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Table of Contents
The
information in this prospectus supplement is not complete and
may be changed. A registration statement relating to these
securities has been declared effective by the Securities and
Exchange Commission. This prospectus supplement and the
accompanying prospectus are not an offer to sell these
securities and are not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted. |
Filed Pursuant to
rule 424(b)(5) Registration No. 333-133729 |
PRELIMINARY PROSPECTUS SUPPLEMENT |
SUBJECT TO COMPLETION | May 16, 2006 |
(To Prospectus dated May 8,
2006)
15,495,867 Shares
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Common stock
We are offering all of the 15,495,867 shares of common
stock offered by this prospectus supplement.
Our common stock is quoted on the American Stock Exchange
(AMEX) under the symbol ANX. On May 12,
2006, the last reported sale price of our common stock on the
AMEX was $4.84 per share.
Investing in our common stock involves a high degree of risk.
Before buying any shares, you should read the discussion of
material risks of investing in our common stock in Risk
factors beginning on page S-14.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
Per share | Total | |||||||
Public offering price
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$ | $ | ||||||
Underwriting discounts and
commissions
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$ | $ | ||||||
Proceeds, before expenses, to us
|
$ | $ | ||||||
The underwriters may also purchase up to an additional
2,324,380 shares of our common stock at the public offering
price, less the underwriting discounts and commissions, to cover
over-allotments, if any, within 30 days of the date of this
prospectus supplement.
The underwriters are offering the common stock as set forth
under Underwriting. Delivery of the shares will be
made on or about May , 2006.
Sole Book-Running Manager
UBS Investment Bank
CIBC World Markets | RBC Capital Markets |
Fortis Securities LLC
You should rely only on the information contained or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. If information in this prospectus
supplement is inconsistent with the accompanying prospectus, you
should rely on the prospectus supplement. We have not and the
underwriters have not authorized anyone to provide you with
information that is different from or in addition to that
contained or incorporated by reference in this prospectus
supplement or the accompanying prospectus. We are not, and the
underwriters are not, offering to sell or seeking offers to buy
shares of common stock in jurisdictions where offers and sales
are not permitted. You should not assume that the information
provided in this prospectus supplement, the accompanying
prospectus or the documents incorporated by reference in this
prospectus supplement and in the accompanying prospectus is
accurate as of any date other than as of their respective dates,
regardless of the time of delivery of this prospectus supplement
or of any sale of our common stock. Changes may occur after
those dates and we may not update this information except as
required by law.
TABLE OF CONTENTS
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CoFactor®,
Selonetm
and
Thiovirtm
are trademarks of
ADVENTRXtm.
This prospectus supplement and the accompanying prospectus
contain product names, trade names and trademarks of other
entities.
In this prospectus supplement, ADVENTRX,
Company, we, us and
our refer to ADVENTRX Pharmaceuticals, Inc., a
Delaware corporation, unless otherwise expressly stated or the
context requires otherwise.
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Prospectus supplement summary
This summary highlights information contained elsewhere or
incorporated by reference in this prospectus supplement and the
accompanying prospectus. This summary does not contain all of
the information that you should consider before buying our
common stock in this offering. You should read this entire
prospectus supplement and the accompanying prospectus carefully,
including the Risk factors, the financial data and
related notes and other information included or incorporated by
reference in this prospectus supplement and the accompanying
prospectus before buying our stock.
OUR BUSINESS
We are a biopharmaceutical research and development company
focused on developing treatments for cancer and infectious
diseases. We seek to develop compounds which surpass the
performance and safety of existing drugs by addressing
significant problems such as poor drug metabolism, toxicity,
bioavailability and drug resistance.
We have four cancer drug candidates, including CoFactor for
metastatic colorectal cancer, breast cancer, and additional
chemotherapy regimens including
leucovorin/5-FU, and
vinorelbine emulsion for
non-small cell lung
cancer. We have pending a request for a Special Protocol
Assessment (SPA) for a Phase III clinical trial for
CoFactor. We currently expect to initiate our CoFactor
Phase III clinical trial in the second quarter of 2006,
assuming we obtain clearance on our pending SPA request. If the
FDA grants us the SPA and clinical results are favorable, we
would intend to submit the Phase III clinical trial results
for CoFactor as part of a New Drug Application, or NDA, seeking
FDA approval to commercialize CoFactor as a first-line treatment
of metastatic colorectal cancer.
In addition, we currently expect to file an IND in the third
quarter of 2006 for a bioequivalence study using vinorelbine
emulsion. Our planned bioequivalence study of vinorelbine
emulsion may also be the basis for regulatory approval if
clinical results are favorable. In addition to CoFactor,
vinorelbine emulsion and Thiovir, we have two other cancer drug
candidates and two other anti-infectious disease candidates
planned for clinical development. Our pipeline further includes
four additional compounds on which we plan to continue
preclinical testing.
We have retained commercial rights to all of our product
candidates in development, except as to certain rights in China,
Taiwan, Hong Kong and Macau relating to the product candidates
that we acquired in the SD Pharmaceuticals transaction. We
intend to seek to maximize the commercial value of each of our
product candidates. We may choose to do so by developing and
commercializing these drug candidates ourselves or through the
creation of co-development and/or co-marketing partnerships.
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OUR PRINCIPAL PRODUCT
CANDIDATES
The table below provides an overview of our product candidates
in development.
Product/Description | Development Stage | Indication | Status | |||
CoFactor® 5-FU Biomodulator |
Phase II U.S. and Europe | Metastatic colorectal cancer | Patient dosing completed. Complete clinical trial results currently expected in 2006 | |||
Phase IIb Europe and India | Metastatic colorectal cancer | Over 66% of patients enrolled. Clinical trial results currently expected in 2007 | ||||
Phase III U.S. | Metastatic colorectal cancer | Currently expected to begin in Q2 2006 | ||||
Phase II and III U.S. | Advanced breast cancer | Strategy and protocol currently in development with company consultants | ||||
Vinorelbine emulsion (ANX-530) |
Preclinical | Non-small cell lung and other solid tumors | Currently plan to file IND in Q3 2006 for bioequivalence study | |||
Paclitaxel emulsion (ANX-513)/Taxane |
Preclinical | Breast, ovarian and non- small cell lung cancers | Currently plan to file IND in Q1 2007 for bioequivalence study | |||
Docetaxel emulsion (ANX-514)/Taxane |
Preclinical | Breast, non-small cell lung, prostate and gastric cancers | Currently plan to request foreign clinical trial approvals and/or file IND in Q1 2007 for bioequivalence study | |||
Selonetm Alkylating agent |
Preclinical | Drug resistant cancers | Continue preclinical testing in 2006 | |||
Thiovirtm Pyrophosphate analog, broad spectrum antiviral |
Preclinical | HIV/AIDS | Currently plan to file IND in Q3 2006 | |||
Clarithromycin emulsion (ANX-015)/IV-macrolide antibiotic |
Preclinical | Mild to moderate infections caused by certain bacteria such as streptococcus pyogenes | Currently plan to request foreign clinical trial approvals in Q2 2007 | |||
Vancomycin emulsion (ANX-016)/Glycopeptide antibiotic |
Preclinical | Systemic therapy for treatment of serious infections by gram-positive bacteria which are resistant to other antibiotics | Currently plan to file IND in Q2 2007 |
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OUR ONCOLOGY PRODUCT
CANDIDATES
CoFactor:
CoFactor (ANX-510) is a folate-based compound that is the active
form of leucovorin. CoFactor is being developed as a
biomodulator of the widely used chemotherapeutic agent
5-fluorouracil (5-FU). CoFactor has been studied in the clinical
setting as part of a treatment regimen for metastatic,
colorectal, breast, gastric and pancreatic cancers.
CoFactor is designed to be a safer and more effective form of
leucovorin as the biomodulator of
5-FU.
Leucovorin/5-FU is used
in a number of chemotherapy regimens and is associated with
multiple toxicities, including hematological and
gastrointestinal toxicities. Leucovorin efficiency is limited by
the requirement to undergo several metabolic steps to convert
into the active form of folate. Our drug, CoFactor, bypasses the
chemical pathway required for leucovorin metabolism. This
biochemical strategy delivers the correct form of folate that
allows 5-FU to kill cancer cells more effectively while reducing
5-FU-associated toxicity. We believe that CoFactor overcomes
that limitations of leucovorin and will lead to developments
that will increase patient outcomes, while reducing side effects
and improving the quality of life of patients on chemotherapy.
Currently, leucovorin is a generically-available product which
is also the only FDA-approved biomodulator of 5-FU. According to
IMS Health Data, global sales of leucovorin exceeded
$300 million in 2005. We believe that if CoFactor shows
improved clinical benefit and patient survival, it may be widely
used as a replacement for leucovorin in 5-FU based cancer
therapies.
Market
More than 11 million people worldwide are diagnosed with
cancer each year and over 7 million people die each year
from cancer, according to statistics published by the World
Health Organization. In the U.S., cancer is responsible for
approximately 25% of all deaths according to recent statistics.
The American Cancer Society estimates that more than
1.3 million new cases of cancer were diagnosed and over
570,000 people died due to cancer in 2005 in the U.S.
According to the National Cancer Institutes SEER program,
the combined incidence of newly diagnosed cases of
gastrointestinal and breast cancers in the U.S. and the EU
exceeds 600,000. Colorectal cancer alone claims more than
170,000 lives annually in the U.S. and EU.
Multiple drugs are commercially available to treat
first-line colorectal
cancer, including;
Avastin®
(bevacizumab),
Eloxatin®
(oxaliplatin),
Camptosar®
(irinotecan),
Xeloda®
(capecitabine), 5-Fluorouracil (5-FU) and leucovorin calcium
(Lv). These drugs are used in a diverse set of therapeutic
regimens, most of which include 5-FU and leucovorin, including:
FOLFOX/Avastin
|
Oxaliplatin, 5-FU, leucovorin, Avastin | |
FOLFOX
|
Oxaliplatin, 5-FU, leucovorin | |
FOLFIRI
|
Oxaliplatin, 5-FU, leucovorin | |
Roswell Park
|
5-FU (bolus), leucovorin | |
Saltz
|
Irinotecan, 5-FU, leucovorin | |
Saltz/Avastin
|
Irinotecan, 5-FU, leucovorin, Avastin | |
Mayo
|
5-FU (bolus), leucovorin | |
5-FU monotherapy
|
Capecitabine | |
deGramont
|
5-FU (infusional), leucovorin |
We believe that although there are a number of drugs being
investigated to treat colorectal cancer, most of these compounds
are being tested as additions to
5-FU/leucovorin-containing
regimens and that 5-FU
will continue to be used widely as the cytotoxic component of
chemotherapy during the
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course of a patients disease. We believe that companies
which are working on improving the activity of
5-FU itself will
continue to utilize leucovorin as a biomodulator of their
modified 5-FU.
Mechanism of Action
The enzyme thymidylate synthase (TS) acts in cells to
convert deoxyuridine to deoxythymidine for incorporation into
newly-replicating DNA. Inhibition of TS is a well-established
and efficacious method of killing rapidly dividing cells such as
tumor cells. Inhibition of TS is most frequently accomplished
via the use of the anti-cancer agent
5-Fluorouracil
(5-FU), the metabolite
of which binds to TS and disrupts DNA replication. This binding
event between TS and the metabolite of
5-FU can be stabilized
and improved by the action of a specific folate;
5,10-methylenetetrahydrofolate (MTHF). Currently, the source of
this important folate in the clinical setting is intravenous
leucovorin calcium, which is administered prior to the
administration of 5-FU.
However, the limitation of leucovorin is that leucovorin must
undergo at least four metabolic conversions to become the active
folate MTHF. Therefore, leucovorin is an indirect source of MTHF
and is often insufficient to achieve desired levels of
TS inhibition in tumor cells. Even in high doses,
leucovorin may not reach the desired concentration in the tumor
tissue to be effective in helping
5-FU achieve its
anti-tumor potential.
We are developing CoFactor, which is a stable preparation of
MTHF, as a direct and superior source of the form of folate
needed to achieve complete inhibition of TS. Unlike leucovorin,
which must undergo chemical conversion, CoFactor directly
delivers the active form of folate and improves
5-FU performance
without increasing toxicity. We believe that CoFactor has the
potential to replace leucovorin in cancer regimens which utilize
5-FU/leucovorin as a
component of therapy.
Clinical Efficacy
Phase II Clinical Trial in
Metastatic Colorectal Cancer
A Phase II clinical trial was conducted in 50 patients
to evaluate tumor response, safety,
time-to-tumor-progression
and overall survival in the first-line treatment of metastatic
colorectal cancer patients using CoFactor and
5-FU. The study
followed an open-label, single-arm, Simon two-stage design. In
January 2006, the Company announced that it had reached the
efficacy and safety endpoint from this Phase II clinical
trial.
The primary endpoint of the study, objective response, was
prospectively set at 25%. Objective response consists of either
a complete (100% regression of tumors) or partial (at least 50%
regression of tumors) response lasting at least 4 weeks.
Blinded, third-party radiological assessment by independent
reviewers determined that 35% of patients achieved an objective
response, exceeding the 25% endpoint by 10%. The
Company also reported median time to tumor progression
(TTP) of 163 days. This duration compares favorably to
historical data from other clinical trials which used
5-FU and leucovorin,
including the control arms for the pivotal registration trials
of
Camptosar®
and
Xeloda®.
CoFactor was well tolerated, with zero incidence of drug-related
grade 3 or grade 4 gastrointestinal or hematological
toxicity observed in this clinical trial. A single case of
grade 4 hematological toxicity occurred after the
completion of the trial and subsequent to treatment with new
chemotherapy. Because this event occurred within 30 days of
the CoFactor study, it was reported as an adverse event, even
though it was attributed to the subsequent course of FOLFOX
therapy received by this patient. In contrast to CoFactor,
administration of other
5-FU-containing
regimens typically leads to an undesirable incidence of severe
gastrointestinal and hematological toxicities.
The Company is also following median overall survival, which is
expected to be reported during 2006.
Phase I/ II Clinical Trial
in Metastatic Colorectal Cancer
A Phase I/ II dose-ranging clinical trial was conducted in
62 patients with colorectal, breast, gastric, pancreatic or
gallbladder cancer. Varying doses of CoFactor and
5-FU were administered
on a weekly
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bolus schedule with an endpoint of overall safety. Response
rate, time to tumor progression and survival data were also
captured. The trial indicated that
CoFactor/5-FU was a
safe and well-tolerated regimen. Objective responses were
observed in colorectal (21%), breast (56%),
gastric (33%), pancreatic (40%) cancer. Among the
24 patients who received CoFactor plus
5-FU for first-line
treatment of metastatic colorectal cancer, 29% had an objective
response.
Preclinical Efficacy
CoFactor has been tested extensively in preclinical models.
Equal doses of CoFactor and leucovorin were compared
head-to-head in various
combination therapies in immunocompromised and immunocompetent
mice to evaluate tumor growth, survival, and toxicity. In
preclinical studies, CoFactor-containing treatment regimens in
immunocompromised mice induced either equivalent or superior
antitumor responses, as noted by slower tumor growth and longer
mouse survival, when compared with identically-dosed
leucovorin-containing combinations for all drug combinations
tested. CoFactor-containing treatment regimens in
immunocompetent mice induced either equivalent or diminished
toxicity in the preclinical studies, as noted by greater blood
cell counts or less weight loss, when compared with
identically-dosed leucovorin-containing combinations for all
drug combinations tested.
Results from preclinical studies using in vivo human
tumor xenotransplant mouse models for colorectal and pancreatic
cancer suggest antitumor efficacy of
CoFactor/5-FU in
combination with irinotecan, oxaliplatin,
anti-VEGF antibody, and
gemcitabine. Results also suggest antitumor activity of CoFactor
in combination with the
5-FU prodrugs,
including Xeloda and UFT. CoFactor-containing combination
regimens induced either equivalent or better antitumor responses
in preclinical studies, as noted by slower tumor growth and
increased mouse survival, compared with leucovorin-containing
combinations for all drug types tested.
Furthermore, in an in vivo immunocompetent mouse model,
CoFactor/5-FU induced
less systemic toxicity than
5-FU/leucovorin either
alone or in combination drug regimens. Lower hematological
toxicity was observed including less thrombocytopenia,
leukopenia, neutropenia and lymphopenia. Furthermore, weight
loss was quantitatively less severe with drug treatments
containing CoFactor. Additional preclinical studies are planned
for CoFactor during 2006.
Development plans
Phase IIb Clinical Trial in
Metastatic Colorectal Cancer
Further clinical development for CoFactor is presently underway
for the treatment of metastatic colorectal cancer. A
300-patient,
multi-national, randomized clinical trial is currently being
conducted in the EU and India. More than two-thirds of the
patients have been enrolled and dosed in this trial. The study
is designed to evaluate
5-FU/ leucovorin versus
5-FU/ CoFactor in a
modified deGramont (infusional) setting. The primary endpoint of
this study is a reduction of grade 3 and grade 4
toxicity. Additionally, response rate, time to tumor progression
and overall survival will be monitored. We anticipate that trial
enrollment will be completed during 2006.
Phase III Clinical Trial in
Metastatic Colorectal Cancer
A pivotal Phase III trial is planned to begin in the second
quarter of 2006, assuming clearance of our pending SPA request.
This 1200-patient,
randomized clinical trial will be conducted in approximately 50
sites across the U.S. in patients with metastatic colorectal
cancer who are receiving therapy in the first-line setting. The
protocol will feature a modified Roswell Park regimen of
5-FU and
Avastin®
(bevacizumab) randomized to either a leucovorin control arm
or a CoFactor experimental arm. CoFactor will be dosed at
60-mg/m^2 while
leucovorin will be dosed at 500mg/m^2. A primary endpoint of
progression-free survival will be evaluated with secondary
endpoints of severity of adverse events, response rate, duration
of response and overall survival.
In 2005 the company was involved in discussions with the FDA
under a Special Protocol Assessment (SPA) regarding our
proposed Phase III pivotal clinical trial with CoFactor for
the treatment of
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metastatic colorectal cancer. In April 2005, we received
correspondence stating that Progression Free Survival was an
acceptable endpoint for the proposed study, and we announced
clearance to proceed with our
600-patient
Phase III trial. In addition to the FDAs acceptance
of our primary endpoint, they made further comments and
suggestions regarding statistical analysis procedures,
acceptability of secondary endpoints, and management of
potential adverse events during treatment, including those
related to the use of Avastin. We accepted and incorporated all
of these suggestions, but in addition, chose to request
modification of the trial protocol after consultation with our
consultants and advisors. In February 2006, we requested these
adjustments with the FDA with respect to our protocol for this
Phase III clinical trial, including increasing the trial
size to 1,200 patients. We are currently waiting to receive
the response to this new SPA request from the FDA. Assuming FDA
clearance of the new SPA, we expect to initiate the clinical
trial in the second quarter of 2006.
Additionally, we are considering clinical evaluation of CoFactor
in a second indication. A breast cancer strategy and protocol is
currently in development.
Intellectual Property
We have licensed from the University of Southern California two
U.S. patents and one Canadian patent pertaining to
CoFactor. These patents expire in 2011-2013. Separately, based
upon independent research and development work, the Company has
filed an international patent application covering the use of
CoFactor. The issue of national patents based upon this
international application would provide patent protection
worldwide until 2025.
Orphan Drug Status for
Pancreatic Cancer
Further, we have applied for and received orphan drug
designation in the U.S. and the EU for the pancreatic cancer
indication for CoFactor.
ANX-530 (Vinorelbine
emulsion)
ANX-530 is a novel emulsion formulation of vinorelbine
tartrate, a generic agent.
ANX-530 is designed to
reduce the incidence and severity of vein irritation from
IV-delivery of the drug. Vinorelbine works by disrupting
microtubule formation and is a member of the vinca alkaloid
class of antineoplastic agents. Vinorelbine is indicated as a
single agent or in combination with cisplatin for treatment of
advanced non-small cell lung cancer. Vinorelbine has also shown
activity in breast, ovarian and other cancers.
Market
Data from IMS Health show annual vinorelbine sales by our
competitors in 2005 of approximately
$160 million worldwide.
Vinorelbine packaging includes a black box warning for
extravasation. The product may also cause phlebitis (vein
irritation) in approximately one-third of treated patients. We
believe that some clinicians elect to use a central line or a
different chemotherapeutic regimen as a means to avoid
phlebitis. ANX-530 was developed to reduce the vein irritation
associated with administration of vinorelbine.
Vinorelbine is indicated as a single agent or in combination
with cisplatin for treatment of advanced non-small cell lung
cancer. However, recently published clinical studies (ANITA
trial results, presented by J. Douillard at 2005 ASCO Annual
Meeting and Winton, et al, published in NEJM, June 23, 2005)
showed a statistically significant improvement (p=0.0131) of 22
months overall survival in patients treated with vinorelbine
plus cisplatin following tumor resection (this form of
chemotherapy is commonly known as adjuvant therapy).
Consequently, we believe that the use of vinorelbine in the
adjuvant setting may increase.
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We are aware that there are multiple suppliers of generic
vinorelbine and that other vinca alkaloid and
non-vinca alkaloid
classes of drugs to treat non-small cell lung cancer are under
development by competing companies, including firms which seek
to develop liposomal formulations of vinorelbine. Furthermore,
additional firms may elect to enter the generic vinorelbine
market. We believe we are developing a formulation of
vinorelbine which ultimately will be differentiated from generic
vinorelbine.
Mechanism of Action
ANX-530 is a novel
emulsion formulation of vinorelbine tartrate. This formulation
emulsifies vinorelbine into a homogeneous suspension of
nanoparticles and is designed to protect the venous endothelium
during administration into a peripheral vein, thereby reducing
associated vein irritation caused by the drug.
Preclinical
In preclinical testing,
ANX-530 was compared
with
Navelbine®,
GlaxoSmithKlines FDA-approved form of vinorelbine. In this
setting, ANX-530
demonstrated a reduction in vein irritation. Vein irritation was
examined in rabbits following repeated IV injections in the
marginal ear vein. In two cancer model studies in rodents,
conducted on behalf of SD Pharmaceuticals,
ANX-530 demonstrated
comparable efficacy to Navelbine.
Development plans
We plan to conduct a single bioequivalence study of
ANX-530. This trial was
affirmed by FDA to be sufficient as a marketing-enabling trial.
The proposed clinical trial will compare the bioequivalence of
ANX-530 with that of
vinorelbine in 28 patients with advanced solid tumors. We
currently plan to file an IND application for
ANX-530 in Q3 2006.
We intend to file for approval of
ANX-530 via a 505(b)(2)
NDA application. While we intend to further develop
ANX-530 as a form of
vinorelbine that reduces vein irritation, if approved for
commercialization, we intend to initially market the drug as
equivalent to generic vinorelbine. We may conduct additional
clinical trials in order to observe the ability of ANX-530 to
reduce vein irritation.
Section 505(b)(2) of the U.S. Food, Drug &
Cosmetic Act allows the FDA to approve a follow-on drug on the
basis of data in the scientific literature or data used by the
FDA in the approval of other drugs. This procedure potentially
makes it easier for drug manufacturers to obtain rapid approval
of new forms of drugs based on proprietary data of the original
drug manufacturer.
Paclitaxel emulsion
(ANX-513)
Paclitaxel emulsion
(ANX-513) is a
novel formulation of the chemotherapy drug paclitaxel (brand
name:
Taxol®)
that is intended to be non-allergenic and to obviate the need
for immunosuppressant premedication. Immunosuppressant
premedication is recommended for paclitaxel therapy to reduce
the incidence and severity of hypersensitivity reactions.
Paclitaxel is an antimicrotubule agent that inhibits the normal
dynamic reorganization of the cellular microtubule network that
is essential for cellular division. Paclitaxel is approved to
treat breast, ovarian, Kaposis sarcoma and non-small cell
lung cancers. All taxanes, including paclitaxel and docetaxel
are highly water-insoluble and therefore utilize certain
non-ionic surfactants as drug formulation vehicles.
Cremophor®
(Polyoxyl castor oil) is used to solubilize paclitaxel and is an
active compound that can cause severe hypersensitivity
reactions. It is recommended that all patients be premedicated
with corticosteroids or anti-histamines prior to paclitaxel
administration in order to prevent severe hypersensitivity
reactions. Despite premedication, fatal reactions may still
occur.
ANX-513 is formulated
without Cremophor or detergents and is intended to eliminate the
need for premedication with immunosuppressant drugs.
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Docetaxel emulsion
(ANX-514)
Docetaxel emulsion
(ANX-514) is a
novel nano-emulsion formulation of the chemotherapy drug,
docetaxel (brand name:
Taxotere®)
that is designed to eliminate the need for multi-day
immunosuppressant premedication. Immunosuppressant premedication
is recommended for Taxotere therapy to reduce the incidence and
severity of allergic reactions. Docetaxel is an anti-cancer
agent that acts by disrupting the cellular microtubular network
that is essential for cell division. Taxotere is approved to
treat breast, non-small cell lung, prostate and gastric cancers.
All taxanes, including docetaxel and paclitaxel are highly
water-insoluble and are formulated with certain non-ionic
surfactants as drug formulation vehicles. Polysorbate 80, a
detergent that is used to solubilize Taxotere, can cause severe
hypersensitivity reactions. Premedication with corticosteroids
is recommended for patients treated with Taxotere. Severe
hypersensitivity reactions may still occur despite pretreatment
with corticosteroids.
ANX-514 is formulated
without polysorbate 80 or other detergents and is intended
to eliminate the need for multi-day immunosuppressant
premedication.
Selonetm
Selonetm
is a compound in a class of drugs known as organoselenones,
consisting of carbon, oxygen and selenium. Selone and its
analogues have shown effectiveness, at even relatively low
concentrations, against human ovarian, breast, lung and
head/neck cancers, and against leukemias and lymphomas, based
upon current in vitro screening methods. Their potency is high
for their rate of alkylating activity, suggesting an increased
specificity of action. Preclinical efforts have shown
effectiveness of Selone in treatment of leukemia in mice at
doses predicted to achieve effective blood concentrations, as
well as in a variety of human tumor cell lines in laboratory
testing. We intend to undertake further preclinical testing of
Selone during 2006 in order to determine the potential for this
drug to be moved into human testing in the future.
OUR INFECTIOUS DISEASE PRODUCT
CANDIDATES
Thiovirtm
Thiovir is a broad spectrum antiviral drug that has shown in
preclinical tests an ability to inhibit HIV, influenza A
and herpes viruses. Thiovir is a pyrophosphate analogue and
reverse transcriptase inhibitor designed for oral delivery as a
component of HAART for HIV/AIDS. Thiovir is a prodrug (a
compound that the body converts into active drug) for a drug
called foscarnet, an
IV-delivered therapy
for opportunistic infections in HIV patients. Thiovir delivers
both the active drug TPFA (thiophosphonoformate) and the active
metabolite PFA (foscarnet). Preclinical studies suggest that
Thiovir is active against HIV which is resistant to other
reverse transcriptase inhibitors and exhibits strong antiviral
synergy when combined with the well-known reverse transcriptase
inhibitor, zidovudine (AZT) and may be synergistic with
Tenofovir. We currently plan to file an IND and initiate a
Phase I/II clinical trial for Thiovir in HIV/AIDS in the
second half of 2006.
Clarithromycin emulsion
(ANX-015)
ANX-015 is a
proprietary intravenous formulation of an approved antibiotic in
the macrolide family known as clarithromycin. Clarithromycin is
approved for mild to moderate bacterial infections such as in
community-acquired pneumonia. Only oral formulations of
clarithromycin are currently available in the U.S.
Vancomycin emulsion
(ANX-016)
ANX-016 is a novel
formulation of vancomycin, a parenteral glycopeptide antibiotic
approved to treat gram-positive bacterial infections.
ANX-016 is designed to
reduce the vein irritation and phlebitis associated with the
IV-delivered drug.
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ADDITIONAL COMPOUNDS
We have three additional compounds in our pipeline as a result
of our recent SD Pharmaceuticals acquisition. These compounds
are currently under evaluation for future preclinical and
clinical development or as out-licensing opportunities. These
compounds include
ANX-211, an intranasal/
topical antiviral gel for viral indications,
ANX-575, an emulsion
formulation of alpha-tocopheryl succinate, which has been shown
in preclinical studies to selectively facilitate cell death in
cancer cells, and
ANX-570, a novel
formulation of beta-elemene, a small molecule anticancer agent
belonging to the triterpene family.
OUR CORPORATE
INFORMATION
We incorporated in the State of Delaware in December 1995. We
initially incorporated under the name Victoria
Enterprises, Inc. A Colorado corporation also named
Victoria Enterprises, Inc. merged into us in 1996. In 1996, we
acquired BioQuest, Inc., a development stage biotechnology
company, and concurrently changed our name to BioQuest,
Inc. In 2000, we acquired Biokeys, Inc., a privately-held
biomedical research and development company based in San Diego,
California. Upon completion of the acquisition, Biokeys, Inc.
became our wholly-owned subsidiary and we changed our name to
Biokeys Pharmaceuticals, Inc.
On May 30, 2003, we merged Biokeys into us and changed our
name from Biokeys Pharmaceuticals, Inc. to
ADVENTRX Pharmaceuticals, Inc.
In July 2004, we formed a wholly owned subsidiary, ADVENTRX
(Europe) Ltd., in the United Kingdom for the purpose of
conducting clinical trials in the European Union.
On April 26, 2006, we acquired SD Pharmaceuticals, Inc., a
Delaware corporation, which became our wholly-owned subsidiary.
SD Pharmaceuticals holds certain U.S. and
ex-U.S. intellectual
property rights to eight oncology and infectious disease product
candidates, including certain
ex-U.S. rights to
SDP-012
(ANX-530, vinorelbine
emulsion). (See Recent Developments in the
accompanying prospectus.)
We began filing reports under the Securities Exchange Act of
1934, as amended, in October 2001. In April 2004, our common
stock began trading on the American Stock Exchange LLC.
Our principal offices are located at 6725 Mesa Ridge Rd.,
San Diego, California 92121 and our telephone number is
(858) 552-0866.
Our web site is located at www.adventrx.com. Information
contained on our website or any linked websites is not part of
this prospectus supplement or the accompanying prospectus.
Additional information regarding our company is set forth in
documents on file with the Securities and Exchange Commission
and incorporated by reference herein.
See Where You Can Find More Information About Us.
S-10
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The offering
Common stock we are offering | 15,495,867 shares | |
Common stock to be outstanding after this offering | 87,145,700 shares | |
Use of proceeds | We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and our estimated offering expenses, will be approximately $69,500,000 or approximately $81,075,000 if the underwriters exercise their over-allotment option in full. We currently intend to use the net proceeds to fund clinical and preclinical development of our products and, if approved for commercial sale by the FDA, commercial launch activities for our lead products. See Use of Proceeds. | |
AMEX symbol | ANX | |
Risk factors | An investment in our common stock involves significant risks. Before making an investment in our common stock, you should carefully review the information under the caption Risk Factors in the accompanying prospectus. |
The number of shares of our common stock to be outstanding after
this offering in the table above is based on the number of
shares outstanding as of May 3, 2006 and does not include,
as of that date:
| 3,593,000 shares of our common stock issuable upon the exercise of stock options issued under our stock option plans having a weighted average exercise price of $1.97 per share; |
| an additional 17,323,733 shares of common stock issuable upon the exercise of outstanding warrants having a weighted average exercise price of $2.07 per share; and |
| an additional 4,754,268 shares of common stock available for future issuance under our stock option plans and employee stock purchase plan. |
Unless otherwise stated, all information contained in this
prospectus supplement assumes that the underwriters do not
exercise their over-allotment option.
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Summary consolidated financial data
The consolidated statement of operations data set forth below
for the years ended December 31, 2003, 2004 and 2005 are
derived from our audited consolidated financial statements
incorporated by reference in this prospectus supplement and the
accompanying prospectus. The financial data for the three-month
periods ended March 31, 2005 and 2006 is derived from our
unaudited financial statements. The unaudited financial data has
been prepared on the same basis as the audited financial
statements and the notes thereto, which include, in the opinion
of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the
information for the unaudited interim periods. The operating
results for the three-month period ended March 31, 2006 may
not be indicative of the operating results for the full year.
This summary consolidated financial data set forth below should
be read in conjunction with, and is qualified in its entirety by
reference to, our audited consolidated financial statements,
including the related notes thereto, and Managements
discussion and analysis of financial condition and results of
operations and Selected financial data in our
Annual Report on
Form 10-K for the
year ended December 31, 2005, and our unaudited
consolidated financial statements, including the related notes
thereto, and Managements discussion and analysis of
financial condition and results of operations in our
Quarterly Report on
Form 10-Q for the
quarter ended March 31, 2006, in each case incorporated by
reference in this prospectus supplement and the accompanying
prospectus.
This summary consolidated financial data set forth below does
not include financial information reflecting our recent
acquisition of SD Pharmaceuticals, Inc., which information can
be found in Amendment No. 1 to our Current Report on
Form 8-K dated April 1, 2006, incorporated by
reference in this prospectus supplement and the accompanying
prospectus. (See Where You Can Find More Information About
Us in the accompanying prospectus).
The as adjusted balance sheet data as of March 31, 2006 has
been adjusted to give effect to the sale of the
15,495,867 shares of our common stock in this offering,
assuming a public offering price of $4.84, and receipt by us of
the net proceeds therefrom, after deducting the underwriting
discounts and commissions and estimated offering expenses
payable by us.
S-12
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Three months ended | ||||||||||||||||||||||
Year ended December 31 | March 31, | |||||||||||||||||||||
Statement of operations data: | 2003 | 2004 | 2005 | 2005 | 2006 | |||||||||||||||||
(unaudited) | ||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||
Grant revenue
|
$ | 3,603 | $ | | $ | | $ | | $ | | ||||||||||||
Interest income
|
9,269 | 103,042 | 496,059 | 37,322 | 236,527 | |||||||||||||||||
Total revenues
|
12,872 | 103,042 | 496,059 | 37,322 | 236,527 | |||||||||||||||||
Research and development
|
748,997 | 2,744,328 | 8,682,498 | 1,704,797 | 2,483,858 | |||||||||||||||||
General and administrative
|
1,594,566 | 4,059,762 | 5,016,547 | 1,177,159 | 1,772,285 | |||||||||||||||||
Interest expense
|
1,386 | | | 300 | | |||||||||||||||||
Total costs and operating expenses
|
2,344,949 | 6,804,090 | 13,699,045 | 2,882,256 | 4,256,143 | |||||||||||||||||
Loss from operations
|
(2,332,077 | ) | (6,701,048 | ) | (13,202,986 | ) | (2,844,934 | ) | (4,019,616 | ) | ||||||||||||
Loss on fair value of warrants
|
| | 11,579,660 | | 17,027,065 | |||||||||||||||||
Net loss
|
(2,332,077 | ) | (6,701,048 | ) | (24,782,646 | ) | (2,844,934 | ) | (21,046,681 | ) | ||||||||||||
Preferred stock dividends
|
(37,840 | ) | | | | | ||||||||||||||||
Net loss applicable to common stock
|
(2,369,917 | ) | (6,701,048 | ) | (24,782,646 | ) | (2,844,934 | ) | (21,046,681 | ) | ||||||||||||
Basic and diluted net loss per share
|
$ | (0.07 | ) | $ | (0.13 | ) | $ | (0.41 | ) | $ | (0.05 | ) | $ | (0.31 | ) | |||||||
Shares used in computing basic and diluted net loss per share
|
31,797,986 | 50,720,180 | 59,828,357 | 53,967,933 | 67,976,352 | |||||||||||||||||
As of March 31, 2006 | ||||||||
Balance sheet data: | Actual | As Adjusted | ||||||
(unaudited) | ||||||||
Cash, cash equivalents and marketable securities
|
22,013,996 | 91,513,993 | ||||||
Working capital
|
(26,613,088 | ) | 42,886,909 | |||||
Total assets
|
23,043,477 | 92,543,474 | ||||||
Long-term obligations
|
57,078 | 57,078 | ||||||
Accumulated deficit
|
(81,011,521 | ) | (81,011,521 | ) | ||||
Shareholders equity (deficiency)
|
(25,945,510 | ) | 43,554,487 |
S-13
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Risk factors
An investment in our common stock involves a high degree of
risk. Prospective investors in our common stock should carefully
consider the following risk factors as well as the other
information contained or incorporated by reference in this
prospectus supplement and the accompanying prospectus. The risks
and uncertainties described below are not the only ones facing
us. Additional risks and uncertainties that we are not aware of
or focused on or we currently deem immaterial may also impair
our business operations. All information contained in this
prospectus supplement, the accompanying prospectus and the
documents incorporated by reference is qualified in its entirety
by these risk factors.
If any of the following risks actually occur, our financial
condition and results of operations could be materially and
adversely affected. If this were to happen, the value of our
common stock could decline significantly, and you could lose all
or part of your investment.
RISKS RELATING TO THE
COMPANY
We have a substantial
accumulated deficit and limited working capital.
We had an accumulated deficit of $81 million as of
March 31, 2006. We have had losses from operations and
negative cash flow from operations in each year since our
inception. We had losses from operations of $2.3 million,
$6.7 million and $13.2 million in the years ended
December 31, 2003, 2004 and 2005, respectively, and a loss
from operations of $4.0 million in the three months ended
March 31, 2006. We used cash from operations of
$2.2 million, $5.1 million, $11.6 million and
$3.0 million during these same periods. Since we presently
have no source of revenues and are committed to continuing our
product research and development program, significant
expenditures and losses will continue until development of new
products is completed and such products have been clinically
tested, approved by the FDA or other regulatory agencies and
successfully marketed. In addition, we fund our operations
primarily through the sale of equity securities, and have had
limited working capital for our product development and other
activities. We do not believe that debt financing from financial
institutions will be available until at least the time that one
of our products is approved for commercial production.
We have no current product sales
revenues or profits.
We have devoted our resources to developing a new generation of
therapeutic drug products, but such products cannot be marketed
until clinical testing is completed and governmental approvals
have been obtained. Accordingly, there is no current source of
revenues, much less profits, to sustain our present activities,
and no revenues will likely be available until, and unless, the
new products are clinically tested, approved by the FDA or other
regulatory agencies and successfully marketed, either by us or a
marketing partner, an outcome which we are not able to guarantee.
It is uncertain that we will
have access to future capital.
We do not expect to generate positive cash flow from operations
for at least the next several years. As a result, substantial
additional equity or debt financing for research and development
or clinical development will be required to fund our activities.
Although we have raised equity financing in the past, including
in April 2004 and July 2005, we cannot be certain that we will
be able to continue to obtain such financing on favorable or
satisfactory terms, if at all, or that it will be sufficient to
meet our cash requirements. Any additional equity financing
could result in substantial dilution to stockholders, and debt
financing, if available, would likely involve restrictive
covenants that preclude us from making distributions to
stockholders and taking other actions beneficial to
stockholders. In
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Risk factors
connection with certain past warrant issuances by us, we have
provided the warrant holders with anti-dilution protections
that, among other things, protect them against subsequent
issuances by us of common stock at a price per share that is
less than the exercise price of the warrants. You could
experience additional significant dilution in the future as a
result of these provisions if we are required to issue common
stock or other equity securities below the exercise prices
contained in the warrants. Our ability to raise capital would
most likely be impaired if we became ineligible to file shelf
registration statements on
Form S-3.
If adequate funds are not available, we may be required to delay
or reduce the scope of our drug development program or attempt
to continue development by entering into arrangements with
collaborative partners or others that may require us to
relinquish some or all of our rights to proprietary drugs. The
inability to adequately and timely fund our capital requirements
would have a material adverse effect on us. We expect that the
proceeds of this offering will last for at least the next
12 months, although we cannot assure you that we will not
require additional funds earlier.
We are not certain that we will
be successful in the development of our drug
candidates.
The successful development of any new drug is highly uncertain
and is subject to a number of significant risks. Our drug
candidates, all of which are in a development stage, require
significant, time-consuming and costly development, testing and
regulatory clearance. This process typically takes several years
and can require substantially more time. Risks include, among
others, the possibility that a drug candidate will (i) be
found to be ineffective or unacceptably toxic, (ii) have
unacceptable side effects, (iii) fail to receive necessary
regulatory clearances, (iv) not achieve broad market
acceptance, (v) be subject to competition from third
parties who may market equivalent or superior products,
(vi) be affected by third parties holding proprietary
rights that will preclude us from marketing a drug product, or
(vii) not be able to be manufactured by manufacturers in a
timely manner in accordance with required standards of quality.
There can be no assurance that the development of our drug
candidates will demonstrate the efficacy and safety of our drug
candidates as therapeutic drugs, or, even if demonstrated, that
there will be sufficient advantages to their use over other
drugs or treatments so as to render the drug product
commercially viable. In the past, we have been faced with
limiting the scope and/or delaying the launch of preclinical and
clinical drug trials due to limited cash and personnel
resources. We have also chosen to terminate licenses of some
drug candidates that were not showing sufficient promise to
justify continued expense and development. In the event that we
are not successful in developing and commercializing one or more
drug candidates, investors are likely to realize a loss of their
entire investment.
We have been delayed at certain times in the past in the
development of our drug products by limited funding. In
addition, if certain of our scientific and technical personnel
resigned at or about the same time, the development of our drug
products would probably be delayed until new personnel were
hired and became familiar with the development programs.
Positive results in preclinical
and clinical trials do not ensure that future clinical trials
will be successful or that drug candidates will receive all
necessary regulatory approvals for the marketing, distribution
or sale of such drug candidates.
Success in preclinical and clinical trials does not ensure that
large-scale clinical trials will be successful. 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 and may be difficult
to predict. In the past, we have terminated licenses of drug
candidates when our preclinical trials did not support or verify
earlier preclinical data. There is a significant risk that any of
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Risk factors
our drug candidates could fail to show satisfactory results in
continued trials, and would not justify further development.
We will face intense competition
from other companies in the pharmaceutical industry.
We are engaged in a segment of the pharmaceutical industry that
is highly competitive and rapidly changing. If successfully
developed and approved, any of our drug candidates will likely
compete with several existing therapies. CoFactor, our leading
drug candidate, would likely compete against a well-established
product, leucovorin. In addition, there are numerous companies
with a focus in oncology and/or anti-viral therapeutics that are
pursuing the development of pharmaceuticals that target the same
diseases as are targeted by the drugs being developed by us. We
anticipate that we will face intense and increasing competition
in the future as new products enter the market and advanced
technologies become available. We cannot assure that existing
products or new products developed by competitors will not be
more effective, or more effectively marketed and sold than those
we may market and sell. Competitive products may render our
drugs obsolete or noncompetitive prior to our recovery of
development and commercialization expenses.
Many of our likely competitors, such as Merck, Wyeth and Pfizer,
will also have significantly greater financial, technical and
human resources and will likely be better equipped to develop,
manufacture and market products. In addition, many of these
competitors have extensive experience in preclinical testing and
clinical trials, obtaining FDA and other regulatory approvals
and manufacturing and marketing pharmaceutical products. A
number of these competitors also have products that have been
approved or are in late-stage development and operate large,
well-funded research and development programs. Smaller companies
may also prove to be significant competitors, particularly
through collaborative arrangements with large pharmaceutical and
biotechnology companies. Furthermore, academic institutions,
government agencies and other public and private research
organizations are becoming increasingly aware of the commercial
value of their inventions and are actively seeking to
commercialize the technology they have developed. Companies such
as Gilead, Roche and GlaxoSmithKline all have drugs in various
stages of development that could become competitors. Other
companies, such as Merck Eprova, with which we had a
Co-Operation Agreement (2001-2003), may be developing products
which could compete with CoFactor. Accordingly, competitors may
succeed in commercializing products more rapidly or effectively
than us, which would have a material adverse effect on us.
There is no assurance that our
products will have market acceptance.
Our success will depend in substantial part on the extent to
which a drug product, if eventually approved for commercial
distribution, achieves market acceptance. The degree of market
acceptance will depend upon a number of factors, including
(i) the receipt and scope of regulatory approvals,
(ii) the establishment and demonstration in the medical
community of the safety and efficacy of a drug product,
(iii) the products potential advantages over existing
treatment methods and (iv) reimbursement policies of
government and third party payors. We cannot predict or
guarantee that physicians, patients, healthcare insurers or
maintenance organizations, or the medical community in general,
will accept or utilize any of our drug products.
The unavailability of health
care reimbursement for any of our products will likely adversely
impact our ability to effectively market such products and
whether health care reimbursement will be available for any of
our products is uncertain.
Our ability to commercialize our technology successfully will
depend in part on the extent to which reimbursement for the
costs of such products and related treatments will be available
from government health administration authorities, private
health insurers and other third-party payors. Significant
S-16
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Risk factors
uncertainty exists as to the reimbursement status of newly
approved medical products. We cannot guarantee that adequate
third-party insurance coverage will be available for us to
establish and maintain price levels sufficient for realization
of an appropriate return on our investments in developing new
therapies. If we are successful in getting FDA approval for
CoFactor, we will be competing against a generic drug,
leucovorin, which has a lower cost and a long, established
history of reimbursement. Receiving sufficient reimbursement for
purchase costs of CoFactor will be necessary to make it cost
effective and competitive versus the established drug,
leucovorin. Government, private health insurers, and other
third-party payors are increasingly attempting to contain health
care costs by limiting both coverage and the level of
reimbursement for new therapeutic products approved for
marketing by the FDA. Accordingly, even if coverage and
reimbursement are provided by government, private health
insurers, and third-party payors for use of our products, the
market acceptance of these products would be adversely affected
if the amount of reimbursement available for the use of our
therapies proved to be unprofitable for health care providers.
Uncertainties related to health
care reform measures may affect our success.
There have been some federal and state proposals in the past to
subject the pricing of health care goods and services, including
prescription drugs, to government control and to make other
changes to the U.S. health care system. None of the
proposals seems to have affected any of the drugs in our
programs. However, it is uncertain if future legislative
proposals would be adopted that might affect the drugs in our
programs or what actions federal, state, or private payors for
health care treatment and services may take in response to any
such health care reform proposals or legislation. Any such
health care reforms could have a material adverse effect on the
marketability of any drugs for which we ultimately require FDA
approval.
Further testing of our drug
candidates will be required and there is no assurance of FDA
approval.
The FDA and comparable agencies in foreign countries impose
substantial requirements upon the introduction of medical
products, through lengthy and detailed laboratory and clinical
testing procedures, sampling activities and other costly and
time-consuming procedures. Satisfaction of these requirements
typically takes several years or more and varies substantially
based upon the type, complexity, and novelty of the product.
The effect of government regulation and the need for FDA
approval will delay marketing of new products for a considerable
period of time, impose costly procedures upon our activities,
and provide an advantage to larger companies that compete with
us. There can be no assurance that the FDA or other regulatory
approval for any products developed by us will be granted on a
timely basis or at all. Any such delay in obtaining or failure
to obtain, such approvals would materially and adversely affect
the marketing of any contemplated products and the ability to
earn product revenue. Further, regulation of manufacturing
facilities by state, local, and other authorities is subject to
change. Any additional regulation could result in limitations or
restrictions on our ability to utilize any of our technologies,
thereby adversely affecting our operations.
Human pharmaceutical products are subject to rigorous
preclinical testing and clinical trials and other approval
procedures mandated by the FDA and foreign regulatory
authorities. Various federal and foreign statutes and
regulations also govern or influence the manufacturing, safety,
labeling, storage, record keeping and marketing of
pharmaceutical products. The process of obtaining these
approvals and the subsequent compliance with appropriate U.S.
and foreign statutes and regulations are time-consuming and
require the expenditure of substantial resources. In addition,
these requirements and processes vary widely from country to
country.
S-17
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Risk factors
Among the uncertainties and risks of the FDA approval process
are the following: (i) the possibility that studies and
clinical trials will fail to prove the safety and efficacy of
the drug, or that any demonstrated efficacy will be so limited
as to significantly reduce or altogether eliminate the
acceptability of the drug in the marketplace, (ii) the
possibility that the costs of development, which can far exceed
the best of estimates, may render commercialization of the drug
marginally profitable or altogether unprofitable, (iii) the
possibility of additional delays in the development of CoFactor,
despite the fact that we expect that the FDA will approve our
SPA for our proposed Phase III clinical and that we will be
able to commence the trial in the second quarter of 2006, and
(iv) the possibility that the amount of time required for
FDA approval of a drug may extend for years beyond that which is
originally estimated. In addition, the FDA or similar foreign
regulatory authorities may require additional clinical trials,
which could result in increased costs and significant
development delays. Delays or rejections may also be encountered
based upon changes in FDA policy and the establishment of
additional regulations during the period of product development
and FDA review. Similar delays or rejections may be encountered
in other countries.
We may not achieve our projected
development goals in the time frames we announce
and expect.
We set goals for and make public statements regarding timing of
the accomplishment of objectives material to our success, such
as the commencement and completion of clinical trials. The
actual timing of these events can vary dramatically due to
factors such as delays or failures in our clinical trials, and
the uncertainties inherent in the regulatory approval process.
There can be no assurance that our clinical trials will commence
or be completed, that we will make regulatory submissions or
receive regulatory approvals as planned or that we will be able
to adhere to our current schedule for the launch of any of our
products. If we fail to achieve one or more of these milestones
as planned, the market price of our shares could decline.
Our success will depend on
licenses and proprietary rights we receive from other parties,
and on any patents we may obtain.
Our success will depend in large part on our ability and our
licensors ability to (i) maintain patent protection
with respect to drug products, (ii) our ability to maintain
our licenses, (iii) defend patents and licenses once
obtained, (iv) maintain trade secrets, (v) operate
without infringing upon the patents and proprietary rights of
others and (vi) obtain appropriate licenses to patents or
proprietary rights held by third parties if infringement would
otherwise occur, both in the U.S. and in foreign countries.
The patent positions of pharmaceutical companies, including
ours, are uncertain and involve complex legal and factual
questions. There is no guarantee that we or our licensors have
or will develop or obtain the rights to products or processes
that are patentable, that patents will issue from any of the
pending applications or that claims allowed will be sufficient
to protect the technology licensed to us. In addition, we cannot
be certain that any patents issued to or licensed by us will not
be challenged, invalidated, infringed or circumvented, including
by our competitors, or that the rights granted thereunder will
provide competitive advantages to us.
Litigation, which could result in substantial cost, may also be
necessary to enforce any patents to which we have rights, or to
determine the scope, validity and unenforceability of other
parties proprietary rights, which may affect our rights.
There can be no assurance that our owned or licensed patents
would be held valid by a court or administrative body or that an
alleged infringer would be found to be infringing. The
uncertainty resulting from the mere institution and continuation
of any technology-related litigation or interference proceeding
could have a material adverse effect on us pending resolution of
the disputed matters.
S-18
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Risk factors
We may also rely on unpatented trade secrets and know-how to
maintain our competitive position, which we seek to protect, in
part, by confidentiality agreements with employees, consultants
and others. There can be no assurance that these agreements will
not be breached, invalidated or terminated, that we will have
adequate remedies for any breach, or that trade secrets will not
otherwise become known or be independently discovered by
competitors.
A third party may have an
interest in two issued U.S. patents licensed to us by the
University of Southern California (USC), which could adversely
affect our intellectual property position with respect to
CoFactor.
We have recently become aware of the possibility that
Mr. Goran Carlsson, a named inventor in the Canadian patent
pertaining to CoFactor licensed to us by USC, may also be a
co-inventor of the two corresponding U.S. patents licensed
to us by USC. The facts are currently under investigation. We
believe that if Mr. Carlsson is found to be a proper
co-inventor of the U.S. patents, he may be under
contractual obligation to assign to USC his ownership rights in
these U.S. patents.
USC may not be successful in acquiring ownership rights, if any,
that Mr. Carlsson may have in the patents. In such case, we
will consider all our alternatives, including seeking remedies
from the courts. Any such action is likely to be expensive and
consume managements attention, and we may not be
successful. Although we believe Mr. Carlssons
possible ownership rights do not limit our ability to make use
of our technology, Mr. Carlsson may attempt to license any
rights he may have to third parties, including our competitors.
While we believe our other intellectual property is sufficient
to preclude others from making, using, or selling aspects of our
CoFactor (ANX-510) technology, if Mr. Carlsson is able to
establish inventorship rights in the relevant patents, and if
his rights are not licensed to us through USC, the value of our
current intellectual property could be materially diminished.
Our license agreements can be
terminated in the event of a breach.
The license agreements pursuant to which we license our core
technologies for CoFactor and Thiovir permit the licensor, the
University of Southern California, to terminate the agreements
under certain circumstances, such as the failure by us to use
our reasonable best efforts to commercialize the subject drug or
the occurrence of any other uncured material breach by us. The
license agreements also provide that the licensor is primarily
responsible for obtaining patent protection for the technology
licensed, and we are required to reimburse the licensor for the
costs it incurs in performing these activities. The license
agreements also require the payment of specified royalties. Any
inability or failure to observe these terms or pay these costs
or royalties could result in the termination of the applicable
license agreement in certain cases. In the past, we have let
lapse certain licenses for drug candidates when we determined
that the expense and risk of continued development outweighed
the likely benefits of that continued development. The
termination of any license agreement could have a material
adverse effect on us.
The United States government and
the University of Southern California retain certain rights in
the technologies we have licensed from them.
The technologies developed by the University of Southern
California were developed in part through funding provided by
the United States government. Therefore, in addition to the
University of Southern Californias termination rights
described above, our licenses are subject to a non-exclusive,
non-transferable, royalty-free right of the United States
government and the University of Southern California to practice
the licensed technologies for research and, in the case of the
United States government, other governmental purposes on behalf
of the United States and on behalf of any foreign government or
international organization pursuant to any existing or future
treaty or agreement with the United States, but only to the
extent the government funded the research. The government also
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Risk factors
reserves the right to require us to grant sublicenses to third
parties when necessary to fulfill public health and safety needs
or if we do not reasonably satisfy government requirements for
public use of the technology. Although we are currently the only
parties licensed to actively develop the technology, we cannot
assure you that the government will not in the future require us
to sublicense the technology. Any action by the government to
force us to issue such sublicenses or development activities
pursuant to its reserved rights in the technology would erode
our ability to exclusively develop products based on the
technology and could materially harm our financial condition and
operating results.
Licenses of technology developed through funding provided by the
United States government, including the University of Southern
California licenses, require that licensees in this case,
us and our affiliates and sub-licensees agree that
products covered by the licenses will be manufactured
substantially in the United States. We cannot assure you that we
will be able to contract for manufacturing facilities in the
United States on favorable terms or obtain waivers of such
requirement, or that such requirement will not impede our
ability to license our products to others. If we are unable to
contract for management facilities in the United States or
obtain an appropriate waiver, we risk losing our rights under
the University of Southern California licenses, which could
materially harm our financial condition and operating results.
Protecting our proprietary
rights may be difficult and costly.
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and
factual questions. Accordingly, we cannot predict the breadth of
claims allowed in these companies patents or whether we
may infringe or be infringing these claims. Although we have not
been notified of any patent infringement, nor notified others of
patent infringement, such patent disputes are common and could
preclude the commercialization of our products. Patent
litigation is costly in its own right and could subject us to
significant liabilities to third parties. In addition, an
adverse decision could force us to either obtain third-party
licenses at a material cost or cease using the technology or
product in dispute.
If a trademark infringement
action is commenced against us regarding the use of our
corporate name, we could be required to pay monetary damages
and/or change our name.
In March of 2005, we received correspondence from Aventis
Pharmaceuticals, Inc. and its parent, Sanofi-Aventis
(collectively, Sanofi) in which Sanofi asserted that
our use of the word ADVENTRX infringes upon their
trademark AVENTIS and demanded that we discontinue
use of the word ADVENTRX. In May of 2005, we responded with a
letter in which we outlined reasons why we do not believe that
our name, ADVENTRX, infringes on Sanofis trademark,
AVENTIS. Since our response, counsel for both parties have
exchanged further communications and Sanofi has made further
inquiries regarding our use of the ADVENTRX mark.
These communications are continuing. Sanofi may take legal
action in the future, including proceeding with an action for
trademark infringement. Depending upon the circumstances, an
adverse result in a trademark infringement action could require
the payment of monetary damages by us and/or changing our
corporate name.
We may be unable to retain
skilled personnel and maintain key relationships.
The success of our business depends, in large part, on our
ability to attract and retain highly qualified management,
scientific and other personnel, and on our ability to develop
and maintain important relationships with leading research
institutions and consultants and advisors. Competition for these
types of personnel and relationships is intense from numerous
pharmaceutical and biotechnology companies, universities and
other research institutions. We are currently dependent upon our
scientific staff, which has a deep background in our drug
candidates and the ongoing preclinical and clinical
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Risk factors
trials. Recruiting and retaining senior employees with relevant
drug development experience in oncology and anti-viral
therapeutics is costly and time-consuming. There can be no
assurance that we will be able to attract and retain such
individuals on an uninterrupted basis and on commercially
acceptable terms, and the failure to do so could have a material
adverse effect on us by significantly delaying one or more of
our drug development programs. The loss of any of our senior
executive officers, including our chief executive officer and
chief financial officer, in particular, could have a material
adverse effect on the company and the market for our common
stock, particularly if such loss was abrupt or unexpected. All
of our employees are employed on an at-will basis under offer
letters. We do not have non-competition agreements with any of
our employees.
We currently have no sales
capability, and limited marketing capability.
We currently do not have sales personnel. We have limited
marketing and business development personnel. We will have to
develop a sales force, or rely on marketing partners or other
arrangements with third parties for the marketing, distribution
and sale of any drug product which is ready for distribution.
There is no guarantee that we will be able to establish
marketing, distribution or sales capabilities or make
arrangements with third parties to perform those activities on
terms satisfactory to us, or that any internal capabilities or
third party arrangements will be cost-effective.
In addition, any third parties with which we may establish
marketing, distribution or sales arrangements may have
significant control over important aspects of the
commercialization of a drug product, including market
identification, marketing methods, pricing, composition of sales
force and promotional activities. There can be no assurance that
we will be able to control the amount and timing of resources
that any third party may devote to our products or prevent any
third party from pursuing alternative technologies or products
that could result in the development of products that compete
with, or the withdrawal of support for, our products.
We do not have manufacturing
capabilities and may not be able to efficiently develop
manufacturing capabilities or contract for such services from
third parties on commercially acceptable terms.
We do not have any manufacturing capacity. When and if required,
we will seek to establish relationships with third-party
manufacturers for the manufacture of clinical trial material and
the commercial production of drug products as we have with our
current manufacturing partners. There can be no assurance that
we will be able to establish relationships with third-party
manufacturers on commercially acceptable terms or that
third-party manufacturers will be able to manufacture a drug
product on a cost-effective basis in commercial quantities under
good manufacturing practices mandated by the FDA or other
regulatory matters.
The dependence upon third parties for the manufacture of
products may adversely affect future costs and the ability to
develop and commercialize a drug product on a timely and
competitive basis. Further, there can be no assurance that
manufacturing or quality control problems will not arise in
connection with the manufacture of our drug products or that
third party manufacturers will be able to maintain the necessary
governmental licenses and approvals to continue manufacturing
such products. Any failure to establish relationships with third
parties for our manufacturing requirements on commercially
acceptable terms would have a material adverse effect on us.
We are dependent in part on
third parties for drug development and research
facilities.
We do not possess research and development facilities necessary
to conduct all of our drug development activities. We engage
consultants and independent contract research organizations to
design and conduct clinical trials in connection with the
development of our drugs. As a result, these
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Risk factors
important aspects of a drugs development will be outside
our direct control. In addition, there can be no assurance that
such third parties will perform all of their obligations under
arrangements with us or will perform those obligations
satisfactorily.
In the future, we anticipate
that we will need to obtain additional or increased product
liability insurance coverage and it is uncertain that such
increased or additional insurance coverage can be obtained on
commercially reasonable terms.
Our business will expose us to potential product liability risks
that are inherent in the testing, manufacturing and marketing of
pharmaceutical products. There can be no assurance that product
liability claims will not be asserted against us. We intend to
obtain additional limited product liability insurance for our
clinical trials, directly or through our marketing development
partners or contract research organization (CRO) partners,
when they begin in the U.S. and to expand our insurance coverage
if and when we begin marketing commercial products. However,
there can be no assurance that we will be able to obtain product
liability insurance on commercially acceptable terms or that we
will be able to maintain such insurance at a reasonable cost or
in sufficient amounts to protect against potential losses. A
successful product liability claim or series of claims brought
against us could have a material adverse effect on us.
The market price of our shares,
like that of many biotechnology companies, is highly
volatile.
Market prices for our common stock and the securities of other
medical and biomedical technology companies have been highly
volatile and may continue to be highly volatile in the future.
Factors such as announcements of technological innovations or
new products by us or our competitors, government regulatory
action, litigation, patent or proprietary rights developments,
and market conditions for medical and high technology stocks in
general can have a significant impact on any future market for
our common stock.
If we cannot satisfy AMEXs
listing requirements, it may delist our common stock and we may
not have an active public market for our common stock. The
absence of an active trading market would likely make the common
stock an illiquid investment.
Our common stock is quoted on the American Stock Exchange. To
continue to be listed, we are required to maintain shareholders
equity of $6,000,000 among other requirements. We do not satisfy
that requirement as of March 31, 2006. However, the
Exchange will not normally consider suspending dealings in, or
removing from the list, the securities of a company if the
company has a total value of market capitalization of at least
$50,000,000 and has at least 1,100,000 shares publicly held,
with a market value of publicly held shares of at least
$15,000,000 and 400 round lot shareholders. We currently
meet these criteria. If the Exchange were to delist our common
stock and suspend trading in our common stock, our common stock
would likely trade in the
over-the-counter market
in the so-called pink sheets or, if available, the
OTC Bulletin Board Service. As a result, an
investor would likely find it significantly more difficult to
dispose of, or to obtain accurate quotations as to the value of,
our shares.
If our common stock is delisted,
it may become subject to the SECs penny stock
rules and more difficult to sell.
SEC rules require brokers to provide information to purchasers
of securities traded at less than $5.00 and not traded on a
national securities exchange or quoted on the Nasdaq Stock
Market. If our common stock becomes a penny stock
that is not exempt from these SEC rules, these disclosure
requirements may have the effect of reducing trading activity in
our common stock and making it more difficult for investors to
sell. The rules require a broker-dealer to deliver a
standardized risk
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Risk factors
disclosure document prepared by the SEC that provides
information about penny stocks and the nature and level of risks
in the penny market. The broker must also give bid and offer
quotations and broker and salesperson compensation information
to the customer orally or in writing before or with the
confirmation. The SEC rules also require a broker to make a
special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchasers
written agreement to the transaction before a transaction in a
penny stock.
Changes in laws and regulations
that affect the governance of public companies has increased our
operating expenses and will continue to do so.
Recently enacted changes in the laws and regulations affecting
public companies, including the provisions of the Sarbanes-Oxley
Act of 2002 and the listing requirements for American Stock
Exchange, have imposed new duties on us and on our executives,
directors, attorneys and independent accountants. In order to
comply with these new rules, we have hired and expect to hire
additional personnel and use additional outside legal,
accounting and advisory services, which have increased and are
likely to continue increasing our operating expenses. In
particular, we expect to incur additional administrative
expenses as we continue compliance with Section 404 of the
Sarbanes-Oxley Act, which requires management to extensively
evaluate and report on, and our independent registered public
accounting firm to attest to, our internal controls. For
example, we have incurred significant expenses, and expect to
incur additional expenses, in connection with the evaluation,
implementation, documentation and testing of our existing and
newly implemented control systems. Management time associated
with these compliance efforts necessarily reduces time available
for other operating activities, which could adversely affect
operating results. If we are unable to achieve full and timely
compliance with these regulatory requirements, we could be
required to incur additional costs, expend additional money and
management time on additional remedial efforts which could
adversely affect our results of operations.
Failure to implement effective
control systems, or failure to complete our assessment of the
effectiveness of our internal control over financial reporting,
may subject us to regulatory sanctions and could result in a
loss of public confidence, which could harm our operating
results.
Pursuant to Section 404 of the Sarbanes-Oxley Act,
beginning with our fiscal year ending December 31, 2005, we
are required to include in our annual report our assessment of
the effectiveness of our internal control over financial
reporting. Furthermore, our independent registered public
accounting firm is required to issue an opinion on whether our
assessment of the effectiveness of our internal control over
financial reporting is fairly stated in all material respects
and separately report on whether it believes we maintained, in
all material respects, effective internal control over financial
reporting on an annual basis.
In connection with their required assessment under
Section 404 of the
Sarbanes-Oxley Act of
2002, our management concluded that our internal controls over
financial reporting were effective as of December 31, 2005,
and our independent public accountants were able to attest to
that assessment. However, in connection with the
2005 year-end audit, our independent public accountants
identified certain internal control weaknesses that, although
not rising to the level of material weaknesses, were significant
deficiencies. Additionally, in prior years (most recently 2004),
certain material weaknesses in our internal controls over
financial reporting were identified in connection with our
annual financial audits. While we believe we remediated the
material weaknesses from prior years, including through adopting
a new financial accounting system and adding a financial
controller to our accounting staff, any failure to implement
required new or improved controls, or difficulties encountered
in their implementation, could harm our operating results or
cause us to fail to meet our reporting obligations. Inferior
internal controls could also cause investors to lose confidence.
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Risk factors
If we fail to remedy any material weaknesses which are uncovered
in the future, fail to timely complete our assessment, or if our
independent registered public accounting firm cannot timely
attest to our assessment, we could be subject to regulatory
sanctions and a loss of public confidence in our internal
control. In addition, any failure to implement required new or
improved controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to
fail to timely meet our regulatory reporting obligations.
Our early corporate records are
incomplete. As a result, we might have difficulty in assessing
and defending against any claims relating to our common stock
purportedly issued during, or corporate actions taken during,
periods for which our records are incomplete.
We were initially incorporated in 1995. All of our current
senior management have joined our company since 2002 and our
corporate records prior to 2002, including minutes of board
meetings and stock transfer records, are incomplete. As a
result, if claims were to be asserted against us relating to our
common stock purportedly issued during, or corporate actions
taken during, this time, we might have difficulty in assessing
and defending them.
We have engaged in and may
continue to engage in further expansion through mergers and
acquisitions, which could negatively affect our business and
earnings.
We have engaged in and may continue to engage in expansion
through mergers and acquisitions. There are risks associated
with such expansion. These risks include, among others,
incorrectly assessing the asset quality of a prospective merger
partner, encountering greater than anticipated costs in
integrating acquired businesses, facing resistance from
customers or employees, and being unable to profitably deploy
assets acquired in the transaction. Additional country- and
region-specific risks are associated with transactions outside
the United States. To the extent we issue capital stock in
connection with additional transactions, these transactions and
related stock issuances may have a dilutive effect on earnings
per share and share ownership.
Our earnings, financial condition, and prospects after a merger
or acquisition depend in part on our ability to successfully
integrate the operations of the acquired company. We may be
unable to integrate operations successfully or to achieve
expected cost savings. Any cost savings which are realized may
be offset by losses in revenues or other charges to earnings.
RISKS RELATED TO OUR COMMON
STOCK AND THE OFFERING
The price of our common stock
has been and is likely to continue to be volatile, and your
investment could suffer a decline in value.
The trading price of our common stock has been, and is likely to
be, volatile and could be subject to wide fluctuations in price
in response to various factors, many of which are beyond our
control, including:
| the timing and the results from our clinical trial programs; |
| FDA or international regulatory actions; |
| failure of any of our product candidates, if approved, to achieve commercial success; |
| announcements of clinical trial results or new product introductions by our competitors; |
| market conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors; |
| developments concerning intellectual property rights; |
| litigation or public concern about the safety of our potential products; |
| deviations in our business and the trading price of our common stock from the estimates of securities analysts; |
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Risk factors
| additions or departures of key personnel; and |
| third party reimbursement policies. |
As a result, you could lose all or part of your investment. In
addition, the stock market in general experiences extreme price
and volume fluctuations that are often unrelated and
disproportionate to the operating performance of companies.
Investors in this offering will
experience immediate and substantial dilution.
The public offering price of our common stock is substantially
higher than the net tangible book value per share of our common
stock. Therefore, if you purchase shares of our common stock in
this offering, you will incur immediate and substantial dilution
in the pro forma net tangible book value per share of common
stock from the price per share that you pay for the common
stock. If the holders of outstanding options or warrants
exercise those options or warrants at prices below the public
offering price, you will incur further dilution. See
Dilution.
Sales of substantial amounts of
our common stock or the perception that such sales may occur
could cause the market price of our common stock to drop
significantly, even if our business is performing
well.
The market price of our common stock could decline as a result
of sales by, or the perceived possibility of sales by, our
existing stockholders of shares of common stock in the market
after this offering. These sales might also make it more
difficult for us to sell equity securities at a time and price
that we deem appropriate. The
lock-up agreements
delivered by our directors and officers to the underwriters in
connection with the offering generally provide that they will
not dispose of their shares for a period of 90 days after
the date of this prospectus supplement. Our underwriters have no
pre-established
conditions to waiving the terms of the
lock-up agreements, and
any decision by them to waive those conditions would depend on a
number of factors, which may include market conditions, the
performance of the common stock in the market and our financial
condition at that time. In addition, we have filed resale shelf
registration statements to register shares of our common stock
that may be sold by certain of our stockholders.
We will have broad discretion in
how we use the proceeds of this offering, and we may not use
these proceeds effectively, which could affect our results of
operations and cause our stock price to decline.
We will have considerable discretion in the application of the
net proceeds of this offering. We currently intend to use the
net proceeds of this offering to fund clinical and preclinical
developments of our product candidates and commercial launch
activities for our lead product candidates. However, our
management has broad discretion over how these proceeds are used
and could spend the proceeds in ways with which you may not
agree. We may not invest the proceeds of this offering
effectively or in a manner that yields a favorable or any
return, and consequently, this could result in financial losses
that could have a material adverse effect on our business, cause
the price of our common stock to decline or delay the
development of our product candidates.
Anti-takeover provisions in our
charter documents and under Delaware law may make an acquisition
of us, which may be beneficial to our stockholders, more
difficult, which could depress our stock price.
We are incorporated in Delaware. Certain anti-takeover
provisions of Delaware law and our charter documents as
currently in effect may make a change in control of our company
more difficult, even if a change in control would be beneficial
to the stockholders. Our charter documents provide that our
board of directors may issue, without a vote of our
stockholders, one or more series of preferred stock
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Risk factors
that has more than one vote per share. This could permit our
board of directors to issue preferred stock to investors who
support our management and give effective control of our
business to our management. Additionally, issuance of preferred
stock could block an acquisition resulting in both a drop in the
price of our common stock and a decline in interest in the
stock, which could make it more difficult for stockholders to
sell their shares. This could cause the market price of our
common stock to drop significantly, even if our business is
performing well. Our bylaws also limit who may call a special
meeting of stockholders and establish advance notice
requirements for nomination for election to the board of
directors or for proposing matters that can be acted upon at
stockholder meetings. Delaware law also prohibits corporations
from engaging in a business combination with any holders of 15%
or more of their capital stock until the holder has held the
stock for three years unless, among other possibilities, the
board of directors approves the transaction. Our board of
directors may use these provisions to prevent changes in the
management and control of our company. Also, under applicable
Delaware law, our board of directors may adopt additional
anti-takeover measures in the future. In addition, provisions of
certain contracts, such as employment agreements with our
executive officers, may have an anti-takeover effect. In
connection with a July 2005 private placement, we agreed with
the investors in that transaction that we would not implement
certain additional measures that would have an anti-takeover
effect, as described under Certain Relationships and
Related Transactions.
Concentration of ownership of
our common stock among our existing executive officers,
directors and principal stockholders may prevent new investors
from influencing significant corporate decisions.
Upon completion of this offering, our executive officers,
directors and beneficial owners of 5% or more of our common
stock and their affiliates will, in aggregate, beneficially own
approximately 27.04% of our outstanding common stock or 26.33%
if the underwriters exercise their over-allotment option in
full. These persons, acting together, will be able to exercise
significant influence over all matters requiring stockholder
approval, including the election and removal of directors and
any merger, consolidation or sale of all or substantially all of
our assets. In addition, these persons, acting together, may
have the ability to control the management and affairs of our
company. This concentration of ownership may harm the market
price of our common stock by delaying or preventing a change in
control of our company at a premium price even if beneficial to
our other stockholders.
Because we do not expect to pay
dividends in the foreseeable future, you must rely on stock
appreciation for any return on your investment.
We have paid no cash dividends on any of our capital stock to
date, and we currently intend to retain our future earnings, if
any, to fund the development and growth of our business. As a
result, we do not expect to pay any cash dividends in the
foreseeable future, and payment of cash dividends, if any, will
also depend on our financial condition, results of operations,
capital requirements and other factors and will be at the
discretion of our board of directors. Furthermore, we may in the
future become subject to contractual restrictions on, or
prohibitions against, the payment of dividends. Accordingly, the
success of your investment in our common stock will likely
depend entirely upon any future appreciation. There is no
guarantee that our common stock will appreciate in value after
the offering or even maintain the price at which you purchased
your shares, and you may not realize a return on your investment
in our common stock.
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Special note regarding
forward-looking statements
Many of the statements under the sections titled
Prospectus supplement summary, Risk
factors and elsewhere in this prospectus supplement and
the accompanying prospectus, including the incorporated by
reference documents, constitute forward-looking statements.
These statements involve known and unknown risks, uncertainties,
and other factors that may cause our actual results and/or the
timing of events, among other things, to be materially different
from projected results or events expressed or implied by the
forward-looking statements. These factors include, among others,
those listed under Risk factors and elsewhere in
this prospectus supplement and the accompanying prospectus.
In some cases, you can identify forward-looking statements by
terms such as may, will,
should, expects, plans,
anticipates, believes,
estimates, predicts,
potential, or continue or similar terms.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance, or
achievements. Our actual results could differ materially from
those expressed or implied by these forward-looking statements
as a result of various factors, including the risk factors
described under the heading Risk factors and
elsewhere in this prospectus supplement and the accompanying
prospectus. We undertake no obligation to update publicly any
forward-looking statements for any reason, except as required by
law, even as new information becomes available or other events
occur in the future.
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Use of proceeds
We estimate the net proceeds of this offering at an assumed
public offering price of $4.84 per share, will be approximately
$69,500,000, after deducting payment of underwriting discounts
and commissions and estimated expenses of this offering payable
by us. If the underwriters over-allotment option is
exercised in full, we anticipate that the net proceeds will be
approximately $81,075,000. An increase (or decrease) in the
public offering price from the assumed public offering price of
$4.84 per share by $1.00 would increase (or decrease) the net
proceeds to us from this offering by approximately
$15.566 million, after deducting the estimated underwriting
discounts and commissions and estimated aggregate offering
expenses payable by us and assuming no exercise of the
underwriters over-allotment option and no other change to
the number of shares offered by us as set forth on the cover
page of this prospectus.
We currently intend to use the net proceeds from the sale of the
shares of common stock in this offering to fund preclinical and
clinical testing and other product developments as well as
possibly for commercial launch preparation. We have no current
agreements or commitments with respect to any acquisition.
The timing and amount of our actual expenditures will be based
on many factors, including our ability to identify drug
candidates to develop, technologies or companies to acquire, and
to negotiate and enter into definitive agreements with respect
to any acquisitions.
Until we use the net proceeds of this offering for the above
purposes, we intend to invest the funds in short-term,
investment grade, interest-bearing securities. We cannot predict
whether the proceeds invested will yield a favorable return.
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Capitalization
The following table sets forth our cash, cash equivalents and
short-term investments and capitalization as of March 31,
2006:
| on an actual basis; and |
| on an as adjusted basis to give effect to our sale of 15,495,867 shares of common stock in this offering at an assumed public offering price of $4.84 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. |
You should read the table above in conjunction with
Managements discussion and analysis of financial
condition and results of operation and our consolidated
financial statements and the related notes incorporated by
reference in this prospectus supplement and the accompanying
prospectus.
As of March 31, 2006 | ||||||||||||
As | ||||||||||||
Actual | adjusted | |||||||||||
(unaudited) | ||||||||||||
(in thousands, except | ||||||||||||
share and per share | ||||||||||||
data) | ||||||||||||
Cash, cash equivalents and short-term investments
|
$ | 22,014 | $ | 91,514 | ||||||||
Warrant liability
|
46,723 | 46,723 | ||||||||||
Current liabilities
|
2,209 | 2,209 | ||||||||||
Long-term obligations
|
57 | 57 | ||||||||||
Shareholders equity:
|
||||||||||||
Temporary equity:
|
||||||||||||
Common stock subject to continuing registration, $.001 par
value; 10,810,809 shares issued and outstanding, actual;
10,810,809 shares issued and outstanding, as adjusted
|
| | ||||||||||
Shareholders deficiency:
|
||||||||||||
Common stock, $0.001 par value. Authorized 200,000,000 shares;
58,317,667 shares issued and outstanding, actual;
73,813,534 shares issued and outstanding, as adjusted
|
69 | 84 | ||||||||||
Additional paid in capital
|
55,034 | 124,519 | ||||||||||
Accumulated other comprehensive loss
|
(3 | ) | (3 | ) | ||||||||
Deficit accumulated during the development stage
|
(81,011 | ) | (81,011 | ) | ||||||||
Treasury stock, 23,165 shares at cost
|
(35 | ) | (35 | ) | ||||||||
Total shareholders equity (deficiency)
|
(25,946 | ) | 43,554 | |||||||||
Total capitalization
|
$ | 23,043 | $ | 92,543 | ||||||||
The number of shares of our common stock in the actual and as
adjusted columns in the table above excludes as of
March 31, 2006:
| 3,113,000 shares of our common stock issuable upon the exercise of stock options issued under our stock option plans having a weighted average exercise price of $2.13 per share; |
| an additional 17,737,100 shares of common stock issuable upon the exercise of outstanding warrants having a weighted average exercise price of $2.06 per share; and |
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Capitalization
| an additional 5,234,268 shares of common stock available for future issuance under our stock option plans and employee stock purchase plan. |
To the extent we change the number of shares of common stock we
sell in this offering from the 15,495,867 shares we expect
to sell or the public offering price varies from the $4.84 per
share assumed public offering price, or any combination of these
events occurs, our net proceeds from this offering and as
adjusted additional paid-in capital may increase or decrease. An
increase (or decrease) of $1.00 from the assumed public offering
price, assuming no change in the number of shares of common
stock to be sold, would increase (or decrease) our net proceeds
from this offering and our as adjusted additional paid-in
capital by approximately $15.566 million and an increase
(or decrease) of 1,000,000 shares from the expected number of
shares to be sold in the offering, assuming no change in the
assumed public offering price, would increase (or decrease) our
net proceeds from this offering and our as adjusted additional
paid-in capital by approximately $4.5 million.
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Table of Contents
Price range of common stock
Since April 2004, our common stock has been trading publicly on
the American Stock Exchange under the symbol ANX.
Our common stock traded on the OTC Bulletin Board from June 2002
to April 2004, and in the Pink Sheets prior to that time. The
following table presents quarterly information on the price
range of our common stock. This information indicates the high
and low sales prices reported by the AMEX.
High | Low | ||||||||
Fiscal year ending December 31, 2004
|
|||||||||
First quarter
|
$ | 2.40 | $ | 0.85 | |||||
Second quarter
|
2.39 | 1.45 | |||||||
Third quarter
|
1.80 | 0.90 | |||||||
Fourth quarter
|
1.35 | 0.78 | |||||||
Fiscal year ended December 31, 2005
|
|||||||||
First quarter
|
$ | 1.69 | $ | 0.87 | |||||
Second quarter
|
3.39 | 1.55 | |||||||
Third quarter
|
4.16 | 2.17 | |||||||
Fourth quarter
|
3.77 | 2.50 | |||||||
Fiscal year ended December 31, 2006
|
|||||||||
First quarter
|
$ | 5.20 | $ | 3.16 | |||||
Second quarter (through May 12)
|
$ | 5.38 | $ | 4.28 |
On May 12, 2006, the last sale price reported on the AMEX
for our common stock was $4.84 per share. As of
May 12, 2006, there were approximately 7,021 holders of
record of our common stock. The actual number of stockholders is
greater than this number of record holders, and includes
stockholders who are beneficial owners, but whose shares are
held in street name by brokers and other nominees. This number
of holders of record also does not include stockholders whose
shares may be held in trust by other entities.
Dividend policy
We have not declared or paid cash dividends on our common stock
and do not anticipate paying any cash dividends in the
foreseeable future. We expect to retain future earnings, if any,
to fund the development and growth of our business. Our board of
directors will determine future dividends, if any.
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Dilution
If you invest in our common stock, your interest will be diluted
to the extent of the difference between the public offering
price per share you pay in this offering and the net tangible
book value per share of our common stock immediately after this
offering.
Our net tangible book value on March 31, 2006 was
approximately ($25,945,510), or approximately $(0.38) per share.
Net tangible book value is total assets minus the
sum of liabilities and intangible assets. Net tangible
book value per share is net tangible book value divided by
the total number of shares of common stock outstanding.
As adjusted net tangible book value dilution per share to new
investors represents the difference between the amount per share
paid by purchasers of shares of common stock in this offering
and the net tangible book value per share of our common stock
immediately after completion of this offering. After giving
effect to the sale of 15,495,867 shares of our common stock in
this offering at an assumed public offering price of $4.84 per
share and after deducting underwriting discounts and commissions
and our estimated offering expenses, our as adjusted net
tangible book value as of March 31, 2006 would have been
$0.51 per share. This amount represents an immediate increase in
net tangible book value of $0.89 per share to existing
shareholders and an immediate dilution in net tangible book
value of $4.33 per share to purchasers of common stock in this
offering, as illustrated in the following table:
Assumed public offering price per share
|
$ | 4.84 | |||||||
Net tangible book value per share as of March 31, 2006
|
($ | 0.38 | ) | ||||||
Increase in net tangible book value per share attributable to
new investors
|
0.89 | ||||||||
As adjusted net tangible book value per share after this offering
|
0.51 | ||||||||
Dilution per share to new investors
|
$ | 4.33 | |||||||
If the underwriters exercise their over-allotment option in
full, the as adjusted net tangible book value as of
March 31, 2006 would have been $0.63 per share,
representing an increase to existing shareholders of $1.01 per
share, and there will be an immediate dilution of $4.21 per
share to new investors. The number of shares of our common stock
in the table above excludes as of March 31, 2006:
| 3,113,000 shares of our common stock issuable upon the exercise of stock options issued under our stock option plans having a weighted average exercise price of $2.13 per share; |
| an additional 17,737,100 shares of our common stock issuable upon the exercise of outstanding warrants having a weighted average exercise price of $2.06 per share; and |
| an additional 5,234,268 shares of common stock available for future issuance under our stock option plans and employee stock purchase plan. |
To the extent that these options are exercised, there could be
further dilution to new investors.
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Board of directors and executive
officers
The names of each of our directors and executive officers at
May 12, 2006 and certain information about them are set
forth below.
The Board of Directors is currently composed of six members.
Directors are elected annually. Each directors term is
subject to the election and qualification of his successor, or
his earlier death, resignation or removal. The authorized number
of directors may not be less than three or more than nine and
may be established within that range by our Board of Directors.
There are no family relationships among any of our directors or
executive officers.
Director | ||||||||||
Name | Age | Position | Since | |||||||
Mark Bagnall,
CPA(1)
|
49 | Director | 2004 | |||||||
Mark Cantwell
|
36 | Vice President, Research & Development | ||||||||
Carrie E. Carlander
|
35 | Chief Financial Officer, Senior Vice President, Finance, Secretary and Treasurer | ||||||||
Brian Culley
|
35 | Senior Vice President, Business Development | ||||||||
Michael M.
Goldberg, M.D.(1)
|
47 | Director | 2004 | |||||||
M. Ross Johnson, Ph.D.
|
61 | Chairman of the Board | 2002 | |||||||
Evan M. Levine
|
40 | Director, Chief Executive Officer, President | 2002 | |||||||
Keith
Meister(2)
|
33 | Director | 2005 | |||||||
Mark J. Pykett,
V.M.D., Ph.D.(1)
|
42 | Director | 2004 | |||||||
Joan M. Robbins
|
46 | Executive Vice President and Chief Science Officer |
(1) | Member of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee of the Board of Directors. |
(2) | Member of the Compensation Committee of the Board of Directors. |
Mark Bagnall, CPA. Mr. Bagnall has served as a
Director since February 2004. Mr. Bagnall is currently
Senior Vice President and Chief Finance and Operations Officer
of Metabolex, Inc., a privately held pharmaceutical company
focused on the development of drugs to treat diabetes and
related metabolic disorders, where he has served since June
2000. Mr. Bagnall has been in the biotechnology industry
for over 17 years. In the 12 years prior to joining
Metabolex, Mr. Bagnall held the top financial position at
four life science companies: Metrika, Inc., a privately held
diagnostics company, and three public biotechnology companies,
Progenitor, Inc., Somatix Therapy Corporation, and Hana
Biologics, Inc. During his career in biotechnology, he has
managed several private and public financings, merger and
acquisition transactions and corporate licensing agreements.
Mr. Bagnall received his Bachelor of Science degree in
Business Administration from the U.C. Berkeley Business School
and is a Certified Public Accountant.
Mark J. Cantwell, Ph.D. Dr. Cantwell is Vice
President, Research and Development and has served in this role
since January 2006. Dr. Cantwell joined the Company as
Director of Preclinical Programs in November 2003. From 1998 to
2003, Dr. Cantwell was employed at Tragen Pharmaceuticals,
formerly Immunogenex Inc., a company specializing in immune
therapies for cancer and autoimmune diseases. While at Tragen,
Dr. Cantwell was a staff scientist involved in the
preclinical development of Tragens drug candidates. Prior
to joining Tragen, Dr. Cantwell received his Ph.D. in
Biomedical Sciences at the University of California,
San Diego in the lab of Thomas J.
Kipps, M.D., Ph.D. Dr. Cantwell received his B.S.
in Applied Biology at Georgia Institute of Technology.
Carrie E. Carlander. Ms. Carlander has served as our
Vice President, Finance and Treasurer since November 2004 and
was appointed Chief Financial Officer in December 2004.
Furthermore,
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Board of directors and executive
officers
Ms. Carlander was appointed Senior Vice President, Finance
in January 2005. From August 2004 to December 2004,
Ms. Carlander served in a consulting capacity as Chief
Financial Officer of Singlefin, Inc., an email/internet security
software company. From December 2003 to December 2004,
Ms. Carlander served in a consulting capacity as Chief
Financial Officer of SofLinx, Inc., a wireless sensor network
and software company. From December 2002 to June 2004,
Ms. Carlander served as Vice President of Finance of
V-Enable, Inc., a software company specializing in multimodal
software for wireless devices. From December 1996 to May 2000,
Ms. Carlander served first as Director of Finance and Human
Resources, and then as Vice President, Finance and
Administration, of Websense Inc., a publicly traded company that
provides software products that analyze, report and manage
computing resource use by employees. Ms. Carlander received
her B.A. in Political Science from University of California,
San Diego, her MBA from San Diego State University and
a Certified Management Accountant designation from the IMA.
Brian M. Culley, MS, MBA. Mr. Culley is our Senior
Vice President, Business Development. He has served as Vice
President, Business Development since joining us in December
2004, and was appointed Senior Vice President, Business
Development in January 2006. From 2002 until 2004,
Mr. Culley managed all strategic collaborations and
licensing agreements for Immusol, Inc. in San Diego, where
his most recent title was Director of Business Development and
Marketing. From 1999 until 2000, he was a licensing and
marketing associate at the University of California,
San Diego Department of Technology Transfer &
Intellectual Property Services and from 1996 to 1999, he was a
research associate for Neurocrine Biosciences, Inc., where he
performed drug discovery research. Mr. Culley has over
12 years of experience in the biotechnology industry,
including deal structure and negotiation, licensing, due
diligence, market and competitive research, and venture funding.
He received a MS in Biochemistry from the University of
California Santa Barbara and an MBA from The Johnson School
of Business at Cornell University with an emphasis on private
equity and entrepreneurship.
Michael M. Goldberg, M.D. Dr. Goldberg has
served as a Director since January 2004. Dr. Goldberg is
currently Chairman and Chief Executive Officer of Emisphere
Technologies, Inc. where he has served since August 1990.
Emisphere is a biopharmaceutical company specializing in the
oral delivery of therapeutic macromolecules and other compounds
that are not currently deliverable by oral means.
Dr. Goldberg was previously a Vice President for The First
Boston Corporation, where he was a founding member of the
Healthcare Banking Group. He received a B.S. from Rensselaer
Polytechnic Institute, an M.D. from Albany Medical College of
Union University and an M.B.A. from Columbia University Graduate
School of Business.
M. Ross Johnson, Ph.D. Dr. Johnson has
served as our Chairman of the Board since October 2002.
Dr. Johnson is also currently Chief Executive Officer,
Director and Co-Founder of Parion Sciences, Inc. where he has
served since February 2001. He has served on numerous boards and
currently holds additional board positions with Cortex
Pharmaceuticals, Inc. (COR) and the University of North
Carolina Education Advancement Board. He also currently serves
on the Advisory Board of the Chemistry Department at the
University of California at Berkley and the University of North
Carolina at Chapel Hill. From 1995 to 1999, he was President,
Chief Executive Officer and Chief Scientific Officer of
Trimeris, Inc. (TRMS), a company which went public in 1997. From
1987 to 1994, he was Vice President of Chemistry at Glaxo Inc.
(GSK) where he was part of the original scientific founding
team for Glaxos research entry in the U.S. From 1971
to 1987, Dr. Johnson served in key scientific and research
management positions with Pfizer Central Research (PFE). He has
also served as a Special Advisor to Nobex Corporation, Ceretec,
AtheroGenics, Inc. (AGIX) and Albany Molecular Research,
Inc. (AMRI). Dr. Johnson received his B.S. in Chemistry
from the University of California at Berkeley in 1967 and a
Ph.D. in organic chemistry from the University of California at
Santa Barbara in 1970.
Evan M. Levine. Mr. Levine has served as our
President and Chief Executive Officer since September 2004 and
as a member of our Board of Directors since October 2002. From
January 2004 until
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Board of directors and executive
officers
August 2005, Mr. Levine served as Vice Chairman of the
Board and from October 2002 until August 2005 Mr. Levine
served as Chief Operating Officer and Secretary of the Company.
From March 2002 to June 2002, Mr. Levine served as the
Interim Chief Executive Officer of Digital Courier Technologies,
Inc., a provider of advanced
e-payment services for
businesses, merchants and financial institutions. From 1997 to
2001, he served as Managing Principal and Portfolio Manager of
Brown Simpson Asset Management, a private equity fund,
specializing in structured finance for public companies. From
1996 to 1997, he served as Senior Vice President of Convertible
Sales and Trading at Dillon Read & Company, a financial
services company, managing a proprietary convertible portfolio
and supervising all institutional sales and trading activity.
From 1993 to 1996, he served as Vice President of Convertible
Sales and Trading at Hambrecht & Quist, a financial
services company, where he handled all convertible operations
and augmented investment banking and corporate finance revenues
through his involvement in the placement of convertible
products. From 1992 to 1993, he served as a Global Arbitrage
Trader at Spectrum Trading Partners, a financial derivatives
trading company, where he was responsible for maintaining market
neutral and currency neutral hedges for an international
convertible securities portfolio. Mr. Levine has over
18 years of investment banking, venture capital,
institutional trading, arbitrage dealing, and senior corporate
management experience. Mr. Levine received his B.A. in
Economics and Finance from Rutgers University and has completed
graduate coursework for his MBA at New York Universitys
Stern School of Business.
Keith Meister. Mr. Meister was appointed Director in
August 2005. Since June 2002, Mr. Meister has been a Senior
Investment Analyst of High River Limited Partnership, a company
owned and controlled by Mr. Carl C. Icahn that is primarily
engaged in the business of holding and investing in securities.
Mr. Meister is also a Senior Investment Analyst of Icahn
Partners LP and Icahn Partners Master Fund LP, private
investment funds controlled by Mr. Icahn. He is also a
director of Icahn Fund Ltd., which is the feeder fund of
Icahn Partners Master Fund LP. Since August 2003,
Mr. Meister has served as the Chief Executive Officer of
American Property Investors, Inc. (API), which is
the general partner of American Real Estate Partners, L.P., a
public limited partnership controlled by Mr. Icahn that
invests in real estate and holds various other interests,
including the interests in its subsidiaries that are engaged,
among other things, in the oil and gas business, the casino
entertainment business and the textile business.
Mr. Meister served as APIs President from August 2003
to April 2005. From March 2000 through the end of 2001,
Mr. Meister co-founded and served as co-president of J Net
Ventures, a venture capital fund focused on investments in
information technology and enterprise software businesses. From
1997 through 1999, Mr. Meister served as an investment
professional at Northstar Capital Partners, an opportunistic
real estate investment partnership. Prior to his work at
Northstar, Mr. Meister served as an investment analyst in
the investment banking group at Lazard Freres. Mr. Meister
also is a director of American Entertainment Properties Corp.
and American Casino & Entertainment Properties Finance
Corp., which are gaming companies, and Scientia Corporation, a
private health care venture company, all of which are companies
controlled by American Real Estate Partners, L.P., which is
controlled by Mr. Icahn. In August 2005, Mr. Meister
became a director of American Railcar Industries, Inc., a
company of which Mr. Icahn is a principal beneficial
stockholder, that is primarily engaged in the business of
manufacturing covered hopper and tank railcars. Mr. Meister
has been a director of XO Holdings, Inc. since February 2006 and
was a member of XO Communications, Inc.s (XO
Holdings predecessor) Board of Directors from January 2003
to February 2006. XO Holdings is a publicly traded
telecommunications services provider controlled by
Mr. Icahn. In addition, in January 2006, Mr. Meister
became a director of BKF Capital Group Inc., a publicly traded
investment firm. Mr. Meister received his A.B. in
Government, cum laude, from Harvard College.
Mark J. Pykett, V.M.D., Ph.D. Dr. Pykett has
served as a Director since February 2004. Dr. Pykett is
currently the President and Chief Operating Officer of Boston
Life Sciences, Inc. where he has served since November 2004.
From May 1996 until April 2003, Dr. Pykett served as
President and Chief
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Board of directors and executive
officers
Executive Officer and a Director of Cytomatrix, LLC, a private
biotechnology company focused on the research, development and
commercialization of novel cell-based therapies that
Dr. Pykett co-founded. Cytomatrix was acquired by Cordlife,
Pte. Ltd., a subsidiary of CyGenics Ltd., a public biotechnology
company listed on the Australian Stock Exchange. From April 2003
to February 2004, Dr. Pykett served as President of
Cordlife and then as President and Director of CyGenics from
February 2004 until November 2004. Dr. Pykett graduated Phi
Beta Kappa, Summa Cum Laude from Amherst College, holds a
veterinary degree, Phi Zeta, Summa Cum Laude, and doctorate in
molecular biology from the University of Pennsylvania, and
received an M.B.A. degree Beta Gamma Sigma from Northeastern
University. He completed post-doctoral fellowships at the
University of Pennsylvania and Harvard University. In his
research in academia, Dr. Pykett focused on understanding
the molecular basis of cancer. Dr. Pykett also held an
adjunct faculty position at the Harvard School of Public Health
from 1997 to 2004.
Joan M. Robbins, Ph.D. Dr. Robbins is our
Executive Vice President and Chief Science Officer. She served
as our Chief Technical Officer from March 2003 to January 2006,
and was appointed Executive Vice President and Chief Science
Officer in January 2006. From 1996 to 2003, Dr. Robbins was
employed by Immusol, Inc., a biopharmaceutical company
specializing in anticancer and antiviral therapeutics in
addition to certain dermatologic and ophthalmic disorders. At
Immusol, she held several positions, including Vice President,
Product Development, Senior Director, Product Development, and
Director, Therapeutics. Dr. Robbins has directed drug
discovery and development resulting in the advancement of drug
candidates into Phase I, II and III human trials,
including the development of clinical protocols with the FDA.
She has also led programs for formulation, manufacturing,
toxicology and pharmacology development. From 1994 to 1995, she
was Research Scientist and Project Leader for Cancer Research at
Chiron where she developed gamma-IFN recombinant retroviral
immuno-gene therapy for cancer, and tk-recombinant retroviral
gene therapy for brain tumors. From 1992 to 1993,
Dr. Robbins was a Post Graduate Researcher at University of
California, San Diego, where she developed a novel
DNA-based immunotherapeutic for treatment of Her2/neu expressing
tumors. From 1990 to 1991, she was a Research Fellow at the
Garvin Institute for Medical Research, Centre for Immunology in
Sydney, Australia, and from 1981 to 1989, Dr. Robbins was a
Microbiologist at the Laboratory of Tumor Immunology and Biology
at the National Cancer Institute in Bethesda, Maryland.
Dr. Robbins received her B.S. degree in genetics from the
University of California, Davis, and a Ph.D. degree in genetics
from George Washington University, Washington D.C.
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Certain relationships and related
transactions
Since January 1, 2003, we have not entered into any
material transaction with any of our directors, executive
officers or holders of more than 5% of our common stock, or with
any persons in which directors, executive officers or such
stockholders have direct or indirect material interests, except
as described below.
In July 2005, we entered into a Securities Purchase Agreement
(the Purchase Agreement) with (i) Icahn
Partners LP, Icahn Partners Master Fund LP and High River
Limited Partnership (the Icahn Funds);
(ii) Viking Global Equities LP and VGE III Portfolio Ltd.
(the Viking Funds), and (iii) certain other
investors (the Purchase Agreement). Pursuant to the
Purchase Agreement, we sold 4,324,324 shares of our common stock
to the Icahn Funds for an aggregate purchase price of
approximately $8,000,000 and issued to the Icahn Funds warrants
to purchase 4,324,324 shares of our common stock at an exercise
price of $2.26 per share. Pursuant to the Purchase Agreement, we
also sold 3,783,783 shares of our common stock to the Viking
Funds for an aggregate purchase price of approximately
$7,000,000 and issued to the Viking Funds warrants to purchase
3,783,783 shares of our common stock at an exercise price of
$2.26 per share. We believe that the Icahn Funds and the Viking
Funds are each the beneficial holder of more than five percent
of our outstanding common stock. We believe that Keith Meister,
a member of our Board of Directors who was appointed pursuant to
our agreements with the Icahn Funds and the Viking Funds, may be
deemed to be the beneficial owner of the shares beneficially
owned by the Icahn Funds.
In the Purchase Agreement, we agreed to enter into a Rights
Agreement (the Icahn/ Viking Agreement) upon the
closing of the transaction with the Icahn Funds and the Viking
Funds (together, the Icahn/ Viking Investors).
Pursuant to the Icahn/ Viking Agreement, which is dated
July 27, 2005, we agreed to propose to our stockholders the
approval of the Classified Board Prohibition Amendment and the
Poison Pill Prohibition Amendment, both of which were approved
by our stockholders.
The Classified Board Prohibition Amendment prohibits us from
dividing our Board of Directors into classes. Each of our
directors, whether elected or appointed to our Board of
Directors, would hold office until our next annual meeting of
stockholders following such election or appointment. The
prohibition would cease upon the earlier of
(i) July 27, 2012; (ii) the date that the Icahn/
Viking Investors, collectively, hold less than 4,054,053 of our
shares (subject to certain adjustments) that the Icahn/Viking
Investors purchased (or for which they exercise warrants for
common stock issued) pursuant to the Securities Purchase
Agreement, dated July 21, 2005; and (iii) the time of
(A) any acquisition of us by means of merger, consolidation
or other form of corporate reorganization (other than a
reincorporation transaction or change of domicile) following
which the holders of our outstanding voting securities
immediately prior to the transaction do not hold equity
securities representing a majority of the voting power of the
surviving or resulting entity immediately following the
transaction or (B) a sale of all or substantially all of
our assets other than to a buyer in which the holders of our
outstanding voting securities immediately prior to such sale
hold (in their capacity as such) equity securities representing
a majority of the voting power immediately following such sale
(such earlier date set forth in (i), (ii) and (iii), the
Prohibition Termination Date).
A classified board of directors could serve to protect our
stockholders against unfair treatment in takeover situations, by
making it more difficult and time-consuming for a potential
acquirer to take control of our Board of Directors. A company
may also adopt a classified board of directors to ensure
stability in the board of directors and thereby improve
long-term planning which arguably benefits stockholders. Any
benefit to us and our stockholders from instituting a classified
board in these and other circumstances would be unavailable
while the Classified Board Prohibition Amendment remains a part
of our restated certificate of incorporation.
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Certain relationships and
related transactions
The Poison Pill Prohibition Amendment prohibits us from adopting
or approving any rights plan, poison
pill or other similar plan, agreement or device (a
Poison Pill) designed to prevent or make more
difficult a hostile takeover of us by increasing the cost to a
potential acquirer of such a takeover either through the
issuance of new rights, shares of common stock or preferred
stock or any other security or device that may be issued to
stockholders of our company, other than all of our stockholders,
that carry severe redemption provisions, favorable purchase
provisions or otherwise. The foregoing provisions would cease to
be of any force or effect upon the Prohibition Termination Date.
Poison Pills are adopted for the purpose of making a hostile
takeover prohibitively expensive for a hostile acquirer.
Customarily, Poison Pills provide that the company issue a large
number of new shares of capital stock, often preferred stock, to
existing stockholders other than the hostile acquirer when the
hostile acquirer has acquired a certain percentage of the
outstanding stock often 15%. The newly issued shares
customarily have harsh redemption and/or conversion features
that would cause an immediate dilution of the target
companys outstanding stock to the detriment of the hostile
acquirer. Because of these severe redemption and/or conversion
features, customarily a potential acquirer will not acquire a
number of shares that would trigger the Poison Pill and would
instead negotiate with the board of directors of the target
company to amend the Poison Pill so that it will not apply to
the acquirers attempt to take over the target company or
terminate the Poison Pill. Any benefit to us and our
stockholders from adopting a poison pill in these and other
circumstances would be unavailable while the Poison Pill
Prohibition Amendment remains a part of our restated certificate
of incorporation.
Pursuant to the Icahn Viking Agreement with the Icahn/Viking
Investors, we also agreed to the following:
| to grant the Icahn/Viking Investors the right to consent to any issuance of securities by us at a per share price lower than the Warrant exercise price for up to one year, with certain enumerated exceptions; |
| to grant the Icahn/Viking Investors the right to participate in sales of securities for the next seven years, with certain enumerated exceptions set forth in the Icahn/Viking Agreement, including the right to purchase (i) up to 50% of securities sold in a public offering if the offering price is equal to or below $8.00 per share, (ii) up to 20% of the securities sold in a public offering if the offering price is above $8.00 per share, and (iii) up to 50% of the securities sold in a private offering; |
| to obtain stockholder approval of any change of control transaction; and |
| to expand the size of the Board of Directors by one member and appoint a nominee of the Icahn/Viking Investors. Thereafter, for so long as the Icahn/Viking Investors hold the participation rights described above, we are required to nominate a nominee selected by them to our Board of Directors. |
At a meeting on August 9, 2005, our Board of Directors
expanded the size of our Board from five (5) to six (6) and
appointed Mr. Keith Meister, the designee of the Icahn/Viking
Investors, to our Board of Directors. (See Board of
Directors and executive officers for information regarding
Mr. Meister.)
In connection with this offering, the Icahn/ Viking Investors
have waived their rights to participate in this offering.
During 2004, we engaged Burnham Hill Partners to provide
placement agent services to us in connection with the sale of
certain of our securities. In consideration of the services
Burnham Hill Partners provided to us, we paid Burnham Hill
Partners $874,532 and issued to Burnham Hill Partners and
certain other persons designated by Burnham Hill Partners
warrants to purchase up to an aggregate of 612,547 shares
of common stock at $2.00 per share. In connection with that
engagement,
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Certain relationships and
related transactions
we agreed to pay to Burnham Hill Partners a four percent cash
commission on each cash exercise of warrants to purchase up to
an aggregate of (i) 3,125,272 shares of Common Stock at
$2.00 per share and (ii) 2,083,518 shares of Common Stock
at $2.50 per share, which warrants were acquired by investors in
transactions for which Burnham Hill Partners acted as placement
agent. During 2005, we paid $84,378 to Burnham Hill Partners as
cash commissions in connection with the cash exercise of a
portion of these warrants. We believe that Matthew Balk, a
person we believe is the beneficial holder of more than
five percent of our outstanding Common Stock, is a partner
of Burnham Hill Partners and therefore may have an indirect
material interest in the amounts we paid to Burnham Hill
Partners. We do not know the nature or extent of Mr. Balks
indirect interest in the amounts we paid to Burnham Hill
Partners, except that Burnham Hill Partners directed us to issue
a warrant to purchase up to 184,447 shares of Common Stock
directly to Mr. Balk from the warrants we were obligated to
issue to Burnham Hill Partners.
SD Pharmaceuticals, which we acquired on April 26, 2006, is
party to an agreement pursuant to which SD Pharmaceuticals has
agreed to offer any formulation developmental work it requires
to Latitude Pharmaceuticals, Inc. before it may contract with
any other third party for these services. We are not required to
use Latitude Pharmaceuticals to provide these services if we
determine in good faith that Latitude Pharmaceuticals cannot
provide the services on a competitive, cost effective, timely
and quality basis comparable to what other third parties are
able to provide, and also in certain other circumstances.
Latitude Pharmaceuticals is a company controlled by
Mr. Andrew Chen, who was a principal of SD Pharmaceuticals
prior to its acquisition by us and is currently one of our
consultants. As a result of the acquisition, we issued
962,860 shares to The Chen Family Trust, for which
Mr. Chen is a Trustee, representing less than 2% of our
outstanding common stock.
S-39
Table of Contents
Principal stockholders
The following table sets forth certain information as of
May 3, 2006, concerning the ownership of common stock by
(i) each of our stockholders that we believe is the
beneficial owner of more than 5% of the outstanding shares of
common stock, (ii) each current member of our Board of
Directors, (iii) each of our executive officers and
(iv) all directors and executive officers as a group. This
information does not give effect to the sale of shares in this
offering, or any other changes in our outstanding securities or
in the holdings of the named security holders after May 3,
2006.
We determined beneficial ownership in accordance with
Rule 13d-3 under
the Exchange Act and included all shares over which the
beneficial owner exercises voting or investment power. Options
and warrants to purchase common stock that are presently
exercisable or exercisable within 60 days of May 3,
2006 that are held by any person listed below are included in
the total number of shares beneficially owned for such person
and are considered outstanding for the purpose of calculating
the percentage ownership only of such holder. We have relied on
information supplied by our officers, directors and certain
stockholders and on information contained in filings with the
SEC in completing the table below. Except as otherwise
indicated, and subject to community property laws where
applicable, we believe, based on information provided by these
persons or contained in filings with the SEC, that the persons
named in the table have sole voting and investment power with
respect to all shares of common stock shown as beneficially
owned by them. The percentage of beneficial ownership of common
stock is based on 71,649,833 shares of common stock
outstanding as of May 3, 2006 and for any particular
stockholder, the options or warrants described above held by
that holder.
Beneficial Ownership | Percent of | ||||||||
as of | Outstanding | ||||||||
Name and Address of Beneficial Owner(1) | May 3, 2006 | Before Offering | |||||||
Carl Icahn Related
Funds(2)
|
8,648,648 | 12.07 | % | ||||||
c/o Icahn Associates Corp. | |||||||||
767 Fifth Avenue | |||||||||
New York, NY 10153 | |||||||||
Viking Global
Funds(3)
|
6,911,366 | 9.65 | % | ||||||
c/o Viking Global Investors LP | |||||||||
55 Railroad Avenue | |||||||||
Greenwich, CT 06830 | |||||||||
Mark Capital
LLC(4)
|
4,320,000 | 6.03 | % | ||||||
Current Directors
|
|||||||||
M. Ross
Johnson, Ph.D.(5)
|
2,297,592 | 3.21 | % | ||||||
Evan M.
Levine(6)
|
4,570,000 | 6.78 | % | ||||||
Mark
Bagnall(7)
|
100,000 | * | |||||||
Michael
Goldberg(8)
|
176,000 | * | |||||||
Mark
Pykett(9)
|
100,000 | * | |||||||
Keith
Meister(10)
|
8,648,648 | 12.07 | % |
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Table of Contents
Principal stockholders
Beneficial Ownership | Percent of | ||||||||
as of | Outstanding | ||||||||
Name and Address of Beneficial Owner(1) | May 3, 2006 | Before Offering | |||||||
Executive Officers who are not Directors
|
|||||||||
Joan
Robbins, Ph.D.(11)
|
500,000 | * | |||||||
Carrie
Carlander(12)
|
136,111 | * | |||||||
Brian
Culley(13)
|
52,778 | * | |||||||
Mark J.
Cantwell(14)
|
68,750 | * | |||||||
All directors and executive officers as a group
|
16,649,879 | 23.24 | % | ||||||
* | Less than one percent. |
(1) | Unless indicated otherwise, the address of each person listed in the table is c/o ADVENTRX Pharmaceuticals, Inc.; 6725 Mesa Ridge Road, Suite 100; San Diego, California 92121 |
(2) | Includes 864,865 shares of common stock held by High River Limited Partnership (High River), 1,660,540 shares of common stock held by Icahn Partners LP (Icahn Partners) and 1,798,919 shares of common stock held by Icahn Partners Master Fund LP (Icahn Master). Also includes 864,865 shares of common stock issuable upon exercise of warrants held by High River, 1,660,540 shares of common stock issuable upon exercise of warrants held by Icahn Partners and 1,798,919 shares of common stock issuable upon exercise of warrants held by Icahn Master. Based on our review of a Schedule 13D filed with the Commission on August 5, 2005 (the Icahn 13D) by High River, Hopper Investments, LLC (Hopper), Barberry Corp. (Barberry), Icahn Master, Icahn Offshore LP (Icahn Offshore), CCI Offshore Corp. (CCI Offshore), Icahn Partners, Icahn Onshore LP (Icahn Onshore), CCI Onshore Corp. (CCI Onshore) and Mr. Carl C. Icahn, we believe that each of (i) Barberry, Hopper and Mr. Icahn may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Exchange Act) the shares (including warrant shares) held by High River; (ii) CCI Onshore, Icahn Onshore and Mr. Icahn may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Exchange Act) the shares (including warrant shares) directly held by Icahn Partners; and (iii) CCI Offshore, Icahn Offshore and Mr. Icahn may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Exchange Act) the shares (including warrant shares) directly held by Icahn Master because in each of the foregoing cases such referenced persons are in a position to directly or indirectly determine the investment and voting decisions of the holder referenced. Barberry, Hopper, CCI Onshore, Icahn Onshore, CCI Offshore, Icahn Offshore and Mr. Icahn each disclaim beneficial ownership of such shares they may be deemed the beneficial owner of for all other purposes. |
(3) | Includes 1,609,700 shares of common stock held by VGE III Portfolio Ltd. (VGE III) and 1,517,883 shares of common stock held by Viking Global Equities LP (VGE Global). Also includes 1,951,300 shares of common stock issuable upon exercise of warrants held by VGE III and 1,832,483 shares of common stock issuable upon exercise of warrants held by Viking Global. Based on our review of a Schedule 13G filed with the Commission on August 5, 2005 (the Viking 13G) by Viking Global Performance LLC (VGP), Viking Global Investors LP (VGI), VGE Global, O. Andreas Halvorsen, Brian T. Olson and David C. Ott, we believe that each of VGP, VGI and Messrs. Halvorsen, Olson and Ott may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Exchange Act) the shares (including warrant shares) directly held by VGE III and VGE Global because such persons are in a position to directly or indirectly determine the investment and voting decisions of VGE III and VGE Global. |
(footnotes continued on following page)
S-41
Table of Contents
Principal stockholders
(4) | Includes 100,000 shares of common stock subject to a warrant. |
(5) | Includes 550,000 shares of common stock exercisable under an option and exercisable warrants to purchase 532,528 shares of common stock. |
(6) | Includes 4,220,000 shares of common stock held by Mark Capital LLC and 100,000 shares of common stock subject to a warrant held by Mark Capital LLC. Mr. Levine is the managing member of Mark Capital LLC. Includes 250,000 shares of common stock exercisable under an option. |
(7) | Includes 100,000 shares of common stock subject to options that are exercisable within 60 days of May 3, 2006. |
(8) | Includes 100,000 shares of common stock subject to options that are exercisable within 60 days of May 3, 2006; a warrant to purchase 6,000 shares of common stock; and a warrant to purchase 50,000 shares of common stock held by Emisphere Technologies, Inc. of which Mr. Goldberg is the President and Chief Executive Officer. |
(9) | Includes 100,000 shares of common stock subject to options that are exercisable within 60 days of May 3, 2006. |
(10) | Based on our review of a Form 3 filed with the Commission on August 16, 2005 (the Form 3) by Keith Meister, a member of our Board of Directors, and the information disclosed in the Icahn 13D, we believe that because Mr. Meister is a limited partner of Icahn Onshore and has an interest in the fees, including the performance fees, relating to Icahn Onshore and Icahn Offshore, he may be deemed to beneficially own (as that term is defined in Rule 13d-3 under the Exchange Act) the shares (including warrant shares) beneficially owned by Icahn Onshore and Icahn Offshore. Mr. Meister disclaims beneficial ownership of all such shares (including warrant shares) in the Form 3. |
(11) | Includes 500,000 shares of common stock subject to an option that is exercisable within 60 days of May 3, 2006; and 162,500 shares of common stock held by Dr. Robbins husband. |
(12) | Includes 111,111 shares of common stock subject to an option that is exercisable within 60 days of May 3, 2006. |
(13) | Consists of 52,778 shares of common stock subject to options that are exercisable within 60 days of May 3, 2006. |
(14) | Consists of 68,750 shares of common stock subject to options that are exercisable within 60 days of May 3, 2006. |
S-42
Table of Contents
Material United States federal
income and estate tax consequences to non-United States holders
The following is a general discussion of the material
U.S. federal income and estate tax consequences of the
ownership and disposition of our common stock by a
non-U.S. holder
that acquires our common stock pursuant to this offering. The
discussion is based on provisions of the Internal Revenue Code
of 1986, as amended (the Code), applicable
U.S. Treasury regulations promulgated thereunder and
administrative and judicial interpretations, all as in effect on
the date of this prospectus, and all of which are subject to
change, possibly on a retroactive basis. The discussion is
limited to
non-U.S. holders
that hold our common stock as a capital asset within
the meaning of Section 1221 of the Code (generally,
property held for investment). As used in this discussion, the
term
non-U.S. holder
means a beneficial owner of our common stock that is not, for
U.S. federal income tax purposes:
| an individual who is a citizen or resident of the United States; |
| a corporation or partnership (including any entity treated as a corporation or partnership for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any State of the United States or the District of Columbia, other than a partnership treated as foreign under U.S. Treasury regulations; |
| an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or |
| a trust (1) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust, or (2) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
This discussion does not consider:
| U.S. federal gift tax consequences, or U.S. state or local or non-U.S. tax consequences; |
| specific facts and circumstances that may be relevant to a particular non-U.S. holders tax position, including, if the non-U.S. holder is a partnership, that the U.S. tax consequences of holding and disposing of our common stock may be affected by certain determinations made at the partner level; |
| the tax consequences for partnerships or persons who hold their interests through a partnership or other entity classified as a partnership for U.S. federal income tax purposes; |
| the tax consequences for the stockholders or beneficiaries of a non-U.S. holder; |
| all of the U.S. federal tax considerations that may be relevant to a non-U.S. holder in light of its particular circumstances or to non-U.S. holders that may be subject to special treatment under U.S. federal tax laws, such as financial institutions, insurance companies, tax-exempt organizations, certain trusts, hybrid entities, certain former citizens or residents of the United States, holders subject to U.S. federal alternative minimum tax, broker-dealers, and traders in securities; or |
| special tax rules that may apply to a non-U.S. holder that holds our common stock as part of a straddle, hedge, conversion transaction, synthetic security, or other integrated investment. |
This discussion is for general purposes only. Prospective
investors are urged to consult their own tax advisors regarding
the application of the U.S. federal income and estate tax
laws to their particular situations and the consequences under
U.S. federal gift tax laws, as well as foreign, state, and
local laws and tax treaties.
S-43
Table of Contents
Material United States federal
income and estate tax consequences to non-United States
holders
Dividends
As previously discussed, we do not anticipate paying dividends
on our common stock in the foreseeable future. See
Dividend Policy. If we pay dividends on our common
stock, those payments will constitute dividends for
U.S. federal income tax purposes to the extent paid from
our current or accumulated earnings and profits, as determined
under U.S. federal income tax principles. To the extent
those dividends exceed our current and accumulated earnings and
profits, the dividends will constitute a return of capital and
first reduce the
non-U.S. holders
basis, but not below zero, and then will be treated as gain from
the sale of stock.
We will have to withhold U.S. federal income tax at a rate
of 30%, or a lower rate under an applicable income tax treaty,
from the gross amount of the dividends paid to a
non-U.S. holder,
unless the dividend is effectively connected with the conduct of
a trade or business of the
non-U.S. holder
within the United States or, if an income tax treaty applies,
attributable to a permanent establishment of the
non-U.S. holder
within the United States. Under applicable U.S. Treasury
regulations, a
non-U.S. holder
(including, in certain cases of
non-U.S. holders
that are entities, the owner or owners of such entities) will be
required to satisfy certain certification requirements in order
to claim a reduced rate of withholding pursuant to an applicable
income tax treaty.
Non-U.S. holders
should consult their tax advisors regarding their entitlement to
benefits under a relevant income tax treaty.
Dividends that are effectively connected with a
non-U.S. holders
conduct of a trade or business in the United States or, if an
income tax treaty applies, attributable to a permanent
establishment in the United States, are taxed on a net income
basis at the regular graduated U.S. federal income tax
rates in the same manner as if the
non-U.S. holder
were a resident of the United States. In such cases, we will not
have to withhold U.S. federal income tax if the
non-U.S. holder
complies with applicable certification and disclosure
requirements. In addition, a branch profits tax may
be imposed at a 30% rate, or a lower rate under an applicable
income tax treaty, on dividends received by a foreign
corporation that are effectively connected with the conduct of a
trade or business in the United States.
In order to claim the benefit of an income tax treaty or to
claim exemption from withholding because the income is
effectively connected with the conduct of a trade or business in
the United States, the
non-U.S. holder
must provide a properly executed IRS
Form W-8BEN, for
treaty benefits, or
W-8ECI, for effectively
connected income, respectively (or such successor forms as the
IRS designates), prior to the payment of dividends. These forms
must be periodically updated.
A non-U.S. holder
that is eligible for a reduced rate of U.S. federal
withholding tax under an income tax treaty may obtain a refund
of any excess amounts withheld by filing an appropriate claim
for a refund together with the required information with the IRS.
Gain on Disposition of Common
Stock
A non-U.S. holder
generally will not be subject to U.S. federal income or
withholding tax with respect to gain realized on a sale or other
disposition of our common stock unless one of the following
applies:
| the gain is effectively connected with the non-U.S. holders conduct of a trade or business in the United States or, alternatively, if an income tax treaty applies, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States; in these cases, the non-U.S. holder generally will be taxed on its net gain derived from the disposition at the regular graduated rates and in the manner applicable to U.S. persons and, if the non-U.S. holder is a foreign corporation, the branch profits tax described above may also apply; |
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Material United States federal
income and estate tax consequences to non-United States
holders
| the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met; in this case, the non-U.S. holder will be subject to a 30% tax on the gain derived from the disposition; or |
| our common stock constitutes a United States real property interest by reason of our status as a United States real property holding corporation, or a USRPHC, for U.S. federal income tax purposes at any time during the shorter of the 5-year period ending on the date of such disposition or the period that the non-U.S. holder held our common stock. We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. As long as our common stock is regularly traded on an established securities market within the meaning of Section 897(c)(3) of the Code, however, such common stock will be treated as United States real property interests only if a non-U.S. holder owned directly or indirectly more than 5 percent of such regularly traded common stock during the shorter of the 5-year period ending on the date of disposition or the period that the non-U.S. holder held our common stock and we were a USRPHC during such period. If we are or were to become a USRPHC and a non-U.S. holder owned directly or indirectly more than 5 percent of our common stock during the period described above or our common stock is not regularly traded on an established securities market, then a non-U.S. holder would generally be subject to U.S. federal income tax on its net gain derived from the disposition of our common stock at regular graduated rates. |
Federal Estate Tax
Common stock owned or treated as owned by an individual who is a
non-U.S. holder at
the time of death will be included in the individuals
gross estate for U.S. federal estate tax purposes, unless
an applicable estate tax or other treaty provides otherwise and,
therefore, may be subject to U.S. federal estate tax.
Information Reporting and Backup
Withholding Tax
We must report annually to the IRS and to each
non-U.S. holder
the amount of dividends paid to that holder and the tax withheld
from those dividends. These reporting requirements apply
regardless of whether withholding was reduced or eliminated by
an applicable income tax treaty. Copies of the information
returns reporting those dividends and withholding may also be
made available under the provisions of an applicable income tax
treaty or agreement to the tax authorities in the country in
which the
non-U.S. holder is
a resident.
Under some circumstances, U.S. Treasury regulations require
backup withholding and additional information reporting on
reportable payments on common stock. The gross amount of
dividends paid to a
non-U.S. holder
that fails to certify its
non-U.S. holder
status in accordance with applicable U.S. Treasury
regulations generally will be reduced by backup withholding at
the applicable rate (currently 28%).
The payment of the proceeds of the sale or other disposition of
common stock made to a
non-U.S. holder by
or through the U.S. office of any broker, U.S. or
non-U.S., generally
will be reported to the IRS and reduced by backup withholding,
unless the
non-U.S. holder
either certifies its status as a
non-U.S. holder
under penalties of perjury or otherwise establishes an
exemption. The payment of the proceeds from the disposition of
common stock made to a
non-U.S. holder by
or through a
non-U.S. office of
a non-U.S. broker
will not be reduced by backup withholding or reported
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Table of Contents
Material United States federal
income and estate tax consequences to non-United States
holders
to the IRS, unless the
non-U.S. broker
has certain enumerated connections with the United States. In
general, the payment of proceeds from the disposition of common
stock made to a
non-U.S. holder by
or through a
non-U.S. office of
a broker that is a U.S. person or has certain enumerated
connections with the United States will be reported to the IRS
and may be reduced by backup withholding unless the broker
receives a statement from the
non-U.S. holder
that certifies its status as a
non-U.S. holder
under penalties of perjury or the broker has documentary
evidence in its files that the holder is a
non-U.S. holder.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules from a payment to a
non-U.S. holder
can be refunded or credited against the
non-U.S. holders
U.S. federal income tax liability, if any, provided that
the required information is furnished to the IRS in a timely
manner. These backup withholding and information reporting rules
are complex and
non-U.S. holders
are urged to consult their own tax advisors regarding the
application of these rules to them.
The foregoing discussion of U.S. federal income and
estate tax considerations is not tax advice. Accordingly, each
prospective
non-U.S. holder of
our common stock should consult that holders own tax
advisor with respect to the federal, state, local and
non-U.S. tax
consequences of the ownership and disposition of our common
stock.
S-46
Table of Contents
Underwriting
We are offering the shares of our common stock described in this
prospectus supplement through the underwriters named below. UBS
Securities LLC is the sole book-running manager of this
offering. UBS Securities LLC, CIBC World Markets Corp., RBC
Capital Markets Corporation and Fortis Securities LLC are the
representatives of the underwriters. We have entered into an
underwriting agreement with the underwriters. Subject to the
terms and conditions of the underwriting agreement, each of the
underwriters has severally agreed to purchase the number of
shares of common stock listed next to its name in the following
table:
Number of | |||||
Underwriters | shares | ||||
UBS Securities LLC
|
|||||
CIBC World Markets Corp.
|
|||||
RBC Capital Markets Corporation
|
|||||
Fortis Securities LLC
|
|||||
Total
|
15,495,867 | ||||
The underwriting agreement provides that the underwriters must
buy all of the shares if they buy any of them. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters over-allotment option
described below.
Our common stock is offered subject to a number of conditions,
including:
| receipt and acceptance of our common stock by the underwriters; and |
| the underwriters right to reject orders in whole or in part. |
In connection with this offering, certain of the underwriters or
securities dealers may distribute prospectuses electronically.
OVER-ALLOTMENT OPTION
We have granted the underwriters an option to buy up to
2,324,380 additional shares of our common stock. The
underwriters may exercise this option solely for the purpose of
covering over-allotments, if any, made in connection with this
offering. The underwriters have 30 days from the date of
this prospectus supplement to exercise this option. If the
underwriters exercise this option, they will each purchase
additional shares approximately in proportion to the amounts
specified in the table above.
COMMISSIONS AND
DISCOUNTS
Shares sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this prospectus supplement. Any shares sold by the
underwriters to securities dealers may be sold at a discount of
up to
$ per
share from the public offering price. Any of these securities
dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to
$ per
share from the public offering price. If all the shares are not
sold at the public offering price, the representatives may
change the public offering price and the other selling terms.
Upon execution of the underwriting agreement, the underwriters
will be obligated to purchase the shares at the prices and upon
the terms stated therein and, as a result, will thereafter bear
any risk associated with changing the offering price to the
public or other selling terms. Sales of shares made outside of
the United States may be made by affiliates of the underwriters.
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Table of Contents
Underwriting
The following table shows the per share and total underwriting
discounts and commissions we will pay to the underwriters,
assuming both no exercise and full exercise of the
underwriters option to purchase up to an additional
2,324,380 shares:
No exercise | Full exercise | ||||||||
Per share
|
$ | $ | |||||||
Total
|
$ | $ |
We estimate that the total expenses of this offering payable by
us, not including the underwriting discounts and commissions,
will be approximately $1,000,000.
NO SALES OF SIMILAR
SECURITIES
We and our executive officers and directors have entered into
lock-up agreements with
the underwriters. Under these
lock-up agreements, we
and each of these persons may not, without the prior written
approval of UBS Securities LLC, subject to limited exceptions,
offer, sell, contract to sell, or otherwise dispose of, directly
or indirectly, or hedge our common stock or securities
convertible into or exercisable or exchangeable for our common
stock. These restrictions will be in effect for a period of
90 days after the date of this prospectus supplement. The
90-day
lock-up period may be
extended under certain circumstances where we announce or
pre-announce earnings or material news or a material event
within approximately 18 days prior to, or approximately
16 days after, the termination of the
90-day period. At any
time and without public notice, UBS Securities LLC may, in its
sole discretion, release all or some of the securities from
these lock-up
agreements.
INDEMNIFICATION AND
CONTRIBUTION
We have agreed to indemnify the underwriters and their
controlling persons against certain liabilities, including
liabilities under the Securities Act. If we are unable to
provide this indemnification, we will contribute to payments the
underwriters and their controlling persons may be required to
make in respect of those liabilities.
AMERICAN STOCK EXCHANGE
QUOTATION
Our common stock is quoted on the American Stock Exchange under
the symbol ANX.
PRICE STABILIZATION, SHORT
POSITIONS
In connection with this offering, the underwriters may engage in
activities that stabilize, maintain or otherwise affect the
price of our common stock, including:
| stabilizing transactions; |
| short sales; |
| purchases to cover positions created by short sales; |
| imposition of penalty bids; and |
| syndicate covering transactions. |
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
These transactions may also include making short sales of our
common stock, which involve the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in this offering. Short sales may be covered
short sales, which are short positions in an amount not
greater than the
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Table of Contents
Underwriting
underwriters over-allotment option referred to above, or
may be naked short sales, which are short positions
in excess of that amount.
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which they may purchase shares
through the over-allotment option. The underwriters must close
out any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
that could adversely affect investors who purchased in this
offering.
The underwriters also may impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have repurchased shares sold by or for the
account of that underwriter in stabilizing or short covering
transactions.
As a result of these activities, the price of our common stock
may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. The underwriters
may carry out these transactions on the AMEX, in the
over-the-counter market
or otherwise.
AFFILIATIONS
Certain of the underwriters and their affiliates have provided
and may provide certain commercial banking, financial advisory
and investment banking services for us for which they receive
fees. The underwriters and their affiliates may from time to
time in the future engage in transactions with us and perform
services for us in the ordinary course of their business.
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Table of Contents
Notice to investors
European economic area
In relation to each Member State of the European Economic Area
(EEA) which has implemented the Prospectus
Directive (each, a Relevant Member State),
with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the
Relevant Implementation Date) our common
stock will not be offered to the public in that Relevant Member
State prior to the publication of a prospectus in relation to
our common stock that has been approved by the competent
authority in that Relevant Member State or, where appropriate,
approved in another Relevant Member State and notified to the
competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, except that, with
effect from and including the Relevant Implementation Date, our
common stock may be offered to the public in that Relevant
Member State at any time:
(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than 43,000,000 and (3) an annual net turnover of more than 50,000,000, as shown in its last annual or consolidated accounts; or | |
(c) in any other circumstances which do not require the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
As used above, the expression offered to the public
in relation to any of our common stock in any Relevant Member
State means the communication in any form and by any means of
sufficient information on the terms of the offer and our common
stock to be offered so as to enable an investor to decide to
purchase or subscribe for our common stock, as the same may be
varied in that Member State by any measure implementing the
Prospectus Directive in that Member State and the expression
Prospectus Directive means Directive 2003/71/ EC and
includes any relevant implementing measure in each Relevant
Member State.
The EEA selling restriction is in addition to any other selling
restrictions set out below.
United Kingdom
Our common stock may not be offered or sold and will not be
offered or sold to any persons in the United Kingdom other than
to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or
as agent) for the purposes of their businesses and in compliance
with all applicable provisions of the Financial Services and
Markets Act 2000 (FSMA) with respect to
anything done in relation to our common stock in, from or
otherwise involving the United Kingdom. In addition, each
underwriter has only communicated or caused to be communicated
and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) received by
it in connection with the issue or sale of our common stock in
circumstances in which Section 21(1) of the FSMA does not
apply to us. Without limitation to the other restrictions
referred to herein, this prospectus supplement and the
accompanying prospectus is directed only at (1) persons
outside the United Kingdom, (2) persons having professional
experience in matters relating to investments who fall within
the definition of investment professionals in
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005; or (3) high net
worth bodies corporate, unincorporated associations and
partnerships and trustees of high value trusts as described in
S-50
Table of Contents
Notice to investors
Article 49(2) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005. Without limitation to the
other restrictions referred to herein, any investment or
investment activity to which this prospectus supplement and the
accompanying prospectus relate is available only to, and will be
engaged in only with, such persons, and persons within the
United Kingdom who receive this communication (other than
persons who fall within (2) or (3) above) should not
rely or act upon this communication.
France
No prospectus (including any amendment, supplement or
replacement thereto) has been prepared in connection with the
offering of our common stock that has been approved by the
Autorité des marchés financiers or by the
competent authority of another State that is a contracting party
to the Agreement on the European Economic Area and notified to
the Autorité des marchés financiers; no common
stock has been offered or sold and will be offered or sold,
directly or indirectly, to the public in France except to
permitted investors (Permitted Investors)
consisting of persons licensed to provide the investment service
of portfolio management for the account of third parties,
qualified investors (investisseurs qualifiés) acting
for their own account and/or corporate investors meeting one of
the four criteria provided in Article 1 of Decree N°
2004-1019 of September 28, 2004 and belonging to a limited
circle of investors (cercle restreint
dinvestisseurs) acting for their own account, with
qualified investors and limited circle of
investors having the meaning ascribed to them in
Article L. 411-2 of the French Code Monétaire et
Financier and applicable regulations thereunder; none of
this prospectus supplement and the accompanying prospectus or
any other materials related to the offer or information
contained therein relating to our common stock has been
released, issued or distributed to the public in France except
to Permitted Investors; and the direct or indirect resale to the
public in France of any common stock acquired by any Permitted
Investors may be made only as provided by articles L. 412-1 and
L. 621-8 of the French Code Monétaire et Financier
and applicable regulations thereunder.
Italy
The offering of shares of our common stock has not been cleared
by the Italian Securities Exchange Commission (Commissione
Nazionale per le Società e la Borsa, the
CONSOB) pursuant to Italian securities legislation
and, accordingly, shares of our common stock may not and will
not be offered, sold or delivered, nor may or will copies of
this prospectus supplement and the accompanying prospectus or
any other documents relating to shares of our common stock or
the offering be distributed in Italy other than to professional
investors (operatori qualificati), as defined in
Article 31, paragraph 2 of CONSOB
Regulation No. 11522 of July 1, 1998, as amended
(Regulation No. 11522).
Any offer, sale or delivery of shares of our common stock or
distribution of copies of this prospectus supplement and the
accompanying prospectus or any other document relating to shares
of our common stock or the offering in Italy may and will be
effected in accordance with all Italian securities, tax,
exchange control and other applicable laws and regulations, and,
in particular, will be: (i) made by an investment firm,
bank or financial intermediary permitted to conduct such
activities in Italy in accordance with the Legislative Decree
No. 385 of September 1, 1993, as amended (the
Italian Banking Law), Legislative Decree
No. 58 of February 24, 1998, as amended,
Regulation No. 11522, and any other applicable laws
and regulations; (ii) in compliance with Article 129
of the Italian Banking Law and the implementing guidelines of
the Bank of Italy; and (iii) in compliance with any other
applicable notification requirement or limitation which may be
imposed by CONSOB or the Bank of Italy.
S-51
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Notice to investors
Any investor purchasing shares of our common stock in the
offering is solely responsible for ensuring that any offer or
resale of shares of common stock it purchased in the offering
occurs in compliance with applicable laws and regulations.
This prospectus supplement and the accompanying prospectus and
the information contained herein are intended only for the use
of its recipient and are not to be distributed to any third
party resident or located in Italy for any reason. No person
resident or located in Italy other than the original recipients
of this document may rely on it or its content.
In addition to the above (which shall continue to apply to the
extent not inconsistent with the implementing measures of the
Prospective Directive in Italy), after the implementation of the
Prospectus Directive in Italy, the restrictions, warranties and
representations set out under the heading European
Economic Area above shall apply to Italy.
Spain
Neither the common stock nor this prospectus supplement and the
accompanying prospectus have been approved or registered in the
administrative registries of the Spanish National Securities
Exchange Commission (Comisión Nacional del Mercado de
Valores). Accordingly, our common stock may not be offered
in Spain except in circumstances which do not constitute a
public offer of securities in Spain within the meaning of
articles 30bis of the Spanish Securities Markets Law of 28 July
1988 (Ley 24/1988, de 28 de Julio, del Marcado de
Valores), as amended and restated, and supplemental rules
enacted thereunder.
Sweden
This is not a prospectus under, and has not been prepared in
accordance with the prospectus requirements provided for in, the
Swedish Financial Instruments Trading Act (lagen
(1991:980) om handel med finasiella instrument) nor
any other Swedish enactment. Neither the Swedish Financial
Supervisory Authority nor any other Swedish public body has
examined, approved, or registered this document.
Switzerland
The common stock may not and will not be publicly offered,
distributed or re-distributed on a professional basis in or from
Switzerland and neither this prospectus supplement and the
accompanying prospectus nor any other solicitation for
investments in our common stock may be communicated or
distributed in Switzerland in any way that could constitute a
public offering within the meaning of Articles 1156 or 652a
of the Swiss Code of Obligations or of Article 2 of the
Federal Act on Investment Funds of March 18, 1994. This
prospectus supplement and the accompanying prospectus may not be
copied, reproduced, distributed or passed on to others without
the underwriters prior written consent. This prospectus
supplement and the accompanying prospectus is not a prospectus
within the meaning of Articles 1156 and 652a of the Swiss
Code of Obligations or a listing prospectus according to article
32 of the Listing Rules of the Swiss Exchange and may not comply
with the information standards required thereunder. We will not
apply for a listing of our common stock on any Swiss stock
exchange or other Swiss regulated market and this prospectus
supplement and the accompanying prospectus may not comply with
the information required under the relevant listing rules. The
common stock offered hereby has not and will not be registered
with the Swiss Federal Banking Commission and has not and will
not be authorized under the Federal Act on Investment Funds of
March 18, 1994. The investor protection afforded to
acquirers of investment fund certificates by the Federal Act on
Investment Funds of March 18, 1994 does not extend to
acquirers of our common stock.
S-52
Table of Contents
Legal matters
The validity of the issuance of shares of common stock we are
offering under this prospectus will be passed upon for us by
Bingham McCutchen LLP, San Francisco, California. Dewey
Ballantine LLP, New York, New York, is counsel to the
underwriters in connection with this offering.
Experts
Our consolidated balance sheets as of December 31, 2005 and
2004, and the related consolidated statements of operations,
stockholders equity (deficit) and cash flows for each
of the years in the three-year period ended December 31,
2005, and for the period from June 12, 1996 (date of
inception) through December 31, 2005, and managements
assessment of the effectiveness of internal control over
financial reporting and the effectiveness of our internal
control over financial reporting as of December 31, 2005,
have been incorporated by reference in this prospectus and in
the registration statement in reliance on the reports of J.H.
Cohn LLP, independent registered public accounting firm, given
upon the authority of that firm as experts in accounting and
auditing. The report of J.H. Cohn LLP notes that the
consolidated financial statements for the period from
June 12, 1996 (date of inception) through December 31,
2001, were audited by other auditors. J.H. Cohn LLPs
opinion insofar as it relates to the period from June 12,
1996 to December 31, 2001, is based solely on the report of
such other auditors.
The financial statements of SD Pharmaceuticals, Inc. as of
December 31, 2005 and 2004 and for the year ended
December 31, 2005 and for the period from June 16,
2004 (date of inception) to December 31, 2004 have been
incorporated by reference in this prospectus and in the
registration statement in reliance on the report, which includes
an explanatory paragraph relating to the ability of SD
Pharmaceuticals, Inc. to continue as a going concern, of J.H.
Cohn LLP, independent registered public accounting firm, given
upon the authority of that firm as experts in accounting and
auditing.
Where you can find more information
about us
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange
Commission. You may read and copy any document we file with the
Commission at the Public Reference Room at the Commission, 100 F
Street, N.E., Washington, D.C. 20549. Please call
1-800-SEC-0330 for
further information concerning the Public Reference Room. The
Commission also makes these documents and other information
available on its website at http://www.sec.gov. We also maintain
a website at http://www.adventrx.com. The material on our
website is not a part of this prospectus supplement or the
accompanying prospectus.
We have filed with the Commission a registration statement under
the Securities Act on
Form S-3 relating
to the common stock offered by this prospectus supplement. This
prospectus supplement and the accompanying prospectus constitute
a part of the registration statement but do not contain all of
the information set forth in the registration statement and its
exhibits. For further information, we refer you to the
registration statement and its exhibits.
The Commission allows us to incorporate by reference
the information we file with it, which means that we can
disclose certain information to you by referring you to another
document we have filed with the Commission. We may furnish other
information to the Commission which is not considered to be
filed and is therefore not incorporated by reference
into or otherwise a part of this prospectus supplement and the
accompanying prospectus, unless we indicate to the contrary. The
information incorporated by reference is an important part of
this prospectus supplement and the accompanying
S-53
Table of Contents
Where you can find more
information about us
prospectus and information that we file later with the
Commission will automatically update this prospectus supplement
and the accompanying prospectus and replace any outdated
information. We incorporate by reference the following:
(a) the section entitled Description of Registrants Securities contained in the Registrants Registration Statement on Form 8-A (file No. 001-32157) filed with the Commission on April 27, 2004; | |
(b) our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 filed with the Commission on March 16, 2006; | |
(c) our Current Report on Form 8-K filed with the Commission on January 30, 2006; | |
(d) our Current Report on Form 8-K filed with the Commission on January 31, 2006; | |
(e) our Current Report on Form 8-K filed with the Commission on February 6, 2006; | |
(f) our Current Report on Form 8-K filed with the Commission on February 15, 2006; | |
(g) our Current Report on Form 8-K filed with the Commission on March 1, 2006; | |
(h) our Current Report on Form 8-K filed with the Commission on March 20, 2006 (Items 4.02, 8.01 and 9.01), as amended by Amendment No. 1 filed with the Commission on March 27, 2006; | |
(i) our Current Report on Form 8-K filed with the Commission on March 20, 2006 (Items 8.01 and 9.01); | |
(j) our Current Report on Form 8-K filed with the Commission on April 6, 2006; | |
(k) our Current Report on Form 8-K filed with the Commission on April 11, 2006 as amended by Amendment No. 1 filed with the Commission on May 1, 2006; | |
(l) our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 filed with the Commission on May 10, 2006; and | |
(m) any future filings we make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act prior to the termination of the offering of the securities made by this prospectus supplement and the accompanying prospectus. |
You may request a copy of these filings, at no cost, by writing
or telephoning:
Carrie E. Carlander
Chief Financial Officer
ADVENTRX Pharmaceuticals, Inc.
6725 Mesa Ridge Road, Suite 100
San Diego, California 92121
(858) 552-0866
We will provide exhibits to these filings at no cost only if
they are specifically incorporated into those filings.
S-54
Table of Contents
PROSPECTUS
$100,000,000
Common Stock
ADVENTRX Pharmaceuticals, Inc.
6725 Mesa Ridge Road, Suite 100
San Diego, California 92121
(858) 558-0866
ADVENTRX Pharmaceuticals, Inc. (the Company) is
offering an aggregate of up to $100,000,000 of its common stock.
We may sell the shares covered by this prospectus from time to
time in transactions on the American Stock Exchange LLC, in the
over-the-counter market
or in negotiated transactions. We may sell directly, or through
agents or dealers designated from time to time, at fixed prices,
at prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices.
Our common stock is listed on the American Stock Exchange LLC
under the symbol ANX. On May 8, 2006, the last
reported sale price of our common stock on the American Stock
Exchange LLC was $4.93 per share.
Investing In Our Common Stock Involves Risks. See Risk
Factors beginning on page 7.
Neither the Securities and Exchange Commission nor any state
securities regulator has approved or disapproved the shares of
common stock covered by this prospectus, or determined if this
prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus is May 8, 2006
Table of Contents
Important Information About This Prospectus
This prospectus is part of a shelf registration
statement that we filed with the SEC. By using a shelf
registration statement, we may sell our common stock, as
described in this prospectus, from time to time in one or more
offerings. Each time we sell our common stock, we will provide a
supplement to this prospectus that contains specific information
about the terms of that offering. The supplement may also add,
update or change information contained in this prospectus.
Before purchasing any of our common stock, you should carefully
read both this prospectus and any supplement, together with the
additional information incorporated into this prospectus or
described under the heading Where You Can Find More
Information.
You should rely only on the information contained or
incorporated by reference in this prospectus and any prospectus
supplement. We have not authorized any other person to provide
you with different information. If anyone provides you with
different or inconsistent information, you should not rely on
it. We will not make an offer to sell our common stock in any
jurisdiction where the offer or sale is not permitted. The
information in this prospectus and any prospectus supplement is
accurate as of the date on the front cover of this prospectus or
any prospectus supplement, and the information in documents we
file with the SEC and incorporate by reference into this
prospectus or any prospectus supplement, is accurate as of the
date on those documents.
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3 | ||||
3 | ||||
5 | ||||
5 | ||||
7 | ||||
14 | ||||
15 | ||||
16 | ||||
17 | ||||
17 |
In this prospectus, ADVENTRX, the
company, we, us, and
our refer to ADVENTRX Pharmaceuticals, Inc.
Special Note Regarding Forward-Looking Statements
Some of the statements under Our Company, Risk
Factors and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and
unknown risks, uncertainties, and other factors that may cause
our actual results to be materially different from projected
results expressed or implied by the forward-looking statements.
These factors include, among others, those listed under
Risk Factors and elsewhere in this prospectus.
In some cases, you can identify forward-looking statements by
terms such as may, will,
should, expects, plans,
anticipates, believes,
estimates, predicts,
potential, or continue or similar terms.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance, or
achievements. Our actual results could differ materially from
those expressed or implied by these forward-looking statements
as a result of various factors, including the risk factors
described under the heading Risk Factors and
elsewhere in this prospectus. We undertake no obligation to
update publicly any forward-looking statements for any reason,
except as required by law, even as new information becomes
available or other events occur in the future.
Where You Can Find More Information About Us
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange
Commission. You may read and copy any document we file with the
Commission at the Public Reference Room at the Commission, 100 F
Street, N.E., Washington, D.C. 20549. Please call
1-800-SEC-0330 for
further information concerning the Public Reference Room. The
Commission also makes these documents and other information
available on its website at http://www.sec.gov. We also maintain
a website at http://www.adventrx.com. The material on our
website is not a part of this prospectus or any prospectus
supplement.
We have filed with the Commission a registration statement under
the Securities Act on
Form S-3 relating
to the common stock offered by this prospectus. This prospectus
and any prospectus supplement constitute a part of the
registration statement but do not contain all of the information
set forth in the registration statement and its exhibits. For
further information, we refer you to the registration statement
and its exhibits.
3
Table of Contents
The Commission allows us to incorporate by reference
the information we file with it, which means that we can
disclose certain information to you by referring you to another
document we have filed with the Commission. We may furnish other
information to the Commission which is not considered to be
filed and is therefore not incorporated by reference
into or otherwise a part of this prospectus, unless we indicate
to the contrary. The information incorporated by reference is an
important part of this prospectus and information that we file
later with the Commission will automatically update this
prospectus and replace any outdated information. We incorporate
by reference the following:
(a) the section entitled Description of Registrants Securities contained in the Registrants Registration Statement on Form 8-A (file No. 001-32157) filed with the Commission on April 27, 2004; | |
(b) our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 filed with the Commission on March 16, 2006; | |
(c) our Current Report on Form 8-K filed with the Commission on January 30, 2006; | |
(d) our Current Report on Form 8-K filed with the Commission on January 31, 2006; | |
(e) our Current Report on Form 8-K filed with the Commission on February 6, 2006; | |
(f) our Current Report on Form 8-K filed with the Commission on February 15, 2006; | |
(g) our Current Report on Form 8-K filed with the Commission on March 1, 2006; | |
(h) our Current Report on Form 8-K filed with the Commission on March 20, 2006 (Items 4.02, 8.01 and 9.01), as amended by Amendment No. 1 filed with the Commission on March 27, 2006; | |
(i) our Current Report on Form 8-K filed with the Commission on March 20, 2006 (Items 8.01 and 9.01); | |
(j) our Current Report on Form 8-K filed with the Commission on April 6, 2006; | |
(k) our Current Report on Form 8-K filed with the Commission on April 11, 2006 as amended by Amendment No. 1 filed with the Commission on May 1, 2006; and | |
(l) any future filings we make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act after the date of the initial registration statement and prior to effectiveness of the registration statement, and until we file a post-effective amendment which indicates the termination of the offering of the securities made by this prospectus. |
You may request a copy of these filings, at no cost, by writing
or telephoning:
Carrie E. Carlander
Chief Financial Officer
ADVENTRX Pharmaceuticals, Inc.
6725 Mesa Ridge Road, Suite 100
San Diego, California 92121
(858) 552-0866
We will provide exhibits to these filings at no cost only if
they are specifically incorporated into those filings.
4
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Our Company
We are a biopharmaceutical research and development company
focused on introducing new technologies for anticancer and
antiviral treatments that improve the performance and safety of
existing drugs by addressing significant problems such as drug
metabolism, toxicity, bioavailability and resistance. We do not
manufacture, market, sell or distribute any product. Pursuant to
license agreements with University of Southern California and SD
Pharmaceuticals, Inc., we have rights to drug candidates in
varying stages of development. Our current drug candidates are
CoFactor, ANX-530,
Selone and Thiovir. All of these drug candidates are described
in our Annual Report on
Form 10-K for the
fiscal year ended December 31, 2005.
On May 30, 2003, we merged our wholly-owned subsidiary,
Biokeys, Inc., into the Company and changed our name from
Biokeys Pharmaceuticals, Inc. to ADVENTRX Pharmaceuticals, Inc.
The merger had no effect on our financial statements.
In July 2004, we formed a wholly-owned subsidiary, ADVENTRX
(Europe) Ltd., in the United Kingdom for the purpose of
conducting drug trials in the European Union.
We have incurred net losses since our inception. As of
December 31, 2005, our accumulated deficit was
approximately $59,964,840. We expect to incur substantial and
increasing losses for the next several years as we continue
development and possible commercialization of new products.
To date, we have funded our operations primarily through sales
of equity securities.
Our business is subject to significant risks, including risks
inherent in our ongoing clinical trials, the regulatory approval
processes, the results of our research and development efforts,
commercialization, and competition from other pharmaceutical
companies.
Recent Developments
On April 7, 2006, we entered into an Agreement and Plan of
Merger (the Merger Agreement) among the Company,
SD Pharmaceuticals, Inc., a Delaware corporation
(SDP), Speed Acquisition, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company
(Merger Sub), Paul Marangos and Andrew X. Chen, each
as stockholders of SDP and Paul Marangos, as an individual
acting as the stockholder representative. Pursuant to the Merger
Agreement, we will acquire SDP through the merger of Merger Sub
into SDP and SDP will continue as the surviving corporation and
as a wholly-owned subsidiary of the Company (the
Merger).
Upon the closing of the transaction on April 26, 2006,
ADVENTRX acquired certain U.S. and
ex-U.S. intellectual
property rights to eight oncology and infectious disease product
candidates, including certain ex-U.S. rights to
SDP-012
(ANX-530, vinorelbine
emulsion). In October 2005, ADVENTRX announced it had licensed
U.S. development and marketing rights to
SDP-012
(ANX-530) from SD
Pharma. Certain product candidates that ADVENTRX acquired as a
result of the merger are based on a nano-emulsion technology for
both soluble and insoluble parenteral drugs. The nano-emulsion
technology was developed by Dr. Andrew Chen and is designed
to enable the delivery of vein irritating or difficult to
dissolve drugs without excipient-induced adverse effects. Many
of the product candidates are based on currently approved drugs
and may qualify for the 505(b)(2) regulatory process. Certain
product candidates obtained in the transaction are being
evaluated by ADVENTRX as possible out-licensing opportunities.
The SD Pharma product portfolio consists of five anticancer and
three anti-infective therapies which are listed below:
| SDP-013 A non-allergenic, non cremophor-containing emulsion formulation of paclitaxel (Taxoltm) designed to eliminate the need for immunosuppressant premedication, which is recommended for paclitaxel therapy to reduce the incidence and severity of severe hypersensitivity |
5
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reaction. Paclitaxel is approved to treat breast, ovarian and non-small cell lung cancers. Taxoltm worldwide sales were approximately $750 million in 2005. (Source: Bristol-Myers Squibb). | |
| SDP-014 A novel docetaxel (Taxoteretm) formulation not containing polysorbate 80 or other detergents, intended to eliminate the need for multiday immunosuppressant premedication, which is recommended for docetaxel therapy to reduce the incidence and severity of allergic reaction. Taxoteretm is approved to treat breast, non-small cell lung, prostate and gastric cancers. Worldwide Taxoteretm sales were approximately $1.6 billion in 2005. (Source: Sanofi-Aventis) |
| SDP-012 (vinorelbine emulsion) A novel emulsion formulation of vinorelbine tartrate designed to reduce vein irritation associated with the drug. Vinorelbine is approved to treat non-small cell lung cancer. According to IMS Health, worldwide sales of vinorelbine in 2005 were over $150 million. |
| SDP-111 A novel formulation of beta-elemene, a small molecule anticancer agent belonging to the triterpene family and currently approved in China for a variety of cancers. |
| SDP-112 An emulsion formulation of alpha-tocopheryl succinate, a form of vitamin E which has been shown to selectively facilitate apoptosis, or cell death, in cancer cells. |
| SDP-015 A proprietary intravenous formulation of an approved antibiotic in the macrolide family known as clarithromycin. Clarithromycin is approved for mild to moderate bacterial infections such as in community-acquired pneumonia. Only oral formulations of clarithromycin are currently available in the U.S. |
| SDP-011 A broad spectrum intranasal/topical anti-viral gel intended for use in cold and flu and other viral indications as an over-the-counter (OTC) product. |
| SDP-016 A novel formulation of vancomycin, a parenteral glycopeptide antibiotic approved to treat gram-positive bacterial infections. SDP-016 is designed to reduce the vein irritation and phlebitis associated with the IV-delivered drug. |
6
Table of Contents
Risk Factors
Readers and prospective investors in our securities should
carefully consider the following risk factors as well as the
other information contained or incorporated by reference in this
report. The risks and uncertainties described below are not the
only ones facing us. Additional risks and uncertainties that
management is not aware of or focused on or that management
currently deems immaterial may also impair our business
operations. This report is qualified in its entirety by these
risk factors.
If any of the following risks actually occur, the Companys
financial condition and results of operations could be
materially and adversely affected. If this were to happen, the
value of the Companys securities could decline
significantly, and you could lose all or part of your investment.
We have a substantial accumulated deficit and limited working capital. |
We had an accumulated deficit of $59,964,840 as of
December 31, 2005. Since we presently have no source of
revenues and are committed to continuing our product research
and development program, significant expenditures and losses
will continue until development of new products is completed and
such products have been clinically tested, approved by the FDA
or other regulatory agencies and successfully marketed. In
addition, we fund our operations primarily through the sale of
equity securities, and have had limited working capital for our
product development and other activities. We do not believe that
debt financing from financial institutions will be available
until at least the time that one of our products is approved for
commercial production.
We have no current product sales revenues or profits. |
We have devoted our resources to developing a new generation of
therapeutic drug products, but such products cannot be marketed
until clinical testing is completed and governmental approvals
have been obtained. Accordingly, there is no current source of
revenues, much less profits, to sustain our present activities,
and no revenues will likely be available until, and unless, the
new products are clinically tested, approved by the FDA or other
regulatory agencies and successfully marketed, either by us or a
marketing partner, an outcome which we are not able to guarantee.
It is uncertain that we will have access to future capital. |
We do not expect to generate positive cash flow from operations
for at least the next several years. As a result, substantial
additional equity or debt financing for research and development
or clinical development will be required to fund our activities.
Although we have raised equity financing in the past, including
in April 2004 and July 2005, we cannot be certain that we will
be able to continue to obtain such financing on favorable or
satisfactory terms, if at all, or that it will be sufficient to
meet our cash requirements. Any additional equity financing
could result in substantial dilution to stockholders, and debt
financing, if available, would likely involve restrictive
covenants that preclude us from making distributions to
stockholders and taking other actions beneficial to
stockholders. If adequate funds are not available, we may be
required to delay or reduce the scope of our drug development
program or attempt to continue development by entering into
arrangements with collaborative partners or others that may
require us to relinquish some or all of our rights to
proprietary drugs. The inability to adequately and timely fund
our capital requirements would have a material adverse effect on
us.
We are not certain that we will be successful in the development of our drug candidates. |
The successful development of any new drug is highly uncertain
and is subject to a number of significant risks. Our drug
candidates, all of which are in a development stage, require
significant, time-consuming and costly development, testing and
regulatory clearance. This process typically takes several years
and can require substantially more time. Risks include, among
others, the possibility that a drug candidate will (i) be
found to be ineffective or unacceptably toxic, (ii) have
unacceptable side
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effects, (iii) fail to receive necessary regulatory
clearances, (iv) not achieve broad market acceptance,
(v) be subject to competition from third parties who may
market equivalent or superior products, (vi) be affected by
third parties holding proprietary rights that will preclude us
from marketing a drug product, or (vii) not be able to be
manufactured by manufacturers in a timely manner in accordance
with required standards of quality. There can be no assurance
that the development of our drug candidates will demonstrate the
efficacy and safety of our drug candidates as therapeutic drugs,
or, even if demonstrated, that there will be sufficient
advantages to their use over other drugs or treatments so as to
render the drug product commercially viable. In the past, we
have been faced with limiting the scope and/or delaying the
launch of preclinical and clinical drug trials due to limited
cash and personnel resources. We have also chosen to terminate
licenses of some drug candidates that were not showing
sufficient promise to justify continued expense and development.
In the event that we are not successful in developing and
commercializing one or more drug candidates, investors are
likely to realize a loss of their entire investment.
We have been delayed at certain times in the past in the
development of our drug products by limited funding. In
addition, if certain of our scientific and technical personnel
resigned at or about the same time, the development of our drug
products would probably be delayed until new personnel were
hired and became familiar with the development programs.
Positive results in preclinical and clinical trials do not ensure that future clinical trials will be successful or that drug candidates will receive all necessary regulatory approvals for the marketing, distribution or sale of such drug candidates. |
Success in preclinical and clinical trials does not ensure that
large-scale clinical trials will be successful. 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 and may be difficult
to predict. In the past, we have terminated licenses of drug
candidates when our preclinical trials did not support or verify
earlier preclinical data. There is a significant risk that any
of our drug candidates could fail to show satisfactory results
in continued trials, and would not justify further development.
We will face intense competition from other companies in the pharmaceutical industry. |
We are engaged in a segment of the pharmaceutical industry that
is highly competitive and rapidly changing. If successfully
developed and approved, any of our drug candidates will likely
compete with several existing therapies. CoFactor, our leading
drug candidate, would likely compete against a well-established
product, leucovorin. In addition, there are numerous companies
with a focus in oncology and/or anti-viral therapeutics that are
pursuing the development of pharmaceuticals that target the same
diseases as are targeted by the drugs being developed by us. We
anticipate that we will face intense and increasing competition
in the future as new products enter the market and advanced
technologies become available. We cannot assure that existing
products or new products developed by competitors will not be
more effective, or more effectively marketed and sold than those
we may market and sell. Competitive products may render our
drugs obsolete or noncompetitive prior to our recovery of
development and commercialization expenses.
Many of our likely competitors such as Merck and Pfizer, will
also have significantly greater financial, technical and human
resources and will likely be better equipped to develop,
manufacture and market products. In addition, many of these
competitors have extensive experience in preclinical testing and
clinical trials, obtaining FDA and other regulatory approvals
and manufacturing and marketing pharmaceutical products. A
number of these competitors also have products that have been
approved or are in late-stage development and operate large,
well-funded research and development programs. Smaller companies
may also prove to be significant competitors, particularly
through collaborative arrangements with large pharmaceutical and
biotechnology companies. Furthermore, academic
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institutions, government agencies and other public and private
research organizations are becoming increasingly aware of the
commercial value of their inventions and are actively seeking to
commercialize the technology they have developed. Companies such
as Gilead, Roche and GlaxoSmithKline all have drugs in various
stages of development that could become competitors.
Accordingly, competitors may succeed in commercializing products
more rapidly or effectively than us, which would have a material
adverse effect on us.
There is no assurance that our products will have market acceptance. |
Our success will depend in substantial part on the extent to
which a drug product, if eventually approved for commercial
distribution, achieves market acceptance. The degree of market
acceptance will depend upon a number of factors, including
(i) the receipt and scope of regulatory approvals,
(ii) the establishment and demonstration in the medical
community of the safety and efficacy of a drug product,
(iii) the products potential advantages over existing
treatment methods and (iv) reimbursement policies of
government and third party payors. We cannot predict or
guarantee that physicians, patients, healthcare insurers or
maintenance organizations, or the medical community in general,
will accept or utilize any of our drug products.
The unavailability of health care reimbursement for any of our products will likely adversely impact our ability to effectively market such products and whether health care reimbursement will be available for any of our products is uncertain. |
Our ability to commercialize our technology successfully will
depend in part on the extent to which reimbursement for the
costs of such products and related treatments will be available
from government health administration authorities, private
health insurers and other third-party payors. Significant
uncertainty exists as to the reimbursement status of newly
approved medical products. We cannot guarantee that adequate
third-party insurance coverage will be available for us to
establish and maintain price levels sufficient for realization
of an appropriate return on our investments in developing new
therapies. If we are successful in getting FDA approval for
CoFactor, we will be competing against a generic drug,
leucovorin, which has a lower cost and a long, established
history of reimbursement. Receiving sufficient reimbursement for
purchase costs of CoFactor will be necessary to make it cost
effective and competitive versus the established drug,
leucovorin. Government, private health insurers, and other
third-party payors are increasingly attempting to contain health
care costs by limiting both coverage and the level of
reimbursement for new therapeutic products approved for
marketing by the FDA. Accordingly, even if coverage and
reimbursement are provided by government, private health
insurers, and third-party payors for use of our products, the
market acceptance of these products would be adversely affected
if the amount of reimbursement available for the use of our
therapies proved to be unprofitable for health care providers.
Uncertainties related to health care reform measures may affect our success. |
There have been some federal and state proposals in the past to
subject the pricing of health care goods and services, including
prescription drugs, to government control and to make other
changes to the U.S. health care system. None of the
proposals seems to have affected any of the drugs in our
programs. However, it is uncertain if future legislative
proposals would be adopted that might affect the drugs in our
programs or what actions federal, state, or private payors for
health care treatment and services may take in response to any
such health care reform proposals or legislation. Any such
health care reforms could have a material adverse effect on the
marketability of any drugs for which we ultimately require FDA
approval.
Further testing of our drug candidates will be required and there is no assurance of FDA approval. |
The FDA and comparable agencies in foreign countries impose
substantial requirements upon the introduction of medical
products, through lengthy and detailed laboratory and clinical
testing
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procedures, sampling activities and other costly and
time-consuming procedures. Satisfaction of these requirements
typically takes several years or more and varies substantially
based upon the type, complexity, and novelty of the product.
The effect of government regulation and the need for FDA
approval will delay marketing of new products for a considerable
period of time, impose costly procedures upon our activities,
and provide an advantage to larger companies that compete with
us. There can be no assurance that the FDA or other regulatory
approval for any products developed by us will be granted on a
timely basis or at all. Any such delay in obtaining or failure
to obtain, such approvals would materially and adversely affect
the marketing of any contemplated products and the ability to
earn product revenue. Further, regulation of manufacturing
facilities by state, local, and other authorities is subject to
change. Any additional regulation could result in limitations or
restrictions on our ability to utilize any of our technologies,
thereby adversely affecting our operations.
Human pharmaceutical products are subject to rigorous
preclinical testing and clinical trials and other approval
procedures mandated by the FDA and foreign regulatory
authorities. Various federal and foreign statutes and
regulations also govern or influence the manufacturing, safety,
labeling, storage, record keeping and marketing of
pharmaceutical products. The process of obtaining these
approvals and the subsequent compliance with appropriate U.S.
and foreign statutes and regulations are time-consuming and
require the expenditure of substantial resources. In addition,
these requirements and processes vary widely from country to
country.
Among the uncertainties and risks of the FDA approval process
are the following: (i) the possibility that studies and
clinical trials will fail to prove the safety and efficacy of
the drug, or that any demonstrated efficacy will be so limited
as to significantly reduce or altogether eliminate the
acceptability of the drug in the marketplace, (ii) the
possibility that the costs of development, which can far exceed
the best of estimates, may render commercialization of the drug
marginally profitable or altogether unprofitable, and
(iii) the possibility that the amount of time required for
FDA approval of a drug may extend for years beyond that which is
originally estimated. In addition, the FDA or similar foreign
regulatory authorities may require additional clinical trials,
which could result in increased costs and significant
development delays. Delays or rejections may also be encountered
based upon changes in FDA policy and the establishment of
additional regulations during the period of product development
and FDA review. Similar delays or rejections may be encountered
in other countries.
Our success will depend on licenses and proprietary rights we receive from other parties, and on any patents we may obtain. |
Our success will depend in large part on our ability and our
licensors ability to (i) maintain license and patent
protection with respect to their drug products, (ii) defend
patents and licenses once obtained, (iii) maintain trade
secrets, (iv) operate without infringing upon the patents
and proprietary rights of others and (iv) obtain
appropriate licenses to patents or proprietary rights held by
third parties if infringement would otherwise occur, both in the
U.S. and in foreign countries. We have obtained licenses to
patents and other proprietary rights from the University of
Southern California.
The patent positions of pharmaceutical companies, including
ours, are uncertain and involve complex legal and factual
questions. There is no guarantee that we or our licensors have
or will develop or obtain the rights to products or processes
that are patentable, that patents will issue from any of the
pending applications or that claims allowed will be sufficient
to protect the technology licensed to us. In addition, we cannot
be certain that any patents issued to or licensed by us will not
be challenged, invalidated, infringed or circumvented, or that
the rights granted thereunder will provide competitive
disadvantages to us.
Litigation, which could result in substantial cost, may also be
necessary to enforce any patents to which we have rights, or to
determine the scope, validity and unenforceability of other
parties proprietary rights, which may affect our rights.
U.S. patents carry a presumption of validity and
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generally can be invalidated only through clear and convincing
evidence. There can be no assurance that our licensed patents
would be held valid by a court or administrative body or that an
alleged infringer would be found to be infringing. The mere
uncertainty resulting from the institution and continuation of
any technology-related litigation or interference proceeding
could have a material adverse effect on us pending resolution of
the disputed matters.
We may also rely on unpatented trade secrets and know-how to
maintain our competitive position, which we seek to protect, in
part, by confidentiality agreements with employees, consultants
and others. There can be no assurance that these agreements will
not be breached or terminated, that we will have adequate
remedies for any breach, or that trade secrets will not
otherwise become known or be independently discovered by
competitors.
Our license agreements can be terminated in the event of a breach. |
The license agreements pursuant to which we license our core
technologies for our potential drug products permit the
licensors, to terminate the agreement under certain
circumstances, such as the failure by us to use our reasonable
best efforts to commercialize the subject drug or the occurrence
of any other uncured material breach by us. The license
agreements also provide that the licensor is primarily
responsible for obtaining patent protection for the technology
licensed, and we are required to reimburse the licensor for the
costs it incurs in performing these activities. The license
agreements also require the payment of specified royalties. Any
inability or failure to observe these terms or pay these costs
or royalties could result in the termination of the applicable
license agreement in certain cases. In the past, we have let
lapse certain licenses for drug candidates when we determined
that the expense and risk of continued development outweighed
the likely benefits of that continued development. The
termination of any license agreement could have a material
adverse effect on us.
Protecting our proprietary rights is difficult and costly. |
The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and
factual questions. Accordingly, we cannot predict the breadth of
claims allowed in these companies patents or whether we
may infringe or be infringing these claims. Although we have not
been notified of any patent infringement, nor notified others of
patent infringement, such patent disputes are common and could
preclude the commercialization of our products. Patent
litigation is costly in its own right and could subject us to
significant liabilities to third parties. In addition, an
adverse decision could force us to either obtain third-party
licenses at a material cost or cease using the technology or
product in dispute.
We may be unable to retain skilled personnel and maintain key relationships. |
The success of our business depends, in large part, on our
ability to attract and retain highly qualified management,
scientific and other personnel, and on our ability to develop
and maintain important relationships with leading research
institutions and consultants and advisors. Competition for these
types of personnel and relationships is intense from numerous
pharmaceutical and biotechnology companies, universities and
other research institutions. We are currently dependent upon our
scientific staff, which has a deep background in our drug
candidates and the ongoing preclinical and clinical trials.
Recruiting and retaining senior employees with relevant drug
development experience in oncology and anti-viral therapeutics
is costly and time-consuming. There can be no assurance that we
will be able to attract and retain such individuals on an
uninterrupted basis and on commercially acceptable terms, and
the failure to do so could have a material adverse effect on us
by significantly delaying one or more of our drug development
programs. The loss of any of our senior executive officers,
including our chief executive officer and chief financial
officer, in particular, could have a material adverse effect on
the company and the market for our common stock, particularly if
such loss was abrupt or unexpected. All of our employees are
employed on an at-will basis under offer letters. We do not have
non-competition agreements with any of our employees.
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We currently have no sales capability, and limited marketing capability. |
We currently do not have sales personnel. We have limited
marketing and business development personnel. We will have to
develop a sales force, or rely on marketing partners or other
arrangements with third parties for the marketing, distribution
and sale of any drug product which is ready for distribution.
There is no guarantee that we will be able to establish
marketing, distribution or sales capabilities or make
arrangements with third parties to perform those activities on
terms satisfactory to us, or that any internal capabilities or
third party arrangements will be cost-effective.
In addition, any third parties with which we may establish
marketing, distribution or sales arrangements may have
significant control over important aspects of the
commercialization of a drug product, including market
identification, marketing methods, pricing, composition of sales
force and promotional activities. There can be no assurance that
we will be able to control the amount and timing of resources
that any third party may devote to our products or prevent any
third party from pursuing alternative technologies or products
that could result in the development of products that compete
with, or the withdrawal of support for, our products.
We do not have manufacturing capabilities and may not be able to efficiently develop manufacturing capabilities or contract for such services from third parties on commercially acceptable terms. |
We do not have any manufacturing capacity. When and if required,
we will seek to establish relationships with third-party
manufacturers for the manufacture of clinical trial material and
the commercial production of drug products as we have with our
current manufacturing partners. There can be no assurance that
we will be able to establish relationships with third-party
manufacturers on commercially acceptable terms or that
third-party manufacturers will be able to manufacture a drug
product on a cost-effective basis in commercial quantities under
good manufacturing practices mandated by the FDA or other
regulatory matters.
The dependence upon third parties for the manufacture of
products may adversely affect future costs and the ability to
develop and commercialize a drug product on a timely and
competitive basis. Further, there can be no assurance that
manufacturing or quality control problems will not arise in
connection with the manufacture of our drug products or that
third party manufacturers will be able to maintain the necessary
governmental licenses and approvals to continue manufacturing
such products. Any failure to establish relationships with third
parties for our manufacturing requirements on commercially
acceptable terms would have a material adverse effect on us.
We are dependent in part on third parties for drug development and research facilities. |
We do not possess research and development facilities necessary
to conduct all of our drug development activities. We engage
consultants and independent contract research organizations to
design and conduct clinical trials in connection with the
development of our drugs. As a result, these important aspects
of a drugs development will be outside our direct control.
In addition, there can be no assurance that such third parties
will perform all of their obligations under arrangements with us
or will perform those obligations satisfactorily.
In the future, we anticipate that we will need to obtain additional or increased product liability insurance coverage and it is uncertain that such increased or additional insurance coverage can be obtained on commercially reasonable terms. |
Our business will expose us to potential product liability risks
that are inherent in the testing, manufacturing and marketing of
pharmaceutical products. There can be no assurance that product
liability claims will not be asserted against us. We intend to
obtain additional limited product liability insurance for our
clinical trials, directly or through our marketing development
partners or contract research organization (CRO) partners,
when they begin in the U.S. and to expand our insurance
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coverage if and when we begin marketing commercial products.
However, there can be no assurance that we will be able to
obtain product liability insurance on commercially acceptable
terms or that we will be able to maintain such insurance at a
reasonable cost or in sufficient amounts to protect against
potential losses. A successful product liability claim or series
of claims brought against us could have a material adverse
effect on us.
The market price of our shares, like that of many biotechnology companies, is highly volatile. |
Market prices for our common stock and the securities of other
medical and biomedical technology companies have been highly
volatile and may continue to be highly volatile in the future.
Factors such as announcements of technological innovations or
new products by us or our competitors, government regulatory
action, litigation, patent or proprietary rights developments,
and market conditions for medical and high technology stocks in
general can have a significant impact on any future market for
our common stock.
If we cannot satisfy AMEXs listing requirements, it may delist our common stock and we may not have an active public market for our common stock. The absence of an active trading market would likely make the common stock an illiquid investment. |
Our common stock is quoted on the American Stock Exchange. To
continue to be listed, we are required to maintain shareholders
equity of $6,000,000 among other requirements. We do not satisfy
that requirement as of December 31, 2005. The AMEX may
consider delisting our common stock and suspend trading in the
common stock in which case our common stock would likely trade
in the over-the-counter
market in the so-called pink sheets or, if
available, the OTC Bulletin Board Service. As a
result, an investor would likely find it significantly more
difficult to dispose of, or to obtain accurate quotations as to
the value of, our shares. Our ability to raise capital would
most likely also be impaired due to our ineligibility to file
resale registration statements under the Securities Act.
If our common stock is delisted, it may become subject to the SECs penny stock rules and more difficult to sell. |
SEC rules require brokers to provide information to purchasers
of securities traded at less than $5.00 and not traded on a
national securities exchange or quoted on the Nasdaq Stock
Market. If our common stock becomes a penny stock
that is not exempt from these SEC rules, these disclosure
requirements may have the effect of reducing trading activity in
our common stock and making it more difficult for investors to
sell. The rules require a broker-dealer to deliver a
standardized risk disclosure document prepared by the SEC that
provides information about penny stocks and the nature and level
of risks in the penny market. The broker must also give bid and
offer quotations and broker and salesperson compensation
information to the customer orally or in writing before or with
the confirmation. The SEC rules also require a broker to make a
special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchasers
written agreement to the transaction before a transaction in a
penny stock.
Changes in laws and regulations that affect the governance of public companies has increased our operating expenses and will continue to do so. |
Recently enacted changes in the laws and regulations affecting
public companies, including the provisions of the Sarbanes-Oxley
Act of 2002 and the listing requirements for American Stock
Exchange have imposed new duties on us and on our executives,
directors, attorneys and independent accountants. In order to
comply with these new rules, we have hired and expect to hire
additional personnel and use additional outside legal,
accounting and advisory services, which have increased and are
likely to continue increasing our operating expenses. In
particular, we expect to incur additional administrative
expenses as we implement Section 404 of the Sarbanes-Oxley
Act, which requires management to extensively evaluate and
report on, and our independent registered public accounting
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firm to attest to, our internal controls. For example, we have
incurred significant expenses, and expect to incur additional
expenses, in connection with the evaluation, implementation,
documentation and testing of our existing and newly implemented
control systems. Management time associated with these
compliance efforts necessarily reduces time available for other
operating activities, which could adversely affect operating
results. If we are unable to achieve full and timely compliance
with these regulatory requirements, we could be required to
incur additional costs, expend additional money and management
time on additional remedial efforts which could adversely affect
our results of operations.
Failure to implement effective control systems, or failure to complete our assessment of the effectiveness of our internal control over financial reporting, may subject us to regulatory sanctions and could result in a loss of public confidence, which could harm our operating results. |
Pursuant to Section 404 of the Sarbanes-Oxley Act,
beginning with our fiscal year ended December 31, 2005, we
are required to include in our annual report our assessment of
the effectiveness of our internal control over financial
reporting. Furthermore, our independent registered public
accounting firm is required to issue an opinion on whether our
assessment of the effectiveness of our internal control over
financial reporting is fairly stated in all material respects
and separately report on whether it believes we maintained, in
all material respects, effective internal control over financial
reporting as of December 31, 2005.
If we fail to remedy any material weaknesses which are
uncovered, fail to timely complete our assessment, or if our
independent registered public accounting firm cannot timely
attest to our assessment, we could be subject to regulatory
sanctions and a loss of public confidence in our internal
control. In addition, any failure to implement required new or
improved controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to
fail to timely meet our regulatory reporting obligations.
We have engaged in and may continue to engage in further expansion through mergers and acquisitions, which could negatively affect our business and earnings. |
We have engaged in and may continue to engage in expansion
through mergers and acquisitions. There are risks associated
with such expansion. These risks include, among others,
incorrectly assessing the asset quality of a prospective merger
partner, encountering greater than anticipated costs in
integrating acquired businesses, facing resistance from
customers or employees, and being unable to profitably deploy
assets acquired in the transaction. Additional country- and
region-specific risks are associated with transactions outside
the United States. To the extent we issue capital stock in
connection with additional transactions, these transactions and
related stock issuances may have a dilutive effect on earnings
per share and share ownership.
Our earnings, financial condition, and prospects after a merger
or acquisition depend in part on our ability to successfully
integrate the operations of the acquired company. We may be
unable to integrate operations successfully or to achieve
expected cost savings. Any cost savings which are realized may
be offset by losses in revenues or other charges to earnings.
Description Of Capital Stock
Our authorized capital stock consists of 1,000,000 shares
of Preferred Stock, $0.01 par value, and
200,000,000 shares of common stock, $0.001 par value.
Common Stock
Our common stock is quoted on the American Stock Exchange LLC
under the symbol ANX.
We have never paid cash dividends on any of our securities and
do not currently expect to pay any cash dividends on our
securities in the foreseeable future. There are no restrictions
that limit our
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ability to pay dividends on our common stock or that are likely
to do so in the future other than restrictions under the
Delaware General Corporation Law and other applicable law.
As of May 3, 2006, there were 71,649,833 shares of
common stock issued and outstanding which were held of record by
approximately 7,021 stockholders.
The holders of our common stock are entitled to one vote per
share held of record on all matters submitted to a vote of the
stockholders. Our certificate of incorporation does not provide
for cumulative voting in the election of directors. Subject to
preferences that may be applicable to any outstanding preferred
stock, the holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared from time to
time by our Board of Directors out of funds legally available
for that purpose. In the event of our liquidation, dissolution
or winding up, holders of our common stock are entitled to share
ratably in all assets remaining after payment of liabilities,
subject to prior distribution rights of preferred stock, if any,
then outstanding. Holders of our common stock have no preemptive
or other subscription or conversion rights. There are no
redemption or sinking fund provisions applicable to our common
stock.
In the event of our voluntary or involuntary liquidation,
dissolution or winding up, the owners of shares of common stock
will be entitled to share equally in any assets available for
distribution after the payment in full of all debts and
distributions and after the owners of any of our outstanding
preferred stock have received their liquidation preferences in
full.
American Stock Transfer & Trust Company is our stock
transfer agent and it maintains all our stockholder records. If
you have questions regarding ADVENTRX stock you own, stock
transfers, address or name changes, lost stock certificates, or
duplicate mailings, please contact American Stock
Transfer & Trust Transfer Company directly at the
address below. If your shares are held with a stockbroker,
please contact your broker.
American Stock Transfer & Trust Company | |
59 Maiden Lane, Plaza Level | |
New York, NY 10038 | |
(800) 937-5449 | |
www.amstock.com | |
email address - info@amstock.com |
Preferred Stock
Our Board of Directors is authorized, without action by the
stockholders, to issue preferred stock in one or more series and
to fix the rights, preferences, privileges and restrictions
thereof. These rights, preferences and privileges may include
dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms and the
number of shares constituting any series or the designation of
any series, all or any of which may be greater than the rights
of the common stock.
Use of Proceeds
We intend to add the net proceeds from the sale of the common
stock to our general funds to be used to fund research and
development and clinical trials and for general corporate
purposes, which may include investment in subsidiaries, working
capital, capital expenditures, repayment of short-term
borrowings, refinancing of existing long-term debt, acquisitions
and other business opportunities.
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Plan Of Distribution
We may sell the common stock through one or more of the
following ways:
| directly to purchasers; |
| to or through one or more underwriters or dealers; or |
| through agents. |
A prospectus supplement with respect to a particular issuance of
securities will set forth the terms of the offering of those
securities, including the following:
| name or names of any underwriters, dealers or agents; |
| the purchase price of the securities and the estimated amount we will receive; |
| underwriting discounts and commissions; and |
| any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers. |
If we use underwriters in the sale, the underwriters will
acquire the securities for their own account and they may resell
them from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Underwriting
syndicates represented by one or more managing underwriters or
one or more independent firms acting as underwriters may offer
the securities to the public. In connection with the sale of
securities, we may compensate the underwriters in the form of
underwriting discounts or commissions. The purchasers of the
securities for whom the underwriters may act as agent may also
pay them commissions. Underwriters may sell the securities to or
through dealers, and these dealers may receive compensation in
the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom
they may act as agents. Unless otherwise set forth in the
applicable prospectus supplement, the obligations of any
underwriters to purchase the securities will be subject to
conditions precedent, and the underwriters will be obligated to
purchase all of the securities if any are purchased.
If we use dealers in the sale of the securities, we will sell
the securities to the dealers as principals. The dealers may
then resell the securities to the public at varying prices to be
determined by the dealer at the time of resale. The applicable
prospectus supplement will name any dealer, who may be deemed to
be an underwriter, as that term is defined in the Securities
Act, involved in the offer or sale of securities, and set forth
any commissions or discounts we grant to the dealer.
If we use agents in the sales of the securities, the agents may
solicit offers to purchase the securities from time to time. Any
of these agents, who may be deemed to be an underwriter, as that
term is defined in the Securities Act, involved in the offer or
sale of the securities will be named, and any commissions
payable by us to such agent set forth, in the applicable
prospectus supplement. Any agent will be acting on a reasonable
efforts basis for the period of its appointment or, if indicated
in the applicable prospectus supplement, on a firm commitment
basis.
We may also sell securities directly to institutional investors
or others who may be deemed to be underwriters within the
meaning of the Securities Act with respect to resales. The terms
of those sales would be described in the prospectus supplement.
If the prospectus supplement so indicates, we will authorize
agents, underwriters or dealers to solicit offers to purchase
securities from us at the public offering price set forth in the
prospectus supplement pursuant to stock purchase or delayed
delivery contracts providing for payment and delivery on a
specified date in the future. The contracts will be subject only
to those conditions set forth in the prospectus supplement, and
the prospectus supplement will set forth the commission payable
for solicitation of the contracts.
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Agents, dealers and underwriters may be entitled under
agreements with us to indemnification against some civil
liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments which the agents,
dealers or underwriters may be required to make. Agents, dealers
and underwriters or their affiliates may engage in transactions
with, or perform services for, us or our subsidiaries for
customary compensation.
If indicated in the applicable prospectus supplement, one or
more firms may offer and sell securities in connection with a
remarketing upon their purchase, in accordance with their terms,
acting as principals for their own accounts or as our agents.
Any remarketing firm will be identified and the terms of its
agreement, if any, with us will be described in the applicable
prospectus supplement. We may be obligated to indemnify the
remarketing firm against some liabilities, including liabilities
under the Securities Act, and the remarketing firm may engage in
transactions with or perform services for us or our subsidiaries
for customary compensation.
Any underwriter may engage in over-allotment, stabilizing and
syndicate short covering transactions and penalty bids in
accordance with Regulation M under the Securities Exchange
Act of 1934, as amended. Over-allotment involves sales in excess
of the offering size, which creates a short position.
Stabilizing transactions involve bids to purchase the underlying
security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate short covering transactions involve
purchases of securities in the open market after the
distribution has been completed in order to cover syndicate
short positions. Penalty bids permit the underwriters to reclaim
selling concessions from dealers when the securities originally
sold by the dealers are purchased in covering transactions to
cover syndicate short positions. These transactions may cause
the price of the securities sold in an offering to be higher
than it would otherwise be. These transactions, if commenced,
may be discontinued by the underwriters at any time.
The prospectus supplement relating to each offering will set
forth the anticipated date of delivery of the securities.
Legal Matters
The validity of the issuance of shares of common stock we are
offering under this prospectus will be passed upon for us by
Bingham McCutchen LLP, San Francisco, California.
Experts
Our consolidated balance sheets as of December 31, 2005 and
2004, and the related consolidated statements of operations,
stockholders equity (deficit) and cash flows for each
of the years in the three-year period ended December 31,
2005, and for the period from June 12, 1996 (date of
inception) through December 31, 2005, and managements
assessment of the effectiveness of internal control over
financial reporting and the effectiveness of our internal
control over financial reporting as of December 31, 2005,
have been incorporated by reference in this prospectus and in
the registration statement in reliance on the reports of J.H.
Cohn LLP, independent registered public accounting firm, given
upon the authority of that firm as experts in accounting and
auditing. The report of J.H. Cohn LLP notes that the
consolidated financial statements for the period from
June 12, 1996 (date of inception) through December 31,
2001, were audited by other auditors. J.H. Cohn LLPs
opinion insofar as it relates to the period from June 12,
1996 to December 31, 2001, is based solely on the report of
such other auditors.
The financial statements of SD Pharmaceuticals, Inc. as of
December 31, 2005 and 2004 and for the year ended
December 31, 2005 and for the period from June 16,
2004 (date of inception) to December 31, 2004 have been
incorporated by reference in this prospectus and in the
registration statement in reliance on the report, which includes
an explanatory paragraph relating to the ability of SD
Pharmaceuticals, Inc. to continue as a going concern, of J.H.
Cohn LLP, independent registered public accounting firm, given
upon the authority of that firm as experts in accounting and
auditing.
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