AS FILED WITH THE SECURITIES AD EXCHANGE COMMISSION ON AUGUST 27, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington.WASHINGTON. D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AVI BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0797222
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
ONE S.W. COLUMBIA, SUITE 1105, PORTLAND, OR 97258
(503) 227-0554
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
-------------------------
DENIS R. BURGER, PH.D.
PRESIDENT & CHIEF EXECUTIVE OFFICER
AVI BIOPHARMA, INC.
ONE S.W. COLUMBIA, SUITE 1105, PORTLAND, OR 97258
(503) 227-0554
(Name, address, including zip code, and telephone number,
including area code of agent for service)
------------------------------
COPY TO:
BYRON W. MILSTEAD, ESQ.
ATER WYNNE LLP
222 S.W. COLUMBIA, SUITE 1800, PORTLAND, OR 97201-6618
Approximate date of commencement of proposed sale to public:------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
------------------------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ___________________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
To Be To Be Price Per Offering Registration
Registered Registered Share (1) Price (1) Fee
-------------------------------------------------------------------------------PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE REGISTRATION FEE
(a) Common Stock, 975,000 $3.4375 $3,351,563 $932
$.0001 par valuevalue(2)....... 714,290 shares $5.34375 $3,816,987 $1,008
(b) Common Stock, $.0001 par value(3)(4).... 214,287 shares $5.34375 $1,145,096 $302
TOTAL................................... $4,962,083 $1,310
(1) The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) using the average of the
high and low price reported by the Nasdaq National Market for the Common
Stock on August 26,December 15, 1999, which was approximately $3.4375$5.34375 per share.
The Registrant hereby amends(2) An indeterminate number of shares of Common Stock are registered under this
Registration Statement on such date or
dates asthat may be necessaryissued, as provided in the Purchase
Agreement to delay its effective date untilprevent dilution resulting from stock splits, stock dividends
or similar transactions. No additional registration fee is included for
these shares.
(3) Issuable upon the Registrant
shall file a further amendment which specifically states thatexercise of Common Stock Purchase Warrants held by
existing shareholders of AVI BioPharma, Inc. who are the selling
shareholders under this Registration Statement.
(4) An indeterminate number of shares of Common Stock are registered under this
Registration Statement shall thereafter become effectivethat may be issued, as provided in accordance with
Sectionthe Common Stock
Purchase Warrants to prevent dilution resulting from stock splits, stock
dividends or similar transactions. No additional registration fee is
included for these shares.
------------------------------
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 ofOF
THE SECURITIES ACT OF 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said SectionOR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
may determine.
-2-MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SHAREHOLDERS MAY NOT SELL THEIR COMMON SHARES UNTIL
THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON
SHARES AND IT IS NOT SOLICITING AN OFFER TO BUY COMMON SHARES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.
SELLING SHAREHOLDERS'
PROSPECTUS
AVI BIOPHARMA, INC.
975,000 Common Shares
Nasdaq National Market928,577 COMMON SHARES
NASDAQ NATIONAL MARKET
AVII
This Investment involves a High Degree of Risk. You Should Purchase Shares
Only If You Can Afford a Complete Loss of Your Investment. See Risk Factors
beginning on page 9.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Common Shares, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES
ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE RISK FACTORS
BEGINNING ON PAGE 10.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE COMMON SHARES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- This is an offering of Common Shares by existing shareholders of AVI
BioPharma, Inc.
- The selling shareholders will receive all of the proceeds from the sale of
the Common Shares, less any commissions or discounts paid to brokers or
other agents. We will not receive any of the proceeds from the sale of the
Common Shares.
- The selling shareholders may offer and sell the Common Shares on the
Nasdaq National Market at prevailing market prices, or in privately
negotiated transactions at prices other than the market price. On
August 26,December 15, 1999, the closing sale price for our Common Shares on the
Nasdaq National Market was $3.375.$5.75.
- The Common Shares were obtained by the selling shareholders in
transactions that were exempt from the registration requirements of the
Securities Act of 1933, as amended, and represent approximately 7%6% of the
Company's outstanding Common Stock.
The information in this Prospectus is not complete and may be changed. The
selling shareholders may not sell their Common Shares until the registration
statement filed with the Securities and Exchange Commission is effective. This
Prospectus is not an offer to sell Common Shares and it is not soliciting an
offer to buy Common Shares in any state where the offer or sale is not
permitted.
August 26,December 20, 1999
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TABLE OF CONTENTS
PAGE
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 5
SUMMARY 6REFERENCE............. 3
SUMMARY..................................................... 4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 8STATEMENTS........... 7
RISK FACTORSFACTORS................................................ 9
INFORMATION ABOUT THE COMPANY 13COMPANY............................... 15
PRIVATE PLACEMENT TO SELLING SHAREHOLDERS................... 19
OUR SELLING SHAREHOLDERS 17SHAREHOLDERS.................................... 20
PLAN OF DISTRIBUTION 18DISTRIBUTION........................................ 21
DESCRIPTION OF CAPITAL SHARES 19SHARES............................... 23
LEGAL MATTERS 21
EXPERTS 21MATTERS............................................... 25
EXPERTS..................................................... 25
ADDITIONAL INFORMATIONINFORMATION......................................
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which we filed with the Securities and Exchange
Commission are incorporated by reference in this Prospectus:
(1) our Annual Report on Form 10-KSB for the year ended December 31, 1998,
which we refer to in the rest of this document as our Annual Report; and
(2) our Report on Form 10-QSB dated AugustNovember 12, 1999, for the quarter ended
JuneSeptember 30, 1999.
In addition, all documents which we file with the Securities and Exchange
Commission ("Commission") pursuant to Section 13, 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the date of the
Registration Statement and before termination of the offering of Common Shares,
including all annual reports on Form 10-KSB, and all filings on Forms 10-QSB and
8-K, will be deemed to be incorporated by reference in this Prospectus and to be
a part of this Prospectus from the date those documents are filed. Any statement
contained in a document which is incorporated, or deemed to be incorporated, by
reference into this Prospectus, shall be considered modified or superseded for
purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
You may request a copy of any document incorporated by reference in this
Prospectus at no cost. To receive a copy, write or call us at
AVI BioPharma, Inc., One S.W. Columbia, Suite 1105, Portland, Oregon 97258,
Attention: Mr. Alan P. Timmins, (503) 227-0554.
We are subject to the informational requirements of the Exchange Act and
file reports and other information with the Commission. Reports and other
information which we file with the Commission, including the Registration
Statement on Form S-3 of which this Prospectus is a part, may be inspected and
copied at the public reference facilities of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The Commission's telephone number is 1-800-SEC-0330. These materials may be
obtained electronically by visiting the Commission's web site on the Internet at
http://www.sec.gw. Our Common Stock is listed on the Nasdaq National Market.
Reports, proxy statements and other Company materials also can be inspected at
1735 K Street, N.W., Washington, D.C. 20006-1506.
-5-3
SUMMARY
MANY OF THE MATTERS SET FORTH IN THIS MEMORANDUMPROSPECTUS CONTAIN FORWARD-LOOKING
STATEMENTS THAT ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH HEREIN. WE REFER YOU TO
CAUTIONARY INFORMATION CONTAINED ELSEWHERE HEREIN AND IN OTHER DOCUMENTS WE FILE
WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME.
BUSINESSBUSINESS.................................. AVI BioPharma, Inc. (AVI) is an emerging
biopharmaceutical company developing therapeutic
products using three distinct
platform technologies:
Therapeutic cancer vaccines Avicine-TM-two distinct platform technologies:
Cancer Immunotherapy......... Avicine clinical
stageXactin pre-clinical
Gene-targeted drugs
Neu-Genes-Registered Trademark- clinical stage
Drug delivery technologies CytoPorter-TM- pre-clinical stage(NEUGENES)................. Resten-NG IND filed
Oncomyc-NG pre-clinical
Our principal focus is the treatment of life-threatening
diseases, most notably cancer and heart disease.
Currently approved drugs or other therapies often prove
to be ineffective in treating advanced stages of these
diseases or produce numerous unwanted side-effects. Our
two leading platforms, AvicineCancer Immunotherapy and
Neu-Genes,NEUGENEs, are specifically aimed at solving the
challenges faced by today's pharmaceutical products.
Each of these products representrepresents large market
opportunities. It is estimated that the world-wide
market for therapeutic cancer vaccines exceeds
$2 billion.
CANCER VACCINESIMMUNOTHERAPY (VACCINES)........... Avicine, a therapeutic vaccine, represents our most
advanced product opportunity, having recently completed a
Phase II human clinical trial for colorectal cancer.
Therapeutic cancer vaccines operate under the rationale
that active immunization can stimulate an immune
response against a
pre-existingthat can be effective in fighting an existing
cancer. The therapeutic benefit of the vaccine hinges on
the existence of specific target sites, called tumor
antigens, on the tumorcancer cells.
The target for Avicine is human chorionic gonadotropin
(hCG). Not only is hCG responsible for stimulating fetal
development during pregnancy, but it is also a tumor
marker
foundantigen on cancer cells of all major types including
cancer of the colon, pancreas, prostate, lung and
breast. It is believed that the role of hCG in pregnancy
and cancer is similar. In both cases, it (i) serves as a
growth factor encouraging rapid cell division,
(ii) fosters the formulation of blood vessels,
(iii) stimulates invasion of other tissues, and
(iv) dampens the immune system to allow the fetus, or
the tumor, to avoid rejection. Avicine usesis based on an
anti-hCG approach to treating cancer.
Avicine has completed five clinical studies in cancer,
including Phase II trials in colorectal,
in which a total of 172 patients received treatment.
From these studies, we believe that the vaccine is a
safe and essentially non-toxic therapy and capable of
producing a specific immune response in most of the patients.
Further, the patients who mounted an immune
4
response to hCG lived longer than patients treated with
other conventional therapies. We intend to investigate
further the use of Avicine alone or in conjunction with
other approved therapies.therapies in Phase II and Phase III
licensing trials.
CANCER IMMUNOTHERAPY
(XACTIN MONOCLONAL ANTIBODIES).......... We are also combating cancer by utilizing antibodies
that have activity against cancer cells that display the
hCG hormone marker. We licensed XenoMouse-TM- technology
from Abgenix Inc. and have produced human monoclonal
antibodies against critical hCG tumor antigen targets.
These high affinity, stable clones recognize the key
epitopes in our cancer vaccine. The Xactin antibodies
are both companion products to Avicine and independent
cancer therapeutics and are now in pre-clinical
development.
GENE-TARGETED DRUGS Most conventional drugs seek to modify(NEUGENES)............ We have developed third generation gene-inactivating
compounds that we believe are more stable, specific,
efficacious, and cost effective than other antisense or
ribozyme agents. Our NEUGENE compounds are distinguished
by a novel backbone which replaces the functionnatural or
modified backbones of target molecules with as few side effects as possible. Many
drugs fail due to (i) their low level of selectivity for a
specific disease targetcompeting antisense or (ii) because of difficulties in
their delivery. These two issues also contribute to
unwanted side effects. Safe and effective therapeutics for
cancer, heart disease, and inflammatory diseases have been
particularly difficult to develop because these diseases
have few targets for therapeutic intervention that would not
prove toxic to the patient.
Our gene-targeted drug platform, Neu-Genes, usesribozyme
technologies.
NEUGENE use synthetic polymers to block the function of
certain genetic sequences involved in the disease
process. Targeting specific genetic -6-
sequences provides
for greater selectivity than available through
conventional drugs. Neu-GenesNEUGENEs have the potential to
provide safe and effective treatment for a wide range of
human diseases.
We have completed pre-clinical studies and expect to begin
Phase I/II clinical trials with Neu-Geneusing our NEUGENE
compounds in the later halftreatment of 1999 for bone cancer and
restenosis, the blockage of arteries following balloon
angioplasty. We recently filed an IND with the FDA for
Resten-NG for restenosis and expect to begin a
balloon angioplasty
treatment.
INTRACELLULAR DRUG
DELIVERY For drugs to reach a target within a cell, they must cross
both tissue and cellular barriers. This requires the drugs
to achieve solubility in both the blood stream and cell
membranes. CytoPorter-TM-, our intracellular drug delivery
platform, is being developed specifically to address this
drug delivery challenge. CytoPorter is in pre-clinical
development.
STRATEGYPhase I/II clinical trial by year-end.
STRATEGY.................................. We have the experience and resources to initiate the drug
discovery and development, and move drug candidates
through pre-clinical development and into early stage
clinical trials (Phase I and Phase II). Our strategy
for the near
term (2-5near-term (2 to 5 years) is to license the
marketing and sales
rights for our product candidates to pharmaceuticalphar-
maceutical partners after Phase II clinical trials.trials or
co-develop product candidates with strategic partners.
In this manner, expensive, late-stage clinical
development marketing and salesmarketing will be the responsibility of
the licensee. With adequate resources we may consider
takingassuming greater responsibility for the late-stage
clinical development and marketing opportunities.opportunities of
future product candidates.
5
CLINICAL DEVELOPMENT PROGRAM
Product Candidate Pre-clinical PhasePRODUCT CANDIDATE PRE-CLINICAL PHASE I PhasePHASE II PhasePHASE III
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Avicine
(Colorectal Cancer Vaccine).................. Completed Completed Completed 1999
(Colorectal2000
Avicine
(Pancreatic Cancer Vaccine).................. Completed Completed In progress
Avicine
(Prostate Cancer Vaccine).................... Completed Completed 1999
(Pancreatic Cancer Vaccine)
Avicine Completed Completed 1999
(Prostate Cancer Vaccine)
Resten-NG Completed 1999 1999
(Gene-Targeted Drug for Restenosis)
Resten-NG.......... Completed 1999 2000
Oncomyc-NG
(Gene-Targeted Drug for Cancer)
CytoPorter-TM- 1999.............. Completed 2000
Xactin
(Human Monoclonal Antibody).................. In progress 2000
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includescontains forward-looking statements regarding amongour plans,
expectations, estimates and beliefs. Our actual results could differ materially
from those discussed in, or implied by, these forward-looking statements.
Forward-looking statements are identified by words such as "believe,"
"anticipate," "expect," "intend," "plan," "will," "may," and other items:similar
expressions. In addition, any statements that refer to expectations, projections
or other characterizations of future events or circumstances are forward-
looking statements. We have based these forward-looking statements largely on
our expectations. Forward-looking statements in this Prospectus include, but are
not necessarily limited to, those relating to:
- our intention to introduce new products
- FDA or other regulatrory approval for our products
- our expectations about the markets for our products
- acceptance of our products in the marketplace
- our future capital needs
- success of our patent applications
- the status of Year 2000 compliance efforts
We have based these forward-looking statements largely on our expectations.
Forward-looking statements are subject to risks and uncertainties, certain
of which are beyond our control. Actual results could differ materially from
those anticipated as a result of the factors described in the "Risk Factors"
section beginning on page 9,Factors,"
including among others:
- delays in developing, or the failure to develop,
products
- delays in obtaining, or our inability to obtain, approval by the FDA andor
other regulatory authorities for our products
- delays in developing, or the failure to develop, our products
- the development of competing or more effective products by other parties
- uncertainty of market acceptance of our products
- problems that we may face in manufacturing, marketing, and distributing
our products
- the timing of our future capital needs
- our inability to raise additional capital when needed
- delays in the issuance of, or the failure to obtain, patents for certain
ofon our products and technologies
- problems with important suppliers and business partners
We do not undertake any obligation to publicly update or revise any forward-looking
statements contained in this Prospectus or incorporated by reference, whether as
a result of new information, future events or otherwise. Because of these risks
and uncertainties, the forward-looking events and circumstances discussed in
this Prospectus might not transpire. Factors that cause actual results or
conditions to differ from those anticipated by these and other froward-looking
statements include those more fully described in the "Risk Factors" section and
elsewhere in this Prospectus.
7
NOTES TO READERS OF THIS PROSPECTUS
We were incorporated in Oregon in 1980. When we refer to "us," "we," "our,"
"the Company" and "AVI" in this prospectus,Prospectus, we mean AVI BioPharma, Inc., and its
consolidated subsidiaries. Our executive offices are located at One S.W.
Columbia, Suite 1105, Portland, Oregon 97258. Our telephone number at that
location is (503) 227-0554. Information contained on our websites does not
constitute part of this prospectus.Prospectus.
We are subject to the informational requirements of the Exchange Act and
file reports and other information with the Commission. Reports and other
information which we file with the Commission, may be inspected and copied at
the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The
Commission's telephone number is 1-800-SEC-0330. These materials may be obtained
electronically by visiting the Commission's website on the Internet at
http://www.sec.gov. Reports, proxy statements and other Company materials also
can be inspected at 1735 K Street, N.W., Washington, D.C. 20006-1506 or obtained
directly from the Company at the address and telephone listed above.
This prospectusProspectus includes our trademarks and registered trademarks, including
Avicine, Neu-Gene and CytoPorter.Avicine-TM-, NEUGENE-Registered Trademark-and Xactin-TM-. Each other trademark,
trade name or service mark appearing in this prospectusProspectus belongs to its holder.
-8-8
RISK FACTORS
The Shares offered by this Prospectus are speculative and involve a high
degree of risk. Before making an investment, you should carefully read this
entire Prospectus and consider the following risk factors.
RISKS RELATING TO OUR BUSINESS
HISTORY OF OPERATING LOSSES AND ANTICIPATED FUTURE LOSSES
We incurred a net operating loss of $26.7 million in 1998, and $3.7which included a
one-time charge of $19.5 million relating to our acquisition of ImmunoTherapy
Corporation. We incurred a $5.9 million loss for the first sixnine months of 1999.
"Net operating loss" represents the amount by which our expenses (other than
interest expense) exceed revenues. As of JuneSeptember 30, 1999, our accumulated
deficit was $46.5$48.7 million. Our losses have resulted principally from expenses
incurred in research and development of our technology and products and from
selling, general and administrative expenses that we have incurred while
building our business infrastructure. We expect to continue to incur significant
operating losses in the future as we continue our research and development
efforts and seek to obtain regulatory approval of our products. Our ability to
achieve profitability depends on our ability to complete development of our
products, obtain regulatory approvals and market our products. It is uncertain
when, if ever, we will become profitable.
EARLY STAGE OF PRODUCT DEVELOPMENT
Although we began operations in 1980, except for Avicine, we are only in the
early stages of the development of our pharmaceutical products. We have devoted
almost all of our time to research and development of our technology and
products, protecting our proprietary rights and establishing strategic
alliances. Our proposed products are in the pre-clinical or clinical stages of
development and will require significant further research, development, clinical
testing and regulatory clearances. We have no products available for sale,
except for research reagents, and we do not expect to have any products
available for sale for several years. Our proposed products are subject to
development risks. These risks include the possibilities that any of the
products could be found to be ineffective or toxic, or could fail to receive
necessary regulatory clearances. Although we have obtained favorable results in
Phase II using Avicine to treat colorectal cancer patients, we cannot assure
that we will obtain similar results in the contemplated Phase III protocol. We
have not received any significant revenues from the sale of products and we
cannot assure investors that we will successfully develop marketable products,
that our sales will increase or that we will become profitable. Third parties
may develop superior or equivalent, but less expensive, products.
LACK OF ASSURANCE OF REGULATORY APPROVALS
Except for Avicine, none of our products has been tested in humans, and,
except for Avicine, we have not filed an Investigational New Drug Application
with the United States Food and Drug Administration on any of our products
currently under development. Our proposed products are subject to
development risks. These risks include the possibilities that any of the
products could be found to be ineffective or toxic, or could fail to receive
necessary regulatory clearances. We cannot assure you that any of our
products will receive marketing approval from the FDA.
LACK OF OPERATING EXPERIENCE
We have engaged solely in the development of pharmaceutical technology.
Although some of our management have experience in biotechnology company
operations, we have limited experience in manufacturing or selling
pharmaceutical products. We also have only limited experience in negotiating and
maintaining strategic relationships, and in conducting clinical trials and other
later-stage phases of the regulatory approval process. We cannot assure
investors that we will successfully engage in any of these activities.
NEED FOR FUTURE CAPITAL AND UNCERTAINTY OF ADDITIONAL FUNDING
Since we began operations, we have obtained operating funds primarily by
selling shares of our company. Based on our current plans, we believe that
current cash balances including the anticipated proceeds from this Offering will
be sufficient to meet our operating needs for approximately the next sixeighteen
months. Furthermore, the actual amount of funds that we will need will be
determined by many factors, some of which are beyond our control. These factors
include the success of our research and development efforts, the status of our
pre-clinical and clinical testing, costs relating to securing regulatory
9
approvals and the costs and timing of obtaining new patent rights, regulatory
changes, competition and technological developments in the market. We may need
funds sooner than currently anticipated.
-9-
We anticipate that we will need to obtain additional funds during or at the
end of this eighteen-month period. If necessary, potential sources of additional
funding include strategic relationships, public or private sales of shares of
our sharescommon stock or debt or other arrangements. We do not have any committed
sources of additional financing at this time, and ittime. It is uncertain whether we can
obtain additional funding when we need it on terms that will be acceptable to us
or at all. If we raise funds by selling additional shares of our common stock or
securities convertible into our common stock, the ownership interest of our
existing sharesshareholders will be diluted. If we are unable to obtain financing when
needed, our business and future prospects would be materially adversely
affected.
DEPENDENCE ON OTHERS FOR CLINICAL TESTING, MANUFACTURING AND MARKETING
We do not intend to conduct late-stage (Phase III) human clinical trials
ourselves. We also do
not intend to commercially manufacture our products to conduct our clinical
trials. We anticipate entering into relationships with larger pharmaceutical
companies to conduct later pharmaceutical trials and to manufacturemarket our products and
marketwe also plan to continue to use contract manufacturing for our products. We may
be unable to enter into corporate partnerships whichthat could impede our ability to
bring our products to market. We cannot assure investors that any corporate
partnerships, if entered, will be on favorable terms or will result in the
successful development or marketing of our products. If we are unsuccessful in
establishing advantageous clinical testing, manufacturing and marketing
relationships, we are not likely to generate significant revenues and become
profitable.
LIMITED MANUFACTURING CAPABILITY
While we believe that we can produce materials for clinical trials at our
existing facilities, we will need to expand our commercial manufacturing
capabilities for products in the future if we elect not to or cannot contract
with others to manufacture our products. This expansion may occur in stages,
each of which would require regulatory approval, and product demand could at
times exceed supply capacity. We have not selected a site for any expanded
facilities and cannot predict the amount we will expend for construction of such
facilities. We cannot assure if or when the FDA will determine that such
facilities comply with Good Manufacturing Practices. The projected location and
construction of any facilities will depend on regulatory approvals, product
development, pharmaceutical partners and capital resources, among other factors.
We have not obtained regulatory approvals for any productions facilities for our
products, nor can we assure investors that we will be able to do so.
GOVERNMENTAL REGULATIONREGULATION; LACK OF ASSURANCE OF REGULATORY APPROVALS
All of our products are subject to extensive regulation by the United States
Food and Drug Administration and by comparable agencies in other countries. The
FDA and comparable agencies require new pharmaceutical products to undergo
lengthy and detailed clinical testing procedures and other costly and
time-consuming compliance procedures. Except for Avicine, none of our products
have been tested in humans. We cannot predict when we will initiate and
complete our clinical trials or when we will be able to submit our products for
regulatory review. Even if we submit a new drug application, there may be delays
in obtaining regulatory approvals, if we obtain them at all. Sales of our
products outside the United States will also be subject to regulatory
requirements governing clinical trials and product approval. These requirements
vary from country to country and could delay introduction of our products in
those countries. We cannot assure you that any of our products will receive
marketing approval from the FDA or comparable foreign agencies.
10
DEPENDENCE ON KEY PERSONNEL
Our success will depend to a large extent on the abilities and continued
service of several key employees, including Drs. Denis Burger, Patrick Iversen,
and Dwight Weller and Mr. Jeffrey L. Lillard.Weller. The loss of any of these key employees could significantly
delay the achievement of our goals. Competition for qualified personnel in our
industry is intense, and our success will be dependent on our ability to attract
and retain highly skilled personnel.
COMPETITION
The biotechnology industry is highly competitive. We compete with companies
in the United States and abroad that are engaged in the development of
pharmaceutical technologies and products. They include:
- biotechnology, pharmaceutical, chemical and other companies;
- academic and scientific institutions;
- governmental agencies; and
- public and private research organizations.
Many of these companies and many of our other competitors have much greater
financial and technical resources and production and marketing capabilities than
we do. Our industry is characterized by extensive research and development and
rapid technological progress. Competitors may successfully develop and market
superior or less expensive products which render our products less valuable or
unmarketable.
PATENTS AND PROPRIETARY RIGHTS
Our success will depend on our existing patents and licenses, and our
ability to obtain additional patents in the future. We have filed 4546 patent
applications in the United States, Canada, Europe, Australia and Japan and 3543
patents
-10-
have been issued. We license the composition, manufacturing and use of
Avicine in all fields except fertility regulation from Dr. Vernon Stevens and
The Ohio State
University.
We cannot assure investors that our 10 pending patent applications will result
in patents being issued in the United States or foreign countries. In addition,
we cannot guarantee that patents which have been or will be issued will afford
meaningful protection for our technology and products. Competitors may develop
products similar to ours which do not conflict with our patents. Others may
challenge our patents and, as a result, our patents could be narrowed or
invalidated. The patent position of biotechnology firms generally is highly
uncertain, involves complex legal and factual questions, and has recently been
the subject of much litigation. No consistent policy has emerged from the United
States Patent and Trademark Office or the courts regarding the breadth of claims
allowed or the degree of protection afforded under biotechnology patents. In
addition, there is a substantial backlog of biotechnology patent applications at
the USPTOs and the approval or rejection of patents may take several years.
Our success will also depend partly on our ability to operate without
infringing upon the proprietary rights of others, as well as our ability to
prevent others from infringing on our proprietary rights. We may be required at
times to take legal action in order to protect our proprietary rights and,
despite our best efforts, we may be sued for infringing on the patent rights of
others. Patent litigation is costly and, even if we prevail, the cost of such
litigation could adversely affect our financial condition. If we do not prevail,
in addition to any damages we might have to pay, we could be required to stop
the infringing activity or obtain a license. We cannot be certain that any
required license would be available to us on acceptable terms, or at all. If we
fail to obtain a license, our business might be materially adversely affected.
11
To help protect our proprietary rights in unpatented trade secrets, we
require our employees, consultants and advisors to execute confidentiality
agreements. However, we cannot guarantee that these agreements will provide us
with adequate protection if confidential information is used or disclosed
improperly. In addition, in some situations, these agreements may conflict with,
or be subject to, the rights of third parties with whom our employees,
consultants or advisors have prior employment or consulting relationships.
Further, others may independently develop substantially equivalent proprietary
information and techniques, or otherwise gain access to our trade secrets.
POTENTIAL PRODUCT LIABILITY
The use of our products will expose us to the risk of product liability
claims. Although we intend to obtain product liability insurance coverage, we
cannot guaranty that product liability insurance will continue to be available
to us on acceptable terms or that our coverage will be sufficient to cover all
claims against us. A product liability claim, even one without merit or for
which we have substantial coverage, could result in significant legal defense
costs, thereby increasing our expenses, lowering our earnings and, depending on
revenues, potentially result in additional losses.
UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT
In addition to obtaining regulatory approval, the successful
commercialization of our products will depend on our ability to obtain
reimbursement for the cost of the product and treatment. Government authorities,
private health insurers and other organizations, such as health maintenance
organizations are increasingly challenging the prices charged for medical
products and services. Also, the trend toward managed health care in the United
States, the growth of healthcare organizations such as HMOs, and legislative
proposals to reform healthcare and government insurance programs could
significantly influence the purchase of healthcare services and products,
resulting in lower prices and reducing demand for our products. The cost
containment measures that healthcare providers are instituting and any
healthcare reform could affect our ability to sell our products and may have a
material adverse effect on our operations. We cannot assure investors that
reimbursement in the United States or foreign countries will be available for
any of our products, that any reimbursement granted will be maintained, or that
limits on reimbursement available from third-party payors will not reduce the
demand for, or the price of, our products. The lack or inadequacy of third-party
reimbursements for our products would have a material adverse affect on our
operations. We cannot forecast what additional legislation or regulation
relating to the healthcare industry or third-party coverage and reimbursement
may be enacted in the future, or what effect the legislation or regulation would
have on our business.
RISKS RELATED TO SHARE OWNERSHIP
OUR PREFERRED SHARES, CLASSIFIED BOARD OF DIRECTORS AND OREGON LAWS COULD
PROHIBIT TAKEOVERS
Our authorized capital consists of 50,000,000 Common Sharesshares of common stock and
2,000,000 preferred shares. The Board of Directors, without any further vote by
the shareholders, has the authority to issue preferred shares and to determine
the price, preferences, rights and restrictions, including voting and dividend
rights, of these shares. The rights of the holders of Common
Sharesshares of common stock may
be affected by the rights of holders of any preferred shares that the Board of
Directors may issue in the future. For example, the Board of Directors may allow
the issuance of preferred shares with more voting rights, higher dividend
payments or more favorable rights upon dissolution, than the Common Shares.shares of common
stock. If preferred shares are issued in the future, it may also be more
difficult for others to acquire a majority of our outstanding voting shares. See
"Description ofon Capital Shares" at page 20.Shares."
In addition, we have a "classified" Board of Directors, which means that
only one-half of our directors are eligible for election each year. Therefore,
if shareholders wish to change the composition of the Board of Directors, it
wouldcould take at least two years to remove a majority of the existing directors or
to change all
12
directors. Having a classified Board of Directors may, in some circumstances,
deter or delay mergers, tender offers or other possible transactions which may
be favored by some or a majority of our shareholders.
-11-
The Oregon Control Share Act and Business Combination Act limit parties who
acquire a significant amount of voting shares from exercising control over us.
The Act may lengthen the period for a proxy contest or for a person to vote
their shares to elect the majority of our Board.
VOLATILITY OF STOCK MARKET COULD DRIVE DOWN PRICE
OF COMMON SHARES
TheHistorically, the market prices for securitiesprice of biotechnology companies,
particularly those that are not profitable, haveour stock has been highly volatile. Publicized events andThe
following types of announcements maycould have a significant impact on the market price of
our Common Shares. For example, announcements publicizing
poor quarterly financialcommon stock:
- positive or negative results biological or medical discoveries by
competitors, failedof testing and clinical trials
- delays in entering into corporate partnerships
- technological innovations unfavorableor commercial product introductions by ourselves
or competitors
- changes in government regulations
- developments concerning patents or other proprietary rights, including patents and
litigation matters
- public concern relating to the commercial value or unfavorable domestic or
foreign regulatory developments,safety of any of our
products
- general stock market conditions
Further, the stock market has in recent months experienced and may continue
to experience significant price and volume fluctuations. These fluctuations have
particularly affected the market prices of equity securities of many
biopharmaceutical companies that are not yet profitable. Often, the effect of temporarily or
permanently driving downon
the price of a company's stock. In addition, the
stock market from time to time experiences extreme price and volume
fluctuations which particularly affect the market prices for emerging and
life sciences companies, such as ours, and which are oftensecurities is unrelated or disproportionate to the operating
performance of the affectedsuch companies. These broad market fluctuations may adversely
affect the ability of a shareholder to dispose of his shares at a price equal to
or above the price at which the Sharesshares were purchased.
FUTURE SALE OF ELIGIBLE SHARES MAY LOWER THE PRICE OF OUR COMMON SHARESSTOCK
We have outstanding 13,351,206 Common Shares. Of these16,235,845 shares 13,351,206of common stock and 14,092,988 are
eligible for sale under Rule 144 or are otherwise freely tradeable. The 975,000We intend to
promptly file a registration statement covering an additional 2,142,857 shares,
covered by this Prospectuswhich will bemake those shares freely tradeable so long as we keep the Registration Statement (of which this
Prospectus is a part) effective.tradeable. In addition:
- Our employees and others hold options to buy a total of 2,161,734 Common Shares.144,277 shares of
common stock. The Common Sharesshares of common stock to be issued upon exercise of
these options, have been registered, and therefore may be freely sold when
issued;
- There are outstanding warrants to buy 4,915,348 Common
Shares.5,826,554 shares of common stock.
The Sharesshares issuable upon exercise of 4,416,8144,631,101 warrants are registered.
These Sharesshares may be freely sold when issued. We also intend to file a
registration statement covering an additional 342,857 warrants. The
holders of warrants covering 400,000 shares have incidental registration
rights to have the shares issuable upon the exercise of their warrants
registered. Once registered, those shares may be freely sold when issued,
for so long as the registration statement is effective and current; andcurrent. The
remaining warrants have no registration rights.
- We may issue options to purchase up to an additional 162,848
Common Shares170,499 shares of
common stock under our stock option plans, which also will be fully
saleable when issued.
Sales of substantial amounts of Common Sharesshares into the public market could lower
the market price of our Common Shares.common stock.
13
RIGHTS OF CERTAIN HOLDERS TO ADDITIONAL STOCK OR REDEMPTION OF SHARES
Holders of 1,857,147 shares of our common stock enjoy the right to receive
additional shares of common stock from the Company without additional payment to
the Company if the Company sells shares of common stock, or engages in similar
financing transactions, at a price of less than $3.49 per share prior to
December 16, 2002, or 33 months have passed since the effective date of the
registration statement relating to this Prospectus. If additional shares of our
common stock are issued under this obligation, the ownership interest of other
existing shareholders will be diluted.
Under certain circumstances, the Company may be required to redeem shares to
be issued to the holders who enjoy this right. Specifically, if the holdings of
the Company's stock by any holder who enjoys this right will exceed their pro
rata share of 20 percent of the Company's outstanding common stock due to the
issuance of new shares, the Company must redeem the new shares to be issued at a
price equal to 110 percent of the price originally paid for these shares. This
redemption obligation could materially adversely affect the business and future
prospects of the Company if it arises.
ABSENCE OF DIVIDENDS
We have never paid dividends on our Common Sharesshares of common stock and do not intend
to pay dividends in the foreseeable future.
-12-YEAR 2000 RISKS
Many currently installed operating systems and software products are coded
only to accept two digit entries in the date code field. Consequently, they are
unable to distinguish 21st century dates from 20th century dates. As a result,
the computer systems and software used by many companies may need to be upgraded
to prevent problems that would result from misreading the entries in the date
code field. Failure to correct systems to become "Year 2000 compliant" may
result in systems failures or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process data, send
invoices or engage in similar normal business activities.
We are currently reviewing the potential impact of Year 2000 issues on our
business and attempting to mitigate or eliminate those issues. The primary risks
to us are those of business continuity. We are determining which equipment we
own needs to be replaced. We have also begun communicating with our significant
suppliers, financial institutions, insurance companies and other parties that
provide us significant services, including clinical trial sites, to determine
whether they anticipate Year 2000 problems in their operations. If we or our
significant vendors or suppliers are unable to become Year 2000 compliant in
time, this could have a material adverse affect on our ability to continue our
operations.
14
INFORMATION ABOUT THE COMPANY
For a detailed description of our business and information about our
management, see our Annual Report which is incorporated into this prospectus by
reference. The following information supplements or supersedes, as may be
appropriate, the information contained in our Annual Report:FOR A DETAILED DESCRIPTION OF OUR BUSINESS AND INFORMATION ABOUT OUR
MANAGEMENT, SEE OUR ANNUAL REPORT WHICH IS INCORPORATED INTO THIS PROSPECTUS BY
REFERENCE. THE FOLLOWING INFORMATION SUPPLEMENTS OR SUPERSEDES, AS MAY BE
APPROPRIATE, THE INFORMATION CONTAINED IN OUR ANNUAL REPORT:
PRODUCT DEVELOPMENT OVERVIEW
VACCINES -I. CANCER IMMUNOTHERAPY
A. AVICINE THERAPEUTIC CANCER VACCINE
RATIONALE: ProminentTECHNICAL OVERVIEW
The therapeutic vaccine approach is among the newer strategies being
investigated for treating cancer. Historically, vaccines were developed and used
to treat cancerinduce an immune response in order to prevent a disease. This is contrasted
with a therapeutic vaccine where the therapeutic cancer vaccine approach.disease entity is known or suspected to be
present at the time of vaccination. The rationale employed with thisa therapeutic
approach is that active immunization against the tumora specific pathogenic agent can
stimulate an immune response that canagainst the existing disease.
In order for a therapeutic vaccine to be effective in fighting an existing cancer.
Targeta disease
such as cancer, it is necessary to identify specific target sites on the tumor
cells, called tumor-associated antigens, representantigens. The more selective that the key components in aantigen is
to the tumor, the greater likelihood of attacking only the cancer vaccine, and the therapeutic benefitcells. The
identification of an appropriate target has been one of the vaccine hinges ongreatest challenges
in the selectiondevelopment of these target sites.a useful cancer vaccine.
AVI BioPharma's therapeutic cancer vaccine, Avicine, wasis designed to elicitproduce
an immune response
directed against a well-characterized target, human chorionic
gonadotropin (hCG). ------------------------------------------------------
AVICINE VACCINE TARGET
- Human Chorionic Gonadotropin (hCG),
"The Pregnancy Hormone"
- A widely expressed tumor target
------------------------------------------------------
Normally, hCG is secreteda hormone produced during pregnancy by fetal cells andthat plays a
variety of roles in fostering the placenta. Cancerdevelopment of a fetus. Through extensive
research, scientists found that hCG is also present in most cancers. In fact,
cancer is believed to be the only significant exception to the normal hCG
secretion process.function during pregnancy. Given this selectivity,the selective production of hCG, is an ideal potentialwe believe it
represents a highly specific target for a therapeutic cancer vaccine approach. Many different human cancers
produce hCG and it is considered a marker of malignancy. Since hCG is a
natural human protein, patients do not mount an immune response to hCG unless
they are actively immunized.vaccine.
The advantagesuse of hCG as a cancer vaccine target compared tomay offer advantages over other
potential targets are significant. This cancer markertumor associated antigens.
- It is not usually found on normal cells with the exception of those
present during a pregnancy. The
hormoneThis means that it is highly selective.
- It is widely expressed by and found on all of the majormany types of cancer, including
colon, pancreas, prostate, lung and breast.
- hCG expression correlateshas been correlated with tumor aggressiveness. In other
words, the higher the level of hCG, the more aggressive the rate of growth
or spread of the cancer.
- Antibodies to hCG are believed to block the same hormonal functions that
hCG plays in both pregnancy and cancer, including growth promotion,rapid cell division, the
formulation of blood vessels, invasion angiogenesis,of other tissues, and immunosuppression. Therefore,dampening of
the immune responses.
Since hCG is a natural human protein, people will not mount an immune
response directed against hCGto it unless they are actively immunized. Once immunized, the mechanism
of action of an anti-hCG vaccine can be viewed as a two-pronged attack,
directingattack. First,
it directs an immune attackresponse against the tumor, and neutralizingsecond, it neutralizes the
hormonal benefits provided by hCG.
The hCG component in Avicine is a small peptide from this hormone. The
peptide is conjugatedjoined to a carrier, diphtheria toxoid, to enhance the immune
response. Diphtheria toxoid was selected due to widesince most of the world's population
has been vaccinated against it and there is significant experience with it as a
vaccine
15
component in man, and since most of the population worldwide is
vaccinated against it. Thisman. The combination provides for an existing immune response to
thisthe carrier in patients, which is believed to be important in stimulating an immune response
to the hCG peptide.
-13-
-----------------------------------------------------------
AVICINE DISTINGUISHING CHARACTERISTICS
- Fully characterizedFully-characterized synthetic vaccine
- ProducedCapable of being produced inexpensively in large quantities
- Targets a widely expressedwidely-expressed tumor antigen (hCG)
- Ready for advancedPhase III clinical testing (Phase III)in colorectal patients
- Applicable to most cancer types in multiple clinical settings
- Twenty years of research and development -----------------------------------------------------------and safety data
AVICINE CLINICAL TRIALS
OF AVICINE IN CANCER: ThreeWe have completed three Phase I studies ofclinical trials using Avicine in 87 patients
with cancer have been completed.cancer. Overall, these studies showed Avicine to be safe and essentially
non-toxic. TheThese early clinical trials showed the vaccine wasto be effective in
stimulating an immune response to hCG in that most patients. Moreover, apparent
survival benefits and some tumor regressions were noted.
AVI has conducted two Phase II studies with Avicine,PANCREATIC AND PROSTATE CANCER TRIALS
We recently completed a pilot Phase II study using Avicine in 10 patients
with advanced pancreatic cancer, and a multicenter Phase II study
in 77cancer. For the 10 patients with colorectal cancer.treated, the median
survival was approximately 33 weeks. Patients with advanced pancreatic cancer
are currently treated with chemotherapy and have a median survival of
approximately 18 to 25 weeks. In the 10 advanced pancreatic patients treated
with Avicine, the median survival was approximately 33 weeks. Although we believesbelieve these results to be
encouraging, the Company hesitateswe hesitate to draw conclusions from such a small study other than
to use these results to design additional trials.
Two additional clinicalPhase II trials have been designed and arewere scheduled to be
initiated infor the fourth quarter of
1999. AThe first Phase II study inof 50 patients with advanced pancreatic cancer was
initiated in which 52 patients will be randomizedOctober 1999. In addition, we plan to two treatment arms, andinitiate a
second Phase II clinical
trial in 24 patients with prostate cancer.
--------------------------------------------------------------------------
AVICINE CLINICALcancer before year-end.
COLORECTAL CANCER TRIALS
TRIAL DESCRIPTION & TYPE PATIENTS STATUS
1 Phase I safety study 43 treated Completed
2 Phase I metastatic cancer 21 treated Completed
3 Phase Ib metastatic cancer 23 treated Completed
4 Phase II pancreatic and extension 8 treated Completed
5 Phase II colorectal 77 treated Completed
6 Phase II pancreatic 52 1999
7 Phase II prostate 16 1999
8 Phase III colorectal licensing trial 300 1999
--------------------------------------------------------------------------
MULTICENTER PHASE II STUDY IN PATIENTS WITH COLORECTAL CANCER: A multicenter Phase II study of Avicine was conducted on in 77 patients with
advanced colorectal cancer has been
completed.cancer. The objectives of this trial were to determine
whether administration of the vaccineAvicine would induce an immune responsesresponse in patients
with metastatic colorectal cancer and to measure safety and efficacy in these
patients. Overall, 51 of the 77 patients responded to theour vaccine by producing
antibodies to hCG. The patients that were antibody responders had a median
survival of 42 weeks. Patients that did not respond immunologically had a median
survival of just 17 weeks.
Further analysis of the multicenter Phase II data showed that patients thatwho
produced antibodies to bothtwo targets on the hCG peptide had a median survival of
66 weeks. This is significantly improved survival (66 versus
37 weeks) compared to treatment with the Pharmacia-Upjohn drug,
Camptosar-Registered Trademark-, the current standard of care for
treating advanced colorectal cancer. Wecancer patients, produces a median survival of
37-40 weeks. Through additional research efforts, we believe we have also learned how
to stimulate production of antibodies to boththe two hCG targets in most patients.
-14-
Overall, these clinical data suggest that the patients that received Avicine
and responded by making hCG antibodies had improved median survival compared to
patients treated with chemotherapeutic drugs. Avicine was found to be safe and
did not exhibit the toxicity associated with cytotoxic drug treatment. Based on
these data, AVI BioPharma planswe plan to initiate a Phase III licensingpivotal trial in 300500 patients with
advancedmetastatic colorectal cancer in 1999.
ANTISENSE - NEU-GENE2000. This trial randomizes patients receiving
first-line therapy for metastatic colorectal cancer to
16
one of two treatment arms: combination chemotherapy or combination chemotherapy
plus Avicine. The end points in the trial are time to disease progression and
median survival.
AVICINE CLINICAL TRIALS
TRIAL DESCRIPTION & TYPE PATIENTS STATUS
- ----- ------------------ ---------- -----------
1 Phase I safety study........................... 43 treated Completed
2 Phase I metastatic cancer...................... 21 treated Completed
3 Phase Ib metastatic cancer..................... 23 treated Completed
4 Phase II pancreatic and extension.............. 10 treated Completed
5 Phase II colorectal............................ 77 treated Completed
6 Phase II pancreatic............................ 50 In progress
7 Phase II prostate.............................. 24 1999
8 Phase III colorectal licensing trial........... 500 2000
B. XACTIN--HUMAN MONOCLONAL ANTIBODY FOR CANCER
We are also combating cancer by administering antibodies that have activity
against cancer cells that display the hCG hormone marker. We licensed XenoMouse
technology from Abgenix Inc. and have produced human monoclonal antibodies
against critical hCG tumor antigen targets. These high affinity, stable clones
recognize the key epitopes in our cancer vaccine. The Xactin antibodies are both
companion products to Avicine and independent cancer therapeutics and are now in
pre-clinical development.
II. GENE-TARGETED DRUGS--NEUGENE TECHNOLOGY
TECHNICAL OVERVIEW
GENE-TARGETED THERAPEUTICS.
Most human diseases arise from the function or dysfunction of genes within
the body, either those of pathogens, such as viruses, or of one's own genes. New
techniques in molecular biology have led to the identification of the genes
associated with most of the major human diseases and to the determination of the
sequence of their genetic code.codes. Using modern methods of chemical synthesis,
compounds can be prepared that recognize target gene sequences in a pathogen or
pathogenic process. When these compounds bind tightly to the disease-causing
sequence, the genetic process is inhibited, and thus the pathogen or pathogenic
process is disabled. This is called "antisense"ANTISENSE technology since the "sense"SENSE of the
genetic code is blocked.
Limitations of then-existing antisense technology in the late 1980s led the Companyus
to pursue the developmenta different approach than many of NEU-GENE antisense technology with improved
pharmaceutical advantages.our competitors. This effort
culminated in the Company'sour development of a new class gene-targeted drugs. These patentedof third-generation agents, known as
NEU-GENENEUGENE compounds. In pre-clinical studies, our patented compounds display
advantageous pharmaceutical properties (stability, specificity, potency and cost
effectiveness) over earlier second-generation compounds now in
clinical trials by others. Such improvements include stability, specificity,
potency, low toxicity and effectiveness.
NEAR-TERM ANTISENSE PRODUCT DEVELOPMENT B CANCERDEVELOPMENT--CANCER AND RESTENOSIS
The first application of the Company'sour antisense technology is designed to treat
proliferation disorders including cancer and restenosis, a cardiovascular
disease. The Company's NEU-GENE target for proliferative is the gene component
named c-myc. The Company believes that this target is applicable to a range of
proliferative diseases including many types ofinvolving abnormal cell division, such as cancer, certain
cardiovascular and inflammatory diseases, and some non-malignant proliferative disorders such
as psoriasis, polycystic kidney disease
and chronic graft rejection. The Company hasNEUGENE target for these diseases is the gene
component named c-myc. We have finished the pre-clinical development of its first NEU-GENE compound,two
NEUGENE compounds, Resten-NG and expectsOncomyc-NG, and hope to file an IND and
initiate twoa Phase I/III clinical trialstrial in 1999 for restenosis and cancer.
17
The following table below page summarizes the Company'sour broader NEU-GENE Antisense
Development Program:
- --------------------------------------------------------------------------------development program for NEUGENE:
NEUGENE ANTISENSE DEVELOPMENT PROGRAM
Antisense Target Clinical IndicationANTISENSE TARGET CLINICAL INDICATION
- ---------------- --------------------------------------------------------------------
C-myc cancer,Cancer, restenosis, psoriasis, chronic graft
C-myc.......................... rejection
Telomerase cancer
BCL2 cancerTelomerase..................... Cancer
BCL2........................... Cancer
TNF alpha arthritis,alpha...................... Arthritis, septic shock, asthma
NF kappa BB..................... Crohn's Disease, chronic inflammation
ICAM-1 arthritis,ICAM-1......................... Arthritis, chronic graft rejection
Hepatitis C virus hepatitisvirus.............. Hepatitis
- --------------------------------------------------------------------------------
-15-18
DRUG DELIVERY - CYTOPORTERPRIVATE PLACEMENT TO SELLING SHAREHOLDERS
On December 17, 1999, the Selling Shareholders bought 714,290 Shares and
warrants to purchase an additional 217,287 Shares.
The body haspurchase agreement and warrants contain protective barriers that shield itprovisions for the
Selling Shareholders if we sell any other Shares (with limited exceptions) at a
lower price than what the Selling Shareholders paid. The period during which
this provision is in effect runs until either 36 months from penetration by
foreign agents. Two of these barriers, cell membranes and the outermost
layerclosing date of
the skin, are composed of lipid layers (fat-like substances). The
lipid composition of these barriers prevents water-soluble agentspurchase transaction or 33 months from the environment or ineffective date of this
registration statement, whichever occurs later.
Under these protective provisions, the bloodSelling Shareholders receive
additional shares and warrants to acquire additional Shares and a reduced strike
price for all Shares acquired with the warrants if we sell Shares for less than
the $3.50 price paid by Selling Shareholders.
The number of additional Shares received by a Selling Shareholder is
calculated by the following steps:
- aggregate purchase price by the Selling Shareholder for all Shares
purchased under the purchase agreement is divided by the new lower per
Share sales price causing the adjustment;
- from penetrating intothis new number of shares is subtracted the interiornumber of cellsShares already
delivered to the Selling Shareholder; and
interfering with critical cellular functions. These lipid layers are- the principal barriersdifference is the number of additional Shares we will issue to effective drug delivery for many drugsthe
Selling Shareholder.
The purchase agreement also contains the provision that have an
intracellular site of action.
AVI has developed an effective drug delivery technology, called
CYTOPORTER, to facilitateif the transport of drugs across the lipid barriersSelling
Shareholder owns at least 250,000 of the skinShares bought pursuant to the purchase
agreement, it receives the adjustment based on all the Shares it originally
bought. However, if the Selling Shareholder owns less than 250,000 of the
originally purchased Shares, it only receives an adjustment based on the number
of Shares it still owns.
Similarly, the warrants provide for an adjustment, both of the exercise
price and cell membranes intonumber of Shares subject to the interiorwarrants.
The Selling Shareholders received warrants to purchase three Shares for
every seven Shares of cells. This takes placestock they purchased. The exercise price of the warrants
was set at 115% of the original per Share purchase price. That calculates to an
exercise price of $4.025, based on a rate$3.50 Share price.
If Shares are sold for less than the exercise price (again with certain
exceptions), then
- warrant price is reduced to 115% of the price of the newly sold Shares;
and
- the number of warrants is increased proportionately so that is practicalthe Selling
Shareholders will still receive warrants for three Shares for every
10 Shares they either purchased or received because of the protective
provision adjustment.
The following chart sets forth an example of how this might work for a
hypothetical Selling Shareholder:
Original aggregate Share purchase price..................... $1,050,000
Original number of Shares................................... 300,000
Original per Share price.................................... $ 3.50
Newly sold Share price...................................... $ 3.00
Original aggregate Share purchase price
divided by newly sold Share price
($1,050,000 DIVIDED BY $3.00)
= 350,000 Shares
Original number of Shares minus adjusted number equals new
Shares we will issue...................................... 50,000
19
For the options:
New Share price times 115% ($3.00 x 1.15) is new strike
price = $3.45
Original number of Shares covered by warrant was three for
ten shares
(3 X
30,000) = 90,000
The after adjustment number of Shares is 350,000 --
three warrant Shares for ten Shares is 3
x 35,000 = 105,000
That is, the Shares subject to the warrant now total 105,000
with a strike price of $3.45
In addition to achieve pharmaceutical results. Furthermore,the Shares covered by this registration statement, we believeare
obligated to register any Shares issued pursuant to the adjustment described
above and any Shares issued following exercise of any new options granted
following an adjustment.
However, the purchase agreement and warrants do contain the restriction that
CYTOPORTERwe may not issue any new Shares or warrants if that would cause a Selling
Shareholder to beneficially own more than 9.90% of the total outstanding Shares
of our common stock. The adjustment must be delayed until it can be chemically adjusted to accommodate a range of
drug delivery challenges. The CYTOPORTER drug delivery technology is
patented and is currently atdone without
exceeding the research and development stage. It has
applications to FDA approved drugs with delivery problems and drugs in
development by pharmaceutical and Biotech companies. We designed this
technology to assist in the delivery of our antisense compounds to their
genetic targets.
-16-
9.90% limitation.
OUR SELLING SHAREHOLDERS
The following table provides certain information with respect to the Shares
held by each Selling Shareholder as of August 9,December 17, 1999. Except as
otherwise noted in the footnotes following the table, none of the Selling
Shareholders with our Company or our subsidiaries or other affiliates within
the past three years, other than owning Common Shares. Except as otherwise
noted, all of the Common Shares owned by each Selling Shareholder are registered
for sale pursuant to this Prospectus. The Selling Shareholders, however, are not
under any obligation to sell all of any portion of their Shares, nor are the
Selling Shareholders obligated to sell any of their Shares immediately under
this Prospectus. We will not receive any proceeds from any sales of Shares by
the Selling Shareholders.
Number of Shares Owned
Common Shares After Offering(1)
Beneficially
Selling Shareholder Owned Before Offering(1) Shares Offered Number(2) PercentNUMBER OF
COMMON
SHARES SHARES OWNED
BENEFICIALLY AFTER OFFERING(1)
OWNED BEFORE SHARES -------------------
SELLING SHAREHOLDER OFFERING(1) OFFERED NUMBER PERCENT
- ------------------------ ------------------------ -------------- --------- -------------------------- ------------ -------- -------- --------
Paulson Investment Company(2) 879,309 559,540 319,769 2.4
Chet and Jackie Paulson(3) 132,020 81,820 50,200 *
Erick Paulson 13,640 13,640 0 *
Wayne Hamersly 86,000 85,000 1,000 *
Scott and Luba Weber 10,000 10,000 0 *
Farrel Johnson 110,100 50,000 60,100 *
Douglas Little(4) 53,424 25,000 28,424 *
Abdul Halat 305,500 150,000 155,500 1.2
1,309,440 975,000 28,940Castle Creek Healthcare Partners LLC................ 557,141(2) 557,141 -- --
Michael T. Jackson Trust,
New Technologies Fund............................. 185,718(3) 185,718 -- --
JALAA Equities LP................................... 185,718(4) 185,718 -- --
--------- ------- ------- -----
928,577 928,577 -- --
- ------------------------
Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options and warrants currently exercisable or convertible, or exercisable
or convertible within 60 days of August 19,December 17, 1999, are deemed beneficially
owned and outstanding for computing the percentage of the person holding
such securities, but are no considered outstanding for computing the
percentage of any other person.
(2) Includes 228,353128,571 shares subject to warrants exercisable within 60 days of
August 19,December 17, 1999.
(3) Includes 25,20042,858 shares subject to warrants exercisable within 60 days of
August 19,December 17, 1999.
(4) Includes 50042,858 shares subject to warrants exercisable within 60 days of
August 19,December 17, 1999.
-17-20
PLAN OF DISTRIBUTION
The Common Sharesselling stockholders may be soldsell the common stock:
- through one or more underwriters or dealers for public offering and sale,
- directly to investors, or
- through agents.
The selling stockholders may distribute the common stock from time to time by the selling shareholders
in one or more transactions at a fixed price or prices, which may be changed
from time to time:
- at market prices prevailing at the timetimes of sale,
- at varying prices determinedrelated to those prevailing market prices, or
- at negotiated prices.
We will not receive any proceeds from the sale of the common stock.
The distribution of the common stock may be effected in one or more of the
following methods:
- ordinary brokers' transactions, which may include long or short sales,
- transactions involving cross or block trades, or otherwise on the Nasdaq
National Market,
- purchases by brokers, dealers or underwriters as principal and resale by
those purchasers for their own accounts pursuant to this prospectus,
- "at the market" to or through market makers or into an existing market for
the common stock,
- in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents,
- through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise),
- pursuant to Rule 144 under the Securities Act, or
- any combination of the foregoing, or by any other legally available means.
In addition, the selling stockholders or their successors in interest may
enter into hedging transactions with broker-dealers who may engage in short
sales of common stock in the course of hedging the positions they assume with
the selling stockholders. The selling stockholders or their successors in
interest may also enter into option or other transactions with broker-dealers
that require the delivery by those broker-dealers of the common stock, which
common stock may be resold thereafter pursuant to this prospectus. In connection
with any sales, the selling stockholders and any brokers or dealers
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling stockholders and/or purchasers of the shares
offered hereby (and, if it acts as agent for the purchaser of those shares, from
that purchaser). Usual and customary brokerage fees will be paid by the selling
stockholders. Broker-dealers may agree with the selling stockholders to sell a
specified number of shares at a stipulated price per share, and, to the extent
the broker-dealer is unable to do so acting as agent for a selling stockholders,
to purchase as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the selling stockholders. Broker-dealers who acquire
shares as principal may thereafter resell the shares from time to time in
transactions (which may involve cross and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market
21
prices prevailing at the time of sale or at negotiated prices.
The Selling Shareholdersprices, and in connection
with the resales may offerpay to or receive from the purchasers of those shares
commissions computed as described above.
We have advised the selling stockholders that Regulation M promulgated under
the Securities Exchange Act, may apply to their Common Sharessales in one or morethe market, have
furnished the selling stockholders with a copy of this regulation and have
informed the selling stockholders of the following transactions:
- onneed for delivery of copies of this
prospectus. The selling stockholders may indemnify any national securities exchange or quotation
service on whichbroker-dealer that
participates in transactions involving the Common Shares may be listed or
quoted at the time of sale including the Nasdaq
National Market;
- in the over-the-counter market;
- in private transactions;
- through options;
- by pledge to secure debts and other obligations;
- or a combination of any of the above transactions.
If required, we will distribute a supplementshares against
liabilities, including liabilities arising under the Securities Act. Any
commissions paid or any discounts or concessions allowed to this Prospectus to describe
material changes in the terms of the offering by the Selling Shareholders.
The Common Shares described in this Prospectus may be sold from time to
time directly by the selling shareholders. Alternatively, the selling
shareholders may from time to time offer Common Shares to or through
underwriters, broker/dealers or agents. The selling shareholdersany such
broker-dealers, and any underwriters, broker/dealers or agents that participate in the distribution
of the Common Shares may be deemed to be "underwriters" within the meaning of
the Securities Act of 1933. Any profits received on the resale of Common Shares and
any compensation received by any underwriter, broker/dealer or agentthose shares, may be
deemed to be underwriting discounts and commissions under the Securities Act if
any such broker-dealers purchase shares as principal. We have agreed to
indemnify the selling stockholders against certain liabilities, including
liabilities under the Securities Act.
We are required by the Purchase Agreement and Registration Rights Agreement
to register for resale by the selling stockholders and keep registered the
number of 1933.shares of common stock they are purchasing or may receive because of a
price adjustment described above under heading "Private Placement to Selling
Shareholders" and 100% of the shares of common stock for which the warrants are
exercisable, including original warrants and warrants received following an
adjustment. We have agreed to and are paying the costs and fees of registering
the common stock. The selling stockholders will pay any brokerage commissions,
discounts or other expenses relating to the sale of the common stock.
Any sharessecurities covered by this Prospectusprospectus which qualify for sale pursuant to
Rule 144 under the Securities Act of 1933 may be sold under Rule 144that rule rather than
pursuant to this Prospectus. Theprospectus.
There can be no assurance that the selling shareholders may not be able
tostockholders will sell all of their shares under Rule 144. The selling shareholders may
transfer, deviseany or gift such shares by other means not described in this
Prospectus.
To comply with the securities laws of certain jurisdictions, the Common
Shares must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the Common Shares may not be
offered or sold unless they have been registered or qualified for sale or an
exemption is available and complied with.
The anti-manipulation provisions of Rules 101 through 104 under
Regulation M of the Exchange Act may apply to purchases and sales of Common
Shares by the Selling Shareholders. In addition, there are restrictions on
market-making activities by persons engaged in the distribution of the Common
Shares.
We have agreed to pay all
of the expenses relating to the registration,
offering and saleshares of the Sharescommon stock offered by the Selling Shareholder to the public,
other than commissions or discounts of underwriters, broker/dealers or
agents. We estimate that our expenses in connection with the Offering will
be approximately $10,932.
-18-them hereunder.
22
DESCRIPTION OF CAPITAL SHARES
Our authorized capital consists of 50,000,000 shares of Common Stock,common stock, par
value $0.0001 per share, and 2,000,000 shares of Preferred Stock,preferred stock, par value
$0.0001 per share.
TRANSFER AGENT
Our transfer agent and registrar is ChaseMellon Shareholder Services, LLC.
COMMON STOCK
We are authorized to issue 50,000,000 shares of Common Stock.common stock. As of
June 30,December 17, 1999, 13,351,20616,235,845 shares of Common Stockcommon stock were outstanding and were
held of record by approximately 950 shareholders. Holders of Common Stockcommon stock are
entitled to one vote for each share at all meetings of our shareholders. Subject
to preferences of Preferred Stockholders, Common Stockholderscommon stockholders are entitled to
receive ratably dividends declared by our Board. Common Stockholders have no
preemptive, subscription, redemption or conversion rights. If we are liquidated
or dissolved, Common Stockholderscommon stockholders would share equally in our assets remaining
after the payment of all our liabilities and the liquidation preference of any
Preferred Stockholders.preferred stockholders.
Holders of 1,857,147 shares of our common stock enjoy the right to receive
additional shares of common stock from the Company without additional payment to
the Company if the Company sells shares of common stock, or engages in similar
financing transactions, at a price of less than $3.49 per share prior to
December 16, 2002, or 33 months have passed since the effective date of the
registration statement relating to this Prospectus. Under certain circumstances,
the Company may be required to redeem shares to be issued to the holders who
enjoy this right. Specifically, if the holdings of the Company's stock by any
holder who enjoys this right will exceed their pro rata share of 20 percent of
the Company's outstanding common stock due to the issuance of new shares, the
Company must redeem the new shares to be issued at a price equal to 110 percent
of the price originally paid for these shares.
PREFERRED STOCK
Our Board of Directors is authorized to issue up to 2,000,000 shares of
undesignated Preferred Stock.preferred stock. No shares of Preferred Stockpreferred stock have been issued. Our
Board has the authority to issue Preferred Stockpreferred stock in one or more series and to
fix the rights, preferences, privileges and restrictions of the Preferred Stock,preferred stock,
as well as fix the number of shares, without any further vote or action by the
shareholders. Our Board, without shareholder approval, may issue Preferred Stockpreferred stock
with voting and conversion rights superior to the voting rights of the Common Shares.shares of
common stock. The Preferred Stockpreferred stock may also decrease the amount of earnings and
assets distributed to Common Stockholders. Issuance of Preferred Stockpreferred stock may delay
or prevent a change in control.
WARRANTS
IPO REPRESENTATIVES' WARRANTS. We issued Representatives' Warrants to the
underwriters of our initial public offering to purchase 400,000 shares of our
common stock. The Representatives' Warrants entitle the holder to acquire up to
200,000 units, each unit consisting of a share of common stock and a warrantWarrant to
purchase a share of common stock for $10.80 per unit and are exercisable until
June 3, 2002. The warrant initially entitles the holder to purchase one share of
common stock at a price of $13.50.
NASDAQ WARRANTS. We have outstanding warrants to purchase 2,300,000 shares
of common stock that were issued in our initial public offering and are traded
on the Nasdaq National Market under the symbol AVIIW. These warrants are
exercisable until June 3, 2002. We may redeem them at a price of $0.25 per
warrant if the closing bid price of our Common Stockcommon stock has been at least 200% of
the warrant exercise price for twenty (20) consecutive trading days. The initial
exercise price of these warrants is $13.50.
23
ITC MERGER WARRANTS. We have outstanding warrants to purchase 2,116,814
shares of the common stock that were issued in connection with our acquisition
of ImmunoTherapy Corporation. These warrants are exercisable after
September 15, 2000 and until May 15, 2003.2003 at a price of $13.50. We may redeem
them at a price of $0.25 per warrant if the closing bid price of our common
stock has been at least 200% of the exercise price for twenty (20) consecutive
trading days and the warrants have been exercisable. These warrants will be
traded under the symbol AVIIX.
-19-
AVIIZ.
OFFERING WARRANTS. We have issued certain investors 557,144 Warrants. Such
Warrants are exercisable until December 19, 2004 at a price of $4.025 per share
of Common Stock.
OTHER WARRANTS. We have also issued warrants to purchase 98,54381,967 shares of
common stock. These warrants are currently exercisable.exercisable and do not have a
termination date.
AGENT WARRANTS. We have issued an additional 100,000 warrants which are exercisable at $3.60 per share andto a Placement Agent 71,429 Warrants. Such
Agent Warrants have a term of five years.years and are exercisable at a price of $4.20
per share.
STOCK OPTIONS
A total of 2,200,000 shares of our common stock are reserved for issuance
under our 1992 Stock Incentive Plan. As of June 30,December 13, 1999, we had outstanding
1,940,24026,941 options to purchase shares under the 1992 Stock Incentive Plan.
In 1998, we assumed the obligations under the 1997 Stock Option Plan of
ImmunoTherapy Corporation. After the acquisition of ImmunoTherapy Corporation
and as of June 30,December 13, 1999, 221,494217,336 options to purchase shares of our common
stock were outstanding under the 1997 plan.
OREGON CONTROL SHARES AND BUSINESS COMBINATION STATUTES
We are subject to the Oregon Control Share Act (the "Control Share Act").
The Control Share Act generally provides that a person (the "Acquiring Person")
who acquires voting stock of an Oregon corporation in a transaction that results
in the Acquiring Person holding more than 20.0%, 33.3% or 50.0% of the total
voting power of the corporation (a "Control Share Acquisition") cannot vote the
shares it acquires in the Control Share Acquisition ("control shares") unless
voting rights are accorded to the control shares by (i) a majority of each
voting group entitled to vote and (ii) the holders of a majority of the
outstanding voting shares, excluding the control shares held by the Acquiring
Person and shares held by our officers and inside directors. The term "Acquiring
Person" is broadly defined to include persons acting as a group.
The Acquiring Person may, but is not required to, submit to us a statement
setting forth certain information about the Acquiring Person and its plans with
respect to us. The statement may also request that we call a special meeting of
shareholders to determine whether voting rights will be accorded to the control
shares. If the Acquiring Person does not request a special meeting of
shareholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of shareholders. If the Acquiring
Person's control shares are accorded voting rights and represent a majority or
more of all voting power, shareholders who do not vote in favor of voting rights
for the control shares will have the right to receive the appraised "fair value"
of their shares which may not be less than the highest price per share by the
Acquiring Person for the control shares.
We are subject to certain provisions of the Oregon Business Corporation Act
that govern business combinations between corporations and interested
shareholders (the "Business Combination Act"). The Business Combination Act
generally provides that if a person or entity acquires 15% or more of the voting
stock of an Oregon corporation (an "Interested Shareholder"), the corporation
and the Interest Shareholder, or any affiliated entity of the Interested
Shareholder, may not engage in certain business combination transactions for
three years following the date the person became an Interested Shareholder.
24
Business combination transactions for this purpose include (a) a merger or plan
of share exchange, (b) any sale, lease, mortgage or other disposition of 10% or
more of the assets of the corporation, and (c) certain transactions that result
in the issuance of capital stock of the corporation to the Interested
Shareholder. These restrictions do not apply if (i) the Interested Shareholder,
as a result of the transaction in which such person became an Interested
Shareholder, owns at least 85% of the outstanding voting stock of the
corporation (disregarding shares owned by directors who are officers and certain
employee benefit plans), (ii) the Board of Directors approves the share
acquisition or business combination before the Interested Shareholder acquires
15% or more of the corporation's outstanding voting stock or (iii) the Board of
Directors and the holders of at least two-thirds of the outstanding voting stock
of the corporation (disregarding shares owned by the Interested Shareholder)
approve the transaction after the Interested Shareholder acquires 15% or more of
the corporation's voting stock. See "RISK FACTORS -- Anti-TakeoverFACTORS--Anti-Takeover Effects of
Certain Charter Provisions and Oregon Law."
-20-
LEGAL MATTERS
Ater Wynne LLP, 222 S.W. Columbia, Suite 1800, Portland, Oregon 97201, our
attorneys, have opined that the Common Shares are duly and validly issued, fully
paid and nonassessable.
EXPERTS
The audited financial statements in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
-21-25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
SEC Registration FeeFee........................................ $ 9321,310
Nasdaq Listing Fee --Fee.......................................... 17,500
Accountant's Fees and ExpensesExpenses.............................. 5,000
Legal Fees and ExpenseExpense...................................... 5,000
Blue Sky Fee and ExpensesMiscellaneous............................................... --
Miscellaneous --
Total 10,932-------
Total....................................................... 28,810
=======
- ------------------------
* Represents expenses related to the distribution by the Selling ShareholderShareholders
pursuant to the Prospectus prepared in accordance with the requirements of
Form S-3. These expenses will be borne by the Company on behalf of the
Selling Shareholder.Shareholders. All amounts are estimates except for the SEC
Registration Fee and the Nasdaq and Boston Stock
Exchange listing fees.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide for indemnification of the
officers and directors of the Company to the fullest extent permitted by law.
The Oregon Business Corporation Act, permits a corporation to limit, under
certain circumstances, a director's liability for monetary damages in actions
brought by the corporation or its stockholders. As an Oregon corporation, the
Company is subject to the OBCA and the exculpation from liability and
indemnification provision contained therein. Pursuant to
Section 60.047(2)(d) of the OBCA, Article II of the Company's Fifth Restated
Articles of Incorporation (the "Articles") eliminates the liability of the
Company's directors to the Company or its stockholders for monetary damages,
except for any liability related to breach of the duty of loyalty, actions not
in good faith and certain other liabilities.
Section 60.387, ET SEQ., of the OBCA allows corporations to indemnify their
directors and officers against liability where the director or officer has acted
in good faith and with a reasonable belief that actions taken were in the best
interests of the corporation or at least not adverse to the corporation's best
interests and, if in a criminal proceeding, the individual had not reasonable
cause to believe the conduct in question was unlawful. Under the OBCA,
corporations may not indemnify against liability in connection with a claim by
or in the right of the corporation but may indemnity against the reasonable
expenses associated with such claims. Corporations may not indemnify against
breached of the duty of loyalty. The OBCA mandates indemnification against all
reasonable expenses incurred in the successful defense of any claim made or
threatened whether or not such claims was by or in the right of the corporation.
Finally, a court may order indemnification if it determines that the director or
officer is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances whether or not the director or officer met the good faith
and reasonable belief standards or conduct set out in the statute.
The OBCA also provides that the statutory indemnification provisions are not
deemed exclusive of any other rights to which directors or officers may be
entitled under a corporation's articles of incorporation or bylaws, any
agreement, general or specific action of the board of directors, voce of
stockholders or otherwise.
The Company's Articles also provide for the elimination of liability of
directors for monetary damages to the full extent permitted by the Oregon
Business Corporations Act.
The Company has entered into indemnification agreements with its directors
and certain of its officers.
-22-26
ITEM 16. EXHIBITS.
Exhibits
NumberNUMBER EXHIBITS
- ------ --------
------
4.1 Purchase Agreement, dated December 15, 1999, by and between
AVI BioPharma, Inc. and certain Investors
4.2 Registration Rights Agreement, dated December 15, 1999, by
and between AVI BioPharma, Inc. and certain Investors
4.3 Form of Common Stock Purchase Warrant
5.1 Opinion of Ater Wynne LLP
23.1 Consent of Arthur Andersen LLP, independent public
accountants
23.2 Consent of Ater Wynne LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-3)
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 to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
changes to such information in this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remains unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act that is incorporated
by reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities shall be deemed to be in 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 is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification is 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
Securities Act and will be governed by the final adjudication of such issue.
-23-27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Beaverton,
State of Oregon, on August 26,December 17, 1999.
AVI BIOPHARMA, INC.
By: /s/ Denis R. Burger
-----------------------------------------
Denis R. Burger, Ph.D.
President and Chief Executive Officer
AVI BIOPHARMA, INC.
By: /s/ DENIS R. BURGER
-----------------------------------------
Denis R. Burger, Ph.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Denis R. Burger and Alan P. Timmins, jointly and
severally, his attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendment to this Registration Statement
on Form S-3 and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may 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 on the date indicated.
Signature Title DateSIGNATURE TITLE DATE
--------- ----- ----
President, Chief Executive
/s/ DENIS R. BURGER, PH.D. Officer and Chairman of
------------------------------------------- the Board (Principal December 17, 1999
Denis R. Burger, Ph.D. President, Chief Executive August 26, 1999
- --------------------------------- Officer and Chairman of the -------------------
Denis R. Burger, Ph.D. Board (Principal Executive Officer)
Chief Operating Officer,
/s/ ALAN P. TIMMINS Chief Financial Officer
------------------------------------------- and Director (Principal December 17, 1999
Alan P. Timmins Chief Operating Officer, Chief August 26, 1999
- --------------------------------- Financial Officer and Director -------------------
Alan P. Timmins (Principal Financial and Accounting
Officer)
Senior Vice President of
/s/ DWIGHT D. WELLER, PH.D. Chemistry and
------------------------------------------- Manufacturing And December 17, 1999
Dwight D. Weller, Ph.D. Development and Director
/s/ PATRICK L. IVERSON, PH.D. Senior Vice President of
August 26,------------------------------------------- Research and Development December 17, 1999
- --------------------------------- Chemistry and Manufacturing -------------------
Dwight D. Weller, Ph.D. And Development and Director
/s/
Patrick L. Iverson, Ph.D. Senior Vice President of August 26, 1999
- --------------------------------- Research and Development -------------------
PatrickDirector
28
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JEFFREY L. Iverson, Ph.D. and Director
-24-
/s/ Jeffrey L. LillardLILLARD
------------------------------------------- Vice President and Director August 26,December 17, 1999
- --------------------------------- -------------------
Jeffrey L. Lillard
/s/ BruceBRUCE L. A. Carter, Ph.D.CARTER, PH.D.
------------------------------------------- Director August 26,December 17, 1999
- --------------------------------- -------------------
Bruce L. A. Carter, Ph.D.
/s/ Nick BunickNICK BUNICK
------------------------------------------- Director August 26,December 17, 1999
- --------------------------------- -------------------
Nick Bunick
/s/ Joseph RubinfeldJOSEPH RUBINFELD
------------------------------------------- Director August 26,December 17, 1999
- --------------------------------- -------------------
Joseph Rubinfeld
-25-29
INDEX TO EXHIBITS
NumberNUMBER
- ------
4.1 Purchase Agreement, dated December 15, 1999, by and between
AVI BioPharma, Inc. and certain Investors
4.2 Registration Rights Agreement, dated December 15, 1999, by
and between AVI BioPharma, Inc. and certain Investors
4.3 Form of Common Stock Purchase Warrant
5.1 Opinion of Ater Wynne LLP
23.1 Consent of Arthur Andersen LLP, independent public
accountants
23.2 Consent of Ater Wynne LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-3)
-26-
30