As filed with the Securities and Exchange Commission on November 25, 1996
Registration No. 33-71798
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
POST-EFFECTIVE
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
DURA PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3645543
(State or other juris- (I.R.S. Employer
diction of incorpo- Identification No.)
ration or organization)
5880 Pacific Center Blvd., San Diego, California 92121
(619) 457-2553
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Mitchell R. Woodbury
VICE PRESIDENT AND GENERAL COUNSEL
DURA PHARMACEUTICALS, INC.
5880 Pacific Center Blvd., San Diego, California 92121
(619) 457-2553
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
----------------------
Copies to:
Craig S. Andrews, Esq.
Faye H. Russell, Esq.
John R. Cook, Esq.
BROBECK, PHLEGER & HARRISON
550 West C Street, Suite 1300
San Diego, California 92101
----------------------
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box: /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
----------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
3,640,000 SHARES
DURA PHARMACEUTICALS, INC.
COMMON STOCK
(NO PAR VALUE)
--------------
This Prospectus relates to the public offering, which is not being
underwritten, of 3,640,000 shares of Common Stock, no par value, of Dura
Pharmaceuticals, Inc. ("Dura" or the "Company"). All 3,640,000 shares (the
"Shares") may be offered by certain shareholders of the Company ("Selling
Shareholders") who will receive such Shares upon exercise of Series W Warrants
of the Company ("Series W Warrant") originally issued by Dura in connection with
a private placement on September 27, 1993. The Series W Warrants were issued
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act") provided by Section 4(2) thereof.
The Shares are being registered by the Company pursuant to a registration rights
agreement with the Selling Shareholders. See "Selling Shareholders." The
number of shares that may be offered by the Selling Shareholders reflects the
2-for-1 stock split in the form of a 100% stock dividend of the Company's Common
Stock that was distributed on July 1, 1996 to shareholders of record on June 17,
1996. As of the date of this prospectus, a total of 1,980,000 Shares have been
sold by the Selling Shareholders.
The sale of the Shares may be effected by the Selling Shareholders from
time to time in transactions in the over-the-counter market, in negotiated
transactions or a combination of such methods of sale, at fixed prices which may
be changed, at market prices prevailing at the time of sale, at prices related
to prevailing market prices or at negotiated prices. The Selling Shareholders
may effect such transactions by selling the Shares to or through broker-dealers,
and such broker-dealers may receive compensation in the form of discounts,
concession or commission from the Selling Shareholders and/or the purchasers of
the Shares for whom such broker-dealers may act as agents or to whom they may
sell as principals or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). See "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed, among
other things, to bear certain expenses (other than underwriting discounts and
commission and brokerage commissions and fees) in connection with the
registration and sale of the Shares being offered by the Selling Shareholders.
See "Selling Shareholders."
Dura Common Stock is traded on the Nasdaq National Market System under the
symbol "DURA." On November 21, 1996, the last sale price of Dura Common Stock
as reported on the Nasdaq National Market was $32 per share.
The Selling Shareholders and any broker-dealers, agents or underwriters
that participate with the Selling Shareholders in the distribution of Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
--------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
--------------
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.
--------------
The date of this Prospectus is November 22, 1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING SHAREHOLDER OR BY ANY OTHER PERSON. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES TO ANY PERSON OR BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE
MADE.
--------------
ENTEX-Registered Trademark- is a trademark of the Company. The Company
claims common law trademark rights to Spiros-TM- and Healthco HomeRx-TM-. This
Prospectus also includes names and trademarks of companies other than the
Company.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files annual and quarterly reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected at the
Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Commission's regional offices at
7 World Trade Center, 13th Floor, New York, New York 10048; and Northwest Atrium
Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511.
Copies of such materials can also be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, the Commission maintains a World Wide Web
site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The Common Stock is traded on the Nasdaq
National Market, and copies of such materials can also be inspected at the
offices of the National Association of Securities Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
(1) The Annual Report of the Company on Form 10-K for the fiscal year
ended December 31, 1995, as amended;
(2) The Current Report of the Company on Form 8-K filed on January 9,
1996, as amended;
(3) The Quarterly Report of the Company on Form 10-Q for the quarter ended
March 31, 1996;
(4) The Quarterly Report of the Company on Form 10-Q for the quarter ended
June 30, 1996;
(5) The Current Report of the Company on Form 8-K filed on July 3, 1996;
(6) The Current Report of the Company on Form 8-K filed on September 5,
1996;
(7) The Quarterly Report of the Company on Form 10-Q for the quarter ended
September 30, 1996; and
(8) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed on January 21, 1992.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such
-2-
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such document). Requests for such documents
should be submitted in writing to Mitchell R. Woodbury, Vice President and
General Counsel, at Dura Pharmaceuticals, Inc., 5880 Pacific Center Boulevard,
San Diego, California 92121 or by telephone at (619) 457-2553.
THE COMPANY
Dura Pharmaceuticals, Inc. ("Dura" or the "Company") is a specialty
respiratory pharmaceutical and pulmonary drug delivery company. The Company is
engaged in marketing prescription products to physicians in the U.S. who treat
patients suffering from asthma, hay fever, chronic obstructive pulmonary
disease, the common cold and related respiratory ailments (the "U.S. Respiratory
Market"). Dura has strategically focused on the U.S. Respiratory Market because
of its size (approximately $4.8 billion in sales in 1995) and growth
opportunities. Additionally, the fragmented nature of the market and the
identifiable base of physician prescribers allow the Company to achieve
significant market penetration with a specialized sales force. The Company
currently markets 30 prescription products, including 26 which are off-patent.
The Company also has a separate mail service pharmacy which dispenses
respiratory pharmaceuticals, Health Script Pharmacy Services, Inc. ("Health
Script").
Dura employs a dual marketing strategy utilizing its focused field sales
force of approximately 150 people and a dedicated managed care sales and
marketing group that covers managed care organizations and retail pharmacy
chains. Dura's field sales force targets a physician base which includes
approximately 60,000 U.S. allergists, ear, nose and throat physicians ("ENTs"),
pulmonologists and a selected subset of pediatricians and generalist physicians,
who the Company believes collectively write approximately 70% of respiratory
pharmaceutical prescriptions. Dura believes that its field sales force calls on
approximately one-half of the target physician base. The Company's managed care
sales and marketing group concentrates on sales to large regional and national
managed care organizations. The Company expects to continue expanding both the
field sales force and the managed care sales and marketing group as warranted by
market opportunities. During 1995, in addition to building its existing
business of dispensing respiratory pharmaceuticals through home healthcare
providers, Health Script launched a new program under the name "Healthco HomeRx"
in which the Dura field sales force provides information concerning the services
of Health Script to Dura's targeted physician base.
This marketing strategy has allowed Dura to leverage its distribution
capabilities by acquiring the rights to market additional prescription
pharmaceutical products through acquisition, in-license or co-promotion
arrangements. Since 1992, the Company has acquired 21 products targeted at the
U.S. Respiratory Market. In July 1996, the Company acquired from Procter &
Gamble Pharmaceuticals, Inc. ("P&G") worldwide rights to the Entex products,
consisting of four prescription upper respiratory drugs. In September 1996, the
Company acquired from Eli Lilly and Company ("Lilly") U.S. marketing rights to
the antibiotics Keftab and Ceclor CD. The Company began marketing Keftab in
September 1996, and launched Ceclor CD in late October 1996.
The Company is developing or has contracted for the development of four
currently-marketed respiratory prescription pharmaceuticals. Three of these
products are being developed by Elan Corporation, plc ("Elan") as part of its
collaborative relationship with the Company and utilize Elan's drug delivery
expertise and proprietary technologies. The fourth product is being developed
internally.
Another key component of Dura's strategy is to develop the Spiros pulmonary
drug delivery system ("Spiros"). Spiros is being designed to aerosolize
pharmaceuticals in dry powder formulations for delivery to the lungs while
providing certain advantages over other currently-used methods of pulmonary drug
delivery.
-3-
The Company has a three-level development program for Spiros which entails
(i) developing, on behalf of Spiros Development Corporation ("Spiros Corp."),
certain drug applications for use in Spiros, including in the near-term
albuterol, beclomethasone and ipratropium, three of the most
frequently-prescribed pharmaceutical agents to treat respiratory conditions,
and, in the longer term, certain proteins and peptides, (ii) licensing Spiros
primarily to pharmaceutical companies, including Mitsubishi Chemical Corporation
and Fujisawa Pharmaceutical Co., Ltd., generally for use with certain of their
proprietary respiratory products, and (iii) developing Spiros, in collaboration
with third parties, for the systemic delivery of compounds through the lungs for
respiratory and non-respiratory indications as an alternative to current
invasive delivery techniques. The Company has licensed certain rights to Spiros
Corp. to continue a significant portion of the development program for Spiros,
including funding of ongoing and future clinical trials of albuterol and
beclomethasone in a cassette version of Spiros, and formulation, preclinical
development and clinical trials of albuterol, beclomethasone and ipratropium in
a blisterdisk version of Spiros. The Company has the right to purchase all of
the currently outstanding shares of callable common stock of Spiros Corp.
through December 31, 1999 at predetermined prices (the "Purchase Option").
In April 1996, Dura completed dosing of subjects in a clinical trial in the
U.S. on behalf of Spiros Corp. focusing on dose selection using a formulation of
powdered albuterol with Spiros under an Investigational New Drug ("IND")
application filed with the United States Food and Drug Administration ("FDA").
In July 1996, the Company commenced long-term and short-term clinical trials
which, along with earlier studies, are intended to serve as the basis for the
filing of a New Drug Application ("NDA") by Dura in 1997 seeking FDA approval,
on behalf of Spiros Corp., to market albuterol in the Spiros cassette system.
The Company is also preparing an IND application for U.S. studies on
beclomethasone in the Spiros cassette system which will be filed on behalf of
Spiros Corp. In addition, Dura, on behalf of Spiros Corp., has performed powder
formulation work with the peptide drug salmon calcitonin which in a pilot
clinical trial demonstrated the ability to develop macromolecule aerosol powder
formulation which achieved systemic delivery using the Spiros technology.
The Company was incorporated under the laws of California in 1981. The
Company's principal executive offices are located at 5880 Pacific Center
Boulevard, San Diego, California 92121. Its telephone number is (619) 457-2553.
RECENT DEVELOPMENTS
In July 1996, the Company acquired the Entex line consisting of four
prescription upper respiratory drugs from P&G. In September 1996, the Company
acquired the U.S. rights to the cephalosporin antibiotics Keftab and Ceclor CD
from Lilly. The U.S. antibiotic market was $4.8 billion in 1995, of which $1.6
billion was accounted for by cephalosporin antibiotics. The Company believes
that this acquisition complements its existing strategy since approximately 70%
of antibiotics are prescribed for respiratory infections. Keftab is an
antibiotic indicated for respiratory tract, skin and soft tissue infections.
Ceclor CD is a twice-a-day dosage form of cefaclor typically taken for seven
days. Ceclor, Lilly's currently marketed cefaclor, is normally taken three
times a day for 10 days, and generated $161.0 million in sales in the U.S. for
the 12 months ended June 30, 1996. The Company launched Ceclor CD in late
October 1996. The Company believes these product acquisitions further its
strategy of acquiring prescription pharmaceuticals which are marketed by its
sales force to its targeted physicians. To support the introduction and growth
of these products, the Company intends to increase its field sales force from
approximately 150 people currently to approximately 250 people by mid-1997.
The Company recently reported revenues and net income of $63.3 million and
$14.5 million, respectively, for the nine months ended September 30, 1996,
compared to $35.7 million and $4.4 million, respectively, for the comparable
period of 1995. Increased revenues and net income were primarily the result of
increased sales of newly-acquired products, higher revenues at Health Script and
increased contract revenues.
-4-
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
REDUCTION IN GROSS MARGINS. There is no proprietary protection for most of
the products sold by the Company and substitutes for such products are sold by
other pharmaceutical companies. The Company expects average selling prices for
many of its products to decline over time due to competitive and reimbursement
pressures. While the Company will seek to mitigate the effect of this decline
in average selling prices, there can be no assurance that the Company will be
successful in these efforts.
THIRD-PARTY REIMBURSEMENT; PRICING PRESSURES. The Company's commercial
success will depend in part on the availability of adequate reimbursement from
third-party health care payors, such as government and private health insurers
and managed care organizations. Third-party payors are increasingly challenging
the pricing of medical products and services. There can be no assurance that
reimbursement will be available to enable the Company to achieve market
acceptance of its products or to maintain price levels sufficient to realize an
appropriate return on the Company's investment in product acquisition,
in-licensing and development. The market for the Company's products may be
limited by actions of third-party payors. For example, many managed health care
organizations are now controlling the pharmaceuticals that are on their
formulary lists. The resulting competition among pharmaceutical companies to
place their products on these formulary lists has created a trend of downward
pricing pressure in the industry. In addition, many managed care organizations
are pursuing various ways to reduce pharmaceutical costs and are considering
formulary contracts primarily with those pharmaceutical companies that can offer
a full line of products for a given therapy sector or disease state. There can
be no assurance that the Company's products will be included on the formulary
lists of managed care organizations or that downward pricing pressure in the
industry generally will not negatively impact the Company's operations.
Further, a number of legislative and regulatory proposals aimed at changing the
health care system have been proposed. While the Company cannot predict whether
any such proposals will be adopted or the effect such proposals may have on its
business, the pending nature of such proposals, as well as the adoption of any
proposal, is likely to exacerbate industry-wide pricing pressures and could have
a material adverse effect on the Company.
DEPENDENCE ON ACQUISITION OF RIGHTS TO PHARMACEUTICAL PRODUCTS. The
Company's strategy for growth is dependent, in part, upon acquiring,
in-licensing and co-promoting pharmaceuticals targeted primarily at allergists,
ENTs, pulmonologists and a selected subset of pediatricians and generalist
physicians. Other companies, including those with substantially greater
resources, are competing with the Company for the rights to such products.
There can be no assurance that the Company will be able to acquire, in-license
or co-promote additional pharmaceuticals on acceptable terms, if at all. The
failure of the Company to acquire, in-license, co-promote, develop or market
commercially successful pharmaceuticals would have a material adverse effect on
the Company. Furthermore, there can be no assurance that the Company, once it
has obtained rights to a pharmaceutical product and committed to payment terms,
will be able to generate sales sufficient to create a profit or otherwise avoid
a loss.
DEVELOPMENT RISKS ASSOCIATED WITH SPIROS. Spiros will require significant
additional development. In addition, regulatory approvals for each drug to be
delivered through the use of Spiros will have to be obtained prior to
commercialization. There can be no assurance that development of Spiros will be
completed successfully, that Spiros will not encounter problems in clinical
trials that will cause the delay or suspension of such trials, that current or
future testing will show Spiros to be safe or efficacious or that Spiros will
receive regulatory approval. Moreover, even if Spiros does receive regulatory
approval, there can be no assurance that Spiros will be commercially successful,
have all of the patent and other protections necessary to prevent competitors
from producing similar products and not infringe on patent or other proprietary
rights of third parties. The failure of Spiros to receive timely regulatory
approval and achieve commercial success would have a material adverse effect on
the Company.
-5-
RISKS ASSOCIATED WITH RECENT ACQUISITIONS. In September 1996, the Company
acquired from Lilly exclusive U.S. rights to market and distribute Keftab and
Ceclor CD and entered into a manufacturing agreement with Lilly which terminates
in certain circumstances. Any interruption in the supply of Keftab or Ceclor CD
from Lilly due to regulatory or other causes could result in the inability of
the Company to meet demand and could have a material adverse impact on the
Company.
Both Keftab and Ceclor CD are antibiotics, and the Company has limited or
no experience in marketing such products. There can be no assurance that the
Company will be able to successfully market and distribute Keftab or that Keftab
will continue to be accepted by the market at the levels previously achieved by
Lilly or at a level sufficient to maintain growth of the product. In addition,
Ceclor CD has not previously been marketed to physicians, and no assurance can
be given that the Company will be successful in introducing this product or will
be able to successfully compete with currently available products. Furthermore,
the Company will need to significantly expand its existing sales force to
address the antibiotic market, and no assurance can be given that such expansion
can be successfully completed in a timely manner, if at all. Failure to
successfully market and sell Keftab and Ceclor CD would have a material adverse
effect on the Company's business, financial condition and results of operations.
CUSTOMER CONCENTRATION; CONSOLIDATION OF DISTRIBUTION NETWORK. The
distribution network for pharmaceutical products has in recent years been
subject to increasing consolidation. As a result, a few large wholesale
distributors control a significant share of the market. In addition, the number
of independent drug stores and small chains has decreased as retail
consolidation has occurred. Further consolidation among, or any financial
difficulties of, distributors or retailers could result in the combination or
elimination of warehouses thereby stimulating product returns to the Company.
Further consolidation or financial difficulties could also cause customers to
reduce their inventory levels, or otherwise reduce purchases of the Company's
products which could result in a material adverse effect on the Company's
business, financial condition or results of operations.
Dura's customers include McKesson Drug Company, Bergen Brunswig Drug
Company, Cardinal Health Inc., Bindley Western Drug Company and major drug store
chains. During the first nine months of 1996, two customers individually
accounted for 15% and 11% of sales. Two customers individually accounted for
16% and 11% of 1995 sales, three customers individually accounted for 21%, 14%
and 12% of 1994 sales and two customers individually accounted for 19% and 14%
of 1993 sales. The loss of any of these customer accounts could have a material
adverse effect upon the Company's business, financial condition or results of
operations.
SEASONALITY AND FLUCTUATING QUARTERLY RESULTS. Historically, as a result
of the winter cold and flu season, industry-wide demand for respiratory products
has been stronger in the first and fourth quarters than during the second and
third quarters of the year. In addition, variations in the timing and severity
of the winter cold and flu season have influenced the Company's results of
operations in the past. While the growth and productivity of the Company's
sales force and the introduction by the Company of new products have
historically mitigated the impact of seasonality on the Company's results of
operations, recent product acquisitions by the Company are likely to increase
the impact of seasonality on the Company's results of operations. No assurances
can be given that the Company's results of operations will not be materially
adversely affected by the seasonality of product sales.
COMPETITION. Many companies, including large pharmaceutical firms with
financial and marketing resources and development capabilities substantially
greater than those of Dura, are engaged in developing, marketing and selling
products that compete with those offered by the Company. The selling prices of
such products typically decline as competition increases. Further, other
products now in use or under development by others may be more effective than
Dura's current or future products. The industry is characterized by rapid
technological change, and competitors may develop their products more rapidly
than Dura. Competitors may also be able to complete the regulatory process
sooner, and therefore, may begin to market their products in advance of Dura's
products. Dura believes that competition among both prescription
pharmaceuticals and pulmonary delivery systems aimed at the asthma and allergy,
cough and cold markets will be based on, among other things, product efficacy,
safety, reliability, availability and price.
-6-
Dura directly competes with at least 25 other companies in the U.S. which
are currently engaged in developing, marketing and selling respiratory
pharmaceuticals. Additionally, there are at least 10 companies currently
involved in the development, marketing or sales of dry powder pulmonary drug
delivery systems. There are two types of dry powder inhalers ("DPIs") currently
in commercial use worldwide. In the U.S., only individual dose DPIs are
marketed, including the Rotohaler (developed and marketed by Glaxo Wellcome,
Inc.) and the Spinhaler (developed and marketed by Fisons Limited). The
Turbuhaler (developed and marketed by Astra Pharmaceuticals), a multiple dose
DPI and the leading DPI in worldwide sales, is considered the current industry
standard. It is not yet marketed in the U.S., although the FDA has issued an
approvable letter for the first Turbuhaler product.
DEPENDENCE ON THIRD PARTIES; LIMITED MANUFACTURING EXPERIENCE. The
Company's strategy for development and commercialization of certain of its
products is dependent upon entering into various arrangements with corporate
partners, licensors and others and upon the subsequent success of these
partners, licensors and others in performing their obligations. There can be no
assurance that the Company will be able to negotiate acceptable arrangements in
the future or that such arrangements, or its existing arrangements, will be
successful. In addition, partners, licensors and others may pursue alternative
technologies or develop alternative compounds or drug delivery systems either on
their own or in collaboration with others, including the Company's competitors.
The Company has limited experience manufacturing products for commercial
purposes and currently does not have the capability to manufacture its
pharmaceutical products and therefore is dependent on contract manufacturers for
the production of such products for development and commercial purposes. The
manufacture of the Company's products is subject to current Good Manufacturing
Practice ("cGMP") regulations prescribed by the FDA. The Company relies on a
single manufacturer for each of its products. In the event that the Company is
unable to obtain or retain third-party manufacturing, it may not be able to
commercialize its products as planned. There can be no assurance that the
Company will be able to continue to obtain adequate supplies of such products in
a timely fashion at acceptable quality and prices. Also, there can be no
assurance that the Company will be able to enter into agreements for the
manufacture of future products with manufacturers whose facilities and
procedures must comply with cGMP and other regulatory requirements. The
Company's current dependence upon others for the manufacture of its products may
adversely affect future profit margins, if any, on the sale of those products
and the Company's ability to develop and deliver products on a timely and
competitive basis.
In June 1995, the Company completed construction of its manufacturing
facility located in a Company-owned building adjacent to its headquarters. The
Company is currently expanding its facilities to provide additional
manufacturing capabilities. The facility initially is intended to be used to
formulate, mill, blend and manufacture drugs to be used with Spiros, pending
regulatory approval. Equipment purchases and validation are currently scheduled
through 1997. The Company's manufacturing facility must be registered with and
licensed by various regulatory authorities and comply with cGMP requirements
prescribed by the FDA and the State of California. Any failure or significant
delay in the validation of or obtaining a satisfactory regulatory inspection of
the new facility could have a material adverse effect on the Company's ability
to manufacture products in connection with Spiros.
MANAGING GROWTH OF BUSINESS. The Company has recently experienced
significant growth as total revenues increased 80% in fiscal 1994, 58% in fiscal
1995 and 77% in the first nine months of 1996 as compared to prior periods.
During fiscal 1995, the Company executed three agreements relating to the
acquisition, in-licensing and co-promotion of products and acquired Health
Script. During 1996, the Company commenced a co-promotion of Uni-Dur and
executed agreements relating to the acquisition of the Entex, Ceclor CD and
Keftab products. Due to the Company's emphasis on acquiring and in-licensing
respiratory pharmaceutical products, the Company anticipates that the
integration of the recently-acquired businesses and products, as well as any
future acquisitions, will require significant management attention and expansion
of its sales force. The Company's ability to achieve and maintain profitability
is based on management's ability to manage its changing business effectively.
See "-- Attraction and Retention of Key Personnel."
-7-
UNCERTAINTY OF PROFITABILITY; NEED FOR ADDITIONAL FUNDS. The Company has
experienced significant operating losses in the past and at September 30, 1996,
the Company's accumulated deficit was approximately $88.8 million. Although the
Company achieved profitability on an annual basis in fiscal 1994 and 1995 (prior
to the charge of approximately $43.8 million in the fourth quarter of 1995 in
connection with the exercise of its option to purchase all of the outstanding
stock of Dura Delivery Systems, Inc. ("DDSI") and its cash contribution to
Spiros Corp.), there can be no assurance that revenue growth or profitability
will continue on a quarterly or annual basis in the future. The acquisition and
in-licensing of products, the expansion of the Company's sales force in response
to acquisition and in-licensing of products, the maintenance of the Company's
existing sales force, the upgrade and expansion of its facilities, continued
pricing pressure and the potential exercise of the Purchase Option or the
Albuterol Purchase Option (as defined below), as well as funds that Dura, at its
option, may provide for Spiros development, both internally and through Spiros
Corp., will require the commitment of substantial capital resources and may also
result in significant losses. Depending upon, among other things, the
acquisition and in-licensing opportunities available to it, the Company may need
to raise additional funds for these purposes. The Company may seek such
additional funding through public and private financings, including equity
financings. Adequate funds for these purposes, whether through financial
markets or from other sources, may not be available when needed or on terms
acceptable to the Company. Insufficient funds may require the Company to delay,
scale back or prevent some or all of its product acquisition and in-licensing
programs, the upgrade and expansion of its facilities, the potential exercise of
the Purchase Option and/or the Albuterol Purchase Option and further development
of Spiros. The Company anticipates that its existing capital resources,
together with cash expected to be generated from operations and available bank
borrowings, should be sufficient to finance its current operations and working
capital requirements through at least November 1997.
POTENTIAL EXERCISE OF PURCHASE OPTIONS FOR SPIROS CORP. CALLABLE COMMON
STOCK AND ALBUTEROL PRODUCT; DILUTION. The Company has a contractual
relationship with Spiros Corp. relating to the development of Spiros, pursuant
to which certain rights to Spiros were transferred by the Company and DDSI to
Spiros Corp. Dura has a Purchase Option with respect to all of the currently
outstanding shares of callable common stock of Spiros Corp. If Dura exercises
the Purchase Option, it will be required to make a substantial cash payment or
to issue shares of Common Stock, or both. A payment in cash would reduce Dura's
capital resources. A payment in shares of Common Stock would result in a
decrease in the percentage ownership of Dura's shareholders at that time. The
exercise of the Purchase Option will likely require Dura to record a significant
charge to earnings and may adversely impact future operating results. If Dura
does not exercise the Purchase Option prior to its expiration, the Company's
rights in and to Spiros with respect to certain compounds will be terminated.
Dura also has the option to provide funding for Spiros development in certain
circumstances. Dura believes that the current funds of Spiros Corp. will be
sufficient to fund product development by Spiros Corp. through the first half of
1998. Development of Spiros Corp. products may require significant additional
funds.
As part of the Company's contractual relationship with Spiros Corp., the
Company received an option to purchase certain rights to an albuterol product in
a cassette version of Spiros (the "Albuterol Purchase Option") exercisable at
any time through the earlier of 60 days after FDA approval of such albuterol
product or December 31, 1999. If the Company exercises the Albuterol Purchase
Option, it will be required to make a cash payment of at least $15.0 million
which could have an adverse effect on its capital resources. The Company may not
have sufficient capital resources to exercise the Albuterol Purchase Option
which may result in the Company's loss of valuable rights. In addition,
continuation of development and commercialization of an albuterol product in a
cassette version of Spiros may require substantial additional expenditures by
Dura. As of the date of this Prospectus, Dura has no plans to provide
additional funding to Spiros Corp. and has not made any determination as to the
likelihood of its exercise of the Purchase Option or the Albuterol Purchase
Option.
GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL. Development, testing,
manufacturing and marketing of the Company's products are subject to extensive
regulation by numerous governmental authorities in the U.S. and other countries.
The process of obtaining FDA approval of pharmaceutical products and drug
delivery systems is costly and time-consuming. Any new pharmaceutical must
undergo rigorous preclinical and clinical testing and an extensive regulatory
approval process mandated by the FDA. Marketing of drug delivery systems also
requires FDA approval, which can be costly and time-consuming to obtain. The
Company will need
-8-
to obtain regulatory approval for each drug to be delivered through the use
of Spiros. There can be no assurance that the pharmaceutical products
currently in development, or those products acquired or in-licensed by the
Company, will be approved by the FDA. In addition, there can be no assurance
that all necessary clearances will be granted to the Company or its licensors
for future products or that FDA review or actions will not involve delays
adversely affecting the marketing and sale of the Company's products. For
both currently marketed and future products, failure to comply with
applicable regulatory requirements can, among other things, result in the
suspension of regulatory approval, as well as possible civil and criminal
sanctions. In addition, changes in regulations could have a material adverse
effect on the Company.
The FDA is continuing an evaluation of the effectiveness of all drug
products containing ingredients marketed prior to 1962 (the year of enactment of
the "Drug Amendments of 1962" to the Federal Food, Drug, and Cosmetic Act) as
part of its Drug Efficacy Study Implementation program and will determine which
drugs are considered "new drugs" requiring approval through a New Drug
Application ("NDA") for marketing. A policy guide issued by the FDA indicates
that the FDA will implement procedures to determine whether the new drug
provisions are applicable to existing products. If a final determination is
made that a particular drug requires an approved NDA, such approval will be
required for marketing to continue. If such a determination is made, the FDA
might impose various requirements; for example, it might require that the
current product be the subject of an approved NDA, that the product be
reformulated and an NDA approval be obtained, that the product must be sold on
an over-the-counter basis rather than as a prescription drug or that the product
must be removed from the market. There can be no assurance as to which of these
courses the FDA will require, if any, with respect to most of the Company's
pharmaceutical products or whether the Company will be able to obtain any
approvals that the FDA may deem necessary. If any of these actions are taken by
the FDA, such actions could have a material adverse effect on the Company's
business. In addition, the Company's Tornalate Metered Dose Inhaler uses
chlorofluorocarbon ("CFC") propellants. If CFCs are banned for use in the
Tornalate Metered Dose Inhaler, then the Company will not be able to market that
product for sale, which could have a material adverse effect on the Company.
Health Script is subject to regulation by state regulatory authorities,
principally state boards of pharmacy. In addition, Health Script is subject to
regulation by other state and federal agencies with respect to reimbursement for
prescription drug benefits provided to individuals covered primarily by
publicly-funded programs.
PATENTS AND PROPRIETARY RIGHTS. The Company's success will depend in part
on its ability to obtain patents on current or future products or formulations,
defend its patents, maintain trade secrets and operate without infringing upon
the proprietary rights of others, both in the U.S. and abroad. However, only
four of the pharmaceuticals currently marketed by the Company are covered by
patents. The Company also has licenses or license rights to certain other U.S.
and foreign patent and patent applications. There can be no assurance that
patents, U.S. or foreign, will be obtained, or that, if issued or licensed to
the Company, they will be enforceable or will provide substantial protection
from competition or be of commercial benefit to the Company or that the Company
will possess the financial resources necessary to enforce or defend any of its
patent rights. Federal court decisions establishing legal standards for
determining the validity and scope of patents in the field are in transition.
For example, in a currently pending case, the U.S. Supreme Court will consider
whether to alter or replace the traditional standard for determining patent
infringement under the doctrine of equivalents. There can be no assurance that
the historical legal standards surrounding questions of validity and scope will
continue to be applied or that current defenses as to issued patents in the
field will offer protection in the future. The commercial success of the
Company will also depend upon avoiding the infringement of patents issued to
competitors and upon maintaining the technology licenses upon which certain of
the Company's current products are, or any future products under development
might be, based. Litigation, which could result in substantial cost to the
Company, may be necessary to enforce the Company's patent and license rights or
to determine the scope and validity of the proprietary rights of third parties.
If any of the Company's products are found to infringe upon patents or other
rights owned by third parties, the Company could be required to obtain a license
to continue to manufacture or market such products. There can be no assurance
that licenses to such patent rights would be made available to the Company on
commercially reasonable terms, if at all. If the Company does not obtain such
licenses, it could encounter delays in marketing affected products while it
attempts to design around such patents or it could find that the development,
manufacture or sale of products requiring such licenses are
-9-
not possible. The Company currently has certain licenses from third parties
and in the future may require additional licenses from other parties to
develop, manufacture and market commercially viable products effectively.
There can be no assurance that such licenses will be obtainable on
commercially reasonable terms, if at all, or that the patents underlying such
licenses will be valid and enforceable.
PRODUCT LIABILITY AND RECALL. The Company faces an inherent business risk
of exposure to product liability claims in the event that the use of its
technologies or products is alleged to have resulted in adverse effects. Such
risks will exist even with respect to those products that receive regulatory
approval for commercial sale. While the Company has taken, and will continue to
take, what it believes are appropriate precautions, there can be no assurance
that it will avoid significant product liability exposure. The Company
currently has product liability insurance; however, there can be no assurance
that the level or breadth of any insurance coverage will be sufficient to fully
cover potential claims. There can be no assurance that adequate insurance
coverage will be available in the future at acceptable costs, if at all, or that
a product liability claim or recall would not materially and adversely affect
the business or financial condition of the Company.
ATTRACTION AND RETENTION OF KEY PERSONNEL. The Company is highly dependent
on the principal members of its management staff, the loss of whose services
might impede the achievement of development objectives. Although the Company
believes that it is adequately staffed in key positions and that it will be
successful in retaining skilled and experienced management, operational and
scientific personnel, there can be no assurance that the Company will be able to
attract and retain such personnel on acceptable terms. The loss of the services
of key scientific, technical and management personnel could have a material
adverse effect on the Company, especially in light of the Company's recent
significant growth. The Company does not maintain key-person life insurance on
any of its employees.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of shares
of the Company's Common Stock in the public market following this offering could
adversely affect the market price of the Common Stock. As of November 18,
1996, there were approximately 42.8 million shares of Common Stock outstanding.
Of those shares, approximately 41.9 million, in addition to the Shares, will be
immediately eligible for resale in the public market without restriction.
VOLATILITY OF THE COMPANY STOCK PRICE. The market prices for securities of
emerging companies, including the Company, have historically been highly
volatile. Future announcements concerning the Company or its competitors may
have a significant impact on the market price of the Common Stock. Such
announcements might include financial results, the results of testing,
technological innovations, new commercial products, changes to government
regulations, government decisions on commercialization of products, developments
concerning proprietary rights, litigation or public concern as to safety of the
Company's products.
ABSENCE OF DIVIDENDS. The Company has never paid any cash dividends on its
Common Stock. In accordance with certain bank loan agreements, the Company is
restricted from paying cash dividends without prior bank approval. The Company
currently anticipates that it will retain all available funds for use in its
business and does not expect to pay any cash dividends in the foreseeable
future.
CHANGE IN CONTROL. Certain provisions of the Company's charter documents
(including cumulative voting provisions for electing directors, provisions
providing for two classes of directors serving staggered two-year terms and
provisions permitting the Company to issue preferred stock in the future) and
terms relating to the acceleration of the exercisability of certain warrants and
options relating to the purchase of such securities by the Company in the event
of a change in control may have the effect of delaying, deferring or preventing
a change in control of the Company, thereby possibly depriving shareholders of
receiving a premium for their shares of the Common Stock.
FORWARD-LOOKING STATEMENTS. Prospective investors are cautioned that the
statements in this Prospectus that are not descriptions of historical facts may
be forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors,
-10-
including those identified under "Risk Factors" and elsewhere in this
Prospectus or documents incorporated by reference herein.
SELLING SHAREHOLDERS
Except as otherwise indicated, the following table sets forth certain
information regarding the beneficial ownership of the Company's Common Stock as
of October 25, 1996 (assuming the exercise of the Series W Warrants) by each
Selling Shareholder. Except as otherwise indicated in this Prospectus, none of
the Selling Shareholders has had a material relationship with the Company within
the past three years other than as a result of the ownership of the Shares or
other securities of the Company. The numbers set forth in the column "Number of
Shares Being Offered" below constitute all of the Shares that each Selling
Shareholder may distribute in the offering; however, there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the Shares and the table below assumes the sale of all Shares held by each
Selling Shareholder. The Shares are being registered to permit public secondary
trading of the Shares, and the Selling Shareholders may offer the Shares for
resale from time to time. As of the date of this Prospectus, a total of
1,980,000 shares of Common Stock issued upon exercise of Series W Warrants have
been sold by the Selling Shareholders. See "Plan of Distribution."
The Shares being offered by the Selling Shareholders will be received by
such Selling Shareholders upon exercise of the Series W Warrants. The Series W
Warrants were originally issued by the Company in a private placement
transaction pursuant to a Purchase Agreement dated as of September 27, 1993 (the
"Agreement"). The Company, in conjunction with DDSI, sold 1,300,000 Units at a
purchase price of $10.00 per Unit. Each Unit consisted of one share of DDSI
Callable Common Stock, one Series W Warrant and one Callable Warrant. Each
Series W Warrant was originally exercisable for 1.4 shares of Dura Common Stock
at an exercise price of $4.75 per share. As a result of the 2-for-1 stock split
in the form of a 100% dividend declared by the Company's Board of Directors
effective July 1, 1996, each Series W Warrant is now exercisable for 2.8 shares
of Dura Common Stock at the exercise price of $2.38 per share. All of the
Callable Warrants were cancelled as part of all of the Company's purchase of the
outstanding Callable Common Stock of DDSI.
Certain original Selling Shareholders have subsequently transferred their
Series W Warrants in a series of private transactions and the transferees are
included among the Selling Shareholders. Each transferee represented that it
was acquiring the Series W Warrants (and the Shares issuable upon exercise
thereof) without a view to any public resale or distribution of the Series W
Warrants or any such Shares. The Shares will be issuable by the Company upon
exercise of the Series W Warrants and payment by each Selling Shareholder of the
exercise price.
In that certain Investors' Rights Agreement dated as of September 27, 1993,
the Company has agreed, among other things, to bear certain expenses (other than
underwriting discounts and commission and brokerage commissions and fees) in
connection with the registration and sale of the Shares being offered by the
Selling Shareholders. The Company also agreed to file with the Commission a
Registration Statement on Form S-3, of which this Prospectus forms a part, with
respect to the resale of the Shares from time to time at prevailing prices in
the over-the-counter market or in privately-negotiated transactions and agreed
to prepare and file such amendments and supplements to the Registration
Statement as may be necessary to keep the Registration Statement effective until
all Shares offered hereby have been sold pursuant thereto or until such Shares
are no longer, by reason of Rule 144 under the Securities Act or any other rule
of similar effect, required to be registered for the sale thereof by the Selling
Shareholders.
-11-
Shares Beneficially Number of Shares Beneficially
Owned Shares Being Owned
Names and Addresses Prior to Offering(1)(2) Offered After Offering(2)
- ---------------------------------------------------------------- ----------------------- ------------ -------------------
Number Percent Number Percent
-------- --------- -------- ---------
Biotechnology Investments Limited (3). . . . . . . . . . . . . . 685,360 1.8% 140,000 545,360 1.4%
Box 242 Sausmarez Street
St. Peter Port
Guernsey, Channel Islands
J.P. Morgan & Co., Inc., for its affiliates (4). . . . . . . . . 872,000 2.3% 672,000 200,000 *
60 Wall Street
New York, New York 10260
New Enterprise Associates V, Limited Partnership (5) . . . . . . 198,920 * 140,000 58,920 *
1119 St. Paul Street
Baltimore, Maryland 21202
Weiss Peck & Greer, L.L.C. (6) . . . . . . . . . . . . . . . . . 448,500 1.2% 140,000 308,500 *
One New York Plaza, 30th Floor
New York, New York 10004-1950
Cove Investments Limited Partnership (7) . . . . . . . . . . . . 53,792 * 44,992 8,800 *
308 Dorla Court
Zephyr Cove, Nevada 89448
Glenbrook Partners, L.P (8). . . . . . . . . . . . . . . . . . . 7,334 * 6,134 1,200 *
308 Dorla Court
Zephyr Cove, Nevada 89448
- -----------------------------
* Less than 1%.
1/ Unless otherwise indicated, (i) the persons named in the table have
sole voting and sole investment power with respect to all shares
beneficially owned and (ii) includes shares issuable upon exercise
of Series W Warrants.
2/ Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
Does not include shares of Dura Common Stock issuable upon exercise
of Series S Warrants, which are not exercisable until the earlier of
December 27, 1997 or the Acceleration Date (as defined in the Series S
Warrants).
3/ Includes 545,360 shares beneficially owned by Biotechnology
Investments Limited.
4/ Includes the following shares held by J.P. Morgan Securities Inc. as
of November 18, 1996: (a) 672,000 shares issuable upon exercise of a
Series W Warrant and (b) 200,000 shares issuable upon exercise of a
warrant to purchase shares at $6.48 per share which expires on
September 21, 1999.
5/ Includes 58,920 shares beneficially owned by New Enterprise Associates.
6/ Includes (a) 198,500 shares held by Weiss, Peck & Greer, a Delaware
limited liability company ("WPG"), (b) 50,000 shares and 56,000 shares
issuable upon exercise of a Series W Warrant held by WPG Institutional
Life Sciences Fund L.P., and (c) 60,000 shares and 84,000 shares
issuable upon exercise of a Series W Warrant held by WPG Life Sciences
Fund L.P. WPG Life Sciences Fund L.P. and WPG Institutional Life
Sciences Fund L.P. are limited partnerships, the general partner of
which is WPG. WPG disclaims beneficial ownership of the above-described
shares.
7/ Includes 8,800 shares beneficially owned by Cove Investments.
8/ Includes 1,200 shares beneficially owned by Glenbrook Partners.
-12-
ISSUANCE OF SHARES
The Shares are issuable upon the exercise of the Series W Warrants. To
date, the Company has received a total of $4,655,000 upon the exercise of
Series W Warrants. As of the date of this Prospectus, the aggregate proceeds
that the Company could receive upon the exercise of the Series W Warrants
that remain outstanding are $2,720,640. The Company intends to use any such
proceeds for general corporate purposes, including working capital.
PLAN OF DISTRIBUTION
The Shares offered hereby are being offered directly by the Selling
Shareholders. The Company will receive no proceeds from the sale of any of
the Shares. However, the Company will receive the exercise price payable
upon exercise of the Series W Warrants. See "Issuance of Shares." The sale
of the Shares may be effected by the Selling Shareholders from time to time
in transactions in the over-the-counter market, in negotiated transactions or
a combination of such methods of sale, at fixed prices which may be changed,
at market prices prevailing at the time of sale, at prices related to
prevailing market prices or at negotiated prices. The Selling Shareholders
may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form
of discounts, concession or commission from the Selling Shareholders and/or
the purchasers of the Shares for whom such broker-dealers may act as agents
or to whom they may sell as principals or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
At the time a particular offer of Shares is made, to the extent required, a
supplemental Prospectus will be distributed which will set forth the number of
shares being offered and the terms of the offering including the name or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for the Shares purchased from the Selling Shareholders, any
discounts, commissions and other items constituting compensation from the
Selling Shareholders and any discounts, concessions or commissions allowed or
reallowed or paid to dealers.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and complied with.
The Selling Shareholders and any broker-dealers, agents or underwriters
that participate with the Selling Shareholders in the distribution of Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities, including
liabilities under the Securities Act, as underwriters or otherwise.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Common Stock of the Company for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Shareholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Shareholders.
-13-
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California.
EXPERTS
The financial statements of the Company incorporated in this Prospectus
by reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended, and the financial statements of DDSI
incorporated in this Prospectus by reference from the Company's Current
Report on Form 8-K filed on January 9, 1996, as amended, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports,
which are incorporated herein by reference, and have been so incorporated in
reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
-14-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various costs and expenses to be paid by
the Company with respect to the sale and distribution of the securities being
registered. All of the amounts shown are estimates except the Securities and
Exchange Commission registration.
SEC Registration Fee. . . . . . . . . . $ 3,753
Legal Fees and Expenses*. . . . . . . . 10,000
Accounting Fees and Expenses* . . . . . 6,000
Printing and Engraving Expenses*. . . . 1,200
Miscellaneous*. . . . . . . . . . . . . $ 2,047
-------
Total. . . . . . . . . . . . . . . $23,000
-------
-------
- --------------------------
*Estimated
Item 15. Indemnification of Directors and Officers.
(a) Section 317 of the California General Corporation Law provides for the
indemnification to officers and directors of the Company and the Subsidiary
against expenses, judgments, fines and amounts paid in settlement under certain
conditions and subject to certain limitations.
(b) Article VI of the Bylaws of the Company provides that the Company shall
have power to indemnify any person who is or was an agent of the Company as
provided in Section 317 of the California General Corporation Law. The Bylaws
also provide that such indemnification is not exclusive of any additional rights
to indemnification such person may have pursuant to contract, vote of
shareholders or disinterested directors or otherwise. The rights to indemnity
thereunder continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director or
officer in defending a civil or criminal action, suit or proceeding by reason of
the fact that he or she is or was a director or officer of the Company (or was
serving at the Company's request as a director or officer of another
corporation) shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Company as
authorized by the relevant section of the California General Corporation Law.
(c) Article IV of the Company's Sixth Restated Articles of Incorporation
provides that the liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Accordingly, a director will not be liable for monetary damages for breach of
duty to the Company or its shareholders in any action brought by or in the right
of the Company. However, a director remains liable to the extent required by law
(i) for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) for acts or omissions that a director believes
to be contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders, (v) for
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Company or its
shareholders, (vi) for any act or omission occurring prior to the date when the
exculpation provision became
II-1
effective and (vii) for any act or omission as an officer, notwithstanding
that the officer is also a director or that his or her actions, if negligent
or improper, have been ratified by the directors. The effect of the
provisions in the Sixth Restated Articles of Incorporation is to eliminate
the rights of the Company and its shareholders (through shareholders'
derivative suits on behalf of the Company) to recover monetary damages
against a director for breach of duty as a director, including breaches
resulting from negligent behavior in the context of transactions involving a
change of control of the Company or otherwise, except in the situations
described in clauses (i) through (vii) above. These provisions will not
alter the liability of directors under federal securities laws.
(d) Pursuant to authorization provided under the Sixth Restated Articles of
Incorporation, the Company has entered into indemnification agreements with each
of its present and certain of its former directors. The Company has also entered
into similar agreements with certain of the Company's executive officers who are
not directors. Generally, the indemnification agreements attempt to provide the
maximum protection permitted by California law as it may be amended from time to
time. Moreover, the indemnification agreements provide for certain additional
indemnification. Under such additional indemnification provisions, however, an
individual will not receive indemnification for judgments, settlements or
expenses if he or she is found liable to the Company (except to the extent the
court determines he or she is fairly and reasonably entitled to indemnity for
expenses), for settlements not approved by the Company or for settlements and
expenses if the settlement is not approved by the court. The indemnification
agreements provide for the Company to advance to the individual any and all
reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding. In order to
receive an advance of expenses, the individual must submit to the Company copies
of invoices presented to him or her for such expenses. Also, the individual
must repay such advances upon a final judicial decision that he or she is not
entitled to indemnification. The Company's Bylaws contain a provision of
similar effect relating to advancement of expenses to a director or officer,
subject to an undertaking to repay if it is ultimately determined that
indemnification is unavailable.
(e) There is directors and officers liability insurance now in effect which
insures directors and officers of the Company.
ITEM 16. EXHIBITS
(a) EXHIBITS
+5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche, LLP.
+23.2 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
+99.1 Form of Series W Warrant.
+99.2 Investors' Rights Agreement dated September 27, 1993 between
the Company and the Selling Shareholders.
- -----------------------------
+ Incorporated by reference to the same numbered exhibit filed with
the original Registration Statement No. 33-71798 on
November 17, 1993.
II-2
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(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 the
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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of Regulation S-X at the state of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by
Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial
statements and information are contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the Prospectus, to deliver, or
cause to be delivered to each person to whom the Prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the Prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, Delaware Corporation law, the
Underwriting Agreement or otherwise, the Registrant has been advised that in the
opinion
II-3
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefor, 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
hereunder, the Registrant will, unless in the opinion of its counsel the
question has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 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.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Diego, State of California, on the 22nd day
of November, 1996.
DURA PHARMACEUTICALS, INC.
By /s/ Cam L. Garner
-------------------------------------
Cam L. Garner, Chairman, President
and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Cam L. Garner Chairman, President and November 22, 1996
- ------------------------- Chief Executive Officer
(Cam L. Garner) (Principal Executive Officer)
/s/ James W. Newman Senior Vice President, Finance November 22, 1996
- ------------------------- and Administration, and
(James W. Newman) Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ David S. Kabakoff Executive Vice President and November 22, 1996
- ------------------------- Director
(David S. Kabakoff)
* Senior Vice President, Sales November 22, 1996
- ------------------------- and Marketing, and Director
(Walter F. Spath)
* Director November 22, 1996
- -------------------------
(James C. Blair)
Director November __, 1996
- -------------------------
(Herbert J. Conrad)
Director November __, 1996
- -------------------------
(Joseph C. Cook, Jr.)
* Director November 22, 1996
- -------------------------
(David F. Hale)
* Director November 22, 1996
- -------------------------
(Gordon V. Ramseier)
* Director November 22, 1996
- -------------------------
(Charles G. Smith)
* /s/ Cam L. Garner November 22, 1996
-----------------------
Cam L. Garner,
Attorney-in-Fact
II-4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
POST-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-3
UNDER
SECURITIES ACT OF 1933
DURA PHARMACEUTICALS, INC.
EXHIBIT INDEX
Exhibit
Number Exhibit
- ------- -------
+ 5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Deloitte & Touche, LLP.
+23.2 Consent of Brobeck, Phleger & Harrison LLP (to be included in
Exhibit 5.1).
+24.1 Power of Attorney (see pages II-5 and II-6).
+99.1 Form of Series W Warrant.
+99.2 Investors' Rights Agreement dated September 27, 1993 between the
Company and the Selling Shareholders.
- -----------------------------
+ Incorporated by reference to the same numbered exhibit filed with the
original Registration Statement No. 33-71798 on November 17, 1993.