As filed with the Securities and Exchange Commission on November 6, 2002
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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XOMA Ltd.
(Exact name of registrant as specified in its charter)
Bermuda 52-2154066
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2910 Seventh Street
Berkeley, California 94710
(510) 204-7200
(Address, including ZIP code, and telephone number,
including area code, of registrant's principal
executive offices)
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CHRISTOPHER J. MARGOLIN, ESQ.
XOMA Ltd.
2910 Seventh Street
Berkeley, California 94710
(510) 204-7292
(Name, address, including ZIP code, and
telephone number, including area code,
of agent for service)
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Copy to:
GEOFFREY E. LIEBMANN, ESQ.
CAHILL GORDON & REINDEL
80 Pine Street
New York, New York 10005
(212) 701-3000
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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, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
Title of Each Class Proposed Proposed
of Securities Amount Maximum Maximum Amount of
To Be To Be Offering Price Aggregate Registration
Registered Registered per Unit(1) Offering Price(1) Fee
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Common Shares,
par value U.S.$.0005
per share................... 5,000,000(2)(3) $5.58 $27,900,000 $2,566.80(4)
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c).
(2) Includes a like number of Preference Share Purchase Rights (the "Rights").
Since no separate consideration is paid for the Rights, the registration
fee is included in the fee for the Common Shares.
(3) Pursuant to Rule 416 under the Securities Act of 1933, any additional
Common Shares issued as a result of stock splits, stock dividends or
similar transactions are deemed to be registered herewith.
(4) The Registrant filed a registration statement on Form S-3 (No. 333-100715)
on October 24, 2002 for which the Registrant previously paid a filing fee
of $2,516.20. In connection with the filing of this registration statement
on Form S-3, the Registrant withdraws the registration statement on Form
S-3 (No. 333-100715) filed on October 24, 2002. Pursuant to Rule 457(p)
under the Securities Act of 1933, the Registrant has offset the $2,566.80
registration fee due herewith with the fee paid on October 24, 2004.
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 Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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-2-
The information contained in this prospectus is not complete and may be changed.
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.
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Prospectus Subject to Completion,
dated November 6, 2002
XOMA Ltd.
5,000,000 Common Shares
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o All of the common shares offered by this prospectus are being offered by
Millennium Pharmaceuticals, Inc. through its wholly-owned subsidiary,
mHoldings Trust, which is a party to an investment agreement with XOMA and
will become one of our shareholders upon the purchase of common shares
under the investment agreement and/or conversion of an outstanding
convertible subordinated note.
o We intend to use the proceeds from our sale of common shares to the selling
shareholders under the investment agreement principally for the development
of products pursuant to our collaboration with Millennium.
o To the extent shares are issued upon conversion of the convertible note, we
will benefit from the resulting cancellation of indebtedness. The $5.0
million convertible subordinated note is convertible at our option into our
common shares.
o Millennium and mHoldings Trust will receive all of the proceeds of their
sale of such common shares to you.
o Our common shares are listed on the Nasdaq National Market under the symbol
"XOMA." The last reported sale price for the common shares on November 1,
2002 was U.S.$5.750 per share.
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This investment involves a high degree of risk. Consider carefully the risk
factors beginning on page 6 of this prospectus before you invest.
Millennium Pharmaceuticals, Inc. and its wholly-owned subsidiary, mHoldings
Trust, are underwriters with respect to all of the common shares they purchase
under the investment agreement with XOMA and which are offered for sale under
this prospectus.
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Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
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The date of this prospectus is , 2002.
TABLE OF CONTENTS
Page Page
Prospectus Summary................................3 Use of Proceeds..................................20
Risk Factors......................................6 Selling Shareholders.............................21
Incorporation of Information We File With Description of Share Capital.....................24
the SEC .......................................17 Plan of Distribution.............................27
Special Note Regarding Forward-Looking Legal Opinion....................................28
Statements ....................................18 Experts..........................................29
Price Range of Common Shares and Dividend Where You Can Get More Information...............29
Information ...................................19
2
PROSPECTUS SUMMARY
XOMA
We are a biopharmaceutical company that develops and manufactures
recombinant antibodies and other protein products to treat cancer, immunological
and inflammatory disorders, and infectious diseases. Our current product
development programs include:
o Raptiva(TM)(Efalizumab, formerly Xanelim(TM)) is a humanized
anti-CD11a monoclonal antibody product being developed in
collaboration with Genentech, Inc. to treat psoriasis, rheumatoid
arthritis and organ transplant rejection. Data from two pivotal Phase
III studies of Raptiva(TM)in nearly 1,100 moderate-to-severe plaque
psoriasis patients were presented in June and July of 2001. Both
trials met all primary and secondary endpoints. In September of 2002,
we and Genentech announced that a third randomized Phase III study
with Raptiva(TM)achieved its primary efficacy endpoint. The data from
this study, conducted with Genentech-produced material, were
consistent with data obtained from the previous Phase III studies that
used both Genentech- and XOMA-produced material. We have also
initiated and completed enrollment in a Phase I/II study of
Raptiva(TM)to prevent graft rejection in kidney transplant recipients.
In April of 2002, we announced the initiation of enrollment in a Phase
II clinical study of Raptiva(TM)in patients suffering from rheumatoid
arthritis. Plans for additional indications are under review with
Genentech.
o NEUPREX(R), also known as rBPI21, is a genetically-engineered fragment
of a particular human protein. We completed a Phase III efficacy
clinical trial in 1999, testing NEUPREX(R)in severe pediatric
meningococcemia, but the data from the trial were determined not to be
sufficient to file for regulatory approval. Further development of
this product is continuing under a license agreement with a division
of Baxter Healthcare Corporation. Enrollment of patients has been
completed in a Phase II study testing NEUPREX(R)in Crohn's disease,
but the results are not yet known. We are providing the product for
testing, and Baxter is conducting the study and funding all NEUPREX(R)
development costs. Plans for additional indications are under review
with Baxter.
o ING-1 is a Human Engineered(TM)recombinant monoclonal antibody that
binds with high affinity to an antigen expressed on epithelial cell
cancers (breast, colorectal, prostate and others) that is designed to
destroy cancer cells by recruiting the patient's own immune system.
Enrollment has been completed in two Phase I studies in advanced
adenocarcinoma patients. The ING-1 monoclonal antibody incorporates
our patented Human Engineering(TM)technology, designed to reduce
immunogenicity. In May of 2002, we announced results of a Phase I
clinical study which showed low immunogenicity in cancer patients.
Additional Phase I/II studies are in progress or in planning to
further evaluate the safety, pharmocodynamics and pharmacokinetics of
ING-1 in cancer patients, and to document any observed anti-tumor
activity. Further testing will be determined by the results of these
studies.
o ONYX-015, also known as CI-1042, developed by Onyx Pharmaceuticals,
Inc., is a therapeutic tumor-selective, modified adenovirus
genetically engineered to destroy cancer cells. Under a strategic
process development and manufacturing alliance with Onyx, we are
scaling up production to commercial volume and will manufacture
ONYX-015. The product is currently in a Phase III clinical trial for
recurrent head and neck cancer and in Phase I and II clinical trials
for a number of additional cancer indications. In September of 2002,
Onyx announced that it has regained full rights to ONYX-015 having
ended its agreement with Warner-Lambert Company, a subsidiary of
Pfizer Inc. since June 2000.
o Two of Millennium Pharmaceuticals, Inc.'s biotherapeutic agents are
being developed for certain vascular inflammation indications pursuant
to a collaboration agreement with Millennium that
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was announced in November of 2001. Current plans call for process
development work and preclinical testing in 2002.
o BPI-derived anti-angiogenic compounds with potential application for
treating retinal disorders are being developed by us. Results of in
vitro and in vivo studies conducted by the Joslin Diabetes Center at
Harvard University show that compounds derived from BPI inhibit
abnormal growth of blood vessels in the retina while sparing key
retinal cells. Joslin is conducting further research in collaboration
with us.
We have experienced significant losses and, as of June 30, 2002, we had an
accumulated deficit of approximately U.S.$523.7 million. For the year ended
December 31, 2001 and the six months ended June 30, 2002, we had a net loss of
approximately U.S.$28.0 million, or U.S.$0.41 per common share (basic and
diluted) and U.S. $16.1 million, or U.S. $.23 per common share (basic and
diluted), respectively.
Based on current spending levels and third party funding, we believe that
we have enough cash (including interest income) to meet our currently
anticipated needs for operating expenses, working capital, equipment
acquisitions and current research projects through at least the middle of 2004.
We continue to evaluate strategic alliances, potential partnerships and
financing arrangements which would further strengthen our competitive position
and provide additional funding. We cannot predict whether or when any such
alliances, partnerships or arrangements will be consummated or whether
additional funding will be available when required and on terms acceptable to
us.
Material Terms of Investment Agreement
On November 26, 2001, Millennium and XOMA entered into an investment
agreement which committed Millennium to purchase, at our option and subject to
the conditions described in the following paragraph, up to $50.0 million worth
of our common shares over the 30 months following the effective date of the
investment agreement. Of the up to $50.0 million worth of our common shares,
$5.0 million worth (and accrued interest) may be issued at our option upon
conversion of a convertible subordinated note already issued to Millennium, the
entire principal amount of which is currently outstanding. At four subsequent
closings, we may issue up to $7.5 million, $7.5 million, $15.0 million and $15.0
million worth of our common shares, respectively. At each closing, the precise
number of shares to be purchased by Millennium will be determined using a
formula based on the average of certain sale prices per common share as reported
on the Nasdaq National Market for a specified period of time prior to the
applicable closing date (subject to certain adjustments and limitations). The
formula is intended to reflect the current market price per common share at the
time of each closing, without any discount or premium.
The obligations of Millennium to purchase the common shares that we wish to
sell at each closing will be subject to customary closing conditions, including
the delivery of legal opinions and certificates from our officers and updated
financial information, the continued listing of our common shares on the Nasdaq
National Market or the New York or American Stock Exchanges, the continued
effectiveness of the registration statement that includes this prospectus and
the continuation of our collaboration agreement with Millennium.
We have agreed to register the resale of the common shares that we may sell
to Millennium at each closing and the common shares that we may issue to
Millennium upon conversion of the convertible debt. The registration statement
that includes this prospectus is intended to satisfy these registration
obligations. We will consummate the first direct sale of common shares to
Millennium after the registration statement that includes this prospectus is
declared effective.
The 5,000,000 shares registered under the registration statement that
includes this prospectus would have represented 6.6% of our outstanding common
shares as of November 1, 2002, after giving effect to their issuance. Based on
the current market price of our common shares, the investment agreement gives us
the
4
option to require the selling shareholders to purchase an aggregate of up to
approximately 8,717,232 common shares (assuming conversion of the convertible
subordinated note).
Material Terms of Convertible Subordinated Note
In connection with the investment agreement, XOMA issued to Millennium a
$5.0 million convertible subordinated note. The principal of the convertible
subordinated note is due and payable in a single installment on May 26, 2003.
The principal and accrued interest on the convertible subordinated note may
be converted in whole (but not in part) at our election upon maturity into our
common shares. The number of shares into which the convertible subordinated note
may be converted will be determined using a formula based on the average of
certain sale prices per common share as reported on the Nasdaq National Market
for a specified period of time prior to the conversion date (subject to certain
adjustments and limitations). The formula is intended to reflect the current
market price per common share at the time of conversion, without any discount or
premium. Based on the current market price of our common shares, we would be
entitled to issue an aggregate of approximately 891,145 common shares in full
payment of the convertible subordinated notes.
If we do not elect to convert the convertible subordinated note into common
shares, all outstanding principal and all accrued interest must be paid to
Millennium in cash on the maturity date, unless otherwise agreed.
In addition to customary restrictions on our ability to convert, we will
not be entitled to convert any portion of the convertible subordinated note or
the accrued interest unless there is on the conversion date an effective
registration statement covering resale of all of the common shares into which
the principal of the convertible note and all accrued interest would convert. If
this is not the case at any time prior to its maturity date, then the
convertible subordinated note will remain outstanding until its maturity date
and, if no effective registration statement is then in place, we will be
required to repay all outstanding principal and accrued interest in cash on the
maturity date. The registration statement that includes this prospectus is
intended to satisfy these registration obligations.
5
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in our common shares. You should
also consider carefully the other information contained, or incorporated by
reference, in this prospectus. The actual results of our business could differ
materially from those described as a result of these risk factors. In such case,
the trading price of our common shares could decline, and you may lose all or
part of the money you paid to buy our common shares.
Risks Relating To Our Business
None Of Our Pharmaceutical Products Have Received Regulatory Approval; If Our
Products Do Not Receive Regulatory Approval, Neither We Nor Our Third Party
Collaborators Will Be Able To Manufacture And Market Them
Even our most developed pharmaceutical product has yet to be submitted for
licensure. We will be unable to manufacture and market our products without
required regulatory approvals in the United States and other countries. The
United States government and governments of other countries extensively regulate
many aspects of our products, including:
o testing
o manufacturing
o promotion and marketing and
o exporting.
In the United States, the Food and Drug Administration regulates
pharmaceutical products under the Federal Food, Drug, and Cosmetic Act and other
laws, including, in the case of biologics, the Public Health Service Act. At the
present time, we believe that our products will be regulated by the FDA as
biologics. The FDA recently announced that it is consolidating its
responsibility for reviewing new pharmaceutical products into its Center for
Drug Evaluation and Research, the body that currently reviews drug products,
combining that operation with part of its biologics review operation, the Center
for Biologics Evaluation and Research. Because implementation of this plan is
not expected to begin until next year, we do not know when or how this change
will affect us. State regulations may also affect our proposed products.
The FDA has substantial discretion in both the product approval process and
manufacturing facility approval process and, as a result of this discretion and
uncertainties about outcomes of testing, we cannot predict at what point, or
whether, the FDA will be satisfied with our submissions or whether the FDA will
raise questions which may be material and delay or preclude product approval or
manufacturing facility approval. As we accumulate additional clinical data, we
will submit it to the FDA, which may have a material impact on the FDA product
approval process.
Our potential products will require significant additional research and
development, extensive preclinical studies and clinical trials and regulatory
approval prior to any commercial sales. This process is lengthy, often taking a
number of years, and expensive. As clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory
approvals, the length of time necessary to complete clinical trials and to
submit an application for marketing approval for a final decision by a
regulatory authority varies significantly. As a result, it is uncertain whether:
o our future filings will be delayed
o our studies will be successful
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o we will be able to provided necessary additional data
o our future results will justify further development or
o we will ultimately achieve regulatory approval for any of these
products.
For example,
o in 1996, we and Genentech began developing Raptiva(TM)(Efalizumab,
formerly Xanelim(TM)) in patients with moderate-to-severe psoriasis.
In April of 2002, we and Genentech announced that a pharmacokinetic
study conducted on Raptiva(TM)comparing XOMA-produced material and
Genentech-produced material did not achieve the pre-defined
statistical definition of comparability, and the FDA requested that
another Phase III study be completed before the filing of a Biologics
License Application for Raptiva, delaying the filing of a Biologics
Licensing Application with the FDA for Raptiva(TM)beyond the
previously-planned time frame of summer 2002. In September of 2002, we
and Genentech announced the results of the additional Phase III study
which achieved its primary efficacy endpoint. Although Genentech and
we are working to file a BLA by the end of 2002, unexpected delays in
the preparation of the BLA due to further data analysis, discussions
with the FDA or similar matters may prevent us from doing so. We have
also conducted a Phase I/II study of Raptiva(TM)in kidney transplant
recipients. Because no final decisions have been made, we do not know
whether there will be follow-on studies, and if there are such
follow-on studies we do not know whether any such studies will be
sufficient for regulatory approval. We have also announced the
initiation of enrollment in a Phase II clinical study of Raptiva(TM)in
patients suffering from rheumatoid arthritis. We do not know whether
or when any such testing will demonstrate product safety and efficacy
in this patient population or result in regulatory approval.
o in December of 1992, we began human testing of our NEUPREX(R)product,
a genetically-engineered fragment of a particular human protein, and
have licensed certain worldwide rights to Baxter. In April of 2000,
members of the FDA and representatives of XOMA and Baxter discussed
results from the Phase III trial that tested NEUPREX(R)in pediatric
patients with a potentially deadly bacterial infection principally of
children called meningococcemia, and senior representatives of the FDA
indicated that the data presented were not sufficient to support the
filing of an application for marketing approval at that time. Because
we have not generated any additional data or completed any further
analysis, we do not know whether we will be able to supply such
additional data. If we conduct an additional trial to provide the
requested additional data, we will not know whether the results will
be adequate for approval until the trial has been completed and the
resulting data reviewed by the FDA. In September of 1999, we
discontinued patient enrollment in our Phase III clinical trial
testing NEUPREX(R)in trauma patients with severe blood loss because an
independent data safety monitoring board told us that interim results
from the trial did not support continuing the trial. Baxter has
initiated a Phase II study with NEUPREX(R)in Crohn's disease patients.
Enrollment in this study has now been completed, but because we do not
know the results, we do not know whether the results will justify
further development.
Given that regulatory review is an interactive and continuous process, we
maintain a policy of limiting announcements and comments upon the specific
details of the ongoing regulatory review of our products, subject to our
obligations under the securities laws, until definitive action is taken.
7
Because All Of Our Products Are Still In Development, We Will Require
Substantial Funds To Continue; We Cannot Be Certain That Funds Will Be Available
And, If Not Available, We May Have To Take Actions Which Could Adversely Affect
Your Investment
If adequate funds are not available, we may have to dilute or otherwise
adversely affect the rights of existing shareholders, curtail or cease
operations or, in extreme circumstances, file for bankruptcy protection. We have
spent, and we expect to continue to spend, substantial funds in connection with:
o research and development relating to our products and production
technologies
o expansion of our production capabilities
o extensive human clinical trials and
o protection of our intellectual property.
Based on current spending levels and third party funding, we believe that we
have enough cash to meet our currently anticipated needs for operating expenses,
working capital, equipment acquisitions and current research projects through at
least the middle of 2004. However, to the extent we experience changes in the
timing or size of expenditures or unanticipated expenditures, or if our
collaborators do not meet their obligations to us or anticipated revenues
otherwise do not materialize, these funds may not be adequate for this period.
As a result, we do not know whether:
o operations will generate meaningful funds
o additional agreements for product development funding can be reached
o strategic alliances can be negotiated or
o adequate additional financing will be available for us to finance our
own development on acceptable terms, if at all.
Cash balances and operating cash flow are influenced primarily by the timing and
level of payments by our licensees and development partners, as well as by our
operating costs.
Because All Of Our Products Are Still In Development, We Have Sustained Losses
In The Past And We Expect To Sustain Losses In The Future
We have experienced significant losses and, as of June 30, 2002, we had an
accumulated deficit of approximately U.S.$523.7 million.
For the year ended December 31, 2001 and the six months ended June 30,
2002, we had a net loss of approximately U.S.$28.0 million, or U.S.$0.41 per
common share (basic and diluted) and U.S.$16.1 million, or U.S.$.23 per common
share (basic and diluted), respectively. We expect to incur additional losses in
the future. For the full year 2002, we currently expect our net loss to be
somewhat higher than in 2001, due to increased expenses on RaptivaTM and on the
Millennium collaboration, and the further expansion of our development
infrastructure.
Our ability to make profits is dependent in large part on obtaining
regulatory approval for our products and entering into agreements for product
development and commercialization, both of which are uncertain. Our ability to
fund our ongoing operations is dependent on the foregoing factors and on our
ability to
8
secure additional funds. Because all of our products are still in development,
we do not know whether we will ever make a profit or whether cash flow from
future operations will be sufficient to meet our needs.
If Third Party Collaborators Do Not Successfully Develop and
Market Our Products, We May Not Be Able To Do So On Our Own
Our financial resources and our marketing experience and expertise are
limited. Consequently, we depend to a large extent upon securing the financial
resources and marketing capabilities of third parties with whom we collaborate.
o In April of 1996, XOMA and Genentech entered into an agreement whereby
XOMA agreed to co-develop Genentech's humanized monoclonal antibody
product Raptiva(TM). In April of 1999, the companies extended and
expanded the agreement.
o In January of 2000, we licensed the worldwide rights to all
pharmaceutical compositions containing a particular human protein for
treatment of meningococcemia and additional potential future human
clinical indications to Baxter.
o In January of 2001, we entered into a strategic process development
and manufacturing alliance with Onyx Pharmaceuticals, Inc. pursuant to
which we are scaling up production to commercial volume and will
manufacture one of Onyx's cancer products.
o In November of 2001, we entered into a collaboration with Millennium
Pharmaceuticals, Inc. to develop two of Millennium's products for
certain vascular inflammation indications.
Because our collaborators are independent third parties, they may be subject to
different risks than we are and have significant discretion in determining the
efforts and resources they will apply, we do not know whether Genentech, Baxter,
Onyx or Millennium will successfully develop or market any of the products we
are collaborating on.
Even when we have a collaboration relationship, other circumstances may
prevent it from resulting in successful development of marketable products. For
example, in June of 1999, we licensed certain genetically-engineered fragments
of a particular human protein to Allergan Inc. to treat bacterial ophthalmic
infections. In May of 2000, following successful product testing at Allergan, we
expanded the collaboration. In November of 2000, Allergan advised us that for
internal economic reasons they planned to discontinue development of ophthalmic
anti-infective products derived from this protein.
Although we continue to evaluate additional strategic alliances and
potential partnerships, we do not know whether or when any such alliances or
partnerships will be entered into.
Because We Have No History Of Profitability And Because The Biotechnology Sector
Has Been Characterized By Highly Volatile Stock Prices, Announcements We Make
And General Market Conditions For Biotechnology Stocks Could Result In A Sudden
Change In The Value Of Our Common Shares
As a biopharmaceutical company, we have experienced significant volatility
in our common shares. Fluctuations in our operating results and general market
conditions for biotechnology stocks could have a significant impact on the
volatility of our common share price. From September 30, 2001 through September
30, 2002, our share price has ranged from a high of U.S.$12.190 to a low of
U.S.$3.000. On November 1, 2002 the last reported sale price of the common
shares as reported on the Nasdaq National Market was U.S.$5.750 per share.
Factors contributing to such volatility include:
9
o results of preclinical studies and clinical trials,
o information relating to the safety or efficacy of our products,
o developments regarding regulatory filings,
o announcements of new collaborations,
o failure to enter into collaborations,
o developments in existing collaborations,
o our funding requirements and the terms of our financing arrangements,
o announcements of technological innovations or new indications for our
therapeutic products,
o government regulations,
o developments in patent or other proprietary rights,
o the number of shares outstanding,
o the number of shares trading on an average trading day,
o announcements regarding other participants in the biotechnology and
pharmaceutical industries, and
o market speculation regarding any of the foregoing.
Because Many Of The Companies We Do Business With Are Also In The Biotechnology
Sector, The Volatility Of That Sector Can Affect Us Indirectly As Well As
Directly
The same factors that affect us directly because we are a biotechnology
company can also adversely impact us indirectly by affecting the ability of our
collaborators, partners and others we do business with to meet their obligations
to us or our ability to realize the value of the consideration provided to us by
these other companies. For example, in connection with our licensing transaction
with MorphoSys AG, MorphoSys has announced that it has exercised its option to
pay a portion of the license fee owed to us in the form of equity securities of
MorphoSys, and the value of those shares is subject both to market risks
affecting our ability to realize the value of those shares and more generally to
the business and other risks to which the issuer of those shares is subject.
If Any Of Our Products Receives Regulatory Approval, We May Not Be Able To
Increase Existing Or Acquire New Manufacturing Capacity Sufficient To Meet
Market Demand
Because we have never commercially introduced any pharmaceutical products
and none of our products have received regulatory approval, we do not know
whether the capacity of our existing manufacturing facilities can be increased
to produce sufficient quantities of our products to meet market demand. Also, if
we need additional manufacturing facilities to meet market demand, we cannot
predict that we will successfully
10
obtain those facilities because we do not know whether they will be available on
acceptable terms. In addition, any manufacturing facilities acquired or used to
meet market demand must meet the FDA's quality assurance guidelines.
Because We Do Not And Cannot Currently Market Any Of Our Products For Commercial
Sale, We Do Not Know Whether There Will Be A Viable Market For Our Products
Even if we receive regulatory approval for our products and we or our third
party collaborators successfully manufacture them, our products may not be
accepted in the marketplace. For example, physicians and/or patients may not
accept a product for a particular indication because it has been biologically
derived (and not discovered and developed by more traditional means) if no
biologically-derived products are currently in widespread use in that
indication, as is currently the case with psoriasis. Consequently, we do not
know if physicians or patients will adopt or use our products for their approved
indications.
If Our And Our Partners' Patent Protection For Our Principal Products And
Processes Is Not Enforceable, We Will Not Realize Our Profit Potential
Because of the length of time and the expense associated with bringing new
products to the marketplace, we and our partners hold and are in the process of
applying for a number of patents in the United States and abroad to protect our
products and important processes and also have obtained or have the right to
obtain exclusive licenses to certain patents and applications filed by others.
However, the patent position of biotechnology companies generally is highly
uncertain and involves complex legal and factual questions, and no consistent
policy regarding the breadth of allowed claims has emerged from the actions of
the U.S. Patent and Trademark Office with respect to biotechnology patents.
Legal considerations surrounding the validity of biotechnology patents continue
to be in transition, and historical legal standards surrounding questions of
validity may not continue to be applied, and current defenses as to issued
biotechnology patents may not in fact be considered substantial in the future.
These factors have contributed to uncertainty as to:
o the degree and range of protection any patents will afford against
competitors with similar technologies
o if and when patents will issue
o whether or not others will obtain patents claiming aspects similar to
those covered by our patent applications or
o the extent to which we will be successful in avoiding infringement of
any patents granted to others.
The Patent Office has issued approximately 60 patents to us related to our
products based on human bactericidal permeability-increasing protein, which we
call BPI, including novel compositions, their manufacture, formulation, assay
and use. In addition, we are the exclusive licensee of BPI-related patents and
applications owned by New York University and Incyte Pharmaceuticals Inc. The
Patent Office has also issued nine patents to us related to our bacterial
expression technology.
If certain patents issued to others are upheld or if certain patent
applications filed by others issue and are upheld, we may require licenses from
others in order to develop and commercialize certain potential products
incorporating our technology or we may become involved in litigation to
determine the proprietary rights of others. These licenses, if required, may not
be available on acceptable terms, and any such litigation may be costly and may
have other adverse effects on our business, such as inhibiting our ability to
compete in the market place and absorbing significant management time.
11
Due to the uncertainties regarding biotechnology patents, we also have
relied and will continue to rely upon trade secrets, know-how and continuing
technological advancement to develop and maintain our competitive position. All
of our employees have signed confidentiality agreements under which they have
agreed not to use or disclose any of our proprietary information. Research and
development contracts and relationships between us and our scientific
consultants and potential customers provide access to aspects of our know-how
that are protected generally under confidentiality agreements. These
confidentiality agreements may not be honored or may not be enforced by a court.
To the extent proprietary information is divulged to competitors or to the
public generally, such disclosure may adversely effect our ability to develop or
commercialize our products by giving others a competitive advantage or by
undermining our patent position.
Protecting Our Intellectual Property Can Be Costly And Exposes Us To Risks Of
Counterclaims Against Us
We may be required to engage in litigation or other proceedings to protect
our intellectual property. The cost to us of this litigation, even if resolved
in our favor, could be substantial. Such litigation could also divert
management's attention and resources. In addition, if this litigation is
resolved against us, our patents may be declared invalid, and we could be held
liable for significant damages. In addition, if the litigation included a claim
of infringement by us of another party's patent that was resolved against us, we
or our collaborators may be enjoined from developing, manufacturing, selling or
importing products, processes or services without a license from the other
party.
Other Companies May Render Some Or All Of Our Products Noncompetitive Or
Obsolete
Developments by others may render our products or technologies obsolete or
uncompetitive. Technologies developed and utilized by the biotechnology and
pharmaceutical industries are continuously and substantially changing.
Competition in the areas of genetically-engineered DNA-based and antibody-based
technologies is intense and expected to increase in the future as a number of
established biotechnology firms and large chemical and pharmaceutical companies
advance in these fields. Many of these competitors may be able to develop
products and processes competitive with or superior to our own for many reasons,
including that they may have:
o significantly greater financial resources
o larger research and development and marketing staffs
o larger production facilities
o entered into arrangements with, or acquired, biotechnology companies
to enhance their capabilities or
o extensive experience in preclinical testing and human clinical trials.
These factors may enable others to develop products and processes
competitive with or superior to our own. In addition, a significant amount of
research in biotechnology is being carried out in universities and other
non-profit research organizations. These entities are becoming increasingly
interested in the commercial value of their work and may become more aggressive
in seeking patent protection and licensing arrangements.
Without limiting the foregoing, we are aware that:
o Biogen Inc. has announced that its Amevive(R) product achieved
positive results in Phase III clinical trials in patients with
moderate-to-severe plaque psoriasis, that the FDA and the EMEA have
officially accepted Biogen's filings for approval of Amevive(R) in
psoriasis, that a FDA advisory
12
panel voted to recommend approval of Amevive(R) for the treatment of
moderate-to-severe chronic plaque psoriasis and that the FDA has
committed to complete the review of its Amevive(R) application by the
end of the first quarter of 2003;
o Centocor Inc., a unit of Johnson & Johnson, has tested its rheumatoid
arthritis and Crohn's disease drug in psoriasis, and it has been
announced that the drug has shown clinical benefit;
o it has been announced that Immunex Corp. (recently acquired by Amgen
Inc.) has tested its rheumatoid arthritis and psoriatic arthritis drug
in psoriasis with positive results;
o MedImmune, Inc. has completed enrollment in three Phase II trials to
evaluate its anti-T cell monoclonal antibody in psoriasis;
o GenMab A/S has announced that the FDA approved its investigational new
drug filing for HuMax-CD4 for psoriasis and the initiation of a Phase
II study; and
o other companies, including Medarex, Inc., are developing monoclonal
antibody or other products for treatment of inflammatory skin
disorders.
Currently, there are several companies with marketed biologics that are
approved for treating patients with rheumatoid arthritis:
o Immunex Corp. markets Enbrel,
o Amgen Inc. gained FDA approval for Kineret and
o Centocor Inc. is approved to market Remicade to rheumatoid arthritis
patients.
In addition to approved products, a number of companies are developing drugs
with a biologic mechanism of action for the treatment of rheumatoid arthritis.
These companies include Cambridge Antibody Technology Group plc, Biogen Inc.,
Celltech Group plc and others.
A number of companies are developing monoclonal antibodies targeting
cancers, which may prove more effective than ONYX-015 or the ING-1 antibody.
It is possible that one or more other companies may be developing one or
more products based on the same human protein as our NEUPREX(R) product, and
these product(s) may prove to be more effective than NEUPREX(R) or receive
regulatory approval prior to NEUPREX(R) or any BPI-derived ophthalmic product
developed by XOMA.
If We Do Business Internationally, We Will Be Subject To Additional Political,
Economic and Regulatory Uncertainties
We may not be able to successfully operate in any foreign market. We
believe that, because the pharmaceutical industry is global in nature,
international activities will be a significant part of our future business
activities and that, when and if we are able to generate income, a substantial
portion of that income will be derived from product sales and other activities
outside the United States. Foreign regulatory agencies often establish standards
different from those in the United States, and an inability to obtain foreign
regulatory approvals on a timely basis could put us at a competitive
disadvantage or make it uneconomical to proceed with a product's development.
International operations may be limited or disrupted by:
o imposition of government controls
13
o export license requirements
o political or economic instability
o trade restrictions
o changes in tariffs
o restrictions on repatriating profits
o withholding and other taxation and
o difficulties in staffing and managing international operations.
Also, our financial results could be significantly affected by factors such
as fluctuations in currency exchange rates or weak economic conditions in the
foreign markets in which we or our collaborators seek to operate.
Because We Are A Relatively Small Biopharmaceutical Company With Limited
Resources, We May Not Be Able To Attract And Retain Qualified Personnel, And The
Loss Of Key Personnel Could Delay Or Prevent Achieving Our Objectives
Our success in developing marketable products and achieving a competitive
position will depend, in part, on our ability to attract and retain qualified
scientific and management personnel, particularly in areas requiring specific
technical, scientific or medical expertise. There is intense competition for
such personnel. Our research, product development and business efforts would be
adversely affected by the loss of one or more of key members of our scientific
or management staff, particularly our executive officers: John L. Castello, our
Chairman of the Board, President and Chief Executive Officer; Patrick J.
Scannon, M.D., Ph.D., our Chief Scientific and Medical Officer and Senior Vice
President; Clarence L. Dellio, our Senior Vice President, Operations; Peter B.
Davis, our Vice President, Finance and Chief Financial Officer; and Christopher
J. Margolin, our Vice President, General Counsel and Secretary. We have
employment agreements with Mr. Castello, Dr. Scannon and Mr. Davis. We currently
have no key person insurance on any of our employees.
Because We Engage In Human Testing, We Are Exposed To An Increased Risk Of
Product Liability Claims
The testing and marketing of medical products entails an inherent risk of
allegations of product liability. We believe that we currently have adequate
levels of insurance for our clinical trials; however, in the event of one or
more large, unforeseen awards, such levels may not provide adequate coverage. We
will seek to obtain additional insurance, if needed, if and when our products
are commercialized; however, because we do not know when this will occur, we do
not know whether adequate insurance coverage will be available or be available
at acceptable costs. A significant product liability claim for which we were not
covered by insurance would have to be paid from cash or other assets. To the
extent we have sufficient insurance coverage, such a claim would result in
higher subsequent insurance rates.
We May Be Subject To Increased Risks Because We Are A
Bermuda Company
Alleged abuses by certain companies that have changed their legal domicile
from jurisdictions within the United States to Bermuda have created an
environment where, notwithstanding that we changed our legal
14
domicile in a transaction that was approved by our shareholders and fully
taxable to our company under U.S. law, we may be exposed to various prejudicial
actions, including:
o "blacklisting" of our common shares by certain pension funds,
o legislation restricting certain types of transactions, or
o punitive tax legislation.
We do not know whether any of these things will happen, but if implemented
one or more of them may have an adverse impact on our future operations or our
share price.
If You Were To Obtain A Judgment Against Us, It May Be Difficult To Enforce
Against Us Because We Are A Foreign Entity
We are a Bermuda company. All or a substantial portion of our assets may be
located outside the United States. As a result, it may be difficult for
shareholders and others to enforce in United States courts judgments obtained
against us. We have irrevocably agreed that we may be served with process with
respect to actions based on offers and sales of securities made hereby in the
United States by serving Christopher J. Margolin, c/o XOMA Ltd., 2910 Seventh
Street, Berkeley, California 94710, our United States agent appointed for that
purpose. We have been advised by our Bermuda counsel, Conyers Dill & Pearman,
that there is doubt as to whether Bermuda courts would enforce judgments of
United States courts obtained in (1) actions against XOMA or our directors and
officers that are predicated upon the civil liability provisions of the U.S.
securities laws or (2) original actions brought in Bermuda against XOMA or such
persons predicated upon the U.S. securities laws. There is no treaty in effect
between the United States and Bermuda providing for such enforcement, and there
are grounds upon which Bermuda courts may not enforce judgments of United States
courts. Certain remedies available under the United States federal securities
laws may not be allowed in Bermuda courts as contrary to that nation's policy.
Our Shareholder Rights Agreement Or Bye-laws May Prevent Transactions That Could
Be Beneficial To Our Shareholders And May Insulate Our Management From Removal
Our shareholder rights agreement could make it considerably more difficult
or costly for a person or group to acquire control of XOMA in a transaction that
our board of directors opposes.
Our bye-laws:
o require certain procedures to be followed and time periods to be met
for any shareholder to propose matters to be considered at annual
meetings of shareholders, including nominating directors for election
at those meetings;
o authorize our board of directors to issue up to 1,000,000 preference
shares without shareholder approval and to set the rights, preferences
and other designations, including voting rights, of those shares as
the board of directors may determine; and
o contain provisions, similar to those contained in the Delaware General
Corporation Law, that may make business combinations with interested
shareholders more difficult.
These provisions of our shareholders rights agreement and our bye-laws,
alone or in combination with each other, may discourage transactions involving
actual or potential changes of control, including transactions that otherwise
could involve payment of a premium over prevailing market prices to holders of
common
15
shares, could limit the ability of shareholders to approve transactions that
they may deem to be in their best interests and could make it considerably more
difficult for a potential acquiror to replace management.
Risks Relating To This Offering
The Actual Or Anticipated Resale By Millennium Of Our Common Shares That It
Purchases From Us Under The Investment Agreement Or Otherwise Owns Or Acquires
May Have An Adverse Impact On The Market Price Of Our Common Shares
The resale by Millennium through open market transactions or other means of
the common shares that it purchases from us under the investment agreement, that
we issue to Millennium upon conversion of the convertible note we have issued to
them or that it otherwise owns or acquires may, depending upon the timing of the
resales, depress the market price of our common shares. Moreover, as all the
common shares we sell to Millennium or issue upon conversion will be available
for immediate resale, the mere prospect of our sales to it could depress the
market price of our common shares. In addition, actual or anticipated downward
pressure on the market price of our common shares due to actual or anticipated
resales of our common shares by Millennium could cause some institutions or
individuals to engage in short sales of our common shares, which may itself
cause the market price of our common shares to decline.
Our Issuance Of Common Shares To Millennium Will Reduce The Percentage Equity
Ownership Of Our Existing Shareholders
Under our investment agreement with Millennium, we may issue to Millennium
up to $50.0 million worth of our common shares over the 30 months following the
effective date of the investment agreement on several predetermined closing
dates. The precise number of common shares that we will issue to Millennium over
the term of the investment agreement will depend on the market price of our
common shares during the period immediately preceding the applicable closing
date. Each issuance of common shares to Millennium pursuant to the investment
agreement will proportionately decrease our existing shareholders' percentage
ownership of our total outstanding equity interests.
16
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The following documents filed by XOMA with the SEC pursuant to the
Securities Exchange Act are "incorporated by reference" in this prospectus,
which means we can disclose important information to you by referring you to
these documents and they are considered to be a part of this prospectus:
(1) annual report on Form 10-K for the fiscal year ended December 31,
2001 (file no. 0-14710);
(2) quarterly reports on Form 10-Q for the quarterly periods ended
March 31, 2002 (file no. 0-14710) and June 30, 2002 (file no. 0-14710);
(3) current report on Form 8-K dated and filed on November 27, 2001,
as amended by amendments on Form 8-K/A dated and filed on December 13, 2001
and October 24, 2002, respectively (file no. 0-14710); and
(4) the description of the common shares in the registration statement
on Form 8-A dated and filed on May 21, 1999 under Section 12 of the
Securities Exchange Act, including any amendment or report for the purpose
of updating such description (registration no. 333-68045).
All documents filed by XOMA with the SEC pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act after the date of this prospectus and
before all of the common shares offered by this prospectus have been sold are
deemed to be incorporated by reference in, and to be part of, this prospectus
from the date any such document is filed.
Any statements contained in a document incorporated by reference in this
prospectus are 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 incorporated by reference in
this prospectus) modifies or supersedes such statement. Any statement so
modified or superseded is not deemed to constitute a part of this prospectus
except as so modified or superseded.
17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this prospectus are forward-looking in
nature, including those relating to the relative size of the Company's loss for
2002, the estimated levels of its expenses and revenues for the balance of 2002,
the sufficiency of its cash resources and the BLA filing time frame, as well as
other statements related to the progress and timing of product development and
present or future licensing or collaborative arrangements, or that otherwise
relate to future periods and other statements that are not historical facts. The
words "believe," "plan," "intend," "expect" and similar expressions are intended
to identify forward-looking statements. We caution you not to place undue
reliance on these forward-looking statements. They apply only as of the date of
this prospectus except that statements incorporated by reference from previously
filed reports apply as of the date made. The occurrence of the events described,
and the achievement of the intended results, depend on many events, some or all
of which are not predictable or not within our control. Actual results may
differ materially from those anticipated in any forward-looking statements. Many
risks and uncertainties are inherent in the biopharmaceutical industry. Others
are more specific to our business. Many of the significant risks related to our
business are described in this prospectus. These include, among others, the
actual loss for 2002 could be higher depending on revenues from licensees and
collaborators, the size and timing of expenditures and whether there are
unanticipated expenditures; the sufficiency of cash resources could be shortened
if expenditures are made earlier or in larger amounts than anticipated or are
unanticipated or if funds are not available; and the BLA filing could be delayed
by unexpected safety or efficacy issues or additional time requirements for data
analysis, BLA preparation, discussions with the FDA, enrollment in clinical
studies, additional clinical studies or manufacturing process modifications.
These and other risks, including those related to changes in the status of the
existing collaborative relationships, availability of additional licensing or
collaboration opportunities, the timing or results of pending and future
clinical trials, the ability of collaborators and other partners to meet their
obligations, market demand for products, actions by the Food and Drug
Administration or the U.S. Patent and Trademark Office, uncertainties regarding
the status of biotechnology patents, uncertainties as to the costs of protecting
intellectual property and risks associated with our status as a Bermuda company
are described in more detail in "Risk Factors." We undertake no obligation to
publicly update any forward-looking statements, regardless of any new
information, future events or other occurrences. We advise you, however, to
consult any additional disclosures we make in our reports to the SEC on Forms
10-K, 10-Q and 8-K.
--------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these common shares or our
solicitation of your offer to buy the common shares in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made hereunder after the date of this prospectus should imply that
the information contained in this prospectus or the affairs of XOMA have not
changed since the date of this prospectus.
18
PRICE RANGE OF COMMON SHARES AND DIVIDEND INFORMATION
XOMA's common shares (such common shares and the common stock of our
predecessor Delaware corporation are referred to in this prospectus as the
common shares) trade on the Nasdaq National Market under the symbol "XOMA." The
following table sets forth the quarterly range of high and low reported sale
prices of the common shares on the Nasdaq National Market for the periods
indicated (in United States dollars):
High Low
---- ---
2000:
First Quarter $16.000 $2.750
Second Quarter 10.125 3.125
Third Quarter 14.750 4.000
Fourth Quarter 15.250 7.750
2001:
First Quarter $13.875 $6.031
Second Quarter 17.750 5.313
Third Quarter 17.090 6.740
Fourth Quarter 10.500 6.400
2002:
First Quarter $12.190 $7.510
Second Quarter 8.510 3.000
Third Quarter 7.200 3.250
Fourth Quarter (through 6.250 5.080
November 1)
On November 1, 2002 the last reported sale price of the common shares as
reported on the Nasdaq National Market was U.S.$5.750 per share. As of November
1, 2002, there were approximately 3,150 record holders of XOMA's common shares.
XOMA has not paid dividends on its common equity. XOMA currently does not
intend to pay dividends and intends to retain any earnings for use in its
business and the financing of its capital requirements for the foreseeable
future. The payment of any future cash dividends on XOMA's common shares will
necessarily be dependent upon the earnings and financial needs of XOMA, along
with applicable legal and contractual restrictions.
19
USE OF PROCEEDS
We intend to use most of the net proceeds from our sale of the common
shares to the selling shareholders under the investment agreement for the
development of two of Millennium's biotherapeutic agents for certain vascular
inflammation indications pursuant to our collaboration agreement with
Millennium. Otherwise, we intend to use the net proceeds for general corporate
purposes, including current research and development projects, the development
of new products or technologies, equipment acquisitions, general working capital
and operating expenses.
We have not determined the amounts we plan to spend on any of the areas
listed above or the timing of these expenditures. As a result, our management
will have broad discretion to allocate the net proceeds from our sale of the
common shares to the selling shareholders. Pending application of the net
proceeds as described above, we intend to invest the net proceeds in short-term,
investment-grade, interest-bearing securities.
We will not receive any proceeds from the sale of the common shares by the
selling shareholders to you. To the extent shares are issued upon conversion of
the convertible note, we will benefit from the resulting cancellation of
indebtedness. The $5.0 million convertible subordinated note is convertible at
our option into our common shares.
20
SELLING SHAREHOLDERS
The selling shareholders are Millennium Pharmaceuticals, Inc. and its
wholly-owned subsidiary, mHoldings Trust, a Massachusetts business trust. On
November 26, 2001, Millennium and XOMA announced an agreement in which they will
collaborate to develop two of Millennium's biotherapeutic agents for certain
vascular inflammation indications. As previously announced, under an investment
agreement, Millennium has committed to purchase, at our option and subject to
certain conditions under the investment agreement, up to $50.0 million worth of
our common shares over the 30 months following the effective date of the
investment agreement on several predetermined closing dates, through a
combination of convertible debt and equity.
The following table sets forth certain information regarding the ownership
of common shares by the selling shareholders as of November 1, 2002, and the
number of common shares covered by this prospectus:
Ownership
Ownership of common shares
of common shares after the offering (assuming all
prior to the offering shares offered are sold)(1)
----------------------- --------------------------------
Number
Name of Number of Shares Number of Percent
Selling Shareholders of Shares Offered Shares of Class
- ----------------------------------- ----------------------- -------------- --------------- -------------
Millennium Pharmaceuticals, Inc. 5,000,000(3) 5,000,000(4) 0 0%
and its wholly-owned subsidiary,
mHoldings Trust(2)
(1) For the purposes of this filing, we have assumed that all of the shares
included in this registration statement will be sold; however, there is no
contractual or other arrangement requiring any of the shares to be sold.
(2) The management of Millennium has voting and investment control over the
common shares.
(3) Includes shares issuable upon conversion of the entire amount of principal
outstanding ($5.0 million), plus accrued interest, under a convertible
subordinated note held by Millennium and convertible at XOMA's option. Also
includes common shares issuable to the selling shareholders, at our option
and subject to certain conditions under the investment agreement, that we
are registering for resale by the selling shareholders under this
registration statement. We are registering 5,000,000 common shares based in
part on our good faith estimate of the maximum number of common shares we
may issue to Millennium under the investment agreement and upon conversion
of the convertible debt.
(4) Consists of shares issuable directly to Millennium by XOMA either for cash
pursuant to the investment agreement between the parties or upon conversion
at maturity of or upon an event of default under the $5.0 million
convertible subordinated note of XOMA held by Millennium.
We are registering 5,000,000 common shares based in part on our good faith
estimate of the maximum number of common shares we may issue to Millennium under
the investment agreement and upon conversion of the convertible debt. If the
price of our common shares increases sufficiently, the number of common shares
we are registering for issuance may be higher than the number of common shares
we actually issue to Millennium under the investment agreement. In such case,
the number of shares resold by Millennium under this prospectus would be less
than the number of shares registered for resale. On the other hand, if the price
of our common shares decreases and the number of common shares we actually issue
to Millennium un-
21
der the investment agreement is greater than the number of shares we are now
registering, we may need to file a new registration statement with the
Securities and Exchange Commission, which will need to become effective prior to
our completing the sales contemplated by the investment agreement. The 5,000,000
common shares that we are registering consist of shares to be issued directly to
Millennium by XOMA either for cash pursuant to the investment agreement between
the parties or upon conversion at maturity of or upon an event of default under
the $5.0 million convertible subordinated note of XOMA held by Millennium.
As of November 1, 2002, the selling shareholders do not directly hold any
of our common shares. Other than their obligation to purchase common shares at
subsequent closing dates under the investment agreement (at our option) and upon
conversion of the $5.0 million convertible note (at our option), the selling
shareholders have no commitments or arrangements to purchase any of our common
shares. Notwithstanding that the conversion by the selling shareholders of the
$5.0 million convertible note is at our option, the selling shareholders may be
deemed to be beneficial owners of the approximately 891,145 common shares
issuable upon the conversion of the convertible note as if the convertible note
had been converted on November 1, 2002. Assuming the selling shareholders sell
all of the common shares that they may acquire under the investment agreement
and do not otherwise acquire our common shares, they will not own any of our
common shares after their sale of the common shares to you.
Material Terms Of Investment Agreement
On November 26, 2001, Millennium and XOMA entered into an investment
agreement which committed Millennium to purchase, at our option and subject to
the conditions described in the following paragraph, up to $50.0 million worth
of our common shares over the 30 months following the effective date of the
investment agreement. Of the up to $50.0 million worth of our common shares,
$5.0 million worth (and accrued interest) may be issued at our option upon
conversion of a convertible subordinated note already issued to Millennium, the
entire principal amount of which is currently outstanding. At four subsequent
closings, we may issue up to $7.5 million, $7.5 million, $15.0 million and $15.0
million worth of our common shares, respectively. At each closing, the precise
number of shares to be purchased by Millennium will be determined using a
formula based on the average of certain sale prices per common share as reported
on the Nasdaq National Market for a specified period of time prior to the
applicable closing date (subject to certain adjustments and limitations). The
formula is intended to reflect the current market price per common share at the
time of each closing, without any discount or premium.
The obligations of Millennium to purchase the common shares that we wish to
sell at each closing will be subject to customary closing conditions, including
the delivery of legal opinions and certificates our officers and updated
financial information, the continued listing of our common shares on the Nasdaq
National Market or the New York or American Stock Exchanges, the continued
effectiveness of the registration statement that includes this prospectus and
the continuation of our collaboration agreement with Millennium.
We have agreed to register the resale of the common shares that we may sell
to Millennium at each closing and the common shares that we may issue to
Millennium upon conversion of the convertible debt. The registration statement
that includes this prospectus is intended to satisfy these registration
obligations. We will consummate the first direct sale of common shares to
Millennium after the registration statement that includes this prospectus is
declared effective.
The 5,000,000 shares registered under the registration statement that
includes this prospectus would have represented 6.6% of our outstanding common
shares as of November 1, 2002, after giving effect to their issuance. Based on
the current market price of our common shares, the investment agreement gives us
the option to require the selling shareholders to purchase an aggregate of up to
approximately 8,717,232 common shares (assuming conversion of the convertible
subordinated note).
22
Conversion Provisions Of Convertible Subordinated Note
The principal and accrued interest on the convertible subordinated note may
be converted in whole (but not in part) at our election upon maturity into our
common shares. The number of shares into which the convertible subordinated note
may be converted will be determined using a formula based on the average of
certain sale prices per common share as reported on the Nasdaq National Market
for a specified period of time prior to the conversion date (subject to certain
adjustments and limitations). The formula is intended to reflect the current
market price per common share at the time of conversion, without any discount or
premium. Based on the current market price of our common shares, we would be
entitled to issue an aggregate of approximately 891,145 common shares in full
payment of the convertible subordinated notes.
If we do not elect to convert the convertible subordinated note into common
shares, all outstanding principal and all accrued interest must be paid to
Millennium in cash on the maturity date, unless otherwise agreed.
In addition to customary restrictions on our ability to convert, we will
not be entitled to convert any portion of the convertible subordinated note or
the accrued interest unless there is on the conversion date an effective
registration statement covering resale of all of the common shares into which
the principal of the convertible note and all accrued interest would convert. If
this is not the case at any time prior to its maturity date, then the
convertible subordinated note will remain outstanding until its maturity date
and, if no such effective registration statement is then in place, we will be
required to repay all outstanding principal and accrued interest in cash on the
maturity date. The registration statement that includes this prospectus is
intended to satisfy these registration obligations.
23
DESCRIPTION OF SHARE CAPITAL
The following statements with respect to our share capital are subject to
the detailed provisions of our memorandum of continuance and bye-laws. These
statements do not purport to be complete and, while we believe the descriptions
of the material provisions of the memorandum of continuance and bye-laws
incorporated by reference are accurate statements with respect to such material
provisions, such statements are subject to the detailed provisions in the
memorandum of continuance and bye-laws, to which reference is hereby made for a
full description of such provisions.
COMMON SHARES
General
The memorandum of continuance and the bye-laws provide that our authorized
common share capital is limited to 135,000,000 common shares, par value
U.S.$.0005 per share. As of November 1, 2002, there were 70,341,504 common
shares outstanding.
Voting
The holders of common shares are entitled to one vote per share. All
actions submitted to a vote of shareholders shall be voted on by the holders of
common shares, voting together as a single class (together with the Series A
preference shares (as described below), if any), except as provided by law.
Dividends
Holders of common shares are entitled to participate, on a share for share
basis, with the holders of any other common shares outstanding, with respect to
any dividends declared by our board of directors, subject to the rights of
holders of preference shares. Dividends will generally be payable in U.S.
dollars. We have not paid cash dividends on the common shares. We currently do
not intend to pay dividends and intend to retain any of our earnings for use in
our business and the financing of our capital requirements for the foreseeable
future. The payment of any future cash dividends on the common shares is
necessarily dependent upon our earnings and financial needs, along with
applicable legal and contractual restrictions.
Liquidation
On a liquidation of XOMA, holders of common shares will be entitled to
receive any assets remaining after the payment of our debts and the expenses of
the liquidation, subject to such special rights as may be attached to any other
class of shares.
Redemption
The common shares are not subject to redemption either by us or the holders
thereof.
Variation of Rights
Under our bye-laws, if at any time our share capital is divided into
different classes of shares, the rights attached to any class (unless otherwise
provided by the terms of the issue of the shares of that class) may be varied
with the consent in writing of the holders of a majority of the issued shares of
that class either in writing or with the sanction of a resolution passed at a
separate general meeting.
24
PREFERENCE SHARES
General
Under our memorandum of continuance and bye-laws, we have the authority to
issue 1,000,000 preference shares, par value U.S.$.05 per share. Of these,
135,000 preference shares have been designated Series A Cumulative Preference
Shares and 7,500 preference shares have been designated Convertible Preference
Shares, Series B. Under our bye-laws, subject to the special rights attaching to
any class of our shares not being varied and to any resolution approved by the
holders of 75% of the issued shares entitled to vote in respect thereof, our
board of directors may establish one or more classes or series of preference
shares having the number of shares, designations, relative voting rights,
dividend rates, liquidation and other rights, preferences and limitations that
the board of directors fixes without any shareholder approval.
The Series A Preference Shares
There are no Series A preference shares outstanding. Pursuant to the rights
of the Series A preference shares, subject to the rights of holders of any
shares of any series of preference shares ranking prior and superior, the
holders of Series A preference shares are entitled to receive, when, as and if
declared by our board of directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year, commencing on the first dividend payment
date after the first issuance of a share or fraction of a share of Series A
preference shares, in an amount per share equal to the greater of (a) U.S.$1.00
or (b) 1,000 times the aggregate per share amount of all cash dividends, plus
1,000 times the aggregate per share amount of all non-cash dividends or other
distributions, other than a dividend payable in common shares, declared on the
common shares since the immediately preceding dividend payment date, or, with
respect to the first dividend payment date, since the first issuance of Series A
preference shares.
In addition to any other voting rights required by law, holders of Series A
preference shares shall have the right to vote on all matters submitted to a
vote of our shareholders with each share of Series A preference shares entitled
to 1,000 votes. Except as otherwise provided by law, holders of Series A
preference shares and holders of common shares shall vote together as one class
on all matters submitted to a vote of our shareholders.
Unless otherwise provided in the rights attaching to a subsequently
designated series of our preference shares, the Series A preference shares shall
rank junior to any other series of preference shares as to the payment of
dividends and distribution of assets on liquidation, dissolution or winding-up
and shall rank senior to the common shares. Upon any liquidation, dissolution or
winding-up of XOMA, no distributions shall be made to holders of shares ranking
junior to the Series A preference shares unless, prior thereto, the holders of
Series A preference shares shall have received an amount equal to accrued and
unpaid dividends and distributions, whether or not declared, to the date of such
payment, plus an amount equal to the greater of (1) U.S.$100.00 per share or (2)
an aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of common shares or to the holders of shares
ranking on parity with the Series A preference shares, except distributions made
ratably on the Series A preference shares and all other such parity shares in
proportion to the total amount to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding-up.
If we shall enter into any consolidation, amalgamation, merger, combination
or other transaction in which common shares are exchanged for or changed into
cash, other securities and/or any other property, then any Series A preference
shares outstanding shall at the same time be similarly exchanged or changed in
an amount per share equal to 1,000 times the aggregate amount of cash,
securities and/or other property, as the case may be, into which or for which
each common share is changed or exchanged.
The Series A preference shares shall not be redeemable.
25
The Series B Preference Shares
There are no Series B preference shares outstanding. The 7,500 Series B
preference shares have been designated for issuance upon conversion of the
convertible subordinated loans to us made and to be made by Genentech in
connection with the funding of the our development costs for hull24. Such loans
are and will be convertible into Series B preference shares upon the occurrence
of certain events relating to certain regulatory approvals, payment defaults,
prepayments and other circumstances. Pursuant to the rights of the Series B
preference shares, the holders of Series B preference shares will not be
entitled to receive any dividends on the Series B preference shares.
The Series B preference shares will rank senior with respect to rights on
liquidation, winding-up and dissolution of XOMA to all classes of common shares.
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
XOMA, holders of Series B preference shares will be entitled to receive $10,000
per share of Series B preference shares before any distribution is made on the
common shares. The holders of Series B preference shares will have no voting
rights, except as required under Bermuda law.
The holders of Series B preference shares will have the right to convert
Series B preference shares into common shares at a conversion price equal to the
current market price of the common shares (determined as provided below). The
current market price will be determined (a) for Series B preference shares
issued in connection with a conversion of one or more of the convertible
subordinated loans upon certain regulatory approvals, payment defaults or in
certain other circumstances, as of the first date on which such a conversion
occurs, and (b) for Series B preference shares issued in connection with certain
prepayments of one or more of the convertible subordinated loans or a conversion
thereof in certain other circumstances, as of the date of the issuance of such
Series B preference shares.
The Series B preference shares will be automatically converted into common
shares at its then effective conversion rate immediately upon the transfer by
the initial holder to any third party which is not an affiliate of such holder.
We will have the right, at any time and from time to time, to redeem any or
all Series B preference shares for cash in an amount equal to the conversion
price multiplied by the number of common shares into which each such share of
Series B preference shares would then be convertible.
OUTSTANDING WARRANTS
XOMA issued 250,000 common stock purchase warrants to Incyte in July of
1998, of which 125,000 remain outstanding. Each Incyte warrant outstanding
entitles the holder thereof to purchase one common share, subject to
anti-dilution adjustments. A holder may exercise the Incyte warrants at an
exercise price of U.S.$6.00 per share on or before July 9, 2008 or earlier upon
the related license becoming fully paid up. Incyte is the holder of these
warrants and received them as part of the consideration for the grant to XOMA of
an exclusive license to all of Incyte's patent rights relating to BPI.
XOMA issued 379,000 warrants to purchase common shares in January of 1999
and March of 1999, of which 175,000 remain outstanding. Each January and March
1999 warrant entitles the holder thereof to purchase one common share, subject
to anti-dilution adjustments. A holder may exercise the January and March 1999
warrants at an exercise price of U.S.$5.85 per share on or before January 29,
2004. Advantage Fund II Ltd. and Koch Investment Group Limited are the holders
of these warrants and received them in connection with their purchase of our
common shares in a private placement in January of 1999.
XOMA issued 150,000 warrants to purchase common shares in July of 1999.
Each July 1999 warrant entitles the holder thereof to purchase one common share,
subject to anti-dilution adjustments. A holder may exercise the July 1999
warrants at an exercise price of U.S.$5.75 per share on or before July 21, 2004.
Sutro & Co. Incorporated and Arnhold and S. Bleichroeder, Inc. are the holders
of these warrants and received them
26
as consideration for their services as placement agents for a private placement
of our common shares in July of 1999.
XOMA issued 250,000 warrants to purchase common shares in February of 2000.
Each February 2000 warrant entitles the holder thereof to purchase one common
share, subject to anti-dilution adjustments. A holder may exercise the February
2000 warrants at an exercise price of U.S.$5.00 per share on or before February
11, 2005. Sutro & Co. Incorporated and Arnhold and S. Bleichroeder, Inc. are the
holders of these warrants and received them as consideration for their services
as placement agents for a private placement of our common shares in February of
2000.
All of the warrants described above were issued in reliance on the
exemption from registration provided in Section 4(2) of the Securities Act. None
of the warrants described above have been registered under the Securities Act
and none may be transferred except pursuant to an effective registration
statement under the Securities Act or pursuant to an exception from registration
thereunder. Additionally, all of the warrants contain certain restrictions on
their transfer. XOMA is not obligated and does not intend to register the
warrants under the Securities Act.
PLAN OF DISTRIBUTION
Any or all of the common shares being offered by this prospectus may be
sold from time to time to purchasers directly by the selling shareholders or by
pledgees, donees, transferees or other successors in interest. Alternatively,
the selling shareholders may from time to time offer any or all of the common
shares through underwriters, brokers, dealers or agents who may receive
compensation in the form of underwriting discounts, concessions or commissions
from such selling shareholder and/or the purchasers of common shares for whom
they may act. The selling shareholders, and any such underwriters, brokers,
dealers or agents that participate in the distribution of common shares, are
underwriters, and any profit on the sale of the common shares by them and any
discounts, commissions or concessions received by them may be deemed to be
underwriting discounts and commissions under the Securities Act. Any such common
shares may be so offered or sold in the open market, on the Nasdaq National
Market or such other exchange or market where our common shares are then traded,
in privately negotiated transactions (subject to limitations imposed by the
investment agreement), in an underwritten offering, in block trades, to a broker
or dealer for its account in ordinary brokerage transactions, or a combination
of such methods. The selling shareholders will make such sales at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. To the extent required, the name of the selling
shareholder, the number of common shares to be sold, the purchase price, the
public offering price, the name of any agent, dealer, broker or underwriter and
any applicable commission or discount or other items constituting compensation
or indemnification arrangements with respect to a particular offering will be
set forth in an accompanying prospectus supplement. These and other matters may
also be addressed in one or more post-effective amendments to the registration
statement of which this prospectus is a part. XOMA will receive no proceeds from
the sale by the selling shareholders of the common shares offered by this
prospectus.
In connection with distributions of the common shares, and subject to
limitations imposed by the investment agreement, the selling shareholders may
enter into option or other transactions with broker-dealers that involve the
delivery of the common shares to the broker-dealers, which may then resell or
otherwise transfer such common shares. The selling shareholder also may loan or
pledge the common shares to a broker-dealer and the broker-dealer may sell the
common shares so loaned or upon a default may sell or otherwise transfer the
pledged common shares.
In addition, the selling shareholders and any other persons participating
in the sale or distribution of the shares offered by this prospectus will be
subject to liability under the federal securities laws and must comply with the
requirements of the Securities Act and the Securities Exchange Act, including
Rule 10b-5 and Regulation M under the Securities Exchange Act. These rules and
regulations may limit the timing of purchases and sales of our common shares by
the selling shareholders or such other persons. Under these rules and
regulations, the selling shareholders and such other persons:
27
o may not engage in any stabilization activity in connection with our
common shares;
o must furnish each broker which offers our common shares covered by
this prospectus with the number of copies of this prospectus and any
prospectus supplement which are required by such broker; and
o may not bid for or purchase any of our common shares or attempt to
induce any person to purchase any of our common shares other than as
permitted under the Securities Exchange Act.
These restrictions may affect the marketability of our common shares by the
selling shareholders.
The selling shareholders have agreed, subject to certain conditions, to a
restriction on their sales in the public market based on the trading volume of
our common shares and that they will not sell shares other than in the public
market without our prior written consent.
To permit the selling shareholders to resell our common shares purchased by
it under the investment agreement, we agreed to register those shares and to
maintain that registration. We have also agreed with the selling shareholders
that, subject to limited exceptions for specified time periods, we will prepare
and file any amendments and supplements to this prospectus and the registration
statement of which it is a part as may be necessary to keep the registration
statement current and effective until:
o the date on which the selling shareholders may sell all of the common
shares then held by the selling shareholders that they purchased from
us under the investment agreement without restriction by the volume
limitations of Rule 144(e) of the Securities Act; or
o the date after which all of our common shares held by the selling
shareholders that are covered by the registration statement have been
sold by the selling shareholders under a registration statement or
pursuant to Rule 144.
We have agree to indemnify and hold harmless the selling shareholders, any
broker-dealer named in the registration statement of which this prospectus is a
part and their respective controlling persons against certain liabilities,
including liabilities under the Securities Act, which may be based upon, among
other things, any untrue statement or alleged untrue statement of a material
fact contained in or incorporated by reference into the registration statement
or any omission or alleged omission to state in the registration statement or
any document incorporated by reference into the registration statement a
material fact required to be stated therein or necessary to make the statements
therein not misleading, unless made or omitted in reliance upon and in
conformity with written information provided to us by the selling shareholders
or such broker-dealer.
All expenses incurred by XOMA in complying with the registration rights
granted to the selling shareholder pursuant to which the registration statement
to which this prospectus relates has been filed, estimated to be approximately
$117,000, will be borne by XOMA. As and when XOMA is required to update this
prospectus, it may incur additional expenses in excess of this estimated amount.
Any common shares offered by this prospectus that qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under such rule rather than
pursuant to this prospectus.
LEGAL OPINION
The validity of the common shares to which this prospectus relates has been
passed upon for XOMA by Conyers Dill & Pearman, located in Hamilton, Bermuda.
28
EXPERTS
The consolidated financial statements of XOMA Ltd. appearing in XOMA Ltd.'s
annual report (Form 10-K) for the year ended December 31, 2001 have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN GET MORE INFORMATION
This prospectus is part of a registration statement that we have filed with
the SEC. The registration statement contains exhibits and other information not
included in this prospectus. At your request, we will provide you, without
charge, a copy of any documents incorporated by reference in, or included as
exhibits to, our registration statement. If you would like more information,
write or call us at:
XOMA Ltd.
2910 Seventh Street
Berkeley, CA 94710
Telephone: (510) 204-7273
XOMA files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
and other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
room. XOMA's SEC filings are also available to the public on the SEC Internet
site at http://www.sec.gov.
29
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with this offering are as follows:
Amount
to be Paid
----------
SEC registration fee ........................................... $ 2,567
Nasdaq fee ..................................................... 22,500
Legal fees and expenses (including Blue Sky fees and expenses).. 75,000
Accounting fees and expenses ................................... 15,000
Miscellaneous .................................................. 1,933
--------
Total ................................................. $117,000
Item 15. Indemnification of Directors and Officers
Under Bermuda law, a company is permitted to indemnify any officer or
director, out of the funds of the company, against (i) any liability incurred by
him or her in defending any proceedings, whether civil or criminal, in which
judgment is given in his or her favor, or in which he or she is acquitted, or in
connection with any application under relevant Bermuda legislation in which
relief from liability is granted to him or her by the court and (ii) any loss or
liability resulting from negligence, default, breach of duty or breach of trust,
save for his or her fraud and dishonesty.
The bye-laws of XOMA provide for the indemnity by XOMA of the officers,
directors and employees of XOMA to the fullest extent permitted by law.
Expenses (including attorneys' fees) incurred by an officer or director of
XOMA in defending any civil, criminal, administrative or investigative action,
suit or proceeding shall be paid by XOMA 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 is not entitled to be indemnified by XOMA pursuant to the
Companies Act 1981 of Bermuda.
An officer or director of XOMA shall not be personally liable to XOMA or
its shareholders for monetary damages for any breach of fiduciary duty as a
director or officer, except to the extent that such limitation is prohibited by
the Companies Act 1981 of Bermuda.
The indemnification and advancement of expenses and the limitation of
liability provided by the bye-laws shall not be deemed exclusive of any other
rights which any officer, director or employee, as such, may have or hereafter
acquire under the Companies Act 1981 of Bermuda, any other provision of the
bye-laws, or any agreement or otherwise. Any repeal or modification of the
aforementioned provisions of the bye-laws shall not adversely affect any right
or protection existing at the time of such repeal or modification.
II-1
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Page
------ ----
3.1 Memorandum of Continuance of XOMA Ltd. (Exhibit
3.4) (1)
3.2 Bye-Laws of XOMA Ltd. (Exhibit 3.5)
4.1 Amended and Restated Shareholder Rights
Agreement dated as of October 27, 1993 and
amended and restated as of December 31, 1998 by
and among XOMA and ChaseMellon Shareholder
Services, L.L.C. as Rights Agent (Exhibit 4.1)
(2)
4.2 Form of Resolution Regarding Preferences and
Rights of Series A Preference Shares (Exhibit
4.2) (1)
4.3 Form of Resolution Regarding Preferences and
Rights of Series B Preference Shares (Exhibit
4.3) (1)
4.4 Form of Common Stock Purchase Warrant (Incyte
Warrants) (Exhibit 2) (3)
4.5 Form of Common Share Purchase Warrant (January
and March 1999 Warrants) (Exhibit 5) (4)
4.6 Form of Common Share Purchase Warrant (July
1999 Warrants) (Exhibit 4) (5)
4.7 Form of Common Share Purchase Warrant (2000
Warrants) (Exhibit 4) (6)
5.1 Opinion of Conyers Dill & Pearman
10.1 Investment Agreement dated as of November 26,
2001 by and among XOMA, Millennium
Pharmaceuticals, Inc. and mHoldings Trust (with
certain confidential information omitted, which
omitted information is the subject of a
confidential treatment request and has been
filed separately with the Securities and
Exchange Commission) (7)
10.2 Registration Rights Agreement dated as of
November 26, 2001 by and among XOMA, Millennium
Pharmaceuticals, Inc. and mHoldings Trust (with
certain confidential information omitted, which
omitted information is the subject of a
confidential treatment request and has been
filed separately with the Securities and
Exchange Commission) (8)
10.3 Convertible Subordinated Promissory Note dated
November 26, 2001 (with certain confidential
information omitted, which omitted information
is the subject of a confidential treatment
request and has been filed separately with the
Securities and Exchange Commission) (8)
II-2
Exhibit
Number Page
------ ----
10.3A Amendment No. 1 to Convertible Subordinated
Promissory Note dated November 5, 2002.
23.1 Consent of Ernst & Young LLP, Independent
Auditors
23.3 Consent of Conyers Dill & Pearman (included in
Exhibit 5.1)
24.1 Power of Attorney
- --------------------
(1) Incorporated by reference to the referenced exhibit to XOMA's Registration
Statement on Form S-4 filed November 27, 1998, as amended (File No.
333-68045).
(2) Incorporated by reference to the referenced exhibit to XOMA's Registration
Statement on Form 8-A filed May 21, 1999 (File No. 0-14710).
(3) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 9, 1998 filed July 16, 1998 (File No.
0-14710).
(4) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated January 28, 1999 filed January 29, 1999, as
amended (File No. 0-14710).
(5) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 23, 1999 filed July 26, 1999 (File No.
0-14710).
(6) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated February 11, 2000 filed February 14, 2000 (File
No. 0-14710).
(7) Incorporated by reference to the referenced exhibit to XOMA's Amendment No.
2 to Current Report on Form 8-K/A dated and filed October 24, 2002 (File
No. 0-14710).
(8) Incorporated by reference to the referenced exhibit to XOMA's Amendment No.
1 to Current Report on Form 8-K/A dated and filed December 13, 2001 (File
No. 0-14710).
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, indi-
II-3
vidually 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;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in the 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 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, 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.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 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 herein, and the offering of such securities
at that 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 foregoing provisions, 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 Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
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 is 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.
II-4
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 Berkeley, State of California, on November 6, 2002.
XOMA LTD.
By: /s/ John L. Castello
--------------------------------------------
Name: John L. Castello
Title: Chairman of the Board,
President and Chief
Executive Officer
II-5
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John L. Castello and Christopher J.
Margolin, and each of them, 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) and supplements to this registration
statement, and to file the same, with the SEC and the Bermuda Registrar of
Companies, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
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
--------- ----- ----
Chairman of the Board, President and Chief November 6, 2002
Executive Officer (Principal Executive
/s/ John L. Castello Officer)
- -------------------------------
John L. Castello
Chief Scientific and Medical Officer and November 6, 2002
/s/ Patrick J. Scannon Director
- -------------------------------
Patrick J. Scannon
Vice President, Finance and Chief Financial November 6, 2002
Officer (Principal Financial and Accounting
/s/ Peter B. Davis Officer)
- -------------------------------
Peter B. Davis
/s/ James G. Andress Director November 6, 2002
- -------------------------------
James G. Andress
/s/ William K. Bowes, Jr. Director November 6, 2002
- -------------------------------
William K. Bowes, Jr.
/s/ Arthur Kornberg Director November 6, 2002
- -------------------------------
Arthur Kornberg
/s/ Steven C. Mendell Director November 6, 2002
- -------------------------------
Steven C. Mendell
/s/ W. Denman Van Ness Director November 6, 2002
- -------------------------------
W. Denman Van Ness
/s/ Patrick J. Zenner Director November 6, 2002
- -------------------------------
Patrick J. Zenner
II-6
EXHIBIT INDEX
Exhibit
Number Page
------ ----
3.1 Memorandum of Continuance of XOMA Ltd. (Exhibit
3.4) (1)
3.2 Bye-Laws of XOMA Ltd. (Exhibit 3.5)
4.1 Amended and Restated Shareholder Rights
Agreement dated as of October 27, 1993 and
amended and restated as of December 31, 1998 by
and among XOMA and ChaseMellon Shareholder
Services, L.L.C. as Rights Agent (Exhibit 4.1)
(2)
4.2 Form of Resolution Regarding Preferences and
Rights of Series A Preference Shares (Exhibit
4.2) (1)
4.3 Form of Resolution Regarding Preferences and
Rights of Series B Preference Shares (Exhibit
4.3) (1)
4.4 Form of Common Stock Purchase Warrant (Incyte
Warrants) (Exhibit 2) (3)
4.5 Form of Common Share Purchase Warrant (January
and March 1999 Warrants) (Exhibit 5) (4)
4.6 Form of Common Share Purchase Warrant (July
1999 Warrants) (Exhibit 4) (5)
4.7 Form of Common Share Purchase Warrant (2000
Warrants) (Exhibit 4) (6)
5.1 Opinion of Conyers Dill & Pearman
10.1 Investment Agreement dated as of November 26,
2001 by and among XOMA, Millennium
Pharmaceuticals, Inc. and mHoldings Trust (with
certain confidential information omitted, which
omitted information is the subject of a
confidential treatment request and has been
filed separately with the Securities and
Exchange Commission) (7)
10.2 Registration Rights Agreement dated as of
November 26, 2001 by and among XOMA, Millennium
Pharmaceuticals, Inc. and mHoldings Trust (with
certain confidential information omitted, which
omitted information is the subject of a
confidential treatment request and has been
filed separately with the Securities and
Exchange Commission) (8)
10.3 Convertible Subordinated Promissory Note dated
November 26, 2001 (with certain confidential
information omitted, which omitted information
is the subject of a confidential treatment
request and has been filed separately with the
Securities and Exchange Commission) (8)
Exhibit
Number Page
------ ----
10.3A Amendment No. 1 to Convertible Subordinated
Promissory Note dated November 5, 2002.
23.1 Consent of Ernst & Young LLP, Independent
Auditors
23.3 Consent of Conyers Dill & Pearman (included in
Exhibit 5.1)
24.1 Power of Attorney
- --------------------
(1) Incorporated by reference to the referenced exhibit to XOMA's Registration
Statement on Form S-4 filed November 27, 1998, as amended (File No.
333-68045).
(2) Incorporated by reference to the referenced exhibit to XOMA's Registration
Statement on Form 8-A filed May 21, 1999 (File No. 0-14710).
(3) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 9, 1998 filed July 16, 1998 (File No.
0-14710).
(4) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated January 28, 1999 filed January 29, 1999, as
amended (File No. 0-14710).
(5) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 23, 1999 filed July 26, 1999 (File No.
0-14710).
(6) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated February 11, 2000 filed February 14, 2000 (File
No. 0-14710).
(7) Incorporated by reference to the referenced exhibit to XOMA's Amendment No.
2 to Current Report on Form 8-K/A dated and filed October 24, 2002 (File
No. 0-14710).
(8) Incorporated by reference to the referenced exhibit to XOMA's Amendment No.
1 to Current Report on Form 8-K/A dated and filed December 13, 2001 (File
No. 0-14710).
-2-
EXHIBIT 5.1
[Letterhead of Conyers Dill & Pearman]
6 November 2002
XOMA Ltd.
2910 Seventh Street
Berkeley, California 94710
USA
Dear Sirs
XOMA Ltd. (the "Company")
We have acted as special legal counsel in Bermuda to the Company in connection
with the Registration Statement on Form S-3 (the "Registration Statement", which
term does not include any other instrument or agreement whether or not
specifically referred to therein or attached as an exhibit or schedule thereto)
filed with the U.S. Securities and Exchange Commission (the "Commission") on 6
November 2002 relating to the registration under the U.S. Securities Act of
1933, as amended, of an aggregate of 5,000,000 common shares par value US$.0005
per share (the "Common Shares"), including $5.0 million worth of common shares
issuable upon the conversion of the convertible subordinated promissory note
issued by the Company pursuant to the Investment Agreement (as defined below).
For the purposes of giving this opinion, we have examined the following
documents:
(i) a facsimile copy of an Investment Agreement (the "Investment Agreement",
which term does not include any other instrument or agreement whether or
not specifically referred to therein or attached as an exhibit or schedule
thereto) dated as of 26 November 2001 between the Company and Millennium
Pharmaceuticals, Inc.;
(ii) a facsimile copy of a Convertible Subordinated Promissory Note (the "Note",
which term does not include any other instrument or agreement whether or
not specifically referred to therein or attached as an exhibit or schedule
thereto) dated as of 26 November 2001 by the Company; and
(iii)a facsimile copy of an Amendment No. 1 to Convertible Subordinated
Promissory Note (the "Amendment") dated as of 5 November 2002 between the
Company, mHoldings Trust and Millennium Pharmaceuticals, Inc.
The documents listed in items (i) through (iii) above are herein sometimes
collectively referred to as the "Documents," (which term does not include any
other instrument or agreement whether or not specifically referred to therein or
attached as an exhibit or schedule thereto).
We have also reviewed the memorandum of continuance and the bye-laws of the
Company, each certified by the Secretary of the Company on 4 November 2002,
extracts of minutes of meetings of its directors held on 1 November
2001 and 30 October 2002 and a meeting of the pricing committee of its board of
directors held on 5 November 2002, certified by the Secretary of the Company on
5 November 2002 (together, the "Minutes") and such other documents and made such
enquiries as to questions of law as we have deemed necessary in order to render
the opinion set forth below.
We have assumed (a) the genuineness and authenticity of all signatures and the
conformity to the originals of all copies (whether or not certified) examined by
us and the authenticity and completeness of the originals from which such copies
were taken, (b) the capacity, power and authority of each of the parties to the
Documents, other than the Company, to enter into and perform its respective
obligations under the Documents, (c) the due execution and delivery of the
Documents by each of the parties thereto, except the Company, (d) the accuracy
and completeness of all factual representations made in the Documents and other
documents reviewed by us, (e) that the resolutions contained in the Minutes
remain in full force and effect and have not been rescinded or amended, (f) that
the Company is entering into the Documents pursuant to its business of medical
research, (g) that there are reasonable grounds for believing that prior to and
immediately following the Company's entering into each of the Documents, the
Company is and will be able to pay its liabilities as they fall due, (h) that
there is no provision of the law of any jurisdiction, other than Bermuda, which
would have any implication in relation to the opinions expressed herein, (i) the
validity and binding effect under the laws of the State of New York of the
Documents in accordance with their respective terms, (j) that none of the
parties to the Documents has carried on or will carry on activities, other than
the performance of its obligations under the Documents, which would constitute
the carrying on of investment business in or from within Bermuda and that none
of the parties to the Documents, other than the Company, will perform its
obligations under the Documents in or from within Bermuda, (k) that the Note
will be issued and paid for in accordance with the Documents, and (l) that the
Company is at all materials times listed on National Association of Securities
Dealers Automatic Quotation System (NASDAQ).
We express no opinion as to the enforceability of any provision of the Documents
which provides for the payment of a specified rate of interest on the amount of
a judgment after the date of judgment or which purports to fetter the statutory
powers of the Company.
We have made no investigation of and express no opinion in relation to the laws
of any jurisdiction other than Bermuda. This opinion is to be governed by and
construed in accordance with the laws of Bermuda and is limited to and is given
on the basis of the current law and practice in Bermuda. This opinion is issued
solely for the purpose set out above and is not to be relied upon in respect of
any other matter.
On the basis of and subject to the foregoing, we are of the opinion that:
1. The Common Shares have been duly authorised in accordance with the
Company's memorandum of continuance and bye-laws.
2. When issued and paid for in accordance with the terms of the Investment
Agreement and the Note, as applicable, the Common Shares will be validly
issued, fully paid and non-assessable (meaning that no further sums are
required to be paid by the holders thereof in connection with the issue of
such shares).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the headings "Risk
Factors" and "Legal Opinion" in the Registration Statement.
Yours faithfully
CONYERS DILL & PEARMAN
/s/ CONYERS DILL & PEARMAN
EXHIBIT 10.3A
THE TRANSFER OF THE SECURITIES REPRESENTED BY THE NOTE WHICH THIS AGREEMENT
AMENDS IS RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICE OF THE COMPANY.
THE SECURITIES REPRESENTED BY THE NOTE WHICH THIS AGREEMENT AMENDS HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS.
XOMA LTD.
AMENDMENT NO. 1
TO
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
This AMENDMENT NO. 1 (this "Amendment"), made as of the 5th day of
November, 2002 between XOMA LTD. (the "Company"), mHOLDINGS TRUST (the "Holder")
and, to the extent set forth herein, MILLENNIUM PHARMACEUTICALS, INC.
("Millennium"), among other things, amends the Convertible Subordinated
Promissory Note (the "Note") of the Company to the Holder dated November 26,
2001 in the principal sum of USD $5,000,000. Except as otherwise indicated, all
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to them in the Note.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, each of the undersigned hereby
agrees as follows:
1. Amendments to the Note.
(a) Section 1 of the Note is amended and restated in its entirety as
follows:
"Principal; Maturity Date. The principal of this Note shall be due and
payable in a single installment on the earliest of: (a) the Third Closing Date,
immediately prior to the Third Closing, (b) the tenth Business Day following the
termination of the Development and License Agreement, and (c) the tenth Business
Day following the first date on which the Common Shares are no longer listed on
any Principal Trading Market (the earliest such date, the "Maturity Date")."
(b) Section 6(c) of the Note is amended and restated in its entirety as
follows:
-2-
"In no event shall the Company be entitled to convert this Note and the
accrued interest into a total number of Common Shares that, together with the
Third Closing Shares (if they are to be issued at the time of such conversion),
exceeds 9.9% of the total issued and outstanding Common Shares as of the date of
such conversion; if conversion of this Note would exceed this 9.9% threshold,
that portion of the principal and accrued interest that, including the Third
Closing Shares (if to be then issued), would convert into 9.9% of the total
issued and outstanding shares of Common Shares as of the date of such conversion
shall be so converted, and the remainder of the principal and accrued interest
shall be repaid in cash."
(c) The third sentence of Section 6(e) is amended and restated in its
entirety as follows:
"If this Note matures on the Third Closing Date in accordance with Section
1(a) and is converted in accordance with Section 6, such conversion shall be
deemed to have been made on the Third Closing Date, immediately prior to the
Third Closing."
(d) Except to the extent expressly amended by this Amendment, the
provisions of the Note shall remain in full force and effect.
2. Investment Agreement. (a) Millennium, the Holder and the Company hereby
agree that the Second Closing (as defined in the Investment Agreement dated as
of November 26, 2001 by and among the Company, Millennium and the Holder (the
"Investment Agreement")) shall be held on the later of (x) November 26, 2002 and
(y) five (5) Business Days following receipt by XOMA of reliable notification
from the U.S. Securities and Exchange Commission that the registration statement
covering the resale by Millennium and the Holder of the Common Shares to be
issued at the Second Closing has been declared effective, but in no event later
than December 19, 2002, and in any event unless the parties otherwise consent in
writing, or as adjusted pursuant to Section 5.3(a) of the Investment Agreement.
(b) Millennium and the Holder hereby agree that the condition set forth in
Section 5.3(i) of the Investment Agreement shall not be applicable to the Second
Closing but instead shall be applicable to the Third Closing (as defined in the
Investment Agreement).
(c) Millennium, the Holder and the Company hereby agree that a certificate
representing Shares (as defined in the Investment Agreement) shall not be
required to bear the legends contained in Section 8.16 of the Investment
Agreement so long as and to the extent that (i) there is an effective
registration statement on file with U.S. Securities and Exchange Commission
covering resale by Millennium and the Holder of the Shares represented by such
certificate, (ii) Millennium and the Holder can and do utilize the DWAC system
directly between the Company's transfer agent and the broker for Millennium and
the Holder to transfer any of such Shares, and (iii) Millennium and the Holder
provide the Company with timely disclosure of sufficient information regarding
any such transfers so as to permit the Company
-3-
to ascertain Millennium's and the Holder's compliance with the provisions of
Section 4.5 of the Investment Agreement.
(d) Except to the extent expressly modified by this Amendment, the
provisions of the Investment Agreement shall remain in full force and effect.
3. Governing Law. This Amendment shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York notwithstanding
the provisions governing conflict of laws under such New York law to the
contrary.
4. Further Actions. Each party agrees to execute, acknowledge and deliver
such further instruments, and do such other acts, as may be necessary and
appropriate in order to carry out the purposes and intent of this Amendment.
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
{The remainder of this page intentionally left blank.}
-4-
IN WITNESS WHEREOF, the parties have set their hand as of the date first
above written.
COMPANY:
XOMA LTD.
By:
----------------------------------------
Name: Christopher J. Margolin
Title: Vice President, General
Counsel and Secretary
HOLDER:
mHOLDINGS TRUST
By:
----------------------------------------
Name:
Title:
AS TO SECTIONS 2 THROUGH 5:
MILLENNIUM PHARMACEUTICALS, INC.
By:
----------------------------------------
Name:
Title:
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of XOMA Ltd. for the
registration of 5,000,000 of its common shares and to the incorporation by
reference therein of our report dated February 8, 2002, with respect to the
consolidated financial statements of XOMA Ltd. included in its Annual Report
(Form 10-K) for the year ended December 31, 2001, filed with the Securities and
Exchange Commission.
/S/ ERNST & YOUNG LLP
Palo Alto, California
November 1, 2002