e424b5
The information in this prospectus supplement is not complete and may be changed. This prospectus
supplement and the accompanying prospectuses is not an offer to sell nor does it seek an offer to
buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 26, 2008
Filed pursuant to Rule 424(b)(5)
File Nos. 333-149125
333-125979
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectuses dated August 3, 2005 and February 8, 2008)
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AVANIR PHARMACEUTICALS
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![(AVANIR LOGO)](a39369p2a3936900.gif) |
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Consisting of Class A Common Stock and Warrants |
$ per unit
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Avanir
Pharmaceuticals is
offering for sale
units
pursuant to this
prospectus
supplement, with
each unit
consisting of one
share of Class A
common stock and a
warrant to buy 0.35
shares of Class A
common stock. Each
warrant has an
exercise price of
$ per share, has
a term of five
years and is
exercisable
beginning on the
date of issue. The
shares of Class A
common stock and
warrants comprising
the units are
immediately
separable and will
be issued
separately.
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The last reported sale price of our common
stock on the NASDAQ Global Market on March 25, 2008
was $1.11 per share.
Trading symbol: NASDAQ Global Market AVNR |
This investment involves a high degree of risk. See Risk Factors on page S-2 of this prospectus
supplement.
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Placement agency fees |
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Proceeds, before expenses, to Avanir Pharmaceuticals |
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The above summary of offering proceeds to us does not give effect to any exercise of the warrants
being issued in this offering. Delivery of the units will be made on or about April ___, 2008,
except for certain investors delivery will be made on or about April ___, 2008, as described under
Plan of Distribution. Certain purchaser funds will be deposited into an escrow account and held
until jointly released by us and the placement agent on the date the units are to be delivered to
the purchasers. All funds received will be held in a non-interest bearing account.
Piper Jaffray & Co. is acting as placement agent in this offering. Because there is no minimum
offering amount required as a condition to closing in this offering, the placement agency fees and
net proceeds to us, if any, in this offering may be less than the maximum offering amounts set
forth above.
Neither the Securities and Exchange Commission nor any state securities commission has approved of
anyones investment in these securities or determined if this prospectus supplement and the
accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
Piper Jaffray
The date of this prospectus supplement is , 2008.
TABLE OF CONTENTS
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Prospectus Supplement |
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Page |
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S-1 |
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S-3 |
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S-12 |
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S-12 |
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S-13 |
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S-14 |
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S-15 |
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August 3, 2005 Prospectus |
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Page |
About This Prospectus |
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1 |
About Avanir Pharmaceuticals |
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3 |
Risk Factors |
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4 |
Note Regarding Forward Looking Statements |
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4 |
Description of Securities |
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5 |
Use of Proceeds |
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12 |
Plan of Distribution |
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12 |
Legal Matters |
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13 |
Experts |
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13 |
Incorporation of Certain Information by Reference |
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14 |
Where You Can Find More Information |
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14 |
Indemnification for Securities Act Liabilities |
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14 |
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February 8, 2008 Prospectus |
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About This Prospectus |
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17 |
About Avanir Pharmaceuticals |
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19 |
Risk Factors |
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19 |
Note Regarding Forward Looking Statements |
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20 |
Description of Securities |
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20 |
Use of Proceeds |
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Ratio of Earnings to Fixed Charges |
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21 |
Plan of Distribution |
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21 |
Legal Matters |
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22 |
Experts |
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Incorporation of Certain Information by Reference |
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Where You Can Find More Information |
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Unless otherwise mentioned or unless the context requires otherwise, all references in this
prospectus supplement and the accompanying prospectuses to the Company, Avanir, we, us,
our or similar references mean Avanir Pharmaceuticals and our subsidiaries, on a consolidated
basis.
This document is in two parts. The first part is this prospectus supplement, which describes
the terms of this offering of our Class A common stock and warrants and supplements information
contained in the accompanying prospectuses and the documents incorporated by reference into the
accompanying prospectuses. The second part consists of the accompanying prospectuses, which give
more general information about us and the shares of Class A common stock and warrants we may offer
from time to time under our shelf registration statements. To the extent there is a conflict
between the information contained in this prospectus supplement, on the one hand, and the
information contained in the accompanying prospectuses or any document incorporated by reference
therein, on the other hand, the information in this prospectus supplement shall control.
S-i
We have not authorized any dealer, salesman or other person to give any information or to make
any representation other than those contained or incorporated by reference in this prospectus
supplement and the accompanying prospectuses. You should not rely upon any information or
representation not contained or incorporated by reference in this prospectus supplement or the
accompanying prospectuses. This prospectus supplement and the accompanying prospectuses do not
constitute an offer to sell or the solicitation of an offer to buy Class A common stock or
warrants, nor do this prospectus supplement and the accompanying prospectuses constitute an offer
to sell or the solicitation of an offer to buy Class A common stock or warrants in any jurisdiction
to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. You
should not assume that the information contained in this prospectus supplement and the accompanying
prospectuses is accurate on any date subsequent to the date set forth on the front of the document
or that any information we have incorporated by reference is correct on any date subsequent to the
date of the document incorporated by reference, even though this prospectus supplement and any
accompanying prospectuses are delivered or Class A common stock or warrants are sold on a later
date.
S-ii
SUMMARY
The Offering
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Class A common stock offered by us pursuant to this
prospectus supplement
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Up to shares,
plus
shares
of Class A common
stock underlying
the warrants
offered hereby |
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Class A common stock to be outstanding after this offering
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Up to shares,
or shares
if the warrants
sold in this
offering are
exercised in full |
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Use of proceeds
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We intend to use
the net proceeds
from this offering
to fund our ongoing
clinical trials and
for general working
capital. See Use
of Proceeds on
page S-10. |
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NASDAQ Global Market symbol
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AVNR |
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Risk factors
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This investment
involves a high
degree of risk. See
Risk Factors
beginning on page
S-2 of this
prospectus
supplement. |
The number of shares of Class A common stock to be outstanding after this offering is based on
43,164,402 shares outstanding as of December 31, 2007 and excludes:
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options and warrants outstanding as of that date representing the right to purchase
a total of 1,137,095 shares of Class A common stock at weighted average exercise price
of $8.80 per share; and |
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2,370,983 shares of Class A common stock underlying restricted stock units and
restricted stock awards outstanding as of that date. |
Unless otherwise indicated, this prospectus supplement assumes the sale of the maximum number
of units offered hereunder and does not assume that any of the warrants issued hereunder will be
exercised.
Election of Director
We expect to elect Nicholas J. Simon to our board of directors as a Class II director
following the completion of this offering with an initial term to expire at the 2009 annual meeting
of shareholders. Mr. Simon, age 53, is Managing Director of Clarus Ventures, LLC, or Clarus, a
venture capital firm focused on life sciences companies. Clarus is expected to purchase units in
the offering through one or more affiliated investment funds as described in the following
paragraph. Mr. Simon co-founded Clarus in February 2005 and has been a general partner of MPM
BioVentures III, a healthcare venture capital fund, since October 2001. From April 2000 to July
2001, Mr. Simon was chief executive officer and founder of Collabra Pharma, Inc., a pharmaceutical
company. Mr. Simon served in various management positions at Genentech, Inc., including its vice
president of business and corporate development. Mr. Simon is currently on the board of directors
of ARYx Therapeutics, Inc. and Sientra, Inc., and several pharmaceutical companies: Barrier
Therapeutics, Inc., Neosil, Inc., QuatRx Pharmaceuticals Company, Pearl Therapeutics, Inc., Poniard
Pharmaceuticals, Inc. and Verus Pharmaceuticals, Inc. He is also on the advisory council of the
Gladstone Institute, a private not-for-profit research institute affiliated with the University of
California, San Francisco. Mr. Simon received a bachelor of sciences degree in microbiology from
the University of Maryland and a masters degree in business administration in marketing from
Loyola College.
S-1
Amendment to Rights Plan
Upon the completion of this offering, we expect to amend our Rights Agreement with American
Stock Transfer & Trust Co., dated March 5, 1999, to allow Clarus and certain of its affiliated
investment funds to acquire and hold up to 20.4% of our issued and outstanding shares without
becoming an acquiring person under the agreement and triggering the rights issued thereunder. We
expect that immediately after the completion of this offering, Clarus will hold approximately 19.9%
of our total issued and outstanding common stock.
Failure to Satisfy Continued NASDAQ Listing Rule
As of March 25, 2008, our market capitalization had been below $50 million for ten consecutive
trading days, as measured on the NASDAQ stock market. Accordingly, we were not in compliance with
the requirements for continued listing on The NASDAQ Global Market set forth in NASDAQ Marketplace
Rule 4450 and on March 26, 2008, we received a formal notice of this non-compliance from NASDAQ.
In addition, we do not satisfy the requirements of having stockholders equity of at least $10
million or at least $50 million of total assets and $50 million of total revenue. In accordance
with Marketplace Rule 4450(e)(4), we have a cure period of 30 calendar days, or until April 24,
2008, to regain compliance. We expect to be able to regain compliance under NASDAQ Marketplace
Rule 4450 through our proposed offering of up to $40 million in units pursuant to this prospectus
supplement, which is expected to close before the expiration of the above-referenced 30-day cure
period.
Corporate Information
Our principal executive offices are located at 101 Enterprise, Suite 300, Aliso Viejo,
California 92656. Our telephone number is (949) 389-6700 and our e-mail address is info@avanir.com.
S-2
RISK FACTORS
Before making an investment decision, you should carefully consider the risks described in
this prospectus supplement, together with all of the other information incorporated by reference
into this prospectus supplement and the accompanying prospectuses, including from our most recent
annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Our business, financial
condition or results of operations could be materially adversely affected by any of these risks.
The trading price of our securities could decline due to any of these risks, and you may lose part
or all of your investment. This prospectus supplement, the accompanying prospectuses and the
incorporated documents also contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks mentioned below.
Risks Relating to Our Business
We must conduct additional clinical trials for Zenvia and there can be no assurance that the
FDA will approve Zenvia or that an approval, if granted, will be on terms we may seek.
In October 2006, we received an approvable letter from the FDA for our new drug application
(NDA) submission for Zenvia in the treatment of patients with PBA. The approvable letter raised
certain safety and efficacy concerns and the safety concerns will require additional clinical
development to resolve. Based on discussions with the FDA, we were able to successfully resolve
the outstanding efficacy concerns of the original dose formulation that was tested in earlier
trials. In order to address the safety concerns, however, we agreed to re-formulate Zenvia and
conduct one additional confirmatory Phase III clinical trial using lower dose formulations. The
goal of the study is to demonstrate improved safety while maintaining a significant degree of the
efficacy seen in our earlier trials testing higher doses. The study is expected to be completed
(as defined as top-line safety and efficacy data becomes available) during the second half of
calendar 2009. It is possible that the efficacy will be so reduced that we will not be able to
satisfy the FDAs efficacy requirements and there can be no assurance that the FDA will approve
Zenvia for commercialization.
Even if the confirmatory trial is successful, the additional development work will be costly
and time consuming. Because our patents covering Zenvia expire at various times from 2011 through
2019 (without accounting for potential extensions that might be available or new patents that may
be issued), any substantial delays in regulatory approval would negatively affect the commercial
potential for Zenvia for this indication. Additionally, it is possible that Zenvia may not be
approved with the labeling claims or for the patient population that we consider most desirable for
the promotion of the product. Less desirable labeling claims could adversely affect the commercial
potential for the product and could also affect our long-term prospects.
Additionally, although we have a Special Protocol Assessment (SPA) from the FDA for our
recently completed Phase III trial for DPN pain and for our confirmatory Phase III trial for Zenvia
for PBA, there can be no assurance that the terms of the SPA will ultimately be binding on the FDA.
An SPA is intended to serve as a binding agreement from the FDA on the adequacy of the design of a
planned clinical trial. Even where an SPA has been granted, however, additional data may
subsequently become available that causes the FDA to reconsider the previously agreed upon scope of
review and the FDA may have subsequent safety or efficacy concerns that override the SPA. For
example, it is possible that we will not obtain enough data on cardiac risks in our ongoing Phase
III trials to satisfy FDA safety concerns, which could necessitate further clinical trials.
Additionally, because we expect to seek FDA approval to expand the number of patients enrolled in
the ongoing PBA Phase III trial, the FDA will need to agree to amend our SPA. They may not agree
to such an amendment and, even if they agree, they may request other amendments to the trial design
that could add to the trials cost and/or time, as well as degree of difficulty in reaching clinical
endpoints. As a result, even with an SPA, we cannot be certain that the trial results will be
found to be adequate to support an efficacy claim and product approval.
The FDAs safety concerns regarding Zenvia for the treatment of PBA may extend to other
clinical indications that we are pursuing, including DPN pain. Due to these concerns, we expect to
develop Zenvia for other indications using alternative doses, which may negatively affect efficacy.
S-3
We are currently developing Zenvia for the treatment of DPN pain, for which we have completed
a Phase III trial. Although the FDA has not expressly stated that the safety concerns and
questions raised in the PBA approvable letter would apply to other indications such as DPN pain, we
believe that it is possible that the FDA will raise similar concerns for this indication.
Accordingly, we are investigating the potential use of alternative formulations with lower doses of
quinidine and various DM levels in the next Phase III trial for Zenvia for this indication.
Although we achieved positive results in our initial Phase III trial, an alternative lower dose may
not yield the same levels of efficacy as seen in the earlier trials and any drop in efficacy may be
so great that the drug does not demonstrate a statistically significant improvement over placebo.
Additionally, any alternative dose that we develop may not sufficiently satisfy the FDAs safety
concerns. If this were to happen, we may not be able to pursue the development of Zenvia for other
indications or may need to undertake significant additional clinical trials, which would be costly
and cause potentially substantial delays. There is also a risk that due to the change in dosage
levels, the FDA may require two additional Phase III trials for regulatory approval, which would be
costly and delay the potential commercial launch of this drug.
We have limited capital resources and will need to raise additional funds to support our
operations.
We have experienced significant operating losses in funding the research, development and
clinical testing of our drug candidates, accumulating operating losses totaling $244 million as of
December 31, 2007, and we expect to continue to incur substantial operating losses for the
foreseeable future. As of December 31, 2007, we had approximately $29.4 million in cash, cash
equivalents, investments in marketable securities and restricted investments in marketable
securities. Additionally, we currently do not have any meaningful sources of recurring revenue or
cash flow.
In light of our current capital resources, lack of near-term revenue opportunities and
substantial long-term capital needs, we will need to raise significant amounts of additional
capital in the future to complete the development of Zenvia and to finance our long-term
operations. Based on our current loss rate and existing capital resources as of the date of this
filing, we estimate that we have sufficient funds to sustain our operations at their current levels
through the next twelve months. Although we expect to be able to raise additional capital and/or
curtail current levels of operations to be able to continue to fund our operations beyond that
time, there can be no assurance that we will be able to do so or that the available terms of any
financing would be acceptable to us. If we are unable to raise additional capital to fund future
operations, then we may be unable to fully execute our development plans for Zenvia and DPN pain.
This may result in significant delays in our planned clinical trial of Zenvia for PBA and may force
us to further curtail our operations.
Any transactions that we may engage in to raise capital could dilute our shareholders and
diminish certain commercial prospects.
We will seek to raise additional capital beyond the amounts raised in this offering and may do
so at any time through various financing alternatives, including licensing or sales of our
technologies, drugs and/or drug candidates, selling shares of common or preferred stock, or through
the issuance of debt. Each of these financing alternatives carries certain risks. Raising capital
through the issuance of common stock may depress the market price of our stock. Any such financing
will dilute our existing shareholders and, if our stock price is relatively depressed at the time
of any such offering, the levels of dilution would be greater. If we instead seek to raise capital
through licensing transactions or sales of one or more of our technologies, drugs or drug
candidates, as we have stated we are actively considering with certain investigational compounds,
then we will likely need to share a significant portion of future revenues from these drug
candidates with our licensees. Additionally, the development of any drug candidates licensed or
sold to third parties will no longer be in our control and thus we may not realize the full value
of any such relationships.
We have licensed out or sold most of our non-core drug development programs and related assets
and these and other possible future dispositions carry certain risks.
We have entered into agreements for the licensing out or sale of most of our non-core drug
development programs, including FazaClo, macrophage migration inhibitory factor (MIF), and our
anthrax antibody program, as well as docosanol in major markets worldwide. We are seeking to
monetize our remaining non-core assets to
S-4
help fund the development of Zenvia and may out-license or otherwise partner Zenvia for PBA
and/or DPN pain indications if we are able to find a licensee / partner willing to offer attractive
terms. These transactions involve numerous risks, including:
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Diversion of managements attention from normal daily operations of the business; |
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Disputes over earn-outs, working capital adjustments or contingent payment obligations; |
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Insufficient proceeds to offset expenses associated with the transactions; and |
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The potential loss of key employees following such a transaction. |
Transactions such as these may result in disputes regarding representations and warranties,
indemnities, earn-outs, and other provisions in the transaction agreements. For example, we are
currently in discussions with Azur to resolve a dispute over a working capital adjustment whereby
Azur seeks to be repaid approximately $1.1 million that we have disputed. If this or other disputes
are resolved unfavorably, our financial condition and results of operations may be adversely
affected and we may not realize the anticipated benefits from the transactions.
Additionally, disputes relating to these transactions can lead to expensive and time-consuming
litigation and may subject us to unanticipated liabilities or risks, disrupt our operations, divert
managements attention from day-to-day operations, and increase our operating expenses.
Our patents may be challenged and our patent applications may be denied. Either result would
seriously jeopardize our ability to compete in the intended markets for our proposed products.
We have invested in an extensive patent portfolio and we rely substantially on the protection
of our intellectual property through our ownership or control of issued patents and patent
applications. Such patents and patent applications cover Zenvia, docosanol 10% cream and other
potential drug candidates that could come from our technologies such as anti-inflammatory compounds
and antibodies. Because of the competitive nature of the biopharmaceutical industry, we cannot
assure you that:
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The claims in any pending patent applications will be allowed or that patents will be granted; |
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Competitors will not develop similar or superior technologies independently, duplicate our
technologies, or design around the patented aspects of our technologies; |
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Our technologies will not infringe on other patents or rights owned by others, including
licenses that may not be available to us; |
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Any of our issued patents will provide us with significant competitive advantages; or |
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Challenges will not be instituted against the validity or enforceability of any patent that
we own or, if instituted, that these challenges will not be successful. |
Even if we successfully preserve our intellectual property rights, third parties, including
other biotechnology or pharmaceutical companies, may allege that our technology infringes on their
rights. Intellectual property litigation is costly, and even if we were to prevail in such a
dispute, the cost of litigation could adversely affect our business, financial condition, and
results of operations. Litigation is also time-consuming and would divert managements attention
and resources away from our operations and other activities. If we were to lose any litigation, in
addition to any damages we would have to pay, we could be required to stop the infringing activity
or obtain a license. Any required license might not be available to us on acceptable terms, or at
all. Some licenses might be non-exclusive, and our competitors could have access to the same
technology licensed to us. If we were to fail to obtain a required
license or were unable to design around a competitors patent, we would be unable to sell or
continue to develop some of our products, which would have a material adverse effect on our
business, financial condition and results of operations.
S-5
We currently have only a limited term of patent coverage for Zenvia in the U.S., which could
result in the introduction of generic competition within in a few years of product launch.
Our PBA related patents for Zenvia in the U.S. expire at various times from 2011 through 2012
and our DPN pain patents for Zenvia expire in 2016. These expirations do not account for any
potential patent term restoration nor does this account for the issuance of any patents pending.
If Zenvia is approved, we can apply for an up to five-year extension to one patent covering Zenvia;
however, as Zenvia is not a new chemical entity, it is unknown whether or not Zenvia will qualify
for patent term restoration under the U.S. Patent and Trademark Office guidelines. Once the
patents covering Zenvia expire or the three-year Hatch Waxman exclusivity period has passed,
generic drug companies would be able to introduce competing versions of the drug. Although we have
filed additional new patents for Zenvia, there can be no assurance that these patents will issue or
that any patents will have claims that are broad enough to prevent generic competition. If we are
unsuccessful in strengthening our patent portfolio, our long-term revenues from Zenvia sales may be
less than expected.
If we fail to obtain regulatory approval in foreign jurisdictions, we would not be able to
market our products abroad and our revenue prospects would be limited.
We may seek to have our products or product candidates marketed outside the United States. In
order to market our products in the European Union and many other foreign jurisdictions, we must
obtain separate regulatory approvals and comply with numerous and varying regulatory requirements.
The approval procedure varies among countries and jurisdictions and can involve additional testing.
The time required to obtain approval may differ from that required to obtain FDA approval. The
foreign regulatory approval process may include all of the risks associated with obtaining FDA
approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. For
example, our development partner in Japan has encountered significant difficulty in seeking
approval of Docosanol in that country and we may be forced to abandon efforts to seek approval in
that country. Approval by the FDA does not ensure approval by regulatory authorities in other
countries or jurisdictions, and approval by one foreign regulatory authority does not ensure
approval by regulatory authorities in other foreign countries or jurisdictions or by the FDA. We
may not be able to file for regulatory approvals and may not receive necessary approvals to
commercialize our products in any market. The failure to obtain these approvals could materially
adversely affect our business, financial condition and results of operations.
We have recently experienced significant turnover in senior management.
In the past 18 months, we have experienced significant turnover in our senior management team,
including the departures of our President and Chief Executive Officer, Chief Financial Officer,
Interim Chief Financial Officer, Vice President of Human Resources, and Vice President of Drug
Discovery. As a result of these changes, we essentially have a new management team. It is not yet
possible to assess how effective this management team will be and whether they will be able to work
together to accomplish the Companys business objectives. Additionally, changes in management are
disruptive to the organization and any further changes may slow the Companys progress toward its
goals. Further, the Board of Directors may elect to reduce its size to streamline operations and
to reflect the fact that the Company is significantly smaller than it was previously. Changes in
Board composition may also be disruptive and the loss of the experience and capabilities of any of
our Board members may reduce the effectiveness of the Board.
We face challenges retaining members of management and other key personnel.
The industry in which we compete has a high level of employee mobility and aggressive
recruiting of skilled employees. This type of environment creates intense competition for qualified
personnel, particularly in clinical and regulatory affairs, sales and marketing and accounting and
finance. Because we have a relatively small organization, the loss of any executive officers or
other key employees could adversely affect our operations. For example, if we were to lose one or
more of the senior members of our clinical and regulatory affairs team, the pace of clinical
development for Zenvia could be slowed significantly. We have experienced extensive employee
turnover recently,
as discussed above, and the loss of any additional key employees could adversely affect our
business and cause significant disruption in our operations.
S-6
Risks Relating to Our Industry
There are a number of difficulties and risks associated with clinical trials and our trials
may not yield the expected results.
There are a number of difficulties and risks associated with conducting clinical trials. For
instance, we may discover that a product candidate does not exhibit the expected therapeutic
results, may cause harmful side effects or have other unexpected characteristics that may delay or
preclude regulatory approval or limit commercial use if approved. It typically takes several years
to complete a late-stage clinical trial, such as the ongoing Phase III confirmatory trial for
Zenvia for PBA, and a clinical trial can fail at any stage of testing. If clinical trial
difficulties or failures arise, our product candidates may never be approved for sale or become
commercially viable.
In addition, the possibility exists that:
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the results from earlier clinical trials may not be statistically
significant or predictive of results that will be obtained from subsequent
clinical trials, particularly larger trials; |
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institutional review boards or regulators, including the FDA, may hold,
suspend or terminate our clinical research or the clinical trials of our
product candidates for various reasons, including noncompliance with
regulatory requirements or if, in their opinion, the participating subjects
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subjects may drop out of our clinical trials; |
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our preclinical studies or clinical trials may produce negative,
inconsistent or inconclusive results, and we may decide, or regulators may
require us, to conduct additional preclinical studies or clinical trials;
and |
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the cost of our clinical trials may be greater than we currently anticipate. |
It is possible that earlier clinical and pre-clinical trial results may not be predictive of
the results of subsequent clinical trials. If earlier clinical and/or pre-clinical trial results
cannot be replicated or are inconsistent with subsequent results, our development programs may be
cancelled or deferred. In addition, the results of these prior clinical trials may not be
acceptable to the FDA or similar foreign regulatory authorities because the data may be incomplete,
outdated or not otherwise acceptable for inclusion in our submissions for regulatory approval.
Additionally, the FDA has substantial discretion in the approval process and may reject our
data or disagree with our interpretations of regulations or our clinical trial data or ask for
additional information at any time during their review. For example, the use of different
statistical methods to analyze the efficacy data from our recent Phase III trial of Zenvia in DPN
pain results in significantly different conclusions about the efficacy of the drug. Although we
believe we have legitimate reasons to use the methods that we have adopted as outlined in our SPA
with the FDA, the FDA may not agree with these reasons and may disagree with our conclusions
regarding the results of these trials.
Although we would work to be able to fully address any such FDA concerns, we may not be able
to resolve all such matters favorably, if at all. Disputes that are not resolved favorably could
result in one or more of the following:
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delays in our ability to submit an NDA; |
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the refusal by the FDA to accept for file any NDA we may submit; |
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requests for additional studies or data; |
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delays of an approval; or |
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the rejection of an application. |
S-7
If we do not receive regulatory approval to sell our product candidates or cannot successfully
commercialize our product candidates, we would not be able to generate meaningful levels of
sustainable revenues.
Clinical trials can be delayed for a variety of reasons. If we experience any such delays, we would
be unable to commercialize our product candidates on a timely basis, which would materially harm
our business.
Clinical trials may not begin on time or may need to be restructured after they have begun.
Additionally, clinical trials can experience delays for a variety of other reasons, including
delays related to:
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identifying and engaging a sufficient number of clinical trial sites; |
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negotiating acceptable clinical trial agreement terms with prospective trial sites; |
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obtaining institutional review board approval to conduct a clinical trial at a prospective site; |
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recruiting eligible subjects to participate in clinical trials; |
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competition in recruiting clinical investigators; |
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shortage or lack of availability of supplies of drugs for clinical trials; |
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the need to repeat clinical trials as a result of inconclusive results or poorly executed testing; |
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the placement of a clinical hold on a study; |
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the failure of third parties conducting and overseeing the operations of our clinical trials to
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exposure of clinical trial subjects to unexpected and unacceptable health risks or noncompliance
with regulatory requirements, which may result in suspension of the trial. |
If we experience significant delays in or termination of clinical trials, our financial
results and the commercial prospects for our product candidates or any other products that we may
develop will be adversely impacted. In addition, our product development costs would increase and
our ability to generate revenue could be impaired.
The pharmaceutical industry is highly competitive and most of our competitors are larger and
have greater resources. As a result, we face significant competitive hurdles.
The pharmaceutical and biotechnology industries are highly competitive and subject to
significant and rapid technological change. We compete with hundreds of companies that develop and
market products and technologies in similar areas as our research. For example, we expect that
Zenvia will compete against antidepressants, atypical anti-psychotic agents and other agents.
Our competitors may have specific expertise and development technologies that are better than
ours and many of these companies, either alone or together with their research partners, have
substantially greater financial resources, larger research and development staffs and substantially
greater experience than we do. Accordingly, our competitors may successfully develop competing
products. We are also competing with other companies and their
products with respect to manufacturing efficiencies and marketing capabilities, areas where we
have limited or no direct experience.
If we fail to comply with regulatory requirements, regulatory agencies may take action against
us, which could significantly harm our business.
S-8
Marketed products, along with the manufacturing processes, post-approval clinical data,
labeling, advertising and promotional activities for these products, are subject to continual
requirements and review by the FDA and other regulatory bodies. Even if we receive regulatory
approval for one of our product candidates, the approval may be subject to limitations on the
indicated uses for which the product may be marketed or to the conditions of approval or contain
requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy
of the product.
In addition, regulatory authorities subject a marketed product, its manufacturer and the
manufacturing facilities to ongoing review and periodic inspections. We will be subject to ongoing
FDA requirements, including required submissions of safety and other post-market information and
reports, registration requirements, current Good Manufacturing Practices (cGMP) regulations,
requirements regarding the distribution of samples to physicians and recordkeeping requirements.
The cGMP regulations also include requirements relating to quality control and quality
assurance, as well as the corresponding maintenance of records and documentation. We rely on the
compliance by our contract manufacturers with cGMP regulations and other regulatory requirements
relating to the manufacture of products. We are also subject to state laws and registration
requirements covering the distribution of our products. Regulatory agencies may change existing
requirements or adopt new requirements or policies. We may be slow to adapt or may not be able to
adapt to these changes or new requirements.
Developing and marketing pharmaceutical products for human use involves product liability
risks, for which we currently have limited insurance coverage.
The testing, marketing and sale of pharmaceutical products involves the risk of product
liability claims by consumers and other third parties. Although we maintain product liability
insurance coverage, product liability claims can be high in the pharmaceutical industry and our
insurance may not sufficiently cover our actual liabilities. If product liability claims were made
against us, it is possible that our insurance carriers may deny, or attempt to deny, coverage in
certain instances. If a lawsuit against us is successful, then the lack or insufficiency of
insurance coverage could affect materially and adversely our business and financial condition.
Furthermore, various distributors of pharmaceutical products require minimum product liability
insurance coverage before their purchase or acceptance of products for distribution. Failure to
satisfy these insurance requirements could impede our ability to achieve broad distribution of our
proposed products and the imposition of higher insurance requirements could impose additional costs
on us.
Risks Related to Reliance on Third Parties
Because we depend on clinical research centers and other contractors for clinical testing and
for certain research and development activities, the results of our clinical trials and such
research activities are, to a certain extent, beyond our control.
The nature of clinical trials and our business strategy of outsourcing a substantial portion
of our research require that we rely on clinical research centers and other contractors to assist
us with research and development, clinical testing activities, patient enrollment and regulatory
submissions to the FDA. As a result, our success depends partially on the success of these third
parties in performing their responsibilities. Although we pre-qualify our contractors and we
believe that they are fully capable of performing their contractual obligations, we cannot directly
control the adequacy and timeliness of the resources and expertise that they apply to these
activities. If our contractors do not perform their obligations in an adequate and timely manner,
the pace of clinical development, regulatory approval and commercialization of our drug candidates
could be significantly delayed and our prospects could be adversely affected.
We depend on third parties to manufacture, package and distribute compounds for our drugs and
drug candidates. The failure of these third parties to perform successfully could harm our
business.
We have utilized, and intend to continue utilizing, third parties to manufacture, package and
distribute Zenvia and the Active Pharmaceutical Ingredient (API) for docosanol 10% cream and
supplies for our drug candidates. We have no experience in manufacturing and do not have any
manufacturing facilities. Currently, we have sole
S-9
suppliers for the API for docosanol and Zenvia,
and a sole manufacturer for the finished form of Zenvia. Any material disruption in manufacturing
could cause a delay in shipments and possible loss of sales. We do not have any long-term
agreements in place with our current docosanol supplier or Zenvia supplier. Any delays or
difficulties in obtaining APIs or in manufacturing, packaging or distributing our products and
product candidates could delay Zenvia clinical trials for PBA and/or DPN pain. Additionally, the
third parties we rely on for manufacturing and packaging are subject to regulatory review, and any
regulatory compliance problems with these third parties could significantly delay or disrupt our
commercialization activities.
We generally do not control the development of compounds licensed to third parties and, as a
result, we may not realize a significant portion of the potential value of any such license
arrangements.
Under our license arrangement for our MIF compound, we have no direct control over the
development of this drug candidate and have only limited, if any, input on the direction of
development efforts. These development efforts are ongoing by our licensing partner and if the
results of their development efforts are negative or inconclusive, it is possible that our
licensing partner could elect to defer or abandon further development of these programs, as was the
case in early 2007 when AstraZeneca terminated our license and collaboration agreement for our RCT
mechanism technology. We similarly rely on licensing partners to obtain regulatory approval for
Docosanol in foreign jurisdictions. Because much of the potential value of these license
arrangements is contingent upon the successful development and commercialization of the licensed
technology, the ultimate value of these licenses will depend on the efforts of licensing partners.
If our licensing partners do not succeed in developing the licensed technology for whatever reason,
or elect to discontinue the development of these programs, we may be unable to realize the
potential value of these arrangements.
We expect to rely entirely on third parties for international sales and marketing efforts.
In the event that we attempt to enter into international markets, we expect to rely on
collaborative partners to obtain regulatory approvals and to market and sell our product(s) in
those markets. We have not yet entered into any collaborative arrangement with respect to
marketing or selling Zenvia, with the exception of one such agreement relating to Israel. We may
be unable to enter into any other arrangements on terms favorable to us, or at all, and even if we
are able to enter into sales and marketing arrangements with collaborative partners, we cannot
assure you that their sales and marketing efforts will be successful. If we are unable to enter
into favorable collaborative arrangements with respect to marketing or selling Zenvia in
international markets, or if our collaborators efforts are unsuccessful, our ability to generate
revenue from international product sales will suffer.
Risks Relating to Our Stock
Our common stock could be delisted from The NASDAQ Global Market, which could negatively
impact the price of our common stock and our ability to access the capital markets.
Our common stock is currently listed on The NASDAQ Global Market. The listing standards of
The NASDAQ Global Market provide that a company may be delisted if the bid price of its stock drops
below $1.00 for a period of 30 consecutive business days. Additionally, we must satisfy at least
one of the following conditions: (A) stockholders equity of at least $10 million, (B) total market
value of listed securities of at least $50 million or (C) at least $50 million of total assets and
$50 million of total revenue.
Recently our stock has traded below $1.00 and our total market value of listed securities has
dropped below $50 million for more than the last ten consecutive trading days. We currently do not
satisfy other alternative listing standards and, on March 26, 2008, we received a NASDAQ Staff
Determination Letter informing us that we have 30 days to regain compliance with listing
requirements or face delisting. We will be required to make a public announcement regarding our
non-compliance, which could cause our stock price to decline further. Although we
expect that the completion of this offering will allow us to regain compliance with the
market-value-of-listed-securities requirement, there can be no assurance that we actually will
regain compliance or that we will do so in a timely manner. Announcements by us of potential or
pending NASDAQ delisting actions could further depress our stock price and market value and, even
if we satisfy the market capitalization requirement, our stock price will need to trade above $1.00
on a sustained basis to remain listed. If our stock price remains depressed after this offering,
S-10
we may seek to implement a reverse stock split. Reverse stock splits frequently result in a loss
in stockholder value as the actual post-split price is often lower than the pre-split price,
adjusted for the split.
If we fail to comply with the listing standards, our common stock listing may be moved to the
NASDAQ Capital Market, which is a lower tier market, or our common stock may be delisted and traded
on the over-the-counter bulletin board network. Moving our listing to the NASDAQ Capital Market
could adversely affect the liquidity of our common stock and the delisting of our common stock
would significantly affect the ability of investors to trade our securities and could significantly
negatively affect the value and liquidity of our common stock. In addition, the delisting of our
common stock could materially adversely affect our ability to raise capital on terms acceptable to
us or at all. Delisting from NASDAQ could also have other negative results, including the
potential loss of confidence by suppliers and employees, the loss of institutional investor
interest and fewer business development opportunities.
Our stock price has historically been volatile and we expect that this volatility will
continue for the foreseeable future.
The market price of our Class A common stock has been, and is likely to continue to be, highly
volatile. This volatility can be attributed to many factors independent of our operating results,
including the following:
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Announcements by us regarding our non-compliance with continued listing standards on the NASDAQ stock market; |
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Comments made by securities analysts, including changes in their recommendations; |
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Short selling activity by certain investors, including any failures to timely settle short sale transactions; |
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Announcements by us of financing transactions and/or future sales of equity or debt securities; |
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Sales of our Class A common stock by our directors, officers, or significant shareholders; |
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Announcements by our competitors of clinical trial results or product approvals; and |
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Market and economic conditions. |
Additionally, our stock price has been volatile as a result of announcements of regulatory
actions and decisions relating to our product candidates, including Zenvia, and periodic variations
in our operating results. We expect that our operating results will continue to vary from
quarter-to-quarter. Our operating results and prospects may also vary depending on our partnering
arrangements for our MIF technology, which has been licensed to a third party that controls the
continued progress and pace of development, meaning that the achievement of development milestones
is outside of our control.
As a result of these factors, we expect that our stock price may continue to be volatile and
investors may be unable to sell their shares at a price equal to, or above, the price paid.
Additionally, any significant drops in our stock price, such as the one we experienced following
the announcement of the Zenvia approvable letter, could give rise to shareholder lawsuits, which
are costly and time consuming to defend against and which may adversely affect our ability to raise
capital while the suits are pending, even if the suits are ultimately resolved in favor of the
Company.
S-11
USE OF PROCEEDS
We anticipate using the net proceeds from the sale of our securities offered by this prospectus
supplement principally to fund the ongoing clinical development of Zenvia for PBA and for DPN pain,
as well as for general and administrative expenses. If this offering is successfully completed, we
expect to expand the size of our ongoing Phase III STAR trial by adding approximately 10% more
patients. Although this will increase the total cost of the trial, we currently estimate that we
will have sufficient capital to complete the expanded STAR trial and fund our operations for at
least six months beyond that time, assuming that we raise the maximum amount sought in this
offering. However, we will retain broad discretion over the use of proceeds from this offering and
may use the net proceeds for other purposes, including the acquisitions of complementary
technologies or companies. Additionally, other changes in the design of clinical trials may affect
the cost and duration of the trial and thus our ability to fully fund the trial with the proceeds
from this offering. Pending the use of the net proceeds, we intend to invest the net proceeds in
short-term, interest-bearing, investment-grade securities.
DILUTION
Our pro forma net tangible book value as of December 31, 2007 was approximately $1.9 million, or
$0.04 per share of Class A common stock. Pro forma net tangible book value per share is calculated
by subtracting our total liabilities from our total tangible assets, which is total assets less
intangible assets, and dividing this amount by the number of shares of Class A common stock
outstanding. After giving effect to the sale by us of the full ___shares of Class A
common stock underlying the units offered by this prospectus supplement at a price of $ per
unit, and after deducting estimated offering expenses and sales commissions payable by us, our pro
forma, as-adjusted net tangible book value as of December 31, 2007 would have been approximately
$ million, or $ per share of Class A common stock. This represents an immediate increase in
the pro forma net tangible book value of $ per share to our existing shareholders and an
immediate and substantial dilution in pro forma net tangible book value of approximately $ per
share to new investors. The following table illustrates this hypothetical per share dilution:
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Offering price per unit |
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Pro forma net tangible book value per share as of December 31, 2007 |
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Dilution per share to new investors |
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The foregoing dilution information is based on 43,164,402 shares outstanding as of December 31,
2007 and excludes:
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options and warrants outstanding as of that date representing the right to purchase
a total of 1,137,095 shares of Class A common stock at weighted average exercise price
of $8.80 per share; and |
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2,370,983 shares of Class A common stock underlying restricted stock units and
restricted stock awards outstanding as of that date |
The foregoing dilution information does not give effect to the exercise of the warrants that are
being offered with the units.
S-12
PLAN OF DISTRIBUTION
We have entered into a placement agency agreement, dated as of March ___, 2008, with Piper
Jaffray & Co. Subject to the terms and conditions contained in the placement agency agreement,
Piper Jaffray has agreed to act as the placement agent in connection with the sale of up to
___units, with each unit consisting of one share of Class A common stock and a warrant to
purchase 0.35 shares of Class A common stock. The placement agent is not purchasing or selling any
securities by this prospectus supplement and the accompanying prospectuses, nor is it required to
arrange the purchase or sale of any specific number or dollar amount of the securities, but it has
agreed to use its best efforts to arrange for the sale of all of the securities in this offering.
There is no required minimum number of securities that must be sold as a condition to completion of
the offering.
The placement agency agreement provides that the obligations of the placement agent and the
purchasers are subject to certain conditions precedent, including, among other things, the absence
of any material adverse change in our business and the receipt of certain opinions, letters and
certificates from our counsel, our independent auditors and us.
We will enter into purchase agreements directly with purchasers in connection with this units
offering, and we will only sell to purchasers who have entered into purchase agreements.
We currently anticipate that the closing of the sale of the units offered hereby will take
place on or about April ___, 2008, except that we will allow certain investors to close until as
late as April ___, 2008. If an investor wishes to close after April ___, 2008, the different closing
date will be set forth in the subscription agreement for that investor.
In order to facilitate the closing, certain purchaser funds will be deposited into an escrow
account and held until jointly released by us and the placement agent on the date the securities
are delivered to the purchasers. The escrow agent will invest all funds it receives in a
non-interest bearing account in accordance with Rule 15c2-4 under the Securities Exchange Act of
1934. The escrow agent will not accept any purchaser funds prior to the date of this prospectus
supplement. Upon closing, we will deliver to each purchaser delivering funds into escrow the
number of shares purchased by such purchaser through the facilities of The Depository Trust
Company.
We have agreed to pay the placement agent an aggregate fee equal to 6.0% of the gross proceeds
from the sale of units in this offering, provided, however, that with respect to units sold in this
offering to certain purchasers whose names are set forth on Schedule II of the placement agency
agreement, no fee shall be paid to the placement agent with respect to the gross proceeds received
by us from the sale of units in this offering to such purchasers. In addition, we have agreed to
pay the fees, disbursements and other charges of counsel to the placement agent in an amount of up
to $100,000.
Until April ___, 2009, we have granted Piper Jaffray the right of first refusal to act as our
exclusive or bookrunning placement agent or underwriter in connection with any registered offering
of securities or securities offering under Rule 144A, subject to certain exceptions.
Pursuant to a requirement by the Financial Industry Regulatory Authority, or FINRA, the
maximum commission or discount to be received by any FINRA member or independent broker/dealer may
not be greater than 8.0% of the gross proceeds received by us for the sale of any securities being
registered pursuant to SEC Rule 415. The following table shows the per unit and total fees we will
pay to the placement agent in connection with the sale of the securities offered pursuant to this
prospectus supplement and the accompanying prospectuses, assuming the sale of all of the securities
offered hereby and assuming that the investors identified on Schedule II of the placement agency
agreement purchase a total of $8,000,000 of units in this offering.
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Because there is no minimum offering amount required as a condition to closing in this
offering, the actual total offering fees, if any, are not presently determinable and may be
substantially less than the maximum amount set
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forth above. To the extent that prospective investors identified on Schedule II of the
placement agency agreement do not purchase the full amounts assumed above, we would be required to
pay a higher average placement agent fee on sales made under this prospectus supplement, although
in no event will the aggregate fee be greater than 6.0% of the gross offering proceeds.
We have agreed to indemnify the placement agent against certain liabilities, including civil
liabilities under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended, and to contribute to payments that the placement agent may be required to make in
respect of those liabilities.
The placement agent has informed us that it will not engage in over-allotment, stabilizing
transactions or syndicate covering transactions in connection with this offering.
We and each of our directors and executive officers have agreed to certain restrictions on the
ability to sell shares of our common stock and other securities that they beneficially own,
including securities convertible into or exercisable or exchangeable for our common stock, for a
period of 90 days following the date of this prospectus supplement. This means that, subject to
certain exceptions, for a period of 90 days following the date of this prospectus supplement, we
and such persons may not, directly or indirectly, offer, pledge, announce the intention to sell,
sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of any
shares of our common stock or any, without the prior written consent of Piper Jaffray.
Notwithstanding the foregoing, if (x) during the last 17 days of such 90 day period, we announce
that we will release earnings results or publicly announce other material news or a material event
relating to us occurs or (y) prior to the expiration of the 90 day period, we announce that we will
release earnings results during the 16 day period beginning on the last day of the 90 day period,
then in each case the 90 day period will be extended until the expiration of the 18 day period
beginning on the date of release of the earnings results or the public announcement regarding the
material news or the occurrence of the material event, as applicable, unless Piper Jaffray waives,
in writing, such extension. At any time and without public notice, Piper Jaffray may in its sole
discretion release all or some of the securities from these lock-up agreements.
The transfer agent for our common stock is American Stock Transfer & Trust Co.
Our common stock is traded on the NASDAQ Global Market under the symbol AVNR.
The placement agent may distribute this prospectus supplement and the accompanying
prospectuses electronically.
The placement agency agreement will be included as an exhibit to a Current Report on Form 8-K
that we will file with the SEC and that will be incorporated by reference into the registration
statements of which this prospectus supplement forms a part.
From time to time in the ordinary course of its business, the placement agent or its
affiliates may in the future engage in investment banking, commercial banking and/or other services
with us and our affiliates for which it may in the future receive customary fees and expenses.
DESCRIPTION OF WARRANTS
The material terms and provisions of the warrants being offered pursuant to this prospectus
supplement and the accompanying prospectuses are summarized below. This summary is subject to, and
qualified in its entirety by, the form of warrant, which will be provided to each purchaser in this
offering and will be filed on a Current Report on Form 8-K in connection with this offering.
The warrants will be exercisable at any time and from time to time for a period of five years
from issuance. The warrants will be exercisable, at the option of each holder, upon the surrender
of the warrants to us and at an exercise price equal to $ per share, which, except as described
below, must be paid in cash at the time of exercise. The exercise price is subject to appropriate
adjustment in the event of stock dividends, stock splits, reorganizations or similar events
affecting our common stock. The warrant holders must surrender payment in cash of the exercise
S-14
price of the shares being acquired upon exercise of the warrants; provided, however, that if
the Company is unable to offer and sell the shares underlying these warrants pursuant to this
prospectus supplement due to the ineffectiveness of the registration statements of which this
prospectus supplement is a part, then the warrants may only be exercised on a net or cashless
basis. In no event is the warrant holder entitled to a cash settlement from the Company upon
exercise.
In the event that the trading price of our common stock closes above 400% of the exercise
price of the warrant for 20 days in any 60-day period during the warrant term, we can then send a
redemption notice to the warrant holders. This redemption notice will provide the warrant holders
with at least 30 days to exercise outstanding warrants, after which time we may redeem and cancel
any unexercised warrants for nominal consideration.
The warrants contain a limitation on exercise, pursuant to which a warrant holder will not be
entitled to exercise any portion of the warrant if, after giving effect to the exercise, the
holder, together with its affiliates, would beneficially own more than 19.99% of the shares of our
outstanding Class A common stock after giving effect to the exercise. Upon the written request of
any investor in this offering, we will set this exercise limit at a lower percentage.
LEGAL MATTERS
Various legal matters with respect to the validity of the securities offered by this prospectus
supplement will be passed upon for us by Goodwin Procter LLP, San Diego, California. Lowenstein
Sandler PC, New York, New York, is counsel for the placement agent in connection with this
offering.
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The information in this preliminary 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
preliminary prospectus is not an offer to sell these securities, and we are not
soliciting offers to buy these securities, in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED JULY 22, 2005
PROSPECTUS
$100,000,000
AVANIR Pharmaceuticals
Class A Common Stock
Preferred Stock
Depositary Shares
Debt Securities
Warrants
We
may offer and sell an indeterminate number of shares of our
Class A common stock and preferred
stock, depositary shares, debt securities and warrants from time to time under this prospectus. We
may offer these securities separately or as units, which may include combinations of the
securities. We will describe in a prospectus supplement the securities we are offering and
selling, as well as the specific terms of the securities.
We may offer these securities in amounts, at prices and on terms determined at the time of
offering. We may sell the securities directly to you, through agents we select, or through
underwriters and dealers we select. If we use agents, underwriters or dealers to sell the
securities, we will name them and describe their compensation in a prospectus supplement.
Our
Class A common stock trades on The American Stock Exchange under
the symbol AVN. On July 21, 2005, the closing price for our Class A common stock, as reported on The American Stock
Exchange, was $3.23 per share.
Investing in our securities involves certain risks. See Risk Factors beginning on Page
4 of this prospectus for certain risks you should consider. You should read the entire prospectus
and any applicable prospectus supplement carefully before you make your investment decision.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and
Exchange Commission utilizing a shelf registration process. Under the shelf registration process,
we may offer shares of our Class A common stock and preferred stock, depositary shares, various
series of debt securities and warrants to purchase any of such securities with a total value of up
to $100,000,000 from time to time under this prospectus at prices and on terms to be determined by
market conditions at the time of offering. This prospectus provides you with a general description
of the securities we may offer. Each time we offer a type or series of securities, we will provide
a prospectus supplement that will describe the specific amounts, prices and other important terms
of the securities, including, to the extent applicable:
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aggregate principal amount or aggregate offering price; |
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maturity; |
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original issue discount, if any; |
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rates and times of payment of interest, dividends or other payments, if any; |
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redemption, conversion, exchange, settlement or sinking fund terms, if any; |
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conversion, exchange or settlement prices or rates, if any, and, if applicable, any
provisions for changes to or adjustments in the conversion, exchange or settlement
prices or rates and in the securities or other property receivable upon conversion,
exchange or settlement; |
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ranking; |
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restrictive covenants, if any; |
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voting or other rights, if any; and |
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important federal income tax considerations. |
A prospectus supplement may include a discussion of risks or other special considerations
applicable to us or the offered securities. A prospectus supplement may also add, update or change
information in this prospectus. If there is any inconsistency between the information in this
prospectus and the applicable prospectus supplement, you must rely on the information in the
prospectus supplement. Please carefully read both this prospectus and the applicable prospectus
supplement together with additional information described under the heading Where You Can Find
More Information. This prospectus may not be used to offer or sell any securities unless
accompanied by a prospectus supplement.
The registration statement containing this prospectus, including exhibits to the registration
statement, provides additional information about us and the common stock offered under this
prospectus. The registration statement can be read at the SEC website or at the SECs public
reading room mentioned under the heading Where You Can Find More Information.
We have not authorized any broker-dealer, salesperson or other person to give any information
or to make any representation other than those contained or incorporated by reference in this
prospectus and the accompanying supplement to this prospectus. You must not rely upon any
information or representation not contained or incorporated by reference in this prospectus or the
accompanying prospectus supplement. This prospectus and the accompanying supplement to this
prospectus do not constitute an offer to sell or the solicitation of an offer to buy securities,
nor do this prospectus and the accompanying supplement to this prospectus constitute an offer to
sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it
is unlawful to make such offer or solicitation. The information contained in this prospectus and
the accompanying prospectus supplement speaks only as of the date set forth on the cover page and
may not reflect subsequent changes in our business, financial condition, results of operations and
prospects even though this prospectus and any accompanying prospectus supplement is delivered or
securities are sold on a later date.
We may sell the securities directly to or through underwriters, dealers or agents. We, and our
underwriters or agents, reserve the right to accept or reject all or part of any proposed purchase
of securities. If we do offer securities through underwriters or agents, we will include in the
applicable prospectus supplement:
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the names of those underwriters or agents; |
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applicable fees, discounts and commissions to be paid to them; |
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details regarding over-allotment options, if any; and |
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the net proceeds to us. |
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Class A Common Stock. We may issue shares of our Class A common stock from time to time.
Holders of our Class A common stock are entitled to one vote per share for the election of
directors and on all other matters that require shareholder approval. Subject to any preferential
rights of any outstanding preferred stock, in the event of our liquidation, dissolution or winding
up, holders of our common stock are entitled to share ratably in the assets remaining after payment
of liabilities and the liquidation preferences of any outstanding preferred stock. Our Class A
common stock does not carry any preemptive rights enabling a holder to subscribe for, or receive
shares of, any class of our Class A common stock or any other securities convertible into shares of
any class of our Class A common stock, or any redemption rights.
Preferred Stock. We may issue shares of our preferred stock from time to time, in one or more
series. Under our certificate of incorporation, our board of directors has the authority, without
further action by shareholders, to designate up to 10,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges, qualifications and restrictions granted
to or imposed upon the preferred stock, including dividend rights, conversion rights, voting
rights, rights and terms of redemption, liquidation preference and sinking fund terms, any or all
of which may be greater than the rights of the Class A common stock.
If we issue preferred stock, we will fix the rights, preferences, privileges, qualifications
and restrictions of the preferred stock of each series that we sell under this prospectus and
applicable prospectus supplements in the certificate of designation relating to that series. If we
issue preferred stock, we will incorporate by reference into the registration statement of which
this prospectus is a part the form of any certificate of determination that describes the terms of
the series of preferred stock we are offering before the issuance of the related series of
preferred stock. We urge you to read the prospectus supplement related to any series of preferred
stock we may offer, as well as the complete certificate of determination that contains the terms of
the applicable series of preferred stock.
Depositary Shares. We may elect to offer fractional shares of preferred stock rather than full
shares of preferred stock and, in that event, will issue receipts for depositary shares. Each of
these depositary shares will represent a fraction, which will be set forth in the applicable
prospectus supplement, of a share of the applicable series of preferred stock.
Any depositary shares that we sell under this prospectus will be evidenced by depositary
receipts issued under a deposit agreement between us and a depositary with whom we deposit the
shares of the applicable series of preferred stock that underlie the depositary shares that are
sold. If we issue depositary shares, a form of deposit agreement, including a form of depositary
receipt, will be incorporated by reference into the registration statement of which this prospectus
is a part. We urge you to read the prospectus supplement related to any depositary shares we may offer, as well
as the complete deposit agreement and depositary receipt.
Debt Securities. We may issue debt securities from time to time, in one or more series, as
either senior or subordinated debt or as senior or subordinated convertible debt. The senior debt
securities will rank equally with any
other unsubordinated debt that we may have and may be secured or unsecured. The subordinated debt
securities will be subordinate and junior in right of payment, to the extent and in the manner
described in the instrument governing the debt, to all or some portion of our indebtedness. Any
convertible debt securities that we issue will be convertible into or exchangeable for our Class A
common stock or other securities of ours. Conversion may be mandatory or at your option and would
be at prescribed conversion rates.
If we issue debt securities, they will be issued under one or more documents called
indentures, which are contracts between us and a trustee for the holders of the debt securities. We
urge you to read the prospectus supplement related to the series of debt securities being offered,
as well as the complete indenture that contains the terms of the debt securities. If we issue debt
securities, indentures and forms of debt securities containing the terms of debt securities being
offered will be incorporated by reference into the registration statement of which this prospectus
is a part.
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Warrants. We may issue warrants for the purchase of Class A common stock, preferred stock,
depositary shares and/or debt securities in one or more series, from time to time. We may issue
warrants independently or together with Class A common stock, preferred stock, depositary shares
and/or debt securities, and the warrants may be attached to or separate from those securities.
If we issue warrants, they will be evidenced by warrant certificates issued under one or more
warrant agreements, which are contracts between us and an agent for the holders of the warrants. We
urge you to read the prospectus supplement related to any series of warrants we may offer, as well
as the complete warrant agreement and warrant certificate that contain the terms of the warrants.
If we issue warrants, forms of warrant agreements and warrant certificates relating to warrants for
the purchase of common stock, preferred stock, depositary shares and debt securities will be
incorporated by reference into the registration statement of which this prospectus is a part.
ABOUT AVANIR PHARMACEUTICALS
Avanir Pharmaceuticals is a drug discovery and development company focused on developing and
commercializing novel treatments for chronic diseases. We are currently developing Neurodex for
the treatment of pseudobulbar affect (PBA) and for the treatment of chronic diabetic neuropathic
pain. We have successfully completed two double blind Phase III clinical trials of Neurodex in the treatment of PBA and
one Phase II open label trial for the treatment of diabetic neuropathic pain. We also have a potential product
for asthma, AVP-13358, which is in Phase I clinical development.
Our clinical and pre-clinical research and drug discovery programs are focused primarily on
small molecules that can be taken orally as therapeutic treatments. Our pre-clinical small molecule
programs include potential treatments for atherosclerosis and inflammation. We have licensed to Novartis
International Pharmaceutical Ltd. our research and development program that targets macrophage
migration inhibitory factor (MIF) as a potential
treatment for inflammatory diseases. Also, we have licensed to
AstraZeneca PLC our research and development program to discover,
develop and commercialize Reverse Cholesterol Transport
(RCT)
enhancing compounds for the treatment of cardiovascular disease. Using our
proprietary Xenerex technology, we are also conducting research to develop injectable human
monoclonal antibody products for anthrax, cytomegalovirus, and other infectious diseases.
We strive to maintain a lean organizational structure while working on a diverse product
development pipeline. We also strive to maintain flexibility in our cost structure, by actively
managing outsourced functions such as clinical trials, market research, legal counsel,
documentation and testing of internal controls, and portions of
chemistry, rather than maintaining all
of these functions in house. While outsourcing can lead to higher costs in some cases, we believe
the benefits of being flexible, and being able to rapidly respond to program delays, or successes,
and the availability of capital to advance our programs, far outweigh the disadvantages.
We
have submitted the final group of modules of a rolling submission to the U.S. Food and Drug
Administration (FDA) of our New Drug Application (NDA) for Neurodex for the treatment of PBA.
If Neurodex is approved by the FDA, we expect to begin marketing and
selling the product in the first half of 2006. We are in the process of
transforming from a research and development organization into a commercially viable pharmaceutical
company. In order to facilitate that transformation, we are investing in our infrastructure to
support the planned commercial launch of Neurodex if approved by the FDA. In preparation for the
commercial launch of Neurodex, we are in the process of developing our sales and marketing strategy, and are recruiting sales and marketing
personnel for key positions within the organization. We continue to evaluate co-promotion alternatives for Neurodex. The goals of a
co-promotion arrangement would be to reach a broader target audience
of physicians as well as to offset some of the expenses associated with Phase III clinical trials of Neurodex as a potential treatment
for diabetic neuropathic pain.
We
have licensed certain rights to docosanol 10% cream, our MIF
development program, and our RCT program, and we
continue to seek licensees for other potential products in our pipeline. We may also seek to
develop our other drug candidates through research collaborations with larger pharmaceutical companies,
potentially allowing us to share the risks and the opportunities that come from such development
efforts.
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We will have to raise significant amounts of additional capital to prepare for and potentially
execute a product launch of Neurodex for PBA, if approved by the FDA
for marketing, and fund selected research and other operating activities. Our future capital needs
will depend substantially on the economic terms and the timing of any new partnership or
collaborative arrangements with pharmaceutical companies under which they will share the costs of
such activities. If we are unable to raise capital as needed to fund our operations, or if we are
unable to enter into any such collaborative arrangements, then we may need to slow the rate of
development of some of our programs or sell the rights to one or more of our drug candidates, and
our commercialization plans for Neurodex may be adversely affected. For additional information
about the risks and uncertainties that may affect our business and prospects, please see Risk
Factors.
Our offices and research facilities are located at 11388 Sorrento Valley Road, San Diego,
California 92121. Our telephone number is (858) 622-5200 and our e-mail address is info@avanir.com.
Additional information about Avanir can be found on our website, at www.avanir.com, and in our
periodic and current reports filed with the Securities and Exchange Commission (SEC). Copies of
our current and periodic reports filed with the SEC are available at the SEC Public Reference Room
at 450 Fifth Street, N.W., Washington, D.C. 20549, and online at www.sec.gov and our website at
www.avanir.com.
RISK FACTORS
Before making an investment decision, you should carefully consider the risks described under
Risk Factors in the applicable prospectus supplement, together with all of the other information
appearing in this prospectus or incorporated by reference into this prospectus and any applicable
prospectus supplement, in light of your particular investment objectives and financial
circumstances. Our business, financial condition or results of operations could be materially
adversely affected by any of these risks. The trading price of our securities could decline due to
any of these risks, and you may lose all or part of your investment. This prospectus and the
incorporated documents also contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks mentioned above.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking statements that
involve risks and uncertainties. The statements contained or incorporated by reference in this
prospectus that are not purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, or the 1933 Act and Section 21E of the Securities
Exchange Act of 1934, or the 1934 Act, including without limitation statements regarding our
expectations, beliefs, intentions or strategies regarding the future. All forward-looking
statements included in this document are based on information available to us on the date hereof,
and all forward-looking statements in documents incorporated by reference are based on information
available to us as of the date of such documents. We assume no obligation to update any such
forward-looking statements. Our actual results may differ materially from those discussed in the
forward-looking statements as a result of certain factors, including those set forth under the
caption Risk Factors in the prospectus supplement and in the documents incorporated by reference
into this prospectus. In evaluating our business, prospective investors should carefully consider
these factors in addition to the other information set forth in this prospectus and incorporated
herein by reference.
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DESCRIPTION OF SECURITIES
We may offer shares of our Class A common stock and preferred stock, depositary shares,
various series of debt securities and warrants to purchase any of such securities with a total
value of up to $100,000,000 from time to time under this prospectus at prices and on terms to be
determined by market conditions at the time of offering. Each time we offer a type or series of
securities, we will provide a prospectus supplement that will describe the specific amounts, prices
and other important terms of the securities. Set forth below is a summary of the principal terms
of these securities, to the extent that such terms are known at this time. Additional information
regarding any securities we offer pursuant to this prospectus will be contained in the applicable
prospectus supplement for such offering, and may including the specific amounts, prices and other
important terms of the securities, including, to the extent applicable:
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designation or classification; |
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aggregate principal amount or aggregate offering price; |
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maturity; |
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original issue discount, if any; |
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rates and times of payment of interest, dividends or other payments, if any; |
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redemption, conversion, exchange, settlement or sinking fund terms, if any; |
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conversion, exchange or settlement prices or rates, if any, and, if
applicable, any provisions for changes to or adjustments in the conversion,
exchange or settlement prices or rates and in the securities or other
property receivable upon conversion, exchange or settlement; |
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ranking; |
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restrictive covenants, if any; |
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voting or other rights, if any; and |
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important federal income tax considerations. |
Class A Common Stock
We may issue shares of our Class A common stock from time to time. Holders of our Class A
common stock are entitled to one vote per share for the election of directors and on all other
matters that require shareholder approval. Subject to any preferential rights of any outstanding
preferred stock, in the event of our liquidation, dissolution or winding up, holders of our common
stock are entitled to share ratably in the assets remaining after payment of liabilities and the
liquidation preferences of any outstanding preferred stock. Our Class A common stock does not carry
any preemptive rights enabling a holder to subscribe for, or receive shares of, any class of our
Class A common stock or any other securities convertible into shares of any class of our Class A
common stock, or any redemption rights.
Preferred Stock
We may issue shares of our preferred stock from time to time, in one or more series. Under our
certificate of incorporation, our board of directors has the authority, without further action by
shareholders, to designate up to 10,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges, qualifications and restrictions granted to or imposed upon
the preferred stock, including dividend rights, conversion rights, voting rights, rights and terms
of redemption, liquidation preference and sinking fund terms, any or all of which may be greater
than the rights of the Class A common stock.
If we issue preferred stock, we will fix the rights, preferences, privileges, qualifications
and restrictions of the preferred stock of each series that we sell under this prospectus and
applicable prospectus supplements in the
certificate of designation relating to that series. If we issue preferred stock, we will
incorporate by reference into the registration statement of which this prospectus is a part the
form of any certificate of determination that describes
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the terms of the series of preferred stock
we are offering before the issuance of the related series of preferred stock. We urge you to read
the prospectus supplement related to any series of preferred stock we may offer, as well as the
complete certificate of determination that contains the terms of the applicable series of preferred
stock.
Depositary Shares
We may elect to offer fractional shares of preferred stock rather than full shares of
preferred stock and, in that event, will issue receipts for depositary shares. Each of these
depositary shares will represent a fraction, which will be set forth in the applicable prospectus
supplement, of a share of the applicable series of preferred stock.
Any depositary shares that we sell under this prospectus will be evidenced by depositary
receipts issued under a deposit agreement between us and a depositary with whom we deposit the
shares of the applicable series of preferred stock that underlie the depositary shares that are
sold. If we issue depositary shares, a form of deposit agreement, including a form of depositary
receipt, will be incorporated by reference into the registration statement of which this prospectus
is a part. We urge you to read the prospectus supplement related to any depositary shares we may
offer, as well as the complete deposit agreement and depositary receipt.
Debt Securities
We may issue debt securities from time to time, in one or more series, as either senior or
subordinated debt or as senior or subordinated convertible debt. The following description,
together with the additional information we include in any applicable prospectus supplements,
summarizes the material terms and provisions of the debt securities that we may offer under this
prospectus. While the terms we have summarized below will generally apply to any future debt
securities we may offer under this prospectus, we will describe the particular terms of any debt
securities that we may offer in more detail in the applicable prospectus supplement. The terms of
any debt securities we offer under a prospectus supplement may differ from the terms we describe
below.
We will issue the senior notes under the senior indenture which we will enter into with the
trustee named in the senior indenture. We will issue the subordinated notes under the subordinated
indenture which we will enter into with the trustee named in the subordinated indenture. We have
filed forms of these documents as exhibits to the registration statement of which this prospectus
is a part. We use the term indentures to refer to both the senior indenture and the subordinated
indenture.
The indentures will be qualified under the Trust Indenture Act of 1939. We use the term
debenture trustee to refer to either the senior trustee or the subordinated trustee, as
applicable.
The following summaries of material provisions of the senior notes, the subordinated notes and
the indentures are subject to, and qualified in their entirety by reference to, all the provisions
of the indenture applicable to a particular series of debt securities. We urge you to read the
applicable prospectus supplements related to the debt securities that we sell under this
prospectus, as well as the complete indentures that contain the terms of the debt securities.
Except as we may otherwise indicate, the terms of the senior indenture and the subordinated
indenture are identical.
General
We will describe in the applicable prospectus supplement the terms relating to a series of
debt securities, including:
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the title; |
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the principal amount being offered, and, if a series, the total amount authorized and
the total amount outstanding; |
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any limit on the amount that may be issued; |
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whether or not we will issue the series of debt securities in global form and, if so,
the terms and who the depositary will be; |
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the maturity date; |
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the principal amount due at maturity, and whether the debt securities will be issued
with any original issue discount; |
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whether and under what circumstances, if any, we will pay additional amounts on any debt
securities held by a person who is not a United States person for tax purposes, and whether
we can redeem the debt securities if we have to pay such additional amounts; |
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the annual interest rate, which may be fixed or variable, or the method for determining
the rate, the date interest will begin to accrue, the dates interest will be payable and
the regular record dates for interest payment dates or the method for determining such
dates; |
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whether or not the debt securities will be secured or unsecured, and the terms of any secured debt; |
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the terms of the subordination of any series of subordinated debt; |
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the place where payments will be payable; |
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restrictions on transfer, sale or other assignment, if any; |
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our right, if any, to defer payment of interest and the maximum length of any such deferral period; |
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the date, if any, after which, the conditions upon which, and the price at which we may,
at our option, redeem the series of debt securities pursuant to any optional or provisional
redemption provisions, and any other applicable terms of those redemption provisions; |
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provisions for a sinking fund, purchase or other analogous fund, if any; |
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the date, if any, on which, and the price at which we are obligated, pursuant to any
mandatory sinking fund or analogous fund provisions or otherwise, to redeem, or at the
holders option to purchase, the series of debt securities; |
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whether the indenture will restrict our ability and/or the ability of our subsidiaries to: |
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incur additional indebtedness; |
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issue additional securities; |
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create liens; |
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pay dividends and make distributions in respect of our capital stock and the capital
stock of our subsidiaries; |
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redeem capital stock; |
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place restrictions on our subsidiaries ability to pay dividends, make distributions or transfer assets; |
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make investments or other restricted payments; |
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sell or otherwise dispose of assets; |
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enter into sale-leaseback transactions; |
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engage in transactions with stockholders and affiliates; |
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issue or sell stock of our subsidiaries; or |
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effect a consolidation or merger; |
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whether the indenture will require us to maintain any interest coverage, fixed charge,
cash flow-based, asset-based or other financial ratios; |
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a discussion of any material or special United States federal income tax considerations
applicable to the debt securities; |
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information describing any book-entry features; |
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the procedures for any auction and remarketing, if any; |
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the denominations in which we will issue the series of debt securities, if other than
denominations of $1,000 and any integral multiple thereof; |
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if other than dollars, the currency in which the series of debt securities will be
denominated; and |
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any other specific terms, preferences, rights or limitations of, or restrictions on, the
debt securities, including any events of default that are in addition to those described in
this prospectus or any covenants provided with respect to the debt securities that are in
addition to those described above, and any terms which may be required by us or advisable
under applicable laws or regulations or advisable in connection with the marketing of the
debt securities. |
Conversion or Exchange Rights
We will set forth in the prospectus supplement the terms on which a series of debt securities
may be convertible into or exchangeable for common stock or other securities of ours or a third
party, including the
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conversion or exchange rate, as applicable, or how it will be calculated, and
the applicable conversion or exchange period. We will include provisions as to whether conversion
or exchange is mandatory, at the option of the holder or at our option. We may include provisions
pursuant to which the number of our securities or the securities of a third party that the holders
of the series of debt securities receive upon conversion or exchange would, under the circumstances
described in those provisions, be subject to adjustment, or pursuant to which those holders would,
under those circumstances, receive other property upon conversion or exchange, for example in the
event of our merger or consolidation with another entity.
Consolidation, Merger or Sale
The indentures in the forms initially filed as exhibits to the registration statement of which
this prospectus is a part do not contain any covenant which restricts our ability to merge or
consolidate, or sell, convey, transfer or otherwise dispose of all or substantially all of our
assets. However, any successor of ours or acquiror of such assets must assume all of our
obligations under the indentures and the debt securities.
If the debt securities are convertible for our other securities, the person with whom we
consolidate or merge or to whom we sell all of our property must make provisions for the conversion
of the debt securities into securities which the holders of the debt securities would have received
if they had converted the debt securities before the consolidation, merger or sale.
Events of Default Under the Indenture
The following are events of default under the indentures with respect to any series of debt
securities that we may issue:
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if we fail to pay interest when due and payable and our failure continues for 90 days
and the time for payment has not been extended or deferred; |
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if we fail to pay the principal, or premium, if any, when due and payable and the time
for payment has not been extended or delayed; |
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if we fail to observe or perform any other covenant contained in the debt securities or
the indentures, other than a covenant specifically relating to another series of debt
securities, and our failure continues for 90 days after we receive notice from the
debenture trustee or holders of at least 25% in aggregate principal amount of the
outstanding debt securities of the applicable series; and |
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if specified events of bankruptcy, insolvency or reorganization occur. |
If an event of default with respect to debt securities of any series occurs and is continuing,
other than an event of default specified in the last bullet point above, the debenture trustee or
the holders of at least 25% in aggregate principal amount of the outstanding debt securities of
that series, by notice to us in writing, and to the debenture trustee if notice is given by such
holders, may declare the unpaid principal of, premium, if any, and accrued interest, if any, due
and payable immediately. If an event of default specified in the last bullet point above occurs
with respect to us, the principal amount of and accrued interest, if any, of each issue of debt
securities then outstanding shall be due and payable without any notice or other action on the part
of the debenture trustee or any holder.
The holders of a majority in principal amount of the outstanding debt securities of an
affected series may waive any default or event of default with respect to the series and its
consequences, except defaults or events of default regarding payment of principal, premium, if any,
or interest, unless we have cured the default or event of default in accordance with the indenture.
Subject to the terms of the indentures, if an event of default under an indenture shall occur
and be continuing, the debenture trustee will be under no obligation to exercise any of its rights
or powers under such indenture at the request or direction of any of the holders of the applicable
series of debt securities, unless such holders have offered the debenture trustee reasonable
indemnity. The holders of a majority in principal amount of the outstanding debt securities of any
series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the debenture trustee, or exercising any trust or power
conferred on the debenture trustee, with respect to the debt securities of that series, provided
that:
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the direction so given by the holder is not in conflict with any law or the applicable
indenture; and |
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subject to its duties under the Trust Indenture Act of 1939, the debenture trustee need
not take any action that might involve it in personal liability or might be unduly
prejudicial to the holders not involved in the proceeding. |
A holder of the debt securities of any series will only have the right to institute a
proceeding under the indentures or to appoint a receiver or trustee, or to seek other remedies if:
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the holder has given written notice to the debenture trustee of a continuing event
of default with respect to that series; |
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the holders of at least 25% in aggregate principal amount of the outstanding debt
securities of that series have made written request, and such holders have offered
reasonable indemnity to the debenture trustee to institute the proceeding as trustee;
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the debenture trustee does not institute the proceeding, and does not receive from
the holders of a majority in aggregate principal amount of the outstanding debt
securities of that series other conflicting directions within 90 days after the notice,
request and offer. |
These limitations do not apply to a suit instituted by a holder of debt securities if we
default in the payment of the principal, premium, if any, or interest on, the debt securities.
We will periodically file statements with the debenture trustee regarding our compliance with
specified covenants in the indentures.
Modification of Indenture; Waiver
We and the debenture trustee may change an indenture without the consent of any holders with
respect to specific matters, including:
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to fix any ambiguity, defect or inconsistency in the indenture; |
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to comply with the provisions described above under Consolidation, Merger or Sale; |
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to comply with any requirements of the Securities and Exchange Commission in connection
with the qualification of any indenture under the Trust Indenture Act of 1939; |
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to evidence and provide for the acceptance of appointment hereunder by a successor trustee; |
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to provide for uncertificated debt securities and to make all appropriate changes for such purpose; |
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to add to, delete from, or revise the conditions, limitations and restrictions on the
authorized amount, terms or purposes of issuance, authorization and delivery of debt
securities of any series; |
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to provide for the issuance of and establish the form, terms and conditions
of debt securities of any series, to establish the form or certifications required under
an indenture or add to the rights of holders of any series of debt securities; |
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to add to our covenants such new covenants, restrictions, conditions or provisions for
the protection of the holders, to make the occurrence, or the occurrence and the
continuance, of a default in any such additional covenants, restrictions, conditions or
provisions an event of default, or to surrender any of our rights or powers under the
indenture; or |
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to change anything that does not adversely affect the rights of any holder of debt securities of
any series in any material respect. |
In addition, under the indentures, the rights of holders of a series of debt securities may be
changed by us and the debenture trustee with the written consent of the holders of at least a
majority in aggregate principal amount of the outstanding debt securities of each series that is
affected. However, we and the debenture trustee may only make the following changes with the
consent of each holder of any outstanding debt securities affected:
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extending the fixed maturity of the series of debt securities; |
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reducing the principal amount, reducing the rate of or extending the time of payment of
interest, or reducing any premium payable upon the redemption of any debt securities; or |
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reducing the percentage of debt securities, the holders of which are required to consent
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Discharge
Each indenture provides that we can elect to be discharged from our obligations with respect
to one or more series of debt securities, except for obligations to:
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register the transfer or exchange of debt securities of the series; |
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replace stolen, lost or mutilated debt securities of the series; |
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maintain paying agencies; |
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hold monies for payment in trust; |
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recover excess money held by the debenture trustee; |
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compensate and indemnify the debenture trustee; and |
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appoint any successor trustee. |
In order to exercise our rights to be discharged, we must deposit with the debenture trustee
money or government obligations sufficient to pay all the principal of, any premium, if any, and
interest on, the debt securities of the series on the dates payments are due.
Form, Exchange and Transfer
We will issue the debt securities of each series only in fully registered form without coupons
and, unless we otherwise specify in the applicable prospectus supplement, in denominations of
$1,000 and any integral multiple thereof. The indentures provide that we may issue debt securities
of a series in temporary or permanent global form and as book-entry securities that will be
deposited with, or on behalf of, The Depository Trust Company or another depositary named by us and
identified in a prospectus supplement with respect to that series.
At the option of the holder, subject to the terms of the indentures and the limitations
applicable to global securities described in the applicable prospectus supplement, the holder of
the debt securities of any series can exchange the debt securities for other debt securities of the
same series, in any authorized denomination and of like tenor and aggregate principal amount.
Subject to the terms of the indentures and the limitations applicable to global securities set
forth in the applicable prospectus supplement, holders of the debt securities may present the debt
securities for exchange or for registration of transfer, duly endorsed or with the form of transfer
endorsed thereon duly executed if so required by us or the security registrar, at the office of the
security registrar or at the office of any transfer agent designated by us for this purpose. Unless
otherwise provided in the debt securities that the holder presents for transfer or exchange, we
will make no service charge for any registration of transfer or exchange, but we may require
payment of any taxes or other governmental charges.
We will name in the applicable prospectus supplement the security registrar, and any transfer
agent in addition to the security registrar, that we initially designate for any debt securities.
We may at any time designate additional transfer agents or rescind the designation of any transfer
agent or approve a change in the office through which any transfer agent acts, except that we will
be required to maintain a transfer agent in each place of payment for the debt securities of each
series.
If we elect to redeem the debt securities of any series, we will not be required to:
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issue, register the transfer of, or exchange any debt securities of any series being
redeemed in part during a period beginning at the opening of business 15 days before
the day of mailing of a notice of redemption of any debt securities that may be
selected for redemption and ending at the close of business on the day of the mailing;
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register the transfer of or exchange any debt securities so selected for redemption,
in whole or in part, except the unredeemed portion of any debt securities we are
redeeming in part. |
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Information Concerning the Debenture Trustee
The debenture trustee, other than during the occurrence and continuance of an event of default
under an indenture, undertakes to perform only those duties as are specifically set forth in the
applicable indenture. Upon an event of default under an indenture, the debenture trustee must use
the same degree of care as a prudent person would exercise or use under the circumstances in the conduct of his or her own
affairs. Subject to this provision, the debenture trustee is under no obligation to exercise any of
the powers given it by the indentures at the request of any holder of debt securities unless it is
offered reasonable security and indemnity against the costs, expenses and liabilities that it might
incur.
Payment and Paying Agents
Unless we otherwise indicate in the applicable prospectus supplement, we will make payment of
the interest on any debt securities on any interest payment date to the person in whose name the
debt securities, or one or more predecessor securities, are registered at the close of business on
the regular record date for the interest.
We will pay principal of and any premium and interest on the debt securities of a particular
series at the office of the paying agents designated by us, except that, unless we otherwise
indicate in the applicable prospectus supplement, we may make interest payments by check which we
will mail to the holder or by wire transfer to certain holders. Unless we otherwise indicate in a
prospectus supplement, we will designate an office or agency of the debenture trustee in the city
of New York as our sole paying agent for payments with respect to debt securities of each series.
We will name in the applicable prospectus supplement any other paying agents that we initially
designate for the debt securities of a particular series. We will maintain a paying agent in each
place of payment for the debt securities of a particular series.
All money we pay to a paying agent or the debenture trustee for the payment of the principal
of or any premium or interest on any debt securities which remains unclaimed at the end of two
years after such principal, premium or interest has become due and payable will be repaid to us,
and the holder of the debt security thereafter may look only to us for payment thereof.
Governing Law
The indentures and the debt securities will be governed by and construed in accordance with
the laws of the state of New York, except to the extent that the Trust Indenture Act of 1939 is
applicable.
Subordination of Subordinated Debt Securities
The subordinated debt securities will be subordinate and junior in priority of payment to
certain of our other indebtedness to the extent described in a prospectus supplement. The
indentures in the forms initially filed as exhibits to the registration statement of which this
prospectus is a part do not limit the amount of indebtedness which we may incur, including senior
indebtedness or subordinated indebtedness, and do not limit us from issuing any other debt,
including secured debt or unsecured debt.
Warrants
We may issue warrants for the purchase of Class A common stock, preferred stock, depositary
shares and/or debt securities in one or more series, from time to time. We may issue warrants
independently or together with Class A common stock, preferred stock, depositary shares and/or debt
securities, and the warrants may be attached to or separate from those securities.
If we issue warrants, they will be evidenced by warrant certificates issued under one or more
warrant agreements, which are contracts between us and an agent for the holders of the warrants. We
urge you to read the prospectus supplement related to any series of warrants we may offer, as well
as the complete warrant agreement and warrant certificate that contain the terms of the warrants.
If we issue warrants, forms of warrant agreements and warrant certificates relating to warrants for
the purchase of common stock, preferred stock, depositary shares and debt securities will be
incorporated by reference into the registration statement of which this prospectus is a part.
11
USE OF PROCEEDS
We will retain broad discretion over the use of the net proceeds from the sale of our
securities offered hereby. Except as described in any prospectus supplement, we currently
anticipate using the net proceeds from the sale of our securities hereby primarily to fund the
commercial development of Neurodex for PBA, assuming it is approved by the FDA, our ongoing and
future clinical trials and for research and development and general and administrative expenses.
The amounts and timing of the expenditures may vary significantly depending on numerous factors,
such as the progress of our research and development efforts, regulatory approval status of
Neurodex, technological advances and the competitive environment for our products. We may also use
a portion of the net proceeds to acquire or invest in complementary businesses, products and
technologies. Although we have no specific agreements, commitments or understandings with respect
to any acquisition, we evaluate acquisition opportunities and engage in related discussions with
other companies from time to time.
Pending the use of the net proceeds, we intend to invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
PLAN OF DISTRIBUTION
We may sell the securities covered by this prospectus from time to time. Registration of the
securities covered by this prospectus does not mean, however, that those securities will
necessarily be offered or sold.
We may sell the securities separately or together:
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through one or more underwriters or dealers in a public offering and sale by them; |
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directly to investors; or |
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through agents. |
We may sell the securities from time to time:
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in one or more transactions at a fixed price or prices, which may be changed from time to time; |
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at market prices prevailing at the times of sale; |
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at prices related to such prevailing market prices; or |
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at negotiated prices. |
We will describe the method of distribution of the securities and the terms of the offering in
the prospectus supplement.
Any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time
to time.
If underwriters are used in the sale of any securities, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or more transactions
described above. The securities may be either offered to the public through underwriting syndicates
represented by managing underwriters, or directly by underwriters. Generally, the underwriters
obligations to purchase the securities will be subject to conditions precedent and the underwriters
will be obligated to purchase all of the securities if they purchase any of the securities. We may
use underwriters with whom we have a material relationship. We will describe in the prospectus
supplement, naming the underwriter, the nature of any such relationship.
We may authorize underwriters, dealers or agents to solicit offers by certain purchasers to
purchase the securities from us at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on a specified date in
the future. The contracts will be subject only to those conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth any commissions we pay for solicitation of
these contracts.
We may enter into derivative transactions with third parties, or sell securities not covered
by this prospectus to third parties in privately negotiated transactions. If the applicable
prospectus supplement indicates, in connection with those derivatives, the third parties may sell
securities covered by this prospectus and the applicable prospectus supplement, including in short
sale transactions. If so, the third party may use securities pledged by us or borrowed from us or
others to settle those sales or to close out any related open borrowings of stock, and may use
securities received from us in settlement of those derivatives to close out any related open
borrowings of stock. The third party in such sale transactions will be an underwriter and will be
identified in the applicable prospectus supplement or in a post-effective amendment.
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Underwriters, dealers and agents may be entitled to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act, or to contribution with respect
to payments made by the underwriters, dealers or agents, under agreements between us and the
underwriters, dealers and agents.
We may grant underwriters who participate in the distribution of securities an option to
purchase additional securities to cover over-allotments, if any, in connection with the
distribution.
Underwriters, dealers or agents may receive compensation in the form of discounts, concessions
or commissions from us or our purchasers, as their agents, in connection with the sale of
securities. These underwriters, dealers or agents may be considered to be underwriters under the
1933 Act. As a result, discounts, commissions or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and commissions. The
prospectus supplement will identify any such underwriter, dealer or agent and describe any
compensation received by them from us. Any initial public offering price and any discounts or
concessions allowed or re-allowed or paid to dealers may be changed from time to time.
Unless otherwise specified in the related prospectus supplement, all securities we offer,
other than common stock, will be new issues of securities with no established trading market. Any
underwriters may make a market in these securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Any common stock sold pursuant to a
prospectus supplement will be included in The American Stock Exchange. We may apply to list any
series of debt securities, preferred stock, depositary shares or warrants on an exchange, but we
are not obligated to do so. Therefore, there may not be liquidity or a trading market for any
series of securities.
Any underwriter may engage in over-allotment transactions, stabilizing transactions,
short-covering transactions and penalty bids in accordance with Regulation M under the Exchange
Act. Over-allotment involves sales in excess of the offering size, which create a short position.
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum. Short covering transactions involve purchases of the
securities in the open market after the distribution is completed to cover short positions. Penalty
bids permit the underwriters to reclaim a selling concession from a dealer when the securities
originally sold by the dealer are purchased in a covering transaction to cover short positions.
Those activities may cause the price of the securities to be higher than it would otherwise be. If
commenced, the underwriters may discontinue any of the activities at any time. We make no
representation or prediction as to the direction or magnitude of any effect that such transactions
may have on the price of the securities. For a description of these activities, see the information
under the heading Underwriting in the applicable prospectus supplement.
Underwriters, broker-dealers or agents who may become involved in the sale of the common stock
may engage in transactions with and perform other services for us in the ordinary course of their
business for which they receive compensation.
LEGAL MATTERS
The
legality of the issuance of the securities being offered hereby and
the binding nature of any Debt Securities being offered hereby will be passed
upon by Heller Ehrman LLP, San Diego, California.
EXPERTS
The consolidated financial statements incorporated in this prospectus by reference from Avanir
Pharmaceuticals Annual Report on Form 10-K have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their report, which is incorporated
herein by reference, and has been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods ended December 31,
2004 and 2003 and March 31, 2005 and 2004, which are incorporated herein by reference, Deloitte &
Touche LLP, an independent registered public accounting firm, have applied limited procedures in
accordance with the standards of the Public Company Accounting Oversight Board (United States) for
a review of such information. However, as stated in their reports included in the Companys
Quarterly Reports on Form 10-Q for the quarters ended December 31, 2004 and March 31, 2005 and
incorporated by reference herein, they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their reports on such
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information should be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11 of the Securities
Act of 1933 for their reports on the unaudited interim financial information because those reports
are not reports or a part of the registration statement prepared or certified by an accountant
within the meaning of Sections 7 and 11 of the 1933 Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference into this prospectus the information contained
in other documents we file with the SEC, which means that we can disclose important information to
you by referring you to those documents. Any statement contained in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or superseded, for
purposes of this prospectus, to the extent that a statement contained in or omitted from this
prospectus, or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded, to constitute a
part of this prospectus. We incorporate by reference the documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act until the offering is completed:
1. Our Annual Report on Form 10-K for the year ended September 30, 2004;
2. Our Definitive Proxy Statement on Schedule 14A, filed January 28, 2005;
3. Our Quarterly Reports on Form 10-Q for the quarters ended December 31, 2004 and March 31, 2005;
4. Our Current Reports on Form 8-K filed with the SEC on December 13, 2004, December 21, 2004, January 19, 2005, March 14, 2005, March 23, 2005, April 6, 2005, May 3, 2005, May 16, 2005 and July 12, 2005; and
5. The description of our Class A common stock contained in our registration statement on Form 8-A
(File No. 001-15803) filed on April 5, 2000, and as amended April 13, 2000.
All other documents we file with the Securities and Exchange Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference into this prospectus
and to be a part hereof from the date of filing of such documents. Any statement contained in any
document incorporated or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as modified or superseded, to constitute a part of this
prospectus.
Upon written or oral request, we will provide without charge to each person to whom a copy of
the prospectus is delivered a copy of the documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated by reference herein).
You may request a copy of these filings, at no cost, by writing or telephoning us at the following
address: Avanir Pharmaceuticals, 11388 Sorrento Valley Road, San Diego, California 92121,
Attention: Chief Financial Officer, telephone: (858) 622-5200. We have authorized no one to provide
you with any information that differs from that contained in this prospectus. Accordingly, you
should not rely on any information that is not contained in this prospectus. You should not assume
that the information in this prospectus is accurate as of any date other than the date of the front
cover of this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the 1934 Act and in accordance therewith
file reports, proxy statements and other information with the Securities and Exchange Commission.
Our filings are available to the public over the Internet at the Securities and Exchange
Commissions website at www.sec.gov, as well as at our website at www.avanir.com. You may also read
and copy, at prescribed rates, any document we file with the Securities and Exchange Commission at
the Public Reference Room of the Securities and Exchange Commission located at 450 Fifth Street,
N.W., Suite 1024, Washington, D.C. 20549. Please call the Securities and Exchange Commission at
(800) SEC-0330 for further information on the Securities and Exchange Commissions Public Reference
Rooms.
INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our Amended and Restated Articles of Incorporation eliminate the
personal liability of directors to the fullest extent permitted by
the California Corporations Code. Additionally, our bylaws provide
that we shall fully indemnify any person who was or is a party, or is
threatened to be made a party, to any action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason
of the fact that he or she is or was our director or officer, or is
or was serving at our request as a director or officer of another
corporation, partnership joint venture, trust, employee benefit plan
or other enterprise. Our bylaws authorize the board of directors to
provide these same indemnification rights to other agents of the
corporation. We have also obtained liability insurance for our
officers and directors and have entered into indemnification
agreements with our directors and certain officers.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers or persons
controlling us pursuant to the foregoing provisions, we have been
informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
* * *
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The information in this preliminary 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
preliminary prospectus is not an offer to sell these securities, and we are not
soliciting offers to buy these securities, in any state where the offer or sale
is not permitted.
SUBJECT
TO COMPLETION, DATED FEBRUARY 8, 2008
PROSPECTUS
$25,000,000
AVANIR Pharmaceuticals
Common Stock
Preferred Stock
Depositary Shares
Debt Securities
Warrants
We may offer and sell an indeterminate number of shares of our common stock, preferred
stock, depositary shares, debt securities and warrants from time to time under this prospectus. We
may offer these securities separately or as units, which may include combinations of the
securities. We will describe in a prospectus supplement the securities we are offering and
selling, as well as the specific terms of the securities.
We may offer these securities in amounts, at prices and on terms determined at the time of
offering. We may sell the securities directly to you, through agents we select, or through
underwriters and dealers we select. If we use agents, underwriters or dealers to sell the
securities, we will name them and describe their compensation in a prospectus supplement.
Our
common stock trades on the NASDAQ Global Market under the symbol AVNR. On February 7,
2008, the closing price for our common stock, as reported on the
NASDAQ Global Market, was $1.14 per
share.
Investing in our securities involves certain risks. See Risk Factors beginning on Page 3 of
this prospectus and in the applicable prospectus supplement for certain risks you should consider.
You should read the entire prospectus carefully before you make your investment decision.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
TABLE OF CONTENTS
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i
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the Securities and
Exchange Commission utilizing a shelf registration process. Under the shelf registration process,
we may offer shares of our common stock, preferred stock, depositary shares, various series of
debt securities and warrants to purchase any of such securities with a total value of up to
$25,000,000 from time to time under this prospectus at prices and on terms to be determined by
market conditions at the time of offering. This prospectus provides you with a general description
of the securities we may offer. Each time we offer a type or series of securities, we will provide
a prospectus supplement that will describe the specific amounts, prices and other important terms
of the securities, including, to the extent applicable:
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designation or classification; |
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aggregate principal amount or aggregate offering price; |
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maturity; |
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original issue discount, if any; |
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rates and times of payment of interest, dividends or other payments, if any; |
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redemption, conversion, exchange, settlement or sinking fund terms, if any; |
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conversion, exchange or settlement prices or rates, if any, and, if applicable, any
provisions for changes to or adjustments in the conversion, exchange or settlement
prices or rates and in the securities or other property receivable upon conversion,
exchange or settlement; |
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ranking; |
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restrictive covenants, if any; |
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voting or other rights, if any; and |
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important federal income tax considerations. |
A prospectus supplement may include a discussion of risks or other special considerations
applicable to us or the offered securities. A prospectus supplement may also add, update or change
information in this prospectus. If there is any inconsistency between the information in this
prospectus and the applicable prospectus supplement, you must rely on the information in the
prospectus supplement. Please carefully read both this prospectus and the applicable prospectus
supplement together with additional information described under the heading Where You Can Find
More Information. This prospectus may not be used to offer or sell any securities unless
accompanied by a prospectus supplement.
The registration statement containing this prospectus, including exhibits to the registration
statement, provides additional information about us and the common stock offered under this
prospectus. The registration statement can be read at the SEC website or at the SECs public
reading room mentioned under the heading Where You Can Find More Information.
We have not authorized any underwriter, broker-dealer, salesperson or other person to give any information
or to make any representation other than those contained or incorporated by reference in this
prospectus and the accompanying supplement to this prospectus. You must not rely upon any
information or representation not contained or incorporated by reference in this prospectus or the
accompanying prospectus supplement. This prospectus and the accompanying supplement to this
prospectus do not constitute an offer to sell or the solicitation of an offer to buy securities,
nor do this prospectus and the accompanying supplement to this prospectus constitute an offer to
sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it
is unlawful to make such offer or solicitation. The information contained in this prospectus and
the accompanying prospectus supplement speaks only as of the date set forth on the cover page and
may not reflect subsequent changes in our business, financial condition, results of operations and
prospects even though this prospectus and any accompanying prospectus supplement is delivered or
securities are sold on a later date.
We may sell the securities directly to or through underwriters, dealers or agents. We, and our
underwriters or agents, reserve the right to accept or reject all or part of any proposed purchase
of securities. If we do offer securities through underwriters or agents, we will include in the
applicable prospectus supplement:
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the names of those underwriters or agents; |
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applicable fees, discounts and commissions to be paid to them; |
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details regarding over-allotment options, if any; and |
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the net proceeds to us. |
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Common Stock. We may issue shares of our Class A common stock (hereinafter referred to as
common stock) from time to time. Holders of our common stock are entitled to one vote per share
for the election of directors and on all other matters that require shareholder approval. Subject
to any preferential rights of any outstanding preferred stock, in the event of our liquidation,
dissolution or winding up, holders of our common stock are entitled to share ratably in the assets
remaining after payment of liabilities and the liquidation preferences of any outstanding preferred
stock. Our common stock does not carry any redemption rights or any preemptive rights enabling a
holder to subscribe for, or receive shares of, any class of our common stock or any other
securities convertible into shares of any class of our common stock.
Preferred Stock. We may issue shares of our preferred stock from time to time, in one or more
series. Under our certificate of incorporation, our board of directors has the authority, without
further action by shareholders, to designate up to 10,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges, qualifications and restrictions granted
to or imposed upon the preferred stock, including dividend rights, conversion rights, voting
rights, rights and terms of redemption, liquidation preference and sinking fund terms, any or all
of which may be greater than the rights of the common stock.
If we issue preferred stock, we will fix the rights, preferences, privileges, qualifications
and restrictions of the preferred stock of each series that we sell under this prospectus and
applicable prospectus supplements in the certificate of designation relating to that series. If we
issue preferred stock, we will incorporate by reference into the registration statement of which
this prospectus is a part the form of any certificate of designation that describes the terms of
the series of preferred stock we are offering before the issuance of the related series of
preferred stock. We urge you to read the prospectus supplement related to any series of preferred
stock we may offer, as well as the complete certificate of designation that contains the terms of
the applicable series of preferred stock.
Depositary Shares. We may elect to offer fractional shares of preferred stock rather than full
shares of preferred stock and, in that event, will issue receipts for depositary shares. Each of
these depositary shares will represent a fraction, which will be set forth in the applicable
prospectus supplement, of a share of the applicable series of preferred stock.
Any depositary shares that we sell under this prospectus will be evidenced by depositary
receipts issued under a deposit agreement between us and a depositary with whom we deposit the
shares of the applicable series of preferred stock that underlie the depositary shares that are
sold. If we issue depositary shares, a form of deposit agreement, including a form of depositary
receipt, will be incorporated by reference into the registration statement of which this prospectus
is a part from reports we would subsequently file with the Securities and Exchange Commission. We
urge you to read the prospectus supplement related to any depositary shares we may offer, as well
as the complete deposit agreement and depositary receipt.
Debt Securities. We may issue debt securities from time to time, in one or more series, as
either senior or subordinated debt or as senior or subordinated convertible debt. The senior debt
securities will rank equally with any other unsubordinated debt that we may have and may be secured or unsecured. The subordinated debt
securities will be subordinate and junior in right of payment, to the extent and in the manner
described in the instrument governing the debt, to all or some portion of our indebtedness. Any
convertible debt securities that we issue will be convertible into or exchangeable for our common
stock or other securities of ours. Conversion may be mandatory or at your option and would be at
prescribed conversion rates.
If we issue debt securities, they will be issued under one or more documents called
indentures, which are contracts between us and a trustee for the holders of the debt securities. We
urge you to read the prospectus supplement related to the series of debt securities being offered,
as well as the complete indenture that contains the terms of the debt securities (which will
include a supplemental indenture). If we issue debt securities, indentures and forms of debt
securities containing the terms of debt securities being offered will be incorporated by reference
into the registration statement of which this prospectus is a part from reports we would
subsequently file with the Securities and Exchange Commission.
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Warrants. We may issue warrants for the purchase of Class A common stock, preferred stock,
depositary shares and/or debt securities in one or more series, from time to time. We may issue
warrants independently or together with Class A common stock, preferred stock, depositary shares
and/or debt securities, and the warrants may be attached to or separate from those securities.
If we issue warrants, they will be evidenced by warrant agreements or warrant certificates
issued under one or more warrant agreements, which are contracts between us and an agent for the
holders of the warrants. We urge you to read the prospectus supplement related to any series of
warrants we may offer, as well as the complete warrant agreement and warrant certificate that
contain the terms of the warrants. If we issue warrants, forms of warrant agreements and warrant
certificates relating to warrants for the purchase of common stock, preferred stock, depositary
shares and debt securities will be incorporated by reference into the registration statement of
which this prospectus is a part from reports we would subsequently file with the Securities and
Exchange Commission.
ABOUT AVANIR PHARMACEUTICALS
Avanir Pharmaceuticals is a pharmaceutical company focused on developing, acquiring and
commercializing novel therapeutic products for the treatment of chronic diseases. Our current product
candidates address therapeutic markets that include the central nervous system, inflammatory
diseases and infectious diseases. Our lead product candidate, ZenviaTM
(dextromethorphan hydrobromide/quinidine sulfate), is currently in Phase III clinical development
for the treatment of pseudobulbar affect (PBA) and diabetic peripheral neuropathic pain (DPN
pain). Our first commercialized product, docosanol 10% cream, (sold as Abreva® by our marketing
partner GlaxoSmithKline Consumer Healthcare in North America) is the only over-the-counter
treatment for cold sores that has been approved by the FDA. Our inflammatory disease program, which targets
macrophage migration inhibitory factor (MIF), is currently partnered with Novartis and our
current infectious disease program, which is focused on anthrax antibodies, has been funded to date by
grants from the National Institute of Health/National Institute of Allergy and Infectious Disease
(NIH/NIAID).
For additional information about our company, please refer to other documents we have filed
with the SEC and that are incorporated by reference into this prospectus, as listed under the
heading Incorporation of Certain Information by Reference.
Our offices are located at 101 Enterprise, Suite 300, Aliso Viejo, California 92656. Our
telephone number is (949) 389-6700 and our e-mail address is info@avanir.com. Additional
information about Avanir can be found on our website, at www.avanir.com, and in our periodic and
current reports filed with the Securities and Exchange Commission (SEC). Copies of our current
and periodic reports filed with the SEC are available at the SEC Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549, and online at www.sec.gov and our website at www.avanir.com.
No portion of our website is incorporated by reference into this prospectus.
RISK FACTORS
Before making an investment decision, you should carefully consider the risks described under
Risk Factors in the applicable prospectus supplement, together with all of the other information
appearing in this prospectus or incorporated by reference into this prospectus and any applicable
prospectus supplement, in light of your particular investment objectives and financial
circumstances. Our business, financial condition or results of operations could be materially
adversely affected by any of these risks. The trading price of our securities could decline due to
any of these risks, and you may lose all or part of your investment. This prospectus and the
incorporated documents also contain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including the risks mentioned above.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking statements and readers
are cautioned that our actual results may differ materially from those discussed in the
forward-looking statements. These forward-looking statements include, without limitation,
statements regarding the progress and timing of clinical trials, the safety and efficacy of our
product candidates, the goals of our development activities, estimates of the potential markets for
our product candidates, projected cash needs and our expected future revenues, operations and
expenditures. These statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that could cause our actual
results, levels of activity, performance or achievement to differ materially from those expressed
or implied by these forward-looking statements. These risks and uncertainties include, among
others:
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risks relating to the uncertainty around the conduct of clinical trials generally
and, more specifically, around our ongoing and future clinical trials for Zenvia for both
PBA/IEED and DPN pain; |
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risks of delay in meeting our development plans, including delays in patient
enrollment in our clinical trials; |
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risks relating to our lack of profitability, our significant historical operating
losses and our ability to obtain additional funding to continue to operate our business,
which funding may not be available on commercially reasonable terms, or at all; |
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risks relating to our patent portfolio and the patent portfolios of competitors; |
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risks relating to turnover in senior management and our reliance on key employees; |
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risks around our reliance on third parties to conduct our clinical trials and
manufacture our product candidates; and |
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competitive risks in our industry. |
In evaluating our business, prospective investors should carefully consider these factors in
addition to the other information set forth in this prospectus and incorporated herein by
reference, including under the caption, Risk Factors. All forward-looking statements included in
this document are based on information available to us on the date hereof, and all forward-looking
statements in documents incorporated by reference are based on information available to us as of
the date of such documents. We disclaim any intent to update any
forward-looking statements.
DESCRIPTION OF SECURITIES
We may offer shares of our common stock, preferred stock, depositary shares, various series
of debt securities and warrants to purchase any such securities with a total value of up to
$25,000,000 from time to time under this prospectus at prices and on terms to be determined by
market conditions at the time of offering. Each time we offer a type or series of securities, we
will provide a prospectus supplement that will describe the specific amounts, prices and other
important terms of the securities.
USE OF PROCEEDS
We will retain broad discretion over the use of the net proceeds from the sale of our
securities offered hereby. Except as described in any prospectus supplement, we currently
anticipate using the net proceeds from the sale of our securities hereby primarily to fund the
further development of Zenvia for PBA and DPN pain, for our ongoing and future clinical trials and
for general and administrative expenses. We may also use a portion of the net proceeds to pay off
outstanding indebtedness and/or acquire or invest in complementary businesses, products and
technologies. Although we have no specific agreements, commitments or understandings with respect
to any acquisition, we evaluate acquisition opportunities and engage in related discussions with
other companies from time to time.
Pending the use of the net proceeds, we intend to invest the net proceeds in short-term,
interest-bearing, investment-grade securities.
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RATIO OF EARNINGS TO FIXED CHARGES
If we offer debt securities and/or preference equity securities under this prospectus, then we
will, at that time, provide a ratio of earnings to fixed charges and/or ratio of combined fixed
charges and preference dividends to earnings, respectively, in the applicable prospectus supplement
for such offering.
PLAN OF DISTRIBUTION
We may sell the securities covered by this prospectus from time to time. Registration of the
securities covered by this prospectus does not mean, however, that those securities will
necessarily be offered or sold.
We may sell the securities separately or together:
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through one or more underwriters or dealers in a public offering and sale by them; |
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directly to investors; or |
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through agents. |
We may sell the securities from time to time:
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in one or more transactions at a fixed price or prices, which may be changed from
time to time; |
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at market prices prevailing at the times of sale; |
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at prices related to such prevailing market prices; or |
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at negotiated prices. |
We will describe the method of distribution of the securities and the terms of the offering in
the prospectus supplement.
Any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time
to time.
If underwriters are used in the sale of any securities, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or more transactions
described above. The securities may be either offered to the public through underwriting syndicates
represented by managing underwriters, or directly by underwriters. Generally, the underwriters
obligations to purchase the securities will be subject to conditions precedent and the underwriters
will be obligated to purchase all of the securities if they purchase any of the securities. We may
use underwriters with whom we have a material relationship. We will describe in the prospectus
supplement, naming the underwriter, the nature of any such relationship.
We may authorize underwriters, dealers or agents to solicit offers by certain purchasers to
purchase the securities from us at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on a specified date in
the future. The contracts will be subject only to those conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth any commissions we pay for solicitation of
these contracts.
We may enter into derivative transactions with third parties, or sell securities not covered
by this prospectus to third parties in privately negotiated transactions. If the applicable
prospectus supplement indicates, in connection with those derivatives, the third parties may sell
securities covered by this prospectus and the applicable prospectus supplement, including in short
sale transactions. If so, the third party may use securities pledged by us or borrowed from us or
others to settle those sales or to close out any related open borrowings of stock, and may use
securities received from us in settlement of those derivatives to close out any related open
borrowings of stock. The third party in such sale transactions will be an underwriter and will be
identified in the applicable prospectus supplement or in a post-effective amendment.
Underwriters, dealers and agents may be entitled to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act, or to contribution with respect
to payments made by the underwriters, dealers or agents, under agreements between us and the
underwriters, dealers and agents.
We may grant underwriters who participate in the distribution of securities an option to
purchase additional securities to cover over-allotments, if any, in connection with the
distribution.
Underwriters, dealers or agents may receive compensation in the form of discounts, concessions
or commissions from us or our purchasers, as their agents in connection with the sale of
securities. These underwriters, dealers or agents may be considered to be underwriters under the
Securities Act of 1933. As a result, discounts, commissions or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and
commissions. The prospectus supplement will identify any such underwriter, dealer or agent and
describe any compensation received by them from us. Any initial public offering price and any
discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time.
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Unless otherwise specified in the related prospectus supplement, all securities we offer,
other than common stock, will be new issues of securities with no established trading market. Any
underwriters may make a market in these securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Any common stock sold pursuant to a
prospectus supplement will be listed for trading on the NASDAQ Stock Market or other principal
market for our common stock. We may apply to list any series of debt securities, preferred stock,
depositary shares or warrants on an exchange, but we are not obligated to do so. Therefore, there
may not be liquidity or a trading market for any series of securities.
Any underwriter may engage in over-allotment transactions, stabilizing transactions,
short-covering transactions and penalty bids in accordance with Regulation M under the Exchange
Act. Over-allotment involves sales in excess of the offering size, which create a short position.
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum. Short covering transactions involve purchases of the
securities in the open market after the distribution is completed to cover short positions. Penalty
bids permit the underwriters to reclaim a selling concession from a dealer when the securities
originally sold by the dealer are purchased in a covering transaction to cover short positions.
Those activities may cause the price of the securities to be higher than it would otherwise be. If
commenced, the underwriters may discontinue any of the activities at any time. We make no
representation or prediction as to the direction or magnitude of any effect that such transactions
may have on the price of the securities. For a description of these activities, see the information
under the heading Underwriting or Plan of Distribution in the applicable prospectus supplement.
Underwriters, broker-dealers or agents who may become involved in the sale of the common stock
may engage in transactions with and perform other services for us in the ordinary course of their
business for which they receive compensation.
LEGAL MATTERS
The legality of the issuance of the securities being offered hereby and the binding nature of
any debt securities being offered hereby is being passed upon by Goodwin Procter LLP, San Diego,
California.
EXPERTS
The consolidated financial statements for the year ended September 30, 2007 incorporated in
this prospectus by reference from Avanir Pharmaceuticals Annual Report on Form 10-K for the year
ended September 30, 2007 have been audited by KMJ Corbin &
Company LLP, an independent registered
public accounting firm, as stated in their report, which is incorporated herein by reference, and
has been so incorporated in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The consolidated financial statements for each of the two years in the period ended September
30, 2006 (before the effects of the retrospective adjustments to the financial statements)
incorporated in this prospectus by reference from Avanir Pharmaceuticals Annual Report on Form
10-K for the year ended September 30, 2007 have been audited by Deloitte & Touche LLP, independent
registered public accounting firm, as stated in their report (which report expresses an unqualified
opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial
Accounting Standards No. 123(R), Share-based Payment, and the change in the method of accounting
for certain patent related costs, effective October 1, 2005), which is incorporated herein by
reference, and has been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference into this prospectus the information contained
in other documents we file with the SEC, which means that we can disclose important information to
you by referring you to those documents. Any statement contained in any document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or superseded, for
purposes of this prospectus, to the extent that a statement contained in or omitted from this
prospectus, or in any other subsequently filed document that also is or is deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded, to constitute a
part of this prospectus. We incorporate by reference the documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the
offering is completed:
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1. Our Annual Report on Form 10-K for the year ended September 30, 2007;
2. Our Definitive Proxy Statement on Schedule 14A filed with the SEC on January
4, 2008;
3. Our Current Reports on Form 8-K filed with the SEC on October 9, 2007,
November 13, 2007, November 21, 2007, as amended, December 10, 2007, December
27, 2007 and February 4, 2008; and
4. The description of our Class A common stock contained in our registration
statement on Form 8-A (File No. 001-15803) filed with the SEC on April 5, 2000,
and as amended April 13, 2000.
Upon written or oral request, we will provide without charge to each person to whom a copy of
the prospectus is delivered a copy of the documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated by reference herein).
You may request a copy of these filings, at no cost, by writing or telephoning us at the following
address: Avanir Pharmaceuticals, 101 Enterprise, Suite 300, Aliso Viejo, California 92656,
Attention: Investor Relations, telephone: (949) 389-6700. We have authorized no one to provide you
with any information that differs from that contained in this prospectus. Accordingly, you should
not rely on any information that is not contained in this prospectus. You should not assume that
the information in this prospectus is accurate as of any date other than the date of the front
cover of this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the 1934 Act and in accordance therewith
file reports, proxy statements and other information with the Securities and Exchange Commission.
Our filings are available to the public over the Internet at the Securities and Exchange
Commissions website at www.sec.gov, as well as at our website at www.avanir.com. You may also read
and copy, at prescribed rates, any document we file with the Securities and Exchange Commission at
the Public Reference Room of the Securities and Exchange Commission located at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the Securities and Exchange Commission at (800) SEC-0330 for
further information on the Securities and Exchange Commissions Public Reference Rooms.
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