter a collaborative agreement with a major pharmaceutical company for such
purposes. There is no assurance that the Company will be successful in either
situation. The inability of the Company to successfully distribute, market and
sell products will adversely affect the commercial value of such products and
may adversely affect the financial position of the Company. In view of the early
stage of development of the Company's potential products and the Company's
limited resources, the Company does not anticipate spending a material portion
of the net proceeds of this Offering to acquire resources and develop
capabilities in distribution, marketing or sales. See "Business -- Marketing and
Distribution."
The Company does not have a manufacturing facility, and thus currently lacks
the resources or capability to manufacture itself any of its product candidates
on a clinical or commercial scale. At the present time, the Company believes
that there are a number of facilities with FDA approval that have the capability
of synthesizing and manufacturing the Company's products and liposomal
formulations. However, the process for manufacturing and formulating the
Company's products is complex and subject to uncertainties. The Company is
currently, and will continue to be, dependent on third parties for manufacturing
clinical and commercial scale quantities of its products. There can be no
assurance that the Company will be able to maintain existing agreements for the
manufacturing of clinical quantities of products, that it will be able to enter
into additional agreements with other third parties for commercial scale
manufacturing, or that contract manufacturers will be able to adequately produce
the Company's products in commercial quantities in a cost-effective manner.
Interruptions or difficulties in clinical or commercial production of the
Company's products may require the Company to incur substantial costs to address
the situation, which could have a material adverse effect on the Company. See "
- -- Dependence on Third Party Manufacturing; Risks of Changing Manufacturing
Sources" and "Business -- Manufacturing and Supply."
Contract manufacturers must adhere to current Good Manufacturing Practice
("cGMP") regulations strictly enforced by the FDA on an ongoing basis through
its facilities inspection program. Contract manufacturing facilities must pass a
pre-approval plant inspection before the FDA will approve a Biologic License
Application ("BLA") or a Product License Application ("PLA") and Establishment
License
9
Application ("ELA"). Certain material manufacturing changes that occur after
approval are also subject to FDA review and clearance or approval. There can be
no assurance that the FDA or other regulatory agencies will approve the process
or the facilities by which any of the Company's products may be manufactured.
The Company's dependence on third parties for the manufacture of products may
adversely affect the Company's ability to develop and deliver products on a
timely and competitive basis. See " -- No Assurance of FDA Approval; Government
Regulation" and "Business -- Government Regulation."
UNCERTAIN ABILITY TO PROTECT PATENTS AND PROPRIETARY INFORMATION
The pharmaceutical and biotechnology fields are characterized by a large
number of patent filings, and a substantial number of patents have already been
issued to other pharmaceutical and biotechnology companies. Third parties may
have filed applications for or have been issued patents and may obtain
additional patents and proprietary rights related to products or processes
competitive with or similar to those of the Company. The Company may not be
aware of all of the patents potentially adverse to the Company's interests that
may have been issued to others. No assurance can be given that such patents do
not exist, have not been filed, or could not be filed or issued, which contain
claims relating to the Company's technology, products or processes. If patents
have been or are issued to others containing preclusive or conflicting claims
and such claims are ultimately determined to be valid, the Company may be
required to obtain licenses to one or more of such patents or to develop or
obtain alternate technology. There can be no assurance that the licenses that
might be required for the Company's processes or products would be available on
commercially acceptable terms, or at all.
Because of the substantial length of time and expense associated with
bringing new products to the marketplace through the development and regulatory
approval process, the biotechnology industry places considerable importance on
patent and trade secret protection for new technologies, products and processes.
Since patent applications in the United States are maintained in secrecy until
patents issue and since publication of discoveries in the scientific or patent
literature often lag behind actual discoveries, the Company cannot be certain
that it (or any licensor) was the first to make the inventions covered by
pending patent applications or that it (or any licensor) was the first to file
patent applications for such inventions. The patent positions of vaccine and
biotechnology companies can be highly uncertain and involve complex legal and
factual questions, and therefore the breadth of claims allowed in vaccine and
biotechnology patents or their enforceability, cannot be predicted. There can be
no assurance that any patents under pending patent applications or any further
patent applications will be issued. Furthermore, there can be no assurance that
the scope of any patent protection will exclude competitors or provide
competitive advantages to the Company, that any of the Company's patents that
have issued or may be issued will be held valid if subsequently challenged or
that others, including competitors or current or former employers of the
Company's employees, advisors and consultants, will not claim rights in or
ownership to the patents and other proprietary rights held by the Company. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information or otherwise obtain access to the Company's
proprietary information or that others may not be issued patents that may
require licensing and the payment of significant fees or royalties by the
Company.
The Company currently licenses several patents and patent applications and
other technology that are integral to the Company's products and business. The
Company's breach of any existing license agreement or the failure to obtain a
license to technology required to commercialize its products candidates may have
a material adverse effect on the Company. See "Business -- Licenses."
The biotechnology industry has experienced extensive litigation regarding
patent and other intellectual property rights. Accordingly, the Company could
incur substantial costs in defending itself in suits that may be brought against
the Company claiming infringement of the patent rights of others or in asserting
the Company's patent rights in a suit against another party. The Company may
also be required to participate in interference proceedings declared by the
United States Patent and Trademark Office for the purpose of determining the
priority of inventions in connection with the patent applications of the Company
or other parties. Adverse determinations in litigation or interference
proceedings could require the Company to seek licenses (which may not be
available on commercially reasonable terms) or subject the Company to
significant liabilities to third parties, and could therefore
10
have a material adverse effect on the Company. Even if the Company prevails in
an interference proceeding or a lawsuit, substantial resources of the Company,
including the time and attention of its officers, will be required.
The Company also relies on trade secrets, know-how and technological
advancement to maintain its competitive position. Although the Company uses
confidentiality agreements and employee proprietary information and invention
assignment agreements to protect its trade secrets and other unpatented
know-how, these agreements may be breached by the other party thereto or may
otherwise be of limited effectiveness or enforceability.
The Company is aware of a company that has filed an intent to use
application in the United States Patent and Trademark Office for the mark "Onco
Vax" relating to therapeutic vaccines for oncological purposes. The Company
believes that it has superior rights to use "OncoVax" based upon its public use
of the mark in technical journals prior to the effective filing date of the
intent to use application. However, there can be no assurance in this regard,
and the Company may be required to discontinue using "OncoVax" as a name for its
products.
DEPENDENCE ON QUALIFIED PERSONNEL
Because of the specialized scientific nature of the Company's business, the
Company is highly dependent upon its ability to attract and retain qualified
scientific, technical and managerial personnel. The loss of the Company's Chief
Executive Officer, Anthony E. Maida III, or its President and Chief Scientific
Officer, Dr. Lynn E. Spitler, would be highly detrimental to the Company. The
Company has an employment agreement with each of these individuals. See
"Management -- Employment Agreements." Following the Offering, the Company
expects to maintain key person insurance for $1,000,000 on the life of each of
Mr. Maida and Dr. Spitler. The proceeds of such insurance may not be sufficient
to compensate the Company for the loss of the services of such individuals and
is not applicable in the case of resignation. There is intense competition for
qualified personnel in the biotechnology field, including personnel with
expertise in product candidate identification, licensing, clinical trials,
government regulation, manufacturing marketing and sales, and there can be no
assurance that the Company will be able to continue to attract and retain
qualified personnel necessary for the development of its business. The loss of
the services of existing personnel as well as the failure to recruit additional
key scientific and technical personnel in a timely manner could have a material
adverse effect on the Company.
RELATIONSHIPS OF SCIENTIFIC ADVISORS WITH OTHER ENTITIES
The members of the Company's Scientific Advisory Board are employed on a
full-time basis by academic or research institutions. Scientific Advisory Board
Members serve as consultants to the Company, and in some cases as consultants to
other companies. Accordingly, Scientific Advisory Board members are able to
devote only a portion of their time to the Company's business and research
activities. In addition, except for work performed specifically for and at the
direction of the Company, the inventions or processes discovered by the
Company's Scientific Advisory Board members and other consultants will not
become the intellectual property of the Company, but will be the intellectual
property of their institutions. If the Company desires access to inventions
which are not its property, it will be necessary for the Company to obtain
licenses to such inventions from the owners. In addition, invention assignment
agreements executed by Scientific Advisory Board members and consultants in
connection with their relationships with the Company may be subject to the
rights of their primary employers or other third parties with whom such
individuals have consulting relationships. See "Business -- Scientific Advisory
Board."
COMPETITION
There are many companies, both publicly and privately held, including
well-known pharmaceutical companies, as well as academic and other research
institutions, that are engaged in the discovery, development, marketing and sale
of products for the treatment of cancer. These include new pharmaceutical
products and new biologically derived products, including vaccines and
macrophage activators. The Company expects to encounter significant competition
for its product candidates from traditional and new treatment methods. The
Company is aware of a number of companies that have products based on
immunoactivation principles or intended to treat the indications targeted by the
Company, including Avigen, Inc., Akzo Pharma Group, Aphton Corp., Biomira, Inc.,
Cell Genesys, Inc., Cel-Sci Corporation, Centocor, Inc., Corixa Corporation,
Cytel Corp., EndoRex Corp., Epigen, Inc., IDEC Pharmaceutical Corp., ImClone
Systems, Inc., Janssen Pharmaceuticals (a division of Johnson & Johnson),
Medarex, Inc., Oncogene Sciences, Inc., RIBI ImmunoChem Research, Inc.,
Schering-Plough Corp., Therion Biologics Corporation, Chiron Viagene, Inc. and
Vical, Inc. Janssen Pharmaceuticals and Schering-Plough Corp. recently
11
received FDA clearance to market products in the United States for surgical
adjuvant treatment of colorectal carcinoma and melanoma, respectively, and
Centocor, Inc. recently received approval to market a product in Germany for the
adjuvant therapy of colorectal cancer.
Most of the Company's competitors and potential competitors have
substantially greater capital, research and development capabilities and human
resources than the Company. Furthermore, many of these competitors have
significantly greater experience than the Company in undertaking preclinical
testing and clinical trials of new biotechnology products and obtaining FDA and
other regulatory approvals. If the Company is permitted to commence commercial
sales of any product, it will also be competing with companies that have greater
resources and experience in manufacturing, marketing and sales. The Company's
competitors may succeed in developing products that are more effective, less
costly, or have a better side effect profile than any that may be developed by
the Company, and such competitors may also prove to be more successful than the
Company in manufacturing, marketing and sales. If the Company is able to
successfully commercialize a product, subsequent competitive developments could
render such product noncompetitive or obsolete. See "Business -- Competition."
TECHNOLOGICAL CHANGES AND UNCERTAINTY
The Company's research and development strategy is based upon advances in
recent years in the scientific understanding of monoclonal antibodies, genetic
engineering and the human immune system. The Company's strategy focuses on
techniques to stimulate the body's immune system to act against cancer cells.
This area is the subject of extensive research efforts and rapid scientific
progress. New developments are expected to continue at a rapid pace in industry
and academia in both the specific areas of interest to the Company and in other
areas directed at the prevention or treatment of cancer. There can be no
assurance that research and discoveries by others will not render some or all of
the Company's proposed products noncompetitive or obsolete. In addition, the
Company's business strategy is subject to the risks inherent in the development
of new therapeutic products. There can be no assurance that unforeseen problems
will not develop, that the Company will be able to address successfully
technological challenges it encounters in its research and development programs
or that commercially feasible products will ultimately be developed by the
Company. See "Business -- Competition."
NO ASSURANCE OF FDA APPROVAL; GOVERNMENT REGULATION
All new drugs and biologics, including the Company's product candidates, are
subject to extensive and rigorous regulation by the federal government,
principally the FDA under the Federal Food, Drug and Cosmetic Act and other laws
including, in the case of biologics, the Public Health Services Act, and by
state and local governments. Such regulations govern, among other things, the
development, testing, manufacture, labeling, storage, premarket clearance or
approval, advertising, promotion, sale and distribution of such products. If
drug products are marketed abroad, they also are subject to extensive regulation
by foreign governments. Failure to comply with the FDA or other applicable
regulatory requirements may subject a Company to administrative or judicially
imposed sanctions such as civil penalties, criminal prosecution, injunctions,
product seizure or detention, product recalls, total or partial suspension of
production, and FDA refusal to approve pending BLAs, PLAs and ELAs, or
supplements to approved BLAs or PLAs/ELAs.
The Company has not received regulatory approval in the United States or any
foreign jurisdiction for the commercial sale of any of its products. The process
of obtaining FDA and other required regulatory approvals, including foreign
approvals, often takes many years and can vary substantially based upon the
type, complexity and novelty of the products involved and the indications being
studied. Furthermore, such approval process is extremely expensive and
uncertain. There can be no assurance that the Company's product candidates will
be cleared for marketing by the FDA. There can be no assurance that the Company
will have sufficient resources to complete the required regulatory review
process, or that the Company could overcome the inability to obtain, or delays
in obtaining, such approvals. The failure of the Company to receive FDA approval
for its product candidates would preclude the Company from marketing and selling
its products in the United States. Therefore, the failure to receive such FDA
approval would have a material adverse effect on the Company. Even if
12
regulatory approval of a product is granted, there can be no assurance that the
Company will be able to obtain the labeling claims necessary or desirable for
the promotion of those products. FDA regulations prohibit the marketing or
promotion of a drug for unapproved indications. Furthermore, regulatory
marketing approval may entail ongoing requirements for postmarketing studies. If
regulatory approval is obtained, the Company will be subject to ongoing FDA
obligations and continued regulatory review. In particular, the Company or its
third party manufacturers will be required to adhere to regulations setting
forth cGMPs, which require that the Company or third party manufacturers
manufacture products and maintain records in a prescribed manner with respect to
manufacturing, testing and quality control activities. Further, the Company or
its third party manufacturer must pass a preapproval inspection of its
manufacturing facilities by the FDA before obtaining marketing approval. Failure
to comply with applicable regulatory requirements may result in penalties such
as restrictions on a product's marketing or withdrawal of the product from the
market. In addition, identification of certain side effects after a drug is on
the market or the occurrence of manufacturing problems could cause subsequent
withdrawal of approval, reformulation of the drug, additional preclinical
testing or clinical trials and changes in labeling of the product.
Prior to the submission of a BLA or PLA/ELA, drugs developed by the Company
must undergo rigorous preclinical and clinical testing which may take several
years and the expenditure of substantial resources. Before commencing clinical
trials in humans, the Company must submit to the FDA and receive clearance of an
IND. There can be no assurance that submission of an IND for future clinical
testing of any product under development or other future products of the Company
would result in FDA permission to commence clinical trials or that the Company
will be able to obtain the necessary approvals for future clinical testing in
any foreign jurisdiction. Success in preclinical studies or early stage clinical
trials does not assure success in later stage clinical trials. Data obtained
from preclinical and clinical activities are susceptible to varying
interpretations which could delay, limit or prevent regulatory approval.
Further, there can be no assurance that if such testing of products under
development is completed, any such drug compounds will be accepted for formal
review by the FDA or any foreign regulatory body, or approved by the FDA for
marketing in the United States or by any such foreign regulatory bodies for
marketing in foreign jurisdictions. Future federal, state, local or foreign
legislation or administrative acts could also prevent or delay regulatory
approval of the Company's products. See "Business -- Government Regulation."
UNCERTAIN AVAILABILITY OF HEALTH CARE REIMBURSEMENT; HEALTH CARE REFORM
The Company's ability to commercialize its product candidates may depend in
part on the extent to which reimbursement for the costs of such product will be
available from government health administration authorities, private health
insurers and others. Significant uncertainty exists as to the reimbursement
status of newly approved health care products. There can be no assurance of the
availability of adequate third-party insurance reimbursement coverage that
enables the Company to establish and maintain price levels sufficient for
realization of an appropriate return on its investment in developing vaccines
and biological products. Government and other third-party payors are
increasingly attempting to contain health care costs by limiting both coverage
and the level of reimbursement for new therapeutic products approved for
marketing by the FDA and by refusing, in some cases, to provide any coverage for
uses of approved products for disease indications for which the FDA has not
granted marketing approval. If adequate coverage and reimbursement levels are
not provided by government and third-party payors for uses of the Company's
product candidates, the market acceptance of these products would be adversely
affected.
Health care reform proposals have been introduced in Congress and in various
state legislatures. It is currently uncertain whether any health care reform
legislation will be enacted at the federal level, or what actions governmental
and private payors may take in response to the suggested reforms. The Company
cannot predict when any proposed reforms will be implemented, if ever, or the
effect of any implemented reforms on the Company's business. There can be no
assurance that any implemented reforms will not have a material adverse effect
on the Company. Such reforms, if enacted, may affect the availability of
third-party reimbursement for products developed by the Company as well as the
price levels at which the Company is able to sell such products. In addition, if
the Company is able to commercialize products in overseas markets, the Company's
ability to achieve success in such markets may depend, in part, on the health
care financing and reimbursement policies of such countries.
13
RISK OF PRODUCT LIABILITY; UNCERTAINTY OF AVAILABILITY OF PRODUCT
LIABILITY INSURANCE
The Company's business exposes it to potential product liability risks which
are inherent in the manufacturing, clinical testing, marketing and use of human
therapeutic products. The Company currently carries clinical trial liability
insurance in the amount of $1 million per occurrence and $1 million in the
aggregate, although this insurance does not currently cover the on-going Phase
III clinical trial for ACT. There can be no assurance that the coverage limits
of the Company's insurance policy will be adequate, and a successful claim in
excess of the coverage limits could have a material adverse effect on the
Company. The Company plans to obtain product liability insurance covering the
commercial sale of its products prior to their commercial introduction, however,
there can be no assurance that the Company will be able to obtain or maintain
such insurance on acceptable terms or that any insurance obtained will provide
adequate coverage against potential liabilities. Claims or losses in excess of
any liability insurance coverage now carried or subsequently obtained by the
Company could have a material adverse effect on the Company.
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
Sales of Common Stock (including shares issued upon the exercise of
outstanding options) in the public market after this Offering could materially
and adversely affect the market price of the Securities. Such sales also might
make it more difficult for the Company to sell equity securities or
equity-related securities in the future at a time and price that the Company
deems appropriate. Upon the completion of this Offering, the Company will have
7,121,886 shares of Common Stock outstanding (not including 378,114 shares of
Common Stock subject to outstanding options) assuming no exercise of options
after January 31, 1997 and outstanding warrants to purchase an additional
2,500,000 shares of Common Stock, assuming no exercise of the Representative's
Warrant. Of these securities, 2,500,000 shares of Common Stock and Warrants to
purchase 2,500,000 shares of Common Stock sold in this Offering will be freely
tradeable (unless held by affiliates of the Company) without restriction. The
remaining 4,621,886 shares will be restricted securities within the meaning of
the Securities Act of 1933, as amended (the "Securities Act"). The Company's
directors, executive officers and stockholders, who in the aggregate hold 100%
of the shares of Common Stock of the Company outstanding immediately prior to
the completion of this Offering, have entered into lock-up agreements under
which they have agreed not to sell, directly or indirectly, any shares owned by
them for a period of 12 months after the date of this Prospectus without the
prior written consent of the Representative. The Representative may, in its sole
discretion and at any time without notice, release all or any portion of the
shares subject to such lock-up agreements. Upon expiration of the 12-month
lock-up agreements, 2,927,449 shares of Common Stock (not including
approximately 228,403 shares subject to outstanding vested options) held by
existing stockholders will be eligible for immediate public resale, subject in
some cases to volume limitations pursuant to Rule 144, and the remaining
1,694,437 shares held by existing stockholders will become eligible for public
resale at various times over a period of less than two years, subject in some
cases to vesting provisions and volume limitations. In addition, 12 months after
the completion of this Offering, 250,000 shares of Common Stock issuable upon
exercise of the Representative's Warrants and the Warrants to purchase 250,000
shares of Common Stock issuable upon exercise of the Representative's Warrants
will be available for sale. Also, 1,860,680 of the shares outstanding
immediately following the completion of this Offering will be entitled to
registration rights with respect to such shares upon termination of lock-up
agreements. The number of shares sold in the public market could increase if
registration rights are exercised and such sales may have an adverse effect on
the market price of the Common Stock. See "Description of Capital Stock" and
"Shares Eligible for Future Sale."
CONCENTRATION OF OWNERSHIP
Upon consummation of this Offering, the directors and officers of the
Company (and certain members of their families) will beneficially own 4,529,387
shares of the Company's Common Stock or approximately 63.6% of the outstanding
shares of Common Stock following the completion of this Offering. Accordingly,
the Company's officers and directors will have the ability to elect a majority
of the Company's directors and otherwise control the Company. See "Principal
Stockholders."
14
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION
Purchasers of Securities in this Offering will experience immediate and
substantial dilution in the net tangible book value of the shares of Common
Stock and Warrants purchased by them in this Offering. The immediate dilution to
purchasers of the Securities offered hereby is $5.46 per share of Common Stock,
assuming an initial public offering price of $7.50 per share. Additional
dilution to future net tangible book value per share may occur upon the exercise
of the Warrants, the Representative's Warrants and the options that are
outstanding or to be issued under the Company's option plans. The current
stockholders of the Company, including the Company's officers and directors,
acquired their shares of Common Stock for nominal consideration or for
consideration substantially less than the public offering price of the shares of
Common Stock offered hereby. As a result, new investors will bear substantially
all of the risks inherent in an investment in the Company. See "Capitalization,"
"Dilution" and "Certain Transactions."
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN CHARTER AND BYLAWS
PROVISIONS
Certain provisions of Delaware law applicable to the Company could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company, including Section 203 of the Delaware General Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years from the date the person
became an interested stockholder unless certain conditions are met. In addition,
the Board of Directors of the Company may issue shares of Preferred Stock
without stockholder approval on such terms as the Board may determine. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. In addition, the Company's Certificate of Incorporation and
Bylaws eliminate the right of stockholders to act by written consent without a
meeting, eliminate cumulative voting in the election of directors and specify
procedures for director nominations by stockholders and submission of other
proposals for consideration at stockholder meetings. All of the foregoing could
have the effect of delaying, deferring or preventing a change in control of the
Company and could limit the price that certain investors might be willing to pay
in the future for shares of the Company's Common Stock. See "Description of
Capital Stock."
ABSENCE OF DIVIDENDS
The Company has never declared or paid dividends on its Common Stock and
does not intend to pay any dividends in the foreseeable future. See "Dividend
Policy."
ARBITRARY DETERMINATION OF OFFERING PRICE; NO PUBLIC MARKET FOR THE SECURITIES
The initial public offering price of the Securities and the exercise prices
and terms of the Warrants have been determined arbitrarily by negotiations
between the Company and the Representative. Factors considered in such
negotiations, in addition to prevailing market conditions, included the history
and prospects for the industry in which the Company competes, an assessment of
the Company's management, the prospects of the Company, its capital structure
and certain other factors as were deemed relevant. Therefore, the public
offering price of the Securities and the exercise prices and terms of the
Warrants do not necessarily bear any relationship to established valuation
criteria and therefore may not be indicative of prices that may prevail at any
time or from time to time in the public market for the Securities. Prior to this
Offering, there has been no public market for the Securities, and there can be
no assurance that an active trading market will develop in any of the Securities
after the Offering, or, if developed, be sustained. See "Underwriting."
PRICE VOLATILITY
The securities markets have from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market prices of the common stock of many
publicly traded pharmaceutical or biotechnology companies have in the past been,
and can in the future be expected to be, especially volatile. Announcements of
15
technological innovations or new products by the Company or its competitors,
developments or disputes concerning patents or proprietary rights, publicity
regarding actual or potential clinical trial results relating to products under
development by the Company or its competitors, regulatory developments in both
the United States and foreign countries, delays in the Company's testing and
development schedules, public concern as to the safety of vaccines or biological
products and economic and other external factors, as well as period-to-period
fluctuations in the Company's financial results, may have a significant impact
on the market prices of the Securities. The realization of any of the risks
described in these "Risk Factors" could have a significant and adverse impact on
such market prices.
POTENTIAL ADVERSE EFFECT OF REPRESENTATIVE'S WARRANTS
At the consummation of the Offering, the Company will sell to the
Representative for nominal consideration the Representative's Warrants to
purchase up to 250,000 shares of Common Stock and/or 250,000 Warrants. The
Representative's Warrants will be exercisable for a period of four years
commencing one year after the effective date of this Offering, at an exercise
price of $ per Share and $ per Warrant [140% of the respective public offering
prices of the Shares and the Warrants]. The Warrants obtained upon exercise of
the Representative's Warrants will be exercisable for a period of four years
commencing one year after the effective date of this Offering, at an exercise
price of $ per share [140% of the initial public offering price per Share]. For
the term of the Representative's Warrants, the holders thereof will have, at
nominal cost, the opportunity to profit from a rise in the market price of the
Securities without assuming the risk of ownership, with a resulting dilution in
the interest of other security holders. As long as the Representative's Warrants
remain unexercised, the Company's ability to obtain additional capital might be
adversely affected. Moreover, the Representative may be expected to exercise the
Representative's Warrants at a time when the Company would, in all likelihood,
be able to obtain any needed capital through a new offering of its securities on
terms more favorable than those provided by the Representative's Warrants. See
"Underwriting."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
Commencing 18 months after the date of this Prospectus, the Warrants are
subject to redemption at $0.10 per Warrant on 30 days' prior written notice to
the Warrant holders if the average closing sales price of the Common Stock as
reported on the AMEX equals or exceeds $ per share [160% of the initial public
offering price per Share of Common Stock] for any 20 trading days within a
period of 30 consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption. If the Warrants are redeemed, holders of
the Warrants will lose their rights to exercise the Warrants upon expiration of
the 30 day notice of redemption period. Upon receipt of a notice of redemption,
holders would be required to (i) exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for them to do so, (ii) sell the
Warrants at the current market price, if any, when they might otherwise wish to
hold the Warrants or (iii) accept the redemption price which is likely to be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities -- Warrants."
POTENTIAL ADVERSE EFFECT OF SUBSTANTIAL SHARES OF COMMON STOCK RESERVED
The Company has reserved a total of 3,728,114 shares of Common Stock for
issuance as follows: (i) 2,500,000 shares for issuance upon exercise of the
2,500,000 Warrants; (ii) 250,000 shares for issuance upon exercise of the
Representative's Warrants; (iii) 250,000 shares for issuance upon exercise of
the Warrants issuable upon exercise of the Representative's Warrants; (iv)
378,114 shares for issuance upon exercise of non-plan stock options and stock
options granted under the Company's 1993 Stock Option Plan; and (v) 350,000
shares that may be granted under the Company's 1997 Stock Plan following the
Offering. The existence of the Warrants, the Representative's Warrants and any
other options or warrants may adversely affect the Company's ability to
consummate future equity financings. Further, the holders of such warrants and
options may exercise them at a time when the Company would otherwise be able to
obtain additional equity capital on terms more favorable to the Company.
16
REPRESENTATIVE'S INFLUENCE ON THE MARKET
A significant amount of the Securities offered hereby may be sold to
customers of the Representative. Such customers subsequently may engage in
transactions for the sale or purchase of such Securities through or with the
Representative. If it participates in the market, the Representative may exert a
dominating influence on the market, if one develops, for the Securities
described in this Prospectus. Such market making activity may be discontinued at
any time. The price and liquidity of the Common Stock and the Warrants may be
significantly affected by the degree, if any, of the Representative's
participation in the market.
LEGAL RESTRICTIONS ON SALES OF SHARES UNDERLYING THE WARRANTS
The Warrants are not exercisable unless, at the time of the exercise, the
Company has in effect a current prospectus covering the shares of Common Stock
issuable upon exercise of the Warrants, and such shares have been registered,
qualified or deemed to be exempt under the securities laws of the state of
residence of the exercising holder of the Warrants. Although the Company has
agreed to keep a registration statement covering the shares of Common Stock
issuable upon exercise of the Warrants effective for the term of the Warrants,
if it fails to do so for any reason, the Warrants may be deprived of value.
The Shares and Warrants are separately transferable immediately upon
issuance. Purchasers may buy Warrants in the aftermarket in, or may move to,
jurisdictions in which the shares underlying the Warrants are not so registered
or qualified during the period that the Warrants are exercisable. In this event,
the Company would be unable to issue shares to those persons desiring to
exercise their Warrants, and holders of Warrants would have no choice but to
attempt to sell the Warrants in a jurisdiction where such sale is permissible or
allow them to expire unexercised. See "Description of Securities."
MANAGEMENT'S BROAD DISCRETION IN USE OF PROCEEDS
Although the Company intends to apply the net proceeds of this Offering in
the manner described under "Use of Proceeds," it has broad discretion within
such proposed uses as to the precise allocation of the net proceeds, the timing
of expenditures and all other aspects of the use thereof. The Company reserves
the right to reallocate the net proceeds of this Offering among the various
categories set forth under "Use of Proceeds" as it, in its sole discretion,
deems necessary or advisable. See "Use of Proceeds."
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation limits, to the maximum extent
permitted by the Delaware General Corporations Law ("Delaware Law"), the
personal liability of directors for monetary damages for breach of their
fiduciary duties as a director. The Company's Bylaws provide that the Company
shall indemnify its officers and directors and may indemnify its employees and
other agents to the fullest extent permitted by law. The Company has entered
into indemnification agreements with its officers and directors containing
provisions which are in some respects broader than the specific indemnification
provisions contained in Delaware Law. The indemnification agreements may require
the Company, among other things, to indemnify such officers and directors
against certain liabilities that may arise by reason of their status or service
as directors or officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms. Section 145
of the Delaware Law provides that a corporation may indemnify a director,
officer, employee or agent made or threatened to be made a party to an action by
reason of the fact that he was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation against expenses
actually and reasonably incurred in connection with such action if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. Delaware Law does not permit a corporation to eliminate a
director's duty of care, and the provisions of the Company's Certificate of
Incorporation have no effect on the availability of equitable remedies, such as
injunction or rescission, for a director's breach of the duty of care. See
"Management -- Limitation of Liability and Indemnification."
17
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
2,500,000 Shares of Common Stock and 2,500,000 Warrants offered hereby (after
deducting estimated offering expenses and underwriting discounts payable by the
Company in connection with the Offering) are estimated to be approximately
$16,380,000 ($19,002,000 if the Underwriters' over-allotment option is exercised
in full) based on an assumed initial public offering price of $7.50 per Share of
Common Stock and $0.10 per Warrant.
The Company intends to use most of the net proceeds of this Offering to fund
its research and development efforts, including clinical and preclinical
studies. In addition, the Company intends to use approximately $1.1 million of
the net proceeds to establish and equip a small laboratory facility to support
its research and development activities. The remainder of the net proceeds will
be used for working capital and general corporate purposes. The amount and
timing of expenditures of the net proceeds of this Offering cannot be precisely
determined, and will depend on numerous factors, including the status of the
Company's product development efforts, the results of clinical trials and the
regulatory approval process. The Company may also use a portion of the net
proceeds to acquire complementary businesses, products or technologies, although
the Company has no agreements and is not involved in any negotiations with
respect to any such transaction. See "Risk Factors -- Management's Broad
Discretion in Use of Proceeds." Pending such uses, the Company plans to invest
the net proceeds from this Offering in short-term, investment-grade,
interest-bearing securities.
The Company estimates that its current cash resources and the net proceeds
of this Offering will be sufficient to meet its operating and capital
requirements for at least 12 months following the closing of this Offering.
However, there can be no assurance that the net proceeds of the Offering will
satisfy the Company's requirements for any particular period of time. The
Company anticipates that additional funding will be required after the use of
the net proceeds of the Offering. No assurance can be given that such additional
financing will be available when needed on terms acceptable to the Company, if
at all. See "Risk Factors -- Need for Substantial Additional Funds."
DIVIDEND POLICY
The Company has never declared nor paid dividends on its Common Stock and
does not intend to pay any dividends in the foreseeable future.
18
CAPITALIZATION
The following table sets forth, as of December 31, 1996, (i) the actual
capitalization of the Company and (ii) the pro forma capitalization of the
Company as adjusted to give effect to the conversion of all outstanding shares
of Preferred Stock of the Company into Common Stock, to reflect the
reincorporation of the Company into the State of Delaware and to reflect the
receipt of the estimated net proceeds from the sale of the 2,500,000 Shares of
Common Stock and 2,500,000 Warrants offered hereby at an assumed initial public
offering price of $7.50 per Share and $0.10 per Warrant. This table should be
read in conjunction with the financial statements of the Company and the notes
thereto included elsewhere in this Prospectus. See "Description of Securities,"
"Use of Proceeds" and "Certain Transactions."
DECEMBER 31, 1996
-----------------
PRO FORMA,
ACTUAL AS ADJUSTED
------ -----------
Note payable to principal stockholder $ 3,000,000 $ 3,000,000
----------- -------------
Stockholders' equity (net capital deficiency):
Preferred Stock, par value $0.001 per share;
5,000,000 shares authorized; 2,616,550 shares issued and
outstanding on an actual basis, none issued and outstanding
pro forma, as adjusted 2,310,400 --
Common Stock, par value $0.001 per share;
30,000,000 shares authorized; 3,111,871 shares issued and
outstanding on an actual basis, 7,121,886 shares issued
and outstanding pro forma, as adjusted(1) 619,156 7,122
Additional paid-in capital -- 19,302,434
Deferred compensation (45,000) (45,000)
Deficit accumulated during the development stage (4,736,726) (4,736,726)
---------- ----------
Total stockholders' equity (net capital deficiency) (1,852,170) 14,527,830
---------- ----------
Total capitalization $ 1,147,830 $ 17,527,830
=========== ============
- -----------
(1) Excludes 378,114 shares of Common Stock issuable upon exercise of
outstanding non-plan stock options and outstanding stock options granted
under the Company's 1993 Incentive Stock Plan as of January 31, 1997 at a
weighted average exercise price of $0.90 per share, and 350,000 shares of
Common Stock reserved for issuance under the Company's 1997 Stock Plan. See
"Management -- Employee Benefit Plans."
19
DILUTION
The pro forma net tangible book value deficit of the Company as of December
31, 1996 was $(1,852,170), or $(0.40) per share of Common Stock, determined by
dividing the pro forma net tangible book value of the Company (pro forma
liabilities in excess of tangible assets) by the number of shares of Common
Stock outstanding as of December 31, 1996 (assuming the conversion of all
outstanding shares of Preferred Stock into Common Stock). After giving effect to
the receipt of the net proceeds of the sale of 2,500,000 shares of Common Stock
and 2,500,000 Warrants offered hereby at an assumed initial public offering
price of $7.50 per Share and $0.10 per Warrant, the adjusted pro forma net
tangible book value of the Company at December 31, 1996 would have been
$14,527,830, or $2.04 per share. This represents an immediate increase in pro
forma net tangible book value of $2.44 per share to existing stockholders and an
immediate dilution of $5.46 per share to new investors. The following table
illustrates the per share dilution:
Assumed initial public offering price per share $ 7.50
Pro forma net tangible book value deficit per share $ (.40)
Increase per share attributable to new stockholders 2.44
----
Pro forma net tangible book value per share after the Offering 2.04
----
Dilution per share to new stockholders $ 5.46
======
In the event the Over-allotment Option is exercised in full, the pro forma
net tangible book value as of December 31, 1996 would be $17,149,830 or $2.29
per share of Common Stock, which would result in immediate dilution in net
tangible book value to new investors of approximately $5.21 per share.
The following table summarizes, on a pro forma basis as of December 31,
1996, the difference between the number of shares of Common Stock purchased from
the Company, the total consideration paid and the average price per share paid
by existing stockholders of Common Stock and by the new investors purchasing
shares in this Offering, assuming the sale of the 2,500,000 Shares of Common
Stock and 2,500,000 Warrants offered hereby at an assumed initial public
offering price of $7.50 per Share and $0.10 per Warrant and before any deduction
of underwriting discounts and estimated offering expenses.
NUMBER OF
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
Existing stockholders 4,621,886 64.9% $ 2,877,556 13.3% $ .62
New investors 2,500,000 35.1% 18,750,000 86.7% $7.50(2)
--------- ---- ---------- ----
Total 7,121,886 100.0% $21,627,556 100.0%
========= ===== =========== =====
- ---------
(1) Excludes 378,114 shares of Common Stock issuable upon exercise of
outstanding non-plan stock options and outstanding stock options granted
under the Company's 1993 Incentive Stock Plan as of January 31, 1997 at a
weighted average exercise price of $0.90 per share, and 350,000 shares of
Common Stock reserved for issuance under the Company's 1997 Stock Plan. See
"Management -- Employee Benefit Plans."
(2) Attributes no value to the Warrants.
20
SELECTED FINANCIAL DATA
The selected financial data set forth below is qualified in its entirety by,
and should be read in conjunction with, the Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The statement of
operations data for the years ended December 31, 1994, 1995 and 1996 and the
period from December 8, 1992 (inception) to December 31, 1996, and the balance
sheet data at December 31, 1995 and 1996, are derived from the financial
statements of Jenner Technologies, Inc. appearing elsewhere herein, which
financial statements have been audited by Ernst & Young LLP, independent
auditors, whose report is included elsewhere in this Prospectus. The statement
of operations data set forth for the period from inception (December 8, 1992) to
December 31, 1993 and the balance sheet data as of December 31, 1993 and 1994
were derived from audited financial statements of the Company, which are not
included in this Prospectus. The results for the year ended December 31, 1996
are not necessarily indicative of the results for any future period.
PERIOD FROM PERIOD FROM
INCEPTION INCEPTION
(DECEMBER 8, (DECEMBER 8,
1992) TO YEAR ENDED DECEMBER 31, 1992) TO
DECEMBER 31, --------------------------------- DECEMBER 31,
1993 1994 1995 1996 1996
----------- --------- --------- ----------- ------------
STATEMENT OF OPERATIONS DATA:
Revenues $ -- $ -- $ -- $ -- $ --
Operating expenses:
Research and development 338,626 499,366 698,303 2,206,900 3,743,195
General and administrative 137,325 228,114 195,663 339,948 901,050
--------- --------- --------- ----------- -----------
Total operating expenses 475,951 727,480 893,966 2,546,848 4,644,245
--------- --------- --------- ----------- -----------
Loss from operations (475,951) (727,480) (893,966) (2,546,848) (4,644,245)
Interest income (expense) 9,037 22,369 17,100 (140,987) (92,481)
--------- ---------- --------- ----------- -----------
Net loss $(466,914) $ (705,111) $(876,866) $(2,687,835) $(4,736,726)
========= ========== ========= =========== ===========
Pro forma net loss per share(1) $ (0.56)
===========
Shares used to compute pro forma net loss
per share(1) 4,785,863
===========
DECEMBER 31,
--------------------------------------------------
1993 1994 1995 1996
-------- ---------- ----------- ----------
Balance Sheet Data:
Working capital $ 440,793 $ 537,814 $ 254,539 $ 1,317,447
Total assets 505,294 602,362 336,371 1,563,392
Note payable to principal stockholder -- -- -- 3,000,000
Deficit accumulated during the development stage (466,914) (1,172,025) (2,048,891) (4,736,726)
Total stockholders' equity (deficit) 452,700 550,108 273,275 (1,852,170)
- ----------
(1) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used to compute pro forma net loss per
share.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements. Such forward-looking
statements include, but are not limited to, the Company's expectations regarding
its future financial condition and operating results, product development,
business and growth strategy, market conditions and competitive environment. 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 this Prospectus.
OVERVIEW
The Company was incorporated in December 1992 and expects to reincorporate
in Delaware prior to consummation of this Offering. The Company is in the
development stage and is subject to all business risks associated with a new
enterprise, including uncertainties regarding product development, constraints
on the Company's financial and personnel resources, and dependence on and need
for third party relationships. At December 31, 1996, the Company had an
accumulated deficit of approximately $4.7 million. The Company anticipates that
it will continue to incur substantial additional operating losses for at least
the next several years and expects cumulative losses to increase as the
Company's research and development efforts expand. The Company has a limited
history of operations consisting primarily of development of its products and
sponsorship of research and clinical trials. The Company has not generated any
revenue to date, whether from product sales, license fees or research funding,
and there can be no assurance as to when or whether it will be able to develop
sources of revenue or that its operations will become profitable, even if it is
able to commercialize any products.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Research and Development Expenses. Research and development expenses
increased from $499,000 in 1994 to $698,000 in 1995 to $2,207,000 in 1996. The
increase in 1995 over 1994 was primarily associated with production and
formulation activities supporting the Company's first limited Phase I/II
clinical trial of OncoVax-P. The increase in 1995 was also the result of initial
production and formulation of OncoVax-CL. The increase in 1996 expenses over
1995 is attributed to further production of OncoVax-P in support of additional
limited Phase I/II clinical trials and support for a limited Phase I/II clinical
trial of OncoVax-CL which is scheduled to begin in the first quarter of 1997.
Research and development expenses in 1996 also include $830,000 associated with
acquiring rights to certain in-process research and development (ACT and JT3002)
from Novartis. This technology is currently being utilized in a Phase III
clinical trial for patients with osteogenic sarcoma. Management anticipates that
research and development expenses will increase significantly over the next
several years in support of ongoing and planned clinical trials in each of the
Company's principal product development programs.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $228,000, $196,000 and $340,000 in the years ended
1994, 1995 and 1996, respectively. General and administrative expenses were
substantially the same in 1994 and 1995, except for a non-recurring settlement
of a finder's fee agreement in the amount of $30,000 in 1994. The increase of
$144,000 in 1996 compared with 1995 is due primarily to salary increases and
increases in legal expenses related to the acquisition of technology and general
corporate matters. The Company expects to incur increasing general and
administrative expenses in 1997 as a result of adding personnel, increasing
office rental costs and other costs related to supporting increases in staffing
and operating as a public company.
Interest Income (Expense). Interest income in 1996 was offset by an increase
in interest expense from $3,000 in 1995 to $203,000 in 1996 as a result of the
$3 million debt financing with the Company's principal shareholder.
22
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily through the sale of
equity securities and borrowings from its principal stockholder. Through
December 31, 1996, the Company has raised approximately $2.4 million from the
sale of equity securities and $3.0 million through the stockholder loan. See
"Certain Transactions." At December 31, 1996, the Company had cash and cash
equivalents of $1.4 million and an outstanding principal balance of $3.0 million
under the stockholder loan. Borrowings under the stockholder loan bear simple
interest at a rate of 10% per annum. The principal and accrued interest is
payable on May 6, 1999. Cash used in operating activities totalled $698,000,
$871,000 and $1,900,000 in 1994, 1995 and 1996, respectively. Cash used to
acquire capital equipment has not been significant. The Company intends to use
approximately $1.1 million of the net proceeds of the Offering to establish and
equip a small laboratory facility to support its research and development
activities. See "Use of Proceeds."
The Company's operations to date have consumed substantial and increasing
amounts of cash. The negative cash flow from operations is expected to continue
and to accelerate in the foreseeable future. The Company will require
substantial funds of its own, or from third parties, to conduct research and
development, preclinical and clinical testing and to manufacture (or have
manufactured) and market (or have marketed) its product candidates. The Company
estimates that its current cash resources and the net proceeds of the Offering
will be sufficient to meet its operating and capital requirements for at least
12 months following the closing of the Offering. However, the Company's cash
requirements may vary materially from those now planned because of results of
research and development, results of preclinical and clinical testing,
relationships with possible strategic partners, changes in the focus and
direction of the Company's research and development programs, competitive and
technological advances, the FDA regulatory process and other factors. The net
proceeds of this Offering are not expected to be sufficient to fund the
Company's operations through the commercialization of one or more products
yielding sufficient revenues to support the Company's operations; therefore, the
Company is likely to need to raise additional funds. The Company may seek to
satisfy its future funding requirements through public or private offerings of
securities, with collaborative or other arrangements with major pharmaceutical
companies or from other sources. Additional financing may not be available when
needed or on terms acceptable to the Company. If adequate financing is not
available, the Company may not be able to continue as a going concern, or may be
required to delay, scale back or eliminate certain of its research and
development programs, to relinquish rights to certain of its technologies or
product candidates, to forego desired opportunities, or to license third parties
to commercialize products or technologies that the Company would otherwise seek
to develop itself. To the extent the Company raises additional capital by
issuing equity securities, ownership dilution to the investors in this Offering
will result.
INCOME TAXES
The Company has elected to be taxed as a C corporation since its inception.
At December 31, 1996, the Company had federal net operating loss carryforwards
of approximately $3.7 million and research and development credit carryforwards
of approximately $40,000. The net operating loss and credit carryforwards will
expire at various dates beginning in 2008, if not utilized. There is no
guarantee that the Company will have future profitable operations which would
allow the use of the tax benefits. In addition, utilization of the net operating
losses and credits may be subject to a substantial annual limitation due to the
"change of ownership" provisions of the Internal Revenue Code. The annual
limitation may result in the expiration of the carryforwards before utilization.
23
BUSINESS
This Prospectus contains forward-looking statements. Such forward-looking
statements include, but are not limited to, the Company's expectations regarding
its future financial condition and operating results, product development,
business and growth strategy, market conditions and competitive environment. 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 this Prospectus.
THE COMPANY
Jenner Technologies, Inc. ("Jenner" or the "Company"), a development stage
company, is engaged in the development of immunotherapies to treat patients with
cancer and certain side effects related to chemotherapy. The Company has four
product candidates under development, two of which are in clinical trials. Three
of the Company's product candidates are designed to delay or prevent the
recurrence of cancer by stimulating the body's own immune system to attack
microscopic disease remaining after a patient has undergone traditional therapy.
The Company's product candidates consist of macrophage activators (ACT and
JT3002) and therapeutic vaccines (OncoVax-P and OncoVax-CL). The Company
acquired the technology related to ACT and JT3002 through an exclusive worldwide
license with Novartis AG (the company resulting from the merger of Ciba-Geigy
Limited and Sandoz, Ltd.) ("Novartis"). In addition, the Company acquired the
rights to produce the antigen related to OncoVax-P through a non-exclusive
license with Research Corporation Technologies, Inc. and the antigen related to
OncoVax-CL through an exclusive worldwide license with Eli Lilly & Company.
ACT is in a nationwide Phase III clinical trial as a therapy for patients
with osteogenic sarcoma (bone cancer). The study calls for a total of 645
patients to be treated under the protocol and, as of December 31, 1996,
approximately 540 patients had entered the study. ACT utilizes a small molecule
that has the capacity to activate macrophages, which are scavenger cells that
are part of the immune system. Once activated, macrophages acquire the ability
to seek out and destroy tumor cells. ACT utilizes a proprietary liposomal
formulation to deliver its active ingredients (liposomes are spheres of
subcellular size composed primarily of fat molecules). JT3002 is in preclinical
evaluation as a therapy for mucositis (damage to the gastrointestinal mucosa or
lining of the gut), a side effect commonly associated with chemotherapy. The
Company intends to file an Investigational New Drug application ("IND") with the
United States Food and Drug Administration ("FDA") in late 1997 or early 1998 to
commence Phase I clinical trials of JT3002, subject to the results of the
preclinical evaluation.
OncoVax-P is in limited Phase I/II clinical trials in patients with prostate
cancer. The Company intends to commence a limited Phase I/II clinical trial for
OncoVax-CL in patients with colorectal cancer in the first quarter of 1997. The
Company's Phase I/II clinical trials are conducted in a small number of patients
(5-6) to gain preliminary information regarding safety of the vaccine and
ability to generate an immune response. OncoVax-P and OncoVax-CL each include a
genetically engineered version of a tumor associated antigen which represents
the "identity tag" of the cancer cell combined with an adjuvant which enhances
the body's immune response. The antigen and adjuvant are packaged in liposomes
which are taken up by antigen presenting cells. The Company believes this
approach will induce a more robust relevant immune response than if the
liposomal delivery system is not used. Based on preclinical data, the Company
believes that OncoVax-CL has the potential for application in cancer indications
other than colorectal cancer, such as lung, pancreatic and ovarian cancer.
In an effort to leverage the Company's resources and better manage the risks
and costs inherent in scientific research and new product development, Jenner
has followed a business strategy of (i) in-licensing promising proprietary
technologies for which substantial preclinical and/or clinical studies have been
undertaken, (ii) focusing on human clinical trials to gain relevant information
rather than developing animal models, and (iii) engaging qualified
subcontractors to perform research and development functions. Through this
business strategy, the Company has expended only approximately $4.0 million in
cash through December 31, 1996 to develop its current product candidates and
believes it has extended its research efforts to a larger number of applications
than would otherwise be the case given its limited resources.
24
The Company believes that its business strategy and management capabilities
may enable it to shorten the time frame for commercializing its products. The
Company intends to pursue its business strategy further by seeking to establish
strategic alliances with pharmaceutical companies and other corporate partners
in connection with development, marketing and distribution of the Company's
product candidates.
CANCER INCIDENCE AND TREATMENT
Cancer is the second leading cause of death in the United States. Based on
cancer incidence data collected by the National Cancer Institute's Surveillance,
Epidemiology and End Results (SEER) program and U.S. population data collected
by the Bureau of the Census, it is estimated that approximately 1.38 million new
cancer cases and 560,000 deaths will occur in the United States in 1997.
The current treatment regimens for cancer consist primarily of surgery to
remove malignant tumors, radiation therapy to treat tumors or post-surgical
residual tumor cells in a localized area in the body, and chemotherapy to treat
cancer that has spread systemically. Depending upon the type and severity of the
cancerous tumor, these therapies can be used individually or in combination with
each other.
Surgery is the most effective treatment for cancer and the one with the
greatest potential cure of solid tumors. However, despite significant
improvements in early diagnosis and in surgical techniques, many surgically
treated patients experience recurrence of cancer. The chances for recurrence
depend on the type of cancer, how early it is detected, and if metastases
(distant spread of the tumor) occurred prior to surgical removal of the primary
tumor. Most deaths from cancer are due to metastases that are resistant to
conventional therapies.
Radiation therapy involves subjecting tumor cells to radiation which causes
the cells to die or multiply more slowly. Because certain tumor cells are
rapidly dividing, they are often more sensitive to radiation than normal cells,
allowing radiation therapy to kill these cells with a resultant improvement in
the patient's condition. However, because of the overall damaging nature of
radiation, it is generally limited in use to small specific sites that are not
near sensitive organs or structures. In addition, the toxicity of the radiation
to normal cells limits the amount of radiation that can be administered, which
in turn limits the effectiveness of radiation therapy in killing cancer cells.
Chemotherapy involves the use of drugs that slow down or kill rapidly
dividing cells. Although many cancer cells fall into this category, there are
also normal cells in the body which divide rapidly. These include cells of the
gastrointestinal mucosa and bone marrow. Since chemotherapy affects all of these
cell populations, it produces significant side effects, including mucositis, a
serious condition that can cause gastrointestinal ulcerations and diarrhea.
Thus, administration of chemotherapy carries with it the hazard of significant
complications, and, for solid tumors, it generally does not achieve cure of the
disease. For prostate cancer, chemotherapy has minimal efficacy, but hormonal
therapy may delay tumor progression for a period of time.
Current treatments for metastatic cancers are not very effective. The
Company believes that recent technological advances and increased understanding
of the immune system make possible cancer therapies that will activate or
stimulate the immune system offering the potential for new, effective treatment.
JENNER'S PRODUCT CANDIDATES AND CLINICAL TRIALS
The Company has two primary areas of product focus: macrophage activators
and therapeutic vaccines. Three of the Company's product candidates are designed
to delay or prevent the recurrence of cancer by stimulating the body's own
immune system to attack microscopic disease remaining after a patient has
undergone traditional therapy. The Company's other product candidate is designed
to ameliorate certain side effects of chemotherapy. There have been many
scientific advances in recent years that have enabled the Company to pursue
development of its macrophage activators and therapeutic vaccines. Hybridoma
technology has permitted the development of monoclonal antibodies that can be
used to identify and characterize tumor associated antigens important for
vaccine development and to study their tissue distribution. In addition,
advances in genetic engineering have
25
enabled cost-effective production of specific antigens once they have been
identified. Finally, advances in biology have provided a better understanding of
the immune response and methods to manipulate it for the clinical benefit of the
patient.
The table below sets forth the Company's principal products under
development, the primary indications for these products and the clinical status
for each product.
PRODUCT CANDIDATE INDICATION CLINICAL STATUS
----------------- ---------- ---------------
ACT Osteogenic Sarcoma Phase III
OncoVax-P Prostate Cancer Limited Phase I/II*
OncoVax-CL Colorectal Cancer Limited Phase I/II*
Patient Enrollment
JT3002 Mucositis Preclinical Evaluation
- ----------
* Jenner's limited Phase I/II clinical trials are conducted in a small number of
patients (5-6) to gain preliminary information regarding safety of the vaccine
and ability to generate an immune response.
ACT
ACT is currently in a pivotal Phase III randomized trial as therapy for
patients with osteogenic sarcoma. The pivotal Phase III clinical trial is
sponsored by the National Cancer Institute of the U.S. National Institutes of
Health and is being conducted nationwide by the Children's Cancer Study Group
and the Pediatric Oncology Group. These groups include the majority of U.S.
centers treating patients with osteogenic sarcoma. The Overall Chair of the
study is Paul Meyers, M.D. of Memorial Sloan-Kettering Cancer Center. The Phase
III study has been designed to evaluate the efficacy of ACT when administered
for nine months with chemotherapy following surgical excision of primary
osteogenic sarcoma. End points of the study are disease-free survival and
survival. The study calls for a total of 645 patients to be treated under the
protocol and, as of December 31, 1996, approximately 540 patients had entered
the study. It is estimated that there will be approximately 2,500 new cases of
osteogenic sarcoma in the United States in 1997. The Company acquired the
technology related to ACT through an exclusive worldwide license with Novartis.
The Phase III pivotal trial design is based on the results obtained in a
Phase II trial conducted at University of Texas, M.D. Anderson Cancer Center, in
children and adults with pulmonary metastasis of osteogenic sarcoma. Patients
who entered the Phase II trial had histologically proven osteogenic sarcoma with
pulmonary metastases that had developed during adjuvant chemotherapy or that
were present at diagnosis, persisted despite chemotherapy and recurred following
surgical excision. Patients were rendered clinically disease-free by surgery.
ACT was administered postoperatively to two separate groups of patients for
three months or six months, respectively. For comparison, medical records of
patients previously treated at the same institution were reviewed and 21
patients identified whose disease status was similar but who were treated with
chemotherapy rather than ACT. The median time to relapse was 4.5 months in the
21 patients treated with chemotherapy, 6.8 months in the 12 patients who
received three months of ACT therapy, and 9.0 months in the 16 patients who
received six months of ACT therapy. The increase in median time to relapse from
4.5 months to 9 months represents a statistically significant increase. These
data suggested that ACT is an active agent in osteogenic sarcoma, that six
months of ACT is superior to three months, and that a more prolonged
administration of the drug (nine to 12 months) could benefit more patients and
could result in even longer disease-free intervals.
ACT is a liposomal formulation of MTP-PE, which is a conjugate of
muramyl-tripeptide (MTP) and dipalmitoylphosphotidylethanolamine (PE). MTP is a
synthetic derivative of muramyl dipeptide, a naturally occurring component of
bacterial cell walls that has the capacity to activate macrophages.
26
Once activated, macrophages acquire the ability to distinguish tumor cells from
normal cells and will kill only the tumor cells. Both the liposomal formulation
and the basic molecule of MTP-PE are proprietary to the Company.
Based on the results of the Phase II trial and earlier preclinical and
clinical trials, the Company believes that ACT may be effective as an
immunotherapeutic for other types of cancer as well. The data suggests that ACT
is most effective when administered at a time when the tumor burden is minimal
but the patient is at high risk of recurrence because of tiny metastases left
behind following standard treatment. The Company is in the process of designing
new Phase II clinical trials and defining patient populations to study the
efficacy of ACT in the adjuvant setting for cancers other than osteogenic
sarcoma. Substantial additional research and development will be necessary in
this regard, and there can be no assurance that ACT will be shown in clinical
trials to be effective for the treatment of osteogenic sarcoma or any other
cancer indication. See "Risk Factors -- No Assurance of Product Development or
Commercialization; Uncertainties Related to Clinical Trials."
CANCER VACCINES
The Company is developing OncoVax-P to treat prostate cancer. Prostate
cancer is the most common malignancy among men in the United States, accounting
for an estimated 43% of all cancer malignancies in men. It is estimated that
there will be 334,500 new cases of prostate cancer in the United States in 1997
and over 40,000 deaths. OncoVax-P includes a prostate specific antigen (PSA)
licensed from Research Technologies Corporation combined with an adjuvant
formulated into liposomes. In the third quarter of 1995, the Company initiated a
limited Phase I/II clinical trial for OncoVax-P in which six patients with
advanced metastatic prostate cancer who had all failed standard therapy
(including hormonal therapy) were treated with OncoVax-P. Moreover, although all
patients had advanced disease, two of the patients mounted an immune response to
the PSA antigen in the vaccine.
Based on the foregoing results, the Company has initiated three additional
limited Phase I/II clinical trials using OncoVax-P, each of which involves five
or six evaluable patients. These new trials are designed to determine an
effective regimen for inducing a strong immune response and will study the
effect of (i) administering OncoVax-P intravenously rather than intramuscularly,
(ii) administering OncoVax-P in combination with granulocyte macrophage-colony
stimulating factor (GM-CSF), a cytokine that has been shown to enhance white
blood cell count and immune response, and (iii) pretreating patients with
cyclophosphamide, a chemotherapy drug, and then treating them with a combination
of OncoVax-P and bacillus Calmette-Guerin (BCG), a bacterium-based adjuvant. In
a fourth limited Phase I/II trial planned to commence later in 1997, OncoVax-P
will be evaluated in a proprietary emulsion formulation. The clinical trials are
sponsored by the Company and are conducted by David Harris, M.D. at Lankenau
Hospital near Philadelphia, Pennsylvania.
The Company is developing OncoVax-CL to treat colorectal cancer. Colorectal
cancer is currently the third most commonly occurring cancer in the United
States. It is estimated that there will be 131,000 new cases of colorectal
cancer in the United States in 1997 and 55,000 deaths. Approximately 50% of all
persons diagnosed with colorectal cancer die within five years of diagnosis.
OncoVax-CL consists of a liposomal formulation of an antigen (KSA) licensed from
Eli Lilly & Company and an adjuvant. The Company has submitted an IND to the FDA
for OncoVax-CL and expects to commence a limited Phase I/II clinical trial
involving six evaluable patients in the first quarter of 1997. The Company
sponsored clinical trial will be conducted by Albert F. LoBuglio, M.D. at the
University of Alabama. Based on preclinical data, the Company believes that
OncoVax-CL may have the potential for application in cancer indications other
than colorectal cancer, such as lung, pancreatic and ovarian cancer.
Each of the Company's cancer vaccines includes a genetically engineered
version of a tumor associated antigen combined with an adjuvant. An antigen is a
substance which induces an immune response within the body. An adjuvant is a
substance that is administered with an antigen to enhance the immune response to
the antigen. The antigen and adjuvant are packaged in liposomes. The liposomal
formulation targets the antigen-presenting cells of the immune system. The
immune response includes direct killing of the tumor cells by the T-cells,
production of antibodies which activate the patient's
27
defense mechanisms to kill the tumor cells, and the generation of cytokines
which kill tumor cells directly and indirectly through activating the patient's
defenses. Research and development and clinical testing of the Company's
vaccines are at an early stage and there can be no assurance that such vaccines
will be shown in clinical trials to be safe or effective in treating any cancer
indication. See "Risk Factors -- No Assurance of Product Development or
Commercialization; Uncertainties Related to Clinical Trials."
JT3002
JT3002 is in preclinical evaluation for the therapy of mucositis, a common
side effect of chemotherapy. Mucositis may cause severe, disabling and
potentially life threatening side effects in patients and may lead to the need
for extended hospitalization. For some chemotherapy regimens, mucositis is the
major dose limiting side effect. There is currently no effective treatment for
mucositis. Preclinical studies are being conducted by Isaiah J. Fidler, D.V.M.,
Ph.D., a director of the Company and a member of its Scientific Advisory Board,
at the University of Texas, M.D. Anderson Cancer Center. See "Certain
Transactions." The Company intends to file an IND with the FDA in late 1997 or
early 1998 to commence Phase I clinical trials of JT3002, subject to the results
of the preclinical evaluation. The Company acquired the technology related to
JT3002 through an exclusive worldwide license with Novartis. Research and
development of JT3002 is at a very early stage and there can be no assurance
that JT3002 will be shown in preclinical studies or in clinical trials, if
undertaken, to be safe or effective in treating mucositis. See "Risk Factors --
No Assurance of Product Development or Commercialization; Uncertainties Related
to Clinical Trials."
BUSINESS STRATEGY
Scientific research and the development of therapeutic products is an
uncertain endeavor in which many projects fail, even though they may appear
promising at an earlier stage. Moreover, the infrastructure, including
facilities, equipment and qualified personnel, needed for research and
development in biotechnology is very costly. As a result, in an effort to
leverage the Company's resources and better manage the risks and costs inherent
in scientific research and new product development, Jenner has followed a
business strategy of (i) in-licensing promising proprietary technologies for
which substantial preclinical and/or clinical studies have been undertaken, (ii)
focusing on human clinical trials to gain relevant information as opposed to
developing animal models, and (iii) engaging qualified subcontractors to perform
research and development functions. Where possible, it has been the Company's
policy to second and sometimes third source those subcontracted services that
are vital to the Company's product development. Through its business strategy,
the Company has expended only approximately $4.0 million in cash through
December 31, 1996 to develop its current product candidates and believes it has
extended its research efforts to a larger number of applications than would
otherwise be the case given its limited resources.
The Company's management has considerable experience in identifying and
licensing promising technologies, retaining and managing the efforts of
subcontractors, and designing, supervising and monitoring clinical trials. The
Company's Chief Executive Officer has extensive experience in business
management and has scientific knowledge complementary to the Company's business.
The Company's President and Chief Scientific Officer has worked in the area of
cancer therapy for over 25 years, and combines comprehensive scientific
knowledge with business experience. The Company recently hired a Vice President
of Clinical Trials and Product Development, and believes that his experience in
the areas of clinical trials and product development will be key to
commercialization of the Company's product candidates. The Company believes that
the overlapping skills of its management has enabled them to communicate
effectively and manage the Company efficiently. The Company intends to continue
to recruit highly qualified personnel with a broad base of scientific and
business skills to complement existing management.
The Company believes that its business strategy and management capabilities
may enable it to shorten the time frame for commercializing its products. As the
Company's product candidates advance through the regulatory process, the Company
generally intends to establish strategic alliances with pharmaceutical companies
and other corporate partners with large distribution systems to market and sell
the Company's products worldwide. In some cases, however, where the customers
for a product are easily identified and concentrated, the Company intends to
market and distribute the product through a direct sales force.
28
Although the Company believes that it has benefitted from its business
strategy, the strategy creates risks to the Company by placing critical aspects
of the Company's business in the hands of third parties whom the Company may not
be able to control as effectively as its own operations. Additionally, in
reliance on these relationships, the Company has not developed its own resources
to the extent these activities have been contracted to third parties. If these
third parties do not perform in a timely and satisfactory manner, the Company
may incur additional costs and lose time in the conduct of its development and
clinical programs as it seeks alternate sources of such products and services,
if available. The effect of such costs and delays may have a material adverse
effect on the Company.
The Company may seek additional third party relationships in certain areas,
particularly in situations in which the Company believes that the clinical
testing, marketing, manufacturing and other resources of a pharmaceutical
company collaborator will enable the Company to develop particular products or
geographic markets which are otherwise beyond the Company's resources and/or
capabilities. There is no assurance that the Company will be able to obtain any
such collaboration, or any other research and development, manufacturing, or
clinical trial agreement. The inability of the Company to obtain and maintain
satisfactory relationships with third parties may have a material adverse effect
on the Company.
LICENSES
Novartis Corporation. The Company is a party to a license agreement with
Novartis which was entered into in April 1996. Under the license agreement,
Novartis granted to Jenner an exclusive worldwide license under its rights in
certain U.S. and foreign patent applications and patents and proprietary
know-how to manufacture and commercialize products incorporating liposomal
MTP-PE (ACT) and CGP 40774 (JT3002) and their analogues in all human and
veterinary therapeutic and prophylactic uses, excluding use as a vaccine
adjuvant and, with respect to JT3002, excluding use for the treatment of asthma
and other allergic diseases which materially affect lung function. Jenner may
grant and authorize sub-licenses under its license. In consideration for the
license, the Company has paid to Novartis an up-front license fee and is
obligated to pay running royalties based on a percentage of the net sales of
licensed products sold by the Company or its sublicensees, annual maintenance
fees and one-time milestone payments for the first products incorporating ACT
and JT3002, respectively, upon the completion of a Phase III clinical trial, the
filing of a PLA, and FDA approval of such PLA. The obligation to pay running
royalties begins upon the first commercial sale of a particular licensed product
and terminates 15 years later. Jenner has an obligation to use reasonable
efforts to diligently develop and commercialize the patent rights licensed under
the agreement and to obtain such approvals as may be necessary for the sale of
the licensed products in the United States and such other worldwide markets as
the Company elects to commercialize the licensed products. If the Company,
either itself or through a sublicensee or a distributor, elects not to
commercialize a licensed product in any particular country, then the Company is
obligated to negotiate a sublicense with Novartis in such country on reasonable
terms customary in the industry. If the Company elects to commercialize any
licensed product for veterinary uses through a sublicensee, Novartis shall have
a right of first refusal to acquire an exclusive, worldwide sublicense to market
such licensed product for veterinary purposes on agreed terms reasonable and
customary in the industry. The license agreement continues in effect on a
country-by-country and licensed product-by-licensed product basis until there
are no remaining royalty payment obligations in a country, at which time the
license shall expire in its entirety in such country. Upon such expiration, the
Company shall have a non-exclusive, irrevocable, fully paid-up right and license
to use and exploit the proprietary know-how. Either party may terminate the
license agreement in the event of a material breach by the other party.
Eli Lilly & Company. The Company entered into a license agreement with Eli
Lilly & Company ("Eli Lilly") in June 1994. Under the license agreement, Eli
Lilly has granted to Jenner an exclusive worldwide license under a U.S. patent
(and all additional patents issuing therefrom and corresponding foreign patents
issued in connection therewith) to manufacture and commercialize products that
contain the KSA antigen (the antigen associated with OncoVax-CL). Jenner may
grant and authorize sub-licenses under its license. Except as expressly provided
in the agreement, Eli Lilly is not obligated
29
under the license grant to provide the Company any know-how related to the
patent rights. In consideration for the license grant, Jenner has paid to Eli
Lilly an up-front license fee and is obligated to pay certain patent issuance
fees and to make certain milestone payments upon the first anniversary of the
initiation of Phase III clinical trials of the first product incorporating the
KSA antigen (regardless of the outcome of the trial) and upon FDA approval to
market the first such product. In addition, the Company is obligated to pay
running royalties to Eli Lilly based on the net sales of licensed products sold
by the Company or any sublicensee. Royalties are due and payable on a
country-by-country basis until the expiration of the patent covering the KSA
antigen in such country. Jenner has an obligation to use reasonable efforts to
develop, gain regulatory approval and market at least one product using the KSA
antigen. The license agreement continues in effect until the expiration of the
last licensed patent. Either party may terminate the license agreement in the
event of a material breach by the other party.
Research Corporation Technologies, Inc. In June 1994, the Company entered
into a license agreement with Research Corporation Technologies, Inc. ("RCT"),
an independent technology management company. Under the license agreement, RCT
granted to Jenner a non-exclusive license under its rights in certain U.S. and
Canadian patents to manufacture and commercialize products that contain the PSA
antigen (the antigen associated with OncoVax-P) as a prophylactic vaccine for
prostate cancer and/or a therapeutic vaccine for prostate cancer in the United
States and Canada. Jenner may grant to up to three third party sublicenses under
its license. The Company has the option to extend the license to include the
territory of Japan if certain pending patent applications filed by RCT are
issued in Japan. In consideration for the license grant, the Company has paid to
RCT an up-front license fee and is obligated to pay running royalties based on
the net sales of licensed products sold by the Company or any sublicensee. The
royalty obligation begins with the first commercial sale of a licensed product
and terminates upon termination of the license agreement. Jenner has an
obligation to exercise diligence consistent with its reasonable business
judgment in developing, testing, manufacturing and marketing products
incorporating the PSA antigen. The license agreement continues in effect until
the expiration of the last licensed patent. RCT may terminate the license
agreement in the event of a material breach by Jenner.
Walter Reed Army Institute of Research. The Company entered into a
Cooperative Research and Development Agreement ("CRADA") with the Walter Reed
Army Institute of Research ("WRAIR") in October 1993. Under the CRADA, the
Company is sponsoring research to develop and optimize liposomal and emulsion
formulations of the Company's cancer vaccines. Under a separate non-exclusive
worldwide license agreement with WRAIR entered into in March 1996, the Company
also licensed a certain patent application related to a special process for
making the liposomes necessary for the formulation of the Company's vaccines.
The CRADA provides that inventions developed solely by one party are owned by
that party and inventions developed jointly are owned by both parties; provided
however that Jenner is obligated to provide the U.S. government a non-exclusive,
fully paid-up, worldwide license under any patents covering any invention
developed under the CRADA; and provided further that Jenner has an option to
acquire an exclusive license under any patent covering any invention developed
under the CRADA in which WRAIR (on behalf of the U.S. government) has an
interest (subject to the reservation of a nonexclusive, irrevocable, paid-up
license to practice and have practiced the subject inventions on behalf of the
U.S. government). If Jenner elects to exercise such option, then it would be
obligated to make certain milestone payments and royalty payments based on net
sales of products covered by the licensed patents. The CRADA continues in effect
until December 15, 1997, although either party may terminate the agreement
earlier upon 30 days prior written notice. The license agreement requires that
the Company make certain milestone payments upon the conclusion of Phase I,
Phase II and Phase III clinical trials of products manufactured using the
licensed liposome formulation process and certain royalty payments to WRAIR
based on the net sales of such products. The term of the license agreement
extends to the expiration of the last to expire of the patents covering the
technology.
MARKETING AND DISTRIBUTION
The Company currently has no marketing and sales resources or personnel. As
the Company's product candidates advance through the regulatory process, the
Company generally intends to establish strategic alliances with pharmaceutical
companies and other corporate partners with large distribution systems to market
and sell the Company's products worldwide. In some cases, the Company may grant
30
marketing and distribution rights in exchange for payment by the strategic
partner of the costs and expenses related to the Phase III clinical trial
relating to the particular product. With respect to ACT, the Company intends to
establish a direct sales force to market such product for the treatment of
osteogenic sarcoma in the United States. The Company believes that a direct
sales force may be effective for this indication because most of the physicians
specializing in this area are located at a small number of well-known clinical
institutions, most of which are participating in the Phase III clinical trials
for ACT.
MANUFACTURING AND SUPPLY
The Company does not have and does not intend to acquire or establish its
own dedicated manufacturing facilities in the foreseeable future. The Company's
manufacturing strategy is to develop relationships with established
pharmaceutical manufacturers for production of all of its product candidates and
liposomal formulations. At the present time, the Company has arrangements in
place for manufacturing and supply of ACT, OncoVax-P and OncoVax-CL to support
its current clinical trials. However, the Company anticipates that current
manufacturers of these products will not necessarily manufacture these products
in subsequent clinical trials, and will not manufacture the products for
commercial use should the clinical trials be successful and regulatory approval
be obtained. As a result, the Company will need to obtain alternate
manufacturing sources for its products. Applicable regulations require that, if
the manufacturing source of products such as the Company's vaccines or
macrophage activators is changed, equivalency must be demonstrated before
patients are treated with product from the new manufacturer. The demonstration
of such equivalency may require that additional clinical trials be conducted.
There is no assurance that the Company will be able to demonstrate equivalency
and the effort to do so may require significant expenditures of money and time
which could have a material adverse effect on the Company.
The Company is currently, and will continue to be, dependent on third
parties for manufacturing clinical and commercial scale quantities of its
products. At the present time, the Company believes that there are a number of
facilities with FDA approval that have the capability of synthesizing and
manufacturing the Company's product candidates and liposomal formulations.
However, the process for manufacturing and formulating the Company's product
candidates is complex and subject to uncertainties. There can be no assurance
that the Company will be able to maintain existing agreements for the
manufacturing of clinical quantities of products, that it will be able to enter
into additional agreements with other third parties for commercial scale
manufacturing, or that contract manufacturers will be able to adequately produce
the Company's products in commercial quantities in a cost-effective manner.
Interruptions or difficulties in clinical or commercial production of the
Company's products may require the Company to incur substantial costs to address
the situation, which could have a material adverse effect on the Company.
PATENTS AND PROPRIETARY RIGHTS
The Company believes that patent and trade secret protection is important to
its business and that its future success will depend in part on its ability to
maintain its technology licenses, protect trade secrets, obtain patents and
operate without infringing the proprietary rights of others, both in the United
States and in other countries. With respect to ACT and JT3002, there are seven
United States patents and 101 foreign patents which have issued, and 28 foreign
patents pending, all of which are under an exclusive, worldwide, royalty-bearing
license from Novartis. With respect to OncoVax-P, there is United States patent
and one Canadian patent, both of which are under a non-exclusive,
royalty-bearing license from RCT, and one United States patent pending with
counterpart filings pending in Australia, Canada, Europe and Japan owned by the
Company. With respect to OncoVax-CL, there is one United States patent with
counterpart foreign filings, all of which are under an exclusive,
royalty-bearing license from Eli Lilly, and one United States patent pending
with counterpart filings pending in Australia, Canada, Europe and Japan owned by
the Company. In addition, there are two additional United States patent
applications with counterpart foreign filings applicable to both OncoVax-P and
OncoVax-CL, one of which is under a non-exclusive, royalty-bearing license from
WRAIR, and one of which is co-owned by the Company and WRAIR (on behalf of the
U.S. Government).
The pharmaceutical and biotechnology fields are characterized by a large
number of patent filings, and a substantial number of patents have already been
issued to other companies. Third parties may have filed applications for or have
been issued patents and may obtain additional patents and proprietary
31
rights related to products or processes competitive with or similar to those of
the Company. The Company may not be aware of all of the patents potentially
adverse to the Company's interests that may have been issued to others. No
assurance can be given that such patents do not exist, have not been filed, or
could not be filed or issued, which contain claims relating to the Company's
technology, products or processes. If patents have been or are issued to others
containing preclusive or conflicting claims and such claims are ultimately
determined to be valid, the Company may be required to obtain licenses to one or
more of such patents or to develop or obtain alternate technology. There can be
no assurance that the licenses that might be required for the Company's
processes or products would be available on commercially acceptable terms, or at
all.
Because of the substantial length of time and expense associated with
bringing new products to the marketplace through the development and regulatory
approval process, the biotechnology industry places considerable importance on
patent and trade secret protection for new technologies, products and processes.
Since patent applications in the United States are maintained in secrecy until
patents issue and since publication of discoveries in the scientific or patent
literature often lag behind actual discoveries, the Company cannot be certain
that it (or any licensor) was the first to make the inventions covered by
pending patent applications or that it (or any licensor) was the first to file
patent applications for such inventions. The patent positions of vaccine and
biotechnology companies can be highly uncertain and involve complex legal and
factual questions, and therefore the breadth of claims allowed in vaccine and
biotechnology patents or their enforceability, cannot be predicted. There can be
no assurance that any patents under pending patent applications or any further
patent applications will be issued. Furthermore, there can be no assurance that
the scope of any patent protection will exclude competitors or provide
competitive advantages to the Company, that any of the Company's patents that
have issued or may be issued will be held valid if subsequently challenged or
that others, including competitors or current or former employers of the
Company's employees, advisors and consultants, will not claim rights in or
ownership to the patents and other proprietary rights held by the Company. There
can be no assurance that others will not independently develop substantially
equivalent proprietary information or otherwise obtain access to the Company's
proprietary information or that others may not be issued patents that may
require licensing and the payment of significant fees or royalties by the
Company. The Company's breach of any existing license agreement or the failure
to obtain a license to technology required to commercialize its products
candidates may have a material adverse effect on the Company.
The biotechnology industry has experienced extensive litigation regarding
patent and other intellectual property rights. Accordingly, the Company could
incur substantial costs in defending itself in suits that may be brought against
the Company claiming infringement of the patent rights of others or in asserting
the Company's patent rights in a suit against another party. The Company may
also be required to participate in interference proceedings declared by the
United States Patent and Trademark Office for the purpose of determining the
priority of inventions in connection with the patent applications of the Company
or other parties. Adverse determinations in litigation or interference
proceedings could require the Company to seek licenses (which may not be
available on commercially reasonable terms) or subject the Company to
significant liabilities to third parties, and could therefore have a material
adverse effect on the Company. Even if the Company prevails in an interference
proceeding or a lawsuit, substantial resources of the Company, including the
time and attention of its officers, will be required.
The Company also relies on trade secrets, know-how and technological
advancement to maintain its competitive position. Although the Company uses
confidentiality agreements and employee proprietary information and invention
assignment agreements to protect its trade secrets and other unpatented
know-how, these agreements may be breached by the other party thereto or may
otherwise be of limited effectiveness or enforceability.
The Company is aware of a company that has filed an intent to use
application in the United States Patent and Trademark Office for the mark "Onco
Vax" relating to therapeutic vaccines for oncological purposes. The Company
believes that it has superior rights to use "OncoVax" based upon its public use
of the mark in technical journals prior to the effective filing date of the
intent to use application. However, there can be no assurance in this regard,
and the Company may be required to discontinue using "OncoVax" as a name for its
products.
32
GOVERNMENT REGULATION
General. Testing, manufacturing, labeling, advertising, promotion, export
and marketing, among other things, of the Company's products are subject to
extensive regulation by governmental authorities in the United States and other
countries. In the United States, pharmaceutical products are regulated by the
FDA under the Federal Food, Drug, and Cosmetic Act and other laws, including, in
the case of biologics, the Public Health Service Act. At the present time, the
Company believes that its immunotherapeutics that it may develop will be
regulated by the FDA as biologics.
The steps required before a drug or biologic may be approved for marketing
in the United States generally includes (i) preclinical laboratory and animal
testing, (ii) the submission to the FDA of an IND for human clinical testing,
which must become effective before human clinical trials may commence, (iii)
adequate and well-controlled human clinical trials to establish the safety and
efficacy of the product, (iv) in the case of a biologic, the submission to the
FDA of a biologic license application ("BLA"), or in the alternative a Product
License Application ("PLA") for the product and an Establishment License
Application ("ELA") for the facility at which the product is manufactured, or in
the case of a drug, a New Drug Application ("NDA"), (v) FDA review of the BLA
(or PLA/ELA) or NDA, and (vi) satisfactory completion of an FDA inspection of
the manufacturing facilities at which the product is made to assess compliance
with cGMPs. The testing and approval process requires substantial time, effort
and financial resources, and there can be no assurance that any approval will be
granted on a timely basis, if at all.
Preclinical studies include laboratory evaluation of the product, as well as
animal studies to assess the potential safety and efficacy of the product. The
results of the preclinical studies, together with manufacturing information and
analytical data, are submitted to the FDA as part of the IND, which must become
effective before clinical trials may be commenced. The IND automatically will
become effective 30 days after receipt by the FDA, unless the FDA, before that
time, raises concerns or questions about the trials as outlined in the IND and
places a clinical hold on the trials. In such case, an IND sponsor and the FDA
must resolve any outstanding concerns before clinical trials can proceed.
Clinical trials involve the administration of the investigational product to
healthy volunteers or patients under the supervision of a qualified principal
investigator. In the case of Jenner's products, it is anticipated that trials
will be conducted in patients with cancer, not healthy subjects. Each clinical
trial must be reviewed and approved by an independent Institutional Review Board
("IRB") at each institution at which the study will be conducted. The IRB will
consider, among other things, ethical factors, the safety of human subjects and
possible liability of the institution.
Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is usually tested for safety (adverse effects), dosage
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
While safety testing in the Phase I trial applies to all of Jenner's products,
the Company believes that the other items may not be applicable in the case of
its vaccine candidates. Phase II clinical trials usually involve studies in a
limited patient population to (i) evaluate the efficacy of the drug for
specific, targeted indications, (ii) determine dosage tolerance and optimal
dosage and (iii) identify possible adverse effects and safety risks. Phase III
clinical trials further evaluate clinical efficacy and test further for safety
within an expanded patient population. There can be no assurance that Phase I,
Phase II or Phase III testing will be completed successfully within any specific
time period, if at all, with respect to any of the Company's product candidates.
Furthermore, the FDA may suspend clinical trials at any time on various grounds,
including a finding that the subjects or patients are being exposed to an
unacceptable health risk.
Phase IV clinical trials are conducted after approval to gain additional
experience from the treatment of patients in the intended therapeutic indication
and to document safety and clinical benefit in the case of drugs approved under
accelerated approval regulations. If the FDA approves a product while a company
has ongoing clinical trials that were not necessary for approval, a company may
be able to use the data from these clinical trials to meet all or part of any
Phase IV clinical trial requirement. These clinical trials are often referred to
as "Phase III/IV post-approval clinical trials." Failure to promptly conduct
Phase IV clinical trials, if required, could result in withdrawal of products
approved under accelerated approval regulations.
33
The results of the preclinical studies and clinical trials, together with
detailed information on the manufacture and composition of the product, are
submitted to the FDA in the form of a BLA or PLA/ELA, or in the case of a drug,
NDA, requesting approval to market the product. Before approving a BLA or
PLA/ELA or NDA, the FDA will inspect the facilities at which the product is
manufactured and will not approve the product unless the manufacturing facility
is in compliance with cGMPs. The FDA may delay regulatory approval if applicable
regulatory criteria are not satisfied, require additional testing or
information, and/or require post marketing testing and surveillance to monitor
safety or efficacy of a product. There can be no assurance that any regulatory
submission submitted by the Company will be accepted on a timely basis, if at
all. Also, if regulatory approval of a product is granted, such approval may
entail limitations on the indicated uses for which such product may be marketed.
In 1988, the FDA issued "fast-track" regulations intended to accelerate the
approval process for the development, evaluation and marketing of new
therapeutic and diagnostic products used to treat life-threatening and severely
debilitating illnesses, especially for those for which no satisfactory
alternative therapy exist. "Fast-track" designation provides the opportunity to
interact early with the FDA in terms of protocol design, and permits, although
it does not require the FDA to grant approval after completion of Phase II
clinical trials (although the FDA may require subsequent Phase III clinical
trials or even post-approval Phase IV safety and/or efficacy studies). The
Company believes that a number of its product candidates may fall within these
regulations, but there can be no assurance that any of the Company's products
will receive this or other similar regulatory treatment, or will be approved
under accelerated approval regulations.
Orphan Drug Designation. Under the Orphan Drug Act, the FDA may grant orphan
drug designation to drugs intended to treat a "rare disease or condition," which
is generally a disease or condition that affects fewer than 200,000 individuals
in the United States. Orphan Drug Designation must be requested before
submitting a BLA or PLA/ELA, or in the case of a drug, NDA. After the FDA grants
Orphan Drug Designation, the generic identity of the therapeutic agent and its
potential orphan use are disclosed publicly by the FDA. Orphan Drug Designation
does not convey any advantage in, or shorten the duration of, the regulatory
review and approval process. If a product that has Orphan Drug Designation
subsequently receives FDA approval for the indication for which it has such
designation, the product is entitled to orphan exclusivity, i.e. the FDA may not
approve any other applications to market the same drug for the same indication
except in very limited circumstances, for seven years. There can be no assurance
that competitors will not receive approval of other, different drugs or
biologics for the same indications sought by the Company. Thus, although
obtaining FDA approval to market a product with Orphan Drug exclusivity can be
advantageous, there can be no assurance that it would provide the Company with a
material commercial benefit.
Foreign Regulations. Whether or not FDA approval has been obtained, approval
of a product by comparable regulatory authorities in foreign countries may be
necessary prior to commencement of marketing the product in such countries. In
certain instances, the Company may seek approval to market and sell certain of
its products outside of the United States before submitting applications for
U.S. approval to the FDA. The regulatory procedures for approval of new
pharmaceutical products vary significantly among foreign countries. 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 Community ("EU") approval mechanism in place, each EU
country may nonetheless impose its own procedures and requirements, many of
which are time consuming and expensive. Thus, there can be substantial delays in
obtaining required approvals from both the FDA and foreign regulatory
authorities after the relevant applications are filed, and approval in any
single country may not be a meaningful indication that the product will
thereafter be approved in another country.
COMPETITION
There are many companies, both publicly and privately held, including
well-known pharmaceutical companies, as well as academic and other research
institutions, that are engaged in the discovery, development, marketing and sale
of products for the treatment of cancer. These include new pharmaceutical
products and new biologically derived products, including vaccines and
macrophage activators. The Company expects to encounter significant competition
for its product candidates from
34
traditional and new treatment methods. The Company is aware of a number of
companies that have products based on immunoactivation principles or intended to
treat the indications targeted by the Company,including Avigen, Inc., Akzo
Pharma Group, Aphton Corp., Biomira, Inc., Cell Genesys, Inc., Cel-Sci
Corporation, Centocor, Inc., Corixa Corporation, Cytel Corp., EndoRex Corp.,
Epigen, Inc., IDEC Pharmaceutical Corp., ImClone Systems, Inc., Janssen
Pharmaceuticals (a division of Johnson & Johnson), Medarex, Inc., Oncogene
Science, Inc., RIBI ImmunoChem Research, Inc., Schering-Plough Corp., Therion
Biologics Corporation, Chiron Viagene, Inc. and Vical, Inc. Janssen
Pharmaceuticals and Schering-Plough Corp. recently received FDA clearance to
market products in the United States for surgical adjuvant treatment of
colorectal carcinoma and melanoma, respectively, and Centocor, Inc. recently
received approval to market a product in Germany for the adjuvant therapy of
colorectal cancer.
The Company believes that its competitive success will be based on its
ability to license and maintain scientifically advanced technology, establish
and maintain key research, manufacturing and distribution relationships, obtain
required regulatory approvals, attract and retain scientific personnel, obtain
patent or other protection for its products, and manufacture and successfully
market its products either independently or through collaborative partners. Most
of the Company's competitors and potential competitors have substantially
greater capital, research and development capabilities and human resources than
the Company. Furthermore, many of these competitors have significantly greater
experience than the Company in undertaking preclinical testing and clinical
trials of new biotechnology products and obtaining FDA and other regulatory
approvals. If the Company is permitted to commence commercial sales of any
product, it will also be competing with companies that have greater resources
and experience in manufacturing, marketing and sales. The Company's competitors
may succeed in developing products that are more effective, less costly, or have
a better side effect profile than any that may be developed by the Company, and
such competitors may also prove to be more successful than the Company in
manufacturing, marketing and sales. If the Company is able to successfully
commercialize a product, subsequent competitive developments could render such
product noncompetitive or obsolete.
PRODUCT LIABILITY AND INSURANCE
The Company's business exposes it to potential product liability risks which
are inherent in the manufacturing, clinical testing, marketing and use of human
therapeutic products. The Company currently carries clinical trial liability
insurance in the amount of $1 million per occurrence and $1 million in the
aggregate, although this insurance does not currently cover the on-going Phase
III clinical trial for ACT. There can be no assurance that the coverage limits
of the Company's insurance policy will be adequate, and a successful claim in
excess of the coverage limits could have a material adverse effect on the
Company. The Company plans to obtain product liability insurance covering the
commercial sale of its products prior to their commercial introduction, however,
there can be no assurance that the Company will be able to obtain or maintain
such insurance on acceptable terms or that any insurance obtained will provide
adequate coverage against potential liabilities. Claims or losses in excess of
any liability insurance coverage now carried or subsequently obtained by the
Company could have a material adverse effect on the Company.
SCIENTIFIC ADVISORY BOARD
The Company has assembled a Scientific Advisory Board which meets for a full
day once a quarter to discuss areas of scientific and medical interest to the
Company. The Company uses the ideas and information from these meetings to help
determine the direction of the Company's scientific endeavors. The Company has
entered into agreements with each member of the Scientific Advisory Board
providing that all inventions made by such member when working for the Company
belong to the Company. The Company has granted options to purchase Common Stock
to most members of the Scientific Advisory Board as compensation for their
efforts, and intends to continue to do so in the future. The Company provides a
cash stipend of $1,000 per month to certain members of the Scientific Advisory
Board. The members of the Scientific Advisory Board and their principal
positions and experience are set forth below:
Michael Mastrangelo, M.D. Dr. Mastrangelo is Chairman of Jenner's Scientific
Advisory Board and a Professor of Medicine and Associate Clinical Director of
the Cancer Center at Jefferson Medical College. Dr. Mastrangelo has been working
in cancer immunotherapy and vaccine development for over 25 years, is founding
Editor of Seminars in Oncology, and past President of the Society of Biological
Therapy.
35
Stuart A. Aaronson, M.D. Dr. Aaronson is the Director of the Ruttenberg
Cancer Center, Mount Sinai Medical Center, New York. He was formerly Chief of
the Laboratory of Cellular and Molecular Biology at the National Cancer
Institute and, before that, head of the Molecular Biology Section of the Viral
Carcinogenesis Branch of the National Cancer Institute. He serves on the
Editorial Boards of several journals, including the International Journal of
Oncology and Onocology Research.
Byron William Brown, Ph.D. Dr. Brown is the former Chairman of the
Department of Health, Research and Policy and a Professor and Head, Division of
Biostatistics, at Stanford University. Dr. Brown is a member of the
International Institute of Statistics and the Institute of Medicine, National
Academy of Sciences. He served on the Editorial Board of Statistics in Medicine
and was head of the Statistical Office for the Northern California Oncology
Group.
Isaiah J. Fidler D.V.M., Ph.D. Dr. Fidler holds the R.E. "Bob" Smith Chair
in Cell Biology and is a Professor and Chairman in the Department of Cell
Biology at the University of Texas, M.D. Anderson Cancer Center. Dr. Fidler is a
past President of the American Association for Cancer Research and is an
Associate Editor of several journals including Cancer Research, Journal of
Immunotherapy, Selective Cancer Therapies, and Melanoma Research. He has
published over 400 articles in the area of cancer metastases and immunology.
Philip O. Livingston, M.D. Dr. Livingston is a Member of the Memorial
Sloan-Kettering Cancer Center and Attending Physician on the clinical immunology
service at Memorial Hospital in New York City. Dr. Livingston has worked in the
area of evaluating immune responses in cancer patients and in cancer vaccine
development for over 20 years. He was the leader of a group which developed a
vaccine which is currently in a Phase III clinical trial for the treatment of
melanoma being conducted by two clinical cooperative groups.
Jeffrey Schlom, Ph.D. Dr. Schlom is Chief of the Laboratory of Tumor
Immunology and Biology, Division of Basic Sciences at the National Cancer
Institute. Dr. Schlom has worked in the area of tumor immunotherapy for over 20
years and has published over 400 manuscripts.
Lynn E. Spitler, M.D. Dr. Spitler is the founder of Jenner and has been its
President and Chief Scientific Officer since December 1992. Dr. Spitler has
worked in the area of cancer therapy for over 25 years. Dr. Spitler was formerly
Senior Vice President of Xoma Corporation. She serves on the Editorial Board of
Cancer Biotherapy and Radiopharmaceuticals and was on the Board of Directors of
the Society of Biological Therapy until her term was completed in 1996. Dr.
Spitler received the Dernham Senior Fellowship from the American Cancer Society
from 1969 to 1971 and the Research Career Development Award from the National
Institutes of Health from 1971 to 1976.
James E. Talmadge, Ph.D. Dr. Talmadge is a Professor in the Department of
Pathology and Microbiology at the University of Nebraska Medical Center. Dr.
Talmadge is or has been an Associate Editor and board member of several
journals, including Cancer Research, Cancer Immunology and Immunotherapy and The
Journal of Immunology. He was formerly head of the Preclinical Screening
Laboratory of the National Cancer Institute -- Frederick Cancer Research
Facility.
Carl R. Alving, M.D. (ex officio, CRADA representative). Dr. Alving is
Chief, Department of Membrane Biochemistry, Walter Reed Army Institute of
Research. He was elected to the rank of Fellow of the American Association for
the Advancement of Science for studies on the practical uses of liposomes. He
holds numerous patents and has developed liposomal inventions as vehicles for
vaccines. He also serves on the Editorial Boards of several journals, including
the Journal of Immunological Methods and Vaccine Research.
Anthony E. Maida, III, M.B.A. (ex officio, Management representative). Mr.
Maida has been the Company's Chief Executive Officer since December 1992, and is
responsible for operations, business development and strategic direction. Mr.
Maida actively participates in all Company Scientific Board meetings. He is a
member of the Genetic and Environmental Toxicology Association, the Society of
Toxicology and the American Chemical Society.
36
EMPLOYEES AND FACILITIES
As of December 31, 1996, the Company had five employees, of whom three were
involved in research and development and two were involved in finance and
administration. The Company believes that its relationship with its employees is
good.
The Company leases approximately 200 square feet of office space located in
San Ramon, California. The Company intends to lease an additional 600 square
feet in the same location in the second quarter of 1997. The lease expires in
December 1997. The Company intends to lease additional space as needed to
accommodate an increase in personnel and believes that adequate space will be
available to do so.
LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings.
37
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company as of
January 31, 1997 are as follows:
NAME AGE POSITION
---- --- --------
Lynn E. Spitler, M.D.. 58 President, Chief Scientific Officer,
Director
Anthony E. Maida, III 44 Chief Executive Officer, Chief Financial
Officer, Director
Thomas P.H. Twaddell, M.D. 59 Vice President of Clinical Research and
Product Development
Larry E. Moore 54 Treasurer
Jack L. Bowman(2) 64 Director
Lowell M. Dicke(1) 57 Director
Isaiah J. Fidler, D.V.M., Ph.D. 60 Director
Robert A. Fildes, Ph.D(1) 58 Director
Herbert Grossman(1) 66 Director
Hayden Leason(1) 66 Director
- -----------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
All directors hold office until the next annual meeting of stockholders and
until their successors are duly elected. Officers are appointed to serve,
subject to the discretion of the Board of Directors, until their successors are
appointed.
Lynn E. Spitler, M.D., is the founder of Jenner and has been its President,
Chief Scientific Officer and a director since inception in December 1992. Dr.
Spitler has worked in the area of cancer therapy for over 25 years, and, prior
to founding the Company, Dr. Spitler was among the founders of Xoma Corporation,
a cancer therapy company, where she was Senior Vice President for seven years.
Since March 1991, she has been the Director of the Northern California Melanoma
Center, a melanoma clinical practice group. She also serves on the Editorial
Board of Cancer Biotherapy and Radiopharmaceuticals and was on the Board of
Directors of the Society of Biological Therapy until her term was completed in
1996. Dr. Spitler received the Dernham Senior Fellowship from the American
Cancer Society from 1969 to 1971 and the Research Career Development Award from
the National Institutes of Health from 1971 to 1976. Dr. Spitler received her
M.D. from the University of Michigan Medical School in 1963.
Anthony E. Maida, III, has been Chief Executive Officer, Chief Financial
Officer and a director of the Company since inception in December 1992, and is
responsible for the Company's operations, business development and strategic
direction. From 1990 to November 1992, Mr. Maida was President and Chief
Executive Officer of Cellpath, Inc, a biotechnology company. Prior to that, Mr.
Maida spent ten years with Lockheed Corporation, a designer and developer of
defense and space technology, where he most recently served as Vice President
and Chief Financial Officer of a subsidiary of Lockheed.
38
He is a member of the Genetic and Environmental Toxicology Association, the
Society of Toxicology and the American Chemical Society. Mr. Maida received an
M.S. in Toxicology from San Jose State University in 1986 and an M.B.A. from
Santa Clara University in 1978.
Thomas P.H. Twaddell, M.D., joined the Company in January 1997 as Vice
President of Clinical Research and Product Development. Dr. Twaddell has more
than 10 years of experience in managing clinical trials and FDA submissions.
From June 1991 until January 1997, Dr. Twaddell was a Clinical Scientist in the
Immunology-Oncology department of Genentech, Inc., a biotechnology company.
Prior to that, he was the Director of Gastroenterology for Glaxo, Inc., a
pharmaceutical company , where he was responsible for the NDA submissions and
FDA interactions for Zofran, a drug for prevention of nausea and vomiting
associated with chemotherapy. Prior to that, he was an Associate Medical
Director at Sandoz Pharmaceutical Corporation, a pharmaceutical company. Dr.
Twaddell received his M.D. from the University of Pennsylvania in 1963.
Larry E. Moore, has been a consultant to the Company since inception in
December 1992 and was appointed as Treasurer in January 1997. For the past eight
years, Mr. Moore has been a self-employed financial and accounting consultant to
companies in several industries, including medical research, electronic
manufacturing and real estate development. Mr. Moore received his B.S. in
Accounting from the San Diego State University and is a certified public
accountant.
Jack L. Bowman joined the Company as a member of the Board of Directors in
December 1993. Since January 1994, Mr. Bowman has been retired. From 1987 until
December 1993, Mr. Bowman was Company Group Chairman at Johnson & Johnson, a
health care company. Mr. Bowman is a member of the Board of Directors of NeoRx
Corp., Cell Therapeutics, Inc., PharmaGenics, Inc. and CytRx Corp., all of which
are publicly traded companies. Mr. Bowman received his B.A. in Education from
Western Washington University.
Lowell M. Dicke joined the Company as a member of the Board of Directors at
its inception in December 1992. Mr. Dicke has served as President, Chief
Financial Officer and Director of Diversified Investors Corporation, a publicly
held investment company, since December 1994. From January 1990 to December
1994, Mr. Dicke was self-employed as a financial consultant. Mr. Dicke received
a J.D. from Yale University.
Isaiah J. Fidler, D.V.M., Ph.D. joined the Company as a member of the Board
of Directors in July 1996. Dr. Fidler holds the R.E. "Bob" Smith Chair in Cell
Biology and is Chairman of the Department of Cell Biology at the University of
Texas, M.D. Anderson Cancer Center, where he has been a professor since 1983.
Dr. Fidler is a past President of the American Association for Cancer Research
and is an Associate Editor of several journals including Cancer Research,
Journal of Biological Response Modifiers, Selective Cancer Therapies and
Melanoma Research. Dr. Fidler received his D.V.M. from Oklahoma State University
in 1963 and his Ph.D. in Pathology from the University of Pennsylvania in 1970.
Robert A. Fildes, Ph.D. joined the Company as a member of the Board of
Directors at its inception in December 1992. Dr. Fildes has served as Chairman
and Chief Executive Officer of Scotgen Biopharmaceuticals, a biotechnology
company, since February 1993. From January 1991 to January 1993, Dr. Fildes was
self-employed as a biotechnology consultant. From 1982 to 1990, he was the
President and Chief Executive Officer of Cetus Corporation, which was acquired
by Chiron Corporation in 1991. In 1978, Dr. Fildes became the first U.S.
employee of Biogen, Inc., a biotechnology company, where he worked until 1981.
Dr. Fildes is a member of the Board of Directors of Carrington Laboratories Inc.
and La Jolla Pharmaceuticals, both of which are publicly traded companies. Dr.
Fildes received his B.Sc. in 1961 and a D.C.C. and Ph.D. in 1964 from the
University of London.
Herbert Grossman joined the Company as a member of the Board of Directors at
its inception in December 1992. Mr. Grossman has served as the President, Chief
Executive Officer and director of Beacon Laboratories LLC, a pharmaceutical
company, since July 1995. From October 1992 until June 1995, he served as a
consultant to Ortho Diagnostics Systems, a diagnostic company and a division of
39
Johnson & Johnson. From May 1988 until September 1992, he held various positions
with Zambon Corporation, a pharmaceutical company, most recently as Chairman of
the Board. Mr. Grossman serves on the Board of Directors of Dermasciences, Inc.,
a publicly traded company. Mr. Grossman received his B.S. from the Brooklyn
College of Pharmacy.
Hayden Leason joined the Company as a member of the Board of Directors in
June 1993. He has served as Chairman of the Board of Advanced Photonics, Inc., a
publicly held company that manufactures electrical equipment, since November
1996. From 1992 to October 1996, Mr. Leason was retired. In 1964, Mr. Leason
founded Filtertek, now a division of Schawk Inc. and manufacturer of insert
molded filters, and served as Chief Executive Officer and Chairman of the Board
until 1992.
DIRECTOR COMPENSATION
Directors are not currently paid any compensation for attendance at
directors' meetings or for attending or participating in any committee, although
the Board expects to review and may revise its policy in this regard following
the Offering. Directors are reimbursed for reasonable out-of-pocket expenses in
connection with attendance at such meetings.
On December 10, 1992, prior to the Company's adoption of its 1993 Incentive
Stock Plan, the Company granted a stock option to purchase 7,158 shares of the
Company's Common Stock at an exercise price of $0.00693 per share to Herbert
Grossman in connection with his services as a director of the Company. On
September 18, 1995, in connection with his services to the Company, including
services as a director, the Company granted to Mr. Maida a stock option to
purchase 143,129 shares of Common Stock at an exercise price of $0.21 per share.
On July 29, 1996, in connection with their services as directors, the Company
granted to each of Messrs. Bowman, Dicke, Fildes and Grossman stock options to
purchase 7,157 shares of the Company 's Common Stock at an exercise price of
$0.23 per share. On July 29, 1996, in connection with their services to the
Company, including services as directors, the Company granted to each of Mr.
Maida and Dr. Spitler stock options to purchase 28,625 shares of the Company's
Common Stock. Mr. Maida's options are exercisable at $0.23 per share and Dr.
Spitler's options are exercisable at $0.24 per share. See " -- Employee Benefit
Plans."
BOARD COMMITTEES
The Audit Committee of the Board of Directors reviews the internal
accounting procedures of the Company and consults with and reviews the services
provided by the Company's independent auditors. The Compensation Committee of
the Board of Directors reviews and recommends to the Board the compensation and
benefits of all officers of the Company and establishes and reviews general
policies relating to compensation and benefits of employees of the Company.
EMPLOYMENT AGREEMENTS
In November 1994, the Company executed employment agreements with each of
Lynn E. Spitler, M.D. and Anthony E. Maida, III (the "Executives"). On each
anniversary of the execution date of the employment agreements, the term of the
employment agreements is automatically extended to a date three years from the
respective anniversary date, unless the Company shall have provided the
Executive with at least 60 days prior notice to such anniversary date of its
intent not to renew the employment agreement. The employment agreements provide
the Executives with a monthly salary, and medical and vacation benefits together
with the following: (i) in the event the Executive's employment is terminated
without cause, the Executive is entitled to severance payments equal to the
Executive's monthly salary computed at the time of such termination payable from
the date employment is terminated to the termination date of the agreement and
all accrued benefits and bonuses, (ii) in the event the Executive's employment
is terminated as a result of the Company experiencing adverse financial
conditions (i.e., bankruptcy or cessation of operations), the Executive is
entitled to a payment of up to $50,000 (subject to applicable law) and (iii) in
the event the Executive's employment is terminated by death, the Executive's
estate is entitled to severance payments equal to the Executive's monthly salary
computed at the time of death payable from the time of death to the termination
date of the agreement and all accrued benefits and bonuses.
40
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information for the year ended December 31, 1996 regarding the compensation of
the Company's Chief Executive Officer and the Company's other most highly
compensated executive officer whose total annual salary and bonus for the fiscal
year ended December 31, 1996 were in excess of $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------ ------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) OPTIONS/SARS(#)
--------------------------- ---- --------- ---------------
Anthony E. Maida, III 1996 $133,333 28,625
Chief Executive Officer, Chief Financial Officer, Director
Lynn E. Spitler, M.D. 1996 $133,331 28,625
President, Chief Scientific Officer, Director
Option Grants in Last Fiscal Year. The following table sets forth each grant
of stock options made during the fiscal year ended December 31, 1996 to each of
the Named Executive Officers:
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996
INDIVIDUAL GRANTS
-------------------- POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS DURING FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) 1996(%)(2) ($/SH)(3) DATE 5%($) 10%($)
---- ------------- ---------- --------- ---- ----- ------
Anthony E. Maida, III 28,625 25.8% $0.23 7/29/03 $2,680 $6,246
Lynn E. Spitler, M.D. 28,625 25.8% $0.24 7/29/03 $2,797 $6,518
- ----------
(1) Options were granted under the Company's 1993 Incentive Stock Option Plan
and vest monthly over three years from May 1996, subject to continued
employment with or services to the Company.
(2) Based on an aggregate of 111,076 options granted by the Company in the year
ended December 31, 1996 to employees of and consultants to the Company,
including the Named Executive Officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board
of Directors except for the options granted to Lynn E. Spitler, M.D. which
were granted at an exercise price of 110% of the fair market value on the
date of grant.
(4) The potential realizable value is calculated based on the term of the
option at its time of grant (seven years). It is calculated assuming that
the fair market value of the Company's Common Stock on the date of grant
appreciates at the indicated annual rate compounded annually for the entire
term of the option and that the option is exercised and sold on the last
day of its term for the appreciated stock price. These numbers are
calculated based on the requirements promulgated by the Securities and
Exchange Commission and do not reflect the Company's estimate of future
stock price growth.
41
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values.
There were no stock option exercises during the year ended December 31, 1996.
The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options held at December
31, 1996:
AGGREGATE OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1996 AND
OPTION VALUES AT DECEMBER 31, 1996
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
-------------------- ------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Anthony E. Maida, III 69,975 101,779 $509,990 $ 741,523
Lynn E. Spitler, M.D. 6,361 22,264 $ 49,361 $ 161,636
- ----------
(1) Based on a value of $7.50 per share, the assumed initial public offering
price, minus the per share exercise price, multiplied by the number of
shares underlying the option.
EMPLOYEE BENEFIT PLANS
1993 Incentive Stock Plan. The Company's 1993 Incentive Stock Plan (the
"1993 Plan") provides for the grant of incentive stock options to employees and
nonstatutory stock options to employees, directors and consultants. Options
granted under the 1993 Plan typically vest over three years. As of January 31,
1997, options to purchase an aggregate of 363,800 shares of Common Stock were
outstanding and 1,950 shares had been issued upon exercise of outstanding
options. Options granted under the 1993 Plan will remain outstanding in
accordance with their terms, but the Board of Directors has determined that no
further options will be granted under the 1993 Plan.
Non-Plan Stock Options. Prior to adopting the 1993 Plan, the Company granted
options to purchase a total of 28,629 shares of its Common Stock. As of January
31, 1997, non-plan options to purchase 14,314 shares were outstanding and 14,315
shares had been issued upon exercise of outstanding options. The Company does
not plan to make any future option grants outside of its existing option plans.
1997 Stock Plan. The Company's 1997 Stock Plan (the "1997 Plan") provides
for the grant of incentive stock options to employees (including employee
directors) and nonstatutory stock options and stock purchase rights to
employees, directors and consultants. A total of 350,000 shares of Common Stock
have been reserved for issuance under the 1997 Plan, all of which are currently
available for grant. The 1997 Stock Plan is administered by the Board of
Directors. Options and stock purchase rights granted under the 1997 Plan will
vest as determined by the Board, and may accelerate and become fully vested in
the event of an acquisition of the Company if so determined. The exercise price
of options and stock purchase rights granted under the 1997 Plan will be as
determined by the Board, although the exercise price of incentive stock options
must be at least equal to the fair market value of the Company's Common Stock on
the date of grant. The Board of Directors may amend or modify the 1997 Plan at
any time. The 1997 Plan will terminate in January 2007, unless terminated
earlier by the Board of Directors.
The Company has agreed that it will not, without the Representative's prior
written consent, for a period of 12 months from the effective date of the
Registration Statement adopt, propose to adopt, or otherwise permit to exist any
additional equity compensation plans or similar arrangements providing for (i)
the grant, sale, or issuance of stock options, warrants, or other rights to
acquire the Company's securities to any of the Company's executive officers,
directors, employees, consultants or holders of
42
5% or more of the Company's Common Stock; (ii) the grant, sale or issuance of
any option, warrant or other right to acquire the Company's securities or enter
into any agreement to grant, sell or issue any option, warrant or other right to
acquire the Company's securities at an exercise price that is less than the
greater of the fair market value on the date of grant or sale or the initial
public offering price of the shares; (iii) allow for the maximum number of
shares of Common Stock or other securities of the Company purchasable pursuant
to options or warrants issued by the Company, together with the shares of Common
Stock acquired upon exercise of outstanding options, to exceed 728,114 shares;
(iv) allow for the payment for such securities with any form of consideration
other than cash; or (v) allow for the existence of stock appreciation rights,
phantom options or similar arrangements.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (i) any
breach of their duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases or redemptions or (iv) any transaction from which the director
derived an improper personal benefit. Such limitation of liability does not
apply to liabilities arising under the federal securities laws and does not
affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its other officers and employees and
other agents to the fullest extent permitted by law. The Company believes that
indemnification under its Bylaws covers at least negligence and gross negligence
on the part of indemnified parties. The Company's Bylaws also permit it to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the Bylaws permit such indemnification.
The Company has entered into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the Company's
Bylaws. These agreements among other things, indemnify the Company's directors
and executive officers for certain expenses (including attorney's fees),
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by or the right of the Company
arising out of such person's services as a director or executive officer of the
Company, any subsidiary of the Company or any other company or enterprise to
which the person provides services at the request of the Company. The Company
believes that these provisions and agreements are necessary to attract and
retain qualified persons as directors and executive officers.
There is no currently pending litigation or proceeding involving a director,
officer, employee or other agent of the Company in which indemnification would
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which would provide the basis for a claim for such
indemnification.
43
CERTAIN TRANSACTIONS
In May 1993, the Company entered into a Series A Preferred Stock and Warrant
Purchase Agreement with Hayden Leason, a director and principal stockholder of
the Company. Pursuant to the agreement, the Company issued 992,056 shares of
Series A Preferred Stock to Mr. Leason at a price of $800,000. In addition, the
Company issued a warrant to Mr. Leason to purchase additional shares of Series A
Preferred Stock. Mr. Leason exercised this warrant in January 1994 and acquired
an additional 992,056 shares of Series A Preferred Stock at a price of $800,000.
The shares of Series A Preferred Stock issued to Mr. Leason will convert into
1,145,034 shares of Common Stock upon consummation of this Offering.
In July 1995, the Company entered into a Series B Preferred Stock and
Warrant Purchase Agreement with Mr. Leason. Pursuant to the Agreement, the
Company issued 496,028 shares of Series B Preferred Stock (convertible into
286,258 shares of Common Stock upon consummation of this Offering) to Mr. Leason
at a price of $600,000. In addition, the Company issued a warrant to Mr. Leason
to purchase up to 2,146,931 shares of Common Stock. Mr. Leason exercised the
warrant as to 715,649 shares in March 1996 at a price of $50,000 and as to
286,258 shares in May 1996 at a price of $20,000. In connection with the May
exercise, the Company and Mr. Leason agreed to terminate the warrant as to the
remaining shares.
In February 1996, the Company caused TherAtid, Incorporated ("TherAtid") to
be formed as a California corporation. TherAtid was formed for the purpose of
entering into the license agreement (the "Novartis License") with Novartis
Corporation. See "Business -- Licenses." TherAtid issued 200,000 shares of
Common Stock to Mr. Leason at a price of $200 and 1,000,000 shares of Common
Stock to Isaiah J. Fidler, D.V.M., Ph.D. at a price of $1,000. Dr. Fidler is a
director and principal stockholder of Jenner. In addition, TherAtid issued
1,818,180 shares of Series A Preferred Stock to Jenner at a price of $999,999
and a warrant to purchase additional shares of Series A Preferred Stock. In
August 1996, TherAtid was merged with and into Jenner. As a result of the
merger, Jenner became the successor to the Novartis License, the shares of
TherAtid Common Stock issued to Mr. Leason were converted into 115,420 shares of
Jenner Common Stock, the shares of TherAtid Common Stock issued to Dr. Fidler
were converted into 577,100 shares of Jenner Common Stock, and the shares of
TherAtid Series A Preferred Stock and the warrant issued to Jenner were
canceled.
From March through May 1996, the Company borrowed an aggregate of $3 million
from Mr. Leason. The loan bears simple interest at 10% per annum and all
principal and interest is due and payable on May 6, 1999. The loan was
originally secured by the TherAtid securities issued to Jenner. However, with
the merger of TherAtid into Jenner, the loan is now unsecured.
In August 1996, the Company entered into a Consulting Agreement with Isaiah
J. Fidler, D.V.M., Ph.D., a director of the Company, pursuant to which Dr.
Fidler agreed to assist the Company in developing proprietary compounds, ACT and
JT3002 and their respective analogs, in exchange for an aggregate of $48,000
payable over the term of the agreement. The agreement expires in August 1997.
In September 1996, the Company entered into a Sponsored Research Agreement
with the University of Texas M.D. Anderson Cancer Center ("M.D. Anderson").
Under the agreement, M.D. Anderson will perform certain research related to the
preclinical development of JT3002 for the adjuvant therapy of cancer and the
abrogation of mucositis, GI toxicity and myelosuppression in exchange for
funding in the aggregate amount of $425,752. All inventions made solely by M.D.
Anderson's personnel or the Company's personnel will be the sole property of
M.D. Anderson or the Company, respectively, and all property developed jointly
by personnel of M.D. Anderson and the Company will be owned jointly. With
respect to the property owned solely by M.D. Anderson or jointly by the Company
and M.D. Anderson, the Company has the option to negotiate the terms and
conditions of a license agreement with M.D. Anderson. If the Company and M.D.
Anderson do not reach agreement on the terms and conditions of such a license
agreement within 180 days, the Company shall have a right of first refusal with
respect to any third party offers that are more favorable to M.D. Anderson than
those offered by the Company. The research performed by M.D. Anderson under the
agreement will be directed by Dr. Fidler.
44
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1996 and as adjusted
to reflect the sale by the Company of the Securities offered hereby, by (i) each
director of the Company, (ii) each Named Executive Officer, (iii) each person
known to the Company to be the beneficial owner of more than 5% of the Company's
Common Stock, and (iv) all directors and executive officers of the Company as a
group. Except as otherwise indicated, based on information furnished by the
beneficial owners of the Common Stock listed below, the Company believes that
such owners have sole investment and voting power with respect to such shares,
subject to community property laws where applicable. See "Certain Transactions"
and "Risk Factors -- Concentration of Ownership."
PERCENTAGE OF VOTING
NUMBER OF STOCK BENEFICIALLY OWNED
SHARES ------------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OWNED OFFERING OFFERING
---------------- ----- -------- --------
Lowell M. Dicke(1) 23,458 1.0% *
Diversified Investors Corporation
82 Wall Street
New York, NY 10005
Isaiah J. Fidler, D.V.M., Ph.D(2) 584,257 12.6% 8.2%
Department of Cell Biology -- 173
MD Anderson Cancer Center
1515 Holcombe Boulevard
Houston, TX 77030
Robert A. Fildes, Ph.D.(3) 23,458 1.0% *
905 Pepperwood Drive
Danville, CA 94506
Jack Bowman(4) 9,145 * *
3077 Scenic Avenue
Lummi Island, WA 98262
Anthony E. Maida, III(5) 258,484 5.5% 3.6%
2010 Crow Canyon Place, Suite 100
San Ramon, CA 94853
Herbert Grossman(6) 9,146 * *
35 Highland Drive
West Caldwell, NJ 07006
Hayden Leason(7) 2,548,610 55.1% 35.8%
W4269 Southland Road
Lake Geneva, WI 53147
Lynn E. Spitler, M.D.(8) 1,072,829 23.2% 15.1%
2010 Crow Canyon Place, Suite 100
San Ramon, CA 94853
All directors and executive officers
as a group (8 persons)(9) 4,529,387 95.9% 62.7%
- ------------
* Less than 1%.
(1) Includes 397 shares issuable upon exercise of stock options exercisable
within 60 days of December 31, 1996.
45
(2) Includes 289,017 shares of Common Stock initially subject to repurchase by
the Company. One twenty-fourth of the shares were released from the
repurchase option on April 30, 1996 and an additional one twenty-fourth of
the shares are released at the end of each full month thereafter, based
upon Dr. Fidler's continued relationship to the Company.
(3) Includes 1,988 shares issuable upon exercise of stock options exercisable
within 60 days of December 31, 1996.
(4) Consists of 9,145 shares issuable upon exercise of stock options
exercisable within 60 days of December 31, 1996.
(5) Includes an aggregate of 49,747 shares that have been gift transferred to
members of Mr. Maida's family. Mr. Maida disclaims beneficial ownership of
all shares held by such transferees except for 43,282 shares held in
custodianship under the California Uniform Transfer to Minors Act for the
benefit of Mr. Maida's minor children. Also includes 79,515 shares issuable
upon exercise of stock options exercisable within 60 days of December 31,
1996.
(6) Includes 1,988 shares issuable upon exercise of stock options exercisable
within 60 days of December 31, 1996.
(7) Includes an aggregate of 288,998 shares that have been gift transferred to
friends and to members of Mr. Leason's family. Mr. Leason disclaims
beneficial ownership of all shares held by such transferees.
(8) Includes an aggregate of 248,335 shares that have been gift transferred to
friends and to members of Dr. Spitler's family. Dr. Spitler disclaims
beneficial ownership of all shares held by such transferees. Also includes
7,951 shares issuable upon exercise of stock options exercisable within 60
days of December 31, 1996.
(9) Includes an aggregate of 587,080 shares previously gift transferred by Mr.
Maida, Mr. Leason and Dr. Spitler. See Notes 5, 7 and 8. Also includes
100,984 shares issuable upon exercise of stock options exercisable within
60 days of December 31, 1996.
46
DESCRIPTION OF SECURITIES
Upon the closing of this Offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Common Stock, par value $0.001 per
share, and 5,000,000 shares of Preferred Stock, $0.001 par value (the "Preferred
Stock"). At December 31, 1996, there were 4,621,886 shares of Common Stock
outstanding held of record by approximately 51 stockholders.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to any
outstanding Preferred Stock preference, the holders of Common Stock are entitled
to receive ratably the dividends, if any, that may be declared from time to time
by the Board of Directors out of funds legally available for such dividends. The
Company has never declared a dividend and does not anticipate doing so. See
"Dividend Policy." Subject to any outstanding Preferred Stock preference, in the
event of a liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities. Holders of Common Stock have no preemptive rights and no right
to convert their Common Stock into any other securities. There are no redemption
or sinking fund provisions applicable to the Common Stock. All the outstanding
shares of Common Stock are, and the shares of Common Stock to be issued in the
Offering will be, validly issued, fully paid and nonassessable.
PREFERRED STOCK
Effective upon the closing of this Offering, the Company will be authorized
to issue 5,000,000 shares of undesignated Preferred Stock, none of which will be
outstanding upon the closing of this Offering. The Board of Directors will have
the authority, without further action by the stockholders, to issue the
undesignated Preferred Stock in one or more series, to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated Preferred Stock and to fix the number of shares
constituting any series and the designation of such series. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders, may
discourage bids for the Company's Common Stock at a premium over the market
price of the Common Stock and may adversely affect the market price of and the
voting and other rights of the holders of Common Stock. At present, the Company
has no plans to issue any of the Preferred Stock.
WARRANTS
The following is a brief summary of certain provisions of the Warrants, but
such summary does not purport to be complete. A copy of the Warrant Agreement
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. See "Additional Information."
Exercise Price and Terms. Each Warrant entitles the registered holder
thereof to purchase, at any time over a forty-eight month period commencing
twelve (12) months after the date of this Prospectus, one share of Common Stock
at a price of $ per share [140% of the initial public offering price per share],
subject to adjustment in accordance with the anti-dilution and other provisions
referred to below. The holder of any Warrant may exercise such Warrant by
surrendering the certificate representing the Warrant to the Warrant Agent, with
the subscription form thereon properly completed and executed, together with
payment of the exercise price. The Warrants may be exercised at any time in
whole or in part at the applicable exercise price until expiration of the
Warrants. No fractional shares will be issued upon the exercise of the Warrants.
The exercise price of the Warrants bears no relationship to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of the Securities offered hereby.
Adjustments. The exercise price and the number of shares of Common Stock
purchasable upon the exercise of the Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications of the Common Stock, or sale by the
47
Company of shares of its Common Stock or other securities convertible into
Common Stock at a price below the then-applicable exercise price of the
Warrants. Additionally, an adjustment would be made in the case of a
reclassification or exchange of Common Stock, consolidation or merger of the
Company with or into another corporation (other than a consolidation or merger
in which the Company is the surviving corporation) or sale of all or
substantially all of the assets of the Company in order to enable warrantholders
to acquire the kind and number of shares of stock or other securities or
property receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon the exercise of the Warrant.
Redemption Provisions. Commencing eighteen (18) months after the date of
this Prospectus, the Warrants are subject to redemption at $0.10 per Warrant on
thirty (30) days' prior written notice to the warrantholders if the average
closing bid price of the Common Stock as reported on the American Stock Exchange
equals or exceeds $ per share [160% of the initial public offering price per
share of Common Stock] for any twenty (20) trading days within a period of
thirty (30) consecutive trading days ending on the fifth trading day prior to
the date of the notice of redemption. In the event the Company exercises the
right to redeem the Warrants, such Warrants will be exercisable until the close
of business on the business day immediately preceding the date for redemption
fixed in such notice. If any Warrant called for redemption is not exercised by
such time, it will cease to be exercisable and the warrantholder will be
entitled only to the redemption price.
Transfer, Exchange and Exercise. The Warrants are in registered form and may
be presented to the Warrant Agent for transfer, exchange or exercise at any time
on or prior to their expiration date five (5) years from the date of this
Prospectus, at which time the Warrants become wholly void and of no value. If a
market for the Warrants develops, the holder may sell the Warrants instead of
exercising them. There can be no assurance, however, that a market for the
Warrants will develop or continue.
Warrantholder Not a Stockholder. The Warrants do not confer upon holders any
voting, dividend or other rights as stockholders of the Company.
Modification of Warrant. The Company and the Warrant Agent may make such
modifications to the Warrant as they deem necessary and desirable that do not
adversely affect the interests of the warrantholders. The Company may, in its
sole discretion, lower the exercise price of the Warrants for a period of not
less than thirty (30) days on not less than thirty (30) days' prior written
notice to the warrantholders and the Representative. Modification of the number
of securities purchasable upon the exercise of any Warrant, the exercise price
and the expiration date with respect to any Warrant requires the consent of
two-thirds of the warrantholders. No other modifications may be made to the
Warrants, without the consent of two-thirds of the warrantholders.
A significant amount of the securities offered hereby may be sold to
customers of the Representative. Such customers subsequently may engage in
transactions for the sale or purchase of such securities through or with the
Representative. Although it has no obligation to do so, the Representative
currently intends to make a market in the Company's securities and may otherwise
effect transactions in such securities. If it participates in the market, the
Representative may exert a dominating influence on the market, if one develops,
for the securities described in this Prospectus. Such market-making activity may
be discontinued at any time. The price and liquidity of the Common Stock and the
Warrants may be significantly affected by the degree, if any, of the
Representative's participation in such market. See "Underwriting."
The Warrants are not exercisable unless, at the time of the exercise, the
Company has a current prospectus covering the shares of Common Stock issuable
upon exercise of the Warrants, and such shares have been registered, qualified
or deemed to be exempt under the securities laws of the state of residence of
the exercising holder of the Warrants. Although the Company will use its best
efforts to have all the shares of Common Stock issuable upon exercise of the
Warrants registered or qualified on or before the exercise date and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
there can be no assurance that it will be able to do so.
The Warrants are separately transferable immediately upon issuance. Although
the Securities will not knowingly be sold to purchasers in jurisdictions in
which the Securities are not registered or otherwise qualified for sale,
purchasers may buy Warrants in the aftermarket or may move to
48
jurisdictions in which the shares underlying the Warrants are not so registered
or qualified during the period that the Warrants are exercisable. In this event,
the Company would be unable to issue shares to those persons desiring to
exercise their Warrants, and holders of Warrants would have no choice but to
attempt to sell the Warrants in a jurisdiction where such sale is permissible or
allow them to expired unexercised.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
The holders of 1,860,680 shares of Common Stock (the "Registrable
Securities") or their transferees are entitled to certain rights with respect to
the registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement between the Company and the holders of
Registrable Securities. Subject to certain limitations in the agreement, the
holders of at least 80% of the Registrable Securities may require, on one
occasion beginning six months after the date of this Prospectus, that the
Company use its best efforts to register the Registrable Securities for public
resale (the "Requested Registration"). If the Company registers any of its
Common Stock either for its own account or for the account of other security
holders, the holders of Registrable Securities are entitled to include their
shares of Common Stock in the registration, subject to the ability of the
underwriters to limit the number of shares included in the offering. Any holders
of the Registrable Securities may also require the Company to register all or a
portion of their Registrable Securities on Form S-3 when use of such form
becomes available to the Company, provided, among other limitations, that the
proposed aggregate selling price of such shares (net of any underwriters'
discounts or commissions) is at least $1 million. All registration expenses for
the Requested Registration must be borne by the Company and all other
registration expenses and selling expenses relating to Registrable Securities
must be borne by the holders of the securities being registered.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Jenner is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law, an anti-takeover law. In general, Section 203
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 the person became an interested stockholder unless (with certain
exceptions) the "business combination" or the transaction in which the person
became an interested stockholder is approved in a prescribed manner. Generally,
a "business combination" includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the stockholder. Generally, 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. The existence of this provision would be expected to
have an anti-takeover effect with respect to transactions not approved in
advance by the Board of Directors, including discouraging attempts that might
result in premium over the market price for the shares of Common Stock held by
the stockholders.
The Company's Certificate of Incorporation provides that the Board of
Directors may issue shares of Preferred Stock without stockholder approval on
such terms as the Board may determine. The authorization of undesignated
Preferred Stock makes it possible for the Board of Directors to issue Preferred
Stock with voting or other rights or preferences that could impede the success
of any attempt to change control of the Company. In addition, the Company's
Certificate of Incorporation and Bylaws eliminate cumulative voting in the
election of directors, and provide that stockholder action can be taken only at
an annual or special meeting of stockholders and may not be taken by written
consent. The Bylaws provide that special meetings of stockholders can be called
only by the Board of Directors, the Chairman of the Board, if any, or the
President of the Company. These and other provisions may have the effect of
deferring hostile takeovers or delaying changes in control or management of the
Company. The affirmative vote of the holders of at least two-thirds of the
voting stock of the Company is required to amend the foregoing provisions of the
Certificate of Incorporation and Bylaws.
TRANSFER AGENT AND REGISTRAR AND WARRANT AGENT
The name and address of the Transfer Agent and Registrar for the Company's
Common Stock and the Warrant Agent for the Warrants is Continental Stock
Transfer and Trust Company, 2 Broadway, New York, New York 10004.
49
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this Offering, the Company will have 7,121,886 shares
of Common Stock outstanding (not including 378,114 shares of Common Stock
subject to outstanding options), assuming no exercise of options after January
31, 1997 and outstanding warrants to purchase an additional 2,500,000 shares of
Common Stock assuming no exercise of the Representative's Warrant. Of these
securities, 2,500,000 shares of Common Stock and the Warrants to purchase
2,500,000 shares of Common Stock sold in this Offering will be freely tradeable
without restriction under the Securities Act. The remaining 4,621,886 shares of
Common Stock held by existing stockholders were issued and sold by the Company
in reliance on exemptions from the registration requirements of the Securities
Act. These shares may be sold in the public market only if registered, or
pursuant to an exemption from registration such as Rule 144, 144(k) or 701 under
the Securities Act. Such restricted shares will be available for sale in the
public market 12 months after the date of this Prospectus upon expiration of
lock-up agreements with the Representative as follows: (i) 2,927,449 shares (not
including approximately 228,403 shares subject to outstanding vested options)
will be available for immediate sale, subject in some cases to volume
limitations pursuant to Rule 144 and (ii) the remaining 1,694,437 shares will be
eligible for sale at various times over a period of less than two years, subject
in some cases to vesting provisions and volume limitations. In addition, twelve
(12) months after the completion of this Offering, 250,000 shares of Common
Stock issuable upon exercise of the Representative's Warrants and the Warrants
to purchase 250,000 shares of Common Stock issuable upon exercise of the
Representative's Warrants will be available for sale. The Company's directors,
executive officers and stockholders, who in the aggregate hold 100% of the
shares of Common Stock of the Company outstanding immediately prior to the
completion of this Offering, have entered into lock-up agreements with the
Representative under which they have agreed not to offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, or agree to dispose
of, directly or indirectly, any shares of Common Stock or options to acquire
shares of Common Stock owned by them for a period of 12 months after the date of
this Prospectus, without the prior written consent of the Representative. The
Representative may, in its sole discretion, and at any time without notice,
release all or any portion of the shares subject to such lock-up agreements. The
Company has entered into a similar agreement, except that the Company may grant
options and issue stock under its current stock option and stock purchase plans
and issue stock pursuant to outstanding vested options.
As of January 31, 1997, 378,114 shares were subject to outstanding options.
All of these shares are subject to the lock-up agreements with the
Representative described above. In addition, 1,860,680 of the shares outstanding
immediately following the completion of this Offering will be entitled to
registration rights with respect to such shares upon the release of lock-up
agreements. The number of shares sold in the public market could increase if
such rights are exercised.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two (2) years (including the contiguous holding period of
any prior owner except an affiliate) is entitled to sell in "broker's
transactions" or to market makers, within any three-month period commencing at
least ninety (90) days after the date of this Prospectus, a number of shares
that does not exceed the greater of (i) one percent of the then outstanding
shares of Common Stock (approximately 105,087 shares immediately after the
Offering) or (ii) the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain requirements as to manner
of sale, the filing of a notice and the availability of public information
concerning the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the three (3) months preceding a
sale and who has beneficially owned the shares proposed to be sold for at least
three (3) years (including the contiguous holding period of any prior owner
except an affiliate) would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701 under the Securities
Act, which permits nonaffiliates to sell their Rule 701 shares without having to
50
comply with the public information, holding period, volume limitation or notice
provisions of Rule 144 and permits affiliates to sell their Rule 701 shares
without having to comply with Rule 144's holding period restrictions, in each
case commencing ninety (90) days after the date of this Prospectus; however, all
persons who hold shares of the Company that would be eligible for resale
pursuant to Rule 701 have entered into agreements with the Company pursuant to
which they have agreed not to sell any such shares for a period of twelve (12)
months from the date of this Prospectus (the "Lock-up Period") without the
Representative's consent. See "Underwriting."
Prior to the Offering, there has been no market for the Common Stock or the
Warrants of the Company, and no predictions can be made of the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock and the Warrants of the Company in the
public market could adversely affect prevailing market prices for the Common
Stock and the Warrants and the ability of the Company to raise equity capital in
the future.
51
UNDERWRITING
The Underwriters named below (the "Underwriters") for whom National
Securities Corporation is acting as representative (in such capacity, the
"Representative"), have severally agreed, subject to the terms and conditions of
the Underwriting Agreement (the "Underwriting Agreement"), to purchase from the
Company, and the Company has agreed to sell to the Underwriters on a firm
commitment basis, the respective number of shares of Common Stock and Warrants
set forth opposite their names.
NUMBER OF
SHARES OF
COMMON NUMBER OF
UNDERWRITER STOCK WARRANTS
----------- ----- --------
National Securities Corporation
--------- ---------
Total 2,500,000 2,500,000
========= =========
The Underwriters are committed to purchase all the shares of Common Stock
and Warrants offered hereby, if any of such Securities are purchased. The
Underwriting Agreement provides that the obligations of the several Underwriters
are subject to conditions precedent specified therein.
The Company has been advised by the Representative that the Underwriters
propose initially to offer the Securities to the public at the initial public
offering prices set forth on the cover page of this Prospectus and to certain
dealers at such prices less concessions of not in excess of $_____ per Share and
$_______ per Warrant. Such dealers may reallow a concession not in excess of
$_______ per Share and $______ per Warrant to certain other dealers. After the
commencement of the Offering, the public offering price, concession and
reallowance may be changed by the Representative.
The Representative has informed the Company that it does not expect sales to
discretionary accounts by the Underwriters to exceed five percent of the
Securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make. The Company has also
agreed to pay to the Representative a nonaccountable expense allowance of
$500,000, of which $50,000 has been paid to date.
The Company has granted to the Underwriters an Over-Allotment Option
exercisable during the forty-five (45) day period from the date of this
Prospectus, to purchase up to an additional 375,000 Shares of Common Stock
and/or 375,000 additional Warrants at the public offering price per Share and
Warrant, respectively, offered hereby, less underwriting discounts. Such
Over-Allotment Option may be exercised only for the purpose of covering
over-allotments, if any, incurred in the sale of the Securities offered hereby.
To the extent such Over-Allotment Option is exercised in whole or in part, each
Underwriter will have a firm commitment, subject to certain conditions, to
purchase the number of the additional Securities proportionate to its initial
commitment.
In connection with the Offering the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
up to 250,000 Shares of Common Stock and/or 250,000 Warrants (the
"Representative's Warrants"). The Representative's Warrants are initially
exercisable at a price of $_______ per Share [140% of the initial public
offering price per Share] and $_______ per Warrant [140% of the initial public
offering price per Warrant] for a period of four years,
52
commencing at the beginning of the second year after their issuance and sale.
The Representative's Warrants provide for adjustment in the numbers of shares of
Common Stock and Warrants issuable upon the exercise thereof as a result of
certain subdivisions or combinations of the Common Stock.
The Company's directors and executive officers, and all holders of shares of
Common Stock, options, warrants or other securities exercisable, convertible or
exchangeable for shares of Common Stock, have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of twelve (12)
months following the effective date of this Prospectus without the prior written
consent of the Representative. An appropriate legend shall be marked on the face
of certificates representing all such securities.
Upon the exercise of any Warrants more than one year after the date of this
Prospectus, which exercise was solicited by the Representative, and to the
extent not inconsistent with the guidelines of the National Association of
Securities Dealers, Inc., and the Rules and Regulations of the Commission, the
Company has agreed to pay the Representative a commission which shall not exceed
five percent (5%) of the aggregate exercise price of such Warrants in connection
with bona fide services provided by the Representative relating to any warrant
solicitation undertaken by the Representative. In addition, the individual must
designate the firm entitled to payment of such warrant solicitation fee. A
warrant solicitation fee will only be paid to the Representative or another NASD
member when such NASD member is specifically designated in writing as the
soliciting broker. However, no compensation will be paid to the Representative
in connection with the exercise of the Warrants if (a) the market price of the
Common Stock is lower than the exercise price, (b) the Warrants were held in a
discretionary account, or (c) the exercise of Warrants is not solicited by the
Representative. Unless granted an exemption by the Commission from its Rule
10b-6 under the Exchange Act, the Representative will be prohibited from
engaging in any market-making activities with regard to the Company's securities
for the period from nine (9) business days (or other such applicable periods as
Rule 10b-6 may provide) prior to any solicitation of the exercise of the
Warrants until the later of the termination of such solicitation activity or the
termination (by waiver or otherwise) of any right the representative may have to
receive a fee. As a result, the Representative may be unable to continue to
provide a market for the Common Stock or Warrants during certain periods while
the Warrants are exercisable. If the Representative has engaged in any of the
activities prohibited by Rule 10b-6 during the periods described above, the
Representative undertakes to waive unconditionally its rights to receive a
commission on the exercise of such Warrants.
The Company has agreed, at the request of the Representative, that for three
years after the date of this Prospectus, it will use its best efforts to cause
one individual designated by the Representative to be elected to the Company's
Board of Directors.
Prior to the Offering, there has been no public market for the Common Stock
or the Warrants. Consequently, the initial public offering price of the
Securities has been determined by negotiation between the Company and the
Representative and does not necessarily bear any relationship to the Company's
asset value, net worth, and other established criteria of value. Factors
considered in such negotiations, in addition to prevailing market conditions,
include the history of and prospects for the industry in which the Company
competes, an assessment of the Company's management, the prospects of the
Company, its capital structure and certain other factors as were deemed
relevant.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement, which is filed as an exhibit to the Registration
Statement. See "Additional Information."
53
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto,
California. Orrick, Herrington & Sutcliffe, LLP, New York, New York, has acted
as counsel to the Underwriters in connection with this Offering. Mario M.
Rosati, a partner of Wilson, Sonsini, Goodrich & Rosati, P.C., is Secretary of
the Company. As of December 31, 1996 a certain investment partnership of Wilson
Sonsini Goodrich & Rosati, P.C. beneficially owned an aggregate of 6,442 shares
of the Company's Common Stock and Mario M. Rosati owned 717 shares of the
Company's Common Stock.
EXPERTS
The financial statements of Jenner Technologies, Inc. as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,
1996 and for the period from inception (December 8, 1992) to December 31, 1996
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein with respect thereto, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") Washington, D.C. 20549, a Registration Statement on Form S-1,
including amendments thereto, under the Securities Act, with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith. For further information with respect to the Company
and the Securities offered hereby, reference is made to such Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any contract or other
document referred to are not necessarily complete and, in each instance,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the principal
office of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of all or any part thereof may be obtained from such office upon the
payment of prescribed fees. Such information is also available electronically by
means of the Commission's web site on the Internet at http:/www.sec.gov.
54
INDEX TO FINANCIAL STATEMENTS
JENNER TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
PAGE
----
Report of Ernst & Young LLP, Independent Auditors F-2
Balance Sheets as of December 31, 1994, 1995, and 1996 F-3
Statements of Operations for the years ended December 31, 1994,
1995 and 1996 and for the period from Inception (December 8,
1992) to December 31, 1996 F-4
Statement of Stockholders' Equity (Net Capital Deficiency)
for the period from Inception (December 8, 1992) to December 31, 1996 F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995
and 1996, and for the period from Inception (December 8, 1992) to
December 31, 1996 F-7
Notes to Financial Statements December 31, 1996 F-8
F-1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Jenner Technologies, Inc.
We have audited the accompanying balance sheets of Jenner Technologies, Inc.
(a development stage company) at December 31, 1995 and 1996, and the related
statements of operations, stockholders' equity (net capital deficiency), and
cash flows for each of the three years in the period ended December 31, 1996 and
for the period from inception (December 8, 1992) to December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jenner Technologies, Inc. (a
development stage company) at December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years ended December 31,
1996 and for the period from inception (December 8, 1992) to December 31, 1996,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
January 14, 1997, except as for Note 7,
as to which the date is
March , 1997
- ------------
The foregoing report is in the form that will be signed upon the completion of
the restatement of the capital accounts as described in Note 7 to the financial
statements.
Palo Alto, California
February 18, 1997
F-2
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
UNAUDITED
PRO FORMA
STOCKHOLDERS'
EQUITY (NET CAPITAL
DECEMBER 31, DEFICIENCY) AT
------------------------ DECEMBER 31,
1995 1996 1996
----------- ---------- --------------------
(NOTE 7)
ASSETS
Current assets:
Cash and cash equivalents $ 317,635 $ 1,428,510
Deferred offering costs -- 102,514
----------- -----------
Total current assets 317,635 1,531,024
Equipment 18,504 35,637
Less accumulated depreciation (9,393) (16,153)
----------- -----------
9,111 19,484
Other assets 9,625 12,884
----------- -----------
$ 336,371 $ 1,563,392
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 14,562 $ 72,351
Accrued offering costs -- 44,000
Accrued liabilities -- 97,226
Notes payable to related party 42,124 --
Accrued interest 6,410 --
----------- -----------
Total current liabilities 63,096 213,577
Long-term note payable to related party -- 3,000,000
Accrued interest due to related party -- 201,985
Commitments
Stockholders' equity (net capital deficiency):
Preferred stock, $0.001 par value, 5,000,000 shares authorized; issuable
in series (none issued and outstanding pro forma):
Series A convertible, 2,137,500 shares designated, 2,120,522 shares
issued and outstanding in 1995 and 1996 (liquidation preference of
$2,035,000 at December 31, 1996) 1,710,400 1,710,400 $ --
Series B convertible, 500,000 shares designated, 496,028 shares issued
and outstanding in 1995 and 1996 (liquidation preference of $645,000
at December 31, 1996) 600,000 600,000 --
Common stock, $0.001 par value, 30,000,000 shares authorized, 1,411,424
and 3,111,871 shares issued and outstanding in 1995 and 1996,
respectively (4,621,886 shares issued and outstanding pro forma) 11,766 619,156 4,622
Additional paid-in capital -- -- 2,924,934
Deferred compensation -- (45,000) (45,000)
Deficit accumulated during the development stage (2,048,891) (4,736,726) (4,736,726)
---------- ---------- ----------
Total stockholders' equity (net capital deficiency) 273,275 (1,852,170) $(1,852,170)
---------- ---------- ==========
$ 336,371 $ 1,563,392
=========== ===========
See accompanying notes.
F-3
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
PERIOD FROM
INCEPTION
(DECEMBER 8,
YEAR ENDED DECEMBER 31, 1992) TO
----------------------------------- DECEMBER 31,
1994 1995 1996 1996
--------- --------- ----------- -------------
Operating expenses:
Research and development $ 499,366 $ 698,303 $ 2,206,900 $ 3,743,195
General and administrative 228,114 195,663 339,948 901,050
--------- --------- ----------- -----------
727,480 893,966 2,546,848 4,644,245
--------- --------- ----------- -----------
Loss from operations (727,480) (893,966) (2,546,848) (4,644,245)
Interest (expense) income 22,369 17,100 (140,987) (92,481)
--------- --------- ----------- -----------
Net loss $(705,111) $(876,866) $(2,687,835) $(4,736,726)
========= ========= =========== ===========
Pro forma net loss per share $ (0.56)
===========
Shares used in calculation of pro forma
net loss per share 4,785,863
============
See accompanying notes.
F-4
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Period from Inception (December 8, 1992) to December 31, 1996
PREFERRED STOCK
-------------------------------------- DEFICIT TOTAL
SERIES A SERIES B ACCUMULATED STOCKHOLDERS'
CONVERTIBLE CONVERTIBLE COMMON STOCK DURING THE EQUITY (NET
----------------- ---------------- ----------------- DEFFERRED DEVELOPEMENT CAPITAL
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT COMPENSATION STAGE DEFICIENCY)
------ ------ ------ ------ ------ ------ ------------ ----- -----------
Issuance of common
stock at $0.007 per
share to founders in
exchange for cash
and technology in
December 1992 and
June 1993 -- $ -- -- $ -- 1,334,718 $ 2,360 $ -- $ -- $ 2,360
Issuance of common
stock at $0.14 per
share in exchange
for technology and
services in April
through October 1993 -- -- -- -- 45,706 6,387 -- -- 6,387
Issuance of common
stock at $0.007 per
share upon exercise
of stock options in
May 1993 -- -- -- -- 3,877 27 -- -- 27
Issuance of Series A
convertible
preferred stock at
$0.8064 per share
and a warrant to
purchase 992,056
shares of Series A
convertible
preferred stock at
an exercise price of
$0.8064 for cash in
May through July
1993 1,128,466 910,400 -- -- -- -- -- -- 910,400
Net loss for period
from inception
(December 8, 1992)
to December 31, 1993 -- -- -- -- -- -- -- (466,914) (466,914)
--------- ------- ----- ------ --------- ----- -------- -------
Balances at December
31, 1993 1,128,466 910,400 -- -- 1,384,301 8,774 -- (466,914) 452,260
Issuance of Series A
convertible
preferred stock for
cash at $0.8064 per
share in January
1994 upon exercise
of warrant 992,056 800,000 -- -- -- -- -- -- 800,000
Issuance of common
stock to consultants
at $0.14 per share
in exchange for
services in January
1994 -- -- -- -- 20,756 2,900 -- -- 2,900
Issuance of common
stock at $0.007-
$0.14 per share upon
exercise of stock
options in May
through October 1994 -- -- -- -- 1,651 59 -- -- 59
Net loss -- -- -- -- -- -- -- (705,111) (705,111)
--------- ------- ----- ------ --------- ----- -------- -------
Balances at December
31, 1994 (carried
forward) 2,120,522 $1,710,400 -- $ -- 1,406,708 $11,733 $ -- $(1,172,025) $550,108
See accompanying notes.
F-5
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) -- (Continued)
Period from Inception (December 8, 1992) to December 31, 1996
PREFERRED STOCK
-------------------------------------- DEFICIT TOTAL
SERIES A SERIES B ACCUMULATED STOCKHOLDERS'
CONVERTIBLE CONVERTIBLE COMMON STOCK DURING THE EQUITY (NET
----------------- ---------------- ----------------- DEFFERRED DEVELOPEMENT CAPITAL
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT COMPENSATION STAGE DEFICIENCY)
------ ------ ------ ------ ------ ------ ------------ ----- -----------
Balances at December
31, 1994 (brought
forward) 2,120,522 $1,710,400 -- $ -- 1,406,708 $ 11,733 $ -- $(1,172,025) $ 550,108
Issuance of Series B
convertible
preferred stock at
$1.21 per share and
a warrant to
purchase 2,146,931
shares of common
stock at an exercise
price of $0.04 per
share for cash in
July 1995 -- -- 496,028 600,000 -- -- -- -- 600,000
Issuance of common
stock upon exercise
of stock options for
cash at $0.007 per
share in January
through April 1995 -- -- -- -- 4,716 33 -- -- 33
Net loss -- -- -- -- -- -- -- (876,866) (876,866)
--------- ---------- ------- ------- --------- ------- ----- ---------- --------
Balances at December
31, 1995 2,120,522 1,710,400 496,028 600,000 1,411,424 11,766 -- (2,048,891) 273,275
Issuance of common
stock upon exercise
of stock options for
cash at $0.007-$0.23
per share in 1996 -- -- -- -- 6,020 390 -- -- 390
Issuance of common
stock upon exercise
of a warrant at an
exercise price of
$0.07 per share for
cash in March and
May 1996 -- -- -- -- 1,001,907 70,000 -- -- 70,000
Issuance of common
stock at $0.70 per
share in exchange
for shares in
TherAtid in August
1996 (see Note 2),
including 115,420
shares to a related
party -- -- -- -- 692,520 485,000 -- -- 485,000
Deferred compensation
related to stock
option grants -- -- -- -- -- 52,000 (52,000) -- --
Amortization of
deferred
compensation -- -- -- -- -- -- 7,000 -- 7,000
Net loss -- -- -- -- -- -- -- (2,687,835) (2,687,835)
--------- ---------- ------- ------- --------- ------- ----- ---------- ---------
Balances at December
31, 1996 2,120,522 $1,710,400 496,028 $600,000 3,111,871 $619,156 $(45,000) $(4,736,726) $(1,852,170)
========= ========== ======= ======== ========= ======== ======== =========== ===========
See accompanying notes.
F-6
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
PERIOD FROM
INCEPTION
(DECEMBER 8,
YEAR ENDED DECEMBER 31, 1992) TO
--------------------------------- DECEMBER 31,
1994 1995 1996 1996
---- ---- ---- ----
Cash flows from operating activities:
Net loss $(705,111) $(876,866) $(2,687,835) $(4,736,726)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 5,414 4,110 14,160 23,553
Common stock issued for technology 2,900 -- 485,000 494,287
Changes in operating assets and liabilities:
Prepaid offering costs -- -- (102,514) (102,514)
Other assets (750) (8,744) (3,659) (13,284)
Accounts payable (4,662) 8,314 57,789 72,351
Accrued offering costs -- -- 44,000 44,000
Accrued liabilities -- -- 97,226 97,226
Accrued interest 3,882 2,528 195,575 201,985
-------- -------- ---------- ----------
Cash flows used in operating activities (698,327) (870,658) (1,900,258) (3,919,122)
-------- -------- ---------- ----------
Cash from investing activities:
Additions to property and equipment (5,490) (1,808) (17,133) (35,637)
Cash flows from financing activities:
Cash proceeds from issuance of preferred stock 800,000 600,000 -- 2,310,400
Proceeds from issuance of notes payable -- -- 3,000,000 3,063,249
Repayment of notes payable -- -- (42,124) (63,249)
Proceeds from issuance of common stock 59 33 70,390 72,869
-------- -------- --------- ---------
Cash flows provided by financing activities 800,059 600,033 3,028,266 5,383,269
------- ------- --------- ---------
Net increase (decrease) in cash 96,242 (272,433) 1,110,875 1,428,510
Cash and cash equivalents at the beginning of the period 493,826 590,068 317,635 --
------- ------- ------- ----------
Cash and cash equivalents at the end of the period $ 590,068 $ 317,635 $ 1,428,510 $1,428,510
========= ========= =========== ==========
See accompanying notes.
F-7
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
Jenner Technologies, Inc. (the "Company") was incorporated in the State of
California on December 8, 1992 (see Note 7). The Company was organized to
develop immunotherapies to treat patients with cancer. Research and development
of the Company's products is primarily conducted by third parties under
contractual arrangements. The Company's activities to date have consisted
principally of raising capital, acquiring intellectual property, and contracting
for and managing research and development performed by others. Accordingly, the
Company is considered to be in the development stage, and expects to incur
increasing losses and require additional financial resources to achieve
commercialization of its products.
Through December 31, 1996, the Company had incurred cumulative losses since
inception amounting to $4.7 million, and management anticipates incurring
additional losses for the next several years. The Company is working on several
long-term development projects which involve extensive research and clinical
testing, may require many years and substantial expenditures to complete, and
which ultimately may be unsuccessful. Therefore, the Company's ability to
continue as a going concern depends on its ability to raise additional financing
to meet its business plan objectives and, ultimately, to fund its operations
from revenues. Management believes that it will be able to obtain additional
funding through the issuance of debt or equity securities to existing and new
investors, including the Company's proposed initial public offering or from
strategic collaborations with other corporations. If adequate financing is not
available, the Company may be required to delay, scale back or eliminate certain
of its research and development programs, to relinquish rights to certain of its
technologies, product candidates, to forego desired opportunities, or to license
third parties to commercialize products or technologies that the Company would
otherwise seek to develop itself.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements.
Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
The Company invests its excess cash primarily in deposits with banks and
short-term securities. These securities consist of U.S. Treasury bills that
mature or are redeemable within 90 days. The Company has not recognized any
material gains or losses on its cash equivalents.
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such determination as of each balance sheet
date. Through December 31, 1996, the Company has classified its entire
investment portfolio as available-for-sale. Available-for- sale securities are
carried at amortized cost which approximates fair value at December 31, 1996.
The estimated fair value amounts have been determined by the Company using
available market information.
F-8
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in interest income. Realized gains and losses and declines in value judged to be
other-than-temporary are included in other income or expense. The cost of
securities sold is based on the specific identification method. Interest and
dividends are included in interest income.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the respective
assets, generally three to five years.
STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected
to account for stock options granted to employees using the intrinsic value
method and, accordingly, does not recognize compensation expense for options
granted to employees at fair value.
NET LOSS PER SHARE
Except as noted below, historical net loss per share is computed using the
weighted average number of common shares outstanding. Common equivalent shares
from stock options and convertible preferred stock are excluded from the
computation as their effect is antidilutive, except that, pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common and common
equivalent shares issued during the period beginning 12 months prior to the
initial filing of the proposed public offering at prices substantially below the
assumed public offering price have been included in the calculation as if they
were outstanding for all periods presented (using the treasury stock method and
the assumed public offering price for stock options).
Historical net loss per share information is as follows:
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
---- ---- ----
Net loss per share $ (0.22) $ (0.27) $ (0.82)
========== =========== ===========
Shares used in computing net loss per share 3,263,447 3,275,374 3,275,848
========= ========= =========
Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of convertible preferred shares that will
automatically convert upon completion of the Company's initial public offering
(using the if-converted method) from the original date of issuance.
2. THERATID TRANSACTION
During 1996, the Company formed a subsidiary, TherAtid Incorporated
("TherAtid") for the purpose of entering into a license agreement with Novartis
Corporation ("Novartis," formerly Ciba-Geigy Limited) (see Note 3). The Company
contributed approximately $1,000,000 to TherAtid in exchange for 1,818,180
shares of Series A preferred stock and a warrant to purchase 981,820 additional
shares of Series A preferred stock at an exercise price of $2.03. TherAtid also
issued 692,520 shares of common stock to others, including 115,420 shares to an
individual who is a member of the Company's Board of Directors and the principal
stockholder of the Company, for nominal consideration in connection with their
assistance in securing the Novartis license.
F-9
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
2. THERATID TRANSACTION -- (CONTINUED)
In August 1996, TherAtid was merged with and into the Company. As a result
of the merger, the Series A preferred stock and the warrant issued to the
Company were canceled, and the outstanding shares of TherAtid common stock were
exchanged for an equal number of shares of the Company's common stock. Prior to
the merger transaction, TherAtid had no operations. In connection with this
transaction, the Company recognized $830,000 of research and development expense
which consists primarily of the fair value of common stock issued to complete
the merger and the initial license payment by TherAtid to Novartis under the
license agreement.
3. RESEARCH LICENSES AND AGREEMENTS
ELI LILLY AND COMPANY
The Company has a worldwide exclusive license with Eli Lilly & Company ("Eli
Lilly") for the rights from Eli Lilly to use or sublicense certain technology
and make, use or sell certain licensed products relating to the patent rights
for the use of the KSA tumor associated antigen (the antigen associated with the
Company's OncoVax-CL product candidate). The agreement calls for the Company to
make certain benchmark payments to Eli Lilly if certain milestones are met. No
benchmark payments were made or were due through 1996. If commercialization is
achieved, the Company will be required to pay Eli Lilly a royalty based on net
sales of the licensed products.
NOVARTIS
The Company is party to a license agreement with Novartis. Under the
agreement, Novartis granted the Company an exclusive worldwide license to
certain patent rights and proprietary know-how for the use of various macrophage
activators for the therapy of cancer and related diseases. In consideration for
this technology, the Company paid Novartis an up-front license fee and is
required to pay annual maintenance fees until certain conditions of Phase III
clinical trials relating to the technology are met. The Company is also required
to make benchmark payments if certain milestones are met. As of December 31,
1996, no milestones had been met. Upon commercialization of any licensed product
developed, the Company will pay royalties based on net sales.
OTHER RESEARCH AGREEMENTS
The Company has entered into several other agreements with universities and
other research organizations. Such agreements generally require the Company to
make research support payments and benchmark payments upon the achievement of
certain milestones. The Company generally owns or has the option to acquire an
exclusive license to the results of the research and must make royalty payments
on the net sales of any products developed. Such agreements are generally
cancelable at the option of the Company upon notice of up to 30 to 60 days.
Total expenses under such agreements amounted to $50,500, $114,000, $442,000 and
$606,500 in 1994, 1995, 1996 and from inception, respectively.
4. NOTES PAYABLE TO RELATED PARTIES
From March through May 1996, the Company received $3,000,000 from a
preferred stockholder in exchange for a promissory note bearing interest at 10%
per annum and the right to immediately exercise a warrant held by the
stockholder (see Note 5). No accounting value was ascribed to the value of the
warrant acceleration, as such amount was determined to be not material. All
principal and accrued interest under the Note is due and payable on May 6, 1999.
The Note is unsecured.
F-10
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
5. STOCKHOLDERS' EQUITY
STOCK SPLIT
On July 10, 1996, the Company filed restated Articles of Incorporation in
California to reduce the authorized shares of preferred and common stock to
30,000,000 and 5,000,000, respectively, and to effect a one-for-4.032 reverse
stock split of all outstanding shares of common stock, Series A and Series B
preferred stock, and common stock options and warrants. All common share and
preferred stock and per share data in the accompanying financial statements has
been adjusted to give effect to the reverse stock split.
COMMON STOCK
After liquidation preference distributions to Series A and Series B
preferred stockholders have been paid, the remaining assets of the Company
available for distribution to stockholders shall be distributed among the
holders of Series A preferred stock, Series B preferred stock and common stock
pro rata, based on the number of shares of common stock held (or deemed to be
held, on an as-converted basis for preferred shares).
In connection with the Company's merger with TherAtid, the Company assumed
the repurchase option related to 289,017 shares of common stock owned by a
director. One twenty-fourth of the shares subject to repurchase were released
from the repurchase option on April 30, 1996 and an additional one twenty-fourth
of the total number of shares are released from the repurchase option at the end
of each full month thereafter, based upon the director's continued relationship
with the Company. As of December 31, 1996, 180,636 shares remain subject to the
repurchase option at an aggregate option exercise price of $541.
CONVERTIBLE PREFERRED STOCK
Each share of Series A and Series B convertible preferred stock ("preferred
stock") is entitled to voting rights equivalent to the number of shares of
common stock into which each share can be converted and is convertible, at the
option of the holder, into one share of common stock (see Note 7). Conversion is
automatic upon the closing of an underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, which results
in a price per share of not less than $13.97 and aggregate offering proceeds of
not less than $7,500,000 or upon the approval of more than 80% of all
outstanding preferred stock voting together as a single class. The Company has
reserved sufficient shares of common stock for issuance upon conversion of the
outstanding Series A and Series B preferred stock.
The Series A preferred shares are subject to liquidation preferences of
$0.8064 per share, plus an additional amount equal to $0.0605 per share
multiplied by the number of years the share was held prior to the effective date
of liquidation, plus all declared but unpaid dividends. The Series B preferred
shares are subject to liquidation preferences of $1.2096 per share plus an
additional amount equal to $0.0907 per share multiplied by the number of years
the share was held prior to the effective date of liquidation. Series A and
Series B preferred stockholders are entitled to noncumulative dividends at rates
of $0.0605 and $0.0907 per share, respectively, per annum, if declared by the
Board of Directors and in preference to common stock dividends. No dividends
have been declared or paid by the Company.
STOCK OPTIONS
During 1993, nonqualified stock options for 28,629 shares of common stock
were granted to consultants at an exercise price of $0.007 per share. At
December 31, 1996, 14,314 of these options remain outstanding and are
exercisable. The 1993 Stock Plan (the "Plan") was adopted in February 1993.
Stock options granted under the Plan may be either incentive stock options or
nonstatutory stock
F-11
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
5. STOCKHOLDERS' EQUITY -- (CONTINUED)
options. Incentive stock options may be granted to employees with exercise
prices of no less than the fair value and nonstatutory options may be granted to
employees or consultants at exercise prices of no less than 85% of the fair
value of the common stock on the grant date, as determined by the Board of
Directors. If, at the time the Company grants an option, the optionee directly
or by attribution owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, the option price shall be
at least 110% of the fair value and shall not be exercisable more than five
years after the date of grant. Options may be granted with different vesting
terms from time to time. Except as noted above, options expire no more than 10
years after the date of grant or earlier if employment is terminated.
During 1996, the Company adopted SFAS 123. The effect of applying the
minimum value method of SFAS 123 to options granted to employees in 1995 and
1996 did not result in pro forma net loss and loss per share amounts that are
materially different from historical amounts reported. Therefore, such pro forma
information is not presented herein. SFAS 123 is applicable only to options
granted subsequent to December 31, 1994, and should the Company successfully
complete the offering, it will no longer be able to utilize the minimum value
method, therefore, the pro forma effect determined in 1996 may not be
representative of the pro forma effect to be reported in future years. The
minimum value method was applied using the following weighted average
assumptions for 1995 and 1996, respectively: risk-free interest rates of 6.09%
and 6.53%; an expected option life of six years; and no annual dividends.
A summary of activity under the Plan for the years ended December 31
follows:
1994 1995 1996
------------------- ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- ----- ------- ----- ------- -----
Outstanding at January 1 11,452 $0.14 17,463 $0.14 160,592 $ 0.20
Granted 7,443 $0.14 143,129 $0.21 111,076 $ 0.23
Exercised (359) $0.14 -- $ -- (1,591) $ 0.22
Forfeited (1,073) $0.14 -- $ -- -- $ --
------ ------- ------- ------
Outstanding at December 31 17,463 $0.14 160,592 $0.20 270,077 $ 0.19
====== ======= ======= ======
Exercise prices of all options outstanding as of December 31, 1996 ranged
from $0.007 to $0.24 and 117,441 of such options were vested with a weighted
average exercise price of $0.18. As of December 31, 1996, the remaining
contractual life of outstanding options ranged from 6.2 years to 9.6 years with
a weighted average contractual life of 8.8 years.
In connection with grants of stock options to employees and directors during
1996, the Company recorded $52,000 for the difference between the deemed fair
value of the Company's common stock for financial statement presentation
purposes and the exercise price at the date of grant. Of such amount, $7,000
related to options that vested prior to December 31, 1996 and, accordingly, was
expensed in the year then ended. The remaining $45,000 is presented as a
component of stockholders' equity at December 31, 1996 and will be amortized
over the vesting period of the underlying options. The weighted average fair
value of options granted during 1996 with an exercise price below the deemed
fair value of the Company's common stock for financial statement presentation
purposes on the date of grant was $0.23.
F-12
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
5. STOCKHOLDERS' EQUITY -- (CONTINUED)
WARRANT
In connection with the sale of Series B preferred stock in 1995, the Company
issued a warrant to purchase 2,146,931 shares of common stock at an exercise
price of $0.04 per share to the Series B investor. In 1996, the stockholder
exercised a portion of the warrant to purchase 715,649 shares of common stock.
In May 1996, the Company entered into an agreement with the stockholder to
provide the stockholder with the right to immediately exercise the warrant as to
286,258 shares of the Company's common stock in exchange for terminating the
warrant with respect to all remaining shares. Under this agreement, the
stockholder exercised his right to purchase the 286,258 shares.
RESERVED SHARES
As of December 31, 1996, the Company has reserved shares of common stock for
future issuance as follows:
Stock option plan:
Outstanding options 270,077
Reserved for future grants (see Note 7) 85,809
Convertible preferred stock:
Issued and outstanding 1,510,015
---------
1,865,901
=========
6. INCOME TAXES
The Company uses the liability method to account for income taxes as
required by Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using enacted tax rules and laws that
will be in effect when the differences are expected to reverse.
Significant components of the Company's deferred tax assets and liabilities
for federal and state income taxes as of December 31 are as follows:
1995 1996
--------- -----------
Deferred tax assets:
Net operating loss carryforwards $ 700,000 $ 1,400,000
Capitalized license agreement -- 300,000
Research credit carryforwards -- 100,000
Capitalized research and development -- 100,000
Other, net 100,000 100,000
------- -------
Net deferred tax assets 800,000 2,000,000
Valuation allowance (800,000) (2,000,000)
-------- ----------
Net deferred tax assets $ -- $ --
======== ==========
The net valuation allowance increased by $130,000, $670,000 and $1,200,000
in 1994, 1995 and 1996, respectively.
F-13
JENNER TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
6. INCOME TAXES -- (CONTINUED)
As of December 31, 1995 and 1996, the Company had federal net operating loss
carryforwards of approximately $1,800,000 and $3,700,000, respectively. As of
December 31, 1995 and 1996, the Company also had federal research and
development tax credit carryforwards of approximately $22,000 and $40,000,
respectively. The net operating loss and credit carryforwards will expire at
various dates beginning in 2008 and 2011, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
7. PROPOSED INITIAL PUBLIC OFFERING AND RELATED MATTERS
In January 1997, the Board of Directors authorized the reincorporation of
the Company in the State of Delaware and a one-for-1.7328 reverse stock split of
all outstanding shares of common stock and stock options. The reincorporation is
expected to occur in March 1997. The conversion ratio of all outstanding shares
of convertible preferred stock were adjusted such that each preferred share
converts into 0.577 shares of common stock. All common share and per share data
in the accompanying financial statements has been adjusted retroactively to give
effect to the reverse stock split.
In January 1997, the Board of Directors authorized management of the Company
to file a Registration Statement with the Securities and Exchange Commission
offering shares of its common stock and warrants to the public. If the offering
is consummated under the terms presently anticipated, all of the preferred stock
outstanding will automatically convert into 1,510,015 shares of common stock
upon the closing of the offering. Unaudited pro forma stockholders' equity (Net
Capital deficiency) as of December 31, 1996 as adjusted for the assumed
conversion of the preferred stock is set forth in the accompanying balance
sheet.
In January 1997, the Board of Directors approved the Company's 1997 Stock
Plan (the "1997 Plan") and initially reserved 350,000 shares for issuance
thereunder. The 1997 Plan provides for the grant of incentive stock options and
stock purchase rights to employees and employee directors and nonstatutory stock
options and stock purchase rights to employees, directors and consultants.
F-14
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
----------
TABLE OF CONTENTS
PAGE
Prospectus Summary 3
Risk Factors 7
Use of Proceeds 18
Dividend Policy 18
Capitalization 19
Dilution 20
Selected Financial Data 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 22
Business 24
Management 38
Certain Transactions 44
Principal Stockholders 45
Description of Securities 47
Shares Eligible for Future Sale 50
Underwriting 52
Legal Matters 54
Experts 54
Additional Information 54
Index to Financial Statements F-1
UNTIL _________, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS WHO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================
================================================================================
[LOGO]
JENNER TECHNOLOGIES, INC.
2,500,000 SHARES OF COMMON STOCK
AND
2,500,000 REDEEMABLE COMMON
STOCK PURCHASE WARRANTS
----------
PROSPECTUS
----------
NATIONAL SECURITIES
CORPORATION
, 1997
================================================================================
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Securities being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the American Stock
Exchange application fee.
AMOUNT TO
BE PAID
-------
SEC Registration Fee $ 18,522
NASD Filing Fee 6,612
American Stock Exchange Application Fee 33,000
Blue Sky Qualification Fees and Expenses 15,000
Printing and Engraving Expenses 120,000
Legal Fees and Expenses 250,000
Accounting Fees and Expenses 130,000
Transfer Agent and Registrar Fees 10,000
Miscellaneous 16,866
--------
Total $600,000
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in the terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). The Registrant's Restated
Certificate of Incorporation to be filed upon the closing of the offering to
which this Registration Statement relates (Exhibit 3.3 hereto) and the
Registrant's Bylaws (Exhibit 3.5 hereto) provides for indemnification of the
Registrant's directors, officers, employees and other agents to the extent and
under the circumstances permitted by the Delaware General Corporation Law. The
Registrant also intends to enter into agreements with its directors and
executive officers that will require the Registrant among other things to
indemnify them against certain liabilities that may arise by reason of their
status or service as directors to the fullest extent not prohibited by Delaware
law.
The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant, its directors and officers, and by the Registrant of the
Underwriters, for certain liabilities, including liabilities arising under the
Act, and affords certain rights of contribution with respect thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Since January 1994, the Registrant has sold and issued the
following securities:
1. On January 18, 1994, the Company issued and sold 992,056 shares of
Series A Preferred Stock to a director of the Company upon the exercise of a
warrant originally issued May 7, 1993 at an exercise price of $0.8060 per
share.
2. From April 18, 1994 to January 31, 1997, the Company granted stock
options under the Company's 1993 Incentive Stock Plan to purchase an
aggregate of 355,370 shares of Common Stock to 16 employees and consultants
at exercise prices ranging from $0.14 to $3.00 per share.
3. On April 29, 1994, the Company issued an aggregate of 20,756 shares of
Common Stock to two individuals and one entity at an issuance price of $0.14
per share in connection with a Settlement Agreement dated April 29, 1994.
II-1
4. From June 1, 1994 to March 5, 1996, the Company issued and sold 7,158
shares of Common Stock to a director of the Company upon the exercise of
non-plan stock options at an exercise price of $0.00693 per share.
5. On October 31, 1994, the Company issued and sold 359 shares of Common
Stock to one employee upon the exercise of stock options at an exercise
price of $0.14 per share pursuant to the Company's 1993 Incentive Stock
Plan.
6. From January 1, 1995 to November 30, 1996, the Company issued and sold
7,157 shares of Common Stock to one individual upon the exercise of non-plan
stock options at an exercise price of $0.00693 per share.
7. On July 25, 1995, the Company issued and sold 496,028 shares of Series
B Preferred Stock and a warrant exercisable for 2,146,931 shares of Common
Stock to a director of the Company for an aggregate purchase price of
$600,100.00. On March 18, 1996, the warrant was exercised for 715,649 shares
of Common Stock for an aggregate purchase price of $50,000. On May 6, 1996,
the warrant was exercised for 286,258 shares of Common Stock for an
aggregate purchase price of $20,000, and was then canceled pursuant to a
Warrant Amendment, Exercise and Termination Agreement.
8. On August 8, 1996, the Company issued an aggregate of 692,520 shares
of Common Stock to two directors of the Company in connection with the
acquisition of TherAtid Incorporated by the Company.
9. From October 31, 1996 to December 31, 1996, the Company issued and
sold 1,591 shares of Common Stock to a director of the Company upon the
exercise of stock options at an exercise price of $0.23 per share, pursuant
to the Company's 1993 Incentive Stock Plan.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under such Rule 701. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NO. TITLE
--- -----
1.1 -- Form of Underwriting Agreement.
3.1 -- Amended and Restated Articles of Incorporation as currently in effect.
3.2 -- Form of Restated Certificate of Incorporation to be filed after the
closing of this Offering made under this Registration Statement.
3.3 -- Bylaws of the Registrant as currently in effect.
3.4 -- Form of Bylaws of the Registrant to be effective upon the closing of
this Offering made under this Registration Statement.
4.1* -- Specimen Common Stock Certificate.
4.2* -- Specimen Warrant Certificate.
II-2
EXHIBIT
NO. TITLE
--- -----
4.3* -- Form of Representative's Warrant Agreement between the Registrant and
the Representative, including form of Representative's Warrant.
4.4* -- Form of Warrant Agreement between the Registrant and Continental Stock
Transfer and Trust Company, including form of Warrant.
5.1* -- Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 -- Form of Indemnification Agreement for directors and officers.
10.2 -- 1993 Incentive Stock Plan.
10.3 -- 1997 Incentive Stock Plan and form of agreement thereunder.
10.4 -- Note Purchase Agreement between the Registrant and Hayden Leason
dated May 6, 1996, and Promissory Note issued pursuant thereto.
10.5** -- License Agreement between the Registrant(as successor) and Ciba-Geigy,
Ltd. dated April 4, 1996.
10.6** -- License Agreement between the Registrant and Eli Lilly and Company
dated June 15, 1994.
10.7** -- License Agreement between the Registrant and Research Corporation
Technologies, Inc., dated June 1, 1994.
10.8** -- License Agreement between the Registrant and Walter Reed Army
Institute of Research dated March 29, 1996.
10.9** -- Cooperative Research and Development Agreement between the Registrant
and Walter Reed Army Institute of Research dated September 30, 1993
and revised March 7, 1995.
10.10 -- Employment agreement between the Registrant and Anthony E. Maida, III.
dated November 20, 1994.
10.11 -- Employment Agreement between the Registrant and Dr. Lynn E. Spitler
dated November 20, 1994.
10.12 -- Employment Agreement between the Registrant and Thomas P.H. Twaddell,
M.D. dated January 6, 1997.
10.13 -- First Amended and Restated Investors Rights Agreement dated July 25,
1995.
10.14 -- Lease agreement between the Registrant and Bay Business Centers, Inc.
dated August 13, 1996.
11.1 -- Statement of computation of net loss per share.
23.1 -- Consent of Wilson Sonsini Goodrich & Rosati, P.C. (See Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP, Independent Auditors
25.1 -- Power of Attorney (See page II-5).
27.1 -- Financial Data Schedule.
- ---------
* To be filed by amendment.
** Confidential treatment requested.
(b) Financial Statements
(1) Financial Statements
The financial statements filed as part of this Registration Statement are
listed in the Index to Financial Statements of the Company on Page F-1.
II-3
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
(a) It will provide to the Underwriters at the closing as specified in
the Underwriting Agreement certificates in such denominations and registered
in such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(b) Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(c) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar volume
of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide Offering thereof;
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE ACT, THE REGISTRANT HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF SAN RAMON, STATE OF CALIFORNIA, ON FEBRUARY 14,
1997.
JENNER TECHNOLOGIES, INC.
By: /s/ ANTHONY E. MAIDA, III
-------------------------
ANTHONY E. MAIDA, III,
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, Anthony E. Maida, III and Lynn E. Spitler, M.D.,
and each of them acting individually, as his attorney-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to sign any registration statement for the same offering covered by this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
PURSUANT TO THE REQUIREMENTS OF THE ACT, THIS REGISTRATION STATEMENT HAS
BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANTHONY E. MAIDA, III Chief Executive Officer and Director
- ------------------------------- (Principal Executive Officer) February 14, 1997
ANTHONY E. MAIDA, III
/s/ ANTHONY E. MAIDA, III Chief Financial Officer (Principal
- ------------------------------- Financial and Accounting Officer) February 14, 1997
ANTHONY E. MAIDA, III
/s/ LYNN E. SPITLER President, Chief Scientific
- ------------------------------- Officer and Director February 14, 1997
LYNN E. SPITLER, M.D.
/s/ JACK BOWMAN
- -------------------------------
JACK BOWMAN Director February 14, 1997
/s/ LOWELL M. DICKE
- -------------------------------
LOWELL M. DICKE Director February 14, 1997
/s/ ISAIAH J. FIDLER
- -------------------------------
ISAIAH J. FIDLER, D.V.M., PH.D. Director February 14, 1997
/s/ ROBERT A. FILDES
- -------------------------------
ROBERT A. FILDES, PH.D. Director February 14, 1997
/s/ HERBERT GROSSMAN
- -------------------------------
HERBERT GROSSMAN Director February 14, 1997
/s/ HAYDEN LEASON
- -------------------------------
HAYDEN LEASON Director February 14, 1997
II-5