AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 26, 2002JANUARY 13, 2003
REGISTRATION STATEMENT NO. ______________333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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LIGAND PHARMACEUTICALS INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
77-0160744
(I.R.S. Employer Identification Number)
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10275 Science Center Drive, San Diego, California 92121-1117
(858) 550-7500
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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David E. Robinson
President and Chief Executive Officer
LIGAND PHARMACEUTICALS INCORPORATED
10275 Science Center Drive, San Diego,
California 92121-1117 (858) 550-7500
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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Copies to:
Faye H. Russell, Esq.
BROBECK, PHLEGER & HARRISONCLIFFORD CHANCE US LLP
12390 El Camino Real381l Valley Centre Drive, 2nd Floor
San Diego, California 92130
(858) 720-2500
------------------------------------720-3500
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
==========================================================================================================
======================================= ==================== ============================ ============================
AMOUNT TO BE PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
(2)
- --------------------------------------- -------------------- ---------------------------- ----------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO BE AGGREGATE OFFERING AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED6% Convertible Subordinated Notes due
2007 (1) PRICE PER SHARE (2) PRICE(2) REGISTRATION FEE
- -------------------------- --------------- ---------------------- --------------------- -----------------$155,250,000 $155,250,000 $ 14,283
Common Stock, par value 4,252,500 $16.97 $72,164,925 $6,639.18
$.001stock, $0.001 per share ========================== =============== ====================== ===================== =================25,149,025(3) -- --(4)
(1) ThisThe 6% Convertible Subordinated Notes due 2007 were issued by the
registrant on November 26, 2002 and November 27, 2002 in an offering exempt
from registration under the Securities Act of 1933. Under a registration
rights agreement dated November 26, 2002 among the registrant and the
initial purchaser of the notes which resold the notes in offerings exempt
from registration under Rule 144A of the Securities Act of 1933, the
registrant is obligated to file this registration statement shall also cover any additionalto permit
registered resales by the selling security holders of the notes and the
shares of common stock which becomeunderlying the notes.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(i) of the Securities Act of 1933 based upon the offering price
of the notes when the registrant originally sold the notes on November 26,
2002 and November 27, 2002 in an offering that was exempt from registration
under the Securities Act of 1933.
(3) Represents the number of shares of common stock issuable upon conversion of
the 6% Convertible Subordinated Notes due 2007 registered hereby. The notes
are convertible into 161.9905 shares of our common stock, par value $0.001
per share, per $1,000 principal amount of notes, subject to adjustment in
connection withcertain circumstances. Pursuant to Rule 416 under the Securities Act of
1933, such number of shares registered
for sale herebyincluded an indeterminate number of shares of
common stock as may be issuable from time to time upon the conversion of
the notes as a result of anya stock split, stock dividend, stock split,
recapitalizationcapitalization or
other similar transaction effected withoutevent and the receipt
of consideration which results in an increase in the number of the
Registrant's outstandinganti-dilution provisions thereof.
(4) The shares of common stock.
(2) Estimated solelystock issuable upon conversion of the notes will be
issued for the purpose of determining theno additional consideration, and therefore no registration fee
and
computedis required pursuant to Rule 457(c) based on the average457(i) of the high and low
sales prices per shareSecurities Act of the common stock on April 25, 2002 as reported on
The Nasdaq Stock Market.1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SEC, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. The preliminary prospectus is
not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED APRIL 26, 2002
PRELIMINARYJANUARY 13, 2003
PROSPECTUS
LIGAND PHARMACEUTICALS INCORPORATED
4,252,500$155,250,000 6% CONVERTIBLE SUBORDINATED NOTES DUE 2007 AND 25,149,025 SHARES
OF COMMON STOCK ThisISSUABLE UPON CONVERSION OF THE NOTES
The notes and the common stock issuable upon conversion of the notes may be
offered and sold from time to time pursuant to this prospectus relates toby the publicholders of
those securities. The selling security holders will receive all of the net
proceeds from the sale of the securities and will pay any applicable discounts,
commission or concessions. The selling security holders and any underwriters,
broker-dealers or agents that participate in the sale of the securities may be
"underwriters" within the meaning of the Securities Act, and any discounts,
commissions, concessions or profit they earn on any resale of the securities may
be underwriting discounts or commissions under the Securities Act.
In November 2002 we issued and sold $155,250,000 of 6% convertible subordinated
notes due 2007 in a private placement in reliance on an exemption from
registration under the Securities Act. The initial purchaser of the notes in
that offering which is not being underwritten,resold the notes in offerings in reliance on an exemption from
registration under Rule 144A of 4,252,500the Securities Act. The notes are convertible
into 161.9905 shares of our common stock, which is held by somepar value $0.001 per share, per $1,000
principal amount of notes and subject to adjustment in certain circumstances.
This results in an initial conversion price of $6.17 per share.
We will pay cash interest on the notes semi-annually on May 16 and November 16
of each year, with the first payment to be made on May 16, 2003 at the rate of
6% per annum. The notes will mature on November 16, 2007.
We have purchased and pledged to a trustee under an indenture, as security for
the notes and for the exclusive ratable benefit of the holders of the notes,
approximately $18 million of US government securities. These US government
securities are sufficient, upon receipt of the scheduled principal and interest
payments of such securities, to provide for the payment in full of the first
four scheduled interest payments on the notes when due. Except to the extent
described above, the notes will be unsecured. The notes are junior to all of our
current
stockholders. These stockholders acquiredexisting and future senior indebtedness and structurally subordinated to all
existing and future liabilities of our subsidiaries, including trade payables,
lease commitments and monies borrowed. As of September 30, 2002, we and our
subsidiaries had approximately $8.6 million of consolidated indebtedness
effectively ranking senior to the shares directly fromnotes, of which $2.5 million has subsequently
been retired. The indenture under which the notes were issued does not restrict
our or our subsidiaries' ability to incur additional senior or other
indebtedness.
On or after November 22, 2005, we may at our option redeem the convertible
notes, in whole or in part, at the prices stated in this prospectus, plus any
accrued and unpaid interest to the redemption date. Holders of the notes may
require us to repurchase all or a portion of their convertible notes upon a
change in a
private placement completed on April 19, 2002.control, as defined in the indenture, at 100% of their principal
amount, plus any accrued and unpaid interest to the repurchase date.
Our common stock is traded on The Nasdaq StockNational Market under the symbol
"LGND." On April 25, 2002,January 10, 2003, the average of the high and low sales prices for
our common stock was $16.97$5.39. The notes trade on the Private Offerings, Resales
and Trading Through Linkages or "PORTAL" Market of the National Association of
Securities Dealers, Inc. However, notes sold pursuant to this prospectus will no
longer be eligible for trading on the PORTAL market. We do not intend to list
the notes on any securities exchange or automated quotation system.
You should read this prospectus and any prospectus supplement carefully before
you invest.
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INVESTING IN THE NOTES AND THE COMMON STOCK OFFERED INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" COMMENCING ON PAGE [3]7 FOR A DISCUSSION OF SOME IMPORTANT RISKS YOU
SHOULD CONSIDER BEFORE BUYING ANY OF OUR COMMON STOCK.SECURITIES.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this prospectus is April 26, 2002January 13, 2003
TABLE OF CONTENTS
PAGE
LIGAND PHARMACEUTICALS INCORPORATED.................................... 1PROSPECTUS SUMMARY............................................................1
RISK FACTORS........................................................... 2FACTORS..................................................................8
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS................... 9STATEMENTS.........................17
WHERE YOU CAN FIND MORE INFORMATION.................................... 9INFORMATION..........................................17
INFORMATION INCORPORATED BY REFERENCE.................................. 10REFERENCE........................................18
USE OF PROCEEDS........................................................ 11PROCEEDS..............................................................19
SELLING SECURITY HOLDERS.....................................................19
PLAN OF DISTRIBUTION................................................... 11
SELLING STOCKHOLDERS................................................... 13DISTRIBUTION.........................................................21
DESCRIPTION OF NOTES.........................................................23
DESCRIPTION OF CAPITAL STOCK.................................................36
DESCRIPTION OF PREFERRED STOCK......................................36
DESCRIPTION OF COMMON STOCK.........................................37
DIVIDEND POLICY..............................................................37
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS......................37
LEGAL MATTERS.......................................................... 15
EXPERTS................................................................ 15MATTERS................................................................44
EXPERTS......................................................................44
PART II INFORMATION NOT REQUIRED IN PROSPECTUS................................1
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION................1
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS..................1
ITEM 16. EXHIBITS...................................................2
(A)EXHIBITS..........................................................2
ITEM 17. UNDERTAKINGS...............................................3
i
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY HIGHLIGHTING SELECTED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT
TO YOU. THIS PROSPECTUS INCLUDES INFORMATION ABOUT THE SECURITIES WE ARE
OFFERING, AS WELL AS INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL
DATA. WE ENCOURAGE YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY, INCLUDING THE
DOCUMENTS INCORPORATED BY REFERENCE.
OUR COMPANY
We are a biopharmaceutical company involved in the discovery, development and
commercialization of new drugs that address critical unmet medical needs in the
areas of cancer, pain, men's and women's health or hormone related health
issues, skin diseases, osteoporosis and metabolic, cardiovascular and
inflammatory diseases. Our marketed products and products in development are
designed to be safer, more effective, more convenient (taken orally or topically
administered) and more cost efficient than existing therapies.
We currently market five products and are developing, either exclusively or with
our collaboration partners, 23 selected additional products in development for
multiple therapeutic indications, as summarized in the table below. Our five
marketed products are Avinza(TM), ONTAK(R), Targretin(R) capsules, Targretin(R)
gel and Panretin(R) gel. Our efforts are directed toward building a profitable
biopharmaceutical company that generates income from biopharmaceutical products
that we develop and market, and from research, milestone and royalty revenues
from our collaborations with large pharmaceutical partners.
PRODUCT SUMMARY BY THERAPEUTIC AREA (LIGAND AND COLLABORATIVE PARTNERS)
MARKETED PRODUCTS CLINICAL PROGRAMS PRE-CLINICAL PROGRAMS
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(5 PRODUCTS) (4 PHASE III / 5 PHASE II / 6 PHASE I PRODUCTS IN (8 PRODUCTS IN DEVELOPMENT)
DEVELOPMENT)
Cancer Cancer Aging and frailty
Moderate/Severe Pain Hormone replacement therapy Autoimmune diseases
Osteoporosis Dermatology
Dermatology Diabetes
Diabetes Hormone replacement therapy
Inflammation Inflammatory diseases
Thrombocytopenia Sexual dysfunction
Dyslipidemia
OUR MARKETED PRODUCTS
PRODUCT US APPROVED INDICATION EUROPEAN STATUS
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Avinza....................... Once-daily treatment of chronic Not applicable
moderate-to-severe pain
ONTAK........................ Cutaneous T-cell lymphoma MAA submitted
Targretin capsules........... Cutaneous T-cell lymphoma MA issued
Targretin gel................ Cutaneous T-cell lymphoma MAA withdrawn
Panretin gel................. Kaposi's sarcoma MA issued
AVINZA. Avinza is marketed for the once-daily treatment of chronic
moderate-to-severe pain to patients who require continuous, around-the-clock
opioid therapy. We launched US sales and marketing of Avinza with distribution
in June 2002 and national promotion in July 2002 following receipt of FDA
approval in March 2002. We licensed exclusive rights to Avinza in the United
States and Canada from Elan in 1998. Avinza is an oral once-daily morphine
product and has a more rapid onset and more stable pharmocokinetic profile with
less peak-to-trough fluctuation than other competing sustained release products.
The sustained-release opioid market was estimated at $2.3 billion in the United
States in 2001.
ONTAK. ONTAK is marketed for the treatment of patients with persistent or
recurrent cutaneous T-cell lymphoma, or CTCL. ONTAK was approved by the FDA and
launched in the United States in February 1999 as our first product for the
treatment of patients with CTCL. ONTAK was the first treatment to be approved
for CTCL in nearly 10 years. ONTAK is currently in three Phase II clinical
trials for the treatment of patients with B-cell Non-Hodgkin's lymphoma.
Clinical trials using ONTAK for the treatment of patients with psoriasis,
rheumatoid arthritis and chronic lymphocytic leukemia, or CLL, have also been
conducted, and further trials are being considered. There are
physician-sponsored Phase II trials ongoing in CLL, peripheral T-cell lymphoma
and graft versus host disease. We believe that these indications provide
significantly larger market opportunities than CTCL. A European MAA for CTCL was
filed in December 2001, and a decision from the EMEA is expected in the first
half of 2003. In Europe, ONTAK will be marketed as ONZAR, if approved.
TARGRETIN CAPSULES. Targretin capsules are marketed for the treatment of
patients with CTCL. We launched US sales and marketing of Targretin capsules in
January 2000 following receipt of FDA approval in December 1999. Targretin
capsules offer the convenience of a daily oral dose administered by the patient
at home. We are developing Targretin capsules for a variety of larger market
opportunities, including non-small cell lung cancer and moderate-to-severe
plaque psoriasis. In March 2001, the European Commission granted marketing
authorization for Targretin capsules in Europe for the treatment of patients
with CTCL, and our network of distributors began marketing the drug in Europe in
the fourth quarter of 2001.
TARGRETIN GEL. Targretin gel is marketed for the treatment of patients with
CTCL. We launched US sales and marketing of Targretin gel in September 2000
following receipt of FDA approval in June 2000. Targretin gel offers patients
with refractory, early-stage CTCL a novel, non-invasive, self-administered
treatment topically applied only to the affected areas of the skin. Preliminary
data presented at the American Academy of Dermatology meeting in March 2001
showed that Targretin gel produced an overall response rate of 75% in patients
with untreated, early-stage CTCL. Targretin gel is currently in clinical
development for hand dermatitis, and we released interim Phase I/II data from a
55-patient trial in September 2002.
PANRETIN GEL. Panretin gel is marketed for the treatment of patients with
AIDS-related Kaposi's sarcoma, or KS. Panretin gel was approved by the FDA and
launched in February 1999 as the first FDA-approved patient-applied topical
treatment for AIDS-related Kaposi's sarcoma. Panretin gel represents a
non-invasive option to the traditional management of this disease. Most approved
therapies require the time and expense of periodic visits to a healthcare
facility, where treatment is administered by a doctor or nurse. AIDS-related KS
adversely affects the quality of life of thousands of people in the United
States and Europe. Panretin gel was approved in Europe for the treatment of
patients with KS in October 2000, and was launched through our distributor
network in the fourth quarter of 2001 in Europe.
2
SALES AND MARKETING
As of December 2002, our marketing and selling organization consisted of
approximately 120 people. Since 1998, we had assembled a 35-person sales force
for the United States focused on specialty cancer sales and selling ONTAK,
Targretin capsules, Avinza, Targretin gel and Panretin gel. We have also formed
a separate sales force of approximately 50 representatives to market only Avinza
by targeting pain specialists and general pain centers not currently served by
our specialty cancer representatives. Since a relatively small number of
physicians are responsible for writing a majority of prescriptions in our target
markets, we believe that the size of our sales force is appropriate to reach our
target physicians.
COLLABORATIVE RESEARCH AND DEVELOPMENT PROGRAMS
We are currently involved in the research phase of research and development
collaborations with Eli Lilly and TAP Pharmaceuticals. Collaborations in the
development phase are being pursued by Abbott Laboratories, Allergan,
GlaxoSmithKline, Organon (AKZO-Nobel), Pfizer and Wyeth (formerly American Home
Products). Currently, our corporate partners have ten Ligand products in human
development, four products moving toward regulatory filings for human clinical
trials and numerous compounds in research and pre-clinical stages. These
products are being studied for the treatment of health problems in large markets
such as osteoporosis, diabetes, contraception and cardiovascular disease. Three
of these partner products are being tested in three separate pivotal Phase III
clinical trial programs: lasofoxifene, which is being developed by Pfizer for
osteoporosis; and bazedoxifene (formerly TSE-424), which is being developed by
Wyeth both as monotherapy for osteoporosis and in combination with Wyeth's
Premarin as hormone replacement therapy, or HRT.
PROPRIETARY TECHNOLOGY PLATFORM
Internal and collaborative research and development programs are built around
our proprietary science technology, which is based on our leadership position in
gene transcription technology, a technology for regulating how genes control
cellular activity. Our proprietary technologies involve two natural mechanisms
that regulate gene activity: hormone-activated intracellular receptors, or IRs,
a type of sensor or switch inside cells that turns genes on and off and alters
the production of proteins in response to hormones, and Signal Transducers and
Activators of Transcription, or STATs, another type of protein production
switch. Targretin capsules, Targretin gel, Panretin gel and all but one of our
corporate partner products currently on human development track were discovered
using our IR technology.
PRODUCT PIPELINE SUMMARY
We are developing several proprietary products for which we have worldwide
rights for a variety of cancers, skin diseases and other indications, as
summarized in the table below. Many of the indications being pursued may present
larger market opportunities for our currently marketed products. Our clinical
development programs are primarily based on products discovered through our IR
technology, with the exception of ONTAK, which was developed using Seragen's
fusion protein technology, and Avinza, which was developed by Elan. Five of the
products in our proprietary product development programs are retinoids,
discovered and developed using our proprietary IR technology. Our research is
based on both our IR and STAT technologies. In addition to our proprietary
product pipeline, our collaborative partners have multiple products in human
development, as well as numerous compounds in research and pre-clinical stages.
3
PRODUCT PIPELINE SUMMARY (CONTINUED)
DEVELOPMENT
PRODUCT CLINICAL INDICATION STATUS COMMERCIALIZATION RIGHTS
- ---------------------------------------------------------------------------------------------------------------------
OUR MARKETED PRODUCTS AND DEVELOPMENT PROGRAMS
Avinza.................... Chronic pain (moderate-to-severe) Marketed United States and Canada
ONTAK..................... Cutaneous T-cell lymphoma Marketed Worldwide
Peripheral T-cell lymphoma Phase II
Chronic lymphocytic leukemia Phase II
B-cell Non-Hodgkin's lymphoma Phase II
Targretin capsules........ Cutaneous T-cell lymphoma Marketed Worldwide
Non-small cell lung cancer Phase III
(combination and monotherapy)
Psoriasis (moderate to severe) Phase II
Targretin gel............. Cutaneous T-cell lymphoma Marketed Worldwide
Hand dermatitis Phase II
Psoriasis Phase II
Panretin gel.............. Kaposi's sarcoma Marketed Worldwide
Panretin capsules......... Kaposi's sarcoma, bronchial metaplasia Phase II Worldwide
LGD 1550.................. Advanced cancers Phase II Worldwide
Acne, psoriasis Pre-clinical
LGD 1331.................. Acne, prostate cancer, androgenetic alopecia, Pre-clinical Worldwide
hirsutism
Glucocorticoid agonist....
Inflammation, cancer Pre-clinical Worldwide
Mineralocorticoid
receptor modulators....
Congestive heart failure, hypertension Research Worldwide
OUR COLLABORATIVE RESEARCH AND DEVELOPMENT PROGRAMS
Lasofoxifene.............. Osteoporosis and breast cancer prevention Phase III Pfizer
Bazedoxifene (TSE424)..... Osteoporosis Phase III Wyeth
Bazedoxifene + Premarin... Hormone replacement therapy Phase III Wyeth
ERA 923................... Breast cancer Phase II Wyeth
NSP 989................... Contraception, hormone replacement therapy Phase I Wyeth
GW 516.................... Dyslipidemia Phase I GlaxoSmithKline
LY 929.................... Type II diabetes, dyslipidemia Phase I Lilly
LY 818.................... Type II diabetes Phase I Lilly
SB-497115................. Thrombocytopenia Phase I GlaxoSmithKline
LY 674.................... Dyslipidemia Phase I Lilly
LGD 2226/ back-ups........ Sexual dysfunction--hypogonadism IND Track TAP
NSP 808 Contraception, hormone replacement therapy IND Track Wyeth
LY YYY Type II diabetes, dyslipidemia IND Track Lilly
LY WWW Dyslipidemia IND Track Lilly
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4
Our principal executive offices are located at 10275 Science Center Drive, San
Diego, California 92121, and our telephone number is (858) 550-7500. Our website
is located at www.ligand.com. The information on our website is not a part of
this prospectus.
Our trademarks, trade names and service marks referenced in this document
include Ligand(R), Avinza(TM)Avinza(R), ONTAK(R), Panretin(R) and Targretin(R). Each other
trademark, trade name or service mark appearing in this document belongs to its
holder.
Reference to Ligand Pharmaceuticals Incorporated, "Ligand","Ligand," the "Company","Company," "we"
or "our" include Ligand's wholly owned subsidiaries, Glycomed Incorporated,
Ligand Pharmaceuticals (Canada) Incorporated, Ligand Pharmaceuticals
International, Inc., and Seragen, Inc.
i
LIGAND PHARMACEUTICALS INCORPORATED
Our goal isRECENT DEVELOPMENTS
EXPANSION OF RELATIONSHIP WITH ROYALTY PHARMA AG
On January 6, 2003, we announced that we had expanded our existing
royalty-sharing arrangement with Royalty Pharma AG relating to buildthree selective
estrogen receptor modulator products, or SERMs, and had entered into a profitable pharmaceutical companynew
royalty-sharing agreement relating to Targretin capsules.
Royalty Pharma exercised an expanded, existing option in December 2002 and
agreed to pay Ligand $6.775 million for 0.1875% of potential future sales of the
three SERM products which are now in Phase III development and for 1% of
worldwide sales of Targretin capsules. In addition, we revised our existing
agreement to provide Royalty Pharma with an additional option with a price of
$12.5 million that discovers,
develops and markets new drugs that address critical unmet medical needsmay be exercised in the areasfourth quarter of cancer, men's and women's health, skin diseases, osteoporosis, and
metabolic, cardiovascular and inflammatory diseases. We strive2003.
Under the new agreement relating to develop drugs
that are more effective and/or safer than existing therapies, that are more
convenient (taken orally or topically administered) and that are cost effective.
We planTargretin capsules, Royalty Pharma will
receive 1% of worldwide sales of Targretin capsules from January 2003 through
2016. The agreement does not apply to build a profitable pharmaceutical company by generating income from
the specialty pharmaceutical products we develop and market, and from research,
milestone and royalty revenues resulting from our collaborations with large
pharmaceutical partners, which develop and market products in large markets that
are beyond our strategic focus or resources.
We currently market four oncology products in the United States:
Panretin(R) gel, ONTAK(R) and Targretin(R)sales of Targretin capsules each of which were approved
byoutside the
United States Foodfor cutaneous T-cell lymphoma, or CTCL, until the product is
approved for an indication other than CTCL.
MILESTONE PAYMENT AS GLAXOSMITHKLINE BEGINS HUMAN TRIALS FOR SB-497115
On January 6, 2003, we announced that we had earned a $2.0 million milestone
payment from GlaxoSmithKline, which has begun human trials with SB-497115, an
oral, small molecule drug that mimics the activity of thrombopoietin, a protein
factor that promotes growth and Drug Administration, or FDA,production of blood platelets.
The research phase of our collaboration with GlaxoSmithKline ended in 1999; and
Targretin(R) gel, which was approved by the FDA in 2000. In Europe, the European
Commission, or EC, granted a Marketing Authorization (MA) for Panretin gel in
October 2000 and an MA for Targretin capsules in March 2001.
We submitted
Marketing Authorization Applications (MAAs) to the European AgencyGlaxoSmithKline is responsible for the Evaluationdevelopment and registration of Medicinal Products (EMEA) for Targretin gel in March 2001any
products resulting from the collaboration, and for
ONZAR(TM) (the brand nameis obligated to pay us milestone
payments as products move through the development process. GlaxoSmithKline has
exclusive worldwide marketing rights to products resulting from the research,
and will pay us royalties on sales of ONTAK(R) in Europe) inany products that make it to market.
COMPLETION OF RESTRUCTURING OF AVINZA LICENSE AND SUPPLY AGREEMENT
On December 2001. We also
market Avinza(TM), formerly Morphelan(TM), a product for9, 2002, we announced the once-daily
treatmentcompletion of moderate-to-severe pain in patients who require continuous,
around-the-clock opioid therapy for an extended periodthe restructuring of time, which we
licensed fromour
AVINZA license and supply agreement with Elan Corporation, plc, thereby
improving our gross margin on AVINZA and which was approvedfacilitating a potential co-promotion
agreement with a future partner.
Under the terms of the restructuring, we paid Elan $100 million in return for a
reduction in Elan's royalty rate on sales of AVINZA by the FDA in March
2002. We also continue efforts to acquire or in-license products, such as ONTAK
(acquired in the 1998 acquisition of Seragen), which have near-term prospects of
FDA approval and which can be marketed by our specialty sales forces. We are
developing additional products through our internal development programs and
currently have various products in clinical development, including marketed
products that we are testing for larger market indications such as non-small
cell lung cancer (NSCLC), B-cell non-Hodgkin's Lymphoma (NHL), psoriasis and
rheumatoid arthritis.
We have research and development collaborations with numerous global
pharmaceutical companies, including Abbott Laboratories, Allergan, Bristol-Myers
Squibb, Eli Lilly & Co., GlaxoSmithKline, Organon (AKZO-Nobel), Pfizer,
Takeda-Abbott Pharmaceuticals (TAP) and Wyeth (formerly American Home Products).
At the end of 2001, our corporate partners had six Ligand products in human
development, six products on an IND track, and numerous compounds in research
and pre-clinical stages. These corporate partner products are being studied for
the treatment of large market indications such as osteoporosis, diabetes,
contraception and cardiovascular disease. Three of these partner products are in
pivotal Phase III clinical trials: lasofoxifene, which is being developed by
Pfizer for osteoporosis; and bazedoxifene (formerly TSE-424), which is being
developed by Wyeth as monotherapy for osteoporosis and in combination with
Wyeth's PREMARIN(R) as hormone replacement therapy (HRT). In March 2002 Royalty
Pharma AG purchased from us, rights to sublicense
and obtain a co-promotion partner in the Unites States and Canada, and rights to
qualify and purchase AVINZA from a second manufacturing source.
5
THE OFFERING
Issuer.............................. Ligand Pharmaceuticals Incorporated.
Notes............................... $155.25 million aggregate principal
amount of 6% convertible subordinated
notes due November 16, 2007.
Interest............................ We will pay 6% interest per annum
on the principal amount payable on
the notes semi-annually on May 16
and November 16 of each year,
starting on May 16, 2003.
Maturity............................ The notes will mature on November 16, 2007.
Conversion.......................... The notes are convertible into 161.9905
shares of our common stock, par value
$0.001 per share, per $1,000 principal
amount of futurenotes, subject to adjustment in
certain circumstances. This rate
results in an initial conversion
price of $6.17 per share. See
"Description of notes--Conversion Rights."
Security............................ We have purchased and pledged to
the trustee under the indenture, as
security for the notes and for the
exclusive ratable benefit of the
holders of the notes, approximately
$18 million of US government
securities. These US government
securities are sufficient, upon
receipt of the scheduled principal
and interest payments from these
three partner products.
Internalof such
securities, to provide for the
payment in full of the first four
scheduled interest payments on the
notes when due. The notes will not
otherwise be secured. See
"Description of notes--Security."
Sinking fund........................ None.
Optional redemption................. On or after November 22, 2005, we
may, at our option, redeem the
notes, in whole or in part, at the
redemption prices described in
this prospectus, plus any accrued
and collaborative research and development programsunpaid interest to the redemption
date. See "Description of notes--
Redemption of Notes at Our Option."
Ranking............................. Except to the extent described
under "Description of notes--Security,"
the notes will be unsecured. The notes are
built
around our proprietary science technology, which is based on our leadership
position in gene transcription technology. Our proprietary technologies involve
two natural mechanisms that regulate gene activity: non-peptide
hormone-activated IRs, and cytokine and growth factor activated STATs. Panretin
gel, Targretin capsules, Targretin gel andjunior to all of our corporate partner products
currently on human development track are IR modulators, discovered usingexisting and future
senior indebtedness and structurally
subordinated to all existing and future
liabilities of our IR
technology.
In late 1998,subsidiaries, including
trade payables, lease commitments and
monies borrowed. As of September 30, 2002,
we assembledand our subsidiaries had approximately
$8.6 million of consolidated
indebtedness effectively ranking
senior to the notes, of which $2.5
million has subsequently been retired.
The indenture under which the notes were
issued does not restrict our or our
subsidiaries'ability to incur additional
senior or other indebtedness. See
"Description of notes--Subordination
of Notes."
Change in control................... If we experience a specialty oncology and HIV-center sales and
marketing team to marketchange in
control, as defined in the
U.S. products developed, acquiredindenture, each holder may require
us to purchase all or licenseda portion
of the holder's notes at 100% of
the principal amount, plus any
accrued and unpaid interest to the
repurchase date. See "Description
of notes--Change in Control
Permits Purchase of Notes by us. In late 1999, we expanded our U.S. sales force from approximately 20 to
approximately 40 sales representatives to supportUs at
the launchOption of Targretin
capsules and Targretin gel and increase market penetrationthe Holder."
Events of ONTAK and Panretin
gel. In 2001, we expanded our sales force to approximately 50 sales
representatives, including approximately 20 full-time contract sales
representatives who focusdefault................... If an event of default on the
dermatology market. In anticipationnotes has occurred and is
continuing, the principal amount
of the launchnotes plus any accrued and
unpaid interest may be declared
immediately due and payable. These
amounts automatically become due
and payable upon certain events
of Avinza(TM)default. See "Description of
notes--Events of Default."
Use of proceeds..................... We will not receive any proceeds from the
sale of the notes or common stock offered
in 2002, we also announcedthis prospectus. See "Selling
Security Holders."
Listing and trading................. The notes trade on The PORTAL
Market. Notes sold pursuant to
this prospectus will no longer be
eligible for trading on the PORTAL
market. Our common stock is listed
on the The National Market under
the symbol"LGND."
Risk factors........................ In analyzing an investment in the
notes offered by this prospectus,
prospective investors should
carefully consider, along with
other matters referred to in this
prospectus, the information set
forth under "Risk factors."
6
For a more complete description of the terms of the notes, see "Description of
notes." For a more complete description of our common stock, see "Description of
capital stock," including the documents incorporated by reference in this
prospectus that are referred to in that section.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
the years ended December 31, 1997, 1998, 1999, 2000, 2001 a strategic decisionand the nine months
ended September 30, 2002. As earnings are inadequate to form another sales force of approximately 20 representatives to target general
pain centers not served by our existing representatives. Internationally,
through marketing and distribution agreements with Elan, Ferrer International
and Alfa Wassermann,cover the combined fixed
charges, we have established marketingprovided the deficiency amounts. For purposes of this
computation, "Earnings" consist of loss before income taxes, excluding the
cumulative effect of a change in accounting principle, plus fixed charges, and
distribution capabilities
in Europe,"fixed charges" consist of interest and the amortization of debt issuance costs
and debt discount incurred and the portion of rental expense deemed by us to be
representative of the interest factor of rental payments under leases. The
extent to which earnings were insufficient to cover fixed charges is as well as Central and South America.
1follows:
YEAR ENDED DECEMBER 31, NINE MONTHS
----------------------------------------------------- ENDED
1997 1998 1999 2000 2001 SEPTEMBER 30, 2002
-------- -------- ------- ------- ------- ------------------
(IN THOUSANDS)
Deficiency of earnings available to
cover fixed charges $100,150 $117,886 $74,719 $59,277 $42,995 $25,868
For the periods indicated above, we had no outstanding shares of preferred
stock with required dividend payments.
7
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS AND UNCERTAINTIES BEFORE PURCHASING SHARES OF OUR
COMMON STOCK.SECURITIES. EACH OF THESE RISKRISKS AND UNCERTAINTIES COULD ADVERSELY AFFECT OUR
BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION, AS WELL AS ADVERSELY AFFECTING THE VALUE OF AN
INVESTMENT IN OUR COMMON STOCKSECURITIES.
RISKS RELATED TO US AND OUR BUSINESS
OUR PRODUCT DEVELOPMENT AND COMMERCIALIZATION INVOLVES A NUMBER OF
UNCERTAINTIES, AND WE MAY NEVER GENERATE SUFFICIENT REVENUES FROM THE SALE OF
PRODUCTS TO BECOME PROFITABLE.
We were founded in 1987. We have incurred significant losses since our
inception. At December 31, 2001,September 30, 2002, our accumulated deficit was approximately $586$612
million. To date, we have received the majority of our revenues from our
collaborative arrangements and only began receiving revenues from the sale of
pharmaceutical products in 1999. To become profitable, we must successfully
develop, clinically test, market and sell our products. Even if we achieve
profitability, we cannot predict the level of that profitability or whether we
will be able to sustain profitability. We expect that our operating results will
fluctuate from period to period as a result of differences in when we incur
expenses and receive revenues from product sales, collaborative arrangements and
other sources. Some of these fluctuations may be significant.
Most of our products in development will require extensive additional
development, including preclinical testing and human studies, as well as
regulatory approvals, before we can market them. We cannot predict if or when
any of the products we are developing or those being co-developed with our
partners will be approved for marketing. There are many reasons that we or our
collaborative partners may fail in our efforts to develop our other potential
products, including the possibility that:
o>> preclinical testing or human studies may show that our potential products
are ineffective or cause harmful side effects,
oeffects;
>> the products may fail to receive necessary regulatory approvals from the
FDA or foreign authorities in a timely manner, or at all,
oall;
>> the products, if approved, may not be produced in commercial quantities or
at reasonable costs,
ocosts;
>> the products, once approved, may not achieve commercial acceptance,acceptance;
>> regulatory or ogovernmental authorities may apply restrictions to our
products, which could adversely affect their commercial success; or
>> the proprietary rights of other parties may prevent us or our partners from
marketing the products.
WE ARE BUILDING MARKETING AND SALES CAPABILITIES IN THE UNITED STATES AND EUROPE
WHICH IS AN EXPENSIVE AND TIME-CONSUMING PROCESS AND MAY INCREASE OUR OPERATING
LOSSES.
Developing the sales force to market and sell products is a difficult, expensive
and time-consuming process. We have developed a U.S.US sales force of about 5585
people, some of whom are contracted from a third party. In addition, we
expect to add approximately 20 sales professionals in the coming months to help
sell Avinza(TM), our recently approved sustained-release morphine product. We also rely on
third-party distributors to distribute our products. We expect to
incur additional near-term expense in adding approximately 20 sales people in
connection with the launch of Avinza(TM). The distributors are
responsible for providing many marketing support services, including customer
service, order entry, shipping and billing and customer reimbursement
assistance. In Europe, we will rely initially on other companies to distribute
and market our products. We have entered into agreements for the marketing and
distribution of our products in territories such as the United Kingdom, Germany,
France, Spain, Portugal, Greece, Italy and Central and South America and have
established a subsidiary, Ligand Pharmaceuticals International, Inc., with a
branch in London, England, to coordinate our European marketing and operations.
We may not be able to continue to expand our sales and marketing capabilities
sufficiently to successfully commercialize our products in the territories where
they receive marketing approval. To the extent we enter into co-
2
promotionco-promotion or other
licensing arrangements, any revenues we receive will depend on the marketing
efforts of others, which may or may not be successful.
8
OUR SMALL NUMBER OF PRODUCTS MEANS OUR RESULTS ARE VULNERABLE TO SETBACKS WITH
RESPECT TO ANY ONE PRODUCT.
We currently have only 4five products approved for marketing, one additional
product, Avinza(TM), for which the licensor, Elan, has received approval for marketing and a handful of
other products/indications that have made significant progress through
development and the regulatory approval process.development. Because these numbers are small, especially the number of marketed
products, any significant setback with respect to any one of them could
significantly impair our operating results and/or reduce the market priceprices for
shares of our stock.securities. Setbacks could include problems with shipping, manufacturing,
product safety, marketing, government licenses and approvals, intellectual
property rights and physician or patient acceptance of the product.
SALES OF OUR SPECIALTY PHARMACEUTICAL PRODUCTS MAY SIGNIFICANTLY FLUCTUATE EACH
PERIOD BASED ON THE NATURE OF OUR PRODUCTS, OUR PROMOTIONAL ACTIVITIES AND
WHOLESALER PURCHASING AND STOCKING PATTERNS.
Our products include small-volume specialty pharmaceutical products that address
the needs of cancer patients in relatively small niche markets with substantial
geographical fluctuations in demand. To ensure patient access to our drugs, we
maintain broad distribution capabilities with inventories held at approximately
125 locations throughout the United States. Furthermore, the purchasing and
stocking patterns of our wholesaler customers are influenced by a number of
factors that vary with each product, including but not limited to overall level
of demand, periodic promotions, required minimum shipping quantities and
wholesaler competitive initiatives. As a result, the level of product in the
distribution channel may average from two to six months' worth of projected
inventory usage. If any or all of our major distributors decide to substantially
reduce the inventory they carry in a given period, our sales for that period
could be substantially lower than historical levels.
OUR DRUG DEVELOPMENT PROGRAMS WILL REQUIRE SUBSTANTIAL ADDITIONAL FUTURE FUNDING
WHICH COULD HURT OUR OPERATIONAL AND FINANCIAL CONDITION.
Our drug development programs require substantial additional capital to
successfully complete them, arising from costs to:
>> conduct research, preclinical testing and human studies;
>> establish pilot scale and commercial scale manufacturing processes and
facilities; and
>> establish and develop quality control, regulatory, marketing, sales and
administrative capabilities to support these programs.
Our future operating and capital needs will depend on many factors, including:
>> the pace of scientific progress in our research and development programs
and the magnitude of these programs;
>> the scope and results of preclinical testing and human studies;
>> the time and costs involved in obtaining regulatory approvals;
>> the time and costs involved in preparing, filing, prosecuting, maintaining
and enforcing patent claims, competing technological and market
developments;
>> our ability to establish additional collaborations;
>> changes in our existing collaborations;
>> the cost of manufacturing scale-up; and
>> the effectiveness of our commercialization activities.
We currently estimate our research and development expenditures over the next 3
years to range between $200 million and $275 million. However, we base our
outlook regarding the need for funds on many uncertain variables. Such
uncertainties include regulatory approvals, the timing of events outside our
direct control such as product launches by partners and the success of such
product launches, negotiations with potential strategic partners and other
factors. Any of these uncertain events can significantly change our cash
requirements as they determine such one-time events as the receipt of major
milestones and other payments.
9
While we expect to fund our research and development activities from cash
generated from internal operations to the extent possible, if we are unable to
do so we may need to complete additional equity or debt financings or seek other
external means of financing. If additional funds are required to support our
operations and we are unable to obtain them on terms favorable to us, we may be
required to cease or reduce further development or commercialization of our
products, to sell some or all of our technology or assets or to merge with
another entity.
SOME OF OUR KEY TECHNOLOGIES HAVE NOT BEEN USED TO PRODUCE MARKETED PRODUCTS AND
MAY NOT BE CAPABLE OF PRODUCING SUCH PRODUCTS.
To date, we have dedicated most of our resources to the research and development
of potential drugs based upon our expertise in our IR and STAT technologies.
Even though there are marketed drugs that act through IRs, some aspects of our
IR technologies have not been used to produce marketed products. In addition, we
are not aware of any drugs that have been developed and successfully
commercialized that interact directly with STATs. Much remains to be learned
about the location and function of IRs and STATs. If we are unable to apply our
IR and STAT technologies to the development of our potential products, we will
not be successful in developing new products.
WE MAY REQUIRE ADDITIONAL MONEY TO RUN OUR DRUG DEVELOPMENT PROGRAMS WILL REQUIRE SUBSTANTIAL ADDITIONAL FUTURE FUNDINGBUSINESS AND MAY BE REQUIRED TO RAISE
THIS MONEY ON TERMS WHICH COULD HURTARE NOT FAVORABLE OR WHICH REDUCE OUR OPERATIONAL AND FINANCIAL CONDITION.STOCK PRICE.
We have incurred losses since our inception and may not generate positive cash
flow to fund our operations for one or more years. As a result, we may need to
complete additional equity or debt financings to fund our operations. Our
drug development programs require substantialinability to obtain additional capital to
successfully complete them, arising from costs to:
o conduct research, preclinical testing and human studies,
o establish pilot scale and commercial scale manufacturing processes and
facilities, and
o establish and develop quality control, regulatory, marketing, sales
and administrative capabilities to supportfinancing could adversely affect our business.
Financings may not be available at all or on favorable terms. In addition, these
programs.
Our future operating andfinancings, if completed, still may not meet our capital needs will depend on many factors,
including:
oand could result
in substantial dilution to our stockholders. For instance, in February and March
2002 we issued to Elan 6.3 million shares upon the paceconversion of scientific progresszero coupon
convertible senior notes held by Elan, and in our researchJanuary 2001 and development
programsApril 2002 we
issued 2 million shares and the magnitude of these programs,
o the scope and results of preclinical testing and human studies,
o the time and costs involved in obtaining regulatory approvals,
o the time and costs involved in preparing, filing, prosecuting,
maintaining and enforcing patent claims,
o competing technological and market developments,
o our ability to establish additional collaborations,
o changes in our existing collaborations,
o the cost of manufacturing scale-up, and
3
o the effectiveness4.3 million shares of our commercialization activities.
For example,common stock,
respectively, in private placements. These transactions have resulted in the
issuance of significant numbers of new shares. In addition, in November 2002 we
are required under the termsissued in a private placement $155,250,000 in aggregate principal amount of our
agreement with Elan, to
spend not less than $7 million through May 2003 to undertake additional clinical
activities related to the commercialization6% convertible subordinated notes due 2007, which are currently convertible into
25,149,025 shares of Avinza(TM), formerly
Morphelan(TM). In the event we do nOt spend this amount, any shortfall would
have to be paid to Elan.our common stock.
If additionaladequate funds are required to support our
operations and we are unable to obtain them on terms favorable to us,not available, we may be required to ceasedelay, reduce the
scope of or reduce further commercializationeliminate one or more of our products,drug development programs.
Alternatively, we may be forced to sellattempt to continue development by entering
into arrangements with collaborative partners or others that require us to
relinquish some or all of our technologyrights to technologies or assets or to merge with another entity.drug candidates that we
would not otherwise relinquish.
OUR PRODUCTS FACE SIGNIFICANT REGULATORY HURDLES PRIOR TO MARKETING WHICH COULD
DELAY OR PREVENT SALES. EVEN AFTER APPROVAL, GOVERNMENT REGULATION OF OUR
BUSINESS IS EXTENSIVE.
Before we obtain the approvals necessary to sell any of our potential products,
we must show through preclinical studies and human testing that each product is
safe and effective. We and our partners have a number of products moving toward
or currently in clinical trials, the most significant of which are our Phase III
trials for Targretin capsules in non-small cell lung cancer and three Phase III
trials by our partners involving bazedoxifene and lasofoxifene and Phase II
trials by our partner for ERA 923. Our failure to show any product's safety and
effectiveness would delay or prevent regulatory approval of the product and
could adversely affect our business. The clinical trials process is complex and
uncertain. The results of preclinical studies and initial clinical trials may
not necessarily predict the results from later large-scale clinical trials. In
addition, clinical trials may not demonstrate a product's safety and
effectiveness to the satisfaction of the regulatory authorities. A number of
companies have suffered significant setbacks in advanced clinical trials or in
seeking regulatory approvals, despite promising results in earlier trials. The
FDA may also require additional clinical trials after regulatory approvals are
received, which could be expensive and time-consuming, and failure to
successfully conduct those trials could jeopardize continued commercialization.
10
The rate at which we complete our clinical trials depends on many factors,
including our ability to obtain adequate supplies of the products to be tested
and patient enrollment. Patient enrollment is a function of many factors,
including the size of the patient population, the proximity of patients to
clinical sites and the eligibility criteria for the trial. For example, each of
our Phase III Targretin clinical trials will involve approximately 600 patients
and may require significant time and investment to complete enrollments. Delays
in patient enrollment may result in increased costs and longer development
times. In addition, our collaborative partners have rights to control product
development and clinical programs for products developed under the
collaborations. As a result, these collaborators may conduct these programs more
slowly or in a different manner than we had expected. Even if clinical trials
are completed, we or our collaborative partners still may not apply for FDA
approval in a timely manner or the FDA still may not grant approval.
WE MAY NOT BE ABLE TO PAY AMOUNTS DUE ON OUR OUTSTANDING INDEBTEDNESS WHEN DUE
WHICH WOULD CAUSE DEFAULTS UNDER THESE ARRANGEMENTS.
WeIn addition, the manufacturing and marketing of approved products is subject to
extensive government regulation, including by the FDA, DEA and state and other
territorial authorities. The FDA administers processes to assure that marketed
products are safe, effective, consistently of uniform, high quality and marketed
only for approved indications. For example, while our subsidiariesproducts are prescribed
legally by some physicians for unapproved uses, we may not have sufficient fundsmarket our products
for such uses. Failure to make required
payments due under existing debt. If we or our subsidiaries do not have adequate
funds, we will be forced to refinance the existing debt and may not be
successful in doing so. Our subsidiary, Glycomed, is obligated to make payments
under convertible subordinated debentures in the total principal amount of $50
million. The debentures incur interest semi-annually at a rate of 7 1/2% per
annum, are due in 2003 and convertible into our common stock at $26.52 per
share. In addition, at April 1, 2002, we had outstanding a $2.5 million
convertible note to GlaxoSmithKline due in 2002comply with interest at prime and
convertible into our common stock at $13.56 per share.
WE MAY REQUIRE ADDITIONAL MONEY TO RUN OUR BUSINESS AND MAY BE REQUIRED TO RAISE
THIS MONEY ON TERMS WHICH ARE NOT FAVORABLE OR WHICH REDUCE OUR STOCK PRICE.
We have incurred losses since our inception and do not expect to generate
positive cash flow to fund our operations for one or more years. As a result, we
may need to complete additional equity or debt financings to fund our
operations. Our inability to obtain additional financing could adversely affect
our business. Financings may not be available at all or on favorable terms. In
addition, these financings, if completed, still may not meet our capital needs
and couldapplicable regulatory requirements can
result in substantial dilutionsanctions up to our stockholders. For instance, in
Februarythe suspension of regulatory approval as well as civil
and March 2002 we issued to Elan 6.2 million shares upon the conversion
of zero coupon convertible senior notes held by Elan, and in January 2001 we
issued 2 million shares of our common stock in a private placement. These
transactions have resulted in the issuance of significant numbers of new shares.
If adequate funds are not available, we may be required to delay, reduce the
scope of or eliminate one or more of our drug development programs.
Alternatively, we may be forced to attempt to continue development by entering
into arrangements with collaborative partners or others that require us to
relinquish some or all of our rights to technologies or drug candidates that we
would not otherwise relinquish.
4
criminal sanctions.
WE FACE SUBSTANTIAL COMPETITION WHICH MAY LIMIT OUR REVENUES.
Some of the drugs that we are developing and marketing will compete with
existing treatments. In addition, several companies are developing new drugs
that target the same diseases that we are targeting and are taking IR-related
and STAT-related approaches to drug development. The principal products
competing with our products targeted at the cutaneous t-cell lymphoma market are
Supergen/Abbott's Nipent and interferon, which is marketed by a number of
companies, including Schering-Plough's Intron A. Products that will compete with
Avinza include Purdue Pharma L.P.'s OxyContin and MS Contin, Janssen
Pharmaceutica Products, L.P.'s Duragesic, Roxane Laboratories, Inc.'s Oramorph
SR and Purepac Phamaceutical Co.'s Kadian, each of which is currently marketed.
Many of our existing or potential competitors, particularly large drug
companies, have greater financial, technical and human resources than us and may
be better equipped to develop, manufacture and market products. Many of these
companies also have extensive experience in preclinical testing and human
clinical trials, obtaining FDA and other regulatory approvals and manufacturing
and marketing pharmaceutical products. In addition, academic institutions,
governmental agencies and other public and private research organizations are
developing products that may compete with the products we are developing. These
institutions are becoming more aware of the commercial value of their findings
and are seeking patent protection and licensing arrangements to collect payments
for the use of their technologies. These institutions also may market
competitive products on their own or through joint ventures and will compete
with us in recruiting highly qualified scientific personnel.
THIRD-PARTY REIMBURSEMENT AND HEALTH CARE REFORM POLICIES MAY REDUCE OUR FUTURE
SALES.
Sales of prescription drugs depend significantly on the availability of
reimbursement to the consumer from third party payers, such as government and
private insurance plans. These third party payers frequently require drug
companies to provide predetermined discounts from list prices, and they are
increasingly challenging the prices charged for medical products and services.
Our current and potential products may not be considered cost-effective, and
reimbursement to the consumer may not be available or sufficient to allow us to
sell our products on a competitive basis. For example, we have current and
recurring discussions with insurers regarding reimbursement rates for our drugs,
including Avinza which was recently approved for marketing. We may not be able
to negotiate favorable reimbursement rates for our products or may have to pay
significant discounts to obtain favorable rates. Only one of our products,
ONTAK, is currently eligible to be reimbursed by Medicare. Proposed changes by
Medicare to the hospital outpatient payment reimbursement system may adversely
affect reimbursement rates for ONTAK.
In addition, the efforts of governments and third-party payers to contain or
reduce the cost of health care will continue to affect the business and
financial condition of drug companies such as us. A number of legislative and
regulatory proposals to change the health care system have been discussed in
recent years.years, including price caps and controls for pharmaceuticals. These
proposals could reduce and/or cap the prices for our products or reduce
government
11
reimbursement rates for products such as ONTAK. In addition, an increasing
emphasis on managed care in the United States has and will continue to increase
pressure on drug pricing. We cannot predict whether legislative or regulatory
proposals will be adopted or what effect those proposals or managed care efforts
may have on our business. The announcement and/or adoption of such proposals or
efforts could adversely affect our profit margins and business.
WE RELY HEAVILY ON COLLABORATIVE RELATIONSHIPS AND TERMINATION OF ANY OF THESE
PROGRAMS COULD REDUCE THE FINANCIAL RESOURCES AVAILABLE TO US.US, INCLUDING
RESEARCH FUNDING AND MILESTONE PAYMENTS.
Our strategy for developing and commercializing many of our potential products,
including products aimed at larger markets, includes entering into
collaborations with corporate partners, licensors, licensees and others. These
collaborations provide us with funding and research and development resources
for potential products for the treatment or control of metabolic diseases,
hematopoiesis, women's health disorders, inflammation, cardiovascular disease,
cancer and skin disease, and osteoporosis. These agreements also give our
collaborative partners significant discretion when deciding whether or not to
pursue any development program. Our collaborations may not continue or be
successful.
In addition, our collaborators may develop drugs, either alone or with others,
that compete with the types of drugs they currently are developing with us. This
would result in less support and increased competition for our programs. If
products are approved for marketing under our collaborative programs, any
revenues we receive will depend on the manufacturing, marketing and sales
efforts of our collaborators, who generally retain commercialization rights
under the collaborative agreements. Our current collaborators also generally
have the right to terminate their collaborations under specified circumstances.
If any of our collaborative partners breach or terminate their agreements with
us or otherwise fail to conduct their collaborative activities successfully, our
product development under these agreements will be delayed or terminated.
We may have disputes in the future with our collaborators, including disputes
concerning which of us owns the rights to any technology developed. For
instance, we were involved in litigation with Pfizer, which we settled in April
1996, concerning our right to milestones and royalties based on the development
and commercialization of droloxifene. These and other possible disagreements
between us and our collaborators could delay our ability and 5
the ability of our
collaborators to achieve milestones or our receipt of other payments. In
addition, any disagreements could delay, interrupt or terminate the
collaborative research, development and commercialization of certain potential
products, or could result in litigation or arbitration. The occurrence of any of
these problems could be time-consuming and expensive and could adversely affect
our business. CHALLENGES TO, OR FAILURE TO SECURE PATENTS AND OTHER PROPRIETARY RIGHTS MAY
SIGNIFICANTLY HURT OUR BUSINESS.Challenges to or failure to secure patents and other proprietary
rights may significantly hurt our business. Our success will depend on our
ability and the ability of our licensors to obtain and maintain patents and
proprietary rights for our potential products and to avoid infringing the
proprietary rights of others, both in the United States and in foreign
countries. Patents may not be issued from any of these applications currently on
file, or, if issued, may not provide sufficient protection. In addition,
disputes with licensors under our license agreements may arise which could
result in additional financial liability or loss of important technology and
potential products.products and related revenue, if any.
Our patent position, like that of many pharmaceutical companies, is uncertain
and involves complex legal and technical questions for which important legal
principles are unresolved. We may not develop or obtain rights to products or
processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or have licensed. In addition, others
may challenge, seek to invalidate, infringe or circumvent any patents we own or
license, and rights we receive under those patents may not provide competitive
advantages to us. Further, the manufacture, use or sale of our products may
infringe the patent rights of others.
Several drug companies and research and academic institutions have developed
technologies, filed patent applications or received patents for technologies
that may be related to our business. Others have filed patent applications and
received patents that conflict with patents or patent applications we have
licensed for our use, either by claiming the same methods or compounds or by
claiming methods or compounds that could dominate those licensed to us. In
addition, we may not be aware of all patents or patent applications that may
impact our ability to make, use or sell any of our potential products. For
example, United StatesUS patent applications may be kept confidential while pending in the
Patent and
12
Trademark Office and patent applications filed in foreign countries are often
first published six months or more after filing. Any conflicts resulting from
the patent rights of others could significantly reduce the coverage of our
patents and limit our ability to obtain meaningful patent protection. While we
routinely receive communications or have conversations with the owners of other
patents, none of these third parties have directly threatened an action or claim
against us. If other companies obtain patents with conflicting claims, we may be
required to obtain licenses to those patents or to develop or obtain alternative
technology. We may not be able to obtain any such licenses on acceptable terms,
or at all. Any failure to obtain such licenses could delay or prevent us from
pursuing the development or commercialization of our potential products.
We have had and will continue to have discussions with our current and potential
collaborators regarding the scope and validity of our patentpatents and other
proprietary rights. If a collaborator or other party successfully establishes
that our patent rights are invalid, we may not be able to continue our existing
collaborations beyond their expiration. Any determination that our patent rights
are invalid also could encourage our collaborators to terminate their agreements
where contractually permitted. Such a determination could also adversely affect
our ability to enter into new collaborations.
We may also need to initiate litigation, which could be time-consuming and
expensive, to enforce our proprietary rights or to determine the scope and
validity of others' rights. If litigation results, a court may find our patents
or those of our licensors invalid or may find that we have infringed on a
competitor's rights. If any of our competitors have filed patent applications in
the United States which claim technology we also have invented, the Patent and
Trademark Office may require us to participate in expensive interference
proceedings to determine who has the right to a patent for the technology.
We have learned that Hoffmann-La Roche Inc. has received a United StatesUS patent and has
made patent filings in foreign countries that relate to our Panretin capsules
and gel products. We filed a patent application with an earlier filing date than
Hoffmann-La Roche's patent, which we believe is broader than, but overlaps in
part with, Hoffmann-La Roche's patent. We believe we were the first to invent
the relevant technology and therefore are entitled to a patent on the
application we filed. The Patent and Trademark Office has initiated a proceeding
to determine whether we or Hoffmann-La Roche are entitled to a patent. We may
not receive a favorable outcome in the proceeding. In addition, the proceeding
may delay the Patent and Trademark Office's decision regarding our earlier
application. If we do not prevail, the Hoffmann-La Roche patent might block our
use of Panretin capsules and gel in specified cancers.
6
We have also learned that Novartis AG has filed an opposition to our European
patent that covers the principal active ingredient of our ONTAK drug. We are
currently investigating the scope and merits of this opposition. If the
opposition is successful, we could lose our ONTAK patent protection in Europe
which could substantially reduce our future ONTAK sales in that region. We could
also incur substantial costs in asserting our rights in this opposition
proceeding, as well as in other interference proceedings in the United States.
We also rely on unpatented trade secrets and know-how to protect and maintain
our competitive position. We require our employees, consultants, collaborators
and others to sign confidentiality agreements when they begin their relationship
with us. These agreements may be breached, and we may not have adequate remedies
for any breach. In addition, our competitors may independently discover our
trade secrets.
RELIANCE ON THIRD-PARTY MANUFACTURERS TO SUPPLY OUR PRODUCTS RISKS SUPPLY
INTERRUPTION OR CONTAMINATION AND DIFFICULTY CONTROLLING COSTS.
We currently have no manufacturing facilities, and we rely on others for
clinical or commercial production of our marketed and potential products. In
addition, certain raw materials necessary for the commercial manufacturing of
our products are custom and must be obtained from a specific sole source. Elan
manufactures Avinza for us, Cambrex manufactures ONTAK for us and RP Scherer and
Raylo manufacture Targretin capsules for us.
13
To be successful, we will need to ensure continuity of the manufacture of our
products, either directly or through others, in commercial quantities, in
compliance with regulatory requirements and at acceptable cost. Any extended and
unplanned manufacturing shutdowns could be expensive and could result in
inventory and product shortages. IfWhile we are unablebelieve that we would be able to
develop our own facilities or contract with others for manufacturing services
with respect to all of our products, if we are unable to do so our revenues
could be adversely affected. In addition, if we are unable to supply products in
development, our ability to conduct preclinical testing and human clinical
trials will be adversely affected. This in turn could also delay our submission
of products for regulatory approval and our initiation of new development
programs. In addition, although other companies have manufactured drugs acting
through IRs and STATs on a commercial scale, we may not be able to do so at
costs or in quantities to make marketable products.
The manufacturing process also may be susceptible to contamination, which could
cause the affected manufacturing facility to close until the contamination is
identified and fixed. In addition, problems with equipment failure or operator
error also could cause delays in filling our customers' orders.
OUR BUSINESS EXPOSES US TO PRODUCT LIABILITY RISKS OR OUR PRODUCTS MAY NEED TO
BE RECALLED, AND WE MAY NOT HAVE SUFFICIENT INSURANCE TO COVER ANY CLAIMS.
Our business exposes us to potential product liability risks. Our products also
may need to be recalled to address regulatory issues. A successful product
liability claim or series of claims brought against us could result in payment
of significant amounts of money and divert management's attention from running
the business. Some of the compounds we are investigating may be harmful to
humans. For example, retinoids as a class are known to contain compounds which
can cause birth defects. We may not be able to maintain our insurance on
acceptable terms, or our insurance may not provide adequate protection in the
case of a product liability claim. To the extent that product liability
insurance, if available, does not cover potential claims, we will be required to
self-insure the risks associated with such claims. WE ARE DEPENDENT ON OUR KEY EMPLOYEES, THE LOSS OF WHOSE SERVICES COULD
ADVERSELY AFFECT US.
We depend on our key scientific and management staff, the loss of whose
services could adversely affect our business. Furthermore,believe that we may need to hire
new scientific, management and operational personnel. Recruiting and retaining
qualified management, operations and scientific personnel is also critical to
our success. We may not be able to attract and retain such personnel on
acceptable terms given the competition among numerous drug companies,
universities and other research institutionscarry
reasonably adequate insurance for such personnel.product liability claims.
WE USE HAZARDOUS MATERIALS WHICH REQUIRES US TO INCUR SUBSTANTIAL COSTS TO
COMPLY WITH ENVIRONMENTAL REGULATIONS.
In connection with our research and development activities, we handle hazardous
materials, chemicals and various radioactive compounds. To properly dispose of
these hazardous materials in compliance with environmental 7
regulations, we are
required to contract with third parties at substantial cost to us. Our annual
cost of compliance with these regulations is approximately $600,000. We cannot
completely eliminate the risk of accidental contamination or injury from the
handling and disposing of hazardous materials, whether by us or by our
third-party contractors. In the event of any accident, we could be held liable
for any damages that result, which could be significant. We believe that we
carry reasonably adequate insurance for toxic tort claims.
OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY VOLATILITY IN THE MARKETS.
The market prices and trading volumes for our securities, and the securities of
emerging companies like us, have historically been highly volatile and have
experienced significant fluctuations unrelated to operating performance. For
example, since January 1, 2001, the daily last reported sale price of our common
stock on The Nasdaq National Market has been as high as $19.99 and as low as
$4.91. Future announcements concerning us or our competitors as well as other
companies in our industry and other public companies may impact the market price
of our common stock. These announcements might include:
o>> the results of research or development testing of ours or our competitors'
products,
oproducts;
>> technological innovations related to diseases we are studying,
ostudying;
>> new commercial products introduced by our competitors,
ocompetitors;
>> government regulation of our industry,
oindustry;
>> receipt of regulatory approvals by competitors,
oour competitors;
>> our failure to receive regulatory approvals for products under development,
odevelopment;
>> developments concerning proprietary rights, or
orights;
14
>> litigation or public concern about the safety of our products.products; or
>> intent to sell or actual sale of our stock held by our corporate partners.
FUTURE SALES OF OUR COMMON STOCKSECURITIES MAY DEPRESS THE PRICE OF OUR STOCK PRICE.SECURITIES.
Sales of substantial amounts of our common stocksecurities in the public market could
seriously harm prevailing market prices for our common stock.securities. These sales might
make it difficult or impossible for us to sell additional securities when we
need to raise capital.
YOU MAY NOT RECEIVE A RETURN ON YOUR SHARESSECURITIES OTHER THAN THROUGH THE SALE OF
YOUR SHARES OF COMMON STOCK.SECURITIES.
We have not paid any cash dividends on our common stock to date. We intend to
retain any earnings to support the expansion of our business, and we do not
anticipate paying cash dividends on any of our securities in the foreseeable
future. Accordingly, other
than through a sale of your shares, you will not receive a return on your
investment in our common stock.
OUR SHAREHOLDER RIGHTS PLAN AND CHARTER DOCUMENTS MAY HINDER OR PREVENT TRANSACTIONS THAT
COULD BE BENEFICIAL TO YOU.CHANGE
OF CONTROL TRANSACTIONS.
Our shareholder rights plan and provisions contained in our certificate of
incorporation and bylaws may discourage transactions involving an actual or
potential change in our ownership, including transactions in which you might
otherwise receive a premium for your shares over then-current market prices.
These provisions also may limit your ability to approve transactions that you
deem to be in your best interests.ownership. In addition, our board of directors may issue
shares of preferred stock without any further action by you. Such issuances may
have the effect of delaying or preventing a change in our ownership. 8If changes
in our ownership are discouraged, delayed or prevented, it would be more
difficult for our current board of directors to be removed and replaced, even if
you or our other stockholders believe that such actions are in the best
interests of us and our stockholders.
RISKS RELATED TO THE NOTES
THE NOTES ARE SUBORDINATED TO OUR SENIOR INDEBTEDNESS AND ARE STRUCTURALLY
SUBORDINATED TO ALL LIABILITIES OF OUR SUBSIDIARIES.
The notes are junior in right of payment to all of our existing and future
senior indebtedness, and are structurally subordinated to all liabilities of our
subsidiaries, including trade payables. However, payment to the holders of the
notes from the proceeds of the US government securities pledged to the trustee
as security for the exclusive ratable benefit of the holders of the notes, as
described under "Description of notes--Security," are subordinated to any senior
indebtedness or subject to the subordination restrictions described in this
prospectus. As of September 30, 2002, we and our subsidiaries had approximately
$8.6 million of consolidated indebtedness effectively ranking senior to the
notes, of which $2.5 million has subsequently been retired. The indenture
governing the notes does not restrict the incurrence of senior indebtedness or
other debt by us or our subsidiaries. A significant amount of our operations are
conducted through subsidiaries. None of our subsidiaries has guaranteed or
otherwise become obligated with respect to the notes. As a result, except as
described under "Description of notes--Security," the notes are structurally
subordinated to all indebtedness and other obligations of our subsidiaries with
respect to our subsidiaries' assets. By reason of such subordination, in the
event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or
winding up of our business, our assets will be available to pay the amounts due
on the notes only after all of our senior indebtedness has been paid in full,
and, therefore, there may not be sufficient assets remaining to pay amounts due
on any or all of the notes then outstanding.
See "Description of notes--Subordination of Notes."
WE AND OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT WHICH
COULD INCREASE OUR LEVERAGE AND THE RISK TO YOU OF HOLDING THE NOTES.
We and our subsidiaries may be able to incur substantial additional debt in the
future. Some or all of any future borrowings could be senior to the notes. If a
substantial amount of new debt in addition to the notes offered hereby is added
to our and our subsidiaries' current debt levels, it could have important
consequences to our business. For example, it could:
15
>> limit our ability to borrow additional amounts for working capital, capital
expenditures, acquisitions, debt service requirements, execution of our
growth strategy or other purposes;
>> require us to dedicate a substantial portion of our cash flow to pay
principal and interest on our debt, which will reduce the funds available
for working capital, capital expenditures, acquisitions and other general
corporate purposes;
>> limit our flexibility in planning for and reacting to changes in our
business and our industry that could make us more vulnerable to adverse
changes in general economic, industry and competitive conditions and
adverse changes in government regulation; and
>> place us at a disadvantage compared to our competitors that have less debt.
In addition, we cannot assure you that sufficient cash flow will be available to
make all required principal payments. Therefore, we may need to refinance at
least a portion of any outstanding debt as it matures. We may not be able to
refinance this debt at all or on terms as favorable as the terms of the existing
debt.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL OFFER REQUIRED BY THE INDENTURE.
If we undergo a change in control (as defined in the indenture), each holder of
the notes may require us to repurchase all or a portion of the holder's notes.
We cannot assure you that there will be sufficient funds available for any
required repurchases of these securities if a change in control occurs. In
addition, the terms of any agreements related to borrowing which we may enter
from time to time may prohibit or limit or make our repurchase of notes an event
of default under those agreements. If we fail to repurchase the notes in that
circumstance, we will be in default under the indenture governing the notes. See
"Description of notes--Change in Control Permits Purchase of Notes by Us at the
Option of the Holder."
THE NOTES MAY NOT BE TRANSFERRED ABSENT AN EXEMPTION FROM REGISTRATION.
The notes are not registered under the Securities Act or any state securities
laws. Accordingly, purchasers of the notes cannot offer or sell them absent an
exemption from the registration requirements of the Securities Act and
applicable state securities laws or pursuant to an effective registration
statement covering their resale.
We intend to use our reasonable best efforts to cause the registration statement
of which this prospectus is a part to become effective under the Securities Act.
However, the SEC has broad discretion whether to declare any registration
statement effective and may delay or deny the effectiveness of any registration
statement for a variety of reasons. In the course of the SEC's review of the
shelf registration statement of which this prospectus is a part, we may be
required to make changes to the description of our business and other
information and financial data, which changes could be significant.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES COULD CAUSE PURCHASERS OF THE NOTES TO
BE UNABLE TO RESELL THEM FOR AN EXTENDED PERIOD OF TIME.
Although the notes trade on the PORTAL Market, there is not an established
trading market for the notes and we cannot assure you that an active public
market for the notes will develop, or if such market develops, how liquid it
will be. Notes sold pursuant to this prospectus will no longer be eligible for
trading on the PORTAL market, and we do not intend to list the notes on any
securities exchange or automated quotation system. At the time of the initial
offering and sale of the notes, the initial purchaser of the notes informed us
that it intended to make a market in the notes. The initial purchaser may cease
its market making activities, if any, at any time without notice.
If the private placement of the notes prior to this registration statement
violated securities laws, purchasers in the private offering would have the
right to seek refunds or damages.
16
If a trading market does not develop or is not maintained, holders of the notes
may experience difficulty in reselling, or an inability to sell, the notes. If a
market for the notes develops, any such market may be discontinued at any time.
If a public trading market develops for the notes, future trading prices of the
notes will depend on many factors, including, among other things, the price of
our common stock into which the notes are convertible, prevailing interest
rates, our operating results and the market for similar securities. Depending on
the price of our common stock into which the notes are convertible, prevailing
interest rates, the market for similar securities and other factors, including
our financial condition, the notes may trade at a discount from their principal
amount.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus may contain forward-looking statements that involve
substantial risks and uncertainties regarding future events or our future
performance within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You
can identify these statements by forward-looking words such as "may," "will,"
"expect," "intent," "anticipate," "believe," "estimate" and "continue" or
similar words. You should read statements that contain these words carefully
because they discuss our future expectations, contain projections of our future
results of operations or of our financial condition or state other
"forward-looking" information. We believe that it is important to communicate
our future expectations to our investors. However, there may be events in the
future that we are not able to accurately predict or control. The factors listed
in the section captioned "Risk Factors," as well as any cautionary language
included in this prospectus or incorporated by reference, provide examples of
risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in the "Risk Factors" section and described or
incorporated by reference elsewhere in this prospectus could have a material
adverse effect on our business, operating results and financial condition. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by these
statements. This caution is made under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549,
and also at the SEC's public reference rooms in New York, New York and Chicago,
Illinois.20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public on the SEC's
website at http://www.sec.gov.
917
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and later information filed with the SEC will
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we make with the SEC under Section 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 from the date of the
initial registration statement until ourthe completion of the offering is
completed:of the
securities covered by this prospectus:
o Our annual report on Form 10-K for the fiscal year ended December 31, 2001.2001,
o Our quarterly reports on Form 10-Q for the quarterly periods ended March
31, 2002, June 30, 2002 and September 30, 2002,
o Our current reports on Form 8-K filed April 1,2, 2002, April 4, 2002, and
April
12, 2002.2002, July 10, 2002, November 13, 2002, November 21, 2002, November 25,
2002 and December 2, 2002,
o The description of our common stock, contained in our registration
statement on Form 8-A filed on November 21, 1994, including any amendments
or reports filed for the purpose of updating such descriptions.descriptions, and
o The description of our preferred stock purchase rights, contained in our
registration statement on Form 8-A filed on September 30, 1996, including
any amendments or reports filed for the purpose of updating such
descriptions.
The reports and other documents that we file after the date of this
prospectus will update and supersede the information in this prospectus.
You may request a copy of these filings, at no cost, by writing or
telephoning us at:
Ligand Pharmaceuticals Incorporated
Attn: Investor Relations
10275 Science Center Road
San Diego, California 92121-1117
(858) 550-7500
YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS.PROSPECTUS OR ANY RELATED PROSPECTUS SUMMARY. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING STOCKHOLDERS ARE NOT AUTHORIZED TO MAKE AN
OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT
ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY RELATED PROSPECTUS SUMMARY
IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
1018
USE OF PROCEEDS
We will not receive any of theno proceeds from the saleresale by the selling security holders of
the notes or the common stock issuable upon conversion of the notes. The selling
security holders will receive all of the net proceeds from the resales.
SELLING SECURITY HOLDERS
We initially issued the notes to the initial purchaser of the notes who then
resold the notes in transactions exempt from the registration requirements of
the Securities Act to persons reasonably believed to be "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act). The selling security
holders (which term includes their transferees, pledgees, donees or their
successors) may from time to time offer and sell pursuant to this prospectus or
any applicable prospectus supplement any or all of the notes and common stock
issuable upon conversion of the notes.
No offer or sale under this prospectus may be made by a selling security holder
unless that holder is listed in the table in this prospectus or until that
holder has notified us and a supplement to this prospectus has been filed or an
amendment to the registration statement of which this prospectus is a part has
become effective. We will supplement or amend this prospectus to include
additional selling security holders upon request and upon provision of all
required information to us. Information concerning the selling security holders
may change from time to time and any changed information will be set forth in
supplements to this prospectus if and when necessary.
The following table sets forth information about each selling security holder,
including the name, the number and percentage of the notes beneficially owned
and being offered by the selling security holder and the number and percentage
of common stock beneficially owned and being offered by the selling security
holder. The percentages of common stock beneficially owned and being offered are
calculated based on 71,448,313 shares of common stock issued and outstanding as
of December 31, 2002. Unless otherwise indicated below, none of the selling
security holders nor any of their affiliates, officers, directors or principal
equity holders has held any position or office or has had any material
relationship with us or our predecessors or affiliates within the past three
years.
PRINCIPAL SHARES OF COMMON
AMOUNT OF NOTES STOCK PERCENTAGE OF
BENEFICIALLY PERCENTAGE OF BENEFICIALLY COMMON STOCK
NAME OWNED AND NOTES OWNED AND OFFERED OUTSTANDING
OFFERED HEREBY OUTSTANDING HEREBY (2) OFFERED HEREBY
(1)
- ------------------------------------------------------------------------------- ---------------- ------------------- --------------
1976 Distribution Trust FBO A.R. Lauder/Zinterhofer 5,000 * 809 *
2000 Revocable Trust FBO A.R. Lauder/Zinterhofer 5,000 * 809 *
AIG DKR Soundshore Holdings Ltd. 1,204,000 * 195,036 *
AIG DKR Soundshore Opportunity Holding Fund Ltd. 2,766,000 1.8% 448,065 *
AIG DKR Soundshore Strategic Holding Fund Ltd. 2,030,000 1.3% 328,840 *
Allentown City Officers & Employees Pension Fund 11,000 * 1,781 *
Allentown City Police Pension Plan 22,000 * 3,563 *
Allentown City Firefighters Pension Plan 17,000 * 2,753 *
Allstate Insurance Company 650,000 * 105,293 *
Allstate Life Insurance Company 350,000 * 56,696 *
Alpine Associates 3,900,000 2.5% 631,762 *
Alpine Partners, L.P. 600,000 * 97,194 *
Amaranth LLC 2,550,000 1.6% 413,075 *
Arapahoe County Colorado 41,000 * 6,641 *
Arbitex Master Fund L.P. 5,000,000 3.2% 809,952 1.1%
Argent Classic Convertible Arbitrage Fund L.P. 2,000,000 1.3% 323,981 *
Argent Classic Convertible Arbitrage Fund (Bermuda) L.P. 2,500,000 1.6% 404,976 *
Arlington County Employees Retirement System 450,000 * 72,895 *
Bear Stearns & Co., Inc. 500,000 * 80,995 *
19
PRINCIPAL SHARES OF COMMON
AMOUNT OF NOTES STOCK PERCENTAGE OF
BENEFICIALLY PERCENTAGE OF BENEFICIALLY COMMON STOCK
NAME OWNED AND NOTES OWNED AND OFFERED OUTSTANDING
OFFERED HEREBY OUTSTANDING HEREBY (2) OFFERED HEREBY
(1)
- ------------------------------------------------------------------------------- ---------------- ------------------- --------------
BNP Paribas Equity Strategies, SNC (3) 1,782,000 1.1% 288,667 *
BP Amoco PLC Master Trust 316,000 * 51,188 *
British Virgin Islands Social Security Board 59,000 * 9,557 *
CC Investments LOC 1,000,000 * 161,990 *
City of New Orleans 169,000 * 27,376 *
City University of New York 102,000 * 16,523 *
Cooper Neff Convertible Strategies (Cayman) Master Fund, LP 987,000 * 159,884 *
Credit Suisse First Boston-London 1,000,000 * 161,990 *
Delaware PERS 730,000 * 118,253 *
Delaware Public Employees Retirement System 1,043,000 * 168,956 *
DKR Saturn Event Driven Holding Fund Ltd. 2,000,000 1.3% 323,981 *
Farallon Capital Institutional Partners II, LP 575,000 * 93,144 *
Farallon Capital Institutional Partners III, LP 315,000 * 51,027 *
Farallon Capital Institutional Partners, LP 2,305,000 1.5% 373,388 *
Farallon Capital Offshore Investors, Inc. 5,075,000 3.3% 822,101 1.1%
Farallon Capital Partners, LP 1,625,000 1% 263,234 *
Grady Hospital Foundation 89,000 * 14,417 *
Guggenheim Portfolio Co. XV, LLC 350,000 * 56,696 *
Hotel Union & Hotel Industry of Hawaii Pension Plan 134,000 * 21,706 *
ICI American Holdings Trust 175,000 * 28,348 *
McMahan Securities Co. L.P. 350,000 * 56,696 *
Municipal Employees 161,000 * 26,080 *
New Orleans Firefighters Pension/Relief Fund 91,000 * 14,741 *
Occidental Petroleum Corporation 174,000 * 28,186 *
Pioneer High Yield Fund 25,950,000 16.7% 4,203,653 5.6%
Pioneer High Yield VCT Portfolio 300,000 * 48,597 *
Policeman and Firemen Retirement System of the
City of Detroit 398,000 * 64,472 *
Pro-mutual 505,000 * 81,805 *
Ramius Capital Group 350,000 * 56,696 *
RCG Halifax Master Fund, LTD 350,000 * 56,696 *
RCG Latitude Master Fund, LTD 1,225,000 * 198,438 *
RCG Multi Strategy A/C, LP 1,225,000 * 198,438 *
Shell Pension Trust 265,000 * 42,927 *
Sphinx Convertible Arb Fund SPC 154,000 * 24,946 *
State of Maryland Reirement Agency 2,153,000 1.4% 348,765 *
Sturgeon Limited 231,000 * 37,419 *
Sunrise Partners Limited Partnership 8,200,000 5.3% 1,328,322 1.8%
Syngenta AG 120,000 * 19,439 *
The Grable Foundation 60,000 * 9,719 *
Tinicum Partners, LP 105,000 * 17,009 *
Trustmark Insurance 232,000 * 37,581 *
UBS O'Connor LLC F/B/O O'Connor
Global Convertible Arbitrage Master Limited 1,350,000 * 218,687 *
UBS O'Connor LLC F/B/O O'Connor
Global Convertible Portfolio 150,000 * 24,298 *
UBS Warburg LLC (4) 1,373,000 * 222,412 *
Viacom Inc. Pension Plan Master Trust 11,000 * 1,781 *
Victus Capital, LP 1,500,000 1% 242,985 *
20
PRINCIPAL SHARES OF COMMON
AMOUNT OF NOTES STOCK PERCENTAGE OF
BENEFICIALLY PERCENTAGE OF BENEFICIALLY COMMON STOCK
NAME OWNED AND NOTES OWNED AND OFFERED OUTSTANDING
OFFERED HEREBY OUTSTANDING HEREBY (2) OFFERED HEREBY
(1)
- ------------------------------------------------------------------------------- ---------------- ------------------- --------------
White River Securities L.L.C. 500,000 * 80,995 *
Zeneca Holding Trust 175,000 * 28,348 *
Zurich Institutional Benchmarks Master Fund Ltd. 385,000 * 62,366 *
* Less than one percent
(1) We prepared this table based on the information supplied to us by the
selling security holders named in the table and we have not sought to
verify such information. This table only reflects information regarding
selling security holders who have provided us with such information. We
expect that we will update this table as we receive more information from
holders of the notes who have not yet provided us with their information.
(2) Assumes conversion of all of the holder's notes at a conversion rate of
161.9905 shares of common stock per $1,000 principal amount of the notes.
However, this conversion rate will be subject to adjustment as described
under "Description of notes--Conversion Rights." As a result, the amount of
common stock issuable upon conversion of the notes may increase or decrease
in the future.
(3) As of December 19, 2992, BNP Paribas Equity Strategies, SNC held an
additional 49,339 shares of our common stock bythat are not being offered
under this prospectus.
(4) As of January 7, 2003, UBS Warburg LLC held an additional 8,554 shares of
our common stock that are not being offered under this prospectus.
The selling security holders listed in the above table may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their notes since the date on which the
information in the above table was provided to us. Information about the selling
stockholders.
PLAN OF DISTRIBUTION
We are registeringsecurity holders may change over time.
Because the selling security holders may offer all 4,252,500 shares on behalfor some of the selling
stockholders. We issued allnotes or
the shares of common stock issuable upon conversion of the shares to the selling stockholders in a
private placement transaction. The selling stockholders named in the table below
or pledgees, donees, transferees OR other successors in interest selling shares
received from a named selling stockholder as a gift, pledge, partnership
distribution or other non-sale related transfer after the date of this
prospectus may sell the shares from time to time. The selling stockholders will
act independently of us in making decisions regarding the timing, manner and
size of each sale. The sales may be made on The Nasdaq Stock Market or in the
over-the-counter market or otherwise, at prices and at terms then prevailing or
at prices related to the then-current market price, or in negotiated
transactions. The selling stockholders may effect these transactions by selling
the shares to or through broker-dealers. The shares may be sold by one or more
of, or a combination of, the following:
o a block trade in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction,
o purchases by a broker-dealer as principal and resale by such
broker-dealer for its account under this prospectus,
o an exchange distribution in accordance with the rules of the
respective exchange,
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers,
o an over-the-counter distribution in accordance with the rules of The
Nasdaq National Market,
o in privately negotiated transactions, and
o in options transactions.
To the extent required, this prospectus may be amended or supplementednotes from time to
time, to describe a specific planwe cannot estimate the amount of distribution. In effecting sales,
broker-dealers engagedthe notes or shares of common stock that
will be held by the selling stockholderssecurity holders upon the termination of any
particular offering by a selling security holder. See "Plan of Distribution."
PLAN OF DISTRIBUTION
The selling security holders, which term includes their transferees, pledgees or
donees or their successors, may arrange for otherfrom time to time sell the notes and the
underlying common stock covered by this prospectus directly to purchasers or
offer the notes and underlying common stock through underwriters, broker-dealers
to participateor agents, who may receive compensation in the resales.form of underwriting discounts,
concessions or commissions from the selling security holders and/or the
purchasers of securities for whom they may act as agent, which discounts,
concessions or commissions as to any particular underwriter, broker-dealer or
agent may be in excess of those customary in the types of transactions involved.
The notes and the underlying common stock may be sold in one or more
transactions:
>> at fixed prices;
>> at prevailing market prices;
>> at varying prices determined at the time of sale; or
>> at negotiated prices.
21
These sales may be effected in transactions, which may involve block
transactions, in the following manner:
>> on any national securities exchange or quotation service on which the notes
or the common stock may be listed or quoted at the time of sale;
>> in the over-the-counter-market;
>> in transactions otherwise than on these exchanges or services or in the
over-the-counter-market; or
>> through the writing and exercise of options, whether these options are
listed on an options exchange or otherwise.
In connection with the sale of the notes and common stock, the selling stockholderssecurity
holders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in connection with distributions
of the shares or otherwise. In connection with these transactions, broker
dealers or other financial institutions mayturn engage in short sales of the
sharessecurities in the course of hedging the positions they assume with selling stockholders.assume. The selling stockholders alsosecurity
holders may sell shares shortthe notes or common stock and redeliver the sharesdeliver notes or common stock to
close out such short positions. The selling stockholders may enter into optionpositions, or other transactions with broker-dealers which require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares covered by this prospectus (as supplemented or amended to
reflect such transaction). The selling stockholders also may loan or pledge the sharessecurities to a broker-dealer or other financial institution. The broker-dealerbroker-dealers
that in turn may sell these securities.
The aggregate proceeds to the shares so loaned,selling security holders from the sale of the
securities offered by them hereby will be the purchase price of such securities
less discounts and commissions, if any. The selling security holder reserves the
right to accept and, together with its agent from time to time, to reject, in
whole or in part, any proposed purchase of securities to be made directly or
through agents. We will not receive any of the proceeds from the resale by the
selling security holders of the notes or the common stock issuable upon
a defaultconversion of the broker-dealer may sell the
pledged shares undernotes.
The notes are traded on The PORTAL Market. However, notes sold pursuant to this
prospectus (as supplementedwill no longer be eligible for trading on the PORTAL market. We do
not intend to list the notes on any securities exchange or amendedautomated quotation
system. Our common stock is listed for trading on The Nasdaq National Market
under the symbol "LGND."
In order to reflect such
transaction). Broker-dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling stockholders. Broker-dealers
or agents may also receive compensation from the purchasers of the shares for
whom they act as agents or to whom they sell as principals, or both.
Compensation as to a particular broker-dealer might be in excess of customary
commissions and will be in amounts to be negotiated in connectioncomply with the sale.
Broker-dealers or agents and any other participating broker-dealers orsecurities laws of some states, if applicable, the
selling stockholders may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act of 1933 in connection with sales of the
shares. Accordingly, any such commission, discount or concession received by
them and any profit on the resale of the shares purchased by them may be deemed
to be underwriting discounts or commissions under the Securities Act. Because
selling stockholders may be deemed to be underwriters within the meaning of
Section 2(11) of the Securities Act, the selling stockholders will be subject to
the
11
prospectus delivery requirements of the Securities Act. In addition, any
securities covered by this prospectus which qualify for sale in compliance with
Rule 144 promulgated under the Securities Act may be sold under Rule 144 rather
than under this prospectus. The selling stockholders have advised us that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. There is
no underwriter or coordinating broker acting in connection with the proposed
sale OF shares by the selling stockholders.
The shares will be soldsuch jurisdictions only through registered or licensed
brokers or dealers if required under applicable state securities laws.dealers. In addition, in certainsome states the sharessecurities may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirementrequirements is available and
is complied with.
Under applicable rulesThe selling security holders, and regulationsany underwriters, broker-dealers or agents
that participate in the sale of the securities, may be "underwriters" within the
meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the securities may be
underwriting discounts and commissions under the Securities Act. The selling
security holders have acknowledged that they understand their obligations to
comply with the provisions of the Securities Exchange Act of 1934 persons engaged in the distribution of the shares may be limited in their
ability to engage in market activities with respect to such shares. In addition,
each selling stockholder will be subject to applicable provisions of the
Exchange Act and the associated rules
and regulations under the Exchange Act,
includingthereunder relating to stock manipulation, particularly Regulation M, which provisions may limit the timing of purchases and
sales of shares of our common stock by the selling stockholders. We will make
copies of this prospectus available to the selling stockholders and have
informed them of the need to deliver copies of this prospectus to purchasers at
or prior toM.
At the time of any salea particular offering of the shares.
We will filesecurities by a selling security holder,
a supplement to this prospectus, if required, will be circulated setting forth
the aggregate amount and type of securities being offered and the terms of the
offering, including the name or names of any underwriters, broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the selling security holders and any discounts, commission or concessions
allowed or reallowed or paid to complybroker-dealers.
We entered into a registration rights agreement for the benefit of holders of
the notes to register their notes and the underlying common stock under
applicable federal and state securities laws under specific circumstances and at
specific times. The registration rights agreement provides for indemnification
by us of the selling security holders and their controlling persons and by the
selling security holders of us and our directors, officers and controlling
persons against specific liabilities in connection with the offer and sale of
the notes and the underlying common stock, including liabilities under the
Securities Act.
22
DESCRIPTION OF NOTES
On November 26th and 27th 2002 we issued and sold the notes in a private
placement transaction. The initial purchaser of the notes in that offering
resold the notes to persons reasonably believed to be qualified institutional
buyers (as defined in Rule 424(b)144A under the Securities Act of 1933). The notes
were issued under the indenture dated November 26, 2002 between us and J.P.
Morgan Trust Company, National Association, as trustee. The following statements
are subject to the detailed provisions of the indenture and are qualified in
their entirety by reference to the indenture. The indenture has been filed as an
exhibit to the registration statement of which this prospectus is a part.
Particular provisions of the indenture which are referred to in this prospectus
are incorporated by reference as a part of the statements made, and the
statements are qualified in their entirety by the reference. For the purposes of
this summary, the terms "Ligand," the "Company," "we" or "our" refer only to
Ligand Pharmaceuticals Incorporated and not to any of our subsidiaries.
References to "interest" shall be deemed to include, unless the context
otherwise requires, the additional amounts payable in the event of a
registration default as described below under the caption "Registration rights;
additional payments."
GENERAL
Except as described under "Security," the notes represent our unsecured general
obligations, subordinate in right of payment to certain of our obligations as
described under "Subordination of notes," and convertible into our common stock
as described under "Conversion rights." The notes are limited to $155.25 million
aggregate principal amount. Interest on the principal amount of the notes will
be payable semi-annually on May 16 and November 16 of each year, with the first
interest payment to be made on May 16, 2003, at the rate of 6% per annum, to the
persons who are registered holders of the notes at the close of business on the
preceding May 1 and November 1, respectively. Unless previously redeemed,
repurchased or converted, the notes will mature on November 16, 2007. The notes
will be payable at the office of the paying agent, which initially will be an
office or agency of the trustee, or an office or agency maintained by us for
such purpose, in the Borough of Manhattan, the City of New York. Payments in
respect of the notes may, at our option, be made by check and mailed to the
holders of record as shown on the register for the notes.
We issued the notes without coupons in denominations of $1,000 and integral
multiples thereof.
Holders may present for conversion any notes that have become eligible for
conversion at the office of the conversion agent, and may present notes for
registration of transfer at the office of the trustee.
The indenture does not contain any financial covenants or any restrictions on
the payment of dividends or on the repurchase of our securities. The indenture
does not require us to maintain any sinking fund or other reserves for repayment
of the notes.
The notes are not subject to defeasance or covenant defeasance.
SECURITY
On the closing dates of the offering in which the notes were issued, we
purchased in the aggregate approximately $18 million of US government securities
as security for the notes and for the exclusive ratable benefit of the holders
of the notes (and not for the benefit of our other creditors). These U.S.
government securities are sufficient, upon being notifiedreceipt of the scheduled interest and
principal payments of such securities, to provide for payment in full of the
first four scheduled interest payments on the notes when due. The US government
securities are held and invested by a selling
stockholderthe trustee in accordance with the terms of
the pledge agreement that any material arrangements have beenwe entered into with a
broker-dealerthe trustee. We refer to payments
on the notes derived from the pledged US government securities as "permitted
payments" in this prospectus.
The US government securities have been pledged by us to the trustee under the
indenture for the sale of shares through a block trade, special offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer. Such supplement will disclose:
o the name of each such selling stockholder andexclusive ratable benefit of the participating
broker-dealer(s)holders of the notes and are
held by the trustee in a pledge account in accordance with a pledge agreement
entered into by us and the trustee and in accordance with a control agreement
entered into by us, the trustee and the account intermediary therein.
Immediately prior to each of the first four interest payment dates, the trustee
will
23
release from the pledge account proceeds sufficient to pay interest then
due on the notes. We may also make additional payments to the trustee to ensure
that sufficient funds are available to pay interest then due on the notes, if
necessary. A failure to pay interest on the notes when due through the first
four scheduled interest payment dates will constitute an event of default under
the indenture.
The pledged US government securities and the pledge account also secures, to the
extent available, the repayment of the principal amount on the notes. If prior
to November 16, 2005:
>> an event of default under the notes or the indenture occurs and is
continuing; and
>> the trustee or the holders of not less than 25% in aggregate principal
amount of the notes then outstanding accelerate the notes by declaring the
principal amount of the notes plus accrued and unpaid interest to be
immediately due and payable (by written consent, at a meeting of holders of
the notes or otherwise), oexcept for the occurrence of an event of default
relating to our bankruptcy, insolvency or reorganization, or that of any of
our subsidiaries, upon which the notes will be accelerated automatically,
then the proceeds from the pledged US government securities will be promptly
released for payment to the holders of the notes, subject to the automatic stay
provisions of bankruptcy law, if applicable. Distributions from the pledge
account will be applied:
>> first, to any accrued and unpaid interest on the notes; and
>> second, to the extent available, to the repayment of a portion of the
principal amount of the notes.
If an event of default is not cured prior to the acceleration of the notes by
the trustee or holders of the notes referred to above, the trustee and the
holders of the notes will be able to accelerate the notes as a result of that
event of default.
For example, if the first two interest payments were made when due but the third
interest payment was not made when due and the holders of the notes promptly
exercised their right to declare the principal amount of the notes to be
immediately due and payable, then, assuming the automatic stay provisions of
bankruptcy law are not applicable and the proceeds of the pledged US government
securities are promptly distributed from the pledge account:
>> an amount equal to the interest payment due on the third interest payment
would be distributed from the pledge account as accrued interest; and
>> the balance of the proceeds of the pledge account would be distributed as a
portion of the principal amount of the notes.
In addition, holders would have an unsecured claim against us for the remainder
of the principal amount of their notes.
If prior to the fourth interest payment with respect to the notes,
>> any notes are converted; or
>> we repurchase any notes,
then the trustee will disburse to us a pro rata portion of the pledge account
corresponding to the remaining interest payments with respect to such notes
secured by the pledge account.
Once we make the first four scheduled interest payments on the notes, all of the
remaining pledged US government securities and cash, if any, will be released to
us from the pledge account, and the notes will thereafter be unsecured.
CONVERSION RIGHTS
Before the close of business on the date of maturity of the notes, subject to
prior redemption or repurchase, holders of the notes may convert the notes, or
portions thereof (if the portions are $1,000 or whole multiples thereof), into
161.9905 shares of common stock per $1,000 of principal amount of notes. This
rate results in an initial conversion price of approximately $6.17 per share.
Except as described below, the number of shares involved,
ointo which a note is
24
convertible will not be adjusted for dividends on any common stock issued on
conversion. We will not issue fractional shares of common stock upon conversion
of notes and instead will pay a cash adjustment based on the market price of the
common stock on the last trading day prior to the conversion date. In the case
of notes called for redemption, conversion rights will expire at the close of
business on the date one business day prior to the redemption date.
We are not obligated to pay accrued interest on notes submitted for conversion.
Accordingly, if a note is converted after the close of business on a record date
for the payment of interest and before the opening of business on the next
succeeding interest payment date, notes submitted for conversion must be
accompanied by funds equal to the interest payable to the registered holder on
the interest payment date on the principal amount of such notes submitted for
conversion. We will then make the interest payment due on the interest payment
date to the registered holder of the note on the record date. Notwithstanding
anything to the contrary in this paragraph, any note submitted for conversion
need not be accompanied by any funds if such notes have been called for
redemption on a redemption date that is after the close of business on a record
date for the payment of interest and before the close of business on the
business day following the corresponding interest payment date.
As soon as practicable following the conversion date, we will deliver through
the conversion agent a certificate for the full number of full shares of common
stock into which any note is converted, together with any cash payment for
fractional shares. For a discussion of the tax treatment of a holder receiving
common shares upon surrendering notes for conversion, see "Certain US federal
income tax considerations--US Holders--Conversion of the notes."
We will adjust the conversion rate for:
>> dividends or distributions on shares of our common stock payable in common
stock or other capital stock of ours;
>> subdivisions, combinations or certain reclassifications of our common
stock;
>> distributions to all or substantially all holders of common stock of
certain rights or warrants entitling them for a period of 60 days or less
to purchase common stock at less than the current market price at the time;
>> distributions to all or substantially all holders of our common stock of
our assets or debt securities or certain rights to purchase our securities,
but excluding cash dividends or other cash distributions from current or
retained earnings referred to in the next paragraph;
>> all-cash distributions to all or substantially all holders of our common
stock in an aggregate amount that, together with
>> any cash and the fair market value of any other consideration payable
in respect of any tender offer or exchange offer for our common stock
consummated within the preceding 12 months not triggering a conversion
rate adjustment and
>> all other all-cash distributions to all or substantially all
stockholders made within the preceding 12 months not triggering a
conversion rate adjustment,
exceeds an amount equal to 10% of the market capitalization of our common
stock on the business day immediately preceding the day on which we declare
the distribution;
>> payments in respect of a tender offer or exchange offer for our common
stock to the extent that the offer involves aggregate consideration that,
together with
>> any cash and the fair market value of any other consideration payable
in respect of any tender offer or exchange offer for our common stock
consummated within the preceding 12 months not triggering a conversion
rate adjustment and
>> all-cash distributions to all or substantially all stockholders made
within the preceding 12 months not triggering a conversion rate
adjustment,
exceeds an amount equal to 10% of the market capitalization of our common
stock on the expiration date of the tender offer or exchange offer.
25
Each adjustment referred to above will be made upon conclusion of the applicable
event. We will not adjust the conversion rate, however, in certain cases,
including where holders of notes are to participate in the transaction without
conversion under circumstances that our board of directors determines to be fair
and appropriate.
To the extent that our stockholders rights plan is still in effect, upon
conversion of the notes into common stock, the holders will receive, in addition
to the common stock, the rights described in our stockholders rights plan,
whether or not the rights have separated from the common stock at the time of
conversion, subject to certain limited exceptions. If we implement a new
stockholders rights plan, we will be required under the indenture to provide
that the holders of notes will receive the rights upon conversion of the notes,
whether or not these rights were separated from the common stock prior to
conversion, subject to certain limited exceptions.
Except as stated above, the number of shares issuable on conversion will not be
adjusted for the issuance of common stock or any securities convertible into or
exchangeable for common stock, or carrying the right to purchase any of the
foregoing. The terms of the notes do not require any adjustment for rights to
purchase common stock pursuant to our present or any future stockholders rights
plan or pursuant to any plans we have for reinvestment of dividends or interest,
or for a change in the par value of the common stock. To the extent that the
notes become convertible into cash, no adjustment will be required thereafter as
to cash.
No adjustment to the conversion rate will be required unless the adjustment
would require a change of at least 1% in the conversion rate then in effect;
provided that any adjustment that would otherwise be required to be made will be
carried forward and taken into account in any subsequent adjustment.
We are permitted to make such increases in the conversion rate as we, in our
discretion, determine to be advisable in order that any stock dividend,
subdivision of shares, were sold,
odistribution or rights to purchase stock or securities or
securities convertible into or exchangeable for stock made by us to our
stockholders will not be taxable to the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
orecipients. In addition, we may at any
time increase the conversion rate by any amount for any period of time if our
board of directors determines that such broker-dealer(s) didincrease would be in our best interests,
provided that:
>> the conversion price is not conduct any investigationless than the par value of a share of our
common stock;
>> the period during which the increased rate is in effect is at least 20 days
(or such longer period as may be required by law); and
>> the increased rate is irrevocable during such period.
If we are party to verifya consolidation, merger or binding share exchange pursuant to
which the information set outcommon stock is converted into cash, securities or incorporated by reference in this
prospectus,other property, at
the effective time of the transaction, the right to convert a note into common
stock will be changed into a right to convert it into the kind and oamount of
cash, securities or other facts materialproperty which the holder would have received if the
holder had converted its note immediately prior to the transaction.
In the event of:
>> a taxable distribution to holders of shares of common stock which results
in an adjustment to the conversion rate; or
>> an increase in the conversion rate at our discretion,
the holders of the notes may, in certain circumstances, be deemed to have
received a distribution subject to Federal income tax as a dividend. See
"Certain United States federal income tax considerations--US Holders--Adjustment
of conversion price."
26
REDEMPTION OF NOTES AT OUR OPTION
No sinking fund is provided for the notes. Prior to November 22, 2005, we cannot
redeem the notes. The notes will be redeemable at our option, in whole or in
part, at any time on or after November 22, 2005, on any date not less than 30
nor more than 60 days after the mailing of a redemption notice to each holder of
notes to be redeemed at the address of the holder appearing in the security
register. The redemption price for the notes, expressed as a percentage of
principal amount, is as follows for the periods set forth below:
PERIOD REDEMPTION PRICE
- ------------------------------------------------------------------
November 22, 2005 to November 15, 2006........... 102.4%
November 16, 2006 to November 15, 2007........... 101.2%
Accrued and unpaid interest will also be paid to the redemption date.
If we redeem less than all of the outstanding notes, the trustee will select the
notes to be redeemed on a pro rata basis in principal amounts of $1,000 or
integral multiples of $1,000. If a portion of a holder's notes is selected for
partial redemption and the holder converts a portion of the notes, the converted
portion shall be deemed to be the portion selected for redemption.
CHANGE IN CONTROL PERMITS PURCHASE OF NOTES BY US AT THE OPTION OF THE HOLDER
In the event of a change in control (as defined below) with respect to us, each
holder will have the right, at its option, subject to the terms and conditions
of the indenture, to require us to purchase for cash all or any portion of the
holder's notes in integral multiples of $1,000 principal amount, at a price for
each $1,000 principal amount of such notes tendered for repurchase equal to 100%
of the principal amount of such notes tendered, plus any accrued and unpaid
interest to the purchase date. We will be required to purchase the notes no
later than 30 business days after notice of a change in control has been mailed
as described below. We refer to this date in this prospectus as the "change in
control purchase date."
Within 30 business days after the occurrence of a change in control, we must
mail to the trustee and to all holders of notes at their addresses shown in the
register of the registrar and to beneficial owners as required by applicable law
a notice regarding the change in control, which notice must state, among other
things:
>> the event or events causing a change in control;
>> the date of such change in control;
>> the last date on which a holder may exercise the purchase right;
>> the change in control purchase price;
>> the change in control purchase date;
>> the name and address of the paying agent and the conversion agent;
>> the conversion rate and any adjustments to the conversion rate;
>> that notes with respect to which a change in control purchase notice is
given by the holder may be converted, if otherwise convertible, only if the
change in control purchase notice has been withdrawn in accordance with the
terms of the indenture; and
>> the procedures that holders must follow to exercise these rights.
To exercise this right, the holder must deliver a written notice so as to be
received by the paying agent no later than the close of business on the third
business day prior to the change in control purchase date. The required purchase
notice upon a change in control must state:
27
>> the certificate numbers of the notes to be delivered by the holder, if
applicable;
>> the portion of the principal amount of notes to be purchased, which portion
must be $1,000 or an integral multiple of $1,000; and
>> that we are to purchase such notes pursuant to the applicable provisions of
the notes.
A holder may withdraw any change in control purchase notice by delivering to the
paying agent a written notice of withdrawal prior to the close of business on
the business day prior to the change in control purchase date. The notice of
withdrawal must state:
>> the principal amount of the notes being withdrawn;
>> the certificate numbers of the notes being withdrawn, if applicable; and
>> the principal amount, if any, of the notes that remain subject to a change
in control purchase notice.
Our obligation to pay the change in control purchase price for a note for which
a change in control purchase notice has been delivered and not validly withdrawn
is conditioned upon delivery of the note, together with necessary endorsements,
to the paying agent at any time after the delivery of such change in control
purchase notice. We will cause the change in control purchase price for such
note to be paid promptly following the later of the change in control purchase
date or the time of delivery of such note.
If the paying agent holds money sufficient to pay the change in control purchase
price of the note on the change in control purchase date in accordance with the
terms of the indenture, then, immediately after the change in control purchase
date, interest on such note will cease to accrue, whether or not the note is
delivered to the paying agent. Thereafter, all other rights of the holder shall
terminate, other than the right to receive the change in control purchase price
upon delivery of the note.
Under the indenture, a "change in control" is deemed to have occurred at such
time as:
>> any "person" or "group" (as such terms are used for purposes of Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner"
(as such term is used in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% or more of the voting power of our common stock or other
capital stock into which our common stock is reclassified or changed;
>> at any time the following persons cease for any reason to constitute a
majority of our board of directors:
>> individuals who on the issue date of the notes constituted our board
of directors and
>> any new directors whose election by our board of directors or whose
nomination for election by our stockholders was approved by at least a
majority of the directors then still in office who were either
directors on the issue date of the notes or whose election or
nomination for election was previously so approved; or
>> the sale, lease or transfer of all or substantially all of our assets and
property to any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act).
However, a change in control will not be deemed to have occurred if either:
>> the last sale price of our common stock for any five trading days during
the ten trading days immediately preceding the change in control is at
least equal to 105% of the conversion price in effect on such trading day;
or
>> in the case of a merger or consolidation, all of the consideration
(excluding cash payments for fractional shares and cash payments pursuant
to dissenters' appraisal rights) in the merger or consolidation
constituting the change in control consists of common stock traded on a US
national securities exchange or quoted on The Nasdaq National Market (or
which will be so traded or quoted when issued or exchanged in connection
with such change in control) and as a result of such transaction or
transactions the notes become convertible solely into such common stock.
28
If a change in control occurs, there can be no assurance that we would have
sufficient funds or financing to repay any senior indebtedness then required to
be repaid or to repurchase any or all notes then required to be repurchased
under the indenture. Any failure by us to repurchase the notes when required
following a change in control would result in an event of default under the
indenture, whether or not such repurchase is permitted by the subordination
provisions of the indenture. Any such default may, in turn, cause a default
under our existing or future senior debt.
In connection with any purchase offer in the event of a change in control, we
will to the extent applicable:
>> comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender
offer rules under the Exchange Act which may then be applicable; and
>> file Schedule TO or any other required schedule under the Exchange Act.
There is inherent uncertainty in the phrase "all or substantially all."
Interpretation of this phrase as it relates to any transfer of our assets and
property will be governed by applicable law and will be dependent upon the
particular facts and circumstances. We cannot assure you how a court would
interpret this phrase if you attempt to exercise your rights following the
occurrence of a transaction that you believe constitutes a transfer of "all or
substantially all" of our assets and property. As a result, you may not receive
the change in control purchase price under circumstances in which you believe
you are entitled to it. In addition, we cannot assure you that we will have the
financial resources necessary, or otherwise be able, to acquire the notes
tendered upon being notifieda change in control.
The change in control purchase feature of the notes may in certain circumstances
make more difficult or discourage a takeover of our company.
We could, in the future, enter into transactions, including certain
recapitalizations, that would not constitute a change in control with respect to
the change in control purchase feature of the notes but that would increase the
amount of our, or our subsidiaries', indebtedness and adversely affect the value
of the notes.
We may not purchase notes at the option of holders upon a change in control if
there has occurred and is continuing an event of default with respect to the
notes, other than a default in the payment of the change in control purchase
price with respect to the notes.
SUBORDINATION OF NOTES
Upon any distribution to our creditors in our liquidation or dissolution or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to us or our property, the payment of all amounts due on the notes
(other than cash payments due upon conversion in lieu of fractional shares, and
other than permitted payments) will be subordinated, to the extent provided in
the indenture, in right of payment to the prior payment in full of all senior
indebtedness and all indebtedness of our subsidiaries.
We will not pay, directly or indirectly, any amount due on the notes (including
any change of control purchase price pursuant to the exercise of the change of
control purchase right, but excluding any permitted payments), or acquire any of
the notes, in the following circumstances:
>> if any default in payment of principal, premium, if any, or interest on
senior indebtedness (as defined below) exists, unless and until the default
has been cured or waived or has ceased to exist;
>> if any default, other than a default in payment of principal, premium, if
any, or interest, has occurred with respect to senior indebtedness, and
that default permits the holders of the senior indebtedness to accelerate
its maturity, until the expiration of the "payment blockage period"
described below unless and until the default has been cured or waived or
has ceased to exist; or
>> if the maturity of senior indebtedness has been accelerated, until the
senior indebtedness has been paid or the acceleration has been cured or
waived.
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A "payment blockage period" is a period that begins on the date that we receive
a written notice from any holder of senior indebtedness or a holder's
representative, or from a trustee under an indenture under which senior
indebtedness has been issued, that an event of default with respect to and as
defined under any senior indebtedness (other than default in payment of the
principal of, or premium, if any, or interest on any senior indebtedness), which
event of default permits the holders of senior indebtedness to accelerate its
maturity, has occurred and is continuing and ends on the earlier of (1) the date
on which such event of default has been cured or waived, (2) 180 days from the
date notice is received, (3) the date on which such senior indebtedness is
discharged or paid in full or (4) the date of which such payment blockage period
shall have been terminated by written notice to the trustee or us from the
trustee or other representative initiating such payment blockage period.
Notwithstanding the foregoing, no new payment blockage period shall commence
until a selling stockholderperiod of at least 365 consecutive days shall have elapsed since the
beginning of the prior payment blockage period. No default (other than a default
in payment) that existed or was continuing on the date of delivery of any
payment blockage notice, shall be the basis for any subsequent payment blockage
notice, unless such event of default has been cured or waived for a period of
not less than 90 consecutive days. However, if the maturity of such senior
indebtedness is accelerated, no payment may be made on the notes until such
senior indebtedness that has matured has been paid or such acceleration has been
cured or waived.
Senior indebtedness is defined in the indenture as all indebtedness (as defined
below) of ours outstanding at any time, except:
>> the notes;
>> indebtedness that by its terms is not senior in right of payment to the
notes; and
>> indebtedness that by its terms is pari passu or junior in right of payment
to the notes.
Senior indebtedness does not include our indebtedness to any of our
subsidiaries.
Indebtedness is defined with respect to any person as the principal of, and
premium, if any, and interest on (a) all indebtedness of such person for
borrowed money (including all indebtedness evidenced by notes, debentures or
other securities sold by such person for money), (b) all obligations incurred by
such person in the acquisition (whether by way of purchase, merger,
consolidation or otherwise and whether by such person or another person) of any
business, real property or other assets (except inventory and related items
acquired in the ordinary course of the conduct of the acquiror's usual
business), (c) guarantees by such person of indebtedness described in clause (a)
or (b) of another person, (d) all renewals, extensions, refundings, deferrals,
restructurings, amendments and modifications of any indebtedness, obligation or
guarantee, (e) all reimbursement obligations of such person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such person, (f) all capital lease obligations of such person, (g)
all net obligations of such person under interest rate swap, currency exchange
or similar agreements of such person and (h) all obligations and other
liabilities, contingent or otherwise, under any lease or related document,
including a purchase agreement, conditional sale or other title retention
agreement, in connection with the lease of real property or improvements thereon
(or any personal property included as part of any such lease) which provides
that such person is contractually obligated to purchase or cause a third party
to purchase the leased property or pay an agreed upon residual value of the
leased property, including such person's obligations under such lease or related
document to purchase or cause a third party to purchase such leased property or
pay an agreed upon residual value of the leased property to the lessor.
By reason of the subordination provisions described above, in the event of
insolvency, funds which would otherwise be payable to holders of the notes other
than as permitted payments will be paid to the holders of senior indebtedness to
the extent necessary to pay senior indebtedness in full.
Substantially all of our operations are currently and are expected in the future
to be conducted through subsidiaries, which are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts due
on the notes or to make any funds available therefor, whether by dividends,
loans or other payments. The payment of dividends and loans and advances to us
by our subsidiaries may be subject to statutory or contractual restrictions, are
contingent upon the earnings of our subsidiaries and are subject to various
business considerations.
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Except for permitted payments, the notes are effectively subordinated to all
indebtedness and other liabilities and commitments (including trade payables and
lease obligations) of our subsidiaries. Any right that we have to receive assets
of any of our subsidiaries upon its liquidation or reorganization (and the
consequent right of the holders of the notes to participate in those assets)
will be effectively subordinated to the claims of that subsidiary's creditors
(including trade creditors), except to the extent that we ourselves are
recognized as a creditor of that subsidiary, in which case our claims would
still be subordinate to any security interests in the assets of that subsidiary
and any indebtedness of that subsidiary senior to that held by us.
There are no restrictions in the indenture upon the creation of additional
senior indebtedness by us, or on the creation of any indebtedness by us or any
of our subsidiaries. As of September 30, 2002, we and our subsidiaries had
approximately $8.6 million of consolidated indebtedness effectively ranking
senior to the notes, of which $2.5 million has subsequently been retired.
MERGER OR CONSOLIDATION, OR CONVEYANCE, TRANSFER OR LEASE OF PROPERTIES AND
ASSETS
The indenture provides that we may not consolidate with or merge with or into
any other person or transfer or lease all or substantially all of our properties
and assets to another person, unless, among other things:
>> the resulting, surviving or transferee person is a corporation organized
and existing under the laws of the United States, any state thereof or the
District of Columbia or a corporation or comparable legal entity organized
under the laws of a foreign jurisdiction and whose equity securities are
listed on a national securities exchange in the United States or authorized
for quotation on The Nasdaq National Market (provided, however, that in the
case of a transaction where the surviving entity is organized under the
laws of a foreign jurisdiction, we may not consummate the transaction
without first (1) making provision for the satisfaction of our obligations
to repurchase the notes following a change in control, if any, and (2)
obtaining an opinion of tax counsel experienced in such matters to the
effect that, under then existing US federal income tax laws, there would be
no material adverse tax consequences to holders of the notes resulting from
such transaction);
>> such person assumes all of our obligations under the notes and the
indenture; and
>> we or such successor person shall not immediately thereafter be in default
under the indenture.
Upon the assumption of our obligations by such a person in such circumstances,
subject to certain exceptions, we shall be discharged from all obligations under
the notes and the indenture.
Although such transactions are permitted under the indenture, certain of the
foregoing transactions could constitute a change in control permitting each
holder to require us to purchase the notes of such holder as described in
"--Change in control permits purchase of notes by us at the option of the
holder."
EVENTS OF DEFAULT
The following will be events of default for the notes:
>> default in the payment of the principal amount, redemption price or change
in control purchase price with respect to any note when such amount becomes
due and payable;
>> default in the payment of accrued and unpaid interest, if any (including
additional payments in the event of a "registration default"), on the notes
for 30 days; provided that a doneefailure to make any of the first four
scheduled interest payments on the notes within three business days of the
applicable interest payment date will constitute an event of default with
no additional grace or pledgee intendscure period;
>> failure by us to sellcomply with any of our other covenants in the notes or the
indenture upon receipt by us of notice of such default by the trustee or by
holders of not less than 25% in aggregate principal amount of the notes
then outstanding and our failure to cure (or obtain a waiver of) such
default within 60 days after receipt of such notice;
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>> default by us or any of our significant subsidiaries in the payment at the
final maturity thereof, after the expiration of any applicable grace
period, of principal of, or premium, if any, on indebtedness for money
borrowed, in the principal amount then outstanding of $15 million or more,
or acceleration of any indebtedness in such principal amount so that it
becomes due and payable prior to the date on which it would otherwise have
become due and payable and such acceleration is not rescinded or such
default cured within 30 business days after notice to us in accordance with
the indenture;
>> certain events of bankruptcy, insolvency or reorganization affecting us or
any of our significant subsidiaries; or
>> the pledge agreement or the control agreement ceases to be in full force
and effect or enforceable in accordance with its terms.
If an event of default shall have occurred and be continuing, either the trustee
or the holders of not less than 500 shares,25% in aggregate principal amount of notes then
outstanding may declare the principal amount of the notes plus accrued and
unpaid interest, if any, on the notes accrued through the date of such
declaration to be immediately due and payable. In the case of certain events of
our bankruptcy, insolvency or reorganization, the principal amount of the notes
plus accrued and unpaid interest, if any, accrued thereon through the occurrence
of such event shall automatically become and be immediately due and payable.
MODIFICATIONS OF THE INDENTURE
We and the trustee may enter into supplemental indentures that add, change or
eliminate provisions of the indenture or modify the rights of the holders of the
notes with the consent of the holders of at least a majority in principal amount
of the notes then outstanding. However, without the consent of each holder, no
supplemental indenture may:
>> reduce the rate or change the time of payment of interest (including
additional payments in the event of a "registration default") on any note;
>> make any note payable in money or securities other than as stated in the
note or the indenture;
>> change the stated maturity of any note;
>> reduce the principal amount, redemption price or change in control purchase
price with respect to any note;
>> make any change that adversely affects the right of a holder to require us
to purchase a note;
>> waive a default in the payment of any amount due with respect to any note;
>> change the right to convert, or receive payment with respect to, a note, or
the right to institute suit for the enforcement of any payment with respect
to, or conversion of, the notes; or
>> change the provisions in the indenture that relate to modifying or amending
the indenture.
Without the consent of any holder of notes, we will fileand the trustee may enter into
supplemental indentures for any of the following purposes:
>> to evidence a supplementpermitted successor to this
prospectus.
We will bear all costs, expensesus and feesthe required assumption by that
successor of our obligations under the indenture and the notes;
>> to add to our covenants for the benefit of the holders of the notes or to
surrender any right or power conferred upon us;
>> to secure our obligations in respect of the notes;
>> to make any changes or modifications to the indenture necessary in
connection with the registration of the shares, other than feesnotes under the Securities Act and
expenses,the qualification of the indenture under the Trust Indenture Act; or
>> to cure any ambiguity or inconsistency in the indenture.
Without the consent of the holders of a majority in principal amount of the
notes, no supplemental indenture may be entered into pursuant to the preceding
paragraph if such supplemental indenture would materially and adversely affect
the interests of the holders of the notes.
The holders of a majority in principal amount of the outstanding notes may, on
behalf of the holders of all notes:
32
>> waive compliance by us with restrictive provisions of the indenture, as
detailed in the indenture; and
>> waive any past default under the indenture and its consequences, except a
default in the payment of the principal amount, accrued and unpaid
interest, if any (including additional payments in the event of counsela
"registration default"), redemption price or other adviserschange in control purchase
price or obligation to deliver common shares upon conversion with respect
to any note or in respect of any provision which under the indenture cannot
be modified or amended without the consent of the holder of each
outstanding note affected.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of ours, as such,
shall have any liability for any of our obligations under the notes or the
indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
Commission that a waiver of such liabilities is against public policy.
SATISFACTION AND DISCHARGE
We may discharge our obligations under the indenture while notes remain
outstanding if:
>> all outstanding notes have or will become due and payable at their
scheduled maturity within one year; or
>> all outstanding notes are scheduled for redemption within one year,
and in either case, we have deposited with the trustee an amount sufficient to
pay and discharge all outstanding notes on the date of their scheduled maturity
or the scheduled date of redemption.
UNCLAIMED MONEY AND PRESCRIPTION
If money deposited with the trustee or paying agent for the payment of principal
or interest remains unclaimed for two years, the trustee and paying agent shall
notify us and shall pay the money back to us at our written request. Thereafter,
holders of notes entitled to the selling stockholders. In addition,money must look to us for payment, subject to
applicable law, and all liability of the selling
stockholderstrustee and the paying agent shall
cease. Other than as described in this paragraph, the indenture does not provide
for any prescription period for the payment of interest and principal on the
notes.
REPORTS TO TRUSTEE
We will bear all commissions and discounts, if any, attributableregularly furnish to the salestrustee copies of our annual report to
stockholders, containing audited financial statements, and any other financial
reports which we furnish to our stockholders.
RULE 144A INFORMATION REQUIREMENTS
We agreed in the indenture to furnish to the holders or beneficial holders of
the shares. The selling stockholders may agree to indemnify any
broker-dealer or agent that participates in transactions involving salesnotes and prospective purchasers of the shares against various liabilities, including liabilities arisingnotes designated by the holders of
the notes, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act until such time as we register the
notes and the underlying common stock for resale under the Securities Act. We have agreedIn
addition, we will agree to indemnifyfurnish such information if, at any time while the
selling stockholders against
various liabilities in connection withnotes or the offeringcommon stock issuable upon conversion of the shares, including
liabilities arisingnotes are restricted
securities within the meaning of the Securities Act, we are not subject to the
informational requirements of the Exchange Act.
TRUSTEE AND TRANSFER AGENT
The trustee for the notes is J.P. Morgan Trust Company, National Association.
The transfer agent for our common stock is Mellon Investor Services LLC.
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LISTING AND TRADING
The notes trade on The PORTAL Market. However, notes sold pursuant to this
prospectus will no longer be eligible for trading on the PORTAL market. We do
not intend to list the notes on any securities exchange or automated quotation
system. Our common stock is listed on The Nasdaq National Market under the
Securities Act. The selling stockholders have
agreed to indemnify us, our directors and officers who signsymbol "LGND."
BOOK, ENTRY, DELIVERY AND FORM
Notes resold under the registration statement of which this prospectus forms a
part and control persons against
various liabilitieswill be represented by one or more permanent global securities in
connectiondefinitive fully registered form, which will be deposited with the offeringtrustee as
custodian for DTC and registered in the name of DTC. We initially issued the
notes in the form of two global securities, bearing a legend relating to
restrictions on transfer, which was deposited with the trustee as custodian for
DTC and registered in the name of the shares, including
liabilities arisingnominee of DTC. Except as set forth below,
the global securities may be transferred, in whole and not in part , only to DTC
or another nominee of DTC. You may hold your beneficial interests in the global
securities directly through DTC if you have an account with DTC or indirectly
through organizations that have accounts with DTC. Notes in definitive
certificated form (referred to as certificated securities) will be issued only
in certain limited circumstances described below.
DTC has advised us that it is:
>> a limited purpose trust company organized under the Securitieslaws of the state of
New York;
>> a member of the Federal Reserve System;
>> a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
>> a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act.
WeDTC was created to hold securities of institutions that have agreedaccounts with DTC
(referred to as participants) and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. DTC's
participants include securities brokers and dealers, which may include the
initial purchasers, banks, trust companies, clearing corporations and certain
other organizations. Access to DTC's book-entry system is also available to
others such as banks, brokers, dealers and trust companies (referred to as
indirect participants) that clear through or maintain a custodial relationship
with a participant, whether directly or indirectly.
Pursuant to procedures established by DTC, upon the deposit of the global
securities with DTC, DTC credited, on its book-entry registration and transfer
system, the principal amount of notes represented by such global securities to
the accounts of participants. The accounts to be credited were designated by the
initial purchasers. Ownership of beneficial interests in the global securities
will be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global securities will be
shown on, and the transfer of those beneficial interests will be effected only
through, records maintained by DTC (with respect to participants' interests),
the participants and the indirect participants. The laws of some jurisdictions
may require that certain purchasers of securities take physical delivery of such
securities in definitive form. These limits and laws may impair the ability to
transfer or pledge beneficial interests in the global securities.
Owners of beneficial interests in global securities who desire to convert their
interests into common stock should contact their brokers or other participants
or indirect participants through whom they hold such beneficial interests to
obtain information on procedures, including proper forms and cut-off times, for
submitting requests for conversion.
So long as DTC, or its nominee, is the registered owner of holder of a global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the notes represented by the global security for all purposes
under the indenture and the notes. In addition, no owner of a beneficial
interest in a global security will be able to transfer that interest except in
accordance with the selling stockholdersapplicable procedures of DTC. Except as set forth below, as
an owner of a beneficial interest in the global security, you will not be
entitled to keephave the notes represented by the global security registered in your
name, will not receive or be entitled to receive physical delivery of
certificated securities, except as described below, and will not be considered
to be the owner or holder of any notes under the global
34
securities. We understand that under existing industry practice, if an owner of
a beneficial interest in the global securities desires to take any action that
DTC, as the holder of the global securities, is entitled to take, DTC would
authorize the participants to take such action, and the participants would
authorize beneficial owners owning through such participants to take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
We will make payments of principal of, premium, if any, and interest (including
any additional interest) on the notes represented by the global securities
registered in the name of and held by DTC or its nominee to DTC or its nominee,
as the case may be, as the registered owner and holder of the global securities.
Neither the trustee, any paying agent nor we will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial interests in the global securities or for maintaining, supervising
or reviewing any records relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal of,
premium, if any, or interest (including liquidated damages) on the global
securities, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the global securities, as shown on the records of DTC or its nominee. We also
expect that payments by participants or indirect participants to owners of
beneficial interests in the global securities held through such participants or
indirect participants will be governed by standing instructions and customary
practices and will be the responsibility of such participants or indirect
participants. We will not have any responsibility or liability for any aspect of
the records relating to, or payments made on account of, beneficial interests in
the global securities for any note or for maintaining, supervising or reviewing
any records relating to such beneficial interests or for any other aspect of the
relationship between DTC and its participants or indirect participants or the
relationship between such participants or indirect participants and the owners
of beneficial interests in the global securities owning through such
participants.
Transfers between participants in DTC will be effected in the ordinary way in
accordance with DTC rules and will be settled in same-day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more participants to whose
account DTC's interests in the global securities is credited and only in respect
of that portion of the aggregate principal amount of notes as to which the
participant or participants have given such direction. However, if DTC notifies
us that it is unwilling to be a depository for the global securities or ceases
to be a clearing agency or there is a continuing event of default under the
notes, DTC will exchange the global securities for certificated securities which
it will distribute to its participants and which will be appropriately legended,
if required.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the global securities among participants of
DTC, it is under no obligation to perform or continue to perform these
procedures, and these procedures may be discontinued at any time. Neither the
trustee nor we will have any responsibility or liability for the performance by
DTC or the participants or indirect participants of their respective obligations
under the rules and procedures governing their respective operations.
PAYMENTS OF PRINCIPAL AND INTEREST
The indenture requires that payments in respect of the notes held of record by
DTC or its nominee (including notes evidenced by the global securities) be made
in same day funds. Payments in respect of the notes held of record by holders
other than DTC may, at our option, be made by check and mailed to such holders
of record as shown on the register for the notes.
REGISTRATION RIGHTS AND ADDITIONAL PAYMENTS
We and the initial purchaser entered into a registration rights agreement
November 26, 2002. Pursuant to the registration rights agreement, we agreed to
file a registration statement, of which this prospectus constitutesis a part, covering the
resales of the notes and the common stock issuable upon conversion of the notes
in accordance with Rule 415 under the Securities Act of 1933.
35
We will use our reasonable best efforts to cause a registration statement to be
declared effective and, subject to certain rights to suspend use of the
registration statement, to keep it effective until the earlier of (i) April 19, 2004, (ii)(x) the date
on which the selling stockholders
may sell all shares coveredoffer and sale of such note or underlying share of common stock has
been effectively registered under the Securities Act and such note or underlying
share has been disposed of, whether or not in accordance with the registration
statement, and (y) the date which is two years after the later of the date of
original issue of such notes and the last date that we or any of our affiliates
was the owner of such notes (or any predecessor thereto) or such shorter period
of time as permitted by this prospectus without restriction pursuant to Rule 144(k) under the Securities Act or any successor
provision thereunder. There can be no assurance that we will be able to maintain
an effective and current registration statement as required. The absence of 1933such
a registration statement may limit the holder's ability to sell such registrable
securities or (iii)adversely affect the price at which such registrable securities
can be sold.
We have agreed to pay a predetermined liquidated damages, as described herein,
to holders of the notes and the holders of common stock issued upon conversion
of the notes if:
>> the registration statement is not filed with the SEC by February 24, 2003
(90 days from the date the notes were originally issued),
>> the registration statement has not been declared effective by the SEC by
May 25, 2003 (180 days from the date the notes were originally issued) or
>> the registration statement is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by an
additional registration statement filed and declared effective) or usable
for the offer and sale of registrable securities for a period of time
(including any suspension period) which shall exceed 30 days in the
aggregate in any 3-month period or 60 days in the aggregate in any 12-month
period,
The liquidated damages shall accrue at a rate per year equal to 0.25% for the
first 90-day period, increasing with respect to each subsequent 90-day period by
an additional 0.25%, up to a maximum rate per year of 0.75% of the aggregate
principal amount of the notes, and, if applicable, on an equivalent basis per
share of common stock (valued on the basis of the conversion price then in
effect and subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) until the registration statement
is declared effective or again becomes effective or usable, as all shares
covered by this prospectus have been sold pursuantthe case may be.
The foregoing summary of certain provisions of the registration rights agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the provisions of the registration rights agreement.
Copies of the registration rights agreement are available from us or the initial
purchaser upon request.
GOVERNING LAW
The indenture and the notes are governed by and construed in accordance with the
registration statement.
12
SELLING STOCKHOLDERS
The following table sets forthlaws of the State of New York, without giving effect to such state's conflicts
of laws principles.
DESCRIPTION OF CAPITAL STOCK
DESCRIPTION OF PREFERRED STOCK
Our board of directors is authorized to issue by resolution an aggregate of 5
million shares of preferred stock in one or more series and to fix the
designation, powers, preferences, rights, qualifications, limitations and
restrictions of the shares of each such series, including the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), liquidation preferences and the number of
shares ownedconstituting any such series, without any further vote or action by eachthe
stockholders. The rights and preferences of preferred stock may in all respects
be superior and prior to the rights of the sellingcommon stock. The issuance of the
preferred stock could decrease the amount of earnings and assets available for
distribution to holders of common stock or adversely affect the rights and
powers, including voting rights, of the holders of the common stock and could
have the effect of delaying, deferring or preventing a change in control. In
connection with the adoption of our stockholder rights plan, the board of
directors designated 1,600,000 shares of series A participating preferred stock,
none of which are outstanding as of the date of this prospectus.
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DESCRIPTION OF COMMON STOCK
Our authorized common stock consists of 130 million shares, $0.001 par value per
share.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. This registration statement also shall coverSubject to
preferences that may be applicable to any additionaloutstanding preferred stock, holders
of common stock are entitled to receive ratably such dividends as may be
declared by our board of directors out of funds legally available. In the event
of liquidation, dissolution or winding up of the Company, holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any outstanding preferred stock.
Holders of common stock have no preemptive rights and no right to cumulate votes
in the election of directors. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock which become issuableare fully
paid and nonassessable.
Mellon Investor Services LLC, is the transfer agent and registrar for our common
stock.
The description of our capital stock is incorporated by reference to filings
with the SEC. See "Incorporation by Reference."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
intend to retain any future earnings to support operations and to finance the
growth and development of our business and we do not anticipate paying cash
dividends in the foreseeable future on our capital stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain US federal income tax
considerations to a holder with respect to the purchase, ownership and
disposition of the notes and our common stock acquired upon conversion of a
note. This summary is generally limited to holders that purchase notes in the
offering at the price set forth on the cover of this prospectus and hold the
notes and the shares of common stock as "capital assets" (generally, property
held for investment). This discussion does not describe all of the US federal
income tax consequences that may be relevant to a holder in light of its
particular circumstances or to holders subject to special rules, such as
tax-exempt organizations, holders subject to the US federal alternative minimum
tax, dealers in securities, financial institutions, insurance companies,
regulated investment companies, certain former citizens or former long-term
residents of the United States, partnerships or other pass-through entities, US
holders (as defined below) whose "functional currency" is not the US dollar and
persons that hold the notes or shares of common stock in connection with a
"straddle," "hedging," "conversion" or other risk reduction transaction. For
purposes of this general discussion, references to "we," "us" and "our" refer
only to Ligand Pharmaceuticals Incorporated and not to any of Ligand's
subsidiaries.
The US federal income tax considerations set forth below are based upon the
shares registeredInternal Revenue Code of 1986, as amended, Treasury regulations promulgated
thereunder, court decisions, and rulings and pronouncements of the Internal
Revenue Service, referred to as the "IRS," now in effect, all of which are
subject to change. Prospective investors should particularly note that any such
change could have retroactive application so as to result in US federal income
tax consequences different from those discussed below. We have not sought any
ruling from the IRS with respect to statements made and conclusions reached in
this discussion and there can be no assurance that the IRS will agree with such
statements and conclusions.
As used herein, the term "US holder" means a beneficial owner of a note (or our
common stock acquired upon conversion of a note) that is for sale herebyUS federal income
tax purposes:
>> an individual who is a citizen or resident of the United States;
>> a corporation, or other entity taxable as a corporation for US federal
income tax purposes, created or organized in or under the laws of the
United States, any state thereof or the District of Columbia;
>> an estate the income of which is subject to US federal income taxation
regardless of its source; or
37
>> a trust, if a court within the United States is able to exercise primary
jurisdiction over its administration and one or more US persons have
authority to control all of its substantial decisions, or if the trust has
a valid election in effect under applicable Treasury regulations to be
treated as a US person.
As used herein, the term "non-US holder" means a holder that is not a US holder.
Non-US holders are subject to special US federal income tax considerations, some
of which are discussed below.
If a partnership is a beneficial owner of a note (or our common stock acquired
upon conversion of a note), the tax treatment of a partner in the partnership
will generally depend upon the status of the partner and the activities of the
partnership. A beneficial owner that is a partnership and partners in such a
partnership should consult their tax advisors about the US federal income tax
consequences of the purchase, ownership and disposition of the notes (or our
common stock acquired upon conversion of a note).
This discussion does not address the tax consequences arising under any state,
local or foreign law. In addition, this summary does not consider the effect of
the US federal estate or gift tax laws.
INVESTORS CONSIDERING THE PURCHASE OF THE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE US FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE US
FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
US HOLDERS
PAYMENTS OF INTEREST
A US holder will be required to recognize as ordinary income any interest paid
or accrued on the notes, in accordance with the holder's regular method of tax
accounting. In certain circumstances, we may be obligated to pay holders of the
notes amounts in excess of stated interest or principal. For example, as more
fully described under "Description of notes--Registration rights and Additional
payments," in the event of a "registration default" we will be required to pay
additional interest to holders of the notes. Under the contingent payment debt
rules of the original issue discount regulations, certain possible payments are
not treated as contingencies (for example, in cases in which the possible
payments are remote or incidental). We do not plan to treat the possible
payments described above as contingent payments that are subject to the
contingent payment debt rules and, therefore, in the event an additional amount
becomes due on the notes, we believe US holders will be taxable on such amount
as interest in accordance with each holder's regular method of tax accounting.
However, because of the lack of authority on point, the tax consequences of
these additional payments are uncertain. Our determination in this regard is
binding on US holders unless they disclose their contrary position in the manner
required by reasonapplicable Treasury regulations. Our determination is not, however,
binding on the IRS, and it is possible that the IRS may take a different
position regarding these payments or potential payments, in which case the
timing and amount of income with respect to a note may be significantly
different than described herein and a US holder may be required to treat as
interest income all or a portion of any gain realized on the disposition of a
note (including also possibly upon conversion of the note into our common
stock). Prospective purchasers should consult their own tax advisors as to the
tax considerations that relate to these payments or potential payments. The rest
of this discussion assumes that the possible payments described above are not
treated as contingent payments that are subject to the contingent payment debt
rules.
SALE, REDEMPTION OR EXCHANGE OF NOTES
A US holder will generally recognize capital gain or loss if the holder disposes
of a note in a sale, redemption or exchange (other than a conversion of the note
into common stock). The US holder's gain or loss will equal the difference
between the proceeds received by the holder and the holder's adjusted tax basis
in the note. The proceeds received by a US holder will include the amount of any
cash and the fair market value of any other property received for the note. The
portion of any proceeds that is attributable to accrued interest will not be
taken into account in computing the US holder's capital gain or loss. Instead,
that portion will be recognized as ordinary interest income to the extent that
the US holder has not previously included the accrued interest in income. The
gain or loss recognized by a US holder on a disposition of the note will be
long-term capital gain or loss if the holder held the note for more than one
year. Long-term capital gains of noncorporate taxpayers are generally taxed at a
lower maximum marginal
38
rate than the maximum marginal rate applicable to ordinary income. The maximum
marginal tax rate for capital gains is further reduced for property held for
more than five years. The deductibility of capital losses is subject to
limitation.
CONVERSION OF THE NOTES
A US holder generally should not recognize income, gain or loss upon conversion
of the notes solely into our common stock, dividend,except with respect to cash received
in lieu of fractional shares. The US holder's tax basis in the common stock
split,
recapitalization or other similar transaction effected withoutreceived on conversion should be the same as the holder's adjusted tax basis in
the notes exchanged therefore at the time of conversion (reduced by any basis
allocable to a fractional share), and the holding period for the common stock
received on conversion should include the holding period of the notes that were
converted. Cash received in lieu of a fractional share of common stock upon
conversion of the notes into common stock will generally be treated as a payment
in exchange for the fractional share of common stock. Accordingly, the receipt
of consideration which resultscash in an increaselieu of a fractional share of common stock generally will result in
capital gain or loss measured by the difference between the cash received for
the fractional share and the holder's adjusted tax basis in the numberfractional
share.
DIVIDENDS ON COMMON STOCK
We have not paid any dividends on our common stock and do not anticipate paying
any dividends in the foreseeable future. However, if, after a US holder converts
a note into common stock, we do make distributions on our common stock, the
distributions will constitute dividends taxable to the holder as ordinary income
for US federal income tax purposes to the extent of our outstandingcurrent or accumulated
earnings and profits as determined under US federal income tax principles. To
the extent that the US holder receives distributions on shares of common stock
that would otherwise constitute dividends for US federal income tax purposes but
that exceed our current and accumulated earnings and profits, such distributions
will be treated first as a non-taxable return of capital reducing the holder's
basis in the shares of common stock. NoneAny such distributions in excess of the selling stockholders has hadUS
holder's basis in the shares of common stock will generally be treated as
capital gain. Subject to applicable limitations, distributions constituting
dividends paid to holders that are US corporations will qualify for the
dividends-received deduction.
ADDITIONAL PAYMENTS IN THE CASE OF A REGISTRATION DEFAULT
Similar to the additional interest described above, we will be required to make
additional payments in respect of our common stock held by US holders in the
event of a material relationship with"registration default" occurring after the conversion of any notes
held by such holders. Any such additional payment generally should be treated
for US federal income tax purposes in a manner similar to a distribution by us
withindescribed under "Dividends on common stock" above.
ADJUSTMENT OF CONVERSION PRICE
The conversion price of the past three years other thannotes is subject to adjustment under certain
circumstances, see "Description of notes--Conversion rights." Certain
adjustments to (or the failure to make such adjustments to) the conversion price
of the notes that increase the proportionate interest of a US holder in our
assets or earnings and profits may result in a taxable constructive distribution
to the holders of the notes, whether or not the holders ever convert the notes.
This could occur, for example, if the conversion rate is adjusted to compensate
holders of notes for certain distributions of cash or property to our
stockholders. Such constructive distribution will be treated as a dividend,
resulting in ordinary income (and a possible dividends received deduction in the
case of corporate holders), to the extent of our current or accumulated earnings
and profits. As a result, US holders of notes could have taxable income as a
result of an event pursuant to which they receive no cash or property.
Generally, a US holder's tax basis in a note will be increased to the ownershipextent any
such constructive distribution is treated as a dividend. Moreover, if there is
an adjustment (or a failure to make an adjustment) to the conversion price of
the sharesnotes that increases the proportionate interest of the holders of
outstanding common stock in our assets or earnings and profits, then such
increase in the proportionate interest of the holders of the common stock
generally will be treated as a constructive distribution to such holders,
taxable as described above.
39
SALE OF COMMON STOCK
A US holder will generally recognize capital gain or loss on a sale or exchange
of our common stock. The US holder's gain or loss will equal the difference
between the proceeds received by the holder and the holder's adjusted tax basis
in the stock, which will generally be the holder's adjusted basis in the note
immediately before a conversion of the note into common stock. The proceeds
received by a US holder will include the amount of any cash and the fair market
value of any other property received for the stock. The gain or loss recognized
by a US holder on a sale or exchange of stock will be long-term capital gain or
loss if the holder's holding period for the stock (which would include the
holding period for the note) is more than one year. Long-term capital gains of
noncorporate taxpayers are generally taxed at a lower maximum marginal rate than
the maximum marginal rate applicable to ordinary income. The maximum marginal
rate for capital gains is further reduced for property held for more than five
years. The deductibility of capital losses is subject to limitation.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate US holders may be subject to IRS information reporting and
backup withholding on payments of interest on the notes, dividends on common
stock and proceeds from the sale or other disposition of the notes or common
stock. Backup withholding will only be imposed where the noncorporate US holder:
>> fails to furnish its taxpayer identification number, referred to as a
"TIN";
>> furnishes an incorrect TIN;
>> is notified by the IRS that he or she has failed to properly report
payments of interest or dividends;
>> under certain circumstances, fails to certify, under penalties of perjury,
that he or she has furnished a correct TIN and has not been notified by the
IRS that he or she is subject to backup withholding; or
>> the IRS otherwise requires us to backup withhold.
Backup withholding is not an additional tax. The amount of any backup
withholding from a payment to a US holder will be allowed as a credit against
the US holder's federal income tax liability and may entitle such holder to a
refund, provided that the required information is furnished to the IRS.
SPECIAL TAX RULES APPLICABLE TO NON-US HOLDERS
The following rules apply to you if you are a non-US holder (as defined above).
PAYMENTS OF INTEREST
Generally, payments of interest on the notes to, or received on behalf of, a
non-US holder will be considered "portfolio interest" and will not be subject to
US federal income or withholding tax where such interest is not effectively
connected with the conduct of a trade or business within the United States by
such non-US holder if:
>> such non-US holder does not actually or by attribution own 10% or more of
the total combined voting power of all classes of our stock entitled to
vote;
>> the non-US holder is not a bank receiving interest pursuant to a loan
agreement entered into in the ordinary course of its trade or business;
>> such non-US holder is not a controlled foreign corporation for US federal
income tax purposes that is related to us, actually or by attribution,
through stock ownership; and
>> the certification requirements, as described below, are satisfied.
To satisfy the certification requirements referred to above, either (i) the
beneficial owner of a note must certify, under penalties of perjury, to us or
our paying agent, as the case may be, that such owner is a non-US person and
must provide such owner's name and address, and TIN, if any, or (ii) a
securities clearing organization, bank or other financial institution that holds
customer securities in the ordinary course of ours.
We do not know whenits trade or in what amountsbusiness, referred to
as a "Financial Institution," and holds the selling stockholdersnote on behalf of the beneficial
owner thereof must certify, under penalties of perjury, to us or our paying
agent, as the case may offer
shares for sale. The selling stockholders may decide not to sell allbe, that such certificate has been received from the
beneficial owner and must furnish the payor with a copy thereof. Such
requirement will be fulfilled if the beneficial owner of a
40
note certifies on IRS Form W-8BEN, under penalties of perjury, that it is a
non-US holder and provides its name and address or any Financial Institution
holding the note on behalf of the sharesbeneficial owner files a statement with the
withholding agent to the effect that this prospectus covers. The shares offeredit has received such a statement from the
beneficial owner (and furnishes the withholding agent with a copy thereof).
Special certification rules apply for notes held by this prospectusforeign partnerships and
other intermediaries.
If interest on the note is effectively connected with the conduct of a trade or
business in the United States by a non-US holder (and, if certain tax treaties
apply, is attributable to a "US permanent establishment" maintained by the
non-US holder in the United States), the non-US holder, although exempt from US
federal withholding tax (provided that the certification requirements discussed
in the next sentence are met), will generally be subject to US federal income
tax on such interest on a net income basis in the same manner as if it were a US
holder. In order to claim an exemption from withholding tax, such a non-US
holder will be required to provide us with a properly executed IRS Form W-8ECI
certifying, under penalties of perjury, that the holder is a non-US person and
the interest is effectively connected with the holder's conduct of a US trade or
business and is includable in the holder's gross income. In addition, if such
non-US holder so engaged is a foreign corporation, it may be offeredsubject to a branch
profits tax equal to 30% (or such lower rate provided by an applicable treaty)
of its effectively connected earnings and profits for the taxable year, subject
to certain adjustments.
Interest on notes not effectively connected with a US trade or business and not
excluded from timeUS federal withholding tax under the "portfolio interest"
exception described above generally will be subject to time bywithholding at a 30%
rate, except where a non-US holder can claim the selling stockholders named below.
Becausebenefits of an applicable tax
treaty to reduce or eliminate such withholding tax and demonstrates such
eligibility to us and the selling stockholdersIRS.
As described under "--US Holders--Payments of interest" above, we may offer all or somebe
required to pay holders of the shares pursuantnotes additional interest in the event of a
"registration default." It is unclear whether the payment of such additional
interest to this offering, and because there are currently no agreements, arrangementsa non-US holder would be subject to US federal income tax or understandingsany
withholding thereof. We intend to withhold US federal income tax from any
payment of additional interest to a non-US holder at a rate of 30% or lower
treaty rate, if applicable. Prospective purchasers should consult their own tax
advisors as to the tax considerations that relate to the potential payment of
additional interest.
CONVERSION OF THE NOTES
A non-US holder generally will not be subject to US federal income or
withholding tax on the conversion of a note into our common stock. To the extent
a non-US holder receives cash in lieu of a fractional share of common stock upon
conversion, such cash may give rise to gain that would be subject to the rules
described below with respect to the sale or exchange of a note or common stock.
See "--Sale or exchange of the notes or common stock" below.
ADJUSTMENT OF CONVERSION PRICE
The conversion price of the notes is subject to adjustment in certain
circumstances. Any such adjustment could, in certain circumstances, give rise to
a deemed distribution to non-US holders of the notes. See "--US
Holders--Adjustment of conversion price" above. In such case, the deemed
distribution would be subject to the rules below regarding withholding of US
federal tax on dividends in respect of common stock. See "--Dividends on common
stock" below.
SALE OR EXCHANGE OF THE NOTES OR COMMON STOCK
A non-US holder generally will not be subject to US federal income or
withholding tax on gain realized on the sale or other taxable disposition
(including a redemption) of a note or common stock received upon conversion
thereof unless:
>> the holder is an individual who was present in the United States for 183
days or more during the taxable year of the disposition and (a) such holder
has a "tax home" in the United States or (b) the gain is attributable to an
office or other fixed place of business maintained in the United States by
such holder; in this case the non-US holder will be subject to a 30% tax on
gain derived from the disposition; or
41
>> the gain is effectively connected with the conduct of a US trade or
business by the non-US holder (and, if required by a tax treaty, the gain
is attributable to a permanent establishment maintained in the United
States); in this case, the non-US holder will generally be taxed on its net
gain derived from the disposition at the regular graduated rates and in the
manner applicable to US persons and, if the non-US holder is a foreign
corporation, the "branch profits tax" described above may also apply.
We do not believe that we are currently a US real property holding corporation
(a "USRPHC"), nor that we will become a USRPHC in the future. However, if we
were to become a USRPHC, a non-US holder could be subject to federal income tax
withholding with respect to gain realized on the disposition of notes or shares
of common stock. In that case, any withholding tax withheld pursuant to the
rules applicable to dispositions of US real property interests would be
creditable against that non-US holder's US federal income tax liability and
could entitle that non-US holder to a refund upon furnishing required
information to the IRS.
DIVIDENDS ON COMMON STOCK
We have not paid any dividends on our common stock and do not anticipate paying
any dividends in the foreseeable future. However, if, after a non-US holder
converts a note into common stock, we do make distributions on our common stock,
the distributions will constitute a dividend for US federal income tax purposes
to the extent of our current or accumulated earnings and profits as determined
under US federal income tax principles. Except as described below, dividends
paid on common stock held by a non-US holder will be subject to US federal
withholding tax at a rate of 30% or lower treaty rate, if applicable. A non-US
holder generally will be required to satisfy certain IRS certification
requirements in order to claim a reduction of or exemption from withholding
under a tax treaty by filing IRS Form W-8BEN upon which the non-US holder
certifies, under penalties of perjury, its status as a non-US person and its
entitlement to the lower treaty rate with respect to such payments.
If dividends paid to a non-US holder are effectively connected with the conduct
of a US trade or business by the non-US holder and, if required by a tax treaty,
the dividends are attributable to a permanent establishment maintained in the
United States, we and other payors generally are not required to withhold tax
from the dividends, provided that the non-US holder furnishes to us a valid IRS
Form W-8ECI certifying, under penalties of perjury, that the holder is a non-US
person, and the dividends are effectively connected with the holder's conduct of
a US trade or business and are includible in the holder's gross income.
Effectively connected dividends will be subject to US federal income tax on net
income that applies to US persons generally (and, with respect to corporate
holders under certain circumstances, the branch profits tax).
ADDITIONAL PAYMENTS IN THE CASE OF A REGISTRATION DEFAULT
Similar to the additional interest described above, we will be required to make
additional payments in respect of our common stock held by non-US holders in the
event of a "registration default" occurring after the conversion of any notes
held by such holders. Any such additional payment generally should be treated
for US federal income tax purposes in a manner similar to a distribution by us
described under "Dividends on common stock" above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
We must report annually to the IRS and to each non-US holder the amount of
interest or dividends paid to that holder and the tax withheld from those
payments of interest or dividends. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by any applicable tax treaty.
Copies of the sharesinformation returns reporting those payments of interest or
dividends and withholding may also be made available to the tax authorities in
the country in which the non-US holder is a resident under the provisions of an
applicable income tax treaty or agreement.
A non-US holder will generally not be subject to additional information
reporting or to backup withholding with respect to payments of interest on the
notes or dividends on common stock or to information reporting or backup
withholding with respect to proceeds from the sale or other disposition of the
notes or common stock to or through a US office of any broker, as long as the
holder has furnished to the payor or broker:
42
>> a valid IRS Form W-8BEN certifying, under penalties of perjury, its status
as a non-US person;
>> other documentation upon which it may rely to treat the payments as made to
a non-US person in accordance with Treasury regulations; or
>> otherwise establishes an exemption.
The payment of the proceeds from the sale or other disposition of the notes or
common stock to or through a foreign office of a broker generally will not be
subject to information reporting or backup withholding. However, a sale or
disposition of the notes or common stock will be subject to information
reporting, but not backup withholding, if it is to or through a foreign office
of a broker that is a "US related broker" unless the documentation requirements
described above are met or the holder otherwise establishes an exemption. A
broker is a "US related broker" if the broker is:
>> a US person;
>> a controlled foreign corporation for US federal income tax purposes;
>> a foreign person 50% or more of whose gross income is effectively connected
with the conduct of a US trade or business for a specified three-year
period; or
>> a foreign partnership, if at any time during its tax year one or more of
its partners are US persons, as defined in Treasury regulations, who in the
aggregate hold more than 50% of the income or capital interest in the
partnership, or such foreign partnership is engaged in the conduct of a US
trade or business.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-US holder will be allowed as a
credit against such holder's US federal income tax liability, if any, or will
otherwise be refundable, provided that the selling
stockholders will hold after completionrequisite procedures are followed and
the proper information is filed with the IRS on a timely basis. Non-US holders
should consult their own tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption, if applicable.
The preceding discussion of certain US federal income tax consequences is for
general information only and is not tax advice. Accordingly, you should consult
your own tax advisor as to particular tax consequences to you of purchasing,
holding and disposing of the offering, we cannot estimatenotes and our common stock, including the
numberapplicability and effect of shares that the selling stockholders will hold after completionany state, local or foreign tax laws, and of the
offering.
SHARES BENEFICIALLY
OWNED PRIOR TO THIS OFFERING
---------------------------------------------
PERCENTAGE OF COMMON NUMBER OF SHARES OF
NAME OF STOCK OUTSTANDING COMMON STOCK
SELLING STOCKHOLDER NUMBER REGISTERED HEREBY
- ----------------------------------- -------------------- -------------------- --------------------
Banque Carnegie Luxembourg 222,000 * 62,000
Banque Carnegie Luxembourg FCP Funds 343,352 * 238,000
Biocentive Limited 31,000 * 31,000
Caduceus Capital II, L.P. 150,000 * 150,000
HBM Bioventures (Cayman) Ltd. 300,000 * 300,000
Interdynamic Fund - BioMed Tech 31,000 * 31,000
Merlin BioMed, L.P. 50,000 * 50,000
Merlin BioMed II, L.P. 28,000 * 28,000
Merlin BioMed III, L.P. 16,000 * 16,000
Merlin BioMed International, Ltd. 94,000 * 94,000
Moore Global Investments, Ltd. 420,000 * 420,000
Nordea Global Biotech Fund 57,000 * 30,000
Nordea Medica Life Science Fund 70,000 * 60,000
Putnam Funds Trust - Putnam New 206,100 * 32,100
Century Growth Fund
Putnam New Opportunities Fund 564,500 * 564,500
13
Putnam Variable Trust - Putnam VT New 112,300 * 112,300
Opportunities Fund
Putnam Variable Trust - Putnam VT 5,840 * 900
Voyager Fund
Putnam Voyager Fund II 429,000 * 67,000
Putnam World Trust II - Putnam New 4,000 * 4,000
Opportunities (U.S. Aggressive Growth
Equity) Fund (Dublin)
PW Eucalyptus Fund, L.L.C. 345,000 * 345,000
PW Eucalyptus Fund, Ltd. 45,000 * 45,000
Remington Investment Strategies, LP 80,000 * 80,000
Saks MedScience Fund 30,000 * 30,000
SF Capital Partners Ltd. 125,000 * 125,000
UBS O'Connor LLC F/B/O O'Connor PIPES 400,000 * 400,000
Corporate Strategies Ltd.
Ursus Capital, L.P. 35,600 * 35,600
Ursus Offshore, Ltd. 41,100 * 41,100
Vertical International Limited 343,750 * 343,750
Vertical Ventures Investments, LLC 206,250 * 206, 250
Winchester Global Trust Company 310,000 * 310,000
------- -------
Limited as Trustee for Caduceus
Capital Trust
TOTAL: 5,095,792 4,252,500
========= =========
* Indicates less than 1%
14any
proposed changes in applicable laws.
43
LEGAL MATTERS
TheClifford Chance US LLP, San Diego, will pass on the validity of the securities offered hereby will be passednotes
and the common stock issuable upon by
Brobeck, Phleger & Harrison LLP, San Diego, California. Attorneys associated
with Brobeck, Phleger & Harrison LLP own a total of 8,827 shares of our common
stock.their conversion.
EXPERTS
The consolidated financial statements for the years ended December 31, 2001
and 2000 incorporated in this prospectus by reference from our Annual Report on
Form 10-K for the year ended December 31, 2001 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference (which report expresses an unqualified opinion
and includes an explanatory paragraph referring to a change in accounting
principle), and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements incorporated by reference in our
Annual Report on Form 10-K for the year ended December 31, 1999 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM
WHAT IS IN THIS PROSPECTUS. IF ANY PERSON DOES MAKE A STATEMENT THAT DIFFERS
FROM WHAT IS IN THIS PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS IS
NOT AN OFFER TO SELL, NOR IS IT AN OFFER TO BUY, THESE SECURITIES IN ANY STATE
IN WHICH THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS
IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE INFORMATION MAY CHANGE AFTER
THAT DATE.
15
4,252,500 SHARES
LIGAND PHARMACEUTICALS INCORPORATED
COMMON STOCK
----------------------------------
Prospectus
----------------------------------
APRIL 26, 200244
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the registrant in connection with the
saleresales of the common stocksecurities being registered. All the amounts shown are estimates,
except for the SEC registration fee.
SEC registration fee................................. $6,639.18
---------fee......................... $14,283
Printing and engraving expenses .....................expenses.............. 5,000
---------
Nasdaq additional listing fee........................ 22,500
---------
Legal fees and expenses.............................. 50,000
---------expenses...................... 15,000
Accounting fees and expenses......................... 25,000
---------
Transfer agent and registrar fee .................... 5,000
---------expenses................. 12,000
Trustee fees................................. 30,000
Miscellaneous expenses...............................expenses....................... 10,000
---------
TOTAL $124,139.18
===========TOTAL................................... $86,283
=======
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, we have broad
powers to indemnify our directors and officers against liabilities they may
incur in such capacities, including liabilities under the Securities Act.
Our amended and restated certificate of incorporation provides for the
indemnification of all persons to the fullest extent permissible under Delaware
law.
Our amended and restated by-laws providesprovide for the indemnification of
officers, directors and third parties acting on our behalf if such person acted
in good faith and in a manner reasonably believed to be in and not opposed to
our best interest, and, with respect to any criminal action or proceeding, the
indemnified party had no reason to believe his or her conduct was unlawful.
We maintain directors and officers insurance providing indemnification for
certain of our directors and officers for certain liabilities.
We also entered into indemnification agreements between us and our
directors and officers, which may be sufficiently broad to permit
indemnification of our officers and directors for liabilities arising under the
Securities Act.
In connection with our April 2002 private placement, the Company agreed to
indemnify the selling stockholders and its controlling persons, as defined in
the Securities Act, against liabilities, including legal fees, that the selling
stockholders or their controlling persons may incur under the Securities Act,
the Exchange Act, or any other federal or state statutory law or regulation, or
at common law or otherwise in connection with this registration statement,
including the prospectus, financial statements and schedules, and amendments and
supplements to those documents, except liabilities related to misstatements or
omissions made in the registration statement in conformity with written
information furnished to the Company by or on behalf of the selling stockholders
expressly for use in the registration statement or prospectus or any breach or
violation of the representations and warranties of the selling stockholders
under the purchase agreements between the Company and the selling stockholders
dated as of April 17, 2002.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions, we have been informed that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
II-1
ITEM 16. EXHIBITS.
(a)(A) EXHIBITS.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.1 Instruments defining the rights of stockholders. Reference is
made to our Form 8-A registration statement filed on November 21,
1994 (incorporated into this registration statement by
reference), the Amended and Restated Certificate of Incorporation
(incorporated into this registration statement by reference to
Exhibit 3.2 to our Form S-4 registration statement filed on July
9, 1998), the Bylaws (incorporated into this registration
statement by reference to Exhibit 3.3 of our Form S-4
registration statement, filed on July 9, 1998), the Amended
Certificate of Designation of Rights, Preferences and Privileges
of Series A Participating Preferred Stock (incorporated into this
registration statement by reference to Exhibit 3.3 to our
quarterly report on Form 10-Q for the period ended March 31,
1999) and our Form 8-A registration statement filed on September
30, 1996, including any amendments or reports filed for the
purposes of updating such descriptions.
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Brobeck, Phleger & Harrison LLP. Included in the
Opinion of Brobeck, Phleger & HarrisonEXHIBIT NO. DESCRIPTION
1.1 Purchase Agreement dated November 21, 2002, between Ligand Pharmaceuticals
Incorporated and UBS Warburg LLC
4.1 Instruments defining the rights of stockholders. Reference is made to our
Form 8-A registration statement filed on November 21, 1994 (incorporated
into this registration statement by reference), our Amended and Restated
Certificate of Incorporation (incorporated into this registration statement
by reference to Exhibit 3.2 to our Form S-4 registration statement filed on
July 9, 1998), our Bylaws (incorporated into this registration statement by
reference to Exhibit 3.3 of our Form S-4 registration statement, filed on
July 9, 1998), our Amended Certificate of Designation of Rights,
Preferences and Privileges of Series A Participating Preferred Stock
(incorporated into this registration statement by reference to Exhibit 3.3
to our quarterly report on Form 10-Q for the period ended March 31, 1999),
our Form 8-A registration statement filed on September 30, 1996 and our
specimen stock certificate for shares of our common stock (incorporated
into this registration statement by reference to Exhibit 4.1 filed with the
our registration statement filed on April 16, 1992 as amended), including
any amendments or reports filed for the purposes of updating such
descriptions.
4.2 Registration Rights Agreement dated November 26, 2002 between Ligand
Pharmaceuticals Incorporated and UBS Warburg LLC
4.3 Indenture dated November 26, 2002, between Ligand Pharmaceuticals
Incorporated and J.P. Morgan Trust Company, National Association, as
trustee, with respect to the 6% convertible subordinated notes due 2007
4.4 Form of 6% Convertible Subordinated Note due 2007
4.5 Pledge Agreement dated November 26, 2002, between Ligand Pharmaceuticals
Incorporated and J.P. Morgan Trust Company, National Association
4.6 Control Agreement dated November 26, 2002, among Ligand Pharmaceuticals
Incorporated, J.P. Morgan Trust Company, National Association and JP Morgan
Chase Bank
5.1 Opinion of Clifford Chance US LLP
12.1 Statement Regarding Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Ernst & Young, Independent Auditors
23.3 Consent of Clifford Chance US LLP. Included in the Opinion of Clifford
Chance US LLP filed as Exhibit 5.1
- -----------------24.1 Power of Attorney (See Signature Page on Page II-5)
25.1 Statement of Eligibility of Trustee on Form T-1
II-2
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii)to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-2The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act (the "Act") in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on April 26, 2002.January 13, 2003.
LIGAND PHARMACEUTICALS INCORPORATED
By: /s/ David/S/DAVID E. Robinson
-----------------------------------ROBINSON
-----------------------------
David E. Robinson, President
and Chief Executive Officer
II-4
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints David E. Robinson and Paul V. Maier, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution, for him or her and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement, and to sign any
registration statement for the same offering covered by this registration
statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, as amended, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ David/S/DAVID E. Robinson April 26, 2002ROBINSON January 13, 2003
- -----------------------------------------
David E. Robinson President and Chief Executive Officer
(Principal Executive Officer)
/s/ Paul/S/PAUL V. Maier April 26, 2002MAIER January 13, 2003
- -----------------------------------------
Paul V. Maier Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Henry/S/HENRY F. Blissenbach April 26, 2002BLISSENBACH January 13, 2003
- -----------------------------------------
Henry F. Blissenbach Director
/S/ALEXANDER D. CROSS January 13, 2003
- -----------------------------------------
Alexander D. Cross Director
/s/ Michael/S/MICHAEL A. Rocca April 26, 2002ROCCA January 13, 2003
- -----------------------------------------
Michael A. Rocca Director
/s/ John Groom April 26, 2002/S/JOHN GROOM January 13, 2003
- -----------------------------------------
John Groom Director
/s/ Irving/S/IRVING S. Johnson April 26, 2002JOHNSON January 13, 2003
- -----------------------------------------
Irving S. Johnson Ph.D. Director
/S/CARL C. PECK January 13, 2003
- -----------------------------------------
Carl C. Peck Director
II-3II-5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.1 Instruments defining the rights of stockholders. Reference is
made to our Form 8-A registration statement filed on November 21,
1994 (incorporated into this registration statement by
reference), the Amended and Restated Certificate of Incorporation
(incorporated into this registration statement by reference to
Exhibit 3.2 to our Form S-4 registration statement filed on July
9, 1998), the Bylaws (incorporated into this registration
statement by reference to Exhibit 3.3 of our Form S-4
registration statement, filed on July 9, 1998), the Amended
Certificate of Designation of Rights, Preferences and Privileges
of Series A Participating Preferred Stock (incorporated into this
registration statement by reference to Exhibit 3.3 to our
quarterly report on Form 10-Q for the period ended March 31,
1999) and our Form 8-A registration statement filed on September
30, 1996, including any amendments or reports filed for the
purposes of updating such descriptions.
5.1 Opinion of Brobeck, Phleger & Harrison LLP
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Brobeck, Phleger & Harrison LLP. Included in the
Opinion of Brobeck, Phleger & HarrisonEXHIBIT NO. DESCRIPTION
1.1 Purchase Agreement dated November 21, 2002, between Ligand Pharmaceuticals
Incorporated and UBS Warburg LLC
4.1 Instruments defining the rights of stockholders. Reference is made to our
Form 8-A registration statement filed on November 21, 1994 (incorporated
into this registration statement by reference), our Amended and Restated
Certificate of Incorporation (incorporated into this registration statement
by reference to Exhibit 3.2 to our Form S-4 registration statement filed on
July 9, 1998), our Bylaws (incorporated into this registration statement by
reference to Exhibit 3.3 of our Form S-4 registration statement, filed on
July 9, 1998), our Amended Certificate of Designation of Rights,
Preferences and Privileges of Series A Participating Preferred Stock
(incorporated into this registration statement by reference to Exhibit 3.3
to our quarterly report on Form 10-Q for the period ended March 31, 1999),
our Form 8-A registration statement filed on September 30, 1996 and our
specimen stock certificate for shares of our common stock (incorporated
into this registration statement by reference to Exhibit 4.1 filed with the
our registration statement filed on April 16, 1992 as amended), including
any amendments or reports filed for the purposes of updating such
descriptions.
4.2 Registration Rights Agreement dated November 26, 2002 between Ligand
Pharmaceuticals Incorporated and UBS Warburg LLC
4.3 Indenture dated November 26, 2002, between Ligand Pharmaceuticals
Incorporated and J.P. Morgan Trust Company, National Association, as
trustee, with respect to the 6% convertible subordinated notes due 2007
4.4 Form of 6% Convertible Subordinated Note due 2007
4.5 Pledge Agreement dated November 26, 2002, between Ligand Pharmaceuticals
Incorporated and J.P. Morgan Trust Company, National Association
4.6 Control Agreement dated November 26, 2002, among Ligand Pharmaceuticals
Incorporated, J.P. Morgan Trust Company, National Association and JP Morgan
Chase Bank
5.1 Opinion of Clifford Chance US LLP
12.1 Statement Regarding Ratio of Earnings to Fixed Charges
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Ernst & Young, Independent Auditors
23.3 Consent of Clifford Chance US LLP. Included in the Opinion of Clifford
Chance US LLP filed as Exhibit 5.1
- ------------------
II-424.1 Power of Attorney (See Signature Page on Page II-5)
25.1 Statement of Eligibility of Trustee on Form T-1