FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-119376
AND NO. 333-126494
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS IS NOT AN OFFER TO SELL SECURITIES, AND WE ARE NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 11, 2005
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 13, 2004)
5,000,000 SHARES
KERYX LOGO
COMMON STOCK
This is a public offering of 5,000,000 shares of common stock of Keryx
Biopharmaceuticals, Inc.
Our common stock is traded on the Nasdaq National Market under the symbol KERX.
On July 7, 2005, the last reported sale price for our common stock on the Nasdaq
National Market was $13.50.
-----------------------------------------------------------------------------------------
PER SHARE TOTAL
-----------------------------------------------------------------------------------------
Public offering price $ $
Underwriting discounts and commissions $ $
Proceeds to Keryx Biopharmaceuticals, Inc., before expenses $ $
-----------------------------------------------------------------------------------------
Keryx Biopharmaceuticals, Inc. has granted the underwriters an option for a
period of 30 days to purchase up to 780,000 additional shares of common stock to
cover any overallotments.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE S-8 OF THIS PROSPECTUS SUPPLEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
JPMORGAN BEAR, STEARNS & CO. INC.
Sole Book-Running Manager
JEFFERIES & COMPANY, INC.
OPPENHEIMER & CO.
BREAN MURRAY & CO., INC.
PUNK, ZIEGEL & COMPANY
July , 2005
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE RELATED PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING
AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THE APPLICABLE DOCUMENT OR THAT ANY INFORMATION WE HAVE
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THE DOCUMENT
INCORPORATED BY REFERENCE. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THOSE DATES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO PERMIT
A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN THAT JURISDICTION.
PERSONS WHO COME INTO POSSESSION OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED
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AND THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS APPLICABLE TO THAT JURISDICTION.
------------------------
TABLES OF CONTENTS
PROSPECTUS SUPPLEMENT
PROSPECTUS
PAGE
Summary..................... S-1
Risk factors................ S-8
Incorporation of certain
information by reference.. S-21
Special cautionary notice
regarding forward-looking
statements................ S-22
Use of proceeds............. S-23
Price range of common
stock..................... S-24
Capitalization.............. S-25
Underwriting................ S-26
Legal matters............... S-29
Experts..................... S-29
PAGE
Keryx Biopharmaceuticals,
Inc. ..................... 1
The offering................ 3
Where you can find more
information............... 3
Risk factors................ 4
Important information about
this prospectus........... 14
Incorporation of certain
information by reference.. 14
Forward looking statements.. 16
Use of proceeds............. 17
Description of common
stock..................... 17
Plan of distribution........ 19
Legal matters............... 20
Experts..................... 20
i
SUMMARY
This summary highlights information contained elsewhere or incorporated by
reference in this prospectus supplement and the accompanying prospectus. This
summary does not contain all of the information that you should consider before
deciding to invest in our common stock. You should read this entire prospectus
supplement and the accompanying prospectus carefully, including the "Risk
factors" section contained in this prospectus supplement and our consolidated
financial statements and the related notes and the other documents that we have
filed with the Securities and Exchange Commission and incorporated by reference
in this prospectus supplement or the accompanying prospectus before making an
investment decision.
KERYX BIOPHARMACEUTICALS, INC.
We are a biopharmaceutical company focused on the acquisition, development and
commercialization of novel pharmaceutical products for the treatment of
life-threatening diseases, including diabetes and cancer. Our lead compound
under development is KRX-101 (sulodexide), a first-in-class, oral heparinoid
compound for the treatment of diabetic nephropathy, a life-threatening kidney
disease caused by diabetes. KRX-101 is in a pivotal Phase III and Phase IV
clinical program under a Special Protocol Assessment, or SPA, with the Food &
Drug Administration, or FDA. Additionally, we are developing clinical-stage
oncology compounds, including KRX-0401, a novel, first-in-class, oral modulator
of Akt, a pathway associated with tumor survival and growth, and other important
signal transduction pathways. KRX-0401 is currently in Phase II clinical
development for multiple tumor types. We also have an active in-licensing and
acquisition program designed to identify and acquire additional drug candidates.
KRX-101 (SULODEXIDE): OUR APPROACH TO THE TREATMENT OF DIABETIC NEPHROPATHY
We are currently conducting pivotal Phase III and Phase IV clinical trials of
KRX-101 for the treatment of diabetic nephropathy under a SPA with the FDA. The
SPA defines clinical endpoints that will potentially support accelerated FDA
approval for KRX-101. Diabetic nephropathy is a long-term complication of
diabetes in which the kidneys are progressively damaged. One of the key markers
of diabetic nephropathy is proteinuria or albuminuria, which is the presence of
albumin, a protein commonly found in the serum or blood, in the urine. As kidney
damage progresses, the degree of albuminuria increases, possibly leading to
further kidney damage which could then result in end-stage renal disease, or
ESRD, requiring dialysis.
There are currently two classes of compounds that are used to treat diabetic
nephropathy: angiotensin converting enzyme, or ACE, inhibitors and angiotensin
receptor blockers, or ARBs. While both ACE inhibitors and ARBs have been helpful
in treating diabetic nephropathy, a significant share of patients continue to
have progressive diabetic kidney disease. Moreover, some patients experience
adverse drug reactions with these medications, such as a persistent cough with
ACE inhibitors and life-threatening hyperkalemia, when ACE inhibitors and ARBs
are combined. We believe that a significant unmet medical need exists for an
agent that can effectively reduce the level of albuminuria and ultimately slow
or halt the progression of diabetic kidney disease in patients that are
currently receiving maximum doses of ARBs or ACE inhibitors.
Our lead compound under development is KRX-101, a glycosaminoglycan with
structural similarities to the broad family of marketed heparins, including both
slow-moving and low-molecular weight heparins. Specifically, KRX-101 is
primarily comprised of heparan sulfate, also referred to as fast-moving heparin,
dermatan sulfate and slow-moving heparin.
S-1
KRX-101 is believed to work via one or more mechanisms of action that have the
potential to be complementary to existing treatments for diabetic nephropathy.
It has undergone testing in this indication in multiple clinical trials
conducted in Europe, including a randomized 223 patient, double-blind,
placebo-controlled Phase II study, known as the DiNAS study. In this study, Type
I and Type II diabetic nephropathy patients were treated daily for four months
with 50, 100 and 200 milligram gelcaps of KRX-101. These patients showed
substantial dose-dependent reduction in proteinuria or pathological urinary
albumin excretion rates. In this study, the higher the dose administered daily,
the greater the demonstrated decrease in albumin excretion. The DiNAS study was
published in the June 2002 issue of the Journal of the American Society of
Nephrology.
KRX-101 has an established safety profile with no known dose limiting
toxicities, at doses similar to those we are using in our current clinical
trials. Moreover, it has been evaluated in over 20 clinical trials encompassing
approximately 3,000 patients and has been marketed by our licensor for more than
20 years in a number of European, Asian and South American countries for certain
cardiovascular conditions. We own the exclusive rights to use KRX-101 for the
treatment of diabetic nephropathy in North America, Japan and certain other
markets. Upon approval from the FDA, we anticipate building our own sales and
marketing franchise targeting specialist physicians, including endocrinologists,
nephrologists and diabetologists.
Currently, the use of KRX-101 to treat diabetic nephropathy is covered by an
issued U.S. patent which expires in 2014 and a pending U.S. patent application
which, if allowed, will expire in 2022. Based on the provisions of the Patent
Term Extension Act, we currently believe that we would qualify for patent term
extension of at least three years, thereby extending our patent exclusivity, for
the issued U.S. patent to at least 2017. We, therefore, believe that we will
have sufficient time to commercially utilize the inventions directed to the
treatment of diabetic nephropathy.
In May 2005, we announced positive interim results from the Phase II clinical
study for KRX-101, presented at the National Kidney Foundation's Spring Clinical
Meeting. The Phase II study, which is currently on-going, compares two oral
doses of KRX-101, 200 and 400 milligrams, versus a placebo in patients with
diabetic microalbuminuria who are receiving an ACE inhibitor or ARBs. In this
study, patients are treated with KRX-101 or a placebo for six months and
followed for an additional two months post-treatment. The primary endpoint for
the study is "therapeutic success" of the two dose levels combined versus a
placebo at six months. Therapeutic success is a binary composite endpoint
defined as: conversion from microalbuminuria to normoalbuminuria (with at least
a 25% reduction in microalbuminuria) as measured by the albumin/creatinine
ratio, or ACR; or at least a 50% reduction in the ACR level relative to
baseline.
Patients were randomized 1:1:1, placebo, 200 milligrams and 400 milligrams of
KRX-101, respectively. Of the 149 patients randomized, 120 were considered
evaluable for this interim analysis of the primary efficacy outcome at six
months. Other data presented related to secondary endpoints of the study,
including KRX-101 versus placebo analysis of the individual endpoints comprising
therapeutic success--return to normal and 50% reduction from baseline. The data
presented confirmed the activity of KRX-101 as a potentially effective treatment
for diabetic nephropathy in patients who are on maximum approved or tolerated
doses of ACE
S-2
inhibitors or ARBs. See the table below for the results from the interim
efficacy analysis. We anticipate presenting the full data analysis of this Phase
II study at a scientific conference in November 2005.
Interim Efficacy Analysis for KRX-101 vs. Placebo(1)
---------------------------------------------------------------------
KRX-101 (200mg and KRX-101 (200mg) Placebo
400mg) n=82 n=38 n=38
---------------------------------------------------------------------
Therapeutic Success 24% 29% 13%
>50% reduction 21% 24% 11%
Normalization 13% 16% 8%
---------------------------------------------------------------------
(1) Patients were considered evaluable only if the patient had both baseline and
6-month data available at the date of the data cut-off. One patient in the
placebo arm was censored pending re-evaluation of that patient's baseline value.
If that patient were included, the therapeutic success, 50% reduction and
normalization percentages of the placebo group would be 15%, 13% and 7%,
respectively.
The Collaborative Study Group, or the CSG, the world's largest standing renal
clinical trial group comprised of academic and tertiary nephrology care centers,
is completing the Phase II trial and is conducting the pivotal Phase III and
Phase IV clinical program of KRX-101 for the treatment of diabetic nephropathy.
The CSG has conducted multiple large-scale clinical trials resulting in over 40
publications in peer-reviewed journals. In addition, the CSG conducted the
pivotal studies for two of the three drugs, including an ACE inhibitor and an
ARB, that are currently approved for the treatment of diabetic nephropathy.
On June 29, 2005, we announced the initiation of our pivotal Phase III and Phase
IV clinical program for KRX-101. We are conducting both of these trials under
our SPA with the FDA. This clinical plan consists of: a single Phase III trial
in patients with microalbuminuria based on the surrogate marker of regression of
microalbuminuria as the primary endpoint; supportive data from previously
conducted clinical studies; and substantial recruitment into our Phase IV
confirmatory study that will measure clinical outcomes in patients with overt
nephropathy, or macroalbuminuria. This Phase IV study is required to enable a
comparison of the clinical events experienced by patients taking KRX-101 to
historical results of earlier trials of other drugs.
The Phase III portion of the program is a randomized, double-blind,
placebo-controlled study comparing a 200 milligram daily dose of KRX-101 versus
a placebo in patients with persistent microalbuminuria. The Phase III study is
designed to enroll approximately 1,000 patients with Type II diabetes and is
expected to take approximately 12 to 18 months to complete enrollment. The Phase
IV portion of the program is a randomized, double-blind, placebo-controlled
study comparing a 200 milligram daily dose of KRX-101 versus a placebo in
patients with persistent macroalbuminuria. The Phase IV study is designed to
enroll approximately 2,200 patients with Type II diabetes and is expected to
take approximately 24 months to complete enrollment. Over 250 U.S., European,
and Asia-Pacific clinical centers are expected to participate in our pivotal
Phase III and Phase IV program.
S-3
KRX-101 MARKET OPPORTUNITY
According to the American Diabetes Association, or the ADA, there are 18.2
million people in the United States, or approximately 6.3% of the population,
who have diabetes. Of this population, approximately 13 million have been
diagnosed with diabetes, of whom approximately 90-95% have been diagnosed with
Type II diabetes. Type II diabetes results from the combination of insulin
deficiency and the body's relative insensitivity to the insulin present, as
opposed to Type I diabetes, in which severe insulin deficiency results from
destruction of the insulin-producing beta cells of the pancreas. Moreover, an
August 2003 study published by Datamonitor estimates that approximately 50% of
all diabetics in the U.S., or approximately nine million people, have diabetic
nephropathy. Diabetes is the most common cause of ESRD in the United States and
in many other developed nations and represents approximately 45% of all new
cases of ESRD in the United States. Despite advances in clinical care, including
improvements in glycemic or blood sugar control and blood pressure control, the
number of Type I and Type II diabetes-related cases of ESRD continues to rise.
In particular, the incidence of Type II diabetes-related ESRD is rapidly
increasing. Approximately 20% of diabetics on dialysis in the United States
survive for five years, making the mortality of end-stage renal failure in this
group higher than most forms of cancer. Unfortunately, renal transplantation is
an option for less than 15% of diabetics with ESRD, as compared to 35-40% of
non-diabetics, principally due to age and concomitant vascular disease. Despite
recent advances, diabetic nephropathy remains a potentially catastrophic illness
for which partial but insufficient treatment is currently available.
ONCOLOGY PORTFOLIO
We are developing a series of proprietary small molecule oncology compounds for
a variety of cancer indications. Several of these compounds are being evaluated
by the National Cancer Institute, or the NCI, a division of the National
Institutes of Health in various phases of clinical trials. Our most advanced
candidate, KRX-0401, is currently in Phase II clinical development for multiple
tumor types. We are currently planning additional company-sponsored clinical
trials of our cancer portfolio.
KRX-0401 (PERIFOSINE)
OVERVIEW
KRX-0401 is a novel, first-in-class, oral modulator of Akt and other important
signal transduction pathways. This compound has demonstrated preliminary single
agent anti-tumor activity and is currently in a Phase II clinical program where
it is being studied both as a single agent and in combination with other
anti-cancer treatments for multiple forms of cancer.
KRX-0401 is an alkylphosphocholine, which is a class of anti-cancer drugs that
block proliferation and induce the apoptosis of cancer cells. This effect is
relatively specific for cancer cells compared to normal cells. Although the
mechanism of action for these drugs remains unclear, they are known to modulate
signaling in a number of pathways known to function abnormally during the
development of cancer. One of the pathways inhibited by the alkylphosphocholines
is Akt, a pathway associated with tumor survival and growth. Akt appears to be
inherently activated in approximately 10-50% of most tumor types and is also
believed to confer resistance to most types of anti-cancer therapies. Based on
its prevalence across cancer types and importance in the control of cell
survival and cell proliferation, Akt is considered to be one of the most
important cancer targets being researched today.
S-4
CLINICAL DEVELOPMENT
In vitro, KRX-0401 inhibits the growth of a variety of human tumor cell lines
and has substantial activity in vivo against a number of murine tumor models and
human xenografts. In most model systems the drug appears to be synergistic with
radiotherapy and additive or synergistic with cytotoxics such as cisplatin,
adriamycin, and cyclophosphamide. In these experiments, the combination regimens
were superior to chemotherapy alone and were well-tolerated.
Five Phase I studies of KRX-0401 have been completed, including two in the U.S.
by the NCI as part of a Cooperative Research and Development Agreement. These
trials demonstrated that KRX-0401 can be safely given to humans with an
acceptable toxicity profile and no observed myelosuppression, or bone marrow
suppression. We believe that the Phase I data provides clinical evidence of the
anti-cancer effects of KRX-0401.
The NCI has completed a number of Phase II clinical trials studying KRX-0401 as
a single agent, including studies in prostate, breast, head and neck and
pancreatic cancers, as well as melanoma and sarcomas. In total, nine clinical
trials have been conducted across the six tumor types mentioned. The NCI and its
collaborators have presented data from four of their Phase II studies, including
from Phase II studies involving prostate, sarcoma, head and neck and breast
cancers. Findings from these studies led the investigators to conclude that the
drug was safe and well-tolerated at the Phase II dose utilized. In the sarcoma
study, the investigators reported a partial response (greater than 50% decrease
in tumor mass) as well as several disease stabilizations. With the responses
seen in the Phase I trials, there are now three sarcoma patients with durable
partial responses. This has led us to consider exploring additional studies in
sarcoma.
In May 2005, we announced that Phase II data presented at the annual meeting of
the American Society of Clinical Oncology in Orlando, Florida demonstrated the
tolerability and potential efficacy of KRX-0401 in the treatment of patients
with biochemically recurrent hormone-sensitive prostate cancer, or HSPC,
patients. The investigators concluded that KRX-0401 in HSPC patients is
feasible, well-tolerated and has been shown to reduce prostate-specific antigen
levels in some patients. Because of its inhibitory effects on the Akt and
related pathways, we believe that further studies of KRX-0401 in combination
with androgen ablation and chemotherapy are warranted.
During the second quarter of 2004, we announced the initiation of a Phase II
program utilizing KRX-0401 as a single agent and in combination with a number of
standard anti-cancer therapies in multiple tumor types. To date, we have
initiated several trials under this program. The first is a multi-center study
that will evaluate the safety and efficacy of KRX-0401 as a single agent
administered weekly to patients with non-small cell lung cancer who have
progressed despite standard therapy. We have also initiated additional
multi-center trials evaluating KRX-0401 in combination with gemcitabine,
paclitaxel and docetaxel, all common forms of chemotherapy used to treat
multiple tumor types. Recently, we started an "all-comers" Phase II clinical
trial evaluating KRX-0401 as a single-agent, administered either weekly or daily
in a variety of tumor types.
S-5
OUR STRATEGY
We are focused on the acquisition, development and commercialization of novel
pharmaceutical products for the treatment of life-threatening diseases,
including diabetes and cancer. Under our strategy, we currently plan to:
-- continue our pivotal program for KRX-101, including our pivotal Phase III
and Phase IV trials;
-- establish the commercial infrastructure required to manufacture, market and
sell our drug candidates following approval, if any, by the FDA;
-- continue our company-sponsored Phase II clinical program for KRX-0401
exploring the use of KRX-0401 as a single-agent and in combination with
other anti-cancer therapies in multiple cancer types;
-- support additional scientific collaborations for KRX-101 and KRX-0401;
-- conduct additional pre-clinical and clinical trials for our other product
candidates; and
-- seek to in-license or acquire additional compounds.
CORPORATE INFORMATION
We were incorporated in Delaware in October 1998. We commenced operations in
November 1999, following our acquisition of substantially all of the assets and
certain of the liabilities of Partec Ltd., our predecessor company that began
its operations in January 1997. Our executive offices are located at 750
Lexington Avenue, New York, New York 10022. Our telephone number is 212-531-5965
and our e-mail address is info@keryx.com.
S-6
THE OFFERING
COMMON STOCK OFFERED BY
US......................5,000,000 shares
COMMON STOCK TO BE
OUTSTANDING AFTER THE
OFFERING................36,504,180 shares
USE OF PROCEEDS.........We intend to use the net proceeds from the sale of our
common stock to fund the ongoing development of KRX-101
and KRX-0401, for research and development activities
related to our other drug candidates, to in-license,
acquire and develop additional drug candidates, to
establish the commercial infrastructure required to
manufacture, market and sell our drug candidates and for
other general corporate purposes. See "Use of Proceeds"
on page S-23.
RISK FACTORS............See "Risk factors" and other information included in
this prospectus supplement and the accompanying
prospectus for a discussion of factors you should
carefully consider before deciding to invest in our
common stock.
NASDAQ NATIONAL MARKET
SYMBOL..................KERX
The number of shares of common stock to be outstanding after the offering is
based on 31,504,180 shares of common stock outstanding as of March 31, 2005.
Unless otherwise indicated, all information in this prospectus supplement
assumes that the underwriters do not exercise their overallotment option.
The number of shares of common stock to be outstanding after this offering does
not take into account:
-- 8,288,426 shares of common stock issuable upon the exercise of stock options
outstanding as of June 30, 2005, with a weighted average exercise price of
$3.56 per share;
-- 479,623 shares of common stock issuable upon the exercise of outstanding
warrants as of June 30, 2005 with a weighted average exercise price of $5.17
per share;
-- 3,372,422 shares of common stock issuable to the former stockholders of
ACCESS Oncology upon the achievement of certain milestones related to the
ACCESS Oncology drug candidates we acquired upon our merger with ACCESS
Oncology in February 2004; and
-- an aggregate of 3,407,822 shares of common stock reserved for future
issuance under our stock option plans.
S-7
RISK FACTORS
You should carefully consider the following risks and uncertainties. If any of
the following occurs, our business, financial condition or operating results
could be materially harmed. These factors could cause the trading price of our
common stock to decline, and you could lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY AND HAVE INCURRED SUBSTANTIAL OPERATING
LOSSES SINCE OUR INCEPTION. WE EXPECT TO CONTINUE TO INCUR LOSSES IN THE FUTURE
AND MAY NEVER BECOME PROFITABLE.
We have a limited operating history. You should consider our prospects in light
of the risks and difficulties frequently encountered by early stage companies.
In addition, we have incurred operating losses since our inception and expect to
continue to incur operating losses for the foreseeable future and may never
become profitable. As of March 31, 2005, we had an accumulated deficit of
approximately $92.4 million. As we expand our research and development efforts,
we will incur increasing losses. We may continue to incur substantial operating
losses even if we begin to generate revenues from our drug candidates or
technologies.
We have not yet commercialized any products or technologies and cannot be sure
we will ever be able to do so. Even if we commercialize one or more of our drug
candidates or technologies, we may not become profitable. Our ability to achieve
profitability depends on a number of factors, including our ability to complete
our development efforts, obtain regulatory approval for our drug candidates,
successfully complete any post-approval regulatory obligations and successfully
commercialize our drug candidates and technologies.
IF WE ARE UNABLE TO SUCCESSFULLY COMPLETE OUR CLINICAL TRIAL PROGRAMS, OR IF
SUCH CLINICAL TRIALS TAKE LONGER TO COMPLETE THAN WE PROJECT, OUR ABILITY TO
EXECUTE OUR CURRENT BUSINESS STRATEGY WILL BE ADVERSELY AFFECTED.
Whether or not and how quickly we complete clinical trials is dependent in part
upon the rate at which we are able to engage clinical trial sites and,
thereafter, the rate of enrollment of patients. Patient enrollment is a function
of many factors, including the size of the patient population, the proximity of
patients to clinical sites, the eligibility criteria for the study, the
existence of competitive clinical trials, and whether existing or new drugs are
approved for the indication we are studying. We are aware that other companies
are planning clinical trials that will seek to enroll patients with the same
diseases as we are studying. In addition, one of our current trials for KRX-101
is designed to continue until a pre-specified number of events have occurred to
the patients enrolled. Trials such as this are subject to delays stemming from
patient withdrawal and from lower than expected event rates and may also incur
increased costs if enrollment is increased in order to achieve the desired
number of events. If we experience delays in identifying and contracting with
sites and/or in patient enrollment in our clinical trial programs, we may incur
additional costs and delays in our development programs, and may not be able to
complete our clinical trials on a cost-effective basis.
Additionally, we have finalized with the FDA our SPA, regarding a subpart H
clinical development plan for the clinical development of KRX-101 for diabetic
nephropathy. This clinical plan consists of: a single Phase III trial in
patients with microalbuminuria based on the surrogate marker of regression of
microalbuminuria as the primary endpoint; supportive data
S-8
from previously conducted clinical studies; and substantial recruitment into our
Phase IV confirmatory study that will measure clinical outcomes in patients with
overt nephropathy, or macroalbuminuria, before filing a New Drug Application, or
NDA, with the agency. The subpart H process is complex and requires careful
execution and no assurance can be given that we will be able to meet the
requirements set forth in the SPA. Even if we meet those requirements, the FDA
is not obligated to grant approval of our NDA for KRX-101. If the FDA approves
KRX-101 for marketing on the basis of our SPA, our Phase IV clinical trial may
yield insufficient efficacy data or give rise to safety concerns, which could
result in withdrawal of such approval or could cause us to withdraw the product
from the market. Many companies who have been granted the right to utilize an
accelerated approval approach have failed to obtain approval. Moreover, negative
or inconclusive results from the clinical trials we hope to conduct or adverse
medical events could cause us to have to repeat or terminate the clinical
trials. Accordingly, we may not be able to complete the clinical trials within
an acceptable time frame, if at all.
IF OUR DRUG CANDIDATES DO NOT RECEIVE THE NECESSARY REGULATORY APPROVALS, WE
WILL BE UNABLE TO COMMERCIALIZE OUR DRUG CANDIDATES.
We have not received, and may never receive, regulatory approval for the
commercial sale of any of our drug candidates. We will need to conduct
significant additional research and human testing before we can apply for
product approval with the FDA or with regulatory authorities of other countries.
Pre-clinical testing and clinical development are long, expensive and uncertain
processes. Satisfaction of regulatory requirements typically depends on the
nature, complexity and novelty of the product and requires the expenditure of
substantial resources. Data obtained from pre-clinical and clinical tests can be
interpreted in different ways, which could delay, limit or prevent regulatory
approval. It may take us many years to complete the testing of our drug
candidates and failure can occur at any stage of this process. Negative or
inconclusive results or medical events during a clinical trial could cause us to
delay or terminate our development efforts.
Furthermore, interim results of preclinical or clinical studies do not
necessarily predict their final results, and acceptable results in early studies
might not be obtained in later studies. Drug candidates in the later stages of
clinical development may fail to show the desired safety and efficacy traits
despite having progressed through initial clinical testing. Specifically, we
received the recommendation to proceed, as planned, into our pivotal Phase III
and Phase IV program for KRX-101 from the CSG based on a safety and efficacy
assessment of a first interim analysis of data from our ongoing Phase II study
for KRX-101, and we recently announced further interim results from this trial.
There can be no assurance that the full data from the Phase II study will track
the data from these interim analyses of the Phase II study. Moreover, the
recommendation to move into our pivotal program, as well as the announced
interim data, may not be indicative of results from future clinical trials and
the risk remains that the pivotal program for KRX-101 may generate efficacy data
that will be insufficient for the approval of the drug, or may raise safety
concerns that may prevent approval of the drug.
Clinical trials also have a high risk of failure. A number of companies in the
pharmaceutical industry, including biotechnology companies, have suffered
significant setbacks in advanced clinical trials, even after achieving promising
results in earlier trials. If we experience delays in the testing or approval
process or if we need to perform more or larger clinical trials than originally
planned, our financial results and the commercial prospects for our drug
candidates may be materially impaired. In addition, we have limited experience
in conducting and
S-9
managing the clinical trials necessary to obtain regulatory approval in the
United States and abroad and, accordingly, may encounter unforeseen problems and
delays in the approval process.
BECAUSE ALL OF OUR PROPRIETARY TECHNOLOGIES ARE LICENSED TO US BY THIRD PARTIES,
TERMINATION OF THESE LICENSE AGREEMENTS WOULD PREVENT US FROM DEVELOPING OUR
DRUG CANDIDATES.
We do not own any of our drug candidates. We have licensed the patent rights to
these drugs candidates from others. These license agreements require us to meet
development or financing milestones and impose development and commercialization
due diligence requirements on us. In addition, under these agreements, we must
pay royalties on sales of products resulting from licensed technologies and pay
the patent filing, prosecution and maintenance costs related to the licenses. If
we do not meet our obligations in a timely manner or if we otherwise breach the
terms of our license agreements, our licensors could terminate the agreements,
and we would lose the rights to our drug candidates.
WE RELY ON THIRD PARTIES TO MANUFACTURE OUR PRODUCTS. IF THESE THIRD PARTIES DO
NOT SUCCESSFULLY MANUFACTURE OUR PRODUCTS, OUR BUSINESS WILL BE HARMED.
We have no experience in manufacturing products for clinical or commercial
purposes and do not have any manufacturing facilities. We intend to continue, in
whole or in part, to use third parties to manufacture our products for use in
clinical trials and for future sales. We may not be able to enter into future
third-party contract manufacturing agreements on acceptable terms to us, if at
all.
Contract manufacturers often encounter difficulties in scaling up production,
including problems involving production yields, quality control and assurance,
shortage of qualified personnel, compliance with FDA and foreign regulations,
production costs and development of advanced manufacturing techniques and
process controls. Our third-party manufacturers may not perform as agreed or may
not remain in the contract manufacturing business for the time required by us to
successfully produce and market our drug candidates. In addition, our contract
manufacturers will be subject to ongoing periodic, unannounced inspections by
the FDA and corresponding foreign governmental agencies to ensure strict
compliance with, among other things, current good manufacturing practices, in
addition to other governmental regulations and corresponding foreign standards.
We will not have control over, other than by contract, third-party
manufacturers' compliance with these regulations and standards. Switching or
engaging multiple manufacturers may be difficult because the number of potential
manufacturers is limited and, particularly in the case of KRX-101, the process
by which multiple manufacturers make the drug substance must be identical at
each manufacturing facility. It may be difficult for us to find and engage
replacement or multiple manufacturers quickly and on terms acceptable to us, if
at all. Moreover, if we need to change manufacturers, the FDA and corresponding
foreign regulatory agencies must approve these manufacturers in advance, which
will involve testing and additional inspections to ensure compliance with FDA
and foreign regulations and standards.
If third-party manufacturers fail to deliver the required quantities of our drug
candidates on a timely basis and at commercially reasonable prices, we will not
be able to commercialize our products as planned.
We have entered into a contract manufacturing relationship with a U.S.-based
contract manufacturer for KRX-101 which we believe will be adequate to satisfy
our current clinical and initial commercial supply needs; however, as we
transition the manufacturing of KRX-101 to
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our U.S.-based contract manufacturer, we will need to create a reproducible
manufacturing process that will ensure consistent manufacture of KRX-101 across
multiple batches and sources. As with all heparin-like compounds, the end
product is highly sensitive to the manufacturing process utilized. Accordingly,
the creation of a reproducible process will be required for the successful
commercialization of KRX-101. There can be no assurance that we will be
successful in this endeavor.
IF WE ARE NOT ABLE TO OBTAIN THE RAW MATERIALS REQUIRED FOR THE MANUFACTURE OF
OUR LEAD PRODUCT CANDIDATE, KRX-101, OUR ABILITY TO DEVELOP AND MARKET THIS
PRODUCT CANDIDATE WILL BE SUBSTANTIALLY HARMED.
Source materials for KRX-101, our lead product candidate, are derived from
porcine mucosa. Long-term supplies for KRX-101 could be affected by limitations
in the supply of porcine mucosa and the demand for other heparin products, over
which we will have no control. Additionally, diseases affecting the world supply
of pigs could have an actual or perceived negative impact on our ability, or the
ability of our contract manufacturers, to source, make and/or sell KRX-101. Such
negative impact could materially affect the commercial success of KRX-101.
IF WE DO NOT ESTABLISH OR MAINTAIN DRUG DEVELOPMENT AND MARKETING ARRANGEMENTS
WITH THIRD PARTIES, WE MAY BE UNABLE TO COMMERCIALIZE OUR PRODUCTS.
We are an emerging company and do not possess all of the capabilities to fully
commercialize our products on our own. From time to time, we may need to
contract with third parties to:
-- assist us in developing, testing and obtaining regulatory approval for and
commercializing some of our compounds and technologies; and
-- market and distribute our drug products.
We can provide no assurance that we will be able to successfully enter into
agreements with such third parties on terms that are acceptable to us, if at
all. If we are unable to successfully contract with third parties for these
services when needed, or if existing arrangements for these services are
terminated, whether or not through our actions, or if such third parties do not
fully perform under these arrangements, we may have to delay, scale back or end
one or more of our drug development programs or seek to develop or commercialize
our products independently, which could result in delays. Furthermore, such
failure could result in the termination of license rights to one or more of our
products. If these development or marketing agreements take the form of a
partnership or strategic alliance, such arrangements may provide our
collaborators with significant discretion in determining the efforts and
resources that they will apply to the development and commercialization of our
products. Accordingly, to the extent that we rely on third parties to research,
develop or commercialize our products, we are unable to control whether such
products will be scientifically or commercially successful.
IF WE ARE UNABLE TO DEVELOP ADEQUATE SALES, MARKETING OR DISTRIBUTION
CAPABILITIES OR ENTER INTO AGREEMENTS WITH THIRD PARTIES TO PERFORM SOME OF
THESE FUNCTIONS, WE WILL NOT BE ABLE TO COMMERCIALIZE OUR PRODUCTS EFFECTIVELY.
In the event KRX-101 receives marketing approval, we anticipate conducting our
own sales and marketing effort to support the drug, and we may adopt this
strategy with respect to future drug products. We currently have no experience
in sales, marketing or distribution. To directly market and distribute any
products, we must build a sales and marketing organization with
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appropriate technical expertise and distribution capabilities. We may attempt to
build such a sales and marketing organization on our own or with the assistance
of a contract sales organization. For some market opportunities, we may need to
enter into co-promotion or other licensing arrangements with larger
pharmaceutical or biotechnology firms in order to increase the commercial
success of our products. We may not be able to establish sales, marketing and
distribution capabilities of our own or enter into such arrangements with third
parties in a timely manner or on acceptable terms. To the extent that we enter
into co-promotion or other licensing arrangements, our product revenues are
likely to be lower than if we directly marketed and sold our products, and some
or all of the revenues we receive will depend upon the efforts of third parties,
and these efforts may not be successful. Additionally, building marketing and
distribution capabilities may be more expensive than we anticipate, requiring us
to divert capital from other intended purposes or preventing us from building
our marketing and distribution capabilities to the desired levels.
EVEN IF WE OBTAIN FDA APPROVAL TO MARKET OUR DRUG PRODUCTS, IF THEY FAIL TO
ACHIEVE MARKET ACCEPTANCE, WE WILL NEVER RECORD MEANINGFUL REVENUES.
Even if our products are approved for sale, they may not be commercially
successful in the marketplace. Market acceptance of our drug products will
depend on a number of factors, including:
-- perceptions by members of the health care community, including physicians,
of the safety and efficacy of our product candidates;
-- the rates of adoption of our products by medical practitioners and the
target populations for our products;
-- the potential advantages that our products offer over existing treatment
methods;
-- the cost-effectiveness of our products relative to competing products;
-- the availability of government or third-party payor reimbursement for our
products;
-- the side effects or unfavorable publicity concerning our products or similar
products; and
-- the effectiveness of our sales, marketing and distribution efforts.
Because we expect sales of our products, if approved, to generate substantially
all of our revenues in the long-term, the failure of our drugs to find market
acceptance would harm our business and could require us to seek additional
financing or other sources of revenue.
IF OUR COMPETITORS DEVELOP AND MARKET PRODUCTS THAT ARE LESS EXPENSIVE, MORE
EFFECTIVE OR SAFER THAN OUR DRUG PRODUCTS, OUR COMMERCIAL OPPORTUNITIES MAY BE
REDUCED OR ELIMINATED.
The pharmaceutical industry is highly competitive. Our competitors include
pharmaceutical companies and biotechnology companies, as well as universities
and public and private research institutions. In addition, companies that are
active in different but related fields represent substantial competition for us.
Many of our competitors have significantly greater capital resources, larger
research and development staffs and facilities and greater experience in drug
development, regulation, manufacturing and marketing than we do. These
organizations also compete with us to recruit qualified personnel, attract
partners for joint ventures or other collaborations, and license technologies
that are competitive with ours. As a result, our competitors may be able to more
easily develop technologies and products that could render our drug products
obsolete or noncompetitive. To compete successfully in this industry we must
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identify novel and unique drugs or methods of treatment and then complete the
development of those drugs as treatments in advance of our competitors.
The drugs that we are attempting to develop will have to compete with existing
therapies. In addition, our commercial opportunities may be reduced or
eliminated if our competitors develop and market products that are less
expensive, more effective or safer than our drug products. Other companies have
drug candidates in various stages of pre-clinical or clinical development to
treat diseases for which we are also seeking to discover and develop drug
products. Some of these potential competing drugs are further advanced in
development than our drug candidates and may be commercialized earlier. Even if
we are successful in developing effective drugs, our products may not compete
successfully with products produced by our competitors.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, OUR OPERATIONS COULD BE DISRUPTED AND OUR BUSINESS COULD BE HARMED.
We currently have 29 full and part-time employees. To successfully develop our
drug candidates, we must be able to attract and retain highly skilled personnel.
In addition, if we lose the services of our current personnel, in particular,
Michael S. Weiss, our Chairman and Chief Executive Officer, our ability to
continue to execute on our business plan could be materially impaired. In
addition, while we have an employment agreement with Mr. Weiss, this agreement
would not prevent him from terminating his employment with us.
ANY ACQUISITIONS WE MAKE MAY REQUIRE A SIGNIFICANT AMOUNT OF OUR AVAILABLE CASH
AND MAY NOT BE SCIENTIFICALLY OR COMMERCIALLY SUCCESSFUL.
As part of our business strategy, we may effect acquisitions to obtain
additional businesses, products, technologies, capabilities and personnel. If we
make one or more significant acquisitions in which the consideration includes
cash, we may be required to use a substantial portion of our available cash.
Acquisitions involve a number of operational risks, including:
-- difficulty and expense of assimilating the operations, technology and
personnel of the acquired business;
-- our inability to retain the management, key personnel and other employees of
the acquired business;
-- our inability to maintain the acquired company's relationship with key third
parties, such as alliance partners;
-- exposure to legal claims for activities of the acquired business prior to
the acquisition;
-- the diversion of our management's attention from our core business; and
-- the potential impairment of goodwill and write-off of in-process research
and development costs, adversely affecting our reported results of
operations.
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THE STATUS OF REIMBURSEMENT FROM THIRD-PARTY PAYORS FOR NEWLY APPROVED HEALTH
CARE DRUGS IS UNCERTAIN AND FAILURE TO OBTAIN ADEQUATE REIMBURSEMENT COULD LIMIT
OUR ABILITY TO GENERATE REVENUE.
Our ability to commercialize pharmaceutical products may depend, in part, on the
extent to which reimbursement for the products will be available from:
-- government and health administration authorities;
-- private health insurers;
-- managed care programs; and
-- other third-party payors.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products. Third-party payors, including Medicare, are challenging
the prices charged for medical products and services. Government and other
third-party payors increasingly are attempting to contain health care costs by
limiting both coverage and the level of reimbursement for new drugs and by
refusing, in some cases, to provide coverage for uses of approved products for
disease indications for which the FDA has not granted labeling approval.
Third-party insurance coverage may not be available to patients for our
products. If government and other third-party payors do not provide adequate
coverage and reimbursement levels for our products, their market acceptance may
be reduced.
HEALTH CARE REFORM MEASURES COULD ADVERSELY AFFECT OUR BUSINESS.
The business and financial condition of pharmaceutical and biotechnology
companies are affected by the efforts of governmental and third-party payors to
contain or reduce the costs of health care. In the United States and in foreign
jurisdictions there have been, and we expect that there will continue to be, a
number of legislative and regulatory proposals aimed at changing the health care
system, such as those relating to reimportation of drugs into the U.S. from
other countries where they are sold at a lower price and government control of
prescription drug pricing. The pendency or approval of such proposals could
result in a decrease in our stock price or limit our ability to raise capital or
to obtain strategic partnerships or licenses.
WE FACE PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE
INSURANCE.
The use of our drug candidates in clinical trials, and the future sale of any
approved products, exposes us to liability claims. Although we are not aware of
any historical or anticipated product liability claims against us, if we cannot
successfully defend ourselves against product liability claims, we may incur
substantial liabilities or be required to cease clinical trials of our drug
candidates or limit commercialization of any approved products.
We believe that we have obtained sufficient product liability insurance coverage
for our clinical trials. We intend to expand our insurance coverage to include
the commercial sale of any approved products if marketing approval is obtained;
however, insurance coverage is becoming increasingly expensive. We may not be
able to maintain insurance coverage at a reasonable cost. We may not be able to
obtain additional insurance coverage that will be adequate to cover product
liability risks that may arise. Regardless of merit or eventual outcome, product
liability claims may result in:
-- decreased demand for a product;
-- injury to our reputation;
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-- our inability to continue to develop a drug candidate;
-- withdrawal of clinical trial volunteers; and
-- loss of revenues.
Consequently, a product liability claim or product recall may result in losses
that could be material.
IN CONNECTION WITH PROVIDING OUR CLINICAL TRIAL MANAGEMENT AND SITE RECRUITMENT
SERVICES, WE MAY BE EXPOSED TO LIABILITY THAT COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The Online Collaborative Oncology Group, Inc., or OCOG, a subsidiary we acquired
through our acquisition of ACCESS Oncology, provides clinical trial management
and site recruitment services to us as well as other biotechnology and
pharmaceutical companies. In conducting the activities of OCOG, any failure on
our part to comply with applicable governmental regulations or contractual
obligations could expose us to liability to our clients and could have a
material adverse effect on us. We also could be held liable for errors or
omissions in connection with the services we perform. In addition, the wrongful
or erroneous delivery of health care information or services may expose us to
liability. If we were required to pay damages or bear the costs of defending any
such claims, the losses could be material.
OUR CORPORATE COMPLIANCE EFFORTS CANNOT GUARANTEE THAT WE ARE IN COMPLIANCE WITH
ALL POTENTIALLY APPLICABLE REGULATIONS.
The development, manufacturing, pricing, sales, and reimbursement of our
products, together with our general operations, are subject to extensive
regulation by federal, state and other authorities within the United States and
numerous entities outside of the United States. We are a relatively small
company with 29 employees. We also have significantly fewer employees than many
other companies that have a product candidate in late-stage clinical
development, and we rely heavily on third parties to conduct many important
functions. While we have developed and instituted a corporate compliance program
based on what we believe are the current best practices, we cannot assure you
that we are or will be in compliance with all potentially applicable
regulations. If we fail to comply with any of these regulations we could be
subject to a range of regulatory actions, including suspension or termination of
clinical trials, the failure to approve a product candidate, restrictions on our
products or manufacturing processes, withdrawal of products from the market,
significant fines, or other sanctions or litigation.
RISKS RELATED TO OUR FINANCIAL CONDITION
OUR CURRENT CASH, CASH EQUIVALENTS AND SHORT-TERM SECURITIES MAY NOT BE ADEQUATE
TO SUPPORT OUR OPERATIONS FOR THE NEXT 24 MONTHS AS WE HAVE ESTIMATED.
We believe that our $44.8 million in cash, cash equivalents, interest receivable
and short-term and long-term securities as of March 31, 2005, and the proceeds
from this offering, will be sufficient to enable us to meet our planned
operating needs and capital expenditures for at least the next 24 months. Our
forecast of the period of time through which our cash, cash equivalents and
short-term securities will be adequate to support our operations is a forward-
looking statement that involves risks and uncertainties. The actual amount of
funds we will
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need to operate is subject to many factors, some of which are beyond our
control. These factors include the following:
-- the timing of expenses associated with manufacturing and product development
of the proprietary drug candidates within our portfolio and those that may
be in-licensed, partnered or acquired;
-- the timing of the in-licensing, partnering and acquisition of new product
opportunities;
-- the progress of the development efforts of parties with whom we have
entered, or may enter, into research and development agreements;
-- our ability to achieve our milestones under our licensing arrangements; and
-- the costs involved in prosecuting and enforcing patent claims and other
intellectual property rights.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDS ON TERMS FAVORABLE TO US, OR AT ALL,
OUR BUSINESS WOULD BE HARMED.
We expect to use, rather than generate, funds from operations for the
foreseeable future. Based on our current plans, we believe our existing cash and
cash equivalents, interest receivable and short-term and long-term securities
and the proceeds of this offering will be sufficient to fund our operating
expenses and capital requirements for at least the next 24 months; however, the
actual amount of funds that we will need prior to or after that date will be
determined by many factors, some of which are beyond our control. As a result,
we may need funds sooner or in different amounts than we currently anticipate,
depending upon:
-- the progress of our development activities;
-- the progress of our research activities;
-- the number and scope of our development programs;
-- the costs associated with commercialization activities, including
manufacturing, marketing and sales;
-- our ability to establish and maintain current and new licensing or
acquisition arrangements;
-- our ability to achieve our milestones under our licensing arrangements;
-- the costs involved in enforcing patent claims and other intellectual
property rights; and
-- the costs and timing of regulatory approvals.
If our capital resources are insufficient to meet future capital requirements,
we will have to raise additional funds. If we are unable to obtain additional
funds on terms favorable to us or at all, we may be required to cease or reduce
our operating activities or sell or license to third parties some or all of our
intellectual property. If we raise additional funds by selling additional shares
of our capital stock, the ownership interests of our stockholders will be
diluted. If we need to raise additional funds through the sale or license of our
intellectual property, we may be unable to do so on terms favorable to us.
OUR PRIOR RESTRUCTURINGS MAY RESULT IN ADDITIONAL ISRAELI-RELATED LIABILITIES.
In July 2003, our Israeli subsidiary vacated its Jerusalem facility, after
giving advance notice to the landlord. On May 1, 2005, the landlord of the
Jerusalem facility filed suit in Israel claiming that we were liable as a result
of the alleged breach of the lease agreement by our subsidiary. The amount
demanded by the landlord totals 4,345,313 NIS or approximately $940,000 at the
current exchange rate, and includes rent for the entire remaining term of the
lease, as well as
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property taxes and other costs allegedly incurred by the landlord. In August
2003, the landlord claimed a bank deposit, in the amount of $222,000, which was
previously provided as security in connection with the lease agreement. We
intend to vigorously defend the suit. To date, we have not yet recorded a charge
to reflect any potential liability associated with this suit.
In September 2001, one of our Israeli subsidiaries received the status of an
"Approved Enterprise," a status which grants certain tax benefits in Israel in
accordance with the "Law for the Encouragement of Capital Investments, 1959."
Through December 31, 2003, our Israeli subsidiary, which ceased operations in
2003, has received tax benefits in the form of exemptions of approximately
$744,000 as a result of our subsidiary's status as an "Approved Enterprise." As
part of the restructuring implemented during 2003, we closed down our Jerusalem
laboratory facility. In October 2003, the subsidiary received a letter from the
Israeli Ministry of Industry and Trade that its Approved Enterprise status was
cancelled as of July 2003 and that past benefits would not need to be repaid.
The Israeli tax authorities have yet to confirm this position; however, we
believe that, based on the letter received from the Ministry of Industry and
Trade, it is unlikely that past benefits will need to be repaid, and therefore,
we have not recorded any charge with respect to this potential liability. There
can be no assurances that the Israeli tax authorities will confirm this
position. As a result, we may be liable to repay some or all of the tax benefits
received to date, which could adversely affect our cash flow and results of
operations.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, THIRD PARTIES
MAY BE ABLE TO USE OUR INTELLECTUAL PROPERTY, WHICH COULD ADVERSELY AFFECT OUR
ABILITY TO COMPETE IN THE MARKET.
Our commercial success will depend in part on our ability and the ability of our
licensors to obtain and maintain patent protection on our drug products and
technologies and successfully defend these patents against third-party
challenges. The patent positions of pharmaceutical and biotechnology companies
can be highly uncertain and involve complex legal and factual questions. No
consistent policy regarding the breadth of claims allowed in biotechnology
patents has emerged to date. Accordingly, the patents we use may not be
sufficiently broad to prevent others from practicing our technologies or from
developing competing products. Furthermore, others may independently develop
similar or alternative drug products or technologies or design around our
patented drug products and technologies. The patents we use may be challenged or
invalidated or may fail to provide us with any competitive advantage.
We rely on trade secrets to protect our intellectual property where we believe
patent protection is not appropriate or obtainable. Trade secrets are difficult
to protect. While we require our employees, collaborators and consultants to
enter into confidentiality agreements, this may not be sufficient to adequately
protect our trade secrets or other proprietary information. In addition, we
share ownership and publication rights to data relating to some of our drug
products and technologies with our research collaborators and scientific
advisors. If we cannot maintain the confidentiality of this information, our
ability to receive patent protection or protect our trade secrets or other
proprietary information will be at risk.
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LITIGATION OR THIRD-PARTY CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT COULD
REQUIRE US TO SPEND SUBSTANTIAL TIME AND MONEY DEFENDING SUCH CLAIMS AND
ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS.
Third parties may assert that we are using their proprietary intellectual
property without authorization. In addition, third parties may have or obtain
patents in the future and claim that our drug products or technologies infringe
their patents. If we are required to defend against patent suits brought by
third parties, or if we sue third parties to protect our patent rights, we may
be required to pay substantial litigation costs, and our management's attention
may be diverted from operating our business. In addition, any legal action
against our licensors or us that seeks damages or an injunction of our
commercial activities relating to the affected our drug products or technologies
could subject us to monetary liability and require our licensors or us to obtain
a license to continue to use the affected our drug products or technologies. We
cannot predict whether our licensors or we would prevail in any of these types
of actions or that any required license would be made available on commercially
acceptable terms, if at all.
RISKS RELATED TO THIS OFFERING
CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK AMONG OUR EXISTING EXECUTIVE
OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM
INFLUENCING SIGNIFICANT CORPORATE DECISIONS.
As of March 31, 2005, our executive officers, directors and principal
stockholders (including their affiliates) beneficially owned, in the aggregate,
approximately 24.6% of our outstanding common stock, including, for this
purpose, currently exercisable options and warrants held by our executive
officers, directors and principal stockholders. After this offering, our
executive officers, directors and principal stockholders (including their
affiliates) will beneficially own, in the aggregate, approximately 21.5% of our
outstanding common stock, including currently exercisable options and warrants.
As a result, these persons, acting together, may have the ability to
significantly influence the outcome of all matters submitted to our stockholders
for approval, including the election and removal of directors and any merger,
consolidation or sale of all or substantially all of our assets. In addition,
such persons, acting together, may have the ability to effectively control our
management and affairs. Accordingly, this concentration of ownership may depress
the market price of our common stock.
FUTURE SALES OR OTHER ISSUANCES OF OUR COMMON STOCK COULD DEPRESS THE MARKET FOR
OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock, or the perception
by the market that those sales could occur, could cause the market price of our
common stock to decline or could make it more difficult for us to raise funds
through the sale of equity in the future.
If we make one or more significant acquisitions in which the consideration
includes stock or other securities, your equity in us may be significantly
diluted. We may be required to issue up to 3,372,422 shares of our common stock
to former shareholders of ACCESS Oncology upon achievement of certain
milestones. In addition, in the past we have entered and in the future we may
enter into arrangements permitting us to issue shares of common stock in lieu of
certain cash payments such as milestones.
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Additionally, our executive officers, directors, and principal stockholders
beneficially owned, in the aggregate, approximately 24.6% of our common stock as
of March 31, 2005, and will own approximately 21.5% of our common stock after
this offering, including currently exercisable warrants and options held by
them. If some or all of them should decide to sell a substantial number of their
holdings, it could have a material adverse effect on the market for our common
stock.
OUR STOCK PRICE CAN BE VOLATILE, WHICH INCREASES THE RISK OF LITIGATION, AND MAY
RESULT IN A SIGNIFICANT DECLINE IN THE VALUE OF YOUR INVESTMENT.
The trading price of our common stock is likely to be highly volatile and
subject to wide fluctuations in price in response to various factors, many of
which are beyond our control. These factors include:
-- developments concerning our drug candidates;
-- announcements of technological innovations by us or our competitors;
-- introductions or announcements of new products by us or our competitors;
-- announcements by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
-- changes in financial estimates by securities analysts;
-- actual or anticipated variations in quarterly operating results;
-- expiration or termination of licenses, research contracts or other
collaboration agreements;
-- conditions or trends in the regulatory climate and the biotechnology and
pharmaceutical industries;
-- changes in the market valuations of similar companies; and
-- additions or departures of key personnel.
In addition, equity markets in general, and the market for biotechnology and
life sciences companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of companies traded in those markets. These broad market and
industry factors may materially affect the market price of our common stock,
regardless of our development and operating performance. In the past, following
periods of volatility in the market price of a company's securities, securities
class-action litigation has often been instituted against that company. Such
litigation, if instituted against us, could cause us to incur substantial costs
to defend such claims and divert management's attention and resources, which
could seriously harm our business.
WE HAVE BROAD DISCRETION TO USE THE NET PROCEEDS FROM THIS OFFERING AND OUR
INVESTMENT OF THESE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN.
Our management has broad discretion as to how to spend the proceeds from this
offering and may spend these proceeds in ways with which our stockholders may
not agree. Pending any such uses, we plan to invest the net proceeds of this
offering in short-term and long-term, investment-grade, interest-bearing
securities. These investments may not yield a favorable return to our
stockholders.
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CERTAIN ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD
MAKE A THIRD-PARTY ACQUISITION OF US DIFFICULT. THIS COULD LIMIT THE PRICE
INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR OUR COMMON STOCK.
Provisions in our amended and restated certificate of incorporation and bylaws
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, or control us.
These factors could limit the price that certain investors might be willing to
pay in the future for shares of our common stock. Our amended and restated
certificate of incorporation allows us to issue preferred stock with rights
senior to those of the common stock. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to the
holders of our common stock or could adversely affect the rights and powers,
including voting rights, of such holders. In certain circumstances, such
issuance could have the effect of decreasing the market price of our common
stock. Our amended and restated bylaws eliminate the right of stockholders to
call a special meeting of stockholders, which could make it more difficult for
stockholders to effect certain corporate actions. Any of these provisions could
also have the effect of delaying or preventing a change in control.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Securities and Exchange Commission, or the SEC, allows us to "incorporate by
reference" into this prospectus supplement and the related prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents without restating that
information in this document. The information incorporated by reference is
deemed to be part of this prospectus supplement and the related prospectus, and
later information that we file with the SEC will automatically update and
supersede that information. This prospectus supplement and the related
prospectus incorporate by reference the documents set forth below that we have
previously filed with the SEC, except to the extent information in those
documents differs from information contained in this prospectus supplement and
the related prospectus, and also incorporate by reference any future filings
made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, including exhibits:
(a) Our Annual Report on Form 10-K for the year ended December 31, 2004;
(b) Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2005;
and
(c) Our Current Report on Form 8-K filed with the SEC on May 6, 2005.
We will provide to each person, including any beneficial owner, to whom a copy
of this prospectus supplement and the related prospectus is delivered, a copy of
any or all of the information that we have incorporated by reference into this
prospectus supplement and the related prospectus. We will provide this
information upon written or oral request at no cost to the requester. You may
request this information by contacting our corporate headquarters at the
following address: 750 Lexington Avenue, New York, New York 10022, Attn: Vice
President Finance and Investor Relations, or by calling (212) 531-5965.
S-21
SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS
When used in this prospectus supplement and the related prospectus and elsewhere
by management or us from time to time, the words "anticipate," "believe,"
"estimate," "may," "expect" and similar expressions are generally intended to
identify forward-looking statements. These forward-looking statements include,
but are not limited to, statements about our:
-- expectations for increases or decreases in expenses;
-- expectations for the development, manufacturing, and approval of KRX-101,
KRX-0401, and our additional product candidates or any other products we may
acquire or in-license;
-- expectations for incurring additional capital expenditures to expand our
research and development capabilities;
-- expectations for generating revenue or becoming profitable on a sustained
basis;
-- expectations or ability to enter into marketing and other partnership
agreements;
-- expectations or ability to enter into product acquisition and in-licensing
transactions;
-- expectations or ability to build our own commercial infrastructure to
manufacture, market and sell our drug candidates;
-- estimates of the sufficiency of our existing cash and cash equivalents and
investments to finance our business strategy;
-- expected losses; and
-- expectations for future capital requirements.
Our actual results could differ materially from those results expressed in, or
implied by, these forward looking statements. Potential risks and uncertainties
that could affect our actual results include those discussed in the section
titled "Risk Factors," beginning on page S-8 of this prospectus supplement, and
any risk factors we may include in other documents incorporated by reference
into this prospectus supplement and the related prospectus. The list of factors
that may affect future performance and the accuracy of forward-looking
statements is illustrative, but by no means exhaustive.
All forward-looking statements should be evaluated with the understanding of
their inherent uncertainty. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, events, levels of activity, performance or achievements. We do not
assume responsibility for the accuracy and completeness of the forward-looking
statements. We do not intend to update any of the forward-looking statements
after the date of this prospectus supplement to conform them to actual results.
S-22
USE OF PROCEEDS
Based on the closing sales price of our common stock on the Nasdaq National
Market on July 7, 2005 of $13.50 per share, we estimate the net proceeds to us
from the sale of 5,000,000 shares of our common stock will be approximately
$63,618,000 (approximately $73,543,000 if the underwriters exercise their
over-allotment option in full) after deducting underwriting discounts.
We expect to use the net proceeds from this offering:
-- to fund the ongoing development of KRX-101 and KRX-0401;
-- for research and development activities related to our other drug
candidates;
-- to establish the commercial infrastructure required to manufacture, market
and sell our drug candidates;
-- to in-license, acquire and develop additional drug candidates; and
-- for general corporate purposes.
The timing and amounts of our actual expenditures will depend on several
factors, including the progress of our clinical trials, the progress of our
research and development programs, the results of other pre-clinical and
clinical studies and the timing and costs of regulatory approvals. Pending the
uses described above, we will invest the net proceeds in short-term and
long-term, investment grade, interest-bearing securities.
S-23
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the Nasdaq National Market under the symbol
"KERX." Trading of our common stock commenced on July 28, 2000, following the
completion of our initial public offering. The following table sets forth the
quarterly high and low last sales prices per share of our common stock for the
periods indicated.
-----------------------------------------------------------------------------
HIGH LOW
-----------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 2003
First quarter............................................ $ 1.60 $ 1.28
Second quarter........................................... 2.68 1.10
Third quarter............................................ 3.85 2.15
Fourth quarter........................................... 5.46 3.23
FISCAL YEAR ENDED DECEMBER 31, 2004
First quarter............................................ $15.42 $ 4.59
Second quarter........................................... 19.07 10.57
Third quarter............................................ 12.90 7.13
Fourth quarter........................................... 13.80 9.65
FISCAL YEAR ENDING DECEMBER 31, 2005
First quarter............................................ $15.38 $10.77
Second quarter........................................... 14.49 11.74
Third quarter (through July 7, 2005)..................... 13.50 13.23
-----------------------------------------------------------------------------
The last reported sales price for our common stock on July 7, 2005 was $13.50
per share.
S-24
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2005:
- on an actual basis; and
- on an as adjusted basis to reflect the sale of the 5,000,000 shares of common
stock offered by us in this offering based on the closing sales price of our
common stock on the Nasdaq National Market on July 7, 2005, of $13.50 per
share after deducting the estimated underwriting discounts and commissions.
You should read this information together with our financial statements and the
notes to those statements incorporated by reference into this prospectus
supplement and the related prospectus.
------------------------------------------------------------------------------------
(UNAUDITED)
AS OF MARCH 31, 2005 ----------------------
(IN THOUSANDS, EXCEPT SHARE DATA) ACTUAL AS ADJUSTED
------------------------------------------------------------------------------------
Cash and cash equivalents................................... $ 23,093 $ 86,711
Short-term investment securities............................ 15,156 15,156
Long-term investment securities............................. 6,509 6,509
Long-term obligations....................................... - -
Stockholders' equity:
Common stock, $.001 par value per share, 60,000,000
shares authorized; 31,560,280 shares actual and
36,560,280 shares as adjusted, issued; 31,504,180
shares actual and 36,504,180 shares as adjusted, issued
and outstanding........................................ 32 37
Additional paid-in capital............................... 133,896 197,509
Treasury stock, at cost, 56,100 shares, actual and as
adjusted............................................... (89) (89)
Unearned compensation.................................... (2,877) (2,877)
Deficit accumulated during the development stage......... (92,385) (92,385)
----------------------
Total stockholders' equity............................ 38,577 102,195
----------------------
Total capitalization............................... $ 38,577 $ 102,195
------------------------------------------------------------------------------------
The table assumes no exercise of the underwriters' overallotment option and
excludes the following shares:
- 8,288,426 shares of common stock issuable upon the exercise of stock options
outstanding as of June 30, 2005, with a weighted average exercise price of
$3.56 per share;
- 479,623 shares of common stock issuable upon the exercise of outstanding
warrants as of June 30, 2005, with a weighted average exercise price of $5.17
per share;
- 3,372,422 shares of common stock issuable to the former stockholders of ACCESS
Oncology upon the achievement of certain milestones related to the ACCESS
Oncology drug candidates we acquired upon our merger with ACCESS Oncology in
February 2004; and
- an aggregate of 3,407,822 shares of common stock reserved for future issuance
under our stock option plans.
S-25
UNDERWRITING
We are offering the shares of our common stock described in this prospectus
supplement through the underwriters named below. J.P. Morgan Securities Inc. is
acting as the representative of the underwriters. We have entered into an
underwriting agreement with the underwriters named below. Subject to the terms
and conditions set forth in the underwriting agreement, each of the underwriters
has severally agreed to purchase the number of shares of common stock set forth
opposite its name in the following table:
-------------------------------------------------------------------------------
UNDERWRITERS NUMBER OF SHARES
-------------------------------------------------------------------------------
J.P. Morgan Securities Inc. ................................
Bear, Stearns & Co. Inc. ...................................
Jefferies & Company, Inc. ..................................
Oppenheimer & Co. Inc. .....................................
Brean Murray & Co., Inc. ...................................
Punk, Ziegel & Company, L.P. ...............................
Total.................................................... 5,000,000
-------------------------------------------------------------------------------
The underwriting agreement provides that the obligations of the underwriters to
purchase the shares included in this offering are subject to conditions
customary for offerings of this type. The underwriters must buy all of the
shares if they buy any of them. However, the underwriters are not required to
take or pay for the shares covered by the underwriters' overallotment option
described below.
OVERALLOTMENT OPTION
We have granted the underwriters an option to buy up to an aggregate of 780,000
additional shares of our common stock. The underwriters may exercise this option
solely for the purpose of covering overallotments, if any, made in connection
with this offering. The underwriters have 30 days from the date of this
prospectus supplement to exercise this option. If the underwriters exercise this
option, they will each purchase additional shares approximately in proportion to
the amounts specified in the table above.
COMMISSIONS AND DISCOUNTS
Shares sold by the underwriters to the public will initially be offered at the
offering price set forth on the cover of this prospectus supplement. Any shares
sold by the underwriters to securities dealers may be sold at a discount of up
to $ per share from the public offering price. Any of these securities
dealers may resell any shares purchased from the underwriters to other brokers
or dealers at a discount of up to $ per share from the public offering
price. If all the shares are not sold at the public offering price, the
representative may change the offering price and the other selling terms. Upon
execution of the underwriting agreement, the underwriters will be obligated to
purchase the shares at the prices and upon the terms stated therein, and, as a
result, will thereafter bear any risk associated with changing the offering
price to the public or other selling terms.
S-26
The following table shows the per share and total underwriting discounts and
commissions we will pay to the underwriters assuming both no exercise and full
exercise of the underwriters' option to purchase up to an additional 780,000
shares.
-----------------------------------------------------------------------------------------
NO EXERCISE FULL EXERCISE
-----------------------------------------------------------------------------------------
Per share................................................... $ $
Total....................................................... $ $
-----------------------------------------------------------------------------------------
We estimate that the total expenses of this offering payable by us, not
including the underwriting discounts and commissions, will be approximately
$ .
NO SALES OF SIMILAR SECURITIES
We, our executive officers and our directors have entered into lock-up
agreements with the underwriters prior to commencement of this offering. The
shares covered by these agreements do not include approximately 7.5% as of March
31, 2005, and 6.5% as adjusted for the offering, of our outstanding shares of
common stock that are held in a trust to which they were transferred by one of
our directors, Dr. Lindsay Rosenwald, who disclaims beneficial ownership of the
shares held by the trust and has entered into a lock-up agreement with respect
to the other shares of our common stock beneficially owned by him. Under these
agreements, we and each of these persons may not, without the prior written
approval of J.P. Morgan Securities Inc., subject to certain permitted
exceptions, sell, offer to sell, contract or agree to sell, hypothecate, pledge,
grant any option to purchase or otherwise dispose of or agree to dispose of, our
common stock or securities convertible into or exercisable or exchangeable for
our common stock or warrants or rights to purchase our common stock. These
restrictions will be in effect for a period of 90 days after the date of the
final prospectus supplement. At any time and without public notice, J.P. Morgan
Securities Inc. may in its sole discretion, release all or some of the
securities from these lock-up agreements.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters may be required
to make in respect of those liabilities.
NASDAQ NATIONAL MARKET LISTING
Our common stock is traded on the Nasdaq National Market under the symbol
"KERX."
PRICE STABILIZATION, SHORT POSITIONS
The underwriters may engage in overallotment, stabilizing transactions,
syndicate covering transactions, and penalty bids or purchases for the purpose
of pegging, fixing or maintaining the price of the common stock, in accordance
with Regulation M under the Securities Exchange Act of 1934, as amended:
- Overallotment involves sales by the underwriters of shares in excess of the
number of shares the underwriters are obligated to purchase, which creates a
syndicate short position. The short position may be either a covered short
position or a naked short position. In a covered short position, the number of
shares overallotted by the underwriters is not greater than the number of
shares that they may purchase in the overallotment option. In a naked short
position, the number of shares involved is greater than the number of shares
in the
S-27
overallotment option. The underwriters may close out any short position by
either exercising their overallotment option and/or purchasing shares in the
open market.
- Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. In determining the source of shares to close out
the short position, the underwriters will consider, among other things, the
price of shares available for purchase in the open market as compared to the
price at which they may purchase shares through the overallotment option. If
the underwriters sell more shares than could be covered by the overallotment
option, a naked short position, the position can only be closed out by buying
shares in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there could be downward pressure on the
price of the shares in the open market after pricing that could adversely
affect investors who purchase in the offering.
- Penalty bids permit the underwriters to reclaim a selling concession from a
syndicate member when the common stock originally sold by the syndicate member
is purchased in a stabilizing or syndicate covering transaction.
As a result of these activities, the price of our common stock may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. The underwriters may carry out these transactions on the Nasdaq National
Market, in the over-the-counter market or otherwise.
Brean Murray & Co., Inc. and Punk, Ziegel & Company, L.P., two of the
underwriters in this offering, have previously performed investment banking and
advisory services for us for which they received customary fees and expenses. In
addition, the underwriters and their affiliates may from time to time in the
future engage in transactions with us and perform services for us in the
ordinary course of their business.
S-28
LEGAL MATTERS
Alston & Bird LLP has passed upon certain legal matters regarding the shares
offered by this prospectus. Certain legal matters will be passed upon for the
underwriters by Cahill Gordon & Reindel LLP.
EXPERTS
The consolidated financial statements of Keryx Biopharmaceuticals, Inc., a
development stage company, as of December 31, 2004 and 2003, and for each of the
years in the three-year period ended December 31, 2004, and for the period from
December 3, 1996 to December 31, 2004, and management's assessment of the
effectiveness of internal control over financial reporting as of December 31,
2004 have been incorporated by reference herein and in the registration
statement in reliance upon the reports of KPMG LLP, independent registered
public accounting firm, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The consolidated balance sheet of ACCESS Oncology, Inc. as of December 31, 2003,
and the related consolidated statement of operations, statement of stockholders'
equity, and statement for cash flows for the year then ended incorporated in
this prospectus by reference from Amendment No. 1 on Form 8-K/A of Keryx
Biopharmaceuticals, Inc. filed with the SEC on April 20, 2004 amending the
Current Report on Form 8-K filed with the SEC on February 20, 2004, have been
audited by Deloitte & Touche LLP, independent registered public accounting firm,
as stated in their report (which report expresses an unqualified opinion), which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
S-29
PROSPECTUS
5,780,000 SHARES
KERYX BIOPHARMACEUTICALS, INC.
COMMON STOCK
We may offer and sell, from time to time, up to 5,780,000 shares of our common
stock. Specific terms of these offerings will be provided in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
We may offer our common stock in one or more offerings in amounts, at prices,
and on terms determined at the time of the offering. We may sell our common
stock through agents we select or through underwriters and dealers we select. If
we use agents, underwriters or dealers, we will name them and describe their
compensation in a prospectus supplement.
Our common stock is traded on the Nasdaq Stock Market under the symbol "KERX."
On October 12, 2004, the per share closing price of our common stock as reported
on the Nasdaq Stock Market was $10.33 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 4 OF THIS PROSPECTUS, IN ANY DOCUMENT INCORPORATED BY
REFERENCE, AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. YOU SHOULD CAREFULLY
CONSIDER THIS INFORMATION BEFORE BUYING OUR COMMON STOCK.
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.
The date of this prospectus is July 11, 2005
TABLE OF CONTENTS
PAGE
Keryx Biopharmaceuticals, Inc............................... 1
The offering................................................ 3
Where you can find more information......................... 3
Risk factors................................................ 4
Important information about this prospectus................. 14
Incorporation of certain information by reference........... 14
Forward looking statements.................................. 16
Use of proceeds............................................. 17
Description of common stock................................. 17
Plan of distribution........................................ 19
Legal matters............................................... 20
Experts..................................................... 20
i
SUMMARY
KERYX BIOPHARMACEUTICALS, INC.
We are a biopharmaceutical company focused on the acquisition, development and
commercialization of novel pharmaceutical products for the treatment of
life-threatening diseases, including diabetes and cancer. We have two product
candidates in the later stages of clinical development: Sulodexide, or KRX-101,
for the treatment of diabetic nephropathy, a life-threatening kidney disease
caused by diabetes, and Perifosine, or KRX-0401, for the treatment of multiple
forms of cancer.
Our lead compound under development is KRX-101, to which we have an exclusive
license in North America, Japan and certain other markets. A randomized,
double-blind, placebo-controlled, Phase II study of the use of Sulodexide for
treatment of diabetic nephropathy was conducted in 223 patients in Europe, and
the results of this study were published in the June 2002 issue of the Journal
of the American Society of Nephrology. The results of this Phase II study showed
a dose-dependent reduction in proteinuria or pathological urinary albumin
excretion rates. In 2001, the Food and Drug Administration, or FDA, granted
KRX-101 "Fast-Track" designation for the treatment of diabetic nephropathy and,
in 2002, we announced that the FDA had agreed, in principle, to permit us to
avail ourselves of the accelerated approval process under subpart H of the FDA's
regulations governing applications for the approval to market a new drug.
In the third quarter of 2003, we announced that the Collaborative Study Group,
or CSG, the largest standing renal clinical trial group in the United States
comprised of academic and tertiary nephrology care centers, will conduct the
U.S.-based Phase II/III clinical program for KRX-101 for the treatment of
diabetic nephropathy. The CSG has conducted multiple large-scale clinical trials
resulting in over 40 publications in peer-reviewed journals. The CSG conducted
the pivotal studies for two of the three drugs that are currently approved for
treatment of diabetic nephropathy. In the fourth quarter of 2003, we initiated
the Phase II portion of our Phase II/III clinical program for our diabetic
nephropathy drug candidate, KRX-101.
In the first quarter of 2004, we completed the acquisition of ACCESS Oncology, a
privately-held, cancer-focused biotechnology company. The acquired drug
portfolio includes three clinical stage compounds, designated as KRX-0401,
KRX-0402 and KRX-0403.
KRX-0401 is a novel, first-in-class, oral Akt-inhibitor that has demonstrated
preliminary single agent anti-tumor activity in Phase I studies and is currently
in a Phase II clinical program evaluating KRX-0401 as a single agent in the
treatment of multiple forms of cancer. The National Cancer Institute, or NCI, a
department of the National Institutes of Health, or NIH, is completing several
Phase II clinical trials, conducted and funded by the NCI under a Cooperative
Research and Development Agreement, or CRADA, arrangement with us. During the
second quarter of 2004, we announced the initiation of the Keryx-sponsored Phase
II program for KRX-0401. In connection with this clinical program, we intend to
initiate several single-agent and combination studies testing KRX-0401 as a
treatment for various forms of cancer. To date, we have initiated two trials
under this program. The first trial is a multi-center study that will evaluate
the safety and efficacy of KRX-0401 as a single agent in the treatment of
patients with non-small cell lung cancer (NSCLC) who have progressed despite
standard therapy. The second trial is a multi-center study that will evaluate
KRX-0401 in combination with Gemcitabine (Gemzar(R)), a form of chemotherapy, in
the treatment of several tumor types
1
for which Gemcitabine is currently indicated, including non-small-cell lung
cancer, breast cancer and pancreatic cancer.
The acquired cancer portfolio also includes KRX-0402, an inhibitor of DNA
repair, which is also being studied by the NCI under a CRADA arrangement in
multiple clinical trials. In addition, the portfolio includes KRX-0403, which is
a novel spindle poison in the same general class as Navelbine(R), Taxol(R)and
Taxotere(R). KRX-0403 has completed a Phase I study. As a part of the
acquisition of ACCESS Oncology, we acquired the Online Collaborative Oncology
Group, Inc., or OCOG, a subsidiary of ACCESS Oncology which provides clinical
trial management and site recruitment services to biotechnology and
pharmaceutical companies.
To date, we have not received approval for the sale of any of our drug
candidates in any market.
We were incorporated in Delaware in October 1998. We commenced operations in
November 1999, following our acquisition of substantially all of the assets and
certain of the liabilities of Partec Ltd., our predecessor company that began
its operations in January 1997. Since commencing operations, our activities have
been primarily devoted to developing our technologies and drug candidates,
acquiring clinical-stage compounds, raising capital, purchasing assets for our
facilities and recruiting personnel. We are a development stage company and have
no product sales to date. Our major sources of working capital have been
proceeds from various private placements of equity securities, option and
warrant exercises and from our initial public offering.
Our principal executive offices are located at 750 Lexington Avenue, New York,
New York 10022, and our telephone number is (212) 531-5965. We maintain a
website on the Internet at www.keryx.com and our e-mail address is
info@keryx.com. Our Internet website, and the information contained on it, are
not to be considered part of this prospectus.
2
THE OFFERING
COMMON STOCK OFFERED
HEREBY..................5,780,000 shares
USE OF PROCEEDS.........We intend to use the net proceeds of any offering to
advance our pharmaceutical products and to in-license,
acquire and develop novel drug candidates.
NASDAQ SYMBOL...........KERX
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission, or SEC. You may read
and copy, at prescribed rates, any documents we have filed with the SEC at its
Public Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. We also file these documents with the SEC
electronically. You can access the electronic versions of these filings on the
SEC's Internet website found at http://www.sec.gov. You can also obtain copies
of materials we file with the SEC from our Internet website found at
www.keryx.com. Our stock is quoted on The Nasdaq Stock Market under the symbol
"KERX."
3
RISK FACTORS
You should carefully consider the following risks and uncertainties. If any of
the following occurs, our business, financial condition or operating results
could be materially harmed. These factors could cause the trading price of our
common stock to decline, and you could lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A LIMITED OPERATING HISTORY AND HAVE INCURRED SUBSTANTIAL OPERATING
LOSSES SINCE OUR INCEPTION. WE EXPECT TO CONTINUE TO INCUR LOSSES IN THE FUTURE
AND MAY NEVER BECOME PROFITABLE.
We have a limited operating history. You should consider our prospects in light
of the risks and difficulties frequently encountered by early stage companies.
In addition, we have incurred operating losses since our inception, and expect
to continue to incur operating losses for the foreseeable future and may never
become profitable. As of June 30, 2004, we had an accumulated deficit of
approximately $79.7 million. As we expand our research and development efforts,
we will incur increasing losses. We may continue to incur substantial operating
losses even if we begin to generate revenues from our drug candidates or
technologies.
We have not yet commercialized any products or technologies and cannot be sure
we will ever be able to do so. Even if we commercialize one or more of our drug
candidates or technologies, we may not become profitable. Our ability to achieve
profitability depends on a number of factors, including our ability to complete
our development efforts, obtain regulatory approval for our drug candidates and
successfully commercialize our drug candidates and technologies.
IF WE ARE UNABLE TO SUCCESSFULLY COMPLETE OUR CLINICAL TRIAL PROGRAMS FOR
KRX-101 OR OUR RECENTLY ACQUIRED CANCER COMPOUNDS, OR IF SUCH CLINICAL TRIALS
TAKE LONGER TO COMPLETE THAN WE PROJECT, OUR ABILITY TO EXECUTE OUR CURRENT
BUSINESS STRATEGY WILL BE ADVERSELY AFFECTED.
Whether or not and how quickly we complete clinical trials is dependent in part
upon the rate at which we are able to engage clinical trial sites and,
thereafter, the rate of enrollment of patients. Patient enrollment is a function
of many factors, including the size of the patient population, the proximity of
patients to clinical sites, the eligibility criteria for the study and the
existence of competitive clinical trials. If we experience delays in identifying
and contracting with sites and/or in patient enrollment in our clinical trial
programs, we may incur additional costs and delays in our development programs,
and may not be able to complete our clinical trials on a cost-effective basis.
Additionally, we have submitted a subpart H clinical development plan to the FDA
for the clinical development of KRX-101 for diabetic nephropathy. A final
agreement on the specifics of our clinical program for that development plan has
not been agreed to with the FDA, and we cannot give any assurance that an
acceptable final agreement on the specifics of such clinical program will ever
be reached with the FDA. In fact, based on the FDA's comments to our last
submission, we believe that additional discussions with the FDA will be required
prior to final agreement on the specifics of our subpart H accelerated approval
clinical program. We cannot assure you as to when those discussions will take
place or that the results of such discussions will be satisfactory to us.
Additionally, the FDA has stated that, based on the
4
novelty of the approach that we have discussed with them, they may want to refer
our proposed approach to the Cardio-Renal Advisory Committee.
Moreover, even if we are able to reach final agreement with the FDA regarding
the specifics of an accelerated approval approach, no assurance can be given
that we will be able to meet the requirements set forth in such agreement. The
subpart H process is complex and requires flawless execution. Many companies who
have been granted the right to utilize an accelerated approval approach have
failed to obtain approval. The clinical timeline, scope and consequent cost for
the development of KRX-101 will depend, in part, on the final outcome of our
discussions with the FDA. Moreover, negative or inconclusive results from the
clinical trials we hope to conduct or adverse medical events could cause us to
have to repeat or terminate the clinical trials. Accordingly, we may not be able
to complete the clinical trials within an acceptable time frame, if at all.
IF OUR DRUG CANDIDATES DO NOT RECEIVE THE NECESSARY REGULATORY APPROVALS, WE
WILL BE UNABLE TO COMMERCIALIZE OUR DRUG CANDIDATES.
We have not received, and may never receive, regulatory approval for commercial
sale for any of our drug candidates. We will need to conduct significant
additional research and human testing before we can apply for product approval
with the FDA or with regulatory authorities of other countries. Pre-clinical
testing and clinical development are long, expensive and uncertain processes.
Satisfaction of regulatory requirements typically depends on the nature,
complexity and novelty of the product and requires the expenditure of
substantial resources. Data obtained from pre-clinical and clinical tests can be
interpreted in different ways, which could delay, limit or prevent regulatory
approval. It may take us many years to complete the testing of our drug
candidates and failure can occur at any stage of this process. Negative or
inconclusive results or medical events during a clinical trial could cause us to
delay or terminate our development efforts.
Clinical trials also have a high risk of failure. A number of companies in the
pharmaceutical industry, including biotechnology companies, have suffered
significant setbacks in advanced clinical trials, even after achieving promising
results in earlier trials. If we experience delays in the testing or approval
process or if we need to perform more or larger clinical trials than originally
planned, our financial results and the commercial prospects for our drug
candidates may be materially impaired. In addition, we have limited experience
in conducting and managing the clinical trials necessary to obtain regulatory
approval in the United States and abroad and, accordingly, may encounter
unforeseen problems and delays in the approval process.
BECAUSE WE LICENSE OUR PROPRIETARY TECHNOLOGIES, TERMINATION OF THESE AGREEMENTS
WOULD PREVENT US FROM DEVELOPING OUR DRUG CANDIDATES.
We do not own any of our drug candidates. We have licensed the patent rights to
these drugs candidates from others. These license agreements require us to meet
development or financing milestones and impose development and commercialization
due diligence requirements on us. In addition, under these agreements, we must
pay royalties on sales of products resulting from licensed technologies and pay
the patent filing, prosecution and maintenance costs related to the licenses. If
we do not meet our obligations in a timely manner or if we otherwise breach the
terms of our agreements, our licensors could terminate the agreements, and we
would lose the rights to our drug candidates.
5
BECAUSE OUR BUSINESS MODEL IS BASED, IN PART, ON THE ACQUISITION OR IN-LICENSING
OF ADDITIONAL CLINICAL PRODUCT CANDIDATES, IF WE FAIL TO ACQUIRE OR IN-LICENSE
SUCH CLINICAL PRODUCT CANDIDATES, OUR FUTURE GROWTH PROSPECTS MAY BE
SUBSTANTIALLY IMPAIRED.
As a major part of our business strategy, we plan to continue to acquire or
in-license additional clinical stage product candidates. If we fail to acquire
or in-license such product candidates, we may not achieve expectations of our
future performance. Because we do not intend to engage in significant discovery
research, we must rely on third parties to sell or license new product
opportunities to us. Other companies, including some with substantially greater
financial, development, marketing and sales resources, are competing with us to
acquire or in-license such products or product candidates. We may not be able to
acquire or in-license rights to additional products or product candidates on
acceptable terms, if at all.
IF WE DO NOT ESTABLISH OR MAINTAIN DRUG DEVELOPMENT AND MARKETING ARRANGEMENTS
WITH THIRD PARTIES, WE MAY BE UNABLE TO COMMERCIALIZE OUR TECHNOLOGIES INTO
PRODUCTS.
We are an emerging company and do not possess all of the capabilities to fully
commercialize our product candidates on our own. From time to time, we may need
to contract with third parties to:
-- assist us in developing, testing and obtaining regulatory approval for and
commercializing some of our compounds and technologies; and
-- market and distribute our drug candidates.
We can provide no assurance that we will be able to successfully enter into
agreements with such partners on terms that are acceptable to us. If we are
unable to successfully contract with third parties for these services when
needed, or if existing arrangements for these services are terminated, whether
or not through our actions, or if such third parties do not fully perform under
these arrangements, we may have to delay, scale back or end one or more of our
drug development programs or seek to develop or commercialize our technologies
independently, which could result in delays. Further, such failure could result
in the termination of license rights to one or more of our technologies.
Moreover, if these development or marketing agreements take the form of a
partnership or strategic alliance, such arrangements may provide our
collaborators with significant discretion in determining the efforts and
resources that they will apply to the development and commercialization of
products based on our technologies.
Accordingly, to the extent that we rely on third parties to research, develop or
commercialize products based on our technologies, we are unable to control
whether such products will be scientifically or commercially successful.
EVEN IF WE OBTAIN FDA APPROVAL TO MARKET OUR PRODUCT CANDIDATES, IF OUR PRODUCTS
FAIL TO ACHIEVE MARKET ACCEPTANCE, WE WILL NEVER RECORD MEANINGFUL REVENUES.
Even if our products are approved for sale, they may not be commercially
successful in the marketplace. Market acceptance of our product candidates will
depend on a number of factors, including:
-- perceptions by members of the health care community, including physicians,
of the safety and efficacy of our product candidates;
-- the rates of adoption of our products by medical practitioners and the
target populations for our products;
6
-- the potential advantages that our product candidates offer over existing
treatment methods;
-- the cost-effectiveness of our product candidates relative to competing
products;
-- the availability of government or third-party payor reimbursement for our
product candidates;
-- the side effects or unfavorable publicity concerning our products or similar
products; and
-- the effectiveness of our sales, marketing and distribution efforts.
Because we expect sales of our product candidates, if approved, to generate
substantially all of our revenues in the long-term, the failure of our drugs to
find market acceptance would harm our business and could require us to seek
additional financing or other sources of revenue.
WE RELY ON THIRD PARTIES TO MANUFACTURE OUR PRODUCTS. IF THESE THIRD PARTIES DO
NOT SUCCESSFULLY MANUFACTURE OUR PRODUCTS, OUR BUSINESS WILL BE HARMED.
We have no experience in manufacturing products for clinical or commercial
purposes and do not have any manufacturing facilities. We intend to continue to
use third parties to manufacture our products for use in clinical trials and for
future sales. We may not be able to enter into future third-party contract
manufacturing agreements on acceptable terms, if at all.
Contract manufacturers often encounter difficulties in scaling up production,
including problems involving production yields, quality control and assurance,
shortage of qualified personnel, compliance with FDA and foreign regulations,
production costs and development of advanced manufacturing techniques and
process controls. Our third-party manufacturers may not perform as agreed or may
not remain in the contract manufacturing business for the time required by us to
successfully produce and market our drug candidates. In addition, our contract
manufacturers will be subject to ongoing periodic, unannounced inspections by
the FDA and corresponding foreign governmental agencies to ensure strict
compliance with, among other things, current good manufacturing practices, in
addition to other governmental regulations and corresponding foreign standards.
We will not have control over, other than by contract, third-party
manufacturers' compliance with these regulations and standards. Switching or
engaging multiple manufacturers may be difficult because the number of potential
manufacturers is limited and, particularly in the case of KRX-101, the process
by which multiple manufacturers make the drug substance must be identical at
each manufacturing facility. It may be difficult for us to find and engage
replacement or multiple manufacturers quickly and on terms acceptable to us, if
at all. Moreover, if we need to change manufacturers, the FDA and corresponding
foreign regulatory agencies must approve these manufacturers in advance, which
will involve testing and additional inspections to ensure compliance with FDA
and foreign regulations and standards.
If third-party manufacturers fail to deliver the required quantities of our drug
candidates on a timely basis and at commercially reasonable prices, and if we
fail to find replacement or multiple manufacturers on acceptable terms, our
ability to develop and deliver products on a timely and competitive basis may be
adversely impacted and our business, financial condition or results of
operations will be materially harmed.
In the event that we are unable to obtain or retain third-party manufacturers,
we will not be able to commercialize our products as planned. The manufacture of
our products for clinical trials and commercial purposes is subject to FDA and
foreign regulations. No assurance can be given that our third-party
manufacturers will comply with these regulations or other regulatory
requirements now or in the future.
7
We have entered into a contract manufacturing relationship with a U.S.-based
contract manufacturer for KRX-101 which we believe will be adequate to satisfy
our current clinical and commercial supply needs; however, as we seek to
transition the manufacturing of KRX-101 to our U.S.-based contract manufacturer,
we will need to create a reproducible manufacturing process that will ensure
consistent manufacture of KRX-101 across multiple batches and sources. As with
all heparin-like compounds, the end product is highly sensitive to the
manufacturing process utilized. Accordingly, the creation of a reproducible
process will be required for the successful commercialization of KRX-101. There
can be no assurance that we will be successful in this endeavor.
IF WE ARE NOT ABLE TO OBTAIN THE RAW MATERIALS REQUIRED FOR THE MANUFACTURE OF
OUR LEAD PRODUCT CANDIDATE, KRX-101, OUR ABILITY TO DEVELOP AND MARKET THIS
PRODUCT CANDIDATE WILL BE SUBSTANTIALLY HARMED.
Source materials for KRX-101, our lead product candidate, are derived from
porcine intestines. Long-term supplies for KRX-101 could be affected by
limitations in the supply of porcine intestines and the demand for other heparin
products, over which we will have no control. Additionally, diseases affecting
the world supply of pigs could have an actual or perceived negative impact on
our ability, or the ability of our contract manufacturers, to source, make
and/or sell KRX-101. Such negative impact could materially affect the commercial
success of KRX-101.
IF OUR COMPETITORS DEVELOP AND MARKET PRODUCTS THAT ARE LESS EXPENSIVE, MORE
EFFECTIVE OR SAFER THAN OUR PRODUCT CANDIDATES, OUR COMMERCIAL OPPORTUNITY MAY
BE REDUCED OR ELIMINATED.
The pharmaceutical industry is highly competitive. Our commercial opportunity
may be reduced or eliminated if our competitors develop and market products that
are less expensive, more effective or safer than our drug candidates. Other
companies have products or drug candidates in various stages of pre-clinical or
clinical development to treat diseases for which we are also seeking to discover
and develop drug candidates. Some of these potential competing drugs are further
advanced in development than our drug candidates and may be commercialized
earlier. Even if we are successful in developing effective drugs, our products
may not compete successfully with products produced by our competitors.
Our competitors include pharmaceutical companies and biotechnology companies, as
well as universities and public and private research institutions. In addition,
companies that are active in different but related fields represent substantial
competition for us. Many of our competitors have significantly greater capital
resources, larger research and development staffs and facilities and greater
experience in drug development, regulation, manufacturing and marketing than we
do. These organizations also compete with us to recruit qualified personnel,
attract partners for joint ventures or other collaborations, and license
technologies that are competitive with ours. As a result, our competitors may be
able to more easily develop technologies and products that could render our
technologies or our drug candidates obsolete or noncompetitive.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, OUR OPERATIONS COULD BE DISRUPTED AND OUR BUSINESS COULD BE HARMED.
We currently have 22 full and part-time employees. To successfully develop our
drug candidates, we must be able to attract and retain highly skilled personnel.
In addition, if we lose the services of our current personnel, in particular,
Michael S. Weiss, our Chairman and Chief Executive Officer, our ability to
continue to execute on our business plan could be
8
materially impaired. In addition, while we have an employment agreement with Mr.
Weiss, this agreement would not prevent him from terminating his employment with
us.
ANY ACQUISITIONS WE MAKE MAY DILUTE YOUR EQUITY OR REQUIRE A SIGNIFICANT AMOUNT
OF OUR AVAILABLE CASH AND MAY NOT BE SCIENTIFICALLY OR COMMERCIALLY SUCCESSFUL.
As part of our business strategy, we may effect acquisitions to obtain
additional businesses, products, technologies, capabilities and personnel. If we
make one or more significant acquisitions in which the consideration includes
stock or other securities, your equity in us may be significantly diluted. If we
make one or more significant acquisitions in which the consideration includes
cash, we may be required to use a substantial portion of our available cash.
Acquisitions involve a number of operational risks, including:
-- difficulty and expense of assimilating the operations, technology and
personnel of the acquired business;
-- inability to retain the management, key personnel and other employees of the
acquired business;
-- inability to maintain the acquired company's relationship with key third
parties, such as alliance partners;
-- exposure to legal claims for activities of the acquired business prior to
acquisition; diversion of management attention; and
-- potential impairment of substantial goodwill and write-off of in-process
research and
-- development costs, adversely affecting our reported results of operations.
WE FACE PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE
INSURANCE.
The use of our drug candidates in clinical trials, and the sale of any approved
products, exposes us to liability claims. Although we are not aware of any
historical or anticipated product liability claims against us, if we cannot
successfully defend ourselves against product liability claims, we may incur
substantial liabilities or be required to cease clinical trials of our drug
candidates or limit commercialization of any approved products.
We believe that we have obtained sufficient product liability insurance coverage
for our clinical trials. We intend to expand our insurance coverage to include
the commercial sale of any approved products if marketing approval is obtained;
however, insurance coverage is becoming increasingly expensive. We may not be
able to maintain insurance coverage at a reasonable cost. We may not be able to
obtain additional insurance coverage that will be adequate to cover product
liability risks that may arise. Regardless of merit or eventual outcome, product
liability claims may result in:
-- decreased demand for a product;
-- injury to our reputation;
-- inability to continue to develop a drug candidate;
-- withdrawal of clinical trial volunteers; and
-- loss of revenues.
Consequently, a product liability claim or product recall may result in losses
that could be material.
9
IN CONNECTION WITH PROVIDING OUR SERVICES, WE MAY BE EXPOSED TO LIABILITY THAT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
In conducting the activities of OCOG, any failure on our part to comply with
applicable governmental regulations or contractual obligations could expose us
to liability to our clients and could have a material adverse effect on us. We
also could be held liable for errors or omissions in connection with the
services we perform. In addition, the wrongful or erroneous delivery of health
care information or services may expose us to liability. We could be materially
and adversely affected if we were required to pay damages or bear the costs of
defending any such claims.
RISKS RELATED TO OUR FINANCIAL CONDITION
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDS ON TERMS FAVORABLE TO US, OR AT ALL,
OUR BUSINESS WOULD BE HARMED.
We expect to use, rather than generate, funds from operations for the
foreseeable future. Based on our current plans, we believe our existing cash and
cash equivalents will be sufficient to fund our operating expenses and capital
requirements for approximately the next 36 months; however, the actual amount of
funds that we will need prior to or after that date will be determined by many
factors, some of which are beyond our control. As a result, we may need funds
sooner or in different amounts than we currently anticipate. These factors
include:
-- the progress of our development activities;
-- the progress of our research activities;
-- the number and scope of our development programs;
-- our ability to establish and maintain current and new licensing or
acquisition arrangements;
-- our ability to achieve our milestones under our licensing arrangements;
-- the costs involved in enforcing patent claims and other intellectual
property rights; and
-- the costs and timing of regulatory approvals.
If our capital resources are insufficient to meet future capital requirements,
we will have to raise additional funds. If we are unable to obtain additional
funds on terms favorable to us or at all, we may be required to cease or reduce
our operating activities or sell or license to third parties some or all of our
technology. If we raise additional funds by selling additional shares of our
capital stock, the ownership interests of our stockholders will be diluted. If
we raise additional funds through the sale or license of our technology, we may
be unable to do so on terms favorable to us.
OUR PRIOR RESTRUCTURINGS MAY RESULT IN ADDITIONAL ISRAELI-RELATED LIABILITIES.
In September 2001, one of our Israeli subsidiaries received the status of an
"Approved Enterprise," a status which grants certain tax benefits in Israel in
accordance with the "Law for the Encouragement of Capital Investments, 1959."
Through December 31, 2003, our Israeli subsidiary, which ceased operations in
2003, has received tax benefits in the form of exemptions of approximately
$744,000 as a result of our subsidiary's status as an "Approved Enterprise." As
part of the restructuring implemented during 2003, we closed down our Jerusalem
laboratory facility. In October 2003, the subsidiary received a letter from the
Israeli Ministry of Industry and Trade that its Approved Enterprise status was
cancelled as of July 2003 and that past benefits would not need to be repaid.
The Israeli tax authorities have yet to
10
confirm this position; however, we believe that, based on the letter received
from the Ministry of Industry and Trade, it is unlikely that past benefits will
need to be repaid, and therefore, we have not recorded any charge with respect
to this potential liability. There can be no assurances that the Israeli tax
authorities will confirm this position. As a result, we may be liable to repay
some or all of the tax benefits received to date, which could adversely affect
our cash flow and results of operations.
In July 2003, our Israeli subsidiaries vacated their Jerusalem facility and
relocated to smaller facilities. The landlord of the Jerusalem facility has
alleged that we were immediately liable to pay the landlord a sum in excess of
$1.1 million as a result of the alleged breach of the lease agreement for the
Jerusalem facility. The amount demanded by the landlord includes rent for the
entire remaining term of the lease (through 2005), as well as property taxes and
other costs. In August 2003, the landlord claimed a bank guarantee, in the
amount of $222,000, which was previously provided as security in connection with
the lease agreement, making the net amount potentially due to the landlord
$776,000. To date, no litigation has been initiated, and, to our knowledge, the
landlord has succeeded in leasing most, if not all, of the space to one or more
new tenants.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, THIRD PARTIES
MAY BE ABLE TO USE OUR TECHNOLOGY, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO
COMPETE IN THE MARKET.
Our commercial success will depend in part on our ability and the ability of our
licensors to obtain and maintain patent protection on our drug products and
technologies and successfully defend these patents and technologies against
third-party challenges. The patent positions of pharmaceutical and biotechnology
companies can be highly uncertain and involve complex legal and factual
questions. No consistent policy regarding the breadth of claims allowed in
biotechnology patents has emerged to date. Accordingly, the patents we use may
not be sufficiently broad to prevent others from practicing our technologies or
from developing competing products. Furthermore, others may independently
develop similar or alternative technologies or design around our patented
technologies. The patents we use may be challenged or invalidated or may fail to
provide us with any competitive advantage.
Moreover, we rely on trade secrets to protect technology where we believe patent
protection is not appropriate or obtainable. However, trade secrets are
difficult to protect. While we require our employees, collaborators and
consultants to enter into confidentiality agreements, this may not be sufficient
to adequately protect our trade secrets or other proprietary information. In
addition, we share ownership and publication rights to data relating to some of
our drug candidates with our research collaborators and scientific advisors. If
we cannot maintain the confidentiality of this information, our ability to
receive patent protection or protect our proprietary information will be at
risk.
LITIGATION OR THIRD-PARTY CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT COULD
REQUIRE US TO SPEND SUBSTANTIAL TIME AND MONEY DEFENDING SUCH CLAIMS AND
ADVERSELY AFFECT OUR ABILITY TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS.
Third parties may assert that we are using their proprietary technology without
authorization. In addition, third parties may have or obtain patents in the
future and claim that our technologies infringe their patents. If we are
required to defend against patent suits brought by third parties, or if we sue
third parties to protect our patent rights, we may be required to pay
substantial litigation costs, and our management's attention may be diverted
from
11
operating our business. In addition, any legal action against our licensors or
us that seeks damages or an injunction of our commercial activities relating to
the affected technologies could subject us to monetary liability and require our
licensors or us to obtain a license to continue to use the affected
technologies. We cannot predict whether our licensors or we would prevail in any
of these types of actions or that any required license would be made available
on commercially acceptable terms, if at all.
RISKS RELATED TO OUR COMMON STOCK
CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK AMONG OUR EXISTING EXECUTIVE
OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM
INFLUENCING SIGNIFICANT CORPORATE DECISIONS.
As of June 30, 2004, our executive officers, directors and principal
stockholders (including their affiliates) beneficially owned, in the aggregate,
approximately 28.24% of our outstanding common stock, including, for this
purpose, currently exercisable options and warrants held by our executive
officers, directors and principal stockholders. As a result, these persons,
acting together, may have the ability to effectively determine the outcome of
all matters submitted to our stockholders for approval, including the election
and removal of directors and any merger, consolidation or sale of all or
substantially all of our assets. In addition, such persons, acting together, may
have the ability to effectively control our management and affairs. Accordingly,
this concentration of ownership may harm the market price of our common stock by
discouraging a potential acquirer from at tempting to acquire us.
OUR STOCK PRICE COULD BE VOLATILE WHICH INCREASES THE RISK OF LITIGATION, AND
MAY RESULT IN A SIGNIFICANT DECLINE IN THE VALUE OF YOUR INVESTMENT.
The trading price of our common stock is likely to be highly volatile and
subject to wide fluctuations in price in response to various factors, many of
which are beyond our control. These factors include:
-- developments concerning our drug candidates;
-- announcements of technological innovations by us or our competitors;
-- introductions or announcements of new products by us or our competitors;
-- announcements by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
-- changes in financial estimates by securities analysts;
-- actual or anticipated variations in quarterly operating results;
-- expiration or termination of licenses, research contracts or other
collaboration agreements;
-- conditions or trends in the regulatory climate and the biotechnology and
pharmaceutical industries;
-- changes in the market valuations of similar companies; and
-- additions or departures of key personnel.
In addition, equity markets in general, and the market for biotechnology and
life sciences companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating
performance of companies traded
12
in those markets. These broad market and industry factors may materially affect
the market price of our common stock, regardless of our development and
operating performance. In the past, following periods of volatility in the
market price of a company's securities, securities class-action litigation has
often been instituted against that company. Such litigation, if instituted
against us, could cause us to incur substantial costs to defend such claims and
divert management's attention and resources, which could seriously harm our
business.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD MAKE A
THIRD-PARTY ACQUISITION OF US DIFFICULT. THIS COULD LIMIT THE PRICE INVESTORS
MIGHT BE WILLING TO PAY IN THE FUTURE FOR OUR COMMON STOCK.
Provisions in our amended and restated certificate of incorporation and bylaws
could have the effect of making it more difficult for a third party to acquire,
or of discouraging a third party from attempting to acquire, or control us.
These provisions could limit the price that certain investors might be willing
to pay in the future for shares of our common stock. Our amended and restated
certificate of incorporation allows us to issue preferred stock with rights
senior to those of the common stock and our amended and restated bylaws
eliminate the right of stockholders to call a special meeting of stockholders,
which could make it more difficult for stockholders to effect certain corporate
actions. These provisions could also have the effect of delaying or preventing a
change in control. The issuance of preferred stock could decrease the amount of
earnings and assets available for distribution to the holders of our common
stock or could adversely affect the rights and powers, including voting rights,
of such holders. In certain circumstances, such issuance could have the effect
of decreasing the market price of our common stock.
13
IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
This prospectus is part of a "shelf" registration statement that we filed with
the SEC. By using a shelf registration statement, we may sell our common stock,
as described in this prospectus, from time to time in one or more offerings. We
may use the shelf registration statement to offer and sell up to a total of
5,780,000 shares of our common stock. Each time we sell our common stock, we
will provide a supplement to this prospectus that contains specific information
about the terms of such offering. The supplement may also add, update or change
information contained in this prospectus. Before purchasing any of our common
stock, you should carefully read both this prospectus and any supplement,
together with the additional information incorporated into this prospectus or
described under the heading "Where You Can Find More Information."
You should rely only on the information contained or incorporated by reference
in this prospectus and the supplement. We have not authorized any other person
to provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We will not make an
offer to sell our common stock in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in this
prospectus, as well as information we previously filed with the SEC and have
incorporated by reference, is accurate as of the date on the front cover of this
prospectus only. Our business, financial condition, results of operations and
prospects may have changed since that date.
We will not use this prospectus to offer and sell our common stock unless it is
accompanied by a supplement that more fully describes the terms of the offering.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents without restating that
information in this document. The information incorporated by reference into
this prospectus is considered to be part of this prospectus, and information we
file with the SEC after the date of this prospectus will automatically update
and supersede the information contained in this prospectus and documents listed
below. We incorporate by reference into this prospectus the documents listed
below, except to the extent information in those documents differs from
information contained in this prospectus, and any future filings made by us with
the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended, including exhibits:
(a) Our Annual Report on Form 10-K for the year ended December 31, 2003;
(b) Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004;
(c) Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2004;
(d) Our Current Report on Form 8-K filed with the SEC on January 15, 2004;
(e) Our Current Report on Form 8-K filed with the SEC on February 20, 2004,
and as amended on Form 8-K/A filed with the SEC on April 20, 2004;
(f) Our Current Report on Form 8-K filed with the SEC on September 23, 2004;
and
(g) The description of our common stock found on page 13 of this prospectus.
14
We will provide to each person, including any beneficial owner, to whom a copy
of this prospectus is delivered, a copy of any or all of the information that we
have incorporated by reference into this prospectus. We will provide this
information upon written or oral request at no cost to the requester. You may
request this information by contacting our corporate headquarters at the
following address: 750 Lexington Avenue, New York, New York 10022, Attn: Vice
President Finance and Investor Relations, or by calling (212) 531-5965.
15
FORWARD LOOKING STATEMENTS
When used in this prospectus and elsewhere by management or us from time to
time, the words "anticipate," "believe," "estimate," "may," "expect" and similar
expressions are generally intended to identify forward-looking statements. These
forward-looking statements include, but are not limited to, statements about
our:
-- expectations for increases or decreases in expenses;
-- expectations for the development, manufacturing, and approval of KRX-101,
KRX-0401, KRX-0402, KRX-0403 or any other products we may acquire or
in-license;
-- expectations for incurring additional capital expenditures to expand our
research and development capabilities;
-- expectations for generating revenue or becoming profitable on a sustained
basis;
-- expectations or ability to enter into marketing and other partnership
agreements;
-- expectations or ability to enter into product acquisition and in-licensing
transactions;
-- estimates of the sufficiency of our existing cash and cash equivalents and
investments to finance our operating and capital requirements;
-- expected losses; and
-- expectations for future capital requirements.
Our actual results could differ materially from those results expressed in, or
implied by, these forward-looking statements. Potential risks and uncertainties
that could affect our actual results include those discussed in the section
titled "Risk Factors," beginning on page 3 of this prospectus, the risk factors
we may include in a supplement to this prospectus, and any risk factors we may
include in other documents incorporated by reference into this prospectus. The
list of factors that may affect future performance and the accuracy of
forward-looking statements is illustrative, but by no means exhaustive.
All forward-looking statements should be evaluated with the understanding of
their inherent uncertainty. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, events, levels of activity, performance or achievements. We do not
assume responsibility for the accuracy and completeness of the forward-looking
statements. We do not intend to update any of the forward-looking statements
after the date of this prospectus to conform them to actual results.
16
USE OF PROCEEDS
Unless otherwise indicated in a prospectus supplement, the net proceeds from the
sale of the common stock will be used to advance our pharmaceutical products and
to in-license, acquire and develop novel drug candidates. The timing and amounts
of our actual expenditures will depend on several factors, including the
progress of our clinical trials, the progress of our research and development
programs, the results of other pre-clinical and clinical studies and the timing
and costs of regulatory approvals.
DESCRIPTION OF COMMON STOCK
The following summary of the terms of our common stock may not be complete and
is subject to, and qualified in its entirety by reference to, the terms and
provisions of our certificate of incorporation and our bylaws. You should refer
to, and read this summary together with, our certificate of incorporation and
bylaws to review all of the terms of our common stock that may be important to
you.
COMMON STOCK
Under our certificate of incorporation, we are authorized to issue a total of
60,000,000 shares of common stock, par value $0.001 per share. As of September
28, 2004, we had issued and outstanding 30,834,180 shares of our common stock.
There are approximately 73 holders of record. All outstanding shares of our
common stock are fully paid and nonassessable. Our common stock is listed on the
Nasdaq National Market under the symbol "KERX."
DIVIDENDS
Holders of our common stock are entitled to participate equally in dividends
when our board of directors declares dividends on our common stock out of
legally available funds.
We have never declared or paid any cash dividends on our common stock and do not
anticipate paying any such cash dividends in the foreseeable future. Future
dividends, if any, will be determined by our Board of Directors and will be
based upon our earnings, capital requirements and operating and financial
condition, among other factors, at the time any such dividends are considered by
our Board of Directors.
VOTING RIGHTS
The holders of our common stock are entitled to one vote for each share of
common stock held. Generally, the vote of the majority of the shares represented
at a meeting of the stockholders and entitled to vote is sufficient for actions
that require a vote of the stockholders.
LIQUIDATION AND DISSOLUTION
In the event of our liquidation, dissolution, or winding up, voluntarily or
involuntarily, holders of our common stock will have the right to a ratable
portion of the assets remaining after satisfaction in full of the prior rights
of our creditors and of all liabilities.
17
OTHER
Holders of our common stock are not entitled to any preemptive or preferential
right to purchase or subscribe for shares of capital stock of any class and have
no conversion or sinking fund rights.
TRANSFER AGENT
American Stock Transfer and Trust Company serves as the transfer agent and
registrar for all of our common stock.
18
PLAN OF DISTRIBUTION
We may sell the common stock in any of three ways (or in any combination):
-- through underwriters or dealers;
-- directly to a limited number of purchasers or to a single purchaser; or
-- through agents.
Each time that we use this prospectus to sell our common stock, we will also
provide a prospectus supplement that contains the specific terms of the
offering. The prospectus supplement will set forth the terms of the offering of
such common stock, including:
-- the name or names of any underwriters, dealers or agents and the amounts of
common stock underwritten or purchased by each of them, and
-- the public offering price of the common stock and the proceeds to us and
any discounts, commissions or concessions allowed or reallowed or paid to
dealers.
Any public offering price and any discounts or concessions allowed or reallowed
or paid to dealers may be changed from time to time.
If underwriters are used in the sale of any common stock, the common stock will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The common stock 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 common stock will be
subject to certain conditions precedent. The underwriters will be obligated to
purchase all of the common stock if they purchase any of the common stock.
We may sell the common stock through agents from time to time. The prospectus
supplement will name any agent involved in the offer or sale of the common stock
and any commissions we pay to them. Generally, any agent will be acting on a
best efforts basis for the period of its appointment.
We may authorize underwriters, dealers or agents to solicit offers by certain
purchasers to purchase the common stock 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.
Agents and underwriters may be entitled to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engage in transactions with, or perform services for us in the ordinary
course of business.
We may enter into derivative transactions with third parties, or sell common
stock 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 common stock covered by this
prospectus and the applicable prospectus supplement, including in short sale
transactions. If so, the third party may use common stock pledged by us or
19
borrowed from us or others to settle those sales or to close out any related
open borrowings of stock, and may use common stock 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, if
not identified in this prospectus, will be identified in the applicable
prospectus supplement (or a post-effective amendment).
The maximum compensation we will pay to underwriters in connection with any
offering of the securities will not exceed 8% of the maximum proceeds of such
offering. All post-effective amendments or prospectus supplements disclosing the
actual price and selling terms of each offering of the securities will be
submitted to the NASD Corporate Financing Department at the same time they are
filed with the SEC. The NASD Corporate Financing Department will be advised if,
subsequent to the filing of any offering of the securities, any of our 5% or
greater stockholders is or becomes an affiliate or associated person of an NASD
member participating in the distribution of such securities. All NASD members
participating in offerings of the securities understand the requirements that
have to be met in connection with SEC Rule 415 and Notice to Members 88-101.
LEGAL MATTERS
The legality and validity of the shares of common stock offered from time to
time under this prospectus will be passed upon by Alston & Bird LLP, New York,
New York.
EXPERTS
The consolidated financial statements of Keryx Biopharmaceuticals, Inc., a
development stage company, as of December 31, 2003 and 2002, and for each of the
years in the three-year period ended December 31, 2003, and for the period from
December 3, 1996 to December 31, 2003, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated balance sheet of ACCESS Oncology, Inc. as of December 31, 2003,
and the related consolidated statement of operations, statement of stockholders'
equity, and statement for cash flows for the year then ended incorporated in
this prospectus by reference from Amendment No. 1 on Form 8-K/A of Keryx
Biopharmaceuticals, Inc. filed with the SEC on April 20, 2004 amending the
Current Report on Form 8-K filed with the SEC on February 20, 2004, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report (which report expresses an unqualified opinion), which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
20
5,000,000 SHARES
keryx pharmaceutical logo
COMMON STOCK
PROSPECTUS
JPMORGAN BEAR, STEARNS & CO. INC.
Sole Book-Running Manager
JEFFERIES & COMPANY, INC.
OPPENHEIMER & CO.
BREAN MURRAY & CO., INC.
PUNK, ZIEGEL & COMPANY
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, COMMON SHARES
ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS OR OF ANY SALE OF OUR COMMON SHARES.
NO ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO PERMIT
A PUBLIC OFFERING OF THE COMMON SHARES OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IN THAT JURISDICTION.
PERSONS WHO COME INTO POSSESSION OF THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES ARE REQUIRED
TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THIS OFFERING
AND THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS APPLICABLE TO THAT JURISDICTION.
UNTIL JULY , 2005, ALL DEALERS THAT BUY, SELL OR TRADE IN OUR COMMON SHARES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
July , 2005