AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 9, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BIOMARIN PHARMACEUTICAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0397820
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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371 BEL MARIN KEYS BOULEVARD, SUITE 210
NOVATO, CALIFORNIA 94949
(415) 884-6700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
RAYMOND W. ANDERSON
CHIEF FINANCIAL OFFICER
BIOMARIN PHARMACEUTICAL INC.
371 BEL MARIN KEYS BOULEVARD, SUITE 210
NOVATO, CALIFORNIA 94949
(415) 884-6700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR
SERVICE, SHOULD BE SENT TO:
SIOBHAN MCBREEN BURKE, ESQ. DONALD J. MURRAY, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP DEWEY BALLANTINE LLP
555 SOUTH FLOWER STREET, 23RD FLOOR 1301 AVENUE OF THE AMERICAS
LOS ANGELES, CALIFORNIA 90071-2371 NEW YORK, NEW YORK 10019-6092
(213) 683-6000 (212) 259-8000
FACSIMILE: (213) 627-0705 FACSIMILE: (212) 259-6333
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE 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. / /
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 under
the Securities Act, please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
AMOUNT OF PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SHARES TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (2) REGISTRATION FEE
Common Stock, $.001 par value per
share................................. 6,900,000 $12.12 $83,628,000 $20,907
(1) Includes 900,000 shares subject to the underwriter's over-allotment option.
(2) Estimated solely for the purpose of computing the registration fee required
pursuant to Section 6(b) of the Securities Act and computed pursuant to
Rule 457(c) of the Securities Act, based on the average of the high and low
prices of the Common Stock on November 8, 2001 as reported on the NASDAQ
National Market.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted
PRELIMINARY PROSPECTUS Subject to Completion November 9, 2001
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6,000,000 Shares
[LOGO]
Common Stock
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We are selling all of the 6,000,000 shares of common stock offered by this
prospectus.
Our common stock is quoted on the Nasdaq National Market and the Swiss SWX New
Market under the symbol "BMRN." On November 8, 2001, the last reported sales
price of our common stock on the Nasdaq National Market was $12.05 per share.
Investing in our common stock involves a high degree of risk. Before buying any
shares you should read the discussion of material risks of investing in our
common stock in "Risk factors" beginning on page 7 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
Per Share Total
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Public offering price $ $
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Underwriting discount and commissions $ $
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Proceeds, before expenses, to us $ $
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The underwriters may also purchase from us up to an additional 900,000 shares of
our common stock at the public offering price less the underwriting discount, to
cover over-allotments, if any, within 30 days of the date of this prospectus.
The underwriters are offering the shares of our common stock as described in
"Underwriting." Delivery of the shares will be made on or about ,
2001
UBS Warburg
CIBC World Markets
U.S. Bancorp Piper Jaffray
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TABLE OF CONTENTS
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Prospectus Summary.................... 1
Risk Factors.......................... 7
Forward-Looking Statements............ 20
Use of Proceeds....................... 21
Market Price of Common Stock.......... 22
Capitalization........................ 23
Dilution.............................. 24
Selected Consolidated Financial
Data................................ 25
Management............................ 27
Underwriting.......................... 30
Where You Can Find More Information... 32
Incorporation of Certain Documents by
Reference........................... 32
Legal Matters......................... 33
Experts............................... 33
"BioMarin" and "Neutralase" are trademarks of BioMarin-TM-. All other trademarks
or trade names referred to in this prospectus are the property of their
respective owners.
As used in this prospectus, the terms "we," "us," "our," the "Company" and
"BioMarin" means BioMarin Pharmaceutical Inc. and its subsidiaries (unless the
context indicates a different meaning), and the term "common stock" means our
common stock, $.001 par value per share.
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Prospectus summary
THE FOLLOWING SUMMARY DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER
BEFORE INVESTING IN OUR COMMON STOCK. YOU SHOULD READ THE ENTIRE PROSPECTUS,
INCLUDING "RISK FACTORS," THE FINANCIAL STATEMENTS AND OTHER INFORMATION
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION.
BUSINESS OVERVIEW
We develop enzyme therapies to treat serious, life-threatening diseases and
conditions. We leverage our expertise in enzyme biology to develop product
candidates for the treatment of genetic diseases, including MPS I, MPS VI, MPS
IVA and PKU, as well as other critical care situations such as cardiovascular
surgery and serious burns. Our product candidates address markets for which no
products are currently available or where current products have been associated
with major deficiencies. We focus on conditions with well-defined patient
populations, including genetic diseases, which require chronic therapy.
Our lead product candidate, Aldurazyme-TM-, which recently completed a Phase III
trial, is being developed for the treatment of Mucopolysaccharidosis I (MPS
I) disease. MPS I is a debilitating and life-threatening genetic disease caused
by the deficiency of (alpha)-L-iduronidase, an enzyme responsible for breaking
down certain carbohydrates. MPS I is a progressive disease that afflicts
patients from birth and frequently leads to severe disability and early death.
There are currently no drugs on the market for the treatment of MPS I.
Aldurazyme has received both fast track designation from the United States Food
and Drug Administration and orphan drug designation for the treatment of MPS I
in the United States and in the European Union. We are developing Aldurazyme
through a joint venture with Genzyme Corporation. In collaboration with Genzyme,
we completed a double-blinded, placebo-controlled Phase III clinical trial of
Aldurazyme in August 2001. On November 2, 2001, we announced positive results
from this trial. We intend to meet with regulators in early 2002 with regard to
the filing of a Biologics License Application, or BLA, with the FDA and a
Marketing Authorization Application, or MAA, with the European Medicines
Evaluation Agency (European Union).
We are developing our second product candidate, Neutralase-TM-, for reversal of
anticoagulation by heparin in patients undergoing Coronary Artery Bypass Graft,
or CABG, surgery and angioplasty. We acquired rights to Neutralase through our
recent acquisition of the pharmaceutical assets of IBEX Technologies Inc.
Heparin is a carbohydrate drug commonly used to prevent coagulation, or blood
clotting, during certain types of major surgery. Neutralase is a
carbohydrate-modifying enzyme that cleaves heparin, allowing coagulation of
blood and aiding patient recovery following CABG surgery and angioplasty. Based
on data from previous trials, we plan to initiate a Phase III trial in CABG
surgery in 2002.
In addition to Aldurazyme and Neutralase, we are developing other enzyme-based
therapeutics for the treatment of a variety of diseases and conditions. We
recently completed a Phase I trial of rhASB for the treatment of MPS VI, another
seriously debilitating genetic disease. Based on data from this previous trial,
we plan to initiate a Phase II trial of rhASB in early 2002. We also are
developing Vibriolysin Topical, a topical enzyme product for use in removing
burned skin tissue in preparation for skin grafting or other therapy. We
initiated a Phase I clinical trial of this product in the United Kingdom in the
fourth quarter of 2001, and we expect to begin a Phase II clinical trial in the
United States following the completion of this Phase I trial. In addition, we
are pursuing preclinical development of other enzyme product candidates for
genetic and other diseases.
1
RECENT DEVELOPMENTS
- On November 2, 2001, we announced positive results from a preliminary
analysis of data from the Phase III clinical trial of Aldurazyme for the
treatment of MPS I. Patients were evaluated at defined intervals to assess
progress in meeting two primary endpoints. The preliminary data analysis
showed a statistically significant increase in pulmonary capacity (p=0.028)
and demonstrated a positive trend in endurance as measured by a six-minute
walk test (p=0.066). Among other endpoints measured in the trial, the main
findings of an earlier open-label study of Aldurazyme were confirmed: a
reduction in liver size and a reduction in excretion of urinary
glycosaminoglycans, or GAGs, the carbohydrate substances that accumulate in
patients with MPS I. Based on the strength of the trial's results, Genzyme
and we plan to meet jointly with U.S., Canadian and European regulatory
authorities to discuss applications to market Aldurazyme.
- On October 31, 2001, we acquired the pharmaceutical assets of IBEX
Technologies Inc. The product candidates and technologies that we gained in
this transaction, primarily the Neutralase and Phenylase programs, are
complementary to our existing product portfolio and core competencies. Under
the terms of the agreement, we acquired these assets in exchange for
consideration of $10.4 million, with $8.4 million payable in shares of
BioMarin common stock and $2.0 million payable in cash. In addition, we
agreed to make contingent cash payments of up to approximately $9.5 million
to IBEX upon FDA approval of products acquired from IBEX.
ALDURAZYME
Our lead product candidate, Aldurazyme, is being developed for the treatment of
MPS I. MPS I is a genetic disease caused by the deficiency of
(alpha)-L-iduronidase. Patients with MPS I have multiple debilitating symptoms
resulting from the buildup of carbohydrate residues in all tissues in the body.
These symptoms include delayed physical and mental growth, enlarged livers and
spleens, skeletal and joint deformities, airway obstruction, heart disease,
reduced endurance and pulmonary function, and impaired hearing and vision. Most
patients with MPS I will die from complications associated with the disease as
children or teenagers. About 3,400 individuals in developed countries have MPS
I, including about 1,000 in the United States and Canada.
There are currently no approved drugs for the treatment of MPS I. Bone marrow
transplantation has been used to treat severely affected patients, generally
under the age of two, with limited success. Bone marrow transplantation is
associated with high morbidity and mortality rates as well as with problems
inherent in the procedure itself, including graft vs. host disease, graft
rejection, and donor availability, which severely limit its utility and
application.
Aldurazyme is a specific form of recombinant human (alpha)-L-iduronidase that
replaces a genetic deficiency of (alpha)-L-iduronidase in MPS I patients, thus
reducing or eliminating the build-up of certain carbohydrates in the lysosomes
of cells. By eliminating this carbohydrate build-up, Aldurazyme is able to
significantly reduce physical symptoms experienced by these patients. The Phase
I trial results of this product candidate reported no neutralizing antibodies,
indicating its applicability for chronic administration. In collaboration with
Genzyme, we completed a 45-patient, double-blinded, placebo-controlled Phase III
clinical trial of Aldurazyme in August 2001, which was conducted at five sites
in the U.S., Europe and Canada. All patients completed the trial and have
elected to receive Aldurazyme in an open label extension study. On November 2,
2001, we announced positive results from this trial. We intend to continue the
development of this drug and meet with regulators in early 2002 with regard to
the filing of a BLA with the FDA and an MAA with the EMEA.
Aldurazyme has received fast track designation from the FDA for the treatment of
MPS I. The FDA has granted Aldurazyme orphan drug designation, which will result
in exclusive rights to market Aldurazyme to treat MPS I for seven years from the
date of FDA approval if Aldurazyme is the first
2
product to be approved by the FDA for the treatment of MPS I. In addition, the
European Commission has designated Aldurazyme for the treatment of MPS I as an
orphan medicinal product, giving the potential for market exclusivity in Europe
for 10 years. In September 1998, we formed a 50/50 joint venture with Genzyme
for the worldwide development and commercialization of Aldurazyme. Genzyme will
be responsible for regulatory submissions in international markets. Genzyme will
also be responsible for marketing, distribution, sales and obtaining
reimbursement for Aldurazyme worldwide.
NEUTRALASE
We are developing Neutralase for the reversal of anticoagulation by heparin in
patients undergoing Coronary Artery Bypass Graft, or CABG, surgery and
angioplasty. Patients undergoing CABG surgery and angioplasty are treated with
heparin to prevent coagulation during surgery. Once the procedure is completed,
anticoagulant reversal agents are administered to prevent excessive bleeding.
Currently, protamine is the only product commercially available for the reversal
of heparin anticoagulation. In medical studies, protamine has been associated
with adverse side effects, such as abnormal changes in blood pressure,
depression of heart function and acute allergic reactions. There were
approximately 550,000 CABG procedures and 925,000 angioplasties in the United
States in 1998 (as published by the American Heart Association in their 2001
Heart and Stroke Statistical Update) that could have potentially benefited from
heparin reversal. We believe that an additional substantial market opportunity
exists in Europe and the rest of the world.
We believe Neutralase has the potential to reverse heparin anticoagulation
without many of the serious side-effects associated with protamine. Neutralase
is a carbohydrate-modifying enzyme that breaks down heparin in a manner that
reverses heparin's anticoagulation effect and restores the normal coagulation of
blood. Neutralase has the potential for use as a reversal agent for heparin
anticoagulation in open-heart surgery such as CABG procedures, interventional
cardiology procedures such as angioplasty, and in other procedures where heparin
or heparin-like anticoagulants are used, such as in hip and knee surgeries.
Data from Phase I and Phase II clinical trials indicate that Neutralase can
reverse heparin anticoagulation without the adverse changes in blood pressure
associated with protamine usage. Building on the work undertaken so far, we
intend to initiate a Phase III trial for CABG in 2002, followed by a Phase IIB
trial for angioplasty.
Other Product Development Programs
RHASB
We are developing recombinant, human N-acetylgalactosamine 4-sulfatase (rhASB)
for the treatment of MPS VI, a debilitating genetic disease similar to MPS I.
rhASB has received fast track designation from the FDA as well as orphan drug
designation for the treatment of MPS VI in the United States and in the European
Union. Based on clinical data to date, we plan to initiate a Phase II trial of
rhASB early in 2002.
VIBRIOLYSIN
We are developing Vibriolysin for use in removing burned skin in preparation for
skin grafting or other therapy. In the fourth quarter of 2001, we initiated a
Phase I clinical trial of this product candidate in the United Kingdom and we
expect to begin a Phase II clinical trial in either the United States or the
United Kingdom following the completion of this Phase I trial.
PHENYLASE
Phenylase is being developed as an oral enzyme therapy for patients with
phenylketonuria (PKU) a genetic disease in which the body cannot properly
metabolize the amino acid phenylalanine. If left untreated, elevated levels of
phenylalanine lead to brain damage and severe mental retardation. Phenylase is
currently in preclinical development.
3
MPS IVA
We are developing a product candidate for the treatment of MPS IVA, a
debilitating genetic disease similar to MPS I. This product is currently in
preclinical development.
OUR STRATEGY
Our strategy is to develop therapeutic enzyme products to treat a variety of
diseases and conditions. The principal elements of this strategy are to:
DEVELOP AND SUCCESSFULLY COMMERCIALIZE ALDURAZYME
We are seeking to develop and globally commercialize Aldurazyme for the
treatment of MPS I. In concert with our joint venture partner, Genzyme, we are
reviewing strategies for the effective launch of this product. We believe we
will benefit from Genzyme's marketing organization, which has extensive
world-wide experience marketing drugs to well-defined patient populations with
chronic genetic diseases.
CONTINUE TO BUILD A DIVERSIFIED PORTFOLIO OF PRODUCT CANDIDATES
We are developing a pipeline of product candidates in various stages of clinical
and preclinical development. We believe this strategy increases the likelihood
of successful product commercialization, while reducing our exposure to the risk
inherent in the development of any one drug. We currently have one product in
Phase III, one product in Phase II and two products in Phase I clinical trials
and additional products in late preclinical development.
TARGET UNDERSERVED MARKETS
We intend to continue to target market opportunities where there is little or no
competition, such as the markets for MPS I and MPS VI. We also target markets
where we believe that our technology will enable us to become a market leader in
a relatively short time period, such as the market for Neutralase. Our strategy
is to avoid situations where market differentiation is a function of marketing
strength and not technical expertise.
SEEK TO LICENSE OR ACQUIRE COMPLEMENTARY PRODUCTS AND TECHNOLOGIES
We intend to supplement our internal drug discovery efforts through the
acquisition of products and technologies that complement our general product
development strategy. An example of this is our recent acquisition of the
pharmaceutical assets of IBEX Technologies, which added two complementary
product candidates to our portfolio. We intend to continue to identify, evaluate
and pursue the licensing or acquisition of other strategically valuable products
and organizations.
LEVERAGE OUR CORE COMPETENCIES
We believe that we have significant expertise in enzyme biology and
manipulation, which we have used to establish a strong platform for the
development of enzyme-related pharmaceutical products. We intend to leverage
these competencies to develop high-value products for markets with unmet medical
needs. When strategically advantageous, we may seek partnerships with industry
leaders for the further advancement of our product candidates.
------------------------
Our principal executive offices are located at 371 Bel Marin Keys Boulevard,
Suite 210, Novato, CA 94949 and our telephone number is (415) 884-6700.
Information contained on our website, www.biomarinpharm.com, is not part of this
prospectus.
4
The offering
Common stock offered......................... 6,000,000 shares
Common stock to be outstanding after this
offering................................... 50,234,374 shares
Use of proceeds.............................. We intend to use the net proceeds to fund
development and commercialization of our lead
product candidate, Aldurazyme; additional
clinical trials and manufacturing of
Neutralase; preclinical studies and clinical
trials for our other product candidates;
potential licenses and other acquisitions of
complementary technologies and products;
general corporate purposes; and working
capital. See "Use of Proceeds."
Nasdaq National Market and SWX Swiss New
Market symbol.............................. "BMRN"
The number of shares of our common stock to be outstanding after this offering
in the table above is based on the number of shares outstanding as of November
6, 2001, and does not include, as of that date:
- 752,427 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $12.99 per share;
- 7,175,722 shares of our common stock issuable upon exercise of outstanding
options issued under our stock option plans at a weighted average exercise
price of $10.92 per share; and
- an additional 1,266,611 shares of common stock available for future issuance
under our stock option plans and employee stock purchase plan.
Unless otherwise stated, all information contained in this prospectus assumes no
exercise of the over-allotment option we granted to the underwriters.
5
Summary Consolidated Financial Data
Nine Months Ended
Year Ended December 31, September 30,
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Consolidated Statements of Operations Data: 1998 1999 2000 2000 2001
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(in thousands, except for per share data)
(unaudited)
Revenues..................................... $ 1,190 $ 6,976 $ 12,326 $ 9,188 $ 10,808
Operating costs and expenses:
Cost of products and services.............. 108 464 719 539 860
Research and development................... 10,502 27,206 35,794 25,109 31,842
Selling, general and administrative........ 3,532 6,805 8,814 6,517 7,505
Carson Street closure...................... -- -- 4,423 4,423 --
-------- -------- -------- -------- --------
Total costs and expenses................. 14,142 34,475 49,750 36,588 40,207
-------- -------- -------- -------- --------
Loss from operations......................... (12,952) (27,499) (37,424) (27,400) (29,399)
Interest income.............................. 685 1,832 2,979 2,281 1,434
Interest expense............................. -- (732) (7) (6) (11)
Equity in loss of joint venture.............. (47) (1,673) (2,912) (1,845) (4,708)
-------- -------- -------- -------- --------
Net loss..................................... $(12,314) $(28,072) $(37,364) $(26,970) $(32,684)
======== ======== ======== ======== ========
Net loss per common share, basic and
diluted.................................... $ (0.55) $ (0.94) $ (1.04) $ (0.76) $ (0.83)
======== ======== ======== ======== ========
Weighted average common shares outstanding... 22,488 29,944 35,859 35,493 39,601
======== ======== ======== ======== ========
September 30, 2001
Consolidated Balance Sheet Data: Actual As Adjusted
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(unaudited)
Cash, cash equivalents and short-term investments........... $43,905 111,685
Total current assets........................................ 50,642 118,422
Total assets................................................ 90,402 158,182
Long-term liabilities....................................... 146 146
Total stockholders' equity.................................. 84,166 151,946
See notes to our consolidated financial statements incorporated by reference in
this prospectus for a description of the number of shares used in the
computation of the net loss per common share.
The as adjusted balance sheet data above gives effect to our sale of 6,000,000
shares of common stock at an assumed offering price of $12.05 per share after
deducting the underwriting discount and estimated offering expenses payable by
us.
This table does not give effect to:
- a cash payment of $2.0 million and the issuance and sale of 814,647 shares
of our common stock which we recently paid to IBEX Technologies Inc. and
certain of its affiliates in connection with our October 31, 2001
acquisition of their pharmaceutical assets, or
- the issuance and sale of an aggregate 1,061,676 shares of our common stock
to Acqua Wellington North American Equities Fund, Ltd. and the
$10.5 million proceeds therefrom in October 2001.
6
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Risk Factors
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. WE OPERATE IN
A DYNAMIC AND RAPIDLY CHANGING INDUSTRY THAT INVOLVES NUMEROUS RISKS AND
UNCERTAINTIES. BEFORE PURCHASING THESE SECURITIES, YOU SHOULD CAREFULLY CONSIDER
THE FOLLOWING RISK FACTORS, AS WELL AS OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS, TO EVALUATE AN
INVESTMENT IN THE SECURITIES OFFERED BY THIS PROSPECTUS. THE RISKS AND
UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE. OTHER RISKS AND
UNCERTAINTIES, INCLUDING THOSE THAT WE DO NOT CURRENTLY CONSIDER MATERIAL, MAY
IMPAIR OUR BUSINESS. IF ANY OF THE RISKS DISCUSSED BELOW ACTUALLY OCCUR, OUR
BUSINESS, FINANCIAL CONDITION, OPERATING RESULTS OR CASH FLOWS COULD BE
MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE TRADING PRICE OF OUR COMMON
STOCK TO DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
If we continue to incur operating losses for a period longer than anticipated,
we may be unable to continue our operations at planned levels and be forced to
reduce or discontinue operations.
We are in an early stage of development and have operated at a net loss since we
were formed. Since we began operations in March 1997, we have been engaged
primarily in research and development. We have no sales revenues from any of our
product candidates. As of September 30, 2001, we had an accumulated deficit of
approximately $113 million. We expect to continue to operate at a net loss for
the foreseeable future. Our future profitability depends on our receiving
regulatory approval of our product candidates and our ability to successfully
manufacture and market any approved drugs, either by ourselves or jointly with
others. The extent of our future losses and the timing of profitability are
highly uncertain. If we fail to become profitable or are unable to sustain
profitability on a continuing basis, then we may be unable to continue our
operations.
If we fail to obtain the capital necessary to fund our operations, we will be
unable to complete our product development programs.
In the future, we may need to raise substantial additional capital to fund
operations. We cannot be certain that any financing will be available when
needed. If we fail to raise additional financing as we need it, we will have to
delay or terminate some or all of our product development programs.
We expect to continue to spend substantial amounts of capital for our operations
for the foreseeable future. The amount of capital we will need depends on many
factors, including:
- The progress, timing and scope of our preclinical studies and clinical
trials
- The time and cost necessary to obtain regulatory approvals
- The time and cost necessary to develop commercial manufacturing processes,
including quality systems and to build or acquire manufacturing
capabilities.
- The time and cost necessary to respond to technological and market
developments
- Any changes made or new developments in our existing collaborative,
licensing and other commercial relationships or any new collaborative,
licensing and other commercial relationships that we may establish
Moreover, our fixed expenses such as rent, license payments and other
contractual commitments are substantial and will increase in the future. These
fixed expenses will increase because we may enter into:
- Additional leases for new facilities and capital equipment
- Additional licenses and collaborative agreements
- Additional contracts for consulting, maintenance and administrative services
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7
Risk factors
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- Additional contracts for product manufacturing
We believe that our cash, cash equivalents and short-term investment securities
balances at September 30, 2001 will be sufficient to meet our operating and
capital requirements at least through the next 12 months. This estimate is based
on assumptions and estimates, which may prove to be wrong. As a result, we may
need or choose to obtain additional financing during that time.
If we fail to obtain regulatory approval to commercially manufacture or sell any
of our future drug products, or if approval is delayed, we will be unable to
generate revenue from the sale of our products.
We must obtain regulatory approval before marketing or selling our drug products
in the U.S. and in foreign jurisdictions. In the United States, we must obtain
FDA approval for each drug that we intend to commercialize. The FDA approval
process is typically lengthy and expensive, and approval is never certain.
Products distributed abroad are also subject to foreign government regulation.
None of our drug products has received regulatory approval to be commercially
marketed and sold. If we fail to obtain regulatory approval, we will be unable
to market and sell our drug products. Because of the risks and uncertainties in
biopharmaceutical development, our drug products could take a significantly
longer time to gain regulatory approval than we expect or may never gain
approval. If regulatory approval is delayed, our management's credibility, the
value of our company and our operating results will be adversely affected.
To obtain regulatory approval to market our products, preclinical studies and
costly and lengthy clinical trials will be required, and the results of the
studies and trials are highly uncertain.
As part of the regulatory approval process, we must conduct, at our own expense,
preclinical studies in the laboratory on animals and clinical trials on humans
for each drug product. We expect the number of preclinical studies and clinical
trials that the regulatory authorities will require will vary depending on the
drug product, the disease or condition the drug is being developed to address
and regulations applicable to the particular drug. We may need to perform
multiple preclinical studies using various doses and formulations before we can
begin clinical trials, which could result in delays in our ability to market any
of our drug products. Furthermore, even if we obtain favorable results in
preclinical studies on animals, the results in humans may be significantly
different.
After we have conducted preclinical studies in animals, we must demonstrate that
our drug products are safe and efficacious for use on the target human patients
in order to receive regulatory approval for commercial sale. Adverse or
inconclusive clinical results would stop us from filing for regulatory approval
of our drug products. Additional factors that can cause delay or termination of
our clinical trials include:
- Slow or insufficient patient enrollment
- Slow recruitment of, and completion of necessary institutional approvals at,
clinical sites
- Longer treatment time required to demonstrate efficacy
- Lack of sufficient supplies of the product candidate
- Adverse medical events or side effects in treated patients
- Lack of effectiveness of the product candidate being tested
- Regulatory requests for additional clinical trials
Typically, if a drug product is intended to treat a chronic disease, as is the
case with most of the product candidates we are developing, safety and efficacy
data must be gathered over an extended period of time, which can range from six
months to three years or more.
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In April 1999, we completed a twelve-month patient evaluation for the initial
clinical trial of our lead drug product, Aldurazyme, for the treatment of MPS I.
Two of the original ten patients enrolled in this trial died in 2000. One of
these patients received 103 weeks of Aldurazyme treatment and the other received
127 weeks of treatment. Based on medical data collected from clinical
investigative sites, neither case directly implicated treatment with Aldurazyme
as the cause of death. In cases of patient complications or death are ultimately
attributed to Aldurazyme, our chances of commercializing this drug would be
seriously compromised.
The fast track designation for our product candidates may not actually lead to a
faster review process.
Although Aldurazyme and rhASB have obtained fast track designations, we cannot
guarantee a faster review process or faster approval compared to the normal FDA
procedures.
We will not be able to sell our products if we fail to comply with manufacturing
regulations.
Before we can begin commercial manufacture of our products, we must obtain
regulatory approval of our manufacturing facility and process. In addition,
manufacture of our drug products must comply with the FDA's current Good
Manufacturing Practices regulations, commonly known as cGMP. The cGMP
regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities are continuously subject to inspection by the FDA,
the State of California and foreign regulatory authorities, before and after
product approval. Our Galli Drive and our Bel Marin Keys Boulevard manufacturing
facilities have been inspected and licensed by the State of California for
clinical pharmaceutical manufacture. We cannot guarantee that these facilities
will pass federal or international regulatory inspection. We cannot guarantee
that we, or any potential third-party manufacturer of our drug products, will be
able to comply with cGMP regulations.
We must pass Federal, state and European regulatory inspections, and we must
manufacture three process qualification batches (five process qualification
batches for Europe) to final specifications under cGMP controls for each of our
drug products before the marketing applications can be approved. Although we
have completed process qualification batches for Aldurazyme, these batches may
be rejected by the regulatory authorities, and we may be unable to manufacture
the process qualification batches for our other products or pass the inspections
in a timely manner, if at all.
If we fail to obtain orphan drug exclusivity for some of our products, our
competitors may sell products to treat the same conditions and our revenues will
be reduced.
As part of our business strategy, we intend to develop drugs that may be
eligible for FDA and European Community orphan drug designation. Under the
Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a
drug intended to treat a rare disease or condition, defined as a patient
population of less than 200,000 in the United States. The company that first
obtains FDA approval for a designated orphan drug for a given rare disease
receives marketing exclusivity for use of that drug for the stated condition for
a period of seven years. However, different drugs can be approved for the same
condition. Similar regulations are available in the European Community with a
ten-year period of market exclusivity.
Because the extent and scope of patent protection for our drug products is
limited, orphan drug designation is particularly important for our products that
are eligible for orphan drug designation. We plan to rely on the exclusivity
period under the orphan drug designation to maintain a competitive position. If
we do not obtain orphan drug exclusivity for our drug products, which do not
have patent protection, our competitors may then sell the same drug to treat the
same condition.
Even though we have obtained orphan drug designation for certain of our product
candidates and even if we obtain orphan drug designation for other products we
develop, we cannot guarantee that we will
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be the first to obtain marketing approval for any orphan indication or, if we
do, that exclusivity would effectively protect the product from competition.
Orphan drug designation neither shortens the development time or regulatory
review time of a drug nor gives the drug any advantage in the regulatory review
or approval process.
Because the target patient populations for some of our products are small, we
must achieve significant market share and obtain high per-patient prices for our
products to achieve profitability.
Two of our lead drug candidates, Aldurazyme and rhASB, target diseases with
small patient populations. As a result, our per-patient prices must be
relatively high in order to recover our development costs and achieve
profitability. Aldurazyme targets patients with MPS I and rhASB targets patients
with MPS VI. We estimate that there are approximately 3,400 patients with MPS I
and 1,100 patients with MPS VI in the developed world. We believe that we will
need to market worldwide to achieve significant market share. In addition, we
are developing other drug candidates to treat conditions, such as other genetic
diseases and serious burn wounds, with small patient populations. We cannot be
certain that we will be able to obtain sufficient market share for our drug
products at a price high enough to justify our product development efforts.
If we fail to obtain an adequate level of reimbursement for our drug products by
third-party payers, there would be no commercially viable markets for our
products.
The course of treatment for patients with MPS I using Aldurazyme and for
patients with MPS VI using rhASB is expected to be expensive. We expect patients
to need treatment throughout their lifetimes. We expect that most families of
patients will not be capable of paying for this treatment themselves. There will
be no commercially viable market for Aldurazyme or rhASB without reimbursement
from third-party payers.
Third-party payers, such as government or private health care insurers,
carefully review and increasingly challenge the prices charged for drugs.
Reimbursement rates from private companies vary depending on the third-party
payer, the insurance plan and other factors. Reimbursement systems in
international markets vary significantly by country and by region, and
reimbursement approvals must be obtained on a country-by-country basis. We
cannot be certain that third-party payers will pay for the costs of our drugs.
Even if we are able to obtain reimbursement from third-party payers, we cannot
be certain that reimbursement rates will be enough to allow us to profit from
sales of our drugs or to justify our product development expenses.
We currently have no expertise obtaining reimbursement. We expect to rely on the
expertise of our joint venture partner Genzyme to obtain reimbursement for the
costs of Aldurazyme. We cannot predict what the reimbursement rates will be. In
addition, we will need to develop our own reimbursement expertise for future
drug candidates unless we enter into collaborations with other companies with
the necessary expertise.
We expect that, in the future, reimbursement will be increasingly restricted
both in the United States and internationally. The escalating cost of health
care has led to increased pressure on the health care industry to reduce costs.
Governmental and private third-party payers have proposed health care reforms
and cost reductions. A number of federal and state proposals to control the cost
of health care, including the cost of drug treatments have been made in the
United States. In some foreign markets, the government controls the pricing
which would affect the profitability of drugs. Current government regulations
and possible future legislation regarding health care may affect our future
revenues from sales of our drugs and may adversely affect our business and
prospects.
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If we are unable to protect our proprietary technology, we may not be able to
compete as effectively.
Where appropriate, we seek patent protection for certain aspects of our
technology. Patent protection may not be available for some of the enzymes we
are developing. If we must spend significant time and money protecting our
patents, designing around patents held by others or licensing, for large fees,
patents or other proprietary rights held by others, our business and financial
prospects may be harmed.
The patent positions of biotechnology products are complex and uncertain. The
scope and extent of patent protection for some of our products are particularly
uncertain because key information on some of the enzymes we are developing has
existed in the public domain for many years. Other parties have published the
structure of the enzymes, the methods for purifying or producing the enzymes or
the methods of treatment. The composition and genetic sequences of animal and/or
human versions of many of our enzymes have been published and are believed to be
in the public domain. The composition and genetic sequences of other MPS enzymes
that we intend to develop as products have also been published. Publication of
this information may prevent us from obtaining composition-of-matter patents,
which are generally believed to offer the strongest patent protection. For
enzymes with no prospect of broad composition-of-matter patents, other forms of
patent protection or orphan drug status may provide us with a competitive
advantage. As a result of these uncertainties, investors should not rely on
patents as a means of protecting our product candidates, including Aldurazyme.
We own or license patents and patent applications to certain of our product
candidates. However, these patents and patent applications do not ensure the
protection of our intellectual property for a number of other reasons:
- We do not know whether our patent applications will result in issued
patents. For example, we may not have developed a method for treating a
disease before others developed similar methods.
- Competitors may interfere with our patent process in a variety of ways.
Competitors may claim that they invented the claimed invention prior to us.
Competitors may also claim that we are infringing on their patents and
therefore cannot practice our technology as claimed under our patent.
Competitors may also contest our patents by showing the patent examiner that
the invention was not original, was not novel or was obvious. In litigation,
a competitor could claim that our issued patents are not valid for a number
of reasons. If a court agrees, we would lose that patent. As a company, we
have no meaningful experience with competitors interfering with our patents
or patent applications.
- Enforcing patents is expensive and may absorb significant time of our
management. Management would spend less time and resources on developing
products, which could increase our research and development expense and
delay product programs.
- Receipt of a patent may not provide much practical protection. If we receive
a patent with a narrow scope, then it will be easier for competitors to
design products that do not infringe on our patent.
In addition, competitors also seek patent protection for their technology. There
are many patents in our field of technology, and we cannot guarantee that we do
not infringe on those patents or that we will not infringe on patents granted in
the future. If a patent holder believes our product infringes on their patent,
the patent holder may sue us even if we have received patent protection for our
technology. If someone else claims we infringe on their technology, we would
face a number of issues, including:
- Defending a lawsuit takes significant time and can be very expensive.
- If the court decides that our product infringes on the competitor's patent,
we may have to pay substantial damages for past infringement.
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- The court may prohibit us from selling or licensing the product unless the
patent holder licenses the patent to us. The patent holder is not required
to grant us a license. If a license is available, we may have to pay
substantial royalties or grant cross-licenses to our patents.
- Redesigning our product so it does not infringe may not be possible or could
require substantial funds and time.
It is also unclear whether our trade secrets will provide useful protection.
While we use reasonable efforts to protect our trade secrets, our employees or
consultants may unintentionally or willfully disclose our information to
competitors. Enforcing a claim that someone else illegally obtained and is using
our trade secrets, like patent litigation, is expensive and time consuming, and
the outcome is unpredictable. In addition, courts outside the United States are
sometimes less willing to protect trade secrets. Our competitors may
independently develop equivalent knowledge, methods and know-how.
We may also support and collaborate in research conducted by government
organizations or by universities. We cannot guarantee that we will be able to
acquire any exclusive rights to technology or products derived from these
collaborations. If we do not obtain required licenses or rights, we could
encounter delays in product development while we attempt to design around other
patents or even be prohibited from developing, manufacturing or selling products
requiring these licenses. There is also a risk that disputes may arise as to the
rights to technology or products developed in collaboration with other parties.
The United States Patent and Trademark Office recently issued two patents that
relate to (alpha)-L-iduronidase. If we are not able to successfully challenge
these patents, we may be prevented from producing Aldurazyme unless and until we
obtain a license.
The United States Patent and Trademark Office recently issued two patents that
include composition of matter and method of use claims for recombinant
(alpha)-L-iduronidase. Our lead drug product, Aldurazyme, is based on
recombinant (alpha)-L-iduronidase. We believe that these patents are invalid on
a number of grounds. A corresponding patent application was filed in the
European Patent Office claiming composition of matter for recombinant
(alpha)-L-iduronidase, and it was rejected over prior art and withdrawn and
cannot be refiled. Nonetheless, under U.S. law, issued patents are entitled to a
presumption of validity, and our challenges to the U.S. patents may be
unsuccessful. Even if we are successful, challenging the U.S. patents may be
expensive, require our management to devote significant time to this effort and
may delay commercialization of Aldurazyme in the United States.
The patent holder has granted an exclusive license for products relating to
these patents to one of our competitors. If we are unable to successfully
challenge the patents, we may be unable to produce Aldurazyme in the United
States unless we can obtain a sub-license from the current licensee. The current
licensee is not required to grant us a license and even if a license is
available, we may have to pay substantial license fees, which could adversely
affect our business and operating results.
If our joint venture with Genzyme were terminated, we could be barred from
commercializing Aldurazyme or our ability to commercialize Aldurazyme would be
delayed or diminished.
We are relying on Genzyme to apply the expertise it has developed through the
launch and sale of other enzyme-based products to the marketing of our initial
drug product, Aldurazyme. Because it is our initial product, our operations are
substantially dependent upon the development of Aldurazyme. We have no
experience selling, marketing or obtaining reimbursement for pharmaceutical
products. In addition, without Genzyme we would be required to pursue foreign
regulatory approvals. We have no experience in seeking foreign regulatory
approvals.
We cannot guarantee that Genzyme will devote the resources necessary to
successfully market Aldurazyme. In addition, either party may terminate the
joint venture for specified reasons, including if the other party is in material
breach of the agreement or has experienced a change of control or has declared
bankruptcy and also is in breach of the agreement. Either party may also
terminate the agreement upon one-year prior written notice for any reason.
Furthermore, we may terminate the joint venture if Genzyme fails to fulfill its
contractual obligation to pay us $12.1 million in cash upon the approval of the
BLA for Aldurazyme.
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If the joint venture is terminated for breach, the non-breaching party would be
granted, exclusively, all of the rights to Aldurazyme and any related
intellectual property and regulatory approvals and would be obligated to buy out
the breaching party's interest in the joint venture. If we are the breaching
party, we would lose our rights to Aldurazyme and the related intellectual
property and regulatory approvals. If the joint venture is terminated without
cause, the non-terminating party would have the option, exercisable for one
year, to buy out the terminating party's interest in the joint venture and
obtain all rights to Aldurazyme exclusively. In the event of termination of the
buy out option without exercise by the non-terminating party as described above,
all right and title to Aldurazyme is to be sold to the highest bidder, with the
proceeds to be split equally between Genzyme and us.
If the joint venture is terminated by either party because the other declared
bankruptcy and is also in breach of the agreement, the terminating party would
be obligated to buy out the other and would obtain all rights to Aldurazyme
exclusively. If the joint venture is terminated by a party because the other
party experienced a change of control, the terminating party shall notify the
other party, the offeree, of its intent to buy out the offeree's interest in the
joint venture for a stated amount set by the terminating party at its
discretion. The offeree must then either accept this offer or agree to buy the
terminating party's interest in the joint venture on those same terms. The party
who buys out the other would then have exclusive rights to Aldurazyme.
If we were obligated, or given the option, to buy out Genzyme's interest in the
joint venture, and gain exclusive rights to Aldurazyme, we may not have
sufficient funds to do so and we may not be able to obtain the financing to do
so. If we fail to buy out Genzyme's interest we may be held in breach of the
agreement and may lose any claim to the rights to Aldurazyme and the related
intellectual property and regulatory approvals. We would then effectively be
prohibited from developing and commercializing the product.
Termination of the joint venture in which we retain the rights to Aldurazyme
could cause us significant delays in product launch in the United States,
difficulties in obtaining third-party reimbursement and delays or failure to
obtain foreign regulatory approval, any of which could hurt our business and
results of operations. Since Genzyme funds 50% of the joint venture's operating
expenses, the termination of the joint venture would double our financial burden
and reduce the funds available to us for other product programs.
If we are unable to manufacture our drug products in sufficient quantities and
at acceptable cost, we may be unable to meet demand for our products and lose
potential revenues or have reduced margins.
With the exception of Aldurazyme, we have no experience manufacturing drug
products in volumes that will be necessary to support commercial sales. Our
manufacturing processes may not meet initial expectations as to schedule,
reproducibility, yields, purity, costs, quality, and other measurements of
performance. Improvements in manufacturing processes typically are very
difficult to achieve and are often very expensive. We cannot know with certainty
how long it might take to make improvements if it became necessary to do so. If
we contract for manufacturing services with an unproven process, our contractor
is subject to the same uncertainties, high standards and regulatory controls.
The manufacture of Neutralase involves the fermentation of a bacterial species.
We have never used a bacterial production process for the production of any
clinical or commercial production. IBEX contracted with a third party for the
manufacture of the Neutralase used in prior clinical trials.
The availability of suitable contract manufacturing at scheduled or optimum
times is not certain. The cost of contract manufacturing is greater than
internal manufacturing and therefore our manufacturing processes must be of
higher productivity to yield equivalent margins.
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If we are unable to establish and maintain commercial scale manufacturing within
our planned time and cost parameters, sales of our products and our financial
performance will be adversely affected.
Although we have successfully manufactured Aldurazyme at commercial scale within
our cost parameters, we cannot guarantee that we will be able to manufacture any
other drug product successfully with a commercially viable process or at a scale
large enough to support their respective commercial markets or at acceptable
margins.
We may encounter problems with any of the following if we attempt to increase
the scale or size or improve the commercial viability of our manufacturing
processes:
- Design, construction and qualification of manufacturing facilities that meet
regulatory requirements
- Production yields
- Purity
- Quality control and assurance systems
- Shortages of qualified personnel
- Compliance with regulatory requirements
We have built-out approximately 67,000 square feet at our Novato facilities for
manufacturing capability for Aldurazyme and rhASB including related quality
control laboratories, materials capabilities, and support areas. We expect to
complete an expansion of the Galli Drive facility in the fourth quarter of 2001
and possibly add additional capabilities in stages over time, which create
additional operational complexity and challenges. We expect that the
manufacturing process of all of our new drug products, including rhASB and
Neutralase, will require significant time and resources before we can begin to
manufacture them (or have them manufactured by third parties) in commercial
quantity at acceptable cost. Even if we can establish the necessary capacity, we
cannot be certain that manufacturing costs will be commercially reasonable,
especially if contract manufacturing is employed or if third-party reimbursement
is substantially lower than expected.
In order to achieve our product cost targets we must develop efficient
manufacturing processes either by:
- Improving the product yield from our current cell lines, colonies of cells
which have a common genetic make-up,
- Improving the manufacturing processes licensed from others, or
- Developing more efficient, lower cost recombinant cell lines and production
processes.
A recombinant cell line is a cell line with foreign DNA inserted that is used to
produce an enzyme or other protein that it would not have otherwise produced.
The development of a stable, high production cell line for any given enzyme is
difficult, expensive and unpredictable and may not result in adequate yields. In
addition, the development of protein purification processes is difficult and may
not produce the high purity required with acceptable yield and costs or may not
result in adequate shelf-lives of the final products. If we are not able to
develop efficient manufacturing processes, the investment in manufacturing
capacity sufficient to satisfy market demand will be much greater and will place
heavy financial demands upon us. If we do not achieve our manufacturing cost
targets, we will have lower margins and reduced profitability in commercial
production and larger losses in manufacturing start-up phases.
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If we are unable to increase our marketing and distribution capabilities or to
enter into agreements with third parties to do so, our ability to generate
revenues will be diminished.
If we cannot increase our marketing capabilities either by developing our sales
and marketing organization or by entering into agreements with others, we may be
unable to successfully sell our products. If we are unable to effectively sell
our drug products, our ability to generate revenues will be diminished.
To increase our distribution and marketing for both our drug candidates, we will
have to increase our current sales force and/or enter into third-party marketing
and distribution agreements. We cannot guarantee that we will be able to hire in
a timely manner the qualified sales and marketing personnel we need, if at all.
Nor can we guarantee that we will be able to enter into any marketing or
distribution agreements on acceptable terms, if at all. If we cannot increase
our marketing capabilities as we intend, either by increasing our sales force or
entering into agreements with third parties, sales of our products may be
adversely affected.
Under our joint venture with Genzyme, Genzyme is responsible for marketing and
distributing Aldurazyme. We cannot guarantee that we will be able to establish
sales and distribution capabilities or that the joint venture, any future
collaborators or we will successfully sell any of our drug products.
With our acquisition of Neutralase from IBEX Technologies Inc., we have an
enzyme product that has a significantly larger potential patient population than
Aldurazyme and rhASB and will be marketed and sold to different target audiences
with different therapeutic and financial requirements and needs. As a result, we
will be competing with other pharmaceutical companies with experienced and
well-funded sales and marketing operations targeting these specific physician
and institutional audiences. We may not be able to develop our own sales and
marketing force at all, or of a size that would allow us to compete with these
other companies. If we elect to enter into third-party marketing and
distribution agreements in order to sell into these markets, we may not be able
to enter into these agreements on acceptable terms, if at all. If we cannot
compete effectively in these specific physician and institutional markets, it
would adversely affect sales of Neutralase.
If we fail to compete successfully, our revenues and operating results will be
adversely affected.
Our competitors may develop, manufacture and market products that are more
effective or less expensive than ours. They may also obtain regulatory approvals
for their products faster than we can obtain them, including those products with
orphan drug designation, or commercialize their products before we do. If our
competitors successfully commercialize a product that treats a given rare
genetic disease before we do, we will effectively be precluded from developing a
product to treat that disease because the patient populations of the rare
genetic diseases are so small. If our competitor gets orphan drug exclusivity,
we could be precluded from marketing our version for seven years in the U.S. and
ten years in the European Union. However, different drugs can be approved for
the same condition. These companies also compete with us to attract qualified
personnel and organizations for acquisitions, joint ventures or other
collaborations. They also compete with us to attract academic research
institutions as partners and to license these institutions' proprietary
technology. If our competitors successfully enter into partnering arrangements
or license agreements with academic research institutions, we will then be
precluded from pursuing those specific opportunities. Since each of these
opportunities is unique, we may not be able to find a substitute. Several
pharmaceutical and biotechnology companies have already established themselves
in the field of enzyme therapeutics, including Genzyme, our joint venture
partner. These companies have already begun many drug development programs, some
of which may target diseases that we are also targeting, and have already
entered into partnering and
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licensing arrangements with academic research institutions, reducing the pool of
available opportunities.
Universities and public and private research institutions are also competitors.
While these organizations primarily have educational or basic research
objectives, they may develop proprietary technology and acquire patents that we
may need for the development of our drug products. We will attempt to license
this proprietary technology, if available. These licenses may not be available
to us on acceptable terms, if at all. We also directly compete with a number of
these organizations to recruit personnel, especially scientists and technicians.
We believe that established technologies provided by other companies, such as
laboratory and testing services firms, compete with Glyko, Inc.'s products and
services. For example, Glyko's FACE-Registered Trademark- Imaging System
competes with alternative carbohydrate analytical technologies, including
capillary electrophoresis, high-pressure liquid chromatography, mass
spectrometry and nuclear magnetic resonance spectrometry. These competitive
technologies have established customer bases and are more widely used and
accepted by scientific and technical personnel because they can be used for
non-carbohydrate applications. Companies competing with Glyko may have greater
financial, manufacturing and marketing resources and experience.
If we do not achieve milestones as expected, our stock price may decline.
For planning purposes, we estimate the timing of the accomplishment of various
scientific, clinical, regulatory and other milestones, such as the commencement
or completion of scientific studies and clinical trials and the submission of
regulatory filings. These estimates, some of which are included in this
prospectus, are based on a variety of assumptions. The actual timing of these
milestones can vary dramatically compared to our estimates, in many cases for
reasons beyond our control.
If we fail to manage our growth or fail to recruit and retain personnel, our
product development programs may be delayed.
Our rapid growth has strained our managerial, operational, financial and other
resources. We expect this growth to continue. We have entered into a joint
venture with Genzyme. If we receive FDA approval to market Aldurazyme, the joint
venture will be required to devote additional resources to support the
commercialization of Aldurazyme.
To manage expansion effectively, we need to continue to develop and improve our
research and development capabilities, manufacturing and quality capacities,
sales and marketing capabilities and financial and administrative systems. We
cannot guarantee that our staff, financial resources, systems, procedures or
controls will be adequate to support our operations or that our management will
be able to manage successfully future market opportunities or our relationships
with customers and other third parties.
Our future growth and success depend on our ability to recruit, retain, manage
and motivate our employees. The loss of key scientific, technical and managerial
personnel may delay or otherwise harm our product development programs. Any harm
to our research and development programs would harm our business and prospects.
Because of the specialized scientific and managerial nature of our business, we
rely heavily on our ability to attract and retain qualified scientific,
technical and managerial personnel. In particular, the loss of Fredric D. Price,
our Chairman and Chief Executive Officer, or Christopher M. Starr, Ph.D., our
Vice President for Research and Development, could be detrimental to us if we
cannot recruit suitable replacements in a timely manner. While Mr. Price and
Dr. Starr are parties to employment agreements with us, we cannot guarantee that
they will remain employed with us in the future. In
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addition, these agreements do not restrict their ability to compete with us
after their employment is terminated. The competition for qualified personnel in
the biopharmaceutical field is intense. We cannot be certain that we will
continue to attract and retain qualified personnel necessary for the development
of our business.
If we fail to effectively integrate the recently acquired Neutralase and
Phenylase programs into our current operations, the efficient execution of these
product programs could be delayed and our operating and research and development
expenditures could increase beyond anticipated levels.
Our recent acquisition of assets from IBEX Technologies Inc., including the
Neutralase and Phenylase product programs, will need to be integrated with our
current operations. This will include several technical and administrative
challenges, including managing the information transfer, integrating certain of
IBEX's former technical staff into our research and development structure and
managing multiple operations in different countries. If we do not accomplish
this integration effectively, our programs could be delayed and our operating
and research and development expenditures could increase beyond anticipated
levels. Additionally, the integration could require a significant time
commitment from our senior management.
Changes in methods of treatment of disease could reduce demand for our products.
Even if our drug products are approved, doctors must use treatments that require
using those products. If doctors elect a different course of treatment from that
which includes our drug products, this decision would reduce demand for our drug
products.
Examples include the potential use in the future of effective gene therapy for
the treatment of genetic diseases. The use of gene therapy could theoretically
reduce or eliminate the use of enzyme replacement therapy in MPS diseases.
Sometimes, this change in treatment method can be caused by the introduction of
other companies' products or the development of new technologies or surgical
procedures which may not directly compete with ours, but which have the effect
of changing how doctors decide to treat a disease. For example, Neutralase is
being developed for heparin reversal in CABG surgery. It is possible that
alternative non-surgical methods of treating heart disease could be developed.
If so, then the demand for Neutralase would likely decrease.
If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities.
We are exposed to the potential product liability risks inherent in the testing,
manufacturing and marketing of human pharmaceuticals. The BioMarin/Genzyme LLC
maintains product liability insurance for our clinical trials of Aldurazyme. We
have obtained insurance against product liability lawsuits for the clinical
trials for rhASB. We may be subject to claims in connection with our current
clinical trials for Aldurazyme and rhASB for which the joint venture's or our
insurance coverages are not adequate. We cannot be certain that if Aldurazyme
receives FDA approval, the product liability insurance the joint venture will
need to obtain in connection with the commercial sales of Aldurazyme will be
available in meaningful amounts or at a reasonable cost. In addition, we cannot
be certain that we can successfully defend any product liability lawsuit brought
against us. If we are the subject of a successful product liability claim which
exceeds the limits of any insurance coverage we may obtain, we may incur
substantial liabilities which would adversely affect our earnings and financial
condition.
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Our stock price may be volatile, and an investment in our stock could suffer a
decline in value.
Our valuation and stock price since the beginning of trading after our initial
public offering have had no meaningful relationship to current or historical
earnings, asset values, book value or many other criteria based on conventional
measures of stock value. The market price of our common stock will fluctuate due
to factors including:
- Progress of Aldurazyme, Neutralase, rhASB and our other lead drug products
through the regulatory process, especially regulatory actions in the United
States related to Aldurazyme
- Results of clinical trials, announcements of technological innovations or
new products by us or our competitors
- Government regulatory action affecting our drug products or our competitors'
drug products in both the United States and foreign countries
- Developments or disputes concerning patent or proprietary rights
- General market conditions and fluctuations for the emerging growth and
biopharmaceutical market sectors
- Economic conditions in the United States or abroad
- Actual or anticipated fluctuations in our operating results
- Broad market fluctuations in the United States or in Europe, which may cause
the market price of our common stock to fluctuate
- Changes in company assessments or financial estimates by securities analysts
In addition, the value of our common stock may fluctuate because it is listed on
both the Nasdaq National Market and the Swiss Exchange's SWX New Market. Listing
on both exchanges may increase stock price volatility due to:
- Trading in different time zones
- Different ability to buy or sell our stock
- Different market conditions in different capital markets
- Different trading volume
In the past, following periods of large price declines in the public market
price of a company's securities, securities class action litigation has often
been initiated against that company. Litigation of this type could result in
substantial costs and diversion of management's attention and resources, which
would hurt our business. Any adverse determination in litigation could also
subject us to significant liabilities.
If you purchase our common stock in this offering, you will incur immediate
dilution in the book value of your shares.
You will experience an immediate dilution of $9.07 per share in the net tangible
book value per share of our common stock, at the assumed public offering price
of $12.05 per share. In addition, this dilution will be increased to the extent
that holders of outstanding options and warrants to purchase our common stock at
prices below our net tangible book value per share after this offering exercise
those options or warrants.
--------------------------------------------------------------------------------
18
Risk factors
--------------------------------------------------------------------------------
If our officers, directors and largest stockholder elect to act together, they
may be able to control our management and operations, acting in their best
interests and not necessarily those of other stockholders.
Without giving effect to this offering, our directors and officers control
approximately 35% of the outstanding shares of our common stock. Without giving
effect to this offering, Glyko Biomedical Ltd. owns approximately 26% of the
outstanding shares of our capital stock. The president and chief executive
officer of Glyko Biomedical and a significant shareholder of Glyko Biomedical
serve as two of our directors. As a result, due to their concentration of stock
ownership, directors and officers, if they act together, may be able to control
our management and operations, and may be able to prevail on all matters
requiring a stockholder vote including:
- The election of all directors;
- The amendment of charter documents or the approval of a merger, sale of
assets or other major corporate transactions; and
- The defeat of any non-negotiated takeover attempt that might otherwise
benefit the public stockholders.
Anti-takeover provisions in our charter documents and under Delaware law may
make an acquisition of us, which may be beneficial to our stockholders, more
difficult.
We are incorporated in Delaware. Certain anti-takeover provisions of Delaware
law and our charter documents as currently in effect may make a change in
control of our company more difficult, even if a change in control would be
beneficial to the stockholders. Our anti-takeover provisions include provisions
in the certificate of incorporation providing that stockholders' meetings may
only be called by the board of directors and a provision in the bylaws providing
that the stockholders may not take action by written consent. Additionally, our
board of directors has the authority to issue 1,000,000 shares of preferred
stock and to determine the terms of those shares of stock without any further
action by the stockholders. The rights of holders of our common stock are
subject to the rights of the holders of any preferred stock that may be issued.
The issuance of preferred stock could make it more difficult for a third party
to acquire a majority of our outstanding voting stock. Delaware law also
prohibits corporations from engaging in a business combination with any holders
of 15% or more of their capital stock until the holder has held the stock for
three years unless, among other possibilities, the board of directors approves
the transaction. Our board of directors may use these provisions to prevent
changes in the management and control of our company. Also, under applicable
Delaware law, our board of directors may adopt additional anti-takeover measures
in the future.
--------------------------------------------------------------------------------
19
--------------------------------------------------------------------------------
Forward-looking statements
This prospectus contains forward-looking statements. These statements relate to
future events or our future financial performance. We have identified
forward-looking statements in this prospectus using words such as "anticipates,"
"believes," "could," "estimates," "expects," "intends," "may," "plans,"
"potential," "predicts," "should," or "will" or the negative of such terms or
other comparable terminology. These statements are based on our beliefs as well
as assumptions we made using information currently available to us. Because
these statements reflect our current views concerning future events, these
statements involve risks, uncertainties, and assumptions. These risks,
uncertainties, assumptions and other factors, including the risks outlined under
"Risk Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from future
results, levels of actual activity, performance or achievements expressed or
implied by such forward looking statements.
Although we believe that the expectations reflected in the forward looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward looking statements after the date
of this prospectus to conform such statements to actual results, unless required
by law.
--------------------------------------------------------------------------------
20
--------------------------------------------------------------------------------
Use of Proceeds
We estimate that the net proceeds from the sale of shares of common stock we are
offering at an assumed public offering price of $12.05 per share will be
approximately $67.8 million. If the underwriters fully exercise their
over-allotment option, the net proceeds from the sale of the shares we are
offering will be approximately $78.0 million. "Net proceeds" are what we expect
to receive after deducting the underwriting discount and paying our other
estimated expenses of this offering.
We intend to use the net proceeds of this offering for the development and
commercialization of our lead product candidate, Aldurazyme; additional clinical
trials and the manufacturing of Neutralase; preclinical studies and clinical
trials for our other product candidates; potential licenses and other
acquisitions of complementary technologies and products; general corporate
purposes; and working capital.
The timing and amount of our actual expenditures are subject to change and will
be based on many factors, including:
- The progress, timing and scope of our preclinical studies and clinical
trials;
- The time and cost necessary to obtain regulatory approvals;
- The time and cost necessary to develop commercial manufacturing processes,
including quality systems and to build or acquire manufacturing capability;
- The time and cost necessary to respond to technological and market
developments; and
- Any changes made or new developments in our existing collaborative,
licensing and other commercial relationships or any new collaborative,
licensing and other commercial relationships that we may establish.
We have discussions from time to time regarding potential acquisitions and
licensing opportunities. Although we may use a portion of the net proceeds for
this purpose, we currently have no material agreements or commitments in this
regard. We reserve the right, at the sole discretion of our Board of Directors,
to reallocate our use of proceeds in response to these and other factors. Until
we use the net proceeds of this offering, we intend to invest the funds in
interest-bearing securities.
--------------------------------------------------------------------------------
21
--------------------------------------------------------------------------------
Market Price of Common Stock
Our common stock is publicly traded through the Nasdaq National Market and the
Swiss SWX New Market under the symbol "BMRN." The following table sets forth,
for the periods indicated, the high and low sales prices of our common stock, as
reported on the Nasdaq National Market.
Fiscal Year Ended December 31, 1999 High Low
----------------------------------------------------------------------------------
Third Quarter (beginning July 22)........................... $ 19.25 $11.00
Fourth Quarter.............................................. 17.38 10.00
Fiscal Year Ended December 31, 2000 High Low
----------------------------------------------------------------------------------
First Quarter............................................... $ 41.25 $11.75
Second Quarter.............................................. 30.38 16.00
Third Quarter............................................... 21.86 15.75
Fourth Quarter.............................................. 18.50 6.94
Fiscal Year Ended December 31, 2001 High Low
----------------------------------------------------------------------------------
First Quarter............................................... $ 13.25 $ 6.56
Second Quarter.............................................. 13.29 7.50
Third Quarter............................................... 13.74 8.07
Fourth Quarter (through November 8, 2001)................... 13.85 8.65
On November 8, 2001, the last reported sale price of our common stock on the
Nasdaq National Market was $12.05 per share. As of November 6, 2001, there were
approximately 82 stockholders of record of our common stock.
--------------------------------------------------------------------------------
22
--------------------------------------------------------------------------------
Capitalization
The following table shows:
- our actual capitalization on September 30, 2001; and
- our capitalization on September 30, 2001, on an as adjusted basis assuming
the completion of this offering at an assumed public offering price of
$12.05 per share, less the underwriting discount and estimated expenses
payable by us.
September 30, 2001
--------------------------
Actual As Adjusted
(unaudited, in thousands)
----------------------------------------------------------------------------------------
Cash, cash equivalents and short term investments........... $ 43,905 $ 111,685
========= =========
Long-term liabilities....................................... $ 146 $ 146
========= =========
Stockholders' equity:
Preferred Stock, $.001 par value, 1,000,000 shares
authorized; no shares issued or outstanding............. -- --
Common stock, $0.001 par value, 75,000,000 shares
authorized; 42,253,611 shares issued and outstanding,
actual and 48,253,611 shares issued and outstanding, as
adjusted................................................ 42 48
Additional paid in capital................................ 195,104 262,878
Common stock warrants..................................... 5,134 5,134
Deferred compensation..................................... (903) (903)
Notes from stockholders................................... (2,014) (2,014)
Deficit accumulated during development stage.............. (113,197) (113,197)
--------- ---------
Total stockholders' equity.................................. 84,166 151,946
--------- ---------
Total liabilities and stockholders' equity.................. $ 90,402 $ 158,182
========= =========
The number of shares of our common stock in the actual and as adjusted columns
in the table above excludes:
- 6,933,981 shares of our common stock issuable upon exercise of outstanding
options issued under our stock option plans at a weighted average exercise
price of $10.81 per share at September 30, 2001;
- an additional 1,762,792 shares of common stock available for future issuance
under our stock option plans and employee stock purchase plan at
September 30, 2001; and
- 752,427 shares of our common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $12.99 per share as of
September 30, 2001.
This table does not give effect to:
- a cash payment of $2.0 million and the issuance and sale of 814,647 shares
of our common stock which we recently paid to IBEX Technologies Inc. and
certain of its affiliates in connection with our October 31, 2001
acquisition of their pharmaceutical assets, or
- the issuance and sale of an aggregate 1,061,676 shares of our common stock
to Acqua Wellington North American Equities Fund, Ltd. and the
$10.5 million proceeds therefrom in October 2001.
--------------------------------------------------------------------------------
23
--------------------------------------------------------------------------------
Dilution
Our net tangible book value on September 30, 2001 was $75.9 million, or
approximately $1.80 per share. "Net tangible book value" is total assets minus
the sum of liabilities and intangible assets. "Net tangible book value per
share" is net tangible book value divided by the total number of shares of
common stock outstanding.
Net tangible book value dilution per share to new investors represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the net tangible book value per share of our common
stock immediately after completion of this offering. After giving effect to the
sale of 6,000,000 shares of our common stock in this offering at an assumed
public offering price of $12.05 per share and after deducting the underwriting
discount and our estimated offering expenses, our net tangible book value as of
September 30, 2001 would have been $2.98 per share. This amount represents an
immediate increase in net tangible book value of $1.18 per share to existing
stockholders and an immediate dilution in net tangible book value of $9.07 per
share to purchasers of common stock in this offering, as illustrated in the
following table:
Assumed public offering price per share..................... $12.05
Net tangible book value per share as of September 30,
2001.................................................... $ 1.80
Increase in net tangible book value per share attributable
to this offering 1.18
-------
Pro forma net tangible book value per share as of
September 30, 2001 after giving effect to this offering... 2.98
------
Dilution per share to new investors in this offering........ $ 9.07
======
This table:
- assumes no exercise of options to purchase 6,933,981 shares of common stock
at a weighted average exercise price of $10.81 per share outstanding as of
September 30, 2001; and
- assumes no exercise of warrants to purchase 752,427 shares of common stock
at a weighted average exercise price of $12.99 per share outstanding as of
September 30, 2001.
To the extent that these options and warrants are exercised there will be
further dilution to new investors.
--------------------------------------------------------------------------------
24
--------------------------------------------------------------------------------
Selected consolidated financial data
This section presents our selected consolidated financial data. You should
carefully read the financial statements included in the reports incorporated by
reference in this prospectus, including the notes to the financial statements
included in those reports. The selected data in this section is not intended to
replace the financial statements.
We derived the statement of operations data for the interim period from
March 21, 1997 through December 31, 1997 and the years ended December 31, 1998,
1999 and 2000 and balance sheet data as of December 31, 1997, 1998, 1999 and
2000 from audited financial statements. We derived the statement of operations
data for the nine months ended September 30, 2000 and 2001 and the balance sheet
data as of September 30, 2001 from our unaudited financial statements included
in the reports incorporated by reference in this prospectus. We believe that the
unaudited historical financial statements contain all adjustments needed to
present fairly the information included in those financial statements and that
the adjustments made consist only of normal recurring adjustments. Historical
results are not necessarily indicative of results that we may expect in the
future.
Period from Nine Months
March 21, 1997 Ended
(inception) to Year Ended December 31, September 30,
Consolidated Statements December 31, ------------------------------ -------------------
of Operations Data: 1997 1998 1999 2000 2000 2001
----------------------------------------------------------------------------------------------------------------------------
(in thousands, except for per share data)
(unaudited)
Revenues........................................ $ -- $ 1,190 $ 6,976 $ 12,326 $ 9,188 $ 10,808
Operating costs and expenses:
Cost of products and services................. -- 108 464 719 539 860
Research and development...................... 1,914 10,502 27,206 35,794 25,109 31,842
Selling, general and administrative........... 914 3,532 6,805 8,814 6,517 7,505
Carson Street closure......................... -- -- -- 4,423 4,423 --
------- -------- -------- -------- -------- --------
Total costs and expenses.................... 2,828 14,142 34,475 49,750 36,588 40,207
------- -------- -------- -------- -------- --------
Loss from operations............................ (2,828) (12,952) (27,499) (37,424) (27,400) (29,399)
Interest income................................. 65 685 1,832 2,979 2,281 1,434
Interest expense................................ -- -- (732) (7) (6) (11)
Equity in loss of joint venture................. -- (47) (1,673) (2,912) (1,845) (4,708)
------- -------- -------- -------- -------- --------
Net loss........................................ $(2,763) $(12,314) $(28,072) $(37,364) $(26,970) $(32,684)
======= ======== ======== ======== ======== ========
Net loss per common share, basic and diluted.... $ (0.34) $ (0.55) $ (0.94) $ (1.04) $ (0.76) $ (0.83)
======= ======== ======== ======== ======== ========
Weighted average common shares outstanding...... 8,136 22,488 29,944 35,859 35,493 39,601
======= ======== ======== ======== ======== ========
As of December 31, September 30,
Consolidated ----------------------------------------- --------------
Balance Sheet Data: 1997 1998 1999 2000 2001
----------------------------------------------------------------------------------------------------------------------
(unaudited)
Cash, cash equivalents and short-term investments......... $6,888 $11,389 $62,986 $40,201 $43,905
Total current assets...................................... 7,507 12,819 66,422 44,541 50,642
Total assets.............................................. 7,653 31,510 103,549 76,933 90,402
Long-term liabilities..................................... -- 110 85 56 146
Total stockholders' equity................................ 7,380 29,394 98,377 69,994 84,166
See notes to our consolidated financial statements incorporated by reference in
this prospectus for a description of the number of shares used in the
computation of the net loss per common share.
--------------------------------------------------------------------------------
25
Selected consolidated financial data
--------------------------------------------------------------------------------
This table does not give effect to:
- a cash payment of $2.0 million and the issuance and sale of 814,647 shares
of our common stock which we recently paid to IBEX Technologies Inc. and
certain of its affiliates in connection with our October 31, 2001
acquisition of their pharmaceutical assets, or
- the issuance and sale of an aggregate 1,061,676 shares of our common stock
to Acqua Wellington North American Equities Fund, Ltd. and the
$10.5 million proceeds therefrom in October 2001.
--------------------------------------------------------------------------------
26
--------------------------------------------------------------------------------
Management
The following table sets forth certain information concerning our executive
officers as of November 8, 2001.
Name Age Position with BioMarin
-------------------------------------------------------------------------------------------------
Fredric D. Price.......................... 55 Chairman and Chief Executive Officer
Raymond W. Anderson....................... 59 Chief Operating Officer, Chief Financial
Officer, Secretary and Vice President,
Finance and Administration
Christopher M. Starr, Ph.D................ 48 Vice President, Research and Development
John L. Jost, Ph.D........................ 56 Vice President, Manufacturing
Robert A. Baffi, Ph.D..................... 46 Vice President, Quality Assurance/Quality
Control
Emil D. Kakkis, M.D., Ph.D................ 41 Vice President, Business Development
Stuart J. Swiedler, M.D., Ph.D............ 45 Vice President, Scientific and Clinical
Affairs
Brian K. Brandley, Ph.D................... 44 Vice President of BioMarin and Managing
Director, Glyko, Inc., a wholly-owned
subsidiary of BioMarin
FREDRIC D. PRICE, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Mr. Price has served as Chairman and Chief Executive Officer since
November 2000. From September 1994 until September 2000, Mr. Price was
President, CEO, and a member of the board of directors of AMBI Inc., formerly
Applied Microbiology, a biotechnology and nutrition company. Prior to that, he
served as Vice President, Finance and Administration and CFO of Regeneron
Pharmaceuticals and, before that, was a strategy consultant for
biopharmaceutical CEOs and investment groups. Mr. Price began his career at
Pfizer Pharmaceuticals, where he simultaneously held line and staff positions as
Vice President, reporting directly to a member of the board of Pfizer Inc.
Mr. Price received an M.B.A. from the Wharton School of the University of
Pennsylvania and a B.A. from Dartmouth College. He is a member of the board of
directors of LifeSpan BioSciences and a member of the advisory board of
equity41ife, a health care investment company based in Zurich, Switzerland.
RAYMOND W. (BILL) ANDERSON, CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND
VICE PRESIDENT, FINANCE & ADMINISTRATION
Mr. Anderson has served as Chief Operating Officer since May 2000 and has been
Chief Financial Officer and Vice President, Finance and Administration since
June 1998. Mr. Anderson served as the Chief Financial Officer and Vice
President, Finance at Fusion Medical Technologies, Inc., a medical technology
company, developing drug delivery systems from July 1997 to June 1998.
Mr. Anderson served as the Vice President, Finance and Chief Financial Officer
at Fidus Medical Technology, Inc., a medical technology company from
October 1996 to July 1997. Prior to that, Mr. Anderson held numerous senior
management positions, including CFO at Chiron and Glycomed and Controller at
Syntex Laboratories. From 1994 to 1996, Mr. Anderson served as a Director of
Recombinant Capital.
--------------------------------------------------------------------------------
27
Management
--------------------------------------------------------------------------------
Mr. Anderson holds an M.B.A. from the Harvard Graduate School of Business
Administration, an M.S. in administration from The George Washington University
and a B.S. in engineering from the United States Military Academy.
CHRISTOPHER M. STARR, PH.D., CO-FOUNDER AND VICE PRESIDENT, RESEARCH AND
DEVELOPMENT
Dr. Starr is one of our co-founders and currently serves as Vice President,
Research and Development. From July 1991 to April 1998, Dr. Starr served as Vice
President, Research and Development for Glyko, Inc. Dr. Starr was a National
Research Council Associate at the National Institutes of Health (NIH). He has
published numerous peer-reviewed articles, including research papers on
Fluorophore-Assisted Carbohydrate Electrophoresis (FACE) in the diagnosis of
lysosomal storage diseases and in the identification of patients with MPS I. His
work in the development of diagnostic tests for lysosomal storage diseases has
been funded by several grants from the NIH and other institutions. Dr. Starr
holds a Ph.D. in biochemistry and molecular biology from the State University of
New York Health Science Center and a B.S. from Syracuse University.
JOHN L. JOST, PH.D., VICE PRESIDENT, MANUFACTURING
Dr. Jost has served as Vice President, Manufacturing since June 1999. Dr. Jost
devoted his time from November 1997 to June 1999 to personal affairs. From
February 1983 to November 1997, Dr. Jost held a variety of management and
scientific positions at Genentech. During his tenure at Genentech, Dr. Jost also
led a variety of development projects focusing on products such as Tumor
Necrosis Factor (TNF), Gamma Interferon, Human Growth Hormone (hGH), animal
interferons, and human serum albumin. These programs contributed to numerous
IND, NDA, BLA, and BLA supplement submissions. Prior to joining Genentech,
Dr. Jost served in various scientific positions in process development at The
Upjohn Company, culminating in his role as a senior research scientist.
Dr. Jost received a Ph.D. and B.S. in chemical engineering from the University
of Minnesota.
ROBERT A. BAFFI, PH.D., VICE PRESIDENT, QUALITY ASSURANCE & QUALITY CONTROL
Dr. Baffi has served as Vice President of Quality Assurance and Quality Control
since May 2000. From 1986 to 2000, Dr. Baffi served in a number of progressively
more responsible positions at Genentech, primarily in the functional area of
quality control. Prior to Genentech, Dr. Baffi worked for Cooper BioMedical as a
research scientist and at Becton Dickinson Research Center as a post-doctoral
fellow. Dr. Baffi has contributed to more than 20 major regulatory submissions
for product approval in the United States and Europe and to more than 50
regulatory submissions for investigational new drug testing. Dr. Baffi received
a Ph.D. in biochemistry, as well as an M.Phil. and a B.S. in biochemistry from
the City University of New York.
EMIL D. KAKKIS, M.D., PH.D., VICE PRESIDENT, SCIENTIFIC AND BUSINESS DEVELOPMENT
Dr. Kakkis has served as a Vice President, since September 1998. From July 1994
to August 1998, Dr. Kakkis held the position of Assistant Professor at the
Harbor-UCLA Medical Center, Division of Genetics, Department of Pediatrics,
together with his colleague, Elizabeth F. Neufeld, Ph.D., of the University of
California at Los Angeles (UCLA), Dr. Kakkis developed Aldurazyme, a recombinant
form of (alpha)-L-iduronidase, the enzyme deficient in MPS I patients. From 1991
to 1994, he completed a fellowship in genetics at the UCLA Intercampus Medical
Genetics training program and, prior to that, conducted his pediatric residency
at the Harbor-UCLA Medical Center. Dr. Kakkis is the author of numerous
published articles and abstracts on MPS I and (alpha)-L-iduronidase. He holds an
M.D. and a Ph.D. in biological chemistry from the Medical Scientist training
program at the UCLA School of Medicine. He is board-certified in pediatrics and
medical genetics.
--------------------------------------------------------------------------------
28
Management
--------------------------------------------------------------------------------
STUART J. SWIEDLER, M.D., PH.D., VICE PRESIDENT, SCIENTIFIC AND CLINICAL AFFAIRS
Dr. Swiedler has served as Vice President, Scientific and Clinical Affairs since
June 1998. From November 1997 to June 1998, Dr. Swiedler was an independent
technology consultant. From May 1995 to November 1997, Dr. Swiedler served as
Vice President, Research Programs at Glycomed. Dr. Swiedler's biotechnology
experience includes six years of post-doctoral work at the Yale University and
Duke University schools of medicine. He is board-certified in anatomic pathology
and has conducted extensive research in the molecular biology of carbohydrate
enzymes. Dr. Swiedler holds five patents and is the author of 20 peer-reviewed
journal articles. Dr. Swiedler holds a Ph.D. from the Johns Hopkins University
School of Medicine, Biochemistry, Cellular, and Molecular Biology training
program, an M.D. from the Johns Hopkins School of Medicine, and a B.S. from the
State University of New York at Albany.
BRIAN K. BRANDLEY, PH.D., VICE PRESIDENT & MANAGING DIRECTOR, GLYKO, INC.
Dr. Brandley joined us in 1998 as Vice President and also Managing Director of
Glyko. From July 1995 to April 1998, Dr. Brandley was Assistant Professor in the
Department of Pharmacology at Rush University, where his research focused on the
role of carbohydrates in angiogenesis and in vitro models of endothelial cell
biology. Dr. Brandley previously served as Senior Scientist and Head of the Cell
Biology Laboratory at Glycomed. He also has five years of post-doctoral research
experience at the Medical University of South Carolina and the Johns Hopkins
University School of Medicine. Dr. Brandley is the author of 27 publications in
peer-reviewed journals and holds 14 patents. He earned a Ph.D. in biology from
the University of Sydney, an M.S. in biology from the University of Miami, and a
B.S. with honors from the University of Miami.
--------------------------------------------------------------------------------
29
--------------------------------------------------------------------------------
Underwriting
We and the underwriters for this offering named below have entered into an
underwriting agreement concerning the shares being offered. Subject to
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. UBS Warburg LLC, CIBC World Markets
Corp. and U.S. Bancorp Piper Jaffray Inc. are the representatives of the
underwriters. UBS Warburg LLC is the sole book-running manager of this offering.
Number of
Underwriters shares
-----------------------------------------------------------------------
UBS Warburg LLC.............................................
CIBC World Markets Corp. ...................................
U.S. Bancorp Piper Jaffray Inc. ............................
---------
Total..................................................... 6,000,000
=========
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy up to 900,000 shares
from us at the public offering price less the underwriting discounts and
commissions to cover these sales. If any shares are purchased under this option,
the underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table provides information regarding the amount of the discount to
be paid to the underwriters by us. These amounts are shown assuming both no
exercise and full exercise of the underwriters' option to purchase up to an
additional 900,000 shares.
No Exercise Full Exercise
------------- -------------
Per share.................................... $ $
Total...................................... $ $
We estimate that the total expenses of this offering payable by us, excluding
underwriting discounts and commissions, will be about $182,000.
Shares sold by the underwriters to the public will initially be offered at the
public offering price set forth on the cover of this prospectus. Any shares sold
by the underwriters to securities dealers may be sold at a discount of up to
$ per share from the public offering price. Any of these securities
dealers may resell any shares purchased from the underwriters to other brokers
or dealers at a discount of up to $ per share from the public offering
price. If all the shares are not sold at the public offering price, the
representatives may change the offering price and the other selling terms.
We and each of our directors and executive officers have agreed with the
underwriters not to offer, sell, contract to sell, hedge or otherwise dispose
of, directly or indirectly, any of our common stock or securities convertible
into or exchangeable for shares of common stock during the period from the date
of this prospectus continuing through the date 90 days after the date of this
prospectus without the prior written consent of UBS Warburg LLC.
In connection with this offering, the underwriters may purchase and sell shares
of our common stock in the open market. These transactions may include
stabilizing transactions, short sales and purchases to cover positions created
by short sales. Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market price of our
common stock while this offering is in progress. Short sales involve the sale by
the underwriters of a greater number of shares
--------------------------------------------------------------------------------
30
Underwriting
--------------------------------------------------------------------------------
than they are required to purchase in this offering. Short sales may be either
"covered short sales" or "naked short sales." Covered short sales are sales made
in an amount not greater than the underwriters' over-allotment option to
purchase additional shares in this offering. The underwriters may close out any
covered short position by either exercising their over-allotment option or
purchasing shares in the open market. In determining the source of shares to
close out the covered short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. Naked short sales are sales in excess of the
over-allotment option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position is more likely
to be created if the underwriters are concerned there may be downward pressure
on the price of shares in the open market after pricing that could adversely
affect investors who purchase in this offering.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of our common stock. As a result, the price of our common stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected on the Nasdaq National Market or
otherwise.
In addition, in connection this offering certain of the underwriters (and
selling group members) may engage in passive market making transactions in the
common stock on the Nasdaq National Market prior to the pricing and completion
of the offering. Passive market making consists of displaying bids on the Nasdaq
National Market no higher than the bid prices of independent market makers and
making purchases at prices no higher than these independent bids and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the common stock during a specified period and must be
discontinued when such limit is reached. Passive market making may cause the
price of the common stock to be higher than the price that otherwise would exist
in the open market in the absence of such transactions. If passive market making
is commenced, it may be discontinued at any time.
We have agreed to indemnify the several underwriters against some liabilities,
including liabilities under the Securities Act of 1933, and to contribute to
payments that the underwriters may be required to make in respect thereof.
UBS Warburg and U.S. Bancorp Piper Jaffray Inc. have in the past provided
financial advisory services to us. For these services, we have paid them
customary compensation.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-3 under the Securities Act of 1933. This prospectus is part
of that registration statement and does not contain all of the information set
forth in the registration statement and its exhibits. You may obtain further
information with respect to BioMarin by reviewing the registration statement and
the attached exhibits, which you may read and copy in public reference rooms at
the following locations of the Securities and Exchange Commission:
Public Reference Room New York Regional Office Chicago Regional Office
Judiciary Plaza Woolworth Building Citicorp Center
450 Fifth Street, N.W., 233 Broadway 500 West Madison Street,
Rm. 1024 New York, New York 10279 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661-2511
We are subject to the informational requirements of the Securities Exchange Act
of 1934. Accordingly, we file reports, proxy statements and other information
with the Securities and Exchange Commission. Such reports, proxy statements and
other information can be inspected and copied at the locations described above.
Copies of these materials can be obtained from the public reference rooms of the
Securities and Exchange Commission at the above locations, at prescribed rates.
You can call the Securities and Exchange Commission at 1-800-732-0330 for
further information about the public reference rooms. The Securities and
Exchange Commission maintains a web site that contains the registration
statement, reports, proxy statements and other information regarding BioMarin at
http://www.sec.gov. Reports, proxy statements and other information concerning
BioMarin may be inspected at the Nasdaq Stock Market at 1735 K Street, N.W.,
Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by reference"
information that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the Securities and Exchange Commission will
automatically update and supersede this information. Further, all filings we
make under the Securities Exchange Act of 1934 after the date of the initial
registration statement and prior to effectiveness of the registration statement
shall be deemed to be incorporated by reference into this prospectus. We
incorporate by reference the documents listed below and any future filings we
will make with the Securities and Exchange Commission under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934:
- Our Annual Report on Form 10-K for the year ended December 31, 2000;
- Our Definitive Proxy Statement dated April 3, 2001 filed in connection with
our 2001 Annual Meeting of Stockholders;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001
June 30, 2001 and September 30, 2001;
- Our Current Reports on Form 8-K, as filed on May 18, 2001, June 25, 2001,
August 16, 2001, September 6, 2001, September 11, 2001, October 10, 2001,
October 26, 2001, and two reports filed on November 2, 2001; and
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32
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- The description of our common stock set forth in our Form 8-A, filed with
the SEC on July 15, 1999.
We will provide to you at no cost a copy of any and all of the information
incorporated by reference into the registration statement of which this
prospectus is a part. You may make a request for copies of this information in
writing or by telephone. Requests should be directed to:
BioMarin Pharmaceutical Inc.
Attention: Mr. Jeremy Price
371 Bel Marin Keys Boulevard, Suite 210
Novato, CA 94949
(415) 884-6777
Any statement contained in a document incorporated or deemed to be incorporated
by reference in this prospectus shall be deemed modified, superceded or replaced
for purposes of this prospectus to the extent that a statement contained in this
prospectus, or in any subsequently filed document that also is deemed to be
incorporated by reference in this prospectus, modifies, supercedes or replaces
such statement. Any statement so modified, superceded or replaced shall not be
deemed, except as so modified, superceded or replaced, to constitute a part of
this prospectus.
LEGAL MATTERS
For the purpose of this offering, Paul, Hastings, Janofsky & Walker LLP, Los
Angeles, California is giving an opinion of the validity of the issuance of the
securities offered in this prospectus. Dewey Ballantine LLP, New York, New York,
is counsel for the underwriters in connection with the offering.
EXPERTS
The financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2000, incorporated by reference 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 giving said report.
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33
[LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses to be paid by the
registrant in connection with the sale of the common stock being registered:
Securities and Exchange Commission registration fee......... $ 20,907
Legal fees and expenses..................................... $ 44,730
Accountants' fees and expenses.............................. $ 50,000
NASD filing fee............................................. $ 8,863
Printing fees............................................... $ 20,000
NASDAQ listing fee.......................................... $ 22,500
Transfer agent fees......................................... $ 10,000
Miscellaneous............................................... $ 5,000
--------
Total....................................................... $182,000
========
The foregoing items, except for the Securities and Exchange Commission
registration fee, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to the Amended and Restated Certificate of Incorporation
with the Registrant; the Bylaws of the Registrant; Section 145 of the Delaware
General Corporation Law; which, among other things, and subject to certain
conditions, authorize the Registrant to indemnify, or indemnify by their terms,
as the case may be, the directors and officers of the Registrant against certain
liabilities and expenses incurred by such persons in connection with claims made
by reason of their being such a director or officer. Pursuant to this authority,
the Registrant has entered into an indemnification agreement with each director
and executive officer, whereby the Registrant has agreed to cover the
indemnification obligations.
The Registrant maintains directors' and officers' insurance providing
indemnification against certain liabilities for certain of the Registrant's
directors, officers, affiliates, partners or employees.
The indemnification provisions in the Registrant's Bylaws, and the
indemnification agreements entered into between the Registrant and its directors
and executive officers, may be sufficiently broad to permit indemnification of
the Registrant's officers and directors for liabilities arising under the Act.
Reference is made to the following documents incorporated by reference into
this Registration Statement regarding relevant indemnification provisions
described above and elsewhere herein: (1) the Amended and Restated Certificate
of Incorporation, filed as Exhibit 3.1B to Registrant's Amendment No. 2 to
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on July 6, 1999; (2) the Registrant's Bylaws filed as Exhibit 3.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001,
and (3) the form of Indemnification Agreement entered into by the Registrant
with each of its directors and executive officers filed as Exhibit 10.1 to
Registrant's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on May 4, 1999, each incorporated by reference into this
Registration Statement.
II-1
ITEM 16. EXHIBITS
Exhibit No. Description of Document
--------------------- ------------------------------------------------------------
1.1 Underwriting Agreement (to be filed by amendment)
5.1 Opinion of Paul, Hastings, Janofsky & Walker LLP (to be
filed by amendment)
23.1 Consent of Paul, Hastings, Janofsky & Walker LLP (to be
filed by amendment))
23.2 Consent of Arthur Andersen LLP (filed herewith)
24.1 Power of Attorney (included with signature page)
---------
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, when applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned Registrant undertakes that: (1) for purpose of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of the registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b) (1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of the registration statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Novato, State of California, this 9th day of November,
2001.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ FREDRIC D. PRICE
-----------------------------------------
Fredric D. Price
Chairman, Chief Executive Officer and
Director (Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Fredric D. Price and Raymond W. Anderson as such
persons' true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any other regulatory
authority, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or such persons' substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ FREDRIC D. PRICE
------------------------------------------- Chairman, Chief Executive November 9, 2001
Fredric D. Price Officer and Director
(Principal Executive
Officer)
/s/ RAYMOND W. ANDERSON
------------------------------------------- Chief Financial Officer, November 9, 2001
Raymond W. Anderson Chief Operating Officer,
Secretary, and Vice
President Finance and
Administration
(Principal Financial and
Accounting Officer)
/s/ GRANT W. DENISON, JR
------------------------------------------- Director November 9, 2001
Grant W. Denison, Jr.
II-3
SIGNATURE TITLE DATE
--------- ----- ----
/s/ PHYLLIS I. GARDNER, M.D.
------------------------------------------- Director November 9, 2001
Phyllis I. Gardner, M.D.
/s/ ERICH SAGER
------------------------------------------- Director November 9, 2001
Erich Sager
/s/ GWYNN R. WILLIAMS
------------------------------------------- Director November 9, 2001
Gwynn R. Williams
II-4
EXHIBIT INDEX
Exhibit No. Description of Document
----------- -----------------------
1.1 Underwriting Agreement (to be filed by amendment)
5.1 Opinion of Paul, Hastings, Janofsky & Walker LLP (to be
filed by amendment)
23.1 Consent of Paul, Hastings, Janofsky & Walker LLP (to be
filed by amendment)
23.2 Consent of Arthur Andersen LLP (filed herewith)
24.1 Power of Attorney (included with signature page)