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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 2001
REGISTRATION NO. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LEXICON GENETICS INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0474169
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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4000 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
(281) 364-0100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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ARTHUR T. SANDS, M.D., PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
4000 RESEARCH FOREST DRIVE
THE WOODLANDS, TEXAS 77381
(281) 364-0100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
DAVID P. OELMAN JEFFREY L. WADE
VINSON & ELKINS L.L.P. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
1001 FANNIN, 2300 FIRST CITY TOWER LEXICON GENETICS INCORPORATED
HOUSTON, TEXAS 77002-6760 4000 RESEARCH FOREST DRIVE
(713) 758-3708 THE WOODLANDS, TEXAS 77381
(281) 364-0100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, 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, 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
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER SHARE (1) OFFERING PRICE (1) REGISTRATION
FEE
Common Stock, par value $0.001............. 3,527,991 shares $8.925 $31,487,319 $7,872
(1) Estimated solely for the purpose of calculating the amount of the
registration fee based on the high and low trading price for the common
stock on August 6, 2001, in accordance with Rule 457(c) under the
Securities Act.
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 10, 2001
3,527,991 SHARES
[LEXICON LOGO]
LEXICON GENETICS INCORPORATED
COMMON STOCK
------------------
This prospectus relates to the resale of previously issued shares of
our common stock by selling stockholders. The selling stockholders are offering
up to 3,527,991 shares of our common stock.
We will not receive any proceeds from the sale of the shares offered by
the selling stockholders.
The selling stockholders may offer the shares from time to time through
public or private transactions at prevailing market prices, at prices related to
prevailing market prices or at privately negotiated prices.
Our common stock is listed on The Nasdaq National Market under the
symbol "LEXG". The last reported sale price on August ___, 2001 was $___ per
share.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2001.
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TABLE OF CONTENTS
PAGE
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Lexicon Genetics Incorporated.................................................................. 3
Risk Factors................................................................................... 4
Special Note Regarding Forward-Looking Statements.............................................. 13
Use of Proceeds................................................................................ 13
Selling Stockholders........................................................................... 13
Plan of Distribution .......................................................................... 16
Legal Matters ................................................................................. 18
Experts ...................................................................................... 18
Where You Can Find More Information............................................................ 18
Documents Incorporated by Reference............................................................ 19
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR
TO WHICH WE HAVE REFERRED YOU. NEITHER WE NOR THE SELLING STOCKHOLDERS HAVE
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.
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In this prospectus, "Lexicon," "we," "us" and "our" refer to Lexicon
Genetics Incorporated.
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The Lexicon name and logo and OmniBank(R) are registered trademarks and
LexVision(TM) and e-Biology(TM) are trademarks of Lexicon Genetics
Incorporated.
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LEXICON GENETICS INCORPORATED
Lexicon Genetics Incorporated is a drug discovery company of the
post-genome era, using gene knockout technology to define the functions of genes
for the discovery of pharmaceutical products. We are using this technology to
expand our LexVision program and fuel drug discovery programs in cancer,
cardiovascular disease, immune disorders, neurological disease, diabetes and
obesity. We have established drug discovery alliances and functional genomics
collaborations with leading pharmaceutical and biotechnology companies, research
institutions and academic institutions throughout the world to commercialize our
technology and further develop our discoveries.
We generate our gene function discoveries using knockout mice - mice
whose DNA has been altered to disrupt, or "knock out," the function of the
altered gene. Our patented gene trapping and gene targeting technologies enable
us to rapidly generate these knockout mice by altering the DNA of genes in a
special variety of mouse cells, called embryonic stem (ES) cells, which can be
cloned and used to generate mice with the altered gene. We employ an integrated
platform of advanced medical technologies to systematically discover the
functions and potential pharmaceutical uses of the genes we have knocked out. We
believe that our LexVision database, which captures and catalogues the
information resulting from this analysis, and our OmniBank library of more than
150,000 knockout mouse clones provide us and our collaborators significant
opportunities to discover and develop pharmaceutical products based on genomics
- - the study of genes and their function.
In July 2001, we acquired Coelacanth Corporation, a company that uses
proprietary chemistry technologies to rapidly discover new chemical entities for
drug development. Coelacanth forms the core of our new Lexicon Pharmaceuticals
division, combining our novel, functionally defined targets from the human
genome with high performance chemistry technologies to discover new drugs. We
believe the combination of our industrialized in vivo gene function discovery
platform with Coelacanth's established chemistry capability will place us in a
superior position to form drug discovery alliances.
Lexicon Genetics was incorporated in Delaware in July 1995, and
commenced operations in September 1995. Our corporate headquarters are located
at 4000 Research Forest Drive, The Woodlands, Texas 77381, and our telephone
number is (281) 364-0100. Our corporate website is located at
www.lexicon-genetics.com. Information found on our website should not be
considered part of this prospectus.
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RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. If any of the
following risks actually occurs, we may not be able to conduct our business as
currently planned and our financial condition and operating results could be
seriously harmed. In addition, the trading price of our common stock could
decline due to the occurrence of any of these risks, and you may lose all or
part of your investment. See "Special Note Regarding Forward-Looking
Statements."
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF NET LOSSES, AND WE EXPECT TO CONTINUE TO INCUR NET LOSSES
AND MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY
We have incurred net losses since our inception, including net losses
of approximately $26.0 million for the year ended December 31, 2000 and $17.9
million for the six months ended June 30, 2001. As of June 30, 2001, we had an
accumulated deficit of approximately $72.8 million. We are unsure when we will
become profitable, if ever. The size of our net losses will depend, in part, on
the rate of growth, if any, in our revenues and on the level of our expenses.
We derive substantially all of our revenues from subscriptions to our
databases, functional genomics collaborations for the development and, in some
cases, analysis of knockout mice, and technology licenses, and will continue to
do so for the foreseeable future. Revenues from database subscriptions,
collaborations and licenses are uncertain because our existing agreements have
fixed terms or relate to specific projects of limited duration. Our ability to
secure future agreements will depend upon our ability to address the needs of
our potential future subscribers and collaborators.
A large portion of our expenses are fixed, including expenses related
to facilities, equipment and personnel. In addition, we expect to spend
significant amounts to fund research and development and to enhance our core
technologies. As a result, we expect that our operating expenses will increase
significantly in the near term and, consequently, we will need to generate
significant additional revenues to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis.
OUR QUARTERLY OPERATING RESULTS HAVE BEEN AND LIKELY WILL CONTINUE TO FLUCTUATE,
AND WE BELIEVE THAT QUARTER-TO-QUARTER COMPARISONS OF OUR OPERATING RESULTS ARE
NOT A GOOD INDICATION OF OUR FUTURE PERFORMANCE
Our quarterly operating results have fluctuated in the past and are
likely to do so in the future. In addition to the risks and uncertainties
described in this section, some of the factors that could cause our operating
results to fluctuate include:
- our ability to establish new database subscriptions or research
contracts with collaborators and new technology licenses, and the
timing of such arrangements;
- the expiration or other termination of database subscriptions or
research contracts with our collaborators or technology licenses,
which may not be renewed or replaced;
- the success rate of our discovery efforts leading to milestone
payments and royalties;
- the timing and willingness of our collaborators to commercialize
pharmaceutical products which would result in milestone payments and
royalties; and
- general and industry-specific economic conditions, which may affect
our and our collaborators' research and development expenditures.
Due to the likelihood of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in
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some quarters may not meet the expectations of stock market analysts and
investors. In that case, our stock price would probably decline.
WE ARE AN EARLY-STAGE COMPANY WITH AN UNPROVEN BUSINESS STRATEGY
Our business strategy of using our gene sequence databases and knockout
mice to select promising candidates for drug target development and
commercializing our discoveries through collaborations and alliances is
unproven. Our success will depend upon our ability to enter into additional
collaboration and alliance agreements on favorable terms, determine which genes
have potential value and select an appropriate commercialization strategy for
each potential product we or our collaborators choose to pursue.
Biotechnology and pharmaceutical companies have successfully developed
and commercialized only a limited number of gene-based pharmaceutical products
to date. We have not proven our ability to identify gene-based drugs or drug
targets with commercial potential, or to develop or commercialize drugs or drug
targets that we do identify. It is difficult to successfully select those genes
with the most potential for commercial development, and we do not know that any
pharmaceutical products based on genes that we discover can be successfully
commercialized. In addition, we may experience unforeseen technical
complications in the processes we use to generate our gene sequence database and
functional genomics resources. These complications could materially delay or
limit the use of those databases and resources, substantially increase the
anticipated cost of generating them or prevent us from implementing our
processes at appropriate quality and throughput levels.
WE FACE SUBSTANTIAL COMPETITION IN THE DISCOVERY OF THE DNA SEQUENCES OF GENES
AND THEIR FUNCTIONS AND IN OUR DRUG DISCOVERY AND PRODUCT DEVELOPMENT EFFORTS
There are a finite number of genes in the human genome, and we believe
that the majority of such genes have been identified by us or others conducting
genomic research and that virtually all will be identified within the next few
years. We face significant competition in our efforts to discover and patent the
sequence and other information derived from such genes from entities using
alternative, and in some cases higher volume and larger scale, approaches for
the same purpose.
We also face competition from entities using more traditional methods
to discover genes related to particular diseases. Many of these entities have
substantially greater financial, scientific and human resources than we do. A
large number of universities and other not-for-profit institutions, many of
which are funded by the U.S. and foreign governments, are also conducting
research to discover genes. A substantial portion of this research has been
conducted under the international Human Genome Project, a multi-billion dollar
program funded by the U.S. government and The Wellcome Trust. One or more of
these entities may discover and establish a patent position in one or more of
the genes that we wish to study or use in the development of a pharmaceutical
product.
We face significant competition in our drug discovery and product
development efforts from entities using traditional knockout mouse technology
and other functional genomics technologies, as well as from those using other
traditional drug discovery techniques. These competitors may develop products
earlier than we do, obtain regulatory approvals faster than we can and develop
products that are more effective than ours. Our ability to use our patent rights
to prevent competition in the creation and use of knockout mice is more limited
outside of the United States. Competitors could discover and establish patents
in genes or gene products that we or our collaborators identify as a drug target
or therapeutic protein. Numerous companies, academic institutions and government
consortia are engaged in efforts to determine the function of genes and gene
products. Furthermore, other methods for conducting functional genomics research
may ultimately prove superior, in some or all respects, to the use of knockout
mice. In addition, technologies more advanced than or superior to our gene
trapping technology may be developed, thereby rendering our gene trapping
technology obsolete.
WE RELY HEAVILY ON COLLABORATORS TO DEVELOP AND COMMERCIALIZE PHARMACEUTICAL
PRODUCTS BASED ON GENES THAT WE IDENTIFY AS PROMISING CANDIDATES FOR DEVELOPMENT
AS DRUG TARGETS
Since we do not currently possess the resources necessary to develop,
obtain approvals for or commercialize potential pharmaceutical products based on
genes contained in our databases or genes that we identify as promising
candidates for development as drug targets or therapeutic proteins, we must
enter into
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collaborative arrangements to develop and commercialize these products. We will
have limited or no control over the resources that any collaborator may devote
to this effort. Any of our present or future collaborators may not perform their
obligations as expected. These collaborators may breach or terminate their
agreements with us or otherwise fail to conduct product discovery, development
or commercialization activities successfully or in a timely manner. Further, our
collaborators may elect not to develop pharmaceutical products arising out of
our collaborative arrangements or may not devote sufficient resources to the
development, approval, manufacture, marketing or sale of these products. If any
of these events occurs, we may not be able to develop or commercialize potential
pharmaceutical products.
Some of our agreements provide us with rights to participate in the
commercial development of compounds or therapeutic approaches derived from our
collaborations or access to our databases, technology or intellectual property.
We may not be able to obtain such rights in future collaborations or agreements.
Our ability to obtain such rights depends in part on the validity of our
intellectual property, the advantages and novelty of our technologies and
databases and our negotiating position relative to each potential collaborator
or customer. Previous attempts by others in the industry to obtain these rights
with respect to the development of knockout mice and related technologies have
generated considerable controversy, especially in the academic community.
ANY CANCELLATION BY OR CONFLICTS WITH OUR COLLABORATORS COULD HARM OUR BUSINESS
Our collaboration agreements may not be renewed and may be terminated
in the event either party fails to fulfill its obligations under these
agreements. Any failure to renew or cancellation by a collaborator could mean a
significant loss of revenues and volatility in our earnings.
In addition, we may pursue opportunities in fields that could conflict
with those of our collaborators. Moreover, disagreements could arise with our
collaborators over rights to our intellectual property or our rights to share in
any of the future revenues of compounds or therapeutic approaches developed by
our collaborators. These kinds of disagreements could result in costly and
time-consuming litigation. Any conflict with our collaborators could reduce our
ability to obtain future collaboration agreements and could have a negative
impact on our relationship with existing collaborators, adversely affecting our
business and revenues. Some of our collaborators could also become competitors
in the future. Our collaborators could develop competing products, preclude us
from entering into collaborations with their competitors or terminate their
agreements with us prematurely. Any of these developments could harm our product
development efforts.
WE HAVE NO EXPERIENCE IN DEVELOPING AND COMMERCIALIZING PHARMACEUTICAL PRODUCTS
ON OUR OWN
Our ability to develop and commercialize pharmaceutical products on our
own will depend on our ability to internally develop preclinical, clinical,
regulatory and sales and marketing capabilities, or enter into arrangements with
third parties to provide those functions. We may not be successful in developing
these capabilities or entering into agreements with third parties on favorable
terms, or at all. Further, our reliance upon third parties for these
capabilities could reduce our control over such activities and could make us
dependent upon these parties. Our inability to develop or contract for these
capabilities would significantly impair our ability to develop and commercialize
pharmaceutical products.
WE MAY ENGAGE IN FUTURE ACQUISITIONS, WHICH MAY BE EXPENSIVE AND TIME CONSUMING
AND FROM WHICH WE MAY NOT REALIZE ANTICIPATED BENEFITS
We may acquire additional businesses, technologies and products, if we
determine that these businesses, technologies and products complement our
existing technology or otherwise serve our strategic goals. We currently have no
commitments or agreements with respect to any acquisitions. If we do undertake
any transactions of this sort, the process of integrating an acquired business,
technology or product may result in operating difficulties and expenditures and
may absorb significant management attention that would otherwise be available
for ongoing development of our business. Moreover, we may never realize the
anticipated benefits of any acquisition. Future acquisitions could result in
potentially dilutive issuances of our equity securities, the incurrence of debt
and contingent liabilities and amortization expenses related to goodwill and
other intangible assets, which could adversely affect our results of operations
and financial condition.
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IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, WE MAY BE UNABLE TO PURSUE COLLABORATIONS OR DEVELOP OUR OWN PRODUCTS
We are highly dependent on Arthur T. Sands, M.D., Ph.D., our president
and chief executive officer, as well as other principal members of our
management and scientific staff. The loss of any of these personnel would have a
material adverse effect on our business, financial condition or results of
operations and could inhibit our product development and commercialization
efforts. Although we have entered into employment agreements with some of our
key personnel, including Dr. Sands, these employment agreements are for a
limited period of time and not all key personnel have employment agreements.
Recruiting and retaining qualified scientific personnel to perform
future research and development work will be critical to our success.
Competition for experienced scientists is high. Failure to recruit and retain
scientific personnel on acceptable terms could prevent us from achieving our
business objectives.
WE MAY ENCOUNTER DIFFICULTIES IN MANAGING OUR GROWTH, WHICH COULD INCREASE OUR
LOSSES
We have experienced a period of rapid growth that has placed and, if
this growth continues, will continue to place a strain on our human and capital
resources. If we are unable to manage our growth effectively, our losses could
increase. The number of our employees increased from 57 at December 31, 1997 to
93 at December 31, 1998, 122 at December 31, 1999, 287 at December 31, 2000 and
371 at June 30, 2001. We intend to increase the number of our employees
significantly during the remainder of 2001. Our ability to manage our operations
and growth effectively requires us to continue to expend funds to improve our
operational, financial and management controls, reporting systems and
procedures. If we are unable to successfully implement improvements to our
management information and control systems in an efficient or timely manner, or
if we encounter deficiencies in existing systems and controls, our management
may not have adequate information to manage our day-to-day operations.
BECAUSE OUR ENTIRE OMNIBANK MOUSE CLONE LIBRARY IS LOCATED AT A SINGLE FACILITY,
THE OCCURRENCE OF A DISASTER COULD SIGNIFICANTLY DISRUPT OUR BUSINESS
Our OmniBank mouse clone library and its back-up are stored in liquid
nitrogen freezers located at our facility in The Woodlands, Texas. If a disaster
such as a fire, flood, hurricane, tornado or similar event significantly damages
or destroys the facility in which our mouse clone library and back-up are
stored, our business could be disrupted until we could regenerate the library
and, as a result, our stock price could decline. Our business interruption
insurance may not be sufficient to compensate us in the event of a major
interruption due to such a disaster.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND, IF IT IS NOT AVAILABLE, WE
WILL HAVE TO CURTAIL OR CEASE OPERATIONS
Our future capital requirements will be substantial and will depend on
many factors, including our ability to obtain database subscription and
collaboration agreements and government grants, the amount and timing of
payments under such agreements and grants, the level and timing of our research
and development expenditures, market acceptance of our products, the resources
we devote to developing and supporting our products and other factors. Our
capital requirements will also be affected by any expenditures we make in
connection with license agreements and acquisitions of and investments in
complementary technologies and businesses.
We anticipate that our existing capital resources will enable us to
maintain our currently planned operations for at least the next several years.
However, changes may occur that would consume available capital resources
significantly sooner than we expect. If our capital resources are insufficient
to meet future capital requirements, we will have to raise additional funds to
continue the development of our technologies and complete the commercialization
of products, if any, resulting from our technologies. We may be unable to raise
sufficient additional capital; if so, we will have to curtail or cease
operations.
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RISKS RELATED TO OUR INDUSTRY
OUR ABILITY TO PATENT OUR DISCOVERIES IS UNCERTAIN BECAUSE PATENT LAWS AND THEIR
INTERPRETATION ARE HIGHLY UNCERTAIN AND SUBJECT TO CHANGE
The patent positions of biotechnology firms generally are highly
uncertain and involve complex legal and factual questions that will determine
who has the right to develop a particular product. No clear policy has emerged
regarding the breadth of claims covered in biotechnology patents. The
biotechnology patent situation outside the United States is even more uncertain
and is currently undergoing review and revision in many countries. Changes in,
or different interpretations of, patent laws in the United States and other
countries might allow others to use our discoveries or to develop and
commercialize our products without any compensation to us. We anticipate that
these uncertainties will continue for a significant period of time.
OUR PATENT APPLICATIONS MAY NOT RESULT IN ENFORCEABLE PATENT RIGHTS
Our disclosures in our patent applications may not be sufficient to
meet the statutory requirements for patentability. Additionally, our current
patent applications cover many genes and we expect to file patent applications
in the future covering many more genes. As a result, we cannot predict which of
our patent applications will result in the granting of patents or the timing of
the granting of our patents. Our ability to obtain patent protection based on
genes or partial gene sequences will depend, in part, upon identification of a
function for the gene or gene sequences sufficient to meet the statutory
requirement that an invention have utility and that a patent application
describe the invention with sufficient specificity. While the U.S. Patent and
Trademark Office has issued guidelines for the examination of patent
applications claiming gene sequences, their therapeutic uses and novel proteins
coded by such genes, the impact of these guidelines is uncertain and may delay
or negatively impact our patent position. Biologic data in addition to that
obtained by our current technologies may be required for issuance of patents or
human therapeutics. If required, obtaining such biologic data could delay, add
substantial costs to, or affect our ability to obtain patent protection. There
can be no assurance that the disclosures in our current or future patent
applications, including those we may file with our collaborators, will be
sufficient to meet these requirements. Alternatively, if the level of biologic
or other experimental data required to obtain a patent is determined to be
minimal, then other companies who emphasize determining the gene sequence
without significant biologic function information will obtain a prior and
superior patent position to us and our collaborators. Even if patents are
issued, there may be current or future uncertainty as to the scope of the
coverage or protection provided by any such patents. In addition, the Human
Genome Project, as well as many companies and institutions, have identified
genes and deposited partial gene sequences in public databases and are
continuing to do so. These public disclosures might limit the scope of our
claims or make unpatentable subsequent patent applications on full-length genes.
Other companies or institutions have filed and will file patent
applications that attempt to patent genes or gene sequences that may be similar
to our patent applications. The U.S. Patent and Trademark Office could decide
competing patent claims in an interference proceeding. Any such proceeding would
be costly, and we may not prevail. In addition, patent applications filed by
third parties may have priority over patent applications we file. In this event,
the prevailing party may require us or our collaborators to stop pursuing a
potential product or to negotiate a license arrangement to pursue the potential
product. We may not be able to obtain a license from the prevailing party on
acceptable terms, or at all.
Some court decisions indicate that disclosure of a partial sequence may
not be sufficient to support the patentability of a full-length sequence. These
decisions have been confirmed by recent pronouncements of the U.S. Patent and
Trademark Office. We believe that these court decisions and the uncertain
position of the U.S. Patent and Trademark Office present a significant risk that
the U.S. Patent and Trademark Office will not issue patents based on patent
disclosures limited to partial gene sequences, like those represented in our
human gene trap database. In addition, we are uncertain about the scope of the
coverage, enforceability and commercial protection provided by any patents
issued on the basis of partial gene sequences.
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IF OTHER COMPANIES AND INSTITUTIONS OBTAIN PATENTS CLAIMING THE FUNCTIONAL USES
OF GENES AND GENE PRODUCTS BASED UPON GENE SEQUENCE INFORMATION AND PREDICTIONS
OF GENE FUNCTION, WE MAY BE UNABLE TO OBTAIN PATENTS FOR OUR DISCOVERIES OF
BIOLOGICAL FUNCTIONS IN KNOCKOUT MICE
We intend to pursue patent protection covering the novel uses and
functions of new and known genes and proteins in mammalian physiology and
disease states. While an actual description of the biological function of a gene
or protein should enhance a patent position, we cannot assure you that such
information will increase the probability of issuance of any patents. Further,
many other entities are currently filing patents on genes which are identical or
similar to our filings. Many such applications seek to protect partial human
gene sequences, full-length gene sequences and the deduced protein products
encoded by the sequences while others use biological or other laboratory data.
Some of these applications attempt to assign biologic function to the DNA
sequences based on computer predictions. There is the significant possibility
that patents claiming the functional uses of genes and gene products will be
issued to our competitors based on such information.
WE ARE PRESENTLY INVOLVED IN PATENT LITIGATION AND MAY BE INVOLVED IN FUTURE
PATENT LITIGATION AND OTHER DISPUTES REGARDING INTELLECTUAL PROPERTY RIGHTS, AND
CAN GIVE NO ASSURANCES THAT WE WILL PREVAIL IN ANY SUCH LITIGATION OR OTHER
DISPUTE
Our potential products and those of our collaborators may give rise to
claims that they infringe the patents of others. This risk will increase as the
biotechnology industry expands and as other companies obtain more patents and
attempt to discover genes through the use of high-speed sequencers. In addition,
many companies have well-established patent portfolios directed to common
techniques, methods and means of developing, producing and manufacturing
pharmaceutical products. Other companies or institutions could bring legal
actions against us or our collaborators for damages or to stop us or our
collaborators from manufacturing and marketing the affected products. If any of
these actions are successful, in addition to our potential liability for
damages, these entities may require us or our collaborators to obtain a license
in order to continue to manufacture or market the affected products or may force
us to terminate manufacturing or marketing efforts.
We may need to pursue litigation against others to enforce our patents
and intellectual property rights. Patent litigation is expensive and requires
substantial amounts of management attention. In addition, the eventual outcome
of any such litigation is uncertain.
On May 24, 2000, we filed a complaint against Deltagen, Inc. in U.S.
District Court for the District of Delaware alleging that Deltagen is willfully
infringing the claims of United States Patent No. 5,789,215, under which we hold
an exclusive license from GenPharm International, Inc. This patent covers
methods of engineering the animal genome, including methods for the production
of knockout mice by homologous recombination, using isogenic DNA technology. In
the complaint, we are seeking unspecified damages from Deltagen, as well as
injunctive relief. Deltagen has counterclaimed for a declaratory judgment that
the patent is invalid and unenforceable and is not infringed by Deltagen. On
November 14, 2000, Deltagen filed an amended counterclaim alleging antitrust
claims against us and GenPharm, for which Deltagen is seeking unspecified
damages.
On October 13, 2000, we filed a second complaint against Deltagen, Inc.
in U.S. District Court for the Northern District of California alleging that
Deltagen is willfully infringing the claims of United States Patents Nos.
5,464,764, 5,487,992, 5,627,059, and 5,631,153, under which also we hold
exclusive licenses from GenPharm International. These patents cover methods and
vectors for using positive-negative selection for producing gene targeted, or
"knockout," cells and animals, including the production of knockout mice by
homologous recombination. In the complaint, we are seeking unspecified damages
from Deltagen, as well as injunctive relief. Deltagen has counterclaimed for a
declaratory judgment that the patents are invalid and unenforceable and are not
infringed by Deltagen.
While we believe that our complaints against Deltagen are meritorious
and that Deltagen's counterclaims against us are without merit, we can provide
no assurance that we will prevail in our litigation against Deltagen or that, if
we prevail, any damages or equitable remedies awarded will be commercially
valuable. If Deltagen prevails in declaring our patents invalid or on its
antitrust claim against us, our business and financial position could be
adversely affected. Furthermore, we are likely to incur substantial costs and
expend substantial personnel time in pursuing our litigation against Deltagen.
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We believe that there will continue to be significant litigation in our
industry regarding patent and other intellectual property rights. We and many of
our competitors have and are continuing to expend significant amounts of time,
money and management resources on intellectual property litigation. If we become
involved in additional litigation, it could consume a substantial portion of our
resources and could negatively affect our results of operations.
Patent litigation involves substantial risks. Each time we sue for
patent infringement we face the risk that the patent will be held invalid or
unenforceable. Such a determination is binding on us for all future litigation
involving that patent. Furthermore, in light of recent U.S. Supreme Court
precedent, our ability to enforce our patents against state agencies, including
state sponsored universities and research labs is limited by the Eleventh
Amendment to the U.S. Constitution. Finally, opposition by academicians and the
government may hamper our ability to enforce our patent against academic or
government research laboratories. Enforcement of our patents may cause our
reputation in the academic community to be injured.
ISSUED PATENTS MAY NOT FULLY PROTECT OUR DISCOVERIES, AND OUR COMPETITORS MAY BE
ABLE TO COMMERCIALIZE PRODUCTS SIMILAR TO THOSE COVERED BY OUR ISSUED PATENTS
Issued patents may not provide commercially-meaningful protection
against competitors. Other companies or institutions may challenge our or our
collaborators' patents or independently develop similar products that could
result in an interference proceeding in the Patent and Trademark Office or a
legal action. In the event any single researcher or institution infringes upon
our or our collaborators' patent rights, enforcing these rights may be difficult
and time consuming. Others may be able to design around these patents or develop
unique products providing effects similar to our products. We may be required to
choose between pursuing litigation against infringers and being unable to
recover damages or otherwise enforce our patent rights.
In addition, others may discover uses for genes or proteins other than
those uses covered in our patents, and these other uses may be separately
patentable. Even if we have a patent claim on a particular gene, the holder of a
patent covering the use of that gene could exclude us from selling a product
that is based on the same use of that gene. In addition, with respect to certain
of our patentable inventions, we have decided not to pursue patent protection
outside the United States, both because we do not believe it is cost effective
and because of confidentiality concerns. Accordingly, our international
competitors could develop, and receive foreign patent protection for gene
sequences and functions for which we are seeking U.S. patent protection.
OUR RIGHTS TO THE USE OF TECHNOLOGIES LICENSED BY THIRD PARTIES ARE NOT WITHIN
OUR CONTROL
We rely, in part, on licenses to use certain technologies that are
material to our business. We do not own the patents that underlie these
licenses. Our rights to use these technologies and practice the inventions
claimed in the licensed patents are subject to our licensors abiding by the
terms of those licenses and not terminating them. In many cases, we do not
control the prosecution or filing of the patents to which we hold licenses. We
rely upon our licensors to prevent infringement of those patents. The scope of
our rights under our licenses may be subject to dispute by our licensors or
third parties.
WE MAY BE UNABLE TO PROTECT OUR TRADE SECRETS
While we have entered into confidentiality agreements with employees
and collaborators, we may not be able to prevent the disclosure of our trade
secrets. In addition, other companies or institutions may independently develop
substantially equivalent information and techniques.
WE MAY BECOME SUBJECT TO REGULATION UNDER THE ANIMAL WELFARE ACT, WHICH COULD
SUBJECT US TO ADDITIONAL COSTS AND PERMIT REQUIREMENTS
The Animal Welfare Act, or AWA, is the federal law that currently
covers animals in laboratories. It applies to institutions or facilities using
any regulated live animals for research, testing, teaching or experimentation,
including diagnostic laboratories and private companies in the pharmaceutical
and biotechnology industries. The AWA currently does not cover rats or mice.
However, the United States Department of Agriculture, which enforces
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the AWA, has entered into a proposed settlement agreement under which it has
agreed to commence the process of adopting regulations under the AWA to include
mice within its coverage.
Currently, the AWA imposes a wide variety of specific regulations which
govern the humane handling, care, treatment and transportation of certain
animals by producers and users of research animals, most notably personnel,
facilities, sanitation, cage size, feeding, watering and shipping conditions. If
the USDA includes mice in its regulations, we will become subject to
registration, inspections and reporting requirements. Compliance with the AWA
could be expensive, and the regulations eventually adopted by the USDA could
impair our research and production efforts.
WE AND OUR COLLABORATORS ARE SUBJECT TO EXTENSIVE AND UNCERTAIN GOVERNMENT
REGULATORY REQUIREMENTS, WHICH COULD INCREASE OUR OPERATING COSTS OR ADVERSELY
AFFECT OUR ABILITY TO OBTAIN GOVERNMENT APPROVAL OF PRODUCTS BASED ON GENES THAT
WE IDENTIFY IN A TIMELY MANNER OR AT ALL
Since we develop animals containing changes in their genetic make-up,
we may become subject to a variety of laws, guidelines, regulations and treaties
specifically directed at genetically modified organisms, or GMOs. The area of
environmental releases of GMOs is rapidly evolving and is currently subject to
intense regulatory scrutiny, particularly internationally. If we become subject
to these laws we could incur substantial compliance costs. For example, the
Biosafety Protocol, or the BSP, a recently adopted treaty, is expected to cover
certain shipments from the United States to countries abroad that have signed
the BSP. The BSP is also expected to cover the importation of living modified
organisms, a category that could include our animals. If our animals are not
contained as described in the BSP, our animals could be subject to the
potentially extensive import requirements of countries that are signatories to
the BSP.
Drugs and diagnostic products are subject to an extensive and uncertain
regulatory approval process by the FDA and comparable agencies in other
countries. The regulation of new products is extensive, and the required process
of laboratory testing and human studies is lengthy and expensive. The burden of
these regulations will fall on us to the extent we develop proprietary products
on our own. If the products are the result of a collaboration effort, these
burdens may fall on our collaborating partner or may be shared with us. We may
not be able to obtain FDA approvals for those products in a timely manner, or at
all. We may encounter significant delays or excessive costs in our efforts to
secure necessary approvals or licenses. Even if we obtain FDA regulatory
approvals, the FDA extensively regulates manufacturing, labeling, distributing,
marketing, promotion and advertising after product approval. Moreover, several
of our product development areas may involve relatively new technology and have
not been the subject of extensive product testing in humans. The regulatory
requirements governing these products and related clinical procedures remain
uncertain and the products themselves may be subject to substantial review by
foreign governmental regulatory authorities that could prevent or delay approval
in those countries. Regulatory requirements ultimately imposed on our products
could limit our ability to test, manufacture and, ultimately, commercialize our
products.
SECURITY RISKS IN ELECTRONIC COMMERCE OR UNFAVORABLE INTERNET REGULATION MAY
DETER FUTURE USE OF OUR PRODUCTS AND SERVICES
We provide access to our databases and the opportunity to acquire our
knockout mice on the Internet. A fundamental requirement to conduct
Internet-based electronic commerce is the secure transmission of confidential
information over public networks. Advances in computer capabilities, new
discoveries in the field of cryptography or other developments may result in a
compromise or breach of the algorithms we use to protect content and
transactions on Lexgen.com or proprietary information in our OmniBank database.
Anyone who is able to circumvent our security measures could misappropriate our
proprietary information, confidential customer information or cause
interruptions in our operations. We may be required to incur significant costs
to protect against security breaches or to alleviate problems caused by
breaches. Further, a well-publicized compromise of security could deter people
from using the Internet to conduct transactions that involve transmitting
confidential information.
Because of the growth in electronic commerce, Congress has held
hearings on whether to regulate providers of services and transactions in the
electronic commerce market, and federal or state authorities could enact laws,
rules or regulations affecting our business or operations. If enacted and
applied to our business, these laws, rules or regulations could render our
business or operations more costly, burdensome, less efficient or impracticable.
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WE USE HAZARDOUS CHEMICALS AND RADIOACTIVE AND BIOLOGICAL MATERIALS IN OUR
BUSINESS; ANY DISPUTES RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL OF
THESE MATERIALS COULD BE TIME CONSUMING AND COSTLY
Our research and development processes involve the use of hazardous
materials, including chemicals and radioactive and biological materials. Our
operations also produce hazardous waste products. We cannot eliminate the risk
of accidental contamination or discharge or any resultant injury from these
materials. Federal, state and local laws and regulations govern the use,
manufacture, storage, handling and disposal of these materials. We could be
subject to civil damages in the event of an improper or unauthorized release of,
or exposure of individuals to, these hazardous materials. In addition, claimants
may sue us for injury or contamination that results from our use or the use by
third parties of these materials, and our liability may exceed our total assets.
Compliance with environmental laws and regulations may be expensive, and current
or future environmental regulations may impair our research, development or
production efforts.
WE MAY BE SUED FOR PRODUCT LIABILITY
We or our collaborators may be held liable if any product we or our
collaborators develop, or any product which is made with the use or
incorporation of any of our technologies, causes injury or is found otherwise
unsuitable during product testing, manufacturing, marketing or sale. Although we
currently have and intend to maintain product liability insurance, this
insurance may become prohibitively expensive, or may not fully cover our
potential liabilities. Inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential product liability
claims could prevent or inhibit the commercialization of products developed by
us or our collaborators. If we are sued for any injury caused by our or our
collaborators' products, our liability could exceed our total assets.
PUBLIC PERCEPTION OF ETHICAL AND SOCIAL ISSUES MAY LIMIT OR DISCOURAGE THE USE
OF OUR TECHNOLOGIES, WHICH COULD REDUCE OUR REVENUES
Our success will depend in part upon our ability to develop products
discovered through our gene trapping and knockout mouse technologies.
Governmental authorities could, for ethical, social or other purposes, limit the
use of genetic processes or prohibit the practice of our gene trapping and
knockout mouse technologies. Claims that genetically engineered products are
unsafe for consumption or pose a danger to the environment may influence public
perceptions. The subject of genetically modified organisms, like knockout mice,
has received negative publicity and aroused public debate in some countries.
Ethical and other concerns about our technologies, particularly the use of genes
from nature for commercial purposes and the products resulting from this use,
could adversely affect the market acceptance of our technologies.
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE HAS BEEN AND LIKELY WILL CONTINUE TO BE VOLATILE, AND YOUR
INVESTMENT MAY SUFFER A DECLINE IN VALUE
The stock market has experienced significant price and volume
fluctuations, and the market prices of technology companies, particularly
biotechnology companies such as ours, have been highly volatile. In addition,
broad market and industry fluctuations that are not within our control may
adversely affect the trading price of our common stock. You may not be able to
sell your shares at or above your purchase price.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD NEGATIVELY AFFECT OUR STOCK PRICE
Provisions in our amended and restated charter and bylaws and
applicable provisions of the Delaware General Corporation Law may make it more
difficult for a third party to acquire control of us without the approval of our
board of directors. These provisions may make it more difficult or expensive for
a third party to acquire a majority of our outstanding voting common stock or
delay, prevent or deter a merger, acquisition, tender offer or proxy contest,
which may negatively affect our stock price.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. We have attempted
to identify forward-looking statements by terminology including "anticipate,"
"believe," "can," "continue," "could," "estimate," "expect," "intend," "may,"
"plan," "potential," "predict," "should" or "will" or the negative of these
terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks outlined under "Risk Factors," that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels or activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We are not under any duty to
update any of the forward-looking statements after the date of this prospectus
to conform these statements to actual results, unless required by law.
USE OF PROCEEDS
All of the shares offered by this prospectus are being offered and sold
by the selling stockholders. We will not receive any proceeds from the sale of
the shares of common stock offered by the selling stockholders.
The selling stockholders will pay any underwriting discounts and
commissions, brokerage fees and other expenses, including fees and expenses of
counsel, which they incur in selling shares of our common stock. We will pay all
expenses for the registration of the selling stockholders' offer and sale of the
shares of common stock covered by this prospectus, including registration fees
and the costs and expenses of our counsel and independent public accountants.
SELLING STOCKHOLDERS
We issued the shares of common stock covered by this prospectus:
- in connection with our acquisition of the outstanding
securities of Coelacanth Corporation in a merger completed on
July 12, 2001; and
- in private placements completed prior to our April 2000
initial public offering.
In connection with the Coelacanth merger, we agreed to register the
resale of the shares of common stock received in the merger by Coelacanth's
former stockholders and to use our commercially reasonable best efforts to keep
the registration statement effective for 24 months or, if earlier, until all of
the common stock received in the merger may be sold by the selling stockholders
under Rule 144 under the Securities Act of 1933 in a 90-day period. The other
selling stockholders requested that we register their resale of shares of common
stock under a registration rights agreement in which we agreed to use
commercially reasonable best efforts to include their shares in a registration
in which they request to participate. All of the shares offered by the selling
stockholders were issued in transactions exempt from the registration
requirements of the Securities Act of 1933.
The selling stockholders, or their donees of 500 or fewer shares, may
offer the shares of common stock covered by this prospectus from time to time.
Our registration of the selling stockholders' resale of such shares does not
necessarily mean that the selling stockholders will sell any or all of their
shares. We do not know when or in what amounts a selling stockholder may offer
shares for sale. Because the selling stockholder may offer all or some of the
shares pursuant to this offering, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares, we
cannot estimate the number of the shares that will be held by the selling
stockholder after completion of the offering.
If a selling stockholder transfers more than 500 shares of common stock
by gift, pledge or other non-sale transfer after the effective date of the
registration statement of which this prospectus is a part, the donee, pledgee or
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transferee may make no offer or sale under this prospectus unless and until a
supplement to this prospectus has been filed or an amendment to the related
registration statement has become effective.
The table below sets forth the beneficial ownership of all common stock
of each selling stockholder as of July 31, 2001 as well as the number of such
shares of common stock offered by this prospectus. For purposes of determining
the number of shares beneficially owned by a person and the percentage ownership
of that person in accordance with the rules of the SEC, shares of common stock
underlying options held by that person that are currently exercisable or
exercisable within 60 days of July 31, 2001 are considered outstanding. These
shares, however, are not considered outstanding when computing the percentage
ownership of each other person.
Except as indicated in the footnotes to this table and pursuant to
state community property laws, to our knowledge, each selling stockholder named
in the table has sole voting and investment power for the shares shown as
beneficially owned by them. Percentage of ownership is based on 51,848,452
shares of common stock outstanding on July 31, 2001.
We prepared this table based on information supplied to us by the
selling stockholders named in the table, and we have not sought to independently
verify such information.
BENEFICIAL OWNERSHIP
PRIOR TO OFFERING
-----------------
SHARES
ISSUABLE
PURSUANT TO
OPTIONS
NUMBER OF EXERCISABLE
SHARES WITHIN 60 SHARES
BENEFICIALLY DAYS OF JULY PERCENTAGE OFFERED
NAME OF SELLING STOCKHOLDER OWNED 31, 2001 OWNERSHIP HEREBY
--------------------------- ----- -------- --------- ------
Former Coelacanth Stockholders (1)
- ----------------------------------
Brett R. Bosley 202 -- * 202
David Brook 202 -- * 202
Eran Broshy 7,577 -- * 7,577
California Institute of Technology 243 -- * 243
Cullen Cavallaro 128 -- * 128
Zheng ming Chen 131 -- * 131
Jay Chiang 1,429 -- * 1,429
Evangeline Priya Eddy 439 -- * 439
Keith Elliston 57 -- * 57
Yoany Gervacio 27 -- * 27
Seth L. Harrison (2) 35,538 -- * 35,538
Hartmuth Kolb (3) 810 25,906 * 810
Laxma Reddy Kolla 157 -- * 157
Amit Kumar 75 -- * 75
Hanghui Liu 273 -- * 273
Dat Nguyen 18 -- * 18
Denise Prince 30 -- * 30
Vasazi Reddy 60 -- * 60
Michael Richards 143 -- * 143
Janice Rothman 188 -- * 188
K. Barry and Janet Dueser Sharpless (4) 72,723 -- * 72,723
John A. Skolas 2,702 -- * 2,702
James Wan 37 -- * 37
Jeffrey Whitney 158 -- * 158
Barry Wolitzky 6,166 -- * 6,166
Daniel J. Bader 2,017 -- * 2,017
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Alfred Bader 22,524 -- * 22,524
David Bader 2,017 -- * 2,017
Robert A. and Ellen F. Bildersee 10,420 -- * 10,420
Robert L. and Joyce Y. Blumberg 1,615 -- * 1,615
Robert L. Blumberg 402 -- * 402
David A. Boulton (5) 20,463 14,681 * 20,463
David Boulton as Custodian for Sarah Boulton (5) 428 -- * 428
Peter B. and Cynthia H. Ellis 15,700 -- * 15,700
Sally Elson 1,011 -- * 1,011
George Fesus 15,700 -- * 15,700
Juliet V. Gauchat 18,928 -- * 18,928
Edward M. Giles 4,046 -- * 4,046
Robert H. and Helen O. Grubbs 4,289 -- * 4,289
Laura Harrison 1,352 -- * 1,352
Alvan Harrison 933 -- * 933
Jeremy Harrison 1,866 -- * 1,866
Joan Harrison 933 -- * 933
Kerry N. Hite 947 -- * 947
Joel Hough 947 -- * 947
Todd M. Hough 947 -- * 947
Lawrence A. and Kathleen M. Hough (6) 16,891 -- * 16,891
JB Partners 5,244 -- * 5,244
Alan R. Katritzky 1,072 -- * 1,072
Klitsner Family & Co. No. A 4,035 -- * 4,035
Charlene Ledbetter 690 -- * 690
Davis U. Merwin 2,017 -- * 2,017
Joseph E. Padulo 632 -- * 632
Louis Padulo 2,781 -- * 2,781
Robert B. Padulo 632 -- * 632
George W. Parshall 464 -- * 464
Jon B. Platt 7,986 -- * 7,986
Rex James Bates Revocable Trust 2,017 -- * 2,017
John Semack 2,023 -- * 2,023
Al Simmons 107 -- * 107
Sondra Somer 107 -- * 107
Nancy Somer 85 -- * 85
Jon and Cathy Somer 214 -- * 214
Pike H. Sullivan 2,017 -- * 2,017
Richard and Caroline Swett 2,017 -- * 2,017
Ivar Ugi 214 -- * 214
Bert van Deun 8,070 -- * 8,070
Vertical Fund Associates LP 6,122 -- * 6,122
Peter Wipf 1,072 -- * 1,072
Chi-Huey Wong 1,340 -- * 1,340
Robert Zambias 2,144 -- * 2,144
Apple Tree Partners I, L.P. (2) 710,400 -- 1.4% 710,400
Freya Fanning & Co. 27,366 -- * 27,366
Oxford Bioscience Partners (Bermuda) II L.P. 92,053 -- * 92,053
Oxford Bioscience Partners (GS-Adjunct) II L.P. 106,865 -- * 106,865
Oxford Bioscience Partners II L.P. 122,833 -- * 122,833
Jon B. Platt 13,683 -- * 13,683
Vertical Fund Associates LP 13,683 -- * 13,683
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Alexandria Real Estate Equities, L.P. 75,187 -- * 75,187
Bank Julius Baer & Co. LTD 320,636 -- * 320,636
BB BioVentures L.P. (7) 963,052 -- 1.9% 963,052
MPM Asset Management Investors 1999 LLC (7) 11,536 -- * 11,536
MPM BioVentures Parallel Fund, L.P. (7) 134,706 -- * 134,706
Other Selling Stockholders
- --------------------------
Joan M. Jordan 60,000 -- * 60,000
Pamela L. Henthorne 60,000 -- * 60,000
William Michael Miller 60,000 -- * 60,000
Eldon Dwayne Morris 60,000 -- * 60,000
Norma Jean Odum 60,000 -- * 60,000
Quentine M. Roberts 60,000 -- * 60,000
Winifried A. Wobbe 60,000 -- * 60,000
John M. Sullivan 174,000 -- * 174,000
Michael B. Sullivan 7,500 -- * 7,500
Carol T. Sullivan 7,500 -- * 7,500
- -----------------
* Represents beneficial ownership of less than 1 percent.
(1) The number of shares reflected in the table as being beneficially owned
by each former Coelacanth stockholder includes shares, representing 10%
of the shares reflected in the first column of this table as
beneficially owned by such selling stockholder, that are held by an
escrow agent and may be used to satisfy claims, if any, which we may
have for breaches of representations, warranties or covenants made by
Coelacanth in the merger agreement. The number of shares reflected in
the first column of this table as beneficially owned by each former
Coelacanth stockholder assumes that such stockholder validly tenders to
us all certificates representing former shares of capital stock of
Coelacanth and other required documents in accordance with the merger
agreement.
(2) Mr. Harrison was a director of Coelacanth before the merger. Mr.
Harrison is managing partner of Apple Tree Partners.
(3) Dr. Kolb was Vice President of Chemistry and Chief Operating Officer of
Coelacanth before the merger, and presently serves as our Vice
President of Chemistry.
(4) Dr. Sharpless was a director of Coelacanth before the merger.
(5) Mr. Boulton was Vice President of Technology Operations of Coelacanth
before the merger, and presently serves as our Vice President of
Technology Operations.
(6) Mr. Hough was a director of Coelacanth before the merger.
(7) Michael Steinmetz, Ph.D., a director of Coelacanth before the merger,
is chairman of the board of MPM Asset Management, the general partner
of BB BioVentures L.P., MPM Asset Management Investors 1999 LLC and MPM
BioVentures Parallel Fund, L.P.
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time by the selling stockholders. The term "selling stockholder" includes
donees selling 500 or fewer shares received from a selling stockholder as a gift
after the effective date of the registration statement of which this prospectus
is a part. The selling stockholders will act independently of us in making
decisions with respect to the timing, manner and size of each sale. Such sales
may be made on one or more exchanges or in the over-the-counter market or
otherwise, at prices and under terms then prevailing or at prices related to the
then current market price or in negotiated transactions. The selling
stockholders have advised us that they may offer and sell the shares of common
stock offered by this prospectus in one or more of, or a combination of, the
following methods:
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
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- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- block trades in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- an over-the-counter distribution in accordance with the rules
of the Nasdaq National Market;
- through the Nasdaq National Market or any other securities
exchange or association that quotes the common stock;
- in privately negotiated transactions; and
- in options transactions.
In addition, the selling stockholders have advised us that they may
sell shares of common stock in compliance with Rule 144, if available, or
pursuant to other available exemptions from the registration requirements under
the Securities Act, rather than pursuant to this prospectus.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the shares or otherwise, the selling stockholders have
advised us that they may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
common stock in the course of hedging the positions they assume with a selling
stockholder. The selling stockholders have advised us that they may also sell
the common stock short and redeliver the shares to close out such short
positions. The selling stockholders have advised us that they may also enter
into option or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction). The selling
stockholders have advised us that they may also pledge shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution may effect sales of the pledged shares pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
In effecting sales, broker-dealers or agents engaged by a selling
stockholder may arrange for other broker-dealers to participate. Broker-dealers
or agents may receive commissions, discounts or concessions from the selling
stockholder in amounts to be negotiated immediately prior to the sale.
In offering the shares covered by this prospectus, a selling
stockholder and any broker-dealers who execute sales for such selling
stockholder may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. Any profits realized by a selling
stockholder and the compensation of any broker-dealer may be deemed to be
underwriting discounts and commissions.
In order to comply with the securities laws of certain states, if
applicable, the shares must 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 is complied with.
The selling stockholders have advised us that they may sell their
shares at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, at negotiated prices or at fixed prices and that
the transactions listed above may include cross or block transactions.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934 may apply to
their sales of common stock and to the activities of the selling stockholders
and their affiliates. In addition, we will make copies of this prospectus
available to the selling stockholders for the purpose of satisfying the
prospectus delivery requirements of the Securities Act of 1933. The selling
stockholders have advised us that they may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
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At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
We have agreed to indemnify the selling stockholders against certain
liabilities, including certain liabilities under the Securities Act.
We have agreed with the selling stockholders that received shares of
our common stock in the Coelacanth merger to keep the registration statement of
which this prospectus constitutes a part effective until the earliest to occur
of:
- such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the
registration statement;
- the expiration of twenty-four months from the date the
registration statement is declared effective; or
- such time as all shares covered by this prospectus may be sold
by the selling stockholders in accordance with the
requirements of Rule 144 in a 90-day period.
Each of the selling stockholders that received common stock in the
Coelacanth merger has entered into a stockholder agreement under which such
selling stockholder has agreed not to sell or otherwise transfer shares of
common stock received in the merger until: (i) the earlier of the effectiveness
of the registration statement of which this prospectus is a part or October 10,
2001 with respect to 50% of such shares; (ii) January 8, 2002 with respect to an
additional 20% of such shares; (iii) April 8, 2002 with respect an additional
20% of such shares; and (iv) July 12, 2002 for the final 10% of such shares. All
shares offered by this prospectus by a selling stockholder that received common
stock in the Coelacanth merger will be sold subject to the terms and conditions
of the stockholder agreement.
All shares offered by this prospectus by any other stockholder will be
sold subject to the terms and conditions of the registration rights agreement
described in the section entitled "Selling Stockholders."
LEGAL MATTERS
The validity of the common stock offered by this prospectus has been
passed upon for us by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The financial statements, as of December 31, 1999 and 2000, and for
each of the three years in the period ended December 31, 2000, incorporated by
reference in this prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933 regarding the offer and sale of shares of common
stock by the selling stockholders. This prospectus, which constitutes a part of
the registration statement, does not contain all of the information contained in
the registration statement, some items of which are contained in exhibits to the
registration statement as permitted by the rules and regulations of the SEC. For
further information about us and our common stock, please review the
registration statement and the exhibits filed as a part of it. Statements made
in this prospectus that describe documents may not necessarily be complete. We
recommend that you review the documents that we have filed with the registration
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statement to obtain a more complete understanding of these documents. A copy of
the registration statement, including the exhibits filed as a part of it, may be
inspected without charge at the SEC's Public Reference Room, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of all or any part of the registration
statement may be obtained from the SEC upon the payment of fees prescribed by
it. You may obtain information on the Public Reference Room by calling the SEC
at 1-800-SEC-0330. The SEC maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding companies that file electronically with it.
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934 and will file periodic reports, proxy statements
and other information with the SEC. You may inspect any of these documents as
described in the preceding paragraph. These reports, proxy statements and other
information may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus
information that we file with the SEC in other documents. This means that we can
disclose important information to you by referring to other documents that
contain that information. The information incorporated by reference is
considered to be part of this prospectus, except for information superseded by
information in this prospectus. We incorporate by reference the documents listed
below that we have previously filed with the SEC and any future filings we make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, prior to the termination of the offering of the securities covered
by this prospectus:
- our annual report on Form 10-K for the year ended December 31,
2000;
- our quarterly reports on Form 10-Q for the quarter ended March
31, 2001;
- our current report on Form 8-K dated June 13, 2001; and
- the description of our common stock contained in our
registration statement on Form 8-A filed with the Commission
on March 27, 2000 pursuant to Section 12 of the Securities
Exchange Act of 1934, including any amendments and reports
filed for the purpose of updating such description.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this prospectus modifies
or supersedes that statement. Any statement that is modified or superseded will
not constitute a part of this prospectus, except as modified or superseded.
Upon your written or oral request, we will provide you at no cost a
copy of any or all of the documents incorporated by reference in this
prospectus, other than the exhibits to those documents, unless the exhibits are
specifically incorporated by reference into this prospectus. You may request a
copy of these documents by contacting:
Investor Relations
Lexicon Genetics Incorporated
4000 Research Forest Drive
The Woodlands, Texas 77381
Telephone: (281) 364-0100
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered (other than
underwriting discounts and commissions) are as follows:
SEC Registration Fee................................. $ 7,872
Printing Expenses.................................... 5,000
Accounting Fees and Expenses......................... 5,000
Legal Fees and Expenses.............................. 5,000
Transfer Agent and Registrar Fees.................... --
Miscellaneous Expenses............................... 2,128
------------
Total...................................... $ 25,000
------------
The selling stockholders will pay any underwriting discounts and
commissions, brokerage fees and other expenses, including fees and expenses of
their counsel, if any, which discounts, commissions, fees and expenses are not
included in the foregoing table.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he 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 conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
Lexicon's certificate of incorporation and bylaws provide that
indemnification shall be to the fullest extent permitted by the DGCL for all
current or former directors or officers. As permitted by the DGCL, the
certificate of incorporation provides that directors of Lexicon shall have no
personal liability to Lexicon or its stockholders for monetary damages for
breach of fiduciary duty as a director, except (1) for any breach of the
director's duty of loyalty to Lexicon or its stockholders, (2) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (3) under Section 174 of the DGCL or (4) for any transaction
from which a director derived an improper personal benefit.
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ITEM 16. EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1+ -- Restated Certificate of Incorporation (filed as Exhibit 3.1
to the Company's Registration Statement on Form S-1
(Registration No. 333-96469) and incorporated by reference
herein).
3.2+ -- Restated Bylaws (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No.
333-96469) and incorporated by reference herein).
4.1* -- Amended and Restated Registration Rights Agreement dated as
of May 7, 1998 by and among the Company and the stockholders
named therein.
4.2* -- Form of Stockholder Agreement by and between the Company
and each former stockholder of Coelacanth Corporation.
5.1* -- Opinion of Vinson & Elkins L.L.P.
23.1* -- Consent of Arthur Andersen LLP
23.2* -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1)
24.1* -- Power of Attorney (contained in signature page)
- ----------------
+ Previously filed.
* Filed herewith.
ITEM 17. UNDERTAKINGS.
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 of 1933, as amended (the
"Securities Act");
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this 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 the volume of securities offered (if
the total dollar value 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 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in this Registration Statement or any material change to such
information in this Registration Statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in this 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.
II-2
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(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.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in Item 14, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of The Woodlands, in the State of Texas, on August 10,
2001.
LEXICON GENETICS INCORPORATED
By: /s/ Arthur T. Sands
-------------------------------------------
Arthur T. Sands, M.D., Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Arthur T. Sands and
Jeffrey L. Wade, and each of them, any of whom may act without the joinder of
the other, as his true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any Registration Statement
(including any amendment thereto) for this offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or would do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or their or
his substitute and substitutes, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED BELOW.
Signature Title Date
--------- ----- ----
/s/ Arthur T. Sands President, Chief Executive August 10, 2001
- ----------------------------------------------------- Officer and Director (principal
Arthur T. Sands, M.D., Ph.D. executive officer)
/s/ Julia P. Gregory Executive Vice President, Chief August 10, 2001
- ----------------------------------------------------- Financial Officer (principal
Julia P. Gregory financial and accounting
officer)
. /s/ C. Thomas Caskey Chairman of the Board of August 10, 2001
- ----------------------------------------------------- Directors
C. Thomas Caskey, M.D.
/s/ Sam L. Barker Director August 10, 2001
- -----------------------------------------------------
Sam L. Barker, Ph.D.
/s/ Gordon A. Cain Director August 10, 2001
- -----------------------------------------------------
Gordon A. Cain
/s/ Patricia M. Cloherty Director August 10, 2001
- -----------------------------------------------------
Patricia M. Cloherty
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/s/ Robert J. Lefkowitz Director August 10, 2001
- -----------------------------------------------------
Robert J. Lefkowitz, M.D.
/s/ William A. McMinn Director August 10, 2001
- -----------------------------------------------------
William A. McMinn
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1+ -- Restated Certificate of Incorporation (filed as Exhibit 3.1
to the Company's Registration Statement on Form S-1
(Registration No. 333-96469) and incorporated by reference
herein).
3.2+ -- Restated Bylaws (filed as Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No.
333-96469) and incorporated by reference herein).
4.1* -- Amended and Restated Registration Rights Agreement dated as
of May 7, 1998 by and among the Company and the stockholders
named therein.
4.2* -- Form of Stockholder Agreement by and between the Company
and each former stockholder of Coelacanth Corporation.
5.1* -- Opinion of Vinson & Elkins L.L.P.
23.1* -- Consent of Arthur Andersen LLP
23.2* -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1)
24.1* -- Power of Attorney (contained in signature page)
- -----------------------
+ Previously filed.
* Filed herewith.