RULE NO. 424(b)(5)
REGISTRATION NO. 333-52696
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus supplement is not complete and +
+ may be changed. +
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Subject to Completion. Dated June 19, 2001.
Prospectus Supplement to Prospectus dated December 22, 2000.
$175,000,000
Medarex, Inc.
% Convertible Subordinated Notes due 2006
----------
Medarex is offering $175,000,000 aggregate principal amount of its %
convertible subordinated notes due 2006. You may convert your notes into shares
of common stock of Medarex at any time prior to maturity or their redemption by
Medarex. The notes will mature on June , 2006. The conversion rate is
shares per each $1,000 principal amount of notes, subject to adjustment in
certain circumstances. This is equivalent to a conversion price of $ per
share. The common stock is quoted on the Nasdaq National Market under the
symbol "MEDX." The last reported sale price for the common stock on June 18,
2001 was $27.20 per share.
Medarex will pay interest on the notes on June and December of each year.
The first interest payment will be made on December , 2001. The notes are
subordinated in right of payment to all senior debt of Medarex and indebtedness
of its subsidiaries. The notes will be issued only in denominations of $1,000
and integral multiples of $1,000.
Prior to June , 2004, Medarex has the option to redeem all or a portion of
the notes which have not been converted at the prices set forth in this
prospectus supplement if the price of its common stock closes above 150% of the
conversion price for at least 20 trading days in any consecutive 30-day trading
period. On or after June , 2004, Medarex has the option to redeem all or a
portion of the notes which have not previously been converted at the redemption
prices set forth in this prospectus supplement. You have the option, subject to
certain conditions, to require Medarex to repurchase any notes held by you in
the event of a "change in control", as described in this prospectus supplement,
at a price equal to 100% of the principal amount of the notes plus accrued
interest to the date of repurchase.
See "Risk Factors" beginning on page S-10 of this prospectus supplement to
read about important factors you should consider before purchasing the notes.
----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
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Per Note Total
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Initial public offering price................................... % $
Underwriting discount........................................... % $
Proceeds, before expenses, to Medarex........................... % $
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the convertible notes will accrue from the date
of original issuance of the notes, expected to be June , 2001.
To the extent that the underwriters sell more than $175,000,000 principal
amount of notes, the underwriters have the option to purchase up to an
additional $26,250,000 principal amount of notes from Medarex at the initial
public offering price less the underwriting discount.
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The underwriters expect to deliver the notes in book-entry form only through
the facilities of The Depository Trust Company against payment in New York, New
York on June , 2001.
Goldman, Sachs & Co.
Credit Suisse First Boston
JPMorgan
Morgan Stanley Dean Witter
Bear, Stearns & Co. Inc.
Dain Rauscher Wessels
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Prospectus Supplement dated June , 2001.
No action has been or will be taken in any jurisdiction by Medarex or any
underwriter that would permit distribution of a prospectus in any jurisdiction
where action for that purpose is required, other than in the United States. Any
person into whose possession this prospectus supplement and accompanying
prospectus comes is advised by Medarex and the underwriters to inform
themselves about, and to observe any restrictions as to, the offering of the
notes and the distribution of this prospectus supplement and accompanying
prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus supplement includes or incorporates by reference forward-
looking statements, including those identified by the words "believes,"
"anticipates," "expects" and similar expressions. Medarex has based these
forward-looking statements on its current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions, including, among other things:
. uncertainties relating to the technological approach;
. history of operating losses and anticipation of future losses;
. uncertainty of product development, need for additional capital and
uncertainty of change;
. uncertainty of patent and proprietary rights;
. management of growth, and risks of acquiring new technologies;
. uncertainties related to clinical trials;
. government regulation and uncertainty of obtaining regulatory approval;
. dependence on key personnel;
. dependence on research collaborators and scientific advisors;
. uncertainty of health care reform measures; and
. third-party reimbursement and risk of product liability.
Medarex undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. In light of these risks, uncertainties and assumptions, the forward-
looking events discussed in this prospectus supplement, the accompanying
prospectus and in the incorporated documents might not occur.
----------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus.
Medarex has not, and the underwriters 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. Medarex is not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus is accurate as of the date on the
front cover of each such prospectus only. The business, financial condition,
results of operations and prospects of Medarex may have changed since such
dates.
S-2
THE COMPANY
We are a human monoclonal antibody-based company with integrated discovery,
development and clinical supply manufacturing capabilities. We are able to
create fully human monoclonal antibodies using our UltiMAb (Human Antibody
Development SystemSM. This unique combination of human antibody technologies
includes: (1) our HuMAb-Mouse(R), in which the mouse genes for creating
antibodies have been inactivated and replaced by human antibody genes; (2)
Kirin's TC Mouse(TM) (pursuant to an agreement with Kirin Brewery Co. Ltd.),
which is "transchromosomic," meaning that 100% of the human antibody genes
contained in the transplanted chromosomes are present in the mouse; and (3) a
crossbred mouse that combines the unique traits of our HuMAb-Mouse with Kirin's
TC Mouse. With our UltiMAb Human Antibody Development System, we believe we
have assembled a unique platform of mice for creating the entire spectrum of
fully human antibodies, which typically have high affinity. As of June 19,
2001, 38 companies have acquired the rights to use our human antibody
technology in their development of new products, including major pharmaceutical
and biotechnology companies such as Novartis Pharma AG, Amgen, Inc., Immunex
Corporation, Schering AG, Centocor, Inc. (a subsidiary of Johnson & Johnson)
Schering-Plough Corporation and Eli Lilly & Company.
As new disease-related targets are continually being discovered through
genomic and other research programs, we intend to use our human antibody
technology to develop therapeutic products for ourselves and for our corporate
partners. As part of our applied genomics strategy, we have entered into
alliances with a number of genomics and proteomics companies, including
Athersys, Inc., Corixa Corporation, Eos Biotechnology, Inc., Epigen, Inc.,
Immusol, Inc., Oxford GlycoSciences plc, Regeneron Pharmaceuticals,
Incorporated, Sangamo Biosciences, Inc. and Seattle Genetics, Inc. to develop
and commercialize genomics-derived antibody-based therapeutic products for the
treatment or prevention of life-threatening diseases. We have also entered into
a collaboration with Genmab A/S, a publicly held Danish biotechnology company,
in which we have a 33% equity interest, pursuant to which Medarex and Genmab
will jointly enter into genomic partnerships involving our human antibody
technology with companies located in Europe, such as the collaborations with
Gemini Genomics, Glaucus Proteomics B.V. and deCODE genetics EHF.
We believe that genomics and other research techniques are leading to the
discovery of an unprecedented number of potential targets for therapeutic
antibody products. To date, ten monoclonal antibody-based products have been
approved for sale by the United States Food and Drug Administration, and these
antibodies have generated revenues in excess of $2 billion worldwide. The
majority of these antibodies have been on the market for less than three years.
Most of the antibodies currently in development, and all of the antibodies that
form the basis of these approved products, have been made in normal ("wild
type") mice and subsequently have been made "chimeric" or "humanized," leading
to a product that contains both human and rodent proteins. These rodent
proteins may be recognized by a patient's immune system as "foreign,"
potentially limiting the utility of the product or causing allergic reactions.
Instead of engineering mouse antibodies to make them chimeric or humanized, we
have developed mice that make fully human antibodies.
Using our UltiMAb Human Antibody Development System, it is possible to
create and develop product candidates very rapidly. Under our T-12
DevelopmentSM program, we have been able to complete the process of making a
very high affinity, fully human antibody to a therapeutic target, and have
filed an application for an Investigational New Drug, or IND, with the FDA in
less than 12 months. Although not every product candidate will be appropriate
for such rapid development, we believe that this efficient and rapid
development capability will provide an attractive platform for product
development for our corporate partners and for our own in-house development
programs.
With our partner Biosite Diagnostics Incorporated, we have developed Trans-
Phage Technology SM. With our human antibody technology and Biosite's
OmniclonalTM phage display
S-3
technology, we can now offer our partners access to large volumes of high
affinity, fully human antibodies to validate genomic targets and to identify
drug candidates. We believe that Trans-Phage Technology will enable scientists
to make large libraries of fully human antibodies to virtually any disease
target.
We believe that the potential of our UltiMAb Human Antibody Development
System to rapidly generate high affinity, fully human antibodies has led to
numerous corporate partnerships under which biopharmaceutical companies have
acquired the right to use our human antibody technology. We initiated or
expanded nine corporate partnerships prior to 1999 and an additional six in
1999. We entered into 12 corporate partnerships in 2000, and as of June 19,
2001, we have entered into 11 corporate partnerships in 2001. We expect to
enter into several new or expanded corporate partnerships in each of the next
several years.
In addition to our UltiMAb system, we have considerable experience in
clinical supply antibody manufacturing. To facilitate the development and
commercialization of antibody-based products for us and for our partners, we
have assembled a team of experienced scientific, production and regulatory
personnel. This team operates in our manufacturing facility, which complies
with applicable FDA current Good Manufacturing Practice regulations, or cGMP.
This facility currently has a capacity of 10 kilograms of monoclonal antibody
production per year. We have recently announced the opening of a developmental
manufacturing facility and expect to add a further 10 kilograms of production
capacity by 2002. Over the last five years, we have received regulatory
approval to commence clinical testing of eight products in seven countries.
More than 200 companies are developing monoclonal antibody-based products.
We believe that many of these companies are potential partners for our human
antibody technology. In part, this reflects the enormous increase in knowledge
about potential targets currently in research and development. For example,
genomics researchers have suggested that scientists may identify as many as
4,000 to 15,000 novel targets, many of which will be appropriate for monoclonal
antibody-based products. We believe that our human antibody technology and our
product development experience, coupled with our T-12 Development capabilities
and our manufacturing facilities, will allow us to rapidly create and develop
numerous fully human antibodies based upon these targets. We intend to develop
some of these products for our own portfolio and some in collaboration with our
corporate partners.
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We were incorporated in New Jersey in 1987. Our principal executive offices
are located at 707 State Road, Princeton, New Jersey 08540. Our telephone
number is (609) 430-2880.
S-4
THE OFFERING
We present below a summary of this offering:
Securities Offered $175,000,000 aggregate principal amount
($201,250,000 aggregate principal amount if the
underwriters exercise their option in full) of %
convertible subordinated notes due 2006.
Maturity Date June , 2006.
Interest Payment Dates June and December of each year, commencing
December , 2001.
Conversion Rights You may convert all or some of your notes at any
time prior to the close of business on the business
day immediately preceding the maturity date or
redemption by Medarex. The conversion rate is
per $1,000 principal amount of notes, subject to
adjustment in certain circumstances. This is
equivalent to a conversion price of $ per share.
Upon conversion, you will not receive any cash
representing accrued interest. See "Description of
Notes--Conversion Rights."
Sinking Fund None.
Provisional Redemption We may redeem all or some of the notes at any time
prior to June , 2004 if the price of our common
stock has exceeded 150% of the conversion price for
at least 20 of the 30 trading days prior to
redemption and we make an additional "make whole"
payment on the redeemed notes equal to $ per
$1,000 note, payable in cash or our common stock,
at our option, minus the amount of any interest
actually paid or accrued and unpaid on the note
prior to the redemption date. We must make these
"make whole" payments on all notes called for
redemption, including notes converted after the
date we mailed the notice. See "Description of
Notes--Provisional Redemption."
Optional Redemption We may redeem all or some of the notes at any time
on or after June , 2004 at the redemption prices
described in the "Description of Notes--Optional
Redemption" section of this prospectus supplement,
plus accrued and unpaid interest.
Repurchase Right of If a "change in control" occurs, holders may sell
Holders Upon a Change in their notes to us at a purchase price equal to 100%
Control of their face amount, plus accrued and unpaid
interest to the date of redemption. This repurchase
right does not apply to every transaction that you
may consider to be a change in control. See
"Description of Notes-- Repurchase at Option of
Holders upon a Change in Control."
Ranking The notes will be our unsecured obligations and
will rank junior to our existing and future senior
indebtedness. The indenture does not restrict our
ability to incur additional senior indebtedness.
See "Description of Notes--Subordination."
Form and Denomination of The notes will initially be represented by one or
Notes more global notes which will be deposited with a
custodian for, and registered in the name of a
nominee of The Depository Trust Company in New York
City. Beneficial interests in the global notes will
be shown on,
S-5
and transfers of the global notes will be effected
only through, records maintained by DTC and its
participants. Certificated notes will not be issued
unless certain conditions in the indenture
governing the notes are satisfied. See "Description
of Notes--Form, Denomination, Transfer, Exchange
and Book-Entry Procedures."
Use of Proceeds We estimate that the net proceeds we will receive
from the sale of the notes, after deducting the
discount to the underwriters and other estimated
expenses payable by us, will be approximately
$169,000,000 ($194,460,000 if the underwriters
exercises their option in full). We intend to use
these proceeds for general corporate purposes. See
"Use of Proceeds."
S-6
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial information. The selected
consolidated financial information for each of the years in the five year
period ended December 31, 2000 and at December 31 of each of those years has
been derived from our audited consolidated financial statements. The financial
information set forth below for all other periods presented has been derived
from unaudited consolidated financial information which we believe presents
fairly such consolidated financial information in conformity with generally
accepted accounting principles. You should read the selected consolidated
financial information in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations", our consolidated financial
statements and the notes thereto and the other financial information
incorporated by reference herein.
For the Three Months
For the Year Ended December 31, Ended March 31,
---------------------------------------------------------- ------------------------
1996 1997 1998 1999 2000 2000 2001
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(in thousands, except share and per share data) (unaudited) (unaudited)
Statement of Operations
Data:
Revenues:
Sales.................. $ 255 $ 221 $ 1,349 $ 1,079 $ 264 $ 55 $ 66
Contract and license
revenue............... 1,626 3,011 5,443 8,593 19,619 2,028 8,104
Sales, contract and
license revenues from
Genmab................ -- -- -- 252 2,574 50 750
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Total revenues......... 1,881 3,232 6,792 9,924 22,457 2,133 8,920
Costs and expenses:
Cost of sales.......... 132 150 1,218 709 1,189 27 28
Research and
development........... 7,596 14,100 23,122 19,929 33,942 5,359 8,060
General and
administrative........ 2,558 3,644 5,065 8,036 18,142 2,887 3,602
Stock bonus to GenPharm
employees............. -- 2,275 -- -- -- -- --
Acquisition of in-
process technology.... -- 40,316 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total costs and
expenses.............. 10,286 60,485 29,405 28,674 53,273 8,273 11,690
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating loss........ (8,405) (57,254) (22,613) (18,750) (30,816) (6,140) (2,770)
Equity in net loss of
affiliate............. -- -- -- -- (80) -- (577)
Interest and dividend
income................ 1,542 1,903 1,956 1,205 21,158 1,966 6,771
Interest expense....... (5) (27) (1,539) (8) (3) (1) (1)
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Income (loss) before
provision (benefit)
for income taxes...... (6,868) (55,377) (22,196) (17,553) (9,741) (4,175) 3,423
Provision (benefit) for
income taxes.......... -- -- 341 (522) (13,075) 150 150
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Net income (loss)..... $ (6,868) $ (55,377) $ (22,537) $ (17,031) $ 3,334 $ (4,325) $ 3,273
---------- ---------- ---------- ---------- ---------- ---------- ----------
Basic net income (loss)
per share.............. $ (0.22) $ (1.47) $ (0.44) $ (0.27) $ 0.05 $ (0.06) $ 0.04
---------- ---------- ---------- ---------- ---------- ---------- ----------
Diluted net income
(loss) per share....... $ (0.22) $ (1.47) $ (0.44) $ (0.27) $ 0.05 $ (0.06) $ 0.04
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average common
shares outstanding
--basic................ 30,578,000 37,742,000 50,780,000 63,840,000 71,532,000 67,790,000 73,858,000
--diluted.............. 30,578,000 37,742,000 50,780,000 63,840,000 73,232,000 67,790,000 75,828,000
Ratio (deficiency) of
earnings available to
cover fixed charges.... $ (6,868) $ (55,377) $ (22,196) $ (17,553) $ (9,661) $ (4,054) 27.31
December 31,
---------------------------------------------------------- March 31,
1996 1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------- -----------
(in thousands) (unaudited)
Balance Sheet Data:
Cash, cash equivalents
and marketable
securities............. $ 31,463 $ 28,444 $ 34,664 $ 30,147 $ 343,603 $ 322,867
Working capital......... 31,259 1,647 29,581 22,382 329,807 306,172
Total assets............ 36,044 48,695 42,235 40,482 558,380 551,194
Long term obligations... 110 107 62 23 -- --
Cash dividends declared
per common share....... -- -- -- -- -- --
Accumulated deficit..... (31,491) (86,869) (109,405) (126,436) (123,102) (119,829)
Total shareholders'
equity................. 34,648 5,681 35,229 22,299 485,562 485,398
S-7
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the Nasdaq National Market under the
symbol "MEDX" since June 1991. The high and low sale prices of our common
stock, as reported by the Nasdaq National Market, are shown below.
High Low
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1999
First Quarter................................................ $ 2.16 $ 1.22
Second Quarter............................................... $ 2.99 $ 1.22
Third Quarter................................................ $ 4.99 $ 2.00
Fourth Quarter............................................... $ 20.75 $ 3.22
2000
First Quarter................................................ $103.00 $14.19
Second Quarter............................................... $ 44.44 $20.50
Third Quarter................................................ $ 59.94 $47.78
Fourth Quarter............................................... $ 75.00 $30.06
2001
First Quarter................................................ $ 42.50 $12.06
Second Quarter (through June 18)............................. $ 31.83 $11.94
The closing price of our common stock on the Nasdaq National Market on June
18, 2001 was $27.20 per share. As of such date, there were approximately 431
record holders of our common stock.
DIVIDEND POLICY
We have never declared or paid any cash dividends. We do not anticipate
declaring or paying cash dividends for the foreseeable future. Instead, we will
retain our earnings, if any, for the future operation and expansion of our
business.
S-8
CAPITALIZATION
The following table shows our current assets and capitalization at March
31, 2001 (i) on an actual basis, and (ii) on an as adjusted basis to give
effect to this offering and the application of the estimated proceeds we will
receive in this offering, net of fees and estimated expenses. See "Use of
Proceeds." You should also refer to our financial statements and the related
notes incorporated by reference in this prospectus supplement.
At March 31, 2001
---------------------
Actual As Adjusted
-------- -----------
(in thousands,
unaudited)
Current assets:
Cash and cash equivalents.............................. $128,714 $128,714
Marketable securities.................................. 194,153 363,153
Other current assets................................... 16,481 16,481
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Total current assets................................. $339,348 $508,348
======== ========
Current liability........................................ 33,176 33,176
Deferred contract revenue--long-term..................... 12,580 12,580
Deferred income taxes.................................... 20,040 20,040
% Convertible Subordinated Notes due 2006.............. -- 169,000
Shareholders' equity:
Preferred stock, $1.00 par value, 2,000,000 shares
authorized; none issued and outstanding............... -- --
Common stock, $.01 par value; 200,000,000 shares
authorized; 73,884,416 shares issued and 72,679,416
shares outstanding actual and as adjusted(/1/)........ 739 739
Capital in excess of par value......................... 569,586 569,586
Treasury stock, at cost, 1,205,000 shares.............. (3,031) (3,031)
Deferred compensation.................................. 2,302 2,302
Accumulated other comprehensive income................. 35,631 35,631
Accumulated deficit.................................... (119,829) (119,829)
-------- --------
Total shareholders' equity........................... 485,398 485,398
-------- --------
Total liabilities and shareholders' equity........... $551,194 720,194
======== ========
--------
(1) Excludes the shares of common stock issuable upon conversion of the notes
issued in this offering and 8,695,192 shares of our common stock reserved
for issuance as of June 18, 2001 under our stock options plans, pursuant to
which options to purchase 4,841,442 shares were outstanding on May 31,
2001.
S-9
RISK FACTORS
You should carefully consider the following risk factors and the other
information in this prospectus supplement, the accompanying prospectus and the
information incorporated by reference herein and therein before investing in
the notes.
Our product candidates are in early stages of development.
Our human antibody technology is a new approach to the generation of
antibody-based therapeutic products. Product candidates employing our human
antibody technology are in early stages of development. Only a limited number
of fully human antibody product candidates employing our human antibody
technology have been generated pursuant to our collaborations. Of these, only
three INDs have been submitted to the FDA for these candidates. In addition, we
are not aware of any commercialized fully human monoclonal antibody therapeutic
products that have been generated from any technologies similar to ours.
Product candidates employing our human antibody technology may not advance
beyond the early stages of product development or demonstrate clinical safety
and effectiveness.
Our human antibody technology may not generate antibodies against all the
antigens to which it is exposed in an efficient and timely manner, if at all.
If our human antibody technology fails to generate antibody product candidates,
or if we or our partners do not succeed in the development of products
employing our antibody technology, those product candidates may not be approved
or commercialized, and our business will suffer. Our products are still under
development, and no revenues have been generated from their sale.
Prior to the acquisition of our HuMAb-Mouse technology in 1997, products
based on mouse or humanized antibodies were the principal focus of our business
and led to eight products in clinical trials. Only two of such products have
progressed to Phase III clinical trials, enrollment in one of which is
currently suspended.
We have recently entered into corporate partnerships with a number of
companies and are seeking additional alliances that will support the costs of
developing our portfolio of antibody-based product candidates. The success of
these products is dependent upon the efforts of our corporate partners in
developing these products in the future. Neither we nor our corporate partners
know if any of these products will be effective.
We have incurred large operating losses and these losses may continue.
We have incurred large operating losses and these losses may continue. In
particular, as of March 31, 2001, we had an accumulated deficit of
approximately $119.8 million. Our losses have resulted principally from:
. research and development costs relating to the development of our
technology and antibody product candidates; and
. general and administrative costs relating to our operations.
We intend to continue to make significant investments in:
. preclinical testing and clinical trials;
. research and development;
. establishing new collaborations;
. investing in new technologies; and
. expansion of our production facilities.
S-10
We do not know when or if we or our corporate partners will complete any
pending or future product development efforts, receive regulatory approval or
successfully commercialize any approved products. We may continue to incur
substantial operating losses even if our revenues increase. As a result, we
cannot predict the extent of future losses or the time required for us to
achieve profitability, if at all.
Our operating results may vary significantly from period to period.
Our future revenues and operating results are expected to vary
significantly from period to period due to a number of factors. Many of these
factors are outside of our control. These factors include:
. the timing of the commencement, completion or termination of
collaborative agreements;
. the introduction of new products and services by us, our collaborative
partners or our competitors;
. delays in preclinical testing and clinical trials;
. costs and expenses associated with preclinical testing and clinical
trials;
. the timing of regulatory approvals, if any;
. sales and marketing expenses; and
. the amount and timing of operating costs and capital expenditures
relating to the expansion of our business operations and facilities.
Period-to-period comparisons of our results of operations may not be relied
upon as an indication of future performance.
Clinical trials required for our product candidates are expensive and time-
consuming, and their outcome is uncertain.
Product candidates employing our human antibody technology must demonstrate
that they are safe and effective for use in humans through preclinical testing
and clinical trials in order to be approved for commercial sale. For biological
products, safety, purity, and potency must also be demonstrated. Conducting
clinical trials is a lengthy, time-consuming and expensive process. The length
of time may vary substantially according to the type, complexity, novelty and
intended use of the product candidate, and often can be several years or more.
Delays associated with products for which we are directly conducting
preclinical or clinical trials may cause us to incur additional operating
expenses. The commencement and rate of completion of clinical trials may be
delayed by many factors, including:
. inability to manufacture sufficient quantities of qualified cGMP
materials for clinical trials;
. slower rates of patient recruitment;
. inability to adequately observe patients after treatment;
. unforeseen safety issues; and
. government or regulatory delays.
Clinical trials may not demonstrate sufficient safety and effectiveness to
obtain the requisite regulatory approvals for product candidates employing our
human antibody technology. The failure of clinical trials to demonstrate safety
and effectiveness for our desired indications could harm the development of
that product candidate as well as other product candidates, and our business
and results of operations would suffer.
S-11
Product candidates employing our antibody technology may fail to gain
acceptance.
Even if clinical trials demonstrate the safety and efficacy of products
developed by us or our corporate partners using our technology and all
regulatory approvals have been obtained, product candidates employing our
antibody technology may not gain market acceptance among physicians, patients,
third-party payors and the medical community. For example, the current delivery
systems for antibody-based therapeutic products are intravenous and
subcutaneous injection, which are generally less well received by patients than
tablets or capsule delivery. The degree of market acceptance of any product
candidates employing our technology will depend on a number of factors,
including:
. establishment and demonstration of clinical efficacy and safety,
especially as compared to conventional treatments;
. cost-effectiveness;
. alternative treatment methods;
. reimbursement policies of government and third-party payors; and
. marketing and distribution support for our product candidates.
In addition, many of our activities involve genetic engineering in animals
and animal testing. These types of activities have been the subject of
controversy and adverse publicity. Animal rights groups and various other
organizations and individuals have attempted to stop genetic engineering
activities and animal testing by lobbying for legislation and regulation in
these areas.
If products employing our technology do not achieve significant market
acceptance, our business will suffer.
The successful commercialization of our antibody products will depend on
obtaining coverage and reimbursement for use of these products from third-party
payors.
Sales of pharmaceutical products largely depend on the reimbursement of
patients' medical expenses by government health care programs and private
health insurers. Without the financial support of the governments or third-
party payors, the market for products employing our human antibody technology
will be limited. Third-party payors may not reimburse sales of products
employing our human antibody technology, or enable us or our corporate partners
to sell them at profitable prices.
Third-party payors control health care costs by limiting both coverage and
the level of reimbursement for new health care products. In the future, the
United States government may institute price controls and further limits on
Medicare and Medicaid spending. Internationally, medical reimbursement systems
vary with differing degrees of regulation. Pricing controls and reimbursement
limitations could affect the payments we receive from sales of products
employing our human antibody technology. These variations could harm our
ability and the ability of our corporate partners to sell products employing
our human antibody technology in commercially acceptable quantities at
profitable prices.
We have limited manufacturing capabilities.
To be successful, our therapeutic products must be manufactured in
commercial quantities in compliance with regulatory requirements and at
acceptable costs. While we believe our current facilities are adequate for the
limited production of product candidates for clinical trials, our facilities
are not yet adequate to produce sufficient quantities of any products for
commercial sale. We may seek to expand our facilities to manufacture some
products commercially. In order to manufacture products for such purposes, we
will have to enhance our existing facilities and obtain requisite
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consents, or acquire new facilities, which will require both additional funds
and inspection and approval by the FDA and other regulatory agencies. We have
no experience in large-scale manufacturing, and we may not be able to
successfully increase our capacity or achieve profitability.
We have no sales or marketing experience.
We currently have no sales, marketing or distribution capabilities. We may
choose to market some of our products directly through a sales and marketing
force. In order to do this, we will have to develop a sales and marketing staff
and establish distribution capability. Developing a sales and marketing force
would be expensive and time-consuming and could delay any product launch. If we
choose to market any of our products directly but are unable to successfully
implement a marketing and sales force, our business and operating results will
be harmed.
We are dependent in part on our corporate partners to support our business and
to develop products employing our human antibody technology.
We depend on our corporate partners to support our business and to develop
products employing our antibody technology. We currently, or in the future may,
rely on our corporate partners to:
. access proprietary antigens for the development of product candidates;
. manufacture products;
. fund and conduct preclinical testing and clinical trials; and
. commercialize and market future products.
Our dependence on our corporate partners subjects us to a number of risks,
including:
. our corporate partners have significant discretion whether to pursue
planned activities;
. we cannot control the quantity and nature of the resources our
corporate partners may devote to product candidates;
. our corporate partners may not develop products employing our antibody
technology as expected; and
. business combinations or significant changes in a corporate partner's
business strategy may adversely affect that partner's willingness or
ability to continue to pursue these product candidates.
If we do not realize the contemplated benefits from our corporate
partnerships, our business will suffer.
Our existing corporate partnerships may not be completed or may be terminated,
and we may not be able to establish additional corporate partnerships.
We have entered into binding letters of intent or memoranda of
understanding with Eos Biotechnology, Genmab, Kirin, Immusol, Epigen, Oxford
GlycoSciences, Athersys, Regeneron and Scil. These binding letters of intent or
memoranda of understanding include the principal terms of these transactions,
which will be incorporated into definitive agreements. By their terms, these
letters of intent and memoranda of understanding will remain in full force and
effect and provide that the parties will operate in accordance with their terms
until such time as definitive agreements are executed. If we are unable to
agree on the terms of a definitive agreement with respect to one or more of
these partners, our business may be harmed.
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Our corporate partners generally have the right to terminate our corporate
partnerships at any time. Lengthy negotiations with potential new corporate
partners or disagreements between us and our corporate partners may lead to
delays or termination in the research, development or commercialization of
product candidates. If we are not able to establish additional corporate
partnerships on terms that are favorable to us or if a significant number of
our existing corporate partnerships are terminated and we cannot replace them,
we may be required to increase our internal product development and
commercialization efforts. This would likely:
. limit the number of product candidates that we will be able to develop
and commercialize;
. significantly increase our need for capital; and
. place additional strain on management's time.
We may have conflicts of interest with our corporate partners.
We may have conflicts of interest with our corporate partners that could
adversely affect our business. For example, our corporate partners may pursue
alternative technologies, including those of our competitors. Disputes may
arise with respect to the ownership of rights to any technology or products
developed with any corporate partner. If our corporate partners pursue
alternative technologies or fail to develop or commercialize successfully any
product candidate to which they have obtained rights from us, our business will
suffer.
We have a significant minority interest in two entities. There may be conflicts
of interest between us and these entities.
We have a 33% interest in Genmab, which intends to develop and
commercialize a portfolio of fully human antibodies derived from our human
antibody technology. We currently have an equity position in IDM S.A., which is
approximately 6%. In the event that we exercise certain warrants held by us to
purchase convertible or redeemable bonds of IDM and such bonds are converted or
redeemed, our equity position in IDM would be approximately 29%, based on the
shares currently outstanding. These warrants are exercisable between September
2002 and September 2010, and such bonds may be converted or redeemed within six
months of such exercise. Each of IDM and Genmab intends to develop and
commercialize a portfolio of antibody-based products. We also have contractual
obligations and rights with these entities that could result in conflicts
between us and these entities.
We are dependent on our key personnel.
We are highly dependent on the members of our scientific and management
staff. If we are not able to retain any of these persons, our business may
suffer. In particular, we depend on the services of Donald L. Drakeman, our
President and Chief Executive Officer, Yashwant M. Deo, Ph.D., our Senior Vice
President, Operations, R&D and Regulatory Compliance, and Nils Lonberg, Ph.D.,
Senior Vice President and Scientific Director. For us to pursue product
development, marketing and commercialization plans, we will need to hire
additional qualified scientific personnel to perform research and development.
We will also need to hire personnel with expertise in clinical testing,
government regulation, manufacturing, marketing and finance. We may not be able
to attract and retain personnel on acceptable terms, given the competition for
such personnel among biotechnology, pharmaceutical and healthcare companies,
universities and non-profit research institutions. If we are not able to
attract and retain qualified personnel, our business will suffer.
We depend on patents and proprietary rights.
Our success depends in part on our ability to:
. protect trade secrets;
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. operate without infringing upon the proprietary rights of others; and
. obtain patents.
We will be able to protect our proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
We protect our proprietary position by filing United States and foreign patent
applications related to our proprietary technology, inventions and improvements
that are important to the development of our business. While a number of
patents have been issued in the United States and Europe relating to our human
antibody technology, we may not be able to obtain patent protection in other
countries. Our pending patent applications, those we may file in the future, or
those we may license from third parties, may not result in patents being
issued. The patent position of biotechnology companies involves complex legal
and factual questions and, therefore, enforceability cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patents that we own or license from third parties may not provide
sufficient protection against competitors. Also, patent rights may not provide
us with proprietary protection or competitive advantages against competitors
with similar technology. Furthermore, others may independently develop similar
technologies or duplicate any technology that we have developed. The laws of
foreign countries may not protect our intellectual property rights to the same
extent as do the laws of the United States.
In addition to patents, we rely on trade secrets and proprietary know-how.
We seek protection, in part, through confidentiality and proprietary
information agreements. These agreements may not provide protection or adequate
remedies for our human antibody technology in the event of unauthorized use or
disclosure of confidential and proprietary information, or breach of these
agreements. Furthermore, our trade secrets may otherwise become known to, or be
independently developed by, our competitors.
Our commercial success depends significantly on our ability to operate
without infringing the patents and other proprietary rights of third parties.
In the event that our technologies may infringe on the patents or violate other
proprietary rights of third parties, we and our corporate partners may be
prevented from pursuing product development or commercialization. Such a result
would harm our business.
The biotechnology and pharmaceutical industries have been characterized by
extensive litigation regarding patents and other intellectual property rights.
The defense and prosecution of intellectual property disputes are costly and
time-consuming to pursue and their outcome is uncertain.
If we become involved in any litigation, interference or other judicial or
administrative proceedings, we will incur substantial expense and the efforts
of our technical and management personnel will be diverted. An adverse
determination may subject us to significant liabilities or require us to seek
licenses that may not be available from third parties on commercially favorable
terms, if at all. Therefore, we and our collaborative partners may be
restricted or prevented from manufacturing and selling products employing our
human antibody technology, which would harm our business.
Even though we have received patents pertaining to the HuMAb-Mouse
technology, this does not mean that we and our permitted licensees of HuMAb-
Mouse technology will have exclusive rights to antibodies against all targets
that are made using this technology, or that we or our licensees will have the
right to make, develop, use or sell such antibodies.
Our patents covering the HuMAb-Mouse technology include patents that cover
particular human monoclonal antibodies. These patents do not cover all human
antibodies.
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Our patents may not protect against the importation of products, such as
antibodies, made using HuMAb-Mouse technology.
Moreover, other parties could have blocking patent rights to products made
using HuMAb-Mouse technology, such as antibodies, and their production and
uses, either because of a proprietary position covering the antibody or the
antibody's target. For example, we are aware of certain United States and
European patents held by third parties relating to particular targets for their
human monoclonal antibodies, to human monoclonal antibodies against various
targets and bispecific products, and the manufacture and use of such products.
In particular, we are aware of a patent and patent filings in the United States
and Europe that pertain to certain monoclonal antibodies against CTLA-4. The
Company is also aware of certain United States and foreign patents and a United
States patent application owned by third parties relating to the production of
recombinant antibodies in host cells and their use in therapy. The Company
seeks to obtain licenses to such patents when, in the Company's judgement, such
licenses are needed. If any licenses are required, there can be no assurance
that the Company will be able to obtain any such license on commercially
favorable terms, if at all, and if these licenses are not obtained, the Company
might be prevented from using certain of its technologies for the generation of
its recombinant human antibody products. The Company's failure to obtain a
license to any technology that it may require may have a material adverse
effect on the Company's business, financial condition and results of
operations. There also can be no assurances that the Company's products and/or
actions in developing or selling their recombinant human antibody products will
not infringe such patents.
We seek to obtain licenses to such patents when, in our judgment, such
licenses are needed. If any licenses are required, we may not be able to obtain
any such license on commercially favorable terms, if at all. If these licenses
are not obtained, we may be prevented from using certain of our technologies or
taking certain products to market. Our failure to obtain a license to any
required technology or product may have a material adverse effect on our
business, financial condition and results of operations. We cannot assure you
that our products and/or actions in developing or selling our products will not
infringe such patents. In general, our patent protection may not prevent others
from developing competitive products using our technology or other
technologies. Similarly, others may obtain patents that could limit our ability
and the ability of our licensees to use, import, manufacture, market or sell
products or impair our competitive position and the competitive position of our
licensees.
We are not the exclusive owner of the technology underlying our HuMAb-Mice.
In March 1997, GenPharm entered into a cross-license and settlement agreement
with Abgenix, Cell Genesys, Inc., Xenotech, L.P. and Japan Tobacco, Inc.,
pursuant to which Abgenix and these entities paid us and GenPharm a total of
approximately $38.6 million during 1997 and 1998. This payment was in exchange
for a non-exclusive license to certain patents, patent applications, third-
party licenses and inventions pertaining to the development and use of certain
transgenic rodents, including mice, that produce fully human antibodies that
are integral to our products and business. These patents, licenses and
inventions form the basis of our HuMAb-Mouse technology. Our business may
suffer from the competition of these entities or if any of these entities
breach the cross-license and settlement agreement.
We are not the exclusive owner of the technology underlying the TC Mouse or
the crossbred mouse developed pursuant to our partnership with Kirin. In
December 1999, we entered into a binding letter of intent with Kirin. Under the
terms of this letter of intent, Kirin was designated as the primary distributor
of our HuMAb-Mouse technology in Asia, and we were designated as the primary
distributor of Kirin's TC Mouse outside of Asia. However, Kirin has certain
rights to distribute the TC Mouse and the crossbred mouse throughout the world.
We have exchanged broad licenses with Kirin, subject to milestone and royalty
payments, for use of each other's technology for the development of human
antibody therapeutic products. The binding letter of intent with Kirin includes
a
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license to certain patents, patent applications, third-party licenses and
inventions pertaining to the development and use of the TC Mouse and the
crossbred mouse. Our business may suffer from the competition of Kirin.
We may face product liability claims related to the use or misuse of products
employing our antibody technology.
The administration of drugs to humans, in clinical trials or after
commercialization, may expose us to product liability claims. Product liability
claims may be expensive to defend and may result in large judgments against us.
In November 1998, we voluntarily suspended clinical trials for one of our
products after some patients experienced serious adverse events, or SAEs. As a
result of these SAEs, we have received a small number of claims, of which four
have resulted in lawsuits being filed. All of these lawsuits have been settled
for insubstantial amounts. We currently maintain liability insurance with
specified coverage limits. Although we believe these coverage limits are
adequate, we cannot be certain that the insurance policies will be sufficient
to cover all claims that may be made against us. Product liability insurance is
expensive, difficult to obtain and may not be available in the future on
acceptable terms. Any claims against us, regardless of their merit, could harm
our business, financial condition and results of operations.
We face intense competition and rapid technological change.
The development of biotechnology and pharmaceutical products is a highly
competitive business subject to rapid technological change. We face competition
in several different forms. First, our human antibody development activities
currently face competition from one principal competitor and from other
technologies. The actual products being developed by our collaborators or by us
also face actual and potential competition. Developments by our competitors may
render our human antibody technology obsolete or non-competitive.
We are aware of several pharmaceuticals and biotechnology companies that
are actively engaged in research and development in areas related to antibody
therapy. These companies have commenced clinical trials of antibody products or
have successfully commercialized antibody products. Many of these companies are
addressing the same diseases and disease indications as we and our corporate
partners. Also, we compete with companies that offer antibody generation
services to companies that have antigens. These competitors have specific
expertise or technology related to antibody development. We compete directly
with Abgenix, Inc., with respect to the generation of fully human antibodies
from transgenic mice. In addition, Xenerex Biosciences (a subsidiary of Avanir
Pharmaceuticals) and XTL Biopharmaceuticals Ltd. have developed technology
that, according to Xenerex and XTL, will allow them to generate fully human
monoclonal antibodies. Companies such as Johnson & Johnson, Medimmune, American
Home Products, Immunex, Idec Pharmaceuticals, Novartis, Genentech and Protein
Design Labs, Inc. are currently marketing therapeutic products derived from
recombinant DNA that comprise human antibody components. Numerous additional
companies are developing therapeutic products comprising human antibody
components. Furthermore, several companies are developing, or have developed,
technologies that do not involve immunization of animals for creating synthetic
antibodies comprising human antibody sequence. For example, phage display
technology is being used by companies, such as Abbott Laboratories, Cambridge
Antibody Technology Group plc, Dyax Corp. and MorphoSys AG to develop
therapeutic products comprising human antibody sequences.
Other technologies can also be applied to the treatment of the diseases
that we or our corporate partners are pursuing. For example, immunoconjugates
monoclonal antibodies linked to toxins or radioactive isotypes are being
developed by others. In addition, the application of recombinant DNA technology
to develop potential products consisting of proteins (such as growth factors,
hormones, enzymes, receptor fragments and fusion proteins, or cytokines) that
do not occur
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normally in the body, or occur only in small amounts, has been underway for
some time. Included in this group are interleukins such as IL-2 and IL-11,
interferons alpha, beta and gamma, colony stimulating factors such as G-CSF and
GM-CSF, clotting factors, growth hormones, erythropoeitin, DNAse, tPA,
glucocerebrosidase, PDGF, and a number of other biological response modifiers.
Continuing development of conventional new chemical entities and other
drugs by large pharmaceutical companies carries with it the potential for
discovery of agents for treating disease indications also targeted by drugs
that we or our partners are developing. In particular, we are aware that
Genentech, Inc. has developed a monoclonal antibody-based product that targets
HER-2 that may be competitive with MDX-210. ITP is currently being treated with
WinRhoSDF(TM) sold by Nabi, IVIgG and steroids, all of which have had limited
success. Rheumatoid arthritis is currently being treated with a number of
compounds and a number of monoclonal antibodies, including antibodies against
TNF and CD4. Anti-TNF and anti-CD4 antibodies are being developed by a number
of companies including Centocor, IDEC Pharmaceuticals, SmithKline Beecham and
others.
Some of our competitors have received regulatory approval or are developing
or testing product candidates that compete directly with product candidates
employing our antibody technology. Many of these companies and institutions,
either alone or together with their corporate partners, have substantially
greater financial resources and larger research and development staffs than we
or some of our corporate partners do. In addition, many of these competitors
have significantly greater experience than we do in:
. developing products;
. undertaking preclinical testing and clinical trials;
. obtaining FDA and other regulatory approvals of products; and
. manufacturing and marketing products.
Accordingly, our competitors may obtain patent protection, receive FDA
approval or commercialize products before we or our corporate partners do. If
we or our corporate partners commence commercial product sales, we or our
corporate partners will be competing against companies with greater marketing
and manufacturing capabilities, areas in which we and certain of our corporate
partners have limited or no experience.
We also face intense competition from other pharmaceutical and
biotechnology companies to establish corporate partnerships, as well as
relationships with academic and research institutions, and to license
proprietary technology. These competitors, either alone or with their corporate
partners, may succeed in developing technologies or products that are more
effective than ours.
If our operating losses are greater than anticipated, we may need substantial
additional funding. We may not be able to obtain sufficient funds to grow our
business or continue our operations.
We will continue to expend substantial resources for research and
development, including costs associated with developing our antibody technology
and conducting preclinical testing and clinical trials. Our future liquidity
and capital requirements will depend on:
. the size and complexity of research and development programs;
. the scope and results of preclinical testing and clinical trials;
. the retention of existing and establishment of further corporate
partnerships, if any;
. continued scientific progress in our research and development programs;
. the time and expense involved in seeking regulatory approvals;
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. competing technological and market developments;
. the time and expense of filing and prosecuting patent applications and
enforcing patent claims; and
. the cost of establishing manufacturing capabilities, conducting
commercialization activities and arrangements and in-licensing
products.
We may be unable to raise sufficient funds to complete development of any
of our product candidates or to continue operations. As a result, we may face
delay, reduction or elimination of research and development programs or
preclinical or clinical trials, in which case our business will suffer.
We are subject to extensive and costly government regulation.
Product candidates employing our human antibody technology are subject to
extensive and rigorous domestic government regulation. The FDA regulates the
development, preclinical and clinical testing, manufacture, safety,
effectiveness, storage, record-keeping, labeling, storage, approval,
advertising, promotion, sale and distribution of biopharmaceutical products. If
products employing our human antibody technology are marketed abroad, they will
also be subject to extensive regulation by foreign governments. The regulatory
review and approval process, which includes preclinical testing and clinical
trials of each product candidate, is lengthy, expensive and uncertain. Securing
FDA approval requires the submission of extensive preclinical and clinical data
and supporting information to the FDA for each indication to establish the
candidate's safety and efficacy. The approval process takes many years,
requires substantial resources, involves post-marketing surveillance, and may
involve ongoing post-marketing studies. Delays in obtaining regulatory
approvals may:
. adversely affect the successful commercialization of any drugs that we
or our corporate partners develop;
. impose costly procedures on us or our corporate partners;
. diminish any competitive advantages that we or our corporate partners
may attain; and
. adversely affect our receipt of revenues or royalties.
Material changes to an approved product, such as manufacturing changes or
additional labeling claims, require further FDA review and approval. Once
obtained, any approvals may be withdrawn. Further, if we, our corporate
partners or our contract manufacturers fail to comply with applicable FDA and
other regulatory requirements at any stage during the regulatory process, the
FDA may impose sanctions, including:
. delays;
. warning letters;
. fines;
. product recalls or seizures;
. injunctions;
. refusal of the FDA to review pending market approval applications or
supplements to approval applications;
. total or partial suspension of production;
. civil penalties;
. withdrawals of previously approved marketing applications; and
. criminal prosecutions.
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In certain cases, we expect to rely on our corporate partners to file INDs
and direct the regulatory approval process for products employing our human
antibody technology. Our corporate partners may not be able to conduct clinical
testing or obtain necessary approvals from the FDA or other regulatory
authorities for any product candidates employing our human antibody technology.
If they fail to obtain required governmental approvals, our corporate partners
will be delayed or precluded from marketing these products. As a result,
commercial use of products employing our technology will not occur and our
business may be harmed.
We do not have, and may never obtain, the regulatory approvals we need to
market our product candidates.
To date, we have not applied for or received the regulatory approvals
required for the commercial sale of our products in the United States or in any
foreign jurisdiction. None of our product candidates has been determined to be
safe and effective, and we have not submitted a new drug application, or NDA,
or biologics license application, or BLA, to the FDA or to any foreign
regulatory authorities for any of our product candidates. We have only limited
experience in filing and pursuing applications necessary to obtain regulatory
approval, and none of our product candidates may be approved for marketing.
If we or our manufacturing partners do not obtain or maintain current good
manufacturing practices, we may not be able to commercialize our product
candidates.
We will depend on our own manufacturing facilities and on that of our
corporate partners and other third parties to manufacture products employing
our human antibody technology. Before commercializing a new drug, manufacturers
must comply with the applicable FDA current good manufacturing practice
regulations, or cGMP, which include quality control and quality assurance
requirements as well as the maintenance of records and documentation.
Manufacturing facilities are subject to ongoing periodic inspection by the FDA
and corresponding state agencies, including unannounced inspections, and must
be licensed before they can be used in commercial manufacturing of products
employing our technology. After regulatory approvals are obtained, the
subsequent discovery of previously unknown problems or failure to maintain
compliance with the regulatory requirements may result in restrictions on the
marketing of a product, withdrawal of the product from the market, seizures,
injunctions, or criminal sanctions. Third parties may not be able to comply
with the applicable regulations.
Our operations involve hazardous materials and are subject to environmental
controls and regulations.
Our business activities involve the controlled use of hazardous materials.
We cannot eliminate the risk of accidental contamination or injury from these
materials. In the event of an accident or environmental discharge, we may be
held liable for any resulting damages, which may exceed our financial resources
and may materially adversely affect our business, financial condition and
results of operations.
As a result of this offering, we will have a significant amount of debt and may
have insufficient cash to satisfy our debt service obligations. In addition,
the amount of our debt could impede our operations and flexibility.
As a result of this offering, we will have a significant amount of debt and
debt service obligations. If we are unable to generate sufficient cash flow or
otherwise obtain funds necessary to make required payments on the notes,
including from cash and cash equivalents on hand, we will be in default under
the terms of the indenture which could, in turn, cause defaults under our other
existing and future debt obligations.
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Even if we are able to meet our debt service obligations, the amount of
debt we have could adversely affect us in a number of ways, including by:
. limiting our ability to obtain any necessary financing in the future
for working capital, capital expenditures, debt service requirements or
other purposes;
. limiting our flexibility in planning for, or reacting to, changes in
our business;
. placing us at a competitive disadvantage relative to our competitors
who have lower levels of debt;
. making us more vulnerable to a downturn in our business or the economy
generally; and
. requiring us to use a substantial portion of our cash to pay principal
and interest on our debt, instead of applying those funds to other
purposes such as working capital and capital expenditures.
Claims by holders of the notes will be subordinated to claims by holders of our
senior debt.
The notes rank behind all of our senior debt. The notes are effectively
subordinated in right of payment to all indebtedness and other liabilities of
our subsidiaries. As a result, if we declare bankruptcy, liquidate, reorganize,
dissolve or otherwise wind up our affairs or are subjected to similar
proceedings, we must repay all senior debt before we will be able to make any
payments on the notes. Likewise, upon a default in payment with respect to any
of our debt or an event of default with respect to this debt resulting in its
acceleration, our assets will be available to pay the amounts due on the notes
only after all senior debt has been paid full. The indenture does not prohibit
us from incurring additional senior debt, other debt or other liabilities or
our subsidiaries from incurring any indebtedness. We may be required to repay
in full all of our senior debt prior to repaying the notes upon maturity or
otherwise. Our ability to pay our obligations on the notes could be adversely
affected if we incur more debt. See "Description of the Notes--Subordination."
Because your right to require repurchase of the notes is limited, the market
price of the notes may decline if we enter into a transaction that is not a
change in control under the indenture.
The term "change in control" is limited and may not include every event
that might cause the market price of the notes to decline or result in a
downgrade of the credit rating of the notes. The term "change in control" does
not apply to transactions in which all of the consideration paid for our common
stock in a merger or similar transaction is publicly traded common stock or
where our common stock trades at a premium over the conversion price of the
notes. Our obligation to repurchase the notes upon a change in control may not
preserve the value of the notes in the event of a highly leveraged transaction,
reorganization, merger or similar transaction. See "Description of Notes--
Repurchase at Option of Holders Upon a Change in Control."
We may be unable to repurchase the notes upon the occurrence of a Change in
Control.
Upon the occurrence of a change in control of Medarex, we will be required
to offer to repurchase all outstanding notes. The indenture allows us, subject
to satisfaction of certain conditions, to repurchase the notes using shares of
our common stock. If a change in control were to occur, our ability to
repurchase the notes with cash will depend on the availability of sufficient
funds and compliance with the terms of any debt ranking senior to the notes.
Our failure to repurchase tendered notes upon a change in control would
constitute an event of default under the indenture, which could result in the
acceleration of the maturity of the notes and all of our other outstanding
debt. These repurchase requirements may also delay or make it harder for others
to obtain control of us.
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If an active trading market for the notes does not develop, the market price of
the notes could decline or you may be unable to sell your notes.
The notes are new issues of securities for which there currently is no
public market. Although the underwriters have informed us that they currently
intend to make a market in the notes, they are not obligated to do so. The
underwriters may discontinue any market making activity at any time without
notice. We cannot assure you that a liquid market for the notes will develop.
If an active trading market does not develop, the market price of the notes
could decline or you may be unable to sell your notes.
Our stock price may be volatile.
There has been significant volatility in the market prices of biotechnology
companies' securities. Various factors and events may have a significant impact
on the market price of our common stock. These factors include:
. fluctuations in our operating results;
. announcements of technological innovations or new commercial
therapeutic products by us or our competitors;
. published reports by securities analysts;
. progress with clinical trials;
. governmental regulation;
. developments in patent or other proprietary rights;
. developments in our relationship with collaborative partners;
. public concern as to the safety and effectiveness of our products; and
. general market conditions.
The trading price of our common stock has been, and could continue to be,
subject to wide fluctuations in response to these factors, including the sale
or attempted sale of a large amount of our common stock into the market. Broad
market fluctuations may also adversely affect the market price of our common
stock.
Our restated certificate of incorporation, by-laws and New Jersey law contain
provisions that could delay or prevent an acquisition of our company.
Our restated certificate of incorporation and by-laws contain provisions
that may discourage third parties from seeking to acquire our company. These
provisions include:
. a classified board of directors;
. a requirement that special meetings of shareholders be called only by
our board of directors, chairman of the board, chief executive officer
or president;
. advance notice requirements for shareholder proposals and nominations;
. limitations on the ability of shareholders to amend, alter or repeal
our by-laws; and
. the authority of the board of directors to issue, without shareholder
approval, preferred stock with such terms as the board of directors may
determine.
We have also recently adopted a right plan, or "Poison Pill", that may
discourage, delay or prevent an acquisition of our company.
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We are also afforded the protections of the New Jersey Shareholders
Protection Act. This New Jersey statute contains provisions that impose
restrictions on shareholder action to acquire control of our company. The
effect of the provisions of our restated certificate of incorporation, by-laws,
and rights plan as well as the provisions of New Jersey Shareholders Protection
Act may discourage third parties from acquiring control of our company.
USE OF PROCEEDS
We estimate that we will receive approximately $169 million in net proceeds
from this offering. This amount reflects deductions from the gross proceeds of
the offering of:
. approximately $5.25 million, which will be retained by the underwriters
as a discount; and
. approximately $750,000, representing our estimated expenses for this
offering.
We expect to use the proceeds from this offering for general corporate
purposes. We may also use a portion of the net proceeds to acquire products or
companies that further our strategic goals, although we have no present
understandings, commitments or agreements with respect to any such acquisition.
The actual amount of net proceeds we spend on a particular use will depend on
many factors, including:
. our future revenue growth, if any;
. our future capital expenditures; and
. the amount of cash required by our operations.
Many of these factors are beyond our control. Therefore, we will retain
broad discretion in the use of the net proceeds. Until we use the net proceeds
of this offering, we intend to invest the net proceeds in U.S. Treasury and
government agency obligations and high grade corporate debt securities and
commercial paper.
This use of proceeds does not reflect the underwriters' exercise of their
option to purchase additional notes from us. We estimate that we will receive
approximately $25.46 million in additional net proceeds if the underwriters
exercise their option in full.
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DESCRIPTION OF NOTES
The following description of the particular terms of the notes offered
hereby, referred to in the prospectus as subordinated debt securities,
supplements, and to the extent inconsistent therewith, replaces, the
description of the general terms and provisions of subordinated debt securities
set forth in the prospectus accompanying this prospectus supplement.
We will issue the notes under a document called the "indenture". The
indenture is a contract between us and Wilmington Trust Company, who will act
as trustee. The indenture and the notes are governed by New York law. Because
this section is a summary, it does not describe every aspect of the notes. This
summary is subject to and qualified in its entirety by reference to all the
provisions of the indenture, including definitions of certain terms used in the
indenture. For example, in this section we use capitalized words to signify
defined terms that have been given special meaning in the indenture. We
describe the meaning for only the more important terms. We also include
references in parentheses to certain sections of the indenture. Wherever we
refer to particular sections or defined terms, those sections or defined terms
are incorporated by reference here. In this section, references to "Medarex" or
"we" or "us" refer solely to Medarex, Inc. and not its subsidiaries.
General
The notes will be general, unsecured obligations of Medarex. The notes will
be subordinated, which means that they will rank behind certain of our
indebtedness as described below. The notes will be limited to $175,000,000
aggregate principal amount (or $201,250,000 if the underwriters' option to
purchase additional notes is exercised in full). Payment of the full principal
amount of the notes will be due on June , 2006.
The notes will bear interest at the annual rate shown on the front cover of
this prospectus supplement from June , 2001 or the date of delivery to the
underwriters, if later. We will pay interest semi-annually on June and
December of each year, beginning December , 2001, until the principal is
paid or made available for payment. Interest will be paid to the person in
whose name the note is registered at the close of business on the preceding
June or December , as the case may be. Interest payable per $1,000
principal amount of notes for the first interest period ending on December ,
2001 will be $ . Interest will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
You may convert the notes into shares of common stock initially at the
conversion rate stated on the front cover of this prospectus supplement at any
time before the close of business on June 2006, unless the notes have been
previously redeemed or repurchased. The conversion rate may be adjusted as
described below.
We may redeem the notes at our option at any time on or after June , 2004,
in whole or in part, at the redemption prices set forth below under "--Optional
Redemption," plus accrued and unpaid interest to the redemption date, provided
that prior to that date we may, at our option, redeem all or any portion of the
notes at $1,000 per note plus accrued and unpaid interest to the redemption
date plus a make-whole payment as described under "--Provisional Redemption" if
our common stock trades at 150% of the conversion price for a specified period.
You may have the right to require us to repurchase your notes if there is a
change in control of Medarex as described below under "--Repurchase at Option
of Holders upon a Change in Control."
Form, Denomination, Transfer, Exchange and Book-Entry Procedures
The notes will be issued:
. only in fully registered form;
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. without interest coupons; and
. in denominations of $1,000 and greater multiples.
The notes will be evidenced by a global note which will be deposited with
the trustee as custodian for DTC and registered in the name of Cede & Co.
("Cede"), as nominee of DTC. Except as set forth below, record ownership of the
global note may be transferred, in whole or in part, only to another nominee of
DTC or to a successor of DTC or its nominee.
The global note will not be registered in the name of any person, or
exchanged for notes that are registered in the name of any person, other than
DTC or its nominee, unless either of the following occurs:
. DTC notifies us that it is unwilling, unable or no longer qualified to
continue acting as the depositary for the global note; or
. an "event of default," as defined below, with respect to the notes
represented by the global note has occurred and is continuing.
In those circumstances, DTC will determine in whose names any securities
issued in exchange for the global note will be registered.
DTC or its nominee will be considered the sole owner and holder of the
global note for all purposes, and as a result:
. you cannot get notes registered in your name if they are represented by
the global note;
. you cannot receive certificated (physical) notes in exchange for your
beneficial interest in the global notes;
. you will not be considered to be the owner or holder of the global note
or any note it represents for any purpose; and
. all payments on the global note will be made to DTC or its nominee.
The laws of some jurisdictions require that certain kinds of purchasers
(for example, certain insurance companies) can only own securities in
definitive (certificated) form. These laws may limit your ability to transfer
your beneficial interests in the global note to these types of purchasers.
Only institutions (such as a securities broker or dealer) that have
accounts with DTC or its nominee (called "participants") and persons that may
hold beneficial interests through participants can own a beneficial interest in
the global note. The only place where the ownership of beneficial interests in
the global note will appear and the only way the transfer of those interests
can be made will be on the records kept by DTC (for their participants'
interests) and the records kept by those participants (for interests of persons
held by participants on their behalf).
Secondary trading in bonds and notes of corporate issuers is generally
settled in clearing house (that is, next-day) funds. In contrast, beneficial
interests in a global note usually trade in DTC's same-day funds settlement
system, and settle in immediately available funds. We make no representations
as to the effect that settlement in immediately available funds will have on
trading activity in those beneficial interests.
We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global note to Cede, the nominee for DTC,
as the registered owner of the global note. We will make these payments by wire
transfer of immediately available funds on each payment date.
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We have been informed that, with respect to any cash payment of interest
on, principal of, or the redemption or repurchase price of, the global note,
DTC's practice is to credit participants' accounts on the payment date with
payments in amounts proportionate to their respective beneficial interests in
the notes represented by the global note as shown on DTC's records, unless DTC
has reason to believe that it will not receive payment on that payment date.
Payments by participants to owners of beneficial interests in notes represented
by the global note held through participants will be the responsibility of
those participants, as is now the case with securities held for the accounts of
customers registered in "street name."
We will send any redemption notices to Cede. We understand that if less
than all the notes are being redeemed, DTC's practice is to determine by lot
the amount of the holdings of each participant to be redeemed.
We also understand that neither DTC nor Cede will consent or vote with
respect to the notes. We have been advised that under its usual procedures, DTC
will mail an "omnibus proxy" to us as soon as possible after the record date.
The omnibus proxy assigns Cede's consenting or voting rights to those
participants to whose accounts the notes are credited on the record date
identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge the
interest to persons or entities that do not participate in the DTC book-entry
system, or otherwise take actions in respect of that interest, may be affected
by the lack of a physical certificate evidencing its interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of notes (including the presentation of notes for exchange) only at the
direction of one or more participants to whose account with DTC interests in
the global note are credited and only in respect of such portion of the
principal amount of the notes represented by the global note as to which such
participant has, or participants have, given such direction.
DTC has also advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Certain of such participants (or their
representatives), together with other entities, own DTC. Indirect access to the
DTC system is available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
The policies and procedures of DTC, which may change periodically, will
apply to payments, transfers, exchanges and other matters relating to
beneficial interests in the global note. We and the trustee have no
responsibility or liability for any aspect of DTC's or any participants'
records relating to beneficial interests in the global note, including for
payments made on the global note, and we and the trustee are not responsible
for maintaining, supervising or reviewing any of those records.
Conversion Rights
You may, at your option, convert any portion of the principal amount of a
note that is an integral multiple of $1,000 into shares of common stock at any
time prior to the close of business on the maturity date, unless the note has
been previously redeemed or repurchased, at a conversion rate
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equal to shares per $1,000 principal amount of notes. This conversion rate
is equivalent to a conversion price of $ per share. The conversion rate is
subject to adjustment as described below. Your right to convert a note called
for redemption or delivered for repurchase will terminate at the close of
business on the business day immediately preceding the redemption date or
repurchase date for that note, unless we default in making the payment due upon
redemption or repurchase.
You may convert a note by delivering the note at the corporate trust office
of the trustee, accompanied by a duly signed and completed notice of
conversion, a copy of which may be obtained from the trustee. In the case of a
global note, DTC will effect the conversion upon notice from the holder of a
beneficial interest in the global note in accordance with DTC's rules and
procedures. The conversion date will be the date on which the note and the duly
signed and completed notice of conversion are so delivered. As promptly as
practicable on or after the conversion date, we will issue and deliver to the
trustee a certificate or certificates for the number of full shares of common
stock issuable upon conversion, together with payment in lieu of any fraction
of a share. The certificates will be sent by the trustee to the conversion
agent for delivery to the holder of the note being converted. The shares of
common stock issuable upon conversion of the notes will be fully paid and
nonassessable and will also rank equally with other shares of our common stock
outstanding from time to time.
If you surrender a note for conversion on a date that is not an interest
payment date, you will not be entitled to receive any interest for the period
from the next preceding interest payment date to the date of conversion, except
as described below. If you are a holder of a note on a regular record date,
including a note that is subsequently surrendered for conversion after the
regular record date, you will receive the interest payable on such note on the
next succeeding interest payment date. Thus to correct for this resulting
overpayment of interest, any note surrendered for conversion during the period
from the close of business on a regular record date to the opening of business
on the next succeeding interest payment date will be required to be accompanied
by payment of an amount equal to the interest payable on such interest payment
date on the principal amount of notes being surrendered for conversion.
However, you will not be required to make that payment if you are converting a
note, or a portion of a note, that we have called for redemption, or that you
are entitled to require us to repurchase from you, if your conversion right
would terminate because of the redemption or repurchase between the regular
record date and the close of business on the next succeeding interest payment
date.
No other payment or adjustment for interest, or for any dividends on our
common stock, will be made upon conversion. If you receive common stock upon
conversion of a note, you will not be entitled to receive any dividends payable
to holders of common stock as of any record date before the close of business
on the conversion date. We will not issue fractional shares upon conversion of
notes. Instead, we will pay an amount in cash based on the market price of the
common stock at the close of business on the conversion date.
If you deliver a note for conversion, you will not be required to pay any
taxes or duties in respect of the issue or delivery of common stock on
conversion. However, you will be required to pay any tax or duty that may be
payable in respect of any transfer involved in the issue or delivery of the
common stock in a name other than that of the holder of the note. We will not
issue or deliver certificates representing shares of common stock unless the
person requesting the issuance or delivery has paid to us the amount of any
such tax or duty or has established to our satisfaction that such tax or duty
is payable.
The conversion rate is subject to adjustment if:
(1) there is a dividend or other distribution payable in common stock on
shares of our capital stock;
S-27
(2) we issue to all holders of common stock rights, options or warrants
entitling them to subscribe for or purchase common stock or preferred
stock at less than the then current market price, calculated as
described in the indenture, of our common stock or preferred stock;
however, if those rights, options or warrants are only exercisable
upon the occurrence of certain triggering events, then the conversion
rate will not be adjusted until the triggering events occur;
(3) we subdivide, reclassify or combine our common stock;
(4) we distribute to all holders of our common stock evidences of our
indebtedness, shares of capital stock, cash or assets, including
securities, but excluding:
. those dividends, rights, options, warrants and distributions
referred to in paragraphs (1) and (2) above;
. dividends and distributions paid exclusively in cash; and
. distributions upon mergers or consolidations;
(5) we make a distribution consisting exclusively of cash (excluding any
cash portions of distributions referred to in paragraph (4) above, or
cash distributed upon a merger or consolidation applicable as
discussed below) to all holders of our common stock if: the aggregate
amount of the distribution combined together with (A) other such all-
cash distributions made within the preceding 12 months in respect of
which no adjustment has been made and (B) any cash and the fair
market value of other consideration payable in respect of any tender
offer by us or any of our subsidiaries for our common stock concluded
within the preceding 12 months in respect of which no adjustment has
been made exceeds 10% of our market capitalization, being the product
of the current market price per share of our common stock on the
record date for such distribution and the number of shares of common
stock then outstanding; and
(6) the successful completion of a tender offer made by us or any of our
subsidiaries for our common stock that involves aggregate
consideration that, together with (A) any cash and other
consideration payable in a tender offer by us or any of our
subsidiaries for our common stock expiring within the 12 months
preceding the expiration of such tender offer in respect of which no
adjustment has been made and (B) the aggregate amount of any such
all-cash distributions referred to in paragraph (5) above to all
holders of common stock within the 12 months preceding the expiration
of such tender offer in respect of which no adjustments have been
made, exceeds 10% of our market capitalization on the expiration of
such tender offer.
No adjustment of the conversion rate will be required to be made until the
cumulative adjustments amount to 1.0% or more of the conversion rate. We will
compute any adjustments to the conversion rate and give notice to the holders
of any such adjustments. We reserve the right to make such increases in the
conversion rate in addition to those required by the provisions described above
as we may consider to be advisable so that any event treated for United States
federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients.
If we merge or consolidate with another person or sell or transfer all or
substantially all of our assets, each note then outstanding will, without the
consent of the holder of any note, become convertible only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
common stock into which the note was convertible immediately prior to the
merger, consolidation or sale. This calculation will be made based on the
assumption that the holder of common stock failed to exercise any rights of
election that the holder may have to select a particular type of consideration.
The adjustment will not be made for a merger that does not result in any
reclassification, conversion, exchange or cancellation of our common stock.
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We may, from time to time, increase the conversion rate by any amount for
any period of at least 20 days if our board of directors has determined that
such increase would be in our best interests. If our board of directors makes
such a determination, it will be conclusive. We will give holders of notes at
least 15 days' notice of such an increase in the conversion rate. No such
increase will take into account for purposes of determining whether the closing
price of the common stock exceeds the conversion price by 105% in connection
with an event which otherwise would be a "change in control," as defined below.
If at any time we make a distribution of property to our shareholders that
would be taxable to such shareholders as a dividend for United States federal
income tax purposes, e.g., distributions of evidences of indebtedness or assets
of Medarex, but generally not stock dividends on common stock or rights to
subscribe for common stock, and, pursuant to the anti-dilution provisions of
the indenture, the number of shares into which notes are convertible is
increased, that increase may be deemed for United States federal income tax
purposes to be the payment of a taxable dividend to holders of notes. See
"Certain Federal Income Tax Consequences--U.S. Holders."
Subordination
The notes are subordinated and, as a result, the payment of the principal,
any premium and interest on the notes, including amounts payable on any
redemption or repurchase, will be subordinated to the prior payment in full of
all of our senior debt. "Senior debt" means the principal of, any premium, and
interest, including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding, on, and all fees and
other amounts payable in connection with, the following, whether absolute or
contingent, secured or unsecured, due or to become due, outstanding on the date
of the indenture or thereafter created, incurred or assumed:
. our indebtedness evidenced by a credit or loan agreement, note, bond,
debenture or other similar instrument;
. all our obligations for money borrowed;
. our obligations as lessee under leases required to be capitalized on
the balance sheet of the lessee under generally accepted accounting
principles;
. all our obligations under interest rate and currency swaps, caps,
floors, collars, hedge agreements, forward contracts or similar
agreements or arrangements;
. all our obligations with respect to letters of credit, bankers'
acceptances and similar facilities, including related reimbursement
obligations;
. all our obligations issued or assumed as the deferred purchase price of
property or services, but excluding trade accounts payable and accrued
liabilities arising in the ordinary course of business;
. all our obligations of the type referred to above of another person and
all dividends of another person, the payment of which, in either case,
we have assumed or guaranteed, or for which we are responsible or
liable, directly or indirectly, jointly or severally, as obligor,
guarantor or otherwise, or which is secured by a lien on our property;
or
. renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange for
any indebtedness or obligation described above.
Senior debt will not include any indebtedness or obligation if the terms of
the indebtedness or obligation, or the terms of the instrument under which the
indebtedness or obligation is issued, expressly provide that the indebtedness
or obligation is not superior in right of payment to the notes.
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In addition, senior debt will not include trade payables and any indebtedness
or obligation that we may owe to any of our direct or indirect subsidiaries,
except for our obligations as lessee under facility leases.
We may not make any payment on account of principal, premium or interest on
the note, or redemption or repurchase of the notes, if either of the following
occurs:
. we default in our obligations to pay principal, premium, interest or
other amounts on our senior debt, including a default under any
redemption or repurchase obligation, and the default continues beyond
any grace period that we may have to make those payments; or
. an "event of default" occurs and is continuing on any "designated
senior debt", as defined below, and (1) the event of default permits
the holders of the designated senior debt to accelerate its maturity
and (2) the trustee has received a notice (a "payment blockage notice")
of the default from a holder of the designated senior debt.
If payments of the notes have been blocked by a payment default on senior
debt, payments on the notes may resume when the payment default has been cured
or waived. If payments on the notes have been blocked by a default, other than
a payment default, payments on the notes may resume on the earlier of (1) the
date the nonpayment default is cured or waived or (2) 179 days after the
payment blockage notice is received unless the designated senior debt has been
accelerated.
No nonpayment default that existed on the day a payment blockage notice was
delivered to the trustee can be used as the basis for any subsequent payment
blockage notice. In addition, once a holder of designated senior debt has
blocked payment on the notes by giving a payment blockage notice, no new period
of payment blockage can be commenced until both of the following are satisfied:
. 365 days have elapsed since the effectiveness of the immediately prior
payment blockage notice; and
. all scheduled payments of principal, any premium and interest on the
notes that have come due have been paid in full in cash.
"Designated senior debt" means our obligations under any particular senior
debt in which the instrument creating or evidencing the debt, or the assumption
or guarantee of the debt, or related agreements or documents to which we are a
party, expressly provides that the indebtedness will be "designated senior
debt" for purposes of the indenture. That instrument, agreement or other
document may place limitations and conditions on the right of that senior debt
to exercise the rights of designated senior debt.
In addition, upon any acceleration of the principal due on the notes as a
result of an event of default or payment or distribution of our assets to
creditors upon any dissolution, winding up, liquidation or reorganization,
whether voluntary or involuntary, marshaling of assets, assignment for the
benefit of credits, or in bankruptcy, insolvency, receivership or other similar
proceedings, all principal, premium, interest and other amounts due or to
become due on all senior debt must be paid in full before you will be entitled
to receive any payment. Because of this subordination, in the event of
insolvency, our creditors who are holders of senior debt may recover more,
ratably, than you would, and this subordination may reduce or eliminate
payments to you. As of March 31, 2001, we did not have any senior debt
outstanding.
In addition, the notes will be "structurally subordinated" to all
indebtedness and other liabilities, including trade payables and lease
obligations, of our subsidiaries. This occurs because any right of Medarex to
receive any assets of our subsidiaries upon their liquidation or
reorganization, and the
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consequent right of the holders of the notes to participate in those assets,
will be effectively subordinated to the claims of that subsidiary's creditors,
including trade creditors, except to the extent that Medarex itself is
recognized as a creditor of the subsidiary, in which case the claims of Medarex
would still be subordinate to any security interest in the assets of the
subsidiary and any indebtedness of the subsidiary senior to that held by
Medarex.
The indenture does not limit our ability or the ability of any of our
subsidiaries to incur indebtedness, including senior debt.
Provisional Redemption
We may redeem any portion of the notes at any time prior to June , 2004
upon at least 30 and not more than 60 days' notice by mail to the holders of
the notes, at a redemption price equal to 100% of the principal amount of the
notes to be redeemed per note plus accrued and unpaid interest to the
redemption date if the closing price of our common stock has exceeded 150% of
the conversion price for at least 20 trading days in any consecutive 30-day
trading period ending on the trading day prior to the mailing of the notice of
redemption.
If we redeem the notes under these circumstances, we will make an
additional "make whole" payment on the redeemed notes equal to $ per $1,000
note, minus the amount of any interest actually paid or accrued and unpaid on
the note prior to the redemption date. We must make these "make whole" payments
on all notes called for redemption, including notes converted after the date we
mailed the notice. We may make these "make whole" payments, at our option,
either in cash or in our common stock or a combination of cash and stock. We
will specify the type of consideration for the "make whole" payment in the
redemption notice.
Payments made in our common stock will be valued at 95% of the average of
the closing sales prices of our common stock for the five trading days ending
on the day prior to the redemption date.
Optional Redemption
On and after June 2004, we may redeem the notes, in whole or in part, at
our option, at the redemption prices specified below. The redemption price,
expressed as a percentage of principal amount, is as follows for the 12-month
periods beginning on June of the following years:
Redemption
Year Price
---- ----------
2004.............................................................. %
2005.............................................................. %
In each case we will also pay accrued interest to the redemption date. The
indenture requires us to give notice of redemption not more than 60 and not
less than 30 days before the redemption date.
We may, to the extent permitted by applicable law, at any time purchase
notes in the open market or by tender at any price or by private agreement. Any
note that we so purchase may, to the extent permitted by applicable law, be
reissued or resold or may, at our option, be surrendered to the trustee for
cancellation. We may not reissue or resell any notes surrendered and will
cancel them promptly.
No "sinking fund" is provided for the notes, which means that the indenture
does not require us to redeem or retire the notes periodically.
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Repurchase at Option of Holders upon a Change in Control
If a change in control, as defined below, occurs, you will have the right,
at your option, to require us to repurchase all of your notes not called for
redemption, or any portion of the principal amount of your notes that is equal
to $1,000 or any integral multiple of $1,000. The price we are required to pay
is 100% of the principal amount of the notes to be repurchased, together with
interest accrued to the repurchase date. Because the number of shares of common
stock to be delivered to holders of notes in payment of the repurchase price,
should we elect this payment option, is determined on the basis of the market
price of our common stock after we have given notice of the occurrence of the
change in control and prior to the repurchase date, the value of the shares of
common stock on the date of delivery to holders may be more or less than the
repurchase price had we elected to pay such price in cash.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in common stock valued at 95% of the average of the
closing sales prices of the common stock for the five trading days immediately
preceding and including the third day prior to the repurchase date. We may only
pay the repurchase price in common stock if we satisfy conditions provided in
the indenture.
Within 30 days after the occurrence of a change in control, we are
obligated to give you notice of the change in control and of the repurchase
right arising as a result of the change in control. We must also deliver a copy
of this notice to the trustee. To exercise the repurchase right, you must
deliver on or before the 30th day after the date of our notice irrevocable
written notice to the trustee of your exercise of your repurchase right,
together with the notes with respect to which that right is being exercised. We
are required to make the repurchase on the date that is 45 days after the date
of our notice.
A "change in control" will be deemed to have occurred at the time after the
notes are originally issued that any of the following occurs:
(1) any person, including any syndicate or group deemed to be a "person"
under Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, acquires beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series
of transactions, of shares of our capital stock entitling that person
to exercise 50% or more of the total voting power of all shares of
our capital stock entitled to vote generally in elections of
directors; however, any acquisition by Medarex, any subsidiary of
Medarex or any employee benefit plan of Medarex will not trigger this
provision;
(2) we consolidate with or merge with or into any other person or another
person merges into us, except if the transaction satisfies any of the
following:
. the holders of 50% or more of the total voting power of all shares
of our capital stock entitled to vote generally in elections of
directors immediately prior to the transaction have, directly or
indirectly, 50% or more of the total voting power of all shares of
capital stock of the continuing or surviving corporation entitled
to vote generally in elections of directors of the continuing or
surviving corporation immediately after the transaction;
. the transaction is a merger which does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares of our capital stock; or the transaction is a
merger effected only to change our jurisdiction of incorporation
and it results in a reclassification, conversion or exchange of
outstanding shares of our common stock only into shares of common
stock of us or another corporation; or
(3) we convey, transfer, sell, lease or otherwise dispose of all or
substantially all of our assets to another person, unless the holders
of 50% or more of the total voting power of all
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shares of our capital stock entitled to vote generally in elections of
directors immediately prior to such transaction have, directly or
indirectly, 50% or more of the total voting power of all shares of
capital stock of such person entitled to vote generally in elections
of directors immediately after such transaction.
However, a change in control will not be deemed to have occurred if
either:
. the closing sales price per share of our common stock for any five
trading days within the period of 10 consecutive trading days ending
immediately after the later of the change in control or the public
announcement of the change in control, in the case of a change in
control relating to an acquisition of capital stock, or the period of 10
consecutive trading days ending immediately before the change in
control, in the case of a change in control relating to a merger,
consolidation or asset sale, equals or exceeds 105% of the conversion
price of the notes in effect on each of those trading days, or
. all of the consideration, excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights, in a
merger or consolidation otherwise constituting a change in control under
the first or second bullet point in the preceding paragraph above
consists of shares of common stock traded on a national securities
exchange or quoted on the Nasdaq National Market, or will be so traded
or quoted.
For purposes of these provisions:
. the conversion price is equal to $1,000 divided by the conversion rate;
. whether a person is a "beneficial owner" will be determined in
accordance with Rule 13d-3 under the Exchange Act; and
. "person" includes any syndicate or group that would be deemed to be a
"person" under Section 13(d)(3) of the Exchange Act.
Rule 13e-4 under the Exchange Act requires the dissemination of prescribed
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to you. We
will comply with this rule to the extent it applies at that time.
The definition of change in control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of "all or substantially all"
of our assets. There is no precise, established definition of the phrase
"substantially all" under applicable law. Accordingly, your ability to require
us to repurchase your notes as a result of conveyance, transfer, sale, lease
or other disposition of less than all of our assets may be uncertain.
The foregoing provisions would not necessarily provide you with protection
if we are involved in a highly leveraged or other transaction that may
adversely affect you.
Our ability to repurchase notes upon the occurrence of a change in control
is subject to important limitations. Moreover, a change in control could cause
an event of default under, or be prohibited or limited by, or require consent
under, the terms of our senior debt. As a result, unless we were to obtain a
waiver or consent, a repurchase of the notes could be prohibited under the
subordination provisions of the indenture until the senior debt is paid in
full. Further, we may not have the financial resources, or may be unable to
arrange financing, to pay the repurchase price for all the notes that might be
delivered by holders of notes seeking to exercise the repurchase right. If we
were to fail to repurchase the notes when required following a change in
control, an event of default under the indenture would occur, whether or not
such repurchase is permitted by the subordination provisions of the indenture.
Any such default may, in turn, cause a default under our senior debt. For more
details, see "--Subordination."
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Mergers and Sales of Assets
We may not consolidate with or merge into any other person or convey,
transfer, sell or lease our properties and assets substantially as an entirety
to any person, and we may not permit any person to consolidate with or merge
into us or convey, transfer, sell or lease such person's properties and assets
substantially as an entirety to us, unless each of the following requirements
is met:
. the person formed by the consolidation or into or with which we merge
or the person to which our properties and assets are conveyed,
transferred, sold or leased, is (x) a corporation, limited liability
company, partnership or trust organized and existing under the laws of
the United States, any State or the District of Columbia, or (y)
organized under the laws of a jurisdiction outside the United States
and has (i) common stock or American Depositary Shares representing
such common stock traded on a national securities exchange in the
United States, including The Nasdaq Stock Market, Inc., and (ii) a
worldwide total market capitalization of its equity securities (before
giving effect to such consolidation or merger) of a least U.S.$5
billion, if other than us, shall expressly assume the due and punctual
payment of the principal of, premium, and interest on the notes and the
performance of our other covenants under the indenture;
. immediately after giving effect to that transaction, no event of
default, and no event which, after notice or lapse of time or both,
would become an event of default, shall have occurred and be
continuing; and
. an officer's certificate and legal opinion relating to these conditions
is delivered to the trustee.
Upon any permitted consolidation, merger or sale, we will be discharged
from, and the surviving or successor corporation will succeed to, all of our
obligations under the indenture and the notes.
Events of Default
The following will be events of default under the indenture:
. we fail to pay principal of or premium on any note when due, whether or
not the payment is prohibited by the subordination provisions of the
indenture;
. we fail to pay any interest on any note when due and that default
continues for 30 days, whether or not the payment is prohibited by the
subordination provisions of the indenture;
. we fail to give the notice that we are required to give in the event of
a change in control, whether or not the notice is prohibited by the
subordination provisions of the indenture;
. we fail to perform any other covenant in the indenture and that failure
continues for 60 days after written notice to us by the trustee or the
holders of at least 25% in aggregate principal amount of outstanding
notes;
. we fail to pay when due, or upon acceleration of, the principal of, or
acceleration of, any indebtedness for money borrowed by us or any of
our subsidiaries in excess of $[10 million] if the indebtedness is not
discharged, or the acceleration is not annulled, within 30 days after
written notice to us by the trustee or the holders of at least 25% in
aggregate principal amount of the outstanding notes; and
. events of bankruptcy, insolvency or reorganization with respect to us
or any of our significant subsidiaries specified in the indenture.
Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any of the holders, unless such
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holders shall have offered to the trustee reasonable indemnity. Subject to such
provisions for the indemnification of the trustee, the holders of a majority in
aggregate principal amount of the outstanding notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee.
In general, the trustee is required to give notice of a default with
respect to the notes to the holders of those notes. However, the trustee may
withhold notice of any such default (except a default in payment of principal
of or interest on any note) if the trustee determines it is in the best
interest of the holders of the notes to do so.
If an event of default, other than an event of default arising from events
of bankruptcy, insolvency or reorganization, occurs and is continuing, either
the trustee or the holders of at least 25% in principal amount of the
outstanding notes may accelerate the maturity of all notes. After acceleration,
but before a judgment or decree based on acceleration, the holders of a
majority in aggregate principal amount of outstanding notes may, under
circumstances set forth in the indenture, rescind the acceleration if all
events of default, other than the nonpayment of principal of the notes which
have become due solely because of the acceleration, have been cured or waived
as provided in the indenture. If an event of default arising from events of
bankruptcy, insolvency or reorganization occurs and is continuing, then the
principal of, and accrued interest on, all of the notes will automatically
become immediately due and payable without any declaration or other act on the
part of the holders of the notes or the trustee.
Prior to an event of default, the trustee is required to perform only the
specific duties stated in the indenture, and after an event of default, the
trustee must exercise the same degree of care as a prudent individual would
exercise or use under the circumstances in the conduct of his or her own
affairs.
Before you may take any action to institute any proceeding relating to the
indenture, or to appoint a receiver or a trustee, or for any other remedy, each
of the following must occur:
. you must have given the trustee written notice of a continuing event of
default;
. the holders of at least 25% of the aggregate principal amount of all
outstanding notes must make a written request of the trustee to take
action because of the default and must have offered reasonable
indemnification to the trustee against the cost, liabilities and
expenses of taking such action; and
. the trustee must not have taken action for 60 days after receipt of
such notice and offer of indemnification.
These limitations do not apply to a suit for the enforcement of payment of
the principal of or any premium or interest on a note, or the repurchase price
payable for a note, on or after the due dates for such payments or of the right
to convert the note in accordance with the indenture.
We will furnish to the trustee annually a statement as to our performance
of our obligations under the indenture and as to any default in performance.
Modification and Waiver
The consent of the holders of a majority in principal amount of the
outstanding notes affected is required to make a modification or amendment to
the indenture. However, a modification or amendment requires the consent of the
holder of each outstanding note affected if it would:
. change the stated maturity of the principal or interest of a note;
. reduce the principal amount of, premium on, or interest on, any note;
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. reduce the amount payable upon a redemption or mandatory repurchase;
. modify the provisions with respect to the repurchase rights of holders
of notes in a manner adverse to the holders;
. change the place or currency of payment on a note;
. impair the right to institute suit for the enforcement of any payment
on any note;
. modify the subordination provisions in a manner adverse to the holders
of the notes;
. adversely affect the right to convert the notes;
. reduce the percentage of holders whose consent is needed to modify or
amend the indenture;
. reduce the percentage of holders whose consent is needed to waive
compliance with certain provisions of the indenture or to waive certain
defaults; or
. modify the provisions dealing with modification and waiver of the
indenture.
In certain circumstances, we may modify or amend the indenture without the
consent of the holders of outstanding notes to effect the assumption of our
obligations under the indenture by a successor corporation, to impose
additional restrictions and events of default with respect to the notes, to
correct any mistakes or defects in the indenture, to add a guarantor or for
other specified purposes.
The holders of a majority in principal amount of the outstanding notes must
consent to waive compliance by us with certain restrictive provisions of the
indenture. The holders of a majority in principal amount of the outstanding
notes may waive any past default, except an uncured default in the payment of
principal, any premium, interest or the repurchase price of the notes.
The notes will not be considered outstanding if money for their payment or
redemption has been deposited or set aside in trust for the holders.
We will generally be entitled to set any day as a record date for the
purpose of determining the holders of outstanding notes that are entitled to
take any action under the indenture. In limited circumstances, the trustee will
be entitled to set a record date for action by holders. If a record date is set
for any action to be taken by holders, such action may be taken only by persons
who are holders of outstanding notes on the record date and must be taken
within 180 days following the record date or such other period as we may
specify (or as the trustee may specify, if it set the record date). This period
may be shortened or lengthened (but not beyond 180 days) from time to time.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect
(except as to any surviving rights of conversion, or registration of transfer
or exchange, or replacement of notes and our obligations to the trustee) as to
all outstanding notes when:
(1) either
(A) all notes theretofore authenticated and delivered (other than (x)
notes that have been destroyed, lost or stolen and which have been
replaced or paid as provided in the indenture and (y) notes for which
payment money has theretofore been deposited in trust or segregated
and held in trust by us and thereafter repaid to us or discharged from
such trust, as provided in the indenture) have been delivered to the
trustee for cancellation, or
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(B) all such notes not theretofore delivered to the trustee or its agent
for cancellation (other than notes referred to in clauses (x) and (y)
of clause (1) (A) above)
(i) have become due and payable, or
(ii) will become due and payable within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the trustee for the giving of
notice of redemption by the trustee in our name, and at our
expense,
and we, in the case of clause (i), (ii) or (iii) above, have deposited
with the trustee as trustee funds (immediately available to the
holders of the notes in the case of clause (i) an amount sufficient to
pay and discharge the entire principal, any premium and interest on
such notes to the date of deposit (in the case of notes which have
become due and payable) or to the final maturity or redemption date,
as the case may be, and
(2) we have paid all other sums payable by us under the indenture.
Notices
We will give notice to holders of the notes by mail to the addresses of the
holders as they appear in the security register. Notices will be deemed to have
been given on the date of mailing.
Replacement of Notes
We will replace, at the expense of the holders, notes that become
mutilated, destroyed, stolen or lost upon delivery to the trustee of the
mutilated notes or evidence of the loss, theft or destruction thereof
satisfactory to us and the trustee. In the case of a lost, stolen or destroyed
note, indemnity satisfactory to the trustee and us may be required at the
expense of the holder of the note before a replacement note will be issued.
No Personal Liability of Stockholders, Officers, Directors and Employees
No direct or indirect stockholder, officer, director or employee, as such,
past, present or future of Medarex, or any successor entity, shall have any
personal liability in respect of our obligations under the indenture or the
notes solely by reason of his or its status as such stockholder, officer,
director or employee.
The Trustee
The trustee for the holders of notes issued under the indenture will be
Wilmington Trust Company. If an event of default shall occur, and shall not be
cured, the trustee will be required to use the degree of care of a prudent
person in the conduct of his own affairs in the exercise of its powers. Subject
to these provisions, the trustee will be under no obligation to exercise any of
its rights or powers under the indenture at the request of any holders of
notes, unless they shall have offered to the trustee reasonable security or
indemnity.
S-37
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material United States federal income
tax consequences of the purchase, ownership and disposition of the notes and
common stock into which the notes may be converted by initial purchasers that
purchase the notes at their "issue price." The "issue price" of the notes will
be the first price at which a substantial amount of the notes is sold for cash
to the public, not including sales to bond houses, brokers or similar persons
or organizations acting in the capacity of underwriters, placement agents or
wholesalers. This discussion is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change, possibly
with retroactive effect. In addition, this discussion assumes that investors
will hold the notes and common stock into which the notes may be converted as
capital assets for United States federal income tax purposes. This discussion
does not address all aspects of United States federal income taxation that may
be important to particular holders in light of their individual tax
circumstances, such as financial institutions, insurance companies, regulated
investment companies, real estate investment trusts, tax-exempt organizations,
dealers in securities, United States expatriates, persons that hold the notes
or common stock into which the notes may be converted as part of a straddle,
hedge or synthetic security transaction for United States federal income tax
purposes and persons that have a functional currency other than the United
States dollar, all of which may be subject to tax rules that differ
significantly from those discussed below. Further, this discussion does not
address any United States federal estate or gift tax laws or any state, local
or foreign tax laws. Prospective investors are urged to consult their tax
advisors regarding the United States federal, state, local and foreign income
and other tax consequences of the purchase, ownership and disposition of the
notes and common stock into which the notes may be converted.
For purposes of this summary, "U.S. Holder" means a beneficial owner of
notes or common stock that is (i) a citizen or resident of the United States,
(ii) a corporation or other entity subject to tax as a corporation for United
States federal income tax purposes that is created or organized under the laws
of the United States or any political subdivision thereof, (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source, or (iv) a trust if (a) a court within the United States is able
to exercise primary supervision over its administration and one or more United
States persons have the authority to control all of its substantial decisions
or (b) the trust has in effect a valid election to be treated as a domestic
trust for United States federal income tax purposes, and "Non-U.S. Holder"
means any beneficial owner of notes or common stock that is an individual,
corporation, estate or trust and that is not a U.S. Holder.
U.S. Holders
Payments of Interest
Stated interest payable on the notes will generally be included in the
gross income of a U.S. Holder as ordinary interest income at the time accrued
or received, in accordance with such U.S. Holder's method of accounting for
United States federal income tax purposes.
Sale, Exchange, Redemption, Retirement or Other Disposition of the Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a note (other than a conversion into or repurchase for our
common stock), a U.S. Holder will generally recognize capital gain or loss
equal to the difference between (i) the amount of cash proceeds and the fair
market value of any property received on such disposition (except to the extent
such amount is attributable to accrued interest not previously included in
income, which will be taxable as ordinary income, or is attributable to accrued
interest that was previously included in income, which amount may be received
without generating further income) and (ii) such holder's adjusted tax basis in
the note. A U.S. Holder's adjusted tax basis in the note will generally equal
the cost of the note to such holder. Such capital gain or loss will be long-
term capital gain or loss if the U.S. Holder's holding period in the note is
more than one year at the time of the disposition.
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Conversion of the Notes
A U.S. Holder will generally not recognize any income, gain or loss upon
conversion of a note into common stock except with respect to cash received in
lieu of a fractional share of common stock. A U.S. Holder's tax basis in the
common stock received on a conversion of a note will be the same as such
holder's adjusted tax basis in the note at the time of conversion (reduced by
any tax basis allocable to a fractional share interest). The holding period for
common stock received on conversion will generally include the holding period
of the note converted.
Cash received in lieu of a fractional share of common stock upon conversion
of a note will be treated as a payment in exchange for the fractional share of
common stock. Accordingly, the receipt of cash in lieu of a fractional share of
common stock will generally result in capital gain or loss equal to the
difference between the cash received for the fractional share and the holder's
adjusted tax basis in the fractional share.
Dividends and Constructive Distributions
Distributions, if any, received in respect of our common stock will
generally be included in the income of a U.S. Holder as ordinary dividend
income to the extent of our current or accumulated earnings and profits.
Distributions in excess of our current or accumulated earnings and profits will
be treated as a return of capital to the extent of the U.S. Holder's adjusted
tax basis in its common stock and thereafter as capital gain.
The conversion price of the notes is subject to adjustment under certain
circumstances. Holders of notes may be treated as receiving a constructive
dividend distribution from us if (1) the conversion price is adjusted and, as a
result of the adjustment, the proportionate interest of holders of notes in our
assets or earnings and profits is increased and (2) the adjustment is not made
pursuant to a bona fide, reasonable anti-dilution formula. An adjustment in the
conversion price would not be considered made pursuant to such a formula if the
adjustment were made to compensate a holder of a note for certain taxable
distributions with respect to common stock.
Sale, Exchange, or Other Disposition of Common Stock
Upon the sale, exchange or other disposition of our common stock, a U.S.
Holder will generally recognize capital gain or loss equal to the difference
between (i) the amount of cash and the fair market value of any property
received upon the sale, exchange or other disposition and (ii) such U.S.
Holder's adjusted tax basis in the common stock. Such capital gain or loss will
be long-term capital gain or loss if the U.S. Holder's holding period in the
common stock is more than one year at the time of the sale, exchange or other
disposition. A U.S. Holder's tax basis and holding period in common stock
received upon conversion of a note should generally be determined as discussed
above under "--Conversion of the Notes."
Non-U.S. Holders
Interest
Subject to the discussion below under "--Information Reporting and Backup
Withholding," a Non-U.S. Holder will not be subject to United States federal
income or withholding tax on payments of interest on the notes if such interest
is not effectively connected with the conduct of a trade or business within the
United States by the Non-U.S. Holder, or, in the case of a resident of a
country that has an income tax treaty in effect with the United States, is not
attributable to a permanent establishment or fixed base in the United States,
and the Non-U.S. Holder: (i) does not actually or constructively own 10% or
more of the total combined voting power of all classes of our voting stock,
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(ii) is not a controlled foreign corporation related to us directly or
constructively through stock ownership and (iii) satisfies certain
certification requirements. If interest on a note is not effectively connected
with the conduct of a trade or business in the United States by a Non-U.S.
Holder or, in the case of a Non-U.S. Holder that is a resident of a country
that has an income tax treaty in effect with the United States, is not
attributable to a permanent establishment or a fixed base in the United States,
but a Non-U.S. Holder cannot satisfy the other requirements outlined in the
preceding sentence, interest on a note will generally be subject to United
States withholding tax at a 30% rate (or a lower applicable treaty rate). If
interest on a note is effectively connected with the conduct of a trade or
business within the United States by the Non-U.S. Holder, or, in the case of a
Non-U.S. Holder that is a resident of a country that has an income tax treaty
in effect with the United States, is attributable to a permanent establishment
or fixed base in the United States, then the Non-U.S. Holder will generally be
subject to United States federal income tax on such interest in the same manner
as a U.S. Holder and, in the case of a Non-U.S. Holder that is a foreign
corporation, may also be subject to the branch profits tax at a rate of 30% (or
a lower applicable treaty rate).
Sale, Exchange or Disposition of a Note or Common Stock
Subject to the discussion below under "--Information Reporting and Backup
Withholding," a Non-U.S. Holder will generally not be subject to United States
federal income or withholding tax with respect to gain recognized on the sale,
redemption or other disposition of a note or our common stock unless (i) the
gain is effectively connected with the conduct of a trade or business within
the United States by the Non-U.S. Holder, or, in the case of a Non-U.S. Holder
that is a resident of a country that has an income tax treaty in effect with
the United States, is attributable to a permanent establishment or a fixed base
in the United States, or (ii) in the case of a Non-U.S. Holder who is a
nonresident alien individual, such holder is present in the United States for
183 or more days in the taxable year and certain other conditions are
satisfied. In either of the foregoing cases, gain or loss recognized on a sale,
redemption or other disposition (other than a conversion of notes into or
repurchase of notes for our common stock) will generally be subject to United
States federal income taxation in the same manner as if such gain or loss were
recognized by a U.S. Holder, and, in the case of a Non-U.S. Holder that is a
foreign corporation, may also be subject to the branch profits tax at a rate of
30% (or a lower applicable treaty rate). Non-U.S. Holders that recognize trade
or business income with respect to the notes or our common stock should consult
their tax advisors as to the treatment of such income or gain.
Dividends and Constructive Distributions
A Non-U.S. Holder of our common stock will generally be subject to United
States federal income or withholding tax at a 30% rate (or such lower rate as
provided under an applicable income tax treaty) on distributions made by us
with respect to our common stock that are treated as dividends for United
States federal income tax purposes and on constructive dividends deemed paid on
the notes as described above under "U.S. Holders--Dividends and Constructive
Distributions." Except to the extent that an applicable tax treaty otherwise
provides, a Non-U.S. Holder will generally be subject to United States federal
income tax in the same manner as a U.S. Holder on dividends paid (or deemed
paid) that are effectively connected with the Non-U.S. Holder's conduct of a
trade or business within the United States, and a Non-U.S. Holder that is a
corporation may also be subject to the branch profits tax at a rate of 30% (or
a lower applicable treaty rate).
Information Reporting and Backup Withholding
U.S. Holders
Payments of interest or dividends by us on, or the proceeds of the sale or
other disposition of, the notes or our common stock may be subject to
information reporting and United States federal backup withholding if the
recipient of the payment fails to supply an accurate taxpayer identification
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number or otherwise fails to comply with applicable United States information
reporting or certification reporting requirements. Any amount withheld from a
payment to a U.S. Holder under the backup withholding rules is allowable as a
credit against the U.S. Holder's United States federal income tax, provided
that the required information is provided to the Internal Revenue Service.
Non-U.S. Holders
A Non-U.S. Holder may be required to comply with certain certification
procedures to establish that the holder is not a U.S. person in order to avoid
backup withholding requirements with respect to our payments of principal,
interest and dividends or the proceeds of a sale or other disposition of the
notes or our common stock. In addition, we must report annually to the Internal
Revenue Service and to each Non-U.S. Holder the amount of any interest or
dividends paid to, and the tax withheld with respect to, such holder,
regardless of whether any tax was actually withheld.
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UNDERWRITING
Medarex and the underwriters for the offering named below have entered into
an underwriting agreement with respect to the notes being offered. Subject to
certain conditions, each underwriter has severally agreed to purchase the
principal amount of notes indicated in the following table.
Principal Amount
Underwriters of Notes
------------ ----------------
Goldman, Sachs & Co......................................... $
Credit Suisse First Boston Corporation......................
J.P. Morgan Securities Inc. ................................
Morgan Stanley & Co. Incorporated...........................
Bear, Stearns & Co. Inc. ...................................
Dain Rauscher Incorporated..................................
------------
Total..................................................... $175,000,000
============
If the underwriters sell more notes than the total principal amount set
forth in the table above, the underwriters have an option to buy up to an
additional $ principal amount of notes from Medarex to cover such sales.
They may exercise that option for 30 days. If any notes are purchased pursuant
to this option, the underwriters will severally purchase notes in approximately
the same proportion as set forth in the table above.
The following table shows the per note and total underwriting discounts and
commissions to be paid to the underwriters by Medarex. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional notes.
Paid by Medarex
No Exercise Full Exercise
----------- -------------
Per Note........................................... % %
Total............................................ $ $
Notes sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus
supplement. Any notes sold by the underwriters to securities dealers may be
sold at a discount from the initial public offering price of up to % of the
principal amount of the notes. Any such securities dealers may resell any notes
purchased from the underwriters to certain other brokers or dealers at a
discount from the initial public offering price of up to % of the principal
amount of the notes. If all the notes are not sold at the initial public
offering price to public, the underwriters may change the offering price and
the other selling terms.
Medarex and its executive officers and directors have agreed with the
underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus supplement continuing through the date 90 days
after the date of this prospectus supplement, except with the prior written
consent of the underwriters. This agreement does not apply to any existing
employee benefit plans.
The notes are a new issue of securities with no established trading market.
Medarex has been advised by the underwriters that the underwriters intend to
make a market in the notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the notes.
In connection with this offering, the underwriters may purchase and sell
notes and common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
principal amount of notes than they are required to purchase in this offering.
"Covered" short sales are sales made in an amount not greater than the
underwriters' option to purchase
S-42
additional notes from Medarex in the offering. The underwriters may close out
any covered short position by either exercising their option to purchase
additional notes or purchasing notes in the open market. In determining the
source of notes to close out the covered short position, the underwriters will
consider, among other things, the price of notes available for purchase in the
open market as compared to the price at which they may purchase notes through
the overallotment option. "Naked" short sales are any sales in excess of such
option. The underwriters must close out any naked short position by purchasing
notes in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the notes in the open market after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions consist of
certain bids or purchases of notes made by the underwriters in the open market
prior to the completion of the offering.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased notes sold by
or for the account of such underwriter in stabilizing or short covering
transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of the
notes and, together with the imposition of the penalty bid, may stabilize,
maintain or otherwise affect the market price of the notes and the common
stock. As a result, the price of the notes or the common stock may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
Medarex estimates that its share of the total expense of this offering,
excluding underwriting discounts and commissions, will be approximately
$750,000.
Medarex has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
LEGAL MATTERS
Certain legal matters will be passed upon for Medarex by Skadden, Arps,
Slate, Meagher & Flom LLP, Palo Alto, California, and Satterlee Stephens Burke
& Burke LLP, New York, New York. The validity of the notes will be passed on
for the underwriters by Sullivan & Cromwell, New York, New York. Sullivan &
Cromwell will rely as to all matters of New Jersey law upon the opinion of
Satterlee Stephens Burke & Burke LLP. Dwight A. Kinsey, Esq., a partner of
Satterlee Stephens Burke & Burke LLP, owns 6,000 shares of our common stock.
Mr. Kinsey also holds options to purchase 40,000 shares of our common stock
which he received for service rendered as our Assistant Secretary. No other
partner or associate of the firm owns shares or holds options to purchase any
of our shares having a fair market value either individually or in the
aggregate in excess of $50,000.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999 and 2000, and for each of the three
years in the period ended December 31, 2000, as set forth in their report,
which is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
S-43
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Exchange Act. The Exchange Act file number
for our SEC filings is 0-19312. You may read and copy any document we file at
the following SEC public reference rooms:
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Room 1024 Chicago, Illinois 60661 New York, New York 10048
Washington, D.C. 20549
You may obtain information on the operation of the public reference room
in Washington, D.C. by calling the SEC at 1-800-SEC-0330. We file information
electronically with the SEC. Our SEC filings are available from the SEC's
Internet site at http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically. Our common stock is listed on The Nasdaq National Market under
the symbol "MEDX." You may read and copy our SEC filings and other information
at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C.
20006.
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the documents we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information in the documents incorporated by
reference is considered to be part of this prospectus supplement, and
information in documents that we file later with the SEC will automatically
update and supersede information in this prospectus supplement. We incorporate
by reference the documents listed below and any future filings we will make
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act:
. Annual Report on Form 10-K for the year ended December 31, 2000;
. Quarterly Report on Form 10-Q for the three months ended March 31,
2001; and
. Current Report on Form 8-K filed May 25, 2001.
All documents filed by Medarex with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the termination of the offering of the notes shall hereby be deemed to be
incorporated by reference into this prospectus supplement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this prospectus
supplement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein or in the accompanying prospectus modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this prospectus
supplement or the accompanying prospectus.
We will provide a copy of the documents we incorporate by reference, at no
cost, to any person who receives this prospectus supplement. To request a copy
of any or all of these documents, you should write or telephone us at: 707
State Road, Suite 206, Princeton, New Jersey 08540 (609) 430-2880, Attention:
Corporate Secretary.
We furnish our stockholders with annual reports that contain audited
financial statements and quarterly reports for the first three quarters of
each year that contain unaudited interim financial information.
S-44
PROSPECTUS
$500,000,000
MEDAREX, INC.
From time to time, we may sell any of the following securities:
--DEBT SECURITIES
--PREFERRED STOCK
--COMMON STOCK
--WARRANTS TO PURCHASE DEBT SECURITIES, PREFERRED STOCK OR COMMON
STOCK
We will provide the specific terms of these securities in one or more
supplements to this prospectus. You should read this prospectus and any
prospectus supplement carefully before you invest.
Our common stock is traded over-the-counter on The Nasdaq Stock Market's
National Market under the trading symbol "MEDX." The applicable prospectus
supplement will contain information, where applicable, as to any other listing
(if any) on The Nasdaq Stock Market's National Market or any securities
exchange of the securities covered by the prospectus supplement.
----------------
INVESTING IN OUR SECURITIES INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 4.
THIS PROSPECTUS MAY NOT BE USED TO OFFER OR SELL ANY SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
----------------
The securities may be sold directly by us to investors through agents
designated from time to time or to or through underwriters or dealers. For
additional information on the methods of sale, you should refer to the section
entitled "Plan of Distribution." If any underwriters are involved in the sale
of any securities in respect of which this prospectus is being delivered, the
names of such underwriters and any applicable commissions or discounts will be
set forth in a prospectus supplement. The net proceeds we expect to receive
from such sale also will be set forth in a prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities to be issued under this
prospectus or determined if this prospectus is accurate or adequate. Any
representation to the contrary is a criminal offense.
Goldman, Sachs & Co.
----------------
The date of this Prospectus is December 22, 2000.
TABLE OF CONTENTS
Page
----
MEDAREX.................................................................... 1
ABOUT THIS PROSPECTUS...................................................... 3
RATIO OF EARNINGS TO FIXED CHARGES......................................... 4
RISK FACTORS............................................................... 4
FORWARD-LOOKING STATEMENTS................................................. 4
USE OF PROCEEDS............................................................ 5
SECURITIES WE MAY OFFER.................................................... 5
DESCRIPTION OF DEBT SECURITIES............................................. 6
DESCRIPTION OF CAPITAL STOCK............................................... 13
DESCRIPTION OF WARRANTS.................................................... 15
PLAN OF DISTRIBUTION....................................................... 16
LEGAL MATTERS.............................................................. 18
EXPERTS.................................................................... 18
WHERE YOU CAN FIND MORE INFORMATION........................................ 18
INFORMATION INCORPORATED BY REFERENCE...................................... 18
----------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
----------------
HuMab-Mouse(R) is a registered trademark of Medarex, Inc. T-12SM is a
servicemark of Medarex, Inc. Tc Mouse(TM) is a trademark of Kirin Brewery Co.
Ltd.
MEDAREX
We are a human monoclonal antibody-based company with integrated discovery,
development and clinical supply manufacturing capabilities. We are able to
create fully human monoclonal antibodies in our "HuMAb-Mouse." These mice are
"transgenic"--that is, the mouse genes for creating antibodies have been
inactivated and have been replaced by human antibody genes. We have entered
into a binding letter of intent with Kirin Brewery Co. Ltd., which provides us
with the exclusive right (except as to Kirin under certain circumstances) to
provide access to Kirin's Tc Mouse technology to companies headquartered
outside of Asia. Like our HuMAb-Mouse, Kirin's Tc Mouse has been designed to
create fully human antibodies. The Tc Mouse is "transchromosomic," meaning that
100% of the human antibody genes contained in the transplanted chromosomes are
present in the mouse. As part of our partnership with Kirin, we have recently
expanded our fully-integrated human antibody technology platform with the
development of a unique cross bred mouse, which combines the unique traits of
our HuMAb-Mouse with Kirin's Tc Mouse, as the newest addition to our
UltiMAb(TM) Human Antibody Development SystemSM. With our UltiMAb platform, we
believe we have assembled a unique family of genetically engineered mice for
creating the entire spectrum of high affinity fully human antibodies. To date,
26 companies have acquired the rights to use our human antibody technology in
their development of new products, including major pharmaceutical and
biotechnology companies such as Novartis AG, Amgen, Inc., Immunex Corporation,
Schering AG, Centocor, Inc., a subsidiary of Johnson & Johnson, and Eli Lilly
and Company.
As new disease-related targets are continually being discovered through
genomic and other research programs, we intend to use our human antibody
technology to develop therapeutic products for ourselves and for our existing
and prospective corporate partners. As part of our applied genomics strategy,
we have entered into alliances with a number of genomics and proteomics
companies including Eos Biotechnology, Inc., Regeneron, Inc., Corixa
Corporation, Oxford GlycoSciences Plc and Athersys, Inc., to develop and
commercialize genomics-derived antibody-based therapeutic products for the
treatment or prevention of life threatening diseases. We have also entered into
a collaboration with Genmab A/S, a publicly held Danish biotechnology company
in which we have a 33% equity interest, pursuant to which Genmab has the right
to enter into multitarget (five or more targets) genomic partnerships involving
our human antibody technology with certain pharmaceutical companies located in
Europe. Medarex has a right to participate in such partnerships. In addition,
we have entered into a technology access agreement with Genmab which provides
Genmab with certain rights to our human antibody technology. As part of these
transactions we may receive license fees, milestone payments, royalties and/or
profit sharing.
We believe that genomic and other research techniques are leading to the
discovery of an unprecedented number of potential targets for therapeutic
antibody products. To date, nine monoclonal antibody-based products have been
approved for sale by the United States Food and Drug Administration (FDA), with
the six highest selling of these antibodies having generated annual revenues in
excess of $1.3 billion worldwide. The majority of these antibodies have been on
the market for less than three years. Most of the antibodies currently in
development and all of the antibodies that form the basis of products approved
to date have been made in normal, or "wild type," mice and subsequently made
"chimeric" or "humanized," leading to a product that contains both human and
rodent proteins. These remaining rodent proteins may be recognized by a
patient's immune system as "foreign," potentially limiting the utility of the
product or causing allergic reactions. Instead of engineering mouse antibodies
to make them human, our HuMAb-Mouse makes fully human antibodies.
Using our human antibody technology, it is possible to create and develop
product candidates very rapidly. Under our T-12 development program, we have
been able to complete the process of making a very high affinity fully human
antibody to a therapeutic target, and filed an investigational
1
new drug application, or IND, with the FDA in less than 12 months. We believe
that this efficient and rapid development capability will provide an attractive
platform for product development for our corporate partners and for our own in-
house development programs.
The potential of our HuMAb-Mouse to rapidly generate high affinity, fully
human antibodies has led to numerous corporate partnerships under which
biopharmaceutical companies have acquired the right to use our human antibody
technology. We initiated or expanded six corporate partnerships in 1998, and an
additional six in 1999. We have entered into 12 corporate partnerships in 2000,
and expect to enter into several new or expanded corporate partnerships in each
of the next several years.
The financial terms of our corporate partnerships typically include license
fees and a series of milestone payments commencing upon initiation of clinical
trials through commercialization which may total up to $7 to $10 million per
target if the antibody receives approval from the FDA and equivalent foreign
agencies. We also expect to receive royalties on product sales. In some cases,
our corporate partners reimburse us for research and development activities
conducted on their behalf. Generally, under the terms of these collaborations,
our corporate partners are responsible for all costs of product development,
manufacturing and marketing of any products.
Over 200 companies are developing monoclonal antibody-based products. We
believe that many of these companies are potential partners for our human
antibody technology. In part, this reflects the enormous increase in knowledge
about potential targets currently in research and development. For example,
genomics research has identified that there are over 100,000 human genes, many
of which are expected to be disease-related. In many cases, these genes encode
proteins that may be attractive targets for monoclonal antibody-based products.
We believe that our human antibody technology and our product development
experience coupled with our T-12 development capabilities and our manufacturing
facilities, which comply with the applicable FDA current good manufacturing
practice regulations, or cGMP, will allow us to rapidly create and develop
numerous fully human antibodies based upon these targets. We intend to develop
some of these products for our own portfolio and some in collaboration with our
existing and prospective corporate partners.
----------------
We were incorporated in New Jersey on July 6, 1987. Our principal executive
offices are located at 707 State Road #206, Princeton, New Jersey 08540. Our
telephone number is (609) 430-2880.
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration process. Under this shelf process, we may
offer, from time to time, in one or more offerings:
--shares of our common stock;
--shares of our preferred stock;
--our debt securities; or
--warrants to purchase our common stock, preferred stock or debt
securities.
The total offering price of these securities will not exceed $500,000,000.
This prospectus provides you with a general description of the securities we
may offer. Each time we offer securities, we will provide you with a prospectus
supplement that will describe the specific amounts, prices and terms of the
securities we offer. The prospectus supplement also may add, update or change
information contained in this prospectus.
We may sell the securities to or through underwriters, dealers or agents or
directly to purchasers. We and our agents reserve the sole right to accept and
to reject in whole or in part any proposed purchase of securities. The
prospectus supplement, which we will provide to you each time we offer
securities, will provide the names of any underwriters, dealers or agents
involved in the sale of the securities, and any applicable fee, commission or
discount arrangements with them, see the section entitled "Plan of
Distribution."
3
RATIO OF EARNINGS TO FIXED CHARGES
We present below the deficiency of our earnings available to cover our
fixed charges. Earnings consist of loss before income taxes and equity in
earnings of unconsolidated affiliate. Fixed charges consist of interest expense
and that portion of rent expense we believe to be representative of interest.
Nine Months
Years Ended December 31, Ended
---------------------------------------------- September 30,
1995 1996 1997 1998 1999 2000
------- ------- -------- -------- -------- -------------
(in thousands)
Deficiency of Earnings
Available to Cover
Fixed Charges......... $(6,509) $(6,868) $(55,377) $(22,196) $(17,553) $(8,662)
RISK FACTORS
Investing in our securities involves risk. Please see the risk factors
described in our Annual Report on Form 10-K for the year ended December 31,
1999 (the "1999 10-K"), which is incorporated by reference in this prospectus.
Before making an investment decision, you should carefully consider these risks
as well as other information we include or incorporate by reference in this
prospectus.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and any prospectus
supplement including, without limitation, statements containing the words
"believes," "anticipates," "expects" and words of similar import, constitute
"forward-looking statements." Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. We believe that it is important to
communicate our future expectations to our investors. However, there may be
events in the future that we are not able to accurately predict or control. The
factors listed in the 1999 10-K in the section captioned "Risk Factors," as
well as any cautionary language in the 1999 10-K, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements.
Certain of these factors are discussed in more detail elsewhere in the 1999
10-K, including, without limitation, under the captions "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Given these uncertainties, you should not place
undue reliance on such forward-looking statements. We disclaim any obligation
to update any such factors or to publicly announce the result of any revisions
to any of the forward-looking statements contained herein, to reflect future
events or developments. Before you invest in our securities, you should be
aware that the occurrence of the events described in these risk factors and
elsewhere in the 1999 10-K could have a material adverse effect on our
business, results of operations and financial position.
4
USE OF PROCEEDS
Except as described in any prospectus supplement, we currently intend to
use the net proceeds from our sale of the securities for our general corporate
purposes, which may include repaying indebtedness, making additions to our
working capital or funding future acquisitions.
When we offer a particular series of securities, the prospectus supplement
relating to that offering will describe the intended use of the net proceeds
received from that offering. The actual amount of net proceeds we spend on a
particular use will depend on many factors, including:
--our future revenue growth, if any;
--our future capital expenditures; and
--the amount of cash required by our operations.
Many of these factors are beyond our control. Therefore, we will retain
broad discretion in the use of the net proceeds.
SECURITIES WE MAY OFFER
We may offer shares of common stock, shares of preferred stock, debt
securities or warrants to purchase common stock, preferred stock or debt
securities, or any combination of the foregoing, either individually or as
units consisting of one or more securities. We may offer up to $500,000,000 of
securities under this prospectus. If securities are offered as units, we will
describe the terms of the units in a prospectus supplement.
5
DESCRIPTION OF DEBT SECURITIES
We may offer any combination of senior debt securities or subordinated debt
securities. Debt securities are unsecured obligations to repay advanced funds.
We may issue the senior debt securities and the subordinated debt securities
under separate indentures between us, as issuer, and the trustee or trustees
identified in the prospectus supplement. The form for each type of indenture is
filed as an exhibit to the registration statement of which this prospectus is a
part.
The prospectus supplement will describe the particular terms of any debt
securities we may offer. The following summaries of the debt securities and the
indentures are not complete. We urge you to read the indentures and the
description of the debt securities included in the prospectus supplement.
General
We may issue an unlimited principal amount of debt securities in separate
series. We may specify a maximum aggregate principal amount for the debt
securities of any series. The debt securities will have terms that are
consistent with the indentures. Unless the prospectus supplement indicates
otherwise, senior debt securities will be unsecured and unsubordinated
obligations and will rank equal with all our other unsecured and unsubordinated
debt. Subordinated debt securities will be paid only if all payments due under
our senior indebtedness, including any outstanding senior debt securities, have
been made.
The indentures might not limit the amount of other debt that we may incur
and might not contain financial or similar restrictive covenants. The
indentures might not contain any provision to protect holders of debt
securities against a sudden or dramatic decline in our ability to pay our debt.
The prospectus supplement will describe the debt securities and the price
or prices at which we will offer the debt securities. The description will
include:
--the title and form of the debt securities;
--any limit on the aggregate principal amount of the debt securities or
the series of which they are a part;
--the person to whom any interest on a debt security of the series will be
paid;
--the date or dates on which we must repay the principal;
--the rate or rates at which the debt securities will bear interest, if
any, the date or dates from which interest will accrue, and the dates on
which we must pay interest;
--if applicable, the duration and terms of the right to extend interest
payment periods;
--the place or places where we must pay the principal and any premium or
interest on the debt securities;
--the terms and conditions on which we may redeem any debt security, if at
all;
--any obligation to redeem or purchase any debt securities, and the terms
and conditions on which we must do so;
--the denominations in which we may issue the debt securities;
--the manner in which we will determine the amount of principal of or any
premium or interest on the debt securities;
--the currency in which we will pay the principal of and any premium or
interest on the debt securities;
6
--the principal amount of the debt securities that we will pay upon
declaration of acceleration of their maturity;
--the amount that will be deemed to be the principal amount for any
purpose, including the principal amount that will be due and payable upon
any maturity or that will be deemed to be outstanding as of any date;
--if applicable, that the debt securities are defeasible and the terms of
such defeasance;
--if applicable, the terms of any right to convert debt securities into,
or exchange debt securities for, shares of common stock or other
securities or property;
--whether we will issue the debt securities in the form of one or more
global securities and, if so, the respective depositaries for the global
securities and the terms of the global securities;
--the subordination provisions that will apply to any subordinated debt
securities;
--any addition to or change in the events of default applicable to the
debt securities and any change in the right of the trustee or the holders
to declare the principal amount of any of the debt securities due and
payable; and
--any addition to or change in the covenants in the indentures.
We may sell the debt securities at a substantial discount below their
stated principal amount. We will describe U.S. federal income tax
considerations, if any, applicable to debt securities sold at an original issue
discount in the prospectus supplement. An "original issue discount security" is
any debt security sold for less than its face value, and which provides that
the holder cannot receive the full face value if maturity is accelerated. The
prospectus supplement relating to any original issue discount securities will
describe the particular provisions relating to acceleration of the maturity
upon the occurrence of an event of default. In addition, we will describe U.S.
federal income tax or other considerations applicable to any debt securities
that are denominated in a currency or unit other than U.S. dollars in the
prospectus supplement.
Conversion and Exchange Rights
The prospectus supplement will describe, if applicable, the terms on which
you may convert debt securities into or exchange them for common stock or other
securities or property. The conversion or exchange may be mandatory or may be
at your option. The prospectus supplement will describe how the number of
shares of common stock or other securities or property to be received upon
conversion or exchange would be calculated.
Subordination of Subordinated Debt Securities
Unless the prospectus supplement indicates otherwise, the following
provisions will apply to the subordinated debt securities. The indebtedness
underlying the subordinated debt securities will be payable only if all
payments due under our senior indebtedness, including any outstanding senior
debt securities, have been made. If we distribute our assets to creditors upon
any dissolution, winding-up, liquidation or reorganization or in bankruptcy,
insolvency, receivership or similar proceedings, we must first pay all amounts
due or to become due on all senior indebtedness before we pay the principal of,
or any premium or interest on, the subordinated debt securities. In the event
the subordinated debt securities are accelerated because of an event of
default, we may not make any payment on the subordinated debt securities until
we have paid all senior indebtedness or the acceleration is rescinded. If the
payment of subordinated debt securities accelerates because of an event of
default, we must promptly notify holders of senior indebtedness of the
acceleration.
7
If we experience a bankruptcy, dissolution or reorganization, holders of
senior indebtedness may receive more, ratably, and holders of subordinated debt
securities may receive less, ratably, than our other creditors. The indenture
for subordinated debt securities may not limit our ability to incur additional
senior indebtedness.
Form, Exchange and Transfer
We will issue debt securities only in fully registered form, without
coupons, and, unless the prospectus supplement indicates otherwise, only in
denominations of $1,000 and integral multiples thereof. The holder of a debt
security may elect, subject to the terms of the indentures and the limitations
applicable to global securities, to exchange them for other debt securities of
the same series of any authorized denomination and of similar terms and
aggregate principal amount.
Holders of debt securities may present them for exchange as provided above
or for registration of transfer, duly endorsed or with the form of transfer
duly executed, at the office of the transfer agent we designate for that
purpose. We will not impose a service charge for any registration of transfer
or exchange of debt securities, but we may require a payment sufficient to
cover any tax or other governmental charge payable in connection with the
transfer or exchange. We will name the transfer agent in the prospectus
supplement. We may designate additional transfer agents or rescind the
designation of any transfer agent or approve a change in the office through
which any transfer agent acts, but we must maintain a transfer agent in each
place in which we will pay on debt securities.
If we redeem the debt securities, we will not be required to issue,
register the transfer of or exchange any debt security during a specified
period prior to mailing a notice of redemption. We are not required to register
the transfer of or exchange any debt security selected for redemption, except
the unredeemed portion of the debt security being redeemed.
Global Securities
The debt securities may be represented, in whole or in part, by one or more
global securities that will have an aggregate principal amount equal to that of
all debt securities of that series. Each global security will be registered in
the name of a depositary identified in the prospectus supplement. We will
deposit the global security with the depositary or a custodian, and the global
security will bear a legend regarding the restrictions on exchanges and
registration of transfer.
No global security may be exchanged in whole or in part for debt securities
registered, and no transfer of a global security in whole or in part may be
registered, in the name of any person other than the depositary or any nominee
or successor of the depositary unless:
--the depositary is unwilling or unable to continue as depositary; or
--the depository is no longer in good standing under the Exchange Act or
other applicable statute or regulation.
The depositary will determine how all securities issued in exchange for a
global security will be registered.
As long as the depositary or its nominee is the registered holder of a
global security, we will consider the depositary or the nominee to be the sole
owner and holder of the global security and the underlying debt securities.
Except as stated above, owners of beneficial interests in a global security
will not be entitled to have the global security or any debt security
registered in their names, will not receive physical delivery of certificated
debt securities and will not be considered to be the
8
owners or holders of the global security or underlying debt securities. We will
make all payments of principal, premium and interest on a global security to
the depositary or its nominee. The laws of some jurisdictions require that some
purchasers of securities take physical delivery of such securities in
definitive form. These laws may prevent you from transferring your beneficial
interests in a global security.
Only institutions that have accounts with the depositary or its nominee and
persons that hold beneficial interests through the depositary or its nominee
may own beneficial interests in a global security. The depositary will credit,
on its book-entry registration and transfer system, the respective principal
amounts of debt securities represented by the global security to the accounts
of its participants. Ownership of beneficial interests in a global security
will be shown only on, and the transfer of those ownership interests will be
effected only through, records maintained by the depositary or any such
participant.
The policies and procedures of the depositary may govern payments,
transfers, exchanges and others matters relating to beneficial interests in a
global security. we and the trustee will assume no responsibility or liability
for any aspect of the depositary's or any participant's records relating to, or
for payments made on account of, beneficial interests in a global security.
Payment and Paying Agents
Unless the prospectus supplement indicates otherwise, we will pay principal
and any premium or interest on a debt security to the person in whose name the
debt security is registered at the close of business on the regular record date
for such interest.
Unless the prospectus supplement indicates otherwise, we will pay principal
and any premium or interest on the debt securities at the office of our
designated paying agent. Unless the prospectus supplement indicates otherwise,
the corporate trust office of the trustee will be the paying agent for the debt
securities.
Any other paying agents we designate for the debt securities of a
particular series will be named in the prospectus supplement. We may designate
additional paying agents, rescind the designation of any paying agent or
approve a change in the office through which any paying agent acts, but we must
maintain a paying agent in each place of payment for the debt securities.
The paying agent will return to us all money we pay to it for the payment
of the principal, premium or interest on any debt security that remains
unclaimed for a specified period. Thereafter, the holder may look only to us
for payment, as an unsecured general creditor.
Consolidation, Merger and Sale of Assets
Under the terms of the indentures, so long as any securities remain
outstanding, we may not consolidate or enter into a share exchange with or
merge into any other person, in a transaction in which we are not the surviving
corporation, or sell, convey, transfer or lease our properties and assets
substantially as an entirety to any person, unless:
--the successor assumes our obligations under the debt securities and the
indentures; and
--we meet the other conditions described in the indentures.
Events of Default
Each of the following will constitute an event of default under each
indenture:
--failure to pay the principal of or any premium on any debt security when
due;
9
--failure to pay any interest on any debt security when due, for more than
a specified number of days past the due date;
--failure to deposit any sinking fund payment when due;
--failure to perform any covenant or agreement in the indenture that
continues for a specified number of days after written notice has been
given by the trustee or the holders of a specified percentage in
aggregate principal amount of the debt securities of that series;
--certain events in bankruptcy, insolvency or reorganization; and
--any other event of default specified in the prospectus supplement.
If an event of default occurs and continues, both the trustee and holders
of a specified percentage in aggregate principal amount of the outstanding
securities of that series may declare the principal amount of the debt
securities of that series to be immediately due and payable. The holders of a
majority in aggregate principal amount of the outstanding securities of that
series may, under certain circumstances, rescind and annul the acceleration if
all events of default, other than the nonpayment of accelerated principal, have
been cured or waived.
Except for certain duties in case of an event of default, the trustee will
not be obligated to exercise any of its rights or powers at the request or
direction of any of the holders, unless the holders have offered the trustee
reasonable indemnity. If they provide this indemnification, the holders of a
majority in aggregate principal amount of the outstanding securities of any
series may direct the time, method and place of conducting any proceeding for
any remedy available to the trustee or exercising any trust or power conferred
on the trustee with respect to the debt securities of that series.
No holder of a debt security of any series may institute any proceeding
with respect to the indentures, or for the appointment of a receiver or a
trustee, or for any other remedy, unless:
--the holder has previously given the trustee written notice of a
continuing event of default;
--the holders of a specified percentage in aggregate principal amount of
the outstanding securities of that series have made a written request
upon the trustee, and have offered reasonable indemnity to the trustee,
to institute the proceeding; and
--the trustee has failed to institute the proceeding for a specified
period of time after its receipt of the notification; and
--the trustee has not received a direction inconsistent with the request
within a specified number of days.
Modification and Waiver
We and the trustee may change an indenture without the consent of any
holders with respect to specific matters, including:
--to fix any ambiguity, defect or inconsistency in the indenture; and
--to change anything that does not materially adversely affect the
interests of any holder of debt securities of any series.
In addition, under the indentures, the rights of holders of a series of
notes may be changed by us and the trustee with the written consent of the
holders of at least a majority in aggregate principal amount of the outstanding
debt securities of each series that is affected. However, we and the trustee
may only make the following changes with the consent of the holder of any
outstanding debt securities affected:
--extending the fixed maturity of the series of notes;
10
--reducing the principal amount, reducing the rate of or extending the
time of payment of interest, or any premium payable upon the redemption,
of any debt securities; or
--reducing the percentage of debt securities the holders of which are
required to consent to any amendment.
The holders of a majority in principal amount of the outstanding debt
securities of any series may waive any past default under the indenture with
respect to debt securities of that series, except a default in the payment of
principal, premium or interest on any debt security of that series or in
respect of a covenant or provision of the indenture that cannot be amended
without each holder's consent.
Except in certain limited circumstances, we may set any day as a record
date for the purpose of determining the holders of outstanding debt securities
of any series entitled to give or take any direction, notice, consent, waiver
or other action under the indentures. In certain limited circumstances, the
trustee may set a record date. To be effective, the action must be taken by
holders of the requisite principal amount of such debt securities within a
specified period following the record date.
Defeasance
To the extent stated in the prospectus supplement, we may elect to apply
the provisions in the indentures relating to defeasance and discharge of
indebtedness, or to defeasance of certain restrictive covenants, to the debt
securities of any series. The indentures provide that, upon satisfaction of the
requirements described below, we may terminate all of our obligations under the
debt securities of any series and the applicable indenture, known as legal
defeasance, other than our obligation:
--to maintain a registrar and paying agents and hold moneys for payment in
trust;
--to register the transfer or exchange of the notes; and
--to replace mutilated, destroyed, lost or stolen notes.
In addition, we may terminate our obligation to comply with any restrictive
covenants under the debt securities of any series or the applicable indenture,
known as covenant defeasance.
We may exercise our legal defeasance option even if we have previously
exercised our covenant defeasance option. If we exercise either defeasance
option, payment of the notes may not be accelerated because of the occurrence
of events of default.
To exercise either defeasance option as to debt securities of any series,
we must irrevocably deposit in trust with the trustee money and/or obligations
backed by the full faith and credit of the U.S. that will provide money in an
amount sufficient in the written opinion of a nationally recognized firm of
independent public accountants to pay the principal of, premium, if any, and
each installment of interest on the debt securities. We may only establish this
trust if, among other things:
--no event of default shall have occurred or be continuing;
--in the case of legal defeasance, we have delivered to the trustee an
opinion of counsel to the effect that we have received from, or there has
been published by, the IRS a ruling or there has been a change in law,
which in the opinion of our counsel, provides that holders of the debt
securities will not recognize gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will
be subject to federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred;
11
--in the case of covenant defeasance, we have delivered to the trustee an
opinion of counsel to the effect that the holders of the debt securities
will not recognize gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit, defeasance and
discharge had not occurred; and
--we satisfy other customary conditions precedent described in the
applicable indenture.
Notices
We will mail notices to holders of debt securities as indicated in the
prospectus supplement.
Title
We may treat the person in whose name a debt security is registered as the
absolute owner, whether or not such debt security may be overdue, for the
purpose of making payment and for all other purposes.
Governing Law
The indentures and the debt securities will be governed by and construed
in accordance with the laws of the state of New York.
12
DESCRIPTION OF CAPITAL STOCK
The following is a description of the common stock and preferred stock we
may offer under this prospectus. While the terms we have summarized below will
apply generally to any future common stock or preferred stock that we may
offer, we will describe the particular terms of these securities in more detail
in the applicable prospectus supplement.
General
Our restated certificate of incorporation authorizes the issuance of up to
200,000,000 shares of common stock, $.01 par value per share, and authorizes
the issuance of up to 2,000,000 shares of preferred stock, $1.00 par value per
share, the rights and preferences of which may be established from time to time
by the Board of Directors. As of December 1, 2000, 72,366,210 shares of common
stock were issued and outstanding and no shares of preferred stock were issued
and outstanding.
Common Stock
Each share of common stock entitles the holder thereof to one vote on all
matters submitted to a vote of the shareholders. Since the holders of common
stock do not have cumulative voting rights, holders of more than 50% of the
outstanding shares can elect all of our directors and holders of the remaining
shares by themselves cannot elect any directors. The holders of common stock do
not have preemptive rights or rights to convert their common stock into other
securities. Holders of common stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of our liquidation, dissolution or winding up,
holders of common stock have the right to a ratable portion of the assets
remaining after payment of liabilities. All shares of common stock outstanding
and to be outstanding upon completion of this offering are and will be fully
paid and non-assessable.
Preferred Stock
Our authorized preferred stock consists of 2,000,000 shares, par value
$1.00 per share. Our restated certificate of incorporation grants the Board of
Directors the authority to issue by resolution shares of preferred stock in one
or more series and to fix the number of shares constituting any such series,
the voting powers, if any, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including the rate or rates at which, and
the other terms and conditions on which, dividends shall be payable; whether
and on what terms the shares constituting any series shall be redeemable,
subject to sinking fund provisions, or convertible or exchangeable; and the
liquidation preferences, if any, of such series, without any further vote or
action by the stockholders. For example, the Board of Directors is authorized
to issue a series of preferred stock that would have the right to vote,
separately or with any other series of preferred stock, on any proposed
amendment to our restated certificate of incorporation, or any other proposed
corporate action, including business combinations and other transactions. The
Board of Directors currently does not contemplate the issuance of any preferred
stock and is not aware of any pending or proposed transactions that would be
affected by such issuance.
The authorization of undesignated preferred stock makes it possible for the
Board of Directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
our company. These and other provisions may have the effect of deferring
hostile takeovers or delaying changes in control or management of our company.
The amendment of any of these provisions would require approval by holders of
at least 66 2/3% of the outstanding common stock.
We have filed registration statements on Form S-8 under the Securities Act
which cover 5,100,053 shares of common stock currently issuable under our stock
option plans. Shares issued under these plans, other than shares issued to
affiliates, will be freely tradeable on the public market.
13
In addition, we have filed a registration statement with the Securities and
Exchange Commission with respect to 246,002 shares of our common stock held by
one of our shareholders. Once this registration statement is declared effective
by the Securities and Exchange Commission, the shareholder may sell such shares
in the public market. Such sales, or the perception that these sales could
occur, may have an adverse effect on the market price of our common stock and
could impair our ability to raise capital through an offering of equity
securities.
Certain Special Charter and By-Law Provisions
Our restated certificate of incorporation and by-laws contain certain
provisions that may delay, defer or prevent a change in control. Specifically,
the Board of Directors is classified. Directors are elected for three year
terms with only one class of board members elected each year. In addition, the
by-laws provide that special meetings of shareholders may be called only by the
President, the Chief Executive Officer, the Chairman of the Board of Directors
or the Board of Directors.
Furthermore, our restated certificate of incorporation, as amended,
incorporates all of the provisions of the New Jersey Shareholders Protection
Act (the "New Jersey Act"), which provides that resident New Jersey
corporations may not engage in certain Business Combinations with any
Interested Stockholder (as such terms are defined therein) for a period of five
years following the date that such Interested Stockholder became the owner,
directly or indirectly, of 10% or more of the voting power of our company,
unless (i) such transaction is approved by our Board of Directors prior to the
acquisition date, or (ii) the holders of two-thirds (66 2/3%) of our voting
stock, excluding the shares of the Interested Stockholder, approve such
transaction. The New Jersey Act also precludes the purchase by us (except as
hereinafter noted) at a premium over market of any of our voting stock from an
Interested Stockholder who has owned such securities for less than five years.
Notwithstanding the foregoing, such a purchase would be permitted if the same
offer were made to all other holders of the same kind of securities, or the
transaction were approved by the holders of 66 2/3% of our outstanding voting
stock excluding the shares of any Interested Stockholder, or the Board of
Directors approved such a transaction prior to such Interested Stockholder's
acquisition date. Our restated certificate of incorporation, as amended, does
not provide for any additional anti-takeover protections other than those set
forth in the New Jersey Act.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Continental Stock
Transfer & Trust Company, Two Broadway, New York, New York 10004.
14
DESCRIPTION OF WARRANTS
Warrants to Purchase Common Stock or Preferred Stock
The following summarizes the terms of common stock warrants and preferred
stock warrants we may issue. This description is subject to the detailed
provisions of a stock warrant agreement that we will enter into with a stock
warrant agent we select at the time of issue. While the terms we have
summarized below will apply generally to any future warrants to purchase common
stock or preferred stock that we may offer, we will describe the particular
terms of these securities in more detail in the applicable prospectus
supplement.
General. We may issue stock warrants evidenced by stock warrant
certificates under a stock warrant agreement independently or together with any
securities we offer by any prospectus supplement. If we offer stock warrants,
the prospectus supplement will describe the terms of the stock warrants,
including:
--the offering price, if any;
--the number of shares of common or preferred stock purchasable upon
exercise of one stock warrant and the initial price at which the shares
may be purchased upon exercise;
--if applicable, the designation and terms of the preferred stock
purchasable upon exercise of the stock warrants;
--the dates on which the right to exercise the stock warrants begins and
expires;
--U.S. federal income tax consequences;
--call provisions, if any;
--the currencies in which the offering price and exercise price are
payable; and
--if applicable, any antidilution provisions.
Exercise of Stock Warrants. You may exercise stock warrants by surrendering
to the stock warrant agent the stock warrant certificate, which indicates your
election to exercise all or a portion of the stock warrants evidenced by the
certificate. Surrendered stock warrant certificates must be accompanied by
payment of the exercise price in the form of cash or a check. The stock warrant
agent will deliver certificates evidencing duly exercised stock warrants to the
transfer agent. Upon receipt of the certificates, the transfer agent will
deliver a certificate representing the number of shares of common stock or
preferred stock purchased. If you exercise fewer than all the stock warrants
evidenced by any certificate, the stock warrant agent will deliver a new stock
warrant certificate representing the unexercised stock warrants.
No Rights as Stockholders. Holders of stock warrants are not entitled to
vote, to consent, to receive dividends or to receive notice as stockholders
with respect to any meeting of stockholders, or to exercise any rights
whatsoever as stockholders.
Warrants to Purchase Debt Securities
The following summarizes the terms of the debt warrants we may offer. This
description is subject to the detailed provisions of a debt warrant agreement
that we will enter into with a debt warrant agent we select at the time of
issue. While the terms we have summarized below will apply generally to any
future warrants to purchase debt securities that we may offer, we will describe
the particular terms of these Securities in more detail in the applicable
prospectus supplement.
15
General. We may issue debt warrants evidenced by debt warrant certificates
independently or together with any securities offered by any prospectus
supplement. If we offer debt warrants, the prospectus supplement will describe
the terms of the warrants, including:
--the offering price, if any;
--the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the warrants and the terms of the
indenture under which the debt securities will be issued;
--if applicable, the designation and terms of the debt securities with
which the debt warrants are issued and the number of debt warrants issued
with each debt security;
--if applicable, the date on and after which the debt warrants and any
related securities will be separately transferable;
--the principal amount of debt securities purchasable upon exercise of one
debt warrant and the price at which the principal amount of debt
securities may be purchased upon exercise;
--the dates on which the right to exercise the debt warrants begins and
expires;
--U.S. federal income tax consequences;
--whether the warrants represented by the debt warrant certificates will
be issued in registered or bearer form;
--the currencies in which the offering price and exercise price are
payable; and
--if applicable, any antidilution provisions.
You may exchange debt warrant certificates for new debt warrant
certificates of different denominations and may present debt warrant
certificates for registration of transfer at the corporate trust office of the
debt warrant agent, which will be listed in the prospectus supplement.
Warrantholders do not have any of the rights of holders of debt securities,
except to the extent that the consent of warrantholders may be required for
certain modifications of the terms of an indenture or form of the debt
security, as the case may be, and the series of debt securities issuable upon
exercise of the debt warrants. In addition, warrantholders are not entitled to
payments of principal of and interest, if any, on the debt securities.
Exercise of Debt Warrants. You may exercise debt warrants by surrendering
the debt warrant certificate at the corporate trust office of the debt warrant
agent, with payment in full of the exercise price. Upon the exercise of debt
warrants, the debt warrant agent will, as soon as practicable, deliver the debt
securities in authorized denominations in accordance with your instructions and
at your sole cost and risk. If less than all the debt warrants evidenced by the
debt warrant certificate are exercised, the agent will issue a new debt warrant
certificate for the remaining amount of debt warrants.
PLAN OF DISTRIBUTION
We may sell the securities through underwriters or dealers, through agents,
or directly to one or more purchasers. The prospectus supplement will describe
the terms of the offering of the securities, including:
--the name or names of any underwriters, if any;
--the purchase price of the securities and the proceeds we will receive
from the sale;
--any underwriting discounts and other items constituting underwriters'
compensation;
16
--any initial public offering price;
--any discounts or concessions allowed or reallowed or paid to dealers;
and
--any securities exchange or market on which the securities may be listed.
Only underwriters named in the prospectus supplement are underwriters of
the securities offered by the prospectus supplement.
If underwriters are used in the sale, they will acquire the securities for
their own account and may resell them from time to time in one or more
transactions at a fixed public offering price or at varying prices determined
at the time of sale. We may offer the securities to the public through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Subject to certain conditions, the underwriters will be
obligated to purchase all the securities of the series offered by the
prospectus supplement. Any public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may change from time to
time.
We may sell securities directly or through agents we designate from time to
time. We will name any agent involved in the offering and sale of securities
and we will describe any commissions we will pay the agent in the prospectus
supplement. Unless the prospectus supplement states otherwise, our agent will
act on a best-efforts basis for the period of its appointment.
We may authorize agents or underwriters to solicit offers by certain types
of institutional investors to purchase securities from us at the public
offering price set forth in the prospectus supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. We will describe the conditions to these contracts and the
commissions we must pay for solicitation of these contracts in the prospectus
supplement.
We may provide agents and underwriters with indemnification against certain
civil liabilities, including liabilities under the Securities Act, or
contribution with respect to payments that the agents or underwriters may make
with respect to such liabilities. Agents and underwriters may engage in
transactions with, or perform services for, us in the ordinary course of
business.
All securities we offer other than common stock will be new issues of
securities with no established trading market. Any underwriters may make a
market in these securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. We cannot guarantee
the liquidity of the trading markets for any securities.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by
Satterlee Stephens Burke & Burke LLP, New York, New York. Dwight A. Kinsey,
Esq., a partner of Satterlee Stephens Burke & Burke LLP owns 6,000 shares of
our common stock. Mr. Kinsey also holds options to purchase 40,000 shares of
our common stock which he received for service rendered as our Assistant
Secretary. No other partner or associate of the firm owns shares or holds
options to purchase any of our shares having a fair market value either
individually or in the aggregate in excess of $50,000.
17
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1999, and for each of the three
years in the period ended December 31, 1999, as set forth in their report,
which is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC under the Securities Act a registration
statement on Form S-3. This prospectus does not contain all of the information
contained in the registration statement, certain portions of which have been
omitted under the rules of the SEC. We are subject to the information and
reporting requirements of the Exchange Act under which we file periodic
reports, proxy statements and other information with the SEC. Copies of the
reports, proxy statements and other information may be examined without charge
at the Public Reference Section of the SEC, 450 Fifth Street, NW., Room 1024,
Washington, D.C. 20549, and the SEC's Regional office located at 500 West
Madison Street, Suite 1400, Chicago IL 60661, or on the Internet at
www.sec.gov. Copies of all or a portion of such materials can be obtained from
the Public Reference Section of the SEC upon payment of prescribed fees. Please
call the Securities and Exchange Commission at 800-SEC-0330 for further
information about the Public Reference Room. We file information electronically
with the SEC. Our SEC filings are available from the SEC's Internet site at
http://www.sec.gov, which contains reports, proxy and information statements
and other information regarding issuers that file electronically. Our SEC
filings and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, NW., Washington, D.C. 20006.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference information into this
prospectus, which means that we can disclose important information to you by
referring you to another document we have filed with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in the prospectus
or any prospectus supplement. This prospectus incorporates by reference the
documents set forth below that have previously been filed with the SEC. These
documents contain important information about us and our financial condition.
Our SEC Filings Period
--------------- ------
Annual Report on Form 10-K Year ended December 31, 1999.
Quarterly Reports on Form 10-Q For the quarters ended March 31, June 30
and September 30, 2000.
Quarterly Reports on Form 10-Q/A Filed on November 17, 2000.
Current Reports on Form 8-K Filed on January 26, 2000, February 14,
2000, March 3, 2000, March 7, 2000,
September 13, 2000 , September 15, 2000 and
December 22, 2000.
Current Report on Form 8-K/A Filed on March 1, 2000.
Registration Statement on Form 8-A Filed May 25, 1991, setting forth a
description for our common stock (including
any amendments or reports filed for the
purpose of updating such description).
18
We incorporate by reference in this prospectus additional documents that we
may file with the SEC between the date the registration statement was initially
filed and the date of termination of the offering. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, as well as proxy statements.
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of information, future events or otherwise. You
are advised, however, to consult any further disclosures we make on related
subjects in our 10-K, 10-Q and 8-K reports to the Securities and Exchange
Commission. Also note that we provide a cautionary discussion of risks and
uncertainties relevant to our business in the "Risk Factors" section of our
Annual Report on Form 10-K for the year ended December 31, 1999. These are
factors that we think could cause our actual results to differ materially from
expected results. Other factors besides those listed there could also adversely
affect us. This discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.
You can obtain any of the documents incorporated by reference through us,
the SEC or the SEC's world wide web site described above. Documents that we
incorporate by reference are available without charge, excluding all exhibits
unless specifically incorporated by reference as an exhibit to this prospectus.
You may obtain documents incorporated in this prospectus by requesting them in
writing or by telephone at the following address:
MEDAREX, INC.
707 State Road #206
Princeton, New Jersey 08540
Attention: Secretary
(609) 430-2880
19
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No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely
on any unauthorized information or representations. This prospectus is an
offer to sell only the notes offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
Forward-Looking Statements................................................. S-2
The Company................................................................ S-3
The Offering............................................................... S-5
Selected Consolidated Financial Data....................................... S-7
Price Range of Common Stock................................................ S-8
Dividend Policy............................................................ S-8
Capitalization............................................................. S-9
Risk Factors .............................................................. S-10
Use of Proceeds............................................................ S-23
Description of Notes....................................................... S-24
Certain United States Federal Income Tax Consequences...................... S-38
Underwriting............................................................... S-42
Legal Matters.............................................................. S-43
Experts.................................................................... S-43
Where You Can Find More Information........................................ S-44
Incorporation By Reference................................................. S-44
Prospectus
Medarex, Inc. ............................................................. 1
About this Prospectus...................................................... 3
Ratio of Earnings to Fixed Charges......................................... 4
Risk Factors............................................................... 4
Forward-Looking Statements................................................. 4
Use of Proceeds............................................................ 5
Description of Debt Securities............................................. 6
Description of Capital Stock............................................... 13
Description of Warrants.................................................... 15
Plan of Distribution....................................................... 16
Legal Matters.............................................................. 18
Experts.................................................................... 18
Where You Can Find More Information........................................ 18
Incorporation by Reference................................................. 18
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$175,000,000
Medarex, Inc.
% Convertible Subordinated Notes due 2006
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
Goldman, Sachs & Co.
Credit Suisse First Boston
JPMorgan
Morgan Stanley Dean Witter
Bear, Stearns & Co. Inc.
Dain Rauscher Wessels
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