As filed with the Securities and Exchange Commission on August 13, 2003
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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XOMA Ltd.
(Exact name of registrant as specified in its charter)
Bermuda 52-2154066
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2910 Seventh Street
Berkeley, California 94710
(510) 204-7200
(Address, including ZIP code, and telephone number, including
area code, of registrant's principal executive offices)
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CHRISTOPHER J. MARGOLIN, ESQ.
XOMA Ltd.
2910 Seventh Street
Berkeley, California 94710
(510) 204-7292
(Name, address, including ZIP code,
and telephone number,
including area code, of agent
for service)
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Copy to:
GEOFFREY E. LIEBMANN, ESQ.
CAHILL GORDON & REINDEL
80 Pine Street
New York, New York 10005
(212) 701-3000
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Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
Title of Each Class Proposed Proposed
of Securities Amount Maximum Maximum Amount of
To Be To Be Offering Price Aggregate Registration
Registered Registered per Unit(1) Offering Price(1) Fee
------------------------------- ----------------------- -------------------- -------------------- --------------------
Common Shares,
par value U.S.$.0005
per share................... 13,000,000(2)(3)(4) $7.965 $103,545,000 $8,376.79
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c).
(2) Includes a like number of Preference Share Purchase Rights (the "Rights").
Since no separate consideration is paid for the Rights, the registration
fee is included in the fee for the Common Shares.
(3) Pursuant to Rule 416 under the Securities Act of 1933, any additional
Common Shares issued as a result of share subdivisions, bonus issues or
similar transactions are deemed to be registered herewith.
(4) In addition to the 13,000,000 Common Shares being registered hereunder,
pursuant to Rule 429(b) under the Securities Act of 1933, 7,000,000 Common
Shares are being carried forward from the Registrant's prior registration
statement on Form S-3 (File No. 333-50134), filed with the Securities and
Exchange Commission on November 17, 2000.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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The information contained in this prospectus is not complete and may not be
changed. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
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Prospectus Subject to Completion, dated August 13, 2003 XOMA Ltd. 20,000,000
Common Shares
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o We may from time to time issue up to 20,000,000 common shares. We will
specify in the accompanying prospectus supplement the terms of any such
offering.
o We may sell these common shares to or through underwriters and also to
other purchasers or through agents. We will set forth the names of any
underwriters or agents in the accompanying prospectus supplement.
o We have used and intend to continue to use the net proceeds from this
offering for general corporate purposes, including current research and
development projects, the development or acquisition of new products or
technologies, equipment acquisitions, general working capital and operating
expenses.
o Our common shares are listed on the Nasdaq National Market under the symbol
"XOMA." The last reported sale price for the common shares on August 11,
2003 was $8.40 per share.
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This investment involves a high degree of risk. Consider carefully the risk
factors beginning on page 4 of this prospectus before you invest.
--------------------
Neither the SEC nor any state securities commission has approved these
securities or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
--------------------
The date of this prospectus is , 2003.
2
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.............................................................2
RISK FACTORS...................................................................4
INCORPORATION OF INFORMATION WE FILE WITH THE SEC.............................15
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................16
PRICE RANGE OF COMMON SHARES AND DIVIDEND INFORMATION.........................17
USE OF PROCEEDS...............................................................18
DESCRIPTION OF SHARE CAPITAL..................................................19
PLAN OF DISTRIBUTION..........................................................22
LEGAL OPINION.................................................................22
EXPERTS.......................................................................23
WHERE YOU CAN GET MORE INFORMATION............................................23
-i-
PROSPECTUS SUMMARY
XOMA
We are a biopharmaceutical company that develops and manufactures
recombinant antibodies and other protein products to treat cancer, immunological
and inflammatory disorders, and infectious diseases. Our current product
development programs include:
o Raptiva(TM) (Efalizumab) is a humanized anti-CD11a monoclonal antibody
developed to treat immune system disorders. In February of 2003, Genentech
received formal acknowledgement from the U.S. Food and Drug Administration
that it had received the December 2002 submission of the Biologics License
Application for marketing approval of Raptiva(TM) in patients with
moderate-to-severe plaque psoriasis. The BLA filing is based on efficacy
and safety data from three Phase III studies. A FDA advisory committee is
scheduled to review the BLA filing for RaptivaTM on September 9, 2003.
Genentech has granted Serono S.A. exclusive marketing rights to Raptiva(TM)
outside the U.S. and Japan. In February of 2003, Serono announced the
filing of an application for European Union marketing approval of
Raptiva(TM) in moderate-to-severe plaque psoriasis.
In January of 2003, we announced initiation of a Phase II study to evaluate
Raptiva(TM) as a possible treatment for patients with psoriatic arthritis.
Genentech and we continue to assess additional indications for Raptiva(TM).
o Two of Millennium Pharmaceuticals, Inc.'s biotherapeutic agents, MLN2201
(formerly MLN01) and CAB-2, are being developed for certain vascular
inflammation indications pursuant to a collaboration agreement with
Millennium that was announced in November of 2001. In June of 2003, we
announced initiation of a Phase I clinical trial of MLN2201, a humanized
monoclonal antibody being developed for conditions related to inflammation
of the heart and blood vessels. This open-label, dose-escalating study will
evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of
MLN2201 in healthy volunteers, who will each receive a single intravenous
infusion, followed by monitoring and evaluation.
CAB-2 continues in preclinical testing, and if successful, we are targeting
the initiation of clinical testing later this year.
o NEUPREX(R), also known as rBPI21, is a genetically-engineered fragment of a
particular human protein. We completed a Phase III efficacy clinical trial
in 1999, testing NEUPREX(R) in severe pediatric meningococcemia, but the
data from the trial were determined not to be sufficient to file for
regulatory approval. Further development of this product continued under a
license agreement with a division of Baxter Healthcare Corporation, and a
Phase II study testing NEUPREX(R) in Crohn's disease completed enrollment
in November of 2002 but results are not yet known. In July of 2003, our
licensing arrangement with Baxter for NEUPREX(R) was terminated, and the
rights returned to us. Future development plans are under review.
o ING-1 is a Human Engineered(TM) recombinant monoclonal antibody that binds
with high affinity to an antigen expressed on epithelial cell cancers
(breast, colorectal, prostate and others) that is designed to destroy
cancer cells by recruiting the patient's own immune system. Enrollment has
been completed in two Phase I studies testing intravenous administration in
advanced adenocarcinoma patients, which showed safety and tolerability
results that supported further clinical development. An additional Phase I
study with subcutaneous administration is ongoing. Further product
development efforts and a decision on future collaborative arrangements
will be determined based on the results of these studies. The ING-1
monoclonal antibody incorporates our patented Human Engineering(TM)
technology, designed to reduce immunogenicity.
o BPI-derived anti-angiogenic compounds with potential application for
treating retinal disorders are being developed by us. Results of in vitro
and in vivo studies conducted by Joslin Diabetes Center at Harvard
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University, presented in April of 2001 and published in February of 2002,
showed that compounds derived from BPI inhibit the function of multiple
growth factors involved in blood vessel formation and angiogenesis in the
retina while sparing key retinal cells (pericytes). These data suggest that
these compounds may have potential for treating retinal disorders. We are
conducting further research together with Joslin.
o XMP.629 is a BPI-derived topical anti-infective compound that is in
preclinical testing as a treatment for acne. Subject to successful
conclusion of this preclinical testing and agreement with the FDA, we
intend to initiate Phase I clinical testing of the compound.
ONYX-015, also known as CI-1042, developed by Onyx Pharmaceuticals, Inc.,
is a therapeutic tumor-selective, modified adenovirus genetically engineered to
destroy cancer cells. In 2002, under a strategic process development and
manufacturing alliance with Onyx, we successfully scaled up production to
500-liter fermentation scale and improved the manufacturing process for
ONYX-015. In June of 2003, Onyx notified XOMA that it was discontinuing
development of the product and therefore was terminating the agreement.
We have experienced significant losses and, as of June 30, 2003, we had an
accumulated deficit of approximately $570.0 million. For the six months ended
June 30, 2003, we had a net loss of approximately $29.2 million, or $0.41 per
common share (basic and diluted). For the year ended December 31, 2002, we had a
net loss of approximately $33.2 million, or $0.47 per common share (basic and
diluted). We expect to incur additional losses in the future, primarily due to
increased expenses on RaptivaTM, on the Millennium collaboration and on our
XMP.629 compound.
Based on current spending levels, anticipated revenues, debt financing
provided by Genentech for our share of Raptiva(TM) development and marketing
costs, and financing commitments from Millennium under the collaborative
agreement between the companies, we estimate we have sufficient cash resources
to meet our operating needs through at least the end of 2004. We continue to
evaluate strategic alliances, potential partnerships and financing arrangements
which would further strengthen our competitive position and provide additional
funding. We cannot predict whether or when any such alliances, partnerships or
arrangements will be consummated or whether additional funding will be available
when required and on terms acceptable to us.
3
RISK FACTORS
You should carefully consider the following factors and other information
in this prospectus before deciding to invest in our common shares. You should
also consider carefully the other information contained, or incorporated by
reference, in this prospectus. The actual results of our business could differ
materially from those described as a result of these risk factors. In such case,
the trading price of our common shares could decline, and you may lose all or
part of the money you paid to buy our common shares.
None Of Our Therapeutic Products Have Received Regulatory Approval. If Our
Products Do Not Receive Regulatory Approval, Neither Our Third Party
Collaborators Nor We Will Be Able To Manufacture And Market Them.
Even our most advanced therapeutic product has not received regulatory
approval. Our products cannot be manufactured and marketed in the United States
and other countries without required regulatory approvals. The United States
government and governments of other countries extensively regulate many aspects
of our products, including:
o testing,
o manufacturing,
o promotion and marketing, and
o exporting.
In the United States, the FDA regulates pharmaceutical products under the
Federal Food, Drug, and Cosmetic Act and other laws, including, in the case of
biologics, the Public Health Service Act. At the present time, we believe that
our products will be regulated by the FDA as biologics. The FDA has announced
that it is consolidating its responsibility for reviewing new pharmaceutical
products into its Center for Drug Evaluation and Research, the body that
currently reviews drug products, combining that operation with part of its
biologics review operation, the Center for Biologics Evaluation and Research.
Because implementation of this plan may not be complete, we do not know when or
how this change will affect us. State regulations may also affect our proposed
products.
The FDA has substantial discretion in both the product approval process and
manufacturing facility approval process and, as a result of this discretion and
uncertainties about outcomes of testing, we cannot predict at what point, or
whether, the FDA will be satisfied with our or our collaborators' submissions or
whether the FDA will raise questions which may be material and delay or preclude
product approval or manufacturing facility approval. As we accumulate additional
clinical data, we will submit it to the FDA, which may have a material impact on
the FDA product approval process.
Our potential products will require significant additional research and
development, extensive preclinical studies and clinical trials and regulatory
approval prior to any commercial sales. This process is lengthy, often taking a
number of years, and expensive. As clinical results are frequently susceptible
to varying interpretations that may delay, limit or prevent regulatory
approvals, the length of time necessary to complete clinical trials and to
submit an application for marketing approval for a final decision by a
regulatory authority varies significantly. As a result, it is uncertain whether:
o our future filings will be delayed,
o our studies will be successful,
o we will be able to provide necessary additional data,
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o our future results will justify further development, or
o we will ultimately achieve regulatory approval for any of these
products.
For example,
o in 1996, we and Genentech began testing RaptivaTM (Efalizumab) in
patients with moderate-to-severe psoriasis. In April of 2002, we and
Genentech announced that a pharmacokinetic study conducted on
RaptivaTM comparing XOMA-produced material and Genentech-produced
material did not achieve the pre-defined statistical definition of
comparability, and the FDA requested that another Phase III study be
completed before the filing of a Biologics License Application for
RaptivaTM, delaying the filing of a Biologics Licensing Application
with the FDA for RaptivaTM beyond the previously-planned time frame of
summer 2002. In September of 2002, we and Genentech announced the
results of the additional Phase III study which achieved its primary
efficacy endpoint. In December of 2002, Genentech submitted a
Biologics License Application for RaptivaTM for the treatment of
moderate-to-severe plaque psoriasis, which was accepted by the FDA in
February of 2003. Genentech has projected a single cycle
(approximately 10-month) regulatory review period, which could
potentially lead to FDA action in late 2003. An FDA advisory committee
is scheduled to review the Biologics License Application for RaptivaTM
on September 9, 2003. However, we do not yet know what issues the FDA
or its advisory committee may raise with respect to efficacy or safety
of the drug or other elements of the application. In March 2003, we
announced completion of enrollment in a Phase II study of RaptivaTM in
patients suffering from rheumatoid arthritis. In May of 2003, we and
Genentech announced our decision to terminate Phase II testing of
RaptivaTM in patients suffering from rheumatoid arthritis based on an
evaluation by an independent Data Safety Monitoring Board that
suggested no overall net clinical benefit in patients receiving the
study drug. We have also announced the initiation of enrollment in a
Phase II study of RaptivaTM as a possible treatment for patients with
psoriatic arthritis. We do not know whether or when any such testing
will demonstrate product safety and efficacy in this patient
population or result in regulatory approval.
o in December of 1992, we began human testing of our NEUPREX(R)product,
a genetically engineered fragment of a particular human protein, and
licensed certain worldwide rights to Baxter. In April of 2000, members
of the FDA and representatives of XOMA and Baxter discussed results
from the Phase III trial that tested NEUPREX(R)in pediatric patients
with a potentially deadly bacterial infection called meningococcemia,
and senior representatives of the FDA indicated that the data
presented were not sufficient to support the filing of an application
for marketing approval at that time. In November of 2002, Baxter
completed enrollment in a Phase II pilot study with NEUPREX(R) in
Crohn's disease patients. In July of 2003, XOMA announced the
termination of its license and supply agreements with Baxter for
XOMA's NEUPREX(R)product, and the rights returned to XOMA.
Given that regulatory review is an interactive and continuous process, we
maintain a policy of limiting announcements and comments upon the specific
details of the ongoing regulatory review of our products, subject to our
obligations under the securities laws, until definitive action is taken.
Because All Of Our Products Are Still In Development, We Will Require
Substantial Funds To Continue; We Cannot Be Certain That Funds Will Be Available
And, If Not Available, We May Have To Take Actions Which Could Adversely Affect
Your Investment.
If adequate funds are not available, we may have to dilute or otherwise
adversely affect the rights of existing shareholders, curtail or cease
operations or, in extreme circumstances, file for bankruptcy protection. We have
spent, and we expect to continue to spend, substantial funds in connection with:
o research and development relating to our products and production
technologies
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o expansion of our production capabilities
o extensive human clinical trials and
o protection of our intellectual property.
Based on current spending levels, anticipated revenues, debt financing
provided by Genentech for our share of RaptivaTM development and marketing
costs, and financing commitments from Millennium under the collaborative
agreement between the companies, we estimate we have sufficient cash resources
to meet our operating needs through at least the end of 2004. However, to the
extent we experience changes in the timing or size of expenditures or
unanticipated expenditures, or if our collaborators do not meet their
obligations to us or anticipated revenues otherwise do not materialize, these
funds may not be adequate for this period. As a result, we do not know whether:
o operations will generate meaningful funds
o additional agreements for product development funding can be reached
o strategic alliances can be negotiated or
o adequate additional financing will be available for us to finance our
own development on acceptable terms, if at all.
Cash balances and operating cash flow are influenced primarily by the
timing and level of payments by our licensees and development partners, as well
as by our operating costs.
Specifically, although changes in spending on RaptivaTM should not impact
liquidity due to our financing arrangements with Genentech and FDA approval of
RaptivaTM would generally be expected to improve operating cash flow to the
extent of XOMA's share of operating profits from sales of RaptivaTM in the U.S.,
such approval will also require repayment in cash, shares or deferred repayment
of up to $40.0 million of amounts owed to Genentech (approximately $74.9 million
under both loan agreements as of June 30, 2003). In addition, any delays in the
review by the FDA of the Biologics License Application for RaptivaTM may have a
material impact on our cash flow and on our ability to raise new funding on
acceptable terms.
The Financial Terms Of Some Of Our Existing Collaborative Arrangements Could
Result In Dilution Of Our Share Value.
We have financed, and anticipate continuing to finance, our most
significant development program, RaptivaTM, principally by borrowing from
Genentech, and this debt is convertible at XOMA's option into our common shares
with the conversion price to be calculated at the time of conversion. The
outstanding amount of such convertible debt as of June 30, 2003 was
approximately $69.6 million. This debt will come due at the earlier of April of
2005 or within 90 days after first product approval (which could be before the
end of 2003). Unless we secure substantial alternative financing, it is likely
that some or all of this debt, as well as some or all of any convertible debt
issued in the future as part of this financing arrangement, will be converted
into equity when it comes due rather than be repaid in cash, resulting in the
issuance of additional common shares.
Our financing arrangement with Millennium includes a $5.0 million
convertible note we issued to Millennium in November of 2001, which comes due in
February of 2004 and may be converted into common shares at that time. In
addition, we have the option to issue up to $33.5 million worth of common
shares, excluding the convertible debt, to Millennium through February 2005. The
total amount issuable in the remainder of 2003 could be $9.0 million. The number
of shares to be issued will be based on a conversion price to be calculated at
the time of conversion.
6
These arrangements, as well as future arrangements we may enter into with
similar effect, could result in dilution in the value of our shares.
Because All Of Our Products Are Still In Development, We Have Sustained Losses
In The Past And We Expect To Sustain Losses In The Future.
We have experienced significant losses and, as of June 30, 2003, we had an
accumulated deficit of $570.0 million.
For the six months ended June 30, 2003, we had a net loss of approximately
$29.2 million, or $0.41 per common share (basic and diluted). For the year ended
December 31, 2002, we had a net loss of approximately $33.2 million, or $0.47
per common share (basic and diluted). We expect to incur additional losses in
the future, primarily due to increased expenses on RaptivaTM, on the Millennium
collaboration and on our XMP.629 compound.
Our ability to make profits is dependent in large part on obtaining
regulatory approval for our products and entering into agreements for product
development and commercialization, both of which are uncertain. Our ability to
fund our ongoing operations is dependent on the foregoing factors and on our
ability to secure additional funds. Because all of our products are still in
development, we do not know whether we will ever make a profit or whether cash
flow from future operations will be sufficient to meet our needs.
If Third Party Collaborators Do Not Successfully Develop And Market Our
Products, We May Not Be Able To Do So On Our Own.
Our financial resources and our marketing experience and expertise are
limited. Consequently, we depend to a large extent upon securing the financial
resources and marketing capabilities of third parties with whom we collaborate.
o In April of 1996, we and Genentech entered into an agreement whereby
we agreed to co-develop Genentech's humanized monoclonal antibody
product RaptivaTM. In April of 1999, the companies extended and
expanded the agreement. In March of 2003, the Company further expanded
the agreement.
o In November of 2001, we entered into a collaboration with Millennium
Pharmaceuticals, Inc. to develop two of Millennium's products for
certain vascular inflammation indications.
Because our collaborators are independent third parties, they may be
subject to different risks than we are and have significant discretion in
determining the efforts and resources they will apply. We do not know whether
Genentech or Millennium will successfully develop or market any of the products
we are collaborating on.
Even when we have a collaborative relationship, other circumstances may
prevent it from resulting in successful development of marketable products.
o In January of 2000, we licensed the worldwide rights to all
pharmaceutical compositions containing a particular human protein for
treatment of meningococcemia and additional potential future human
clinical indications to Baxter. In July of 2003, this arrangement was
terminated, and the rights returned to XOMA. Although we are
evaluating future options for developing this product, we do not know
whether any options we may pursue will succeed.
o In January of 2001, we entered into a strategic process development
and manufacturing alliance with Onyx Pharmaceuticals, Inc. pursuant to
which we are scaling up production to commercial volume to manufacture
one of Onyx's cancer products. In June of 2003, Onyx
7
notified XOMA that it was discontinuing development of the product and
terminating the agreement so that it could focus on its anticancer
compound.
Although we continue to evaluate additional strategic alliances and
potential partnerships, we do not know whether or when any such alliances or
partnerships will be entered into.
Because We Have No History Of Profitability And Because The Biotechnology Sector
Has Been Characterized By Highly Volatile Stock Prices, Announcements We Make
And General Market Conditions For Biotechnology Stocks Could Result In A Sudden
Change In The Value Of Our Common Shares.
As a biopharmaceutical company, we have experienced significant volatility
in our common shares. Fluctuations in our operating results and general market
conditions for biotechnology stocks could have a significant impact on the
volatility of our common share price. From December 31, 2001 through August 12,
2003, our share price has ranged from a high of $12.19 to a low of $2.84. On
August 11, 2003, the last reported sale price of the common shares as reported
on the Nasdaq National Market was $8.40 per share. Factors contributing to such
volatility include, but are not limited to:
o results of preclinical studies and clinical trials
o information relating to the safety or efficacy of our products
o developments regarding regulatory filings
o announcements of new collaborations
o failure to enter into collaborations
o developments in existing collaborations
o our funding requirements and the terms of our financing arrangements
o announcements of technological innovations or new indications for our
therapeutic products
o government regulations
o developments in patent or other proprietary rights
o the number of shares outstanding
o the number of shares trading on an average trading day
o announcements regarding other participants in the biotechnology and
pharmaceutical industries
o market speculation regarding any of the foregoing.
Because Many Of The Companies We Do Business With Are Also In The Biotechnology
Sector, The Volatility Of That Sector Can Affect Us Indirectly As Well As
Directly.
The same factors that affect us directly because we are a biotechnology
company can also adversely impact us indirectly by affecting the ability of our
collaborators, partners and others we do business with to meet
8
their obligations to us or our ability to realize the value of the consideration
provided to us by these other companies. For example, in connection with our
licensing transaction with MorphoSys AG, MorphoSys has announced that it has
exercised its option to pay a portion of the license fee owed to us in the form
of equity securities of MorphoSys. XOMA has only recently received these shares
and the future value of these shares is subject both to market risks affecting
our ability to realize the value of these shares and more generally to the
business and other risks to which the issuer of these shares is subject. Since
the date of MorphoSys' election on October 23, 2002, the per share closing price
for MorphoSys shares has ranged from approximately $4.77 to $15.95, which
demonstrates the volatility of these shares in the current market.
If Any Of Our Products Receives Regulatory Approval, We May Not Be Able To
Increase Existing Or Acquire New Manufacturing Capacity Sufficient To Meet
Market Demand.
Because we have never commercially introduced any pharmaceutical products
and none of our products have received regulatory approval, we do not know
whether the capacity of our existing manufacturing facilities can be increased
to produce sufficient quantities of our products to meet market demand. Also, if
we need additional manufacturing facilities to meet market demand, we cannot
predict that we will successfully obtain those facilities because we do not know
whether they will be available on acceptable terms. In addition, any
manufacturing facilities acquired or used to meet market demand must meet the
FDA's quality assurance guidelines.
Because We Do Not And Cannot Currently Market Any Of Our Products For Commercial
Sale, We Do Not Know Whether There Will Be A Viable Market For Our Products.
Even if we receive regulatory approval for our products and we or our third
party collaborators successfully manufacture them, our products may not be
accepted in the marketplace. For example, physicians and/or patients may not
accept a product for a particular indication because it has been biologically
derived (and not discovered and developed by more traditional means) if no
biologically derived products are currently in widespread use in that
indication, as is currently the case with psoriasis. Consequently, we do not
know if physicians or patients will adopt or use our products for their approved
indications.
If Our And Our Partners' Patent Protection For Our Principal Products And
Processes Is Not Enforceable, We May Not Realize Our Profit Potential.
Because of the length of time and the expense associated with bringing new
products to the marketplace, we and our partners hold and are in the process of
applying for a number of patents in the United States and abroad to protect our
products and important processes and also have obtained or have the right to
obtain exclusive licenses to certain patents and applications filed by others.
However, the patent position of biotechnology companies generally is highly
uncertain and involves complex legal and factual questions, and no consistent
policy regarding the breadth of allowed claims has emerged from the actions of
the U.S. Patent and Trademark Office with respect to biotechnology patents.
Legal considerations surrounding the validity of biotechnology patents continue
to be in transition, and historical legal standards surrounding questions of
validity may not continue to be applied, and current defenses as to issued
biotechnology patents may not in fact be considered substantial in the future.
These factors have contributed to uncertainty as to:
o the degree and range of protection any patents will afford against
competitors with similar technologies
o if and when patents will issue
o whether or not others will obtain patents claiming aspects similar to
those covered by our patent applications or
9
o the extent to which we will be successful in avoiding infringement of
any patents granted to others.
The Patent Office has issued approximately 69 patents to us related to our
products based on human bactericidal permeability-increasing protein, which we
call BPI, including novel compositions, their manufacture, formulation, assay
and use. In addition, we are the exclusive licensee of BPI-related patents and
applications owned by New York University and Incyte Pharmaceuticals Inc. The
Patent Office has also issued nine patents to us related to our bacterial
expression technology.
If certain patents issued to others are upheld or if certain patent
applications filed by others issue and are upheld, we may require licenses from
others in order to develop and commercialize certain potential products
incorporating our technology or we may become involved in litigation to
determine the proprietary rights of others. These licenses, if required, may not
be available on acceptable terms, and any such litigation may be costly and may
have other adverse effects on our business, such as inhibiting our ability to
compete in the marketplace and absorbing significant management time.
Due to the uncertainties regarding biotechnology patents, we also have
relied and will continue to rely upon trade secrets, know-how and continuing
technological advancement to develop and maintain our competitive position. All
of our employees have signed confidentiality agreements under which they have
agreed not to use or disclose any of our proprietary information. Research and
development contracts and relationships between us and our scientific
consultants and potential customers provide access to aspects of our know-how
that are protected generally under confidentiality agreements. These
confidentiality agreements may not be honored or may not be enforced by a court.
To the extent proprietary information is divulged to competitors or to the
public generally, such disclosure may adversely affect our ability to develop or
commercialize our products by giving others a competitive advantage or by
undermining our patent position.
Protecting Our Intellectual Property Can Be Costly And Expose Us To Risks Of
Counterclaims Against Us.
We may be required to engage in litigation or other proceedings to protect
our intellectual property. The cost to us of this litigation, even if resolved
in our favor, could be substantial. Such litigation could also divert
management's attention and resources. In addition, if this litigation is
resolved against us, our patents may be declared invalid, and we could be held
liable for significant damages. In addition, if the litigation included a claim
of infringement by us of another party's patent that was resolved against us, we
or our collaborators may be enjoined from developing, manufacturing, selling or
importing products, processes or services without a license from the other
party.
Other Companies May Render Some Or All Of Our Products Noncompetitive Or
Obsolete.
Developments by others may render our products or technologies obsolete or
uncompetitive. Technologies developed and utilized by the biotechnology and
pharmaceutical industries are continuously and substantially changing.
Competition in the areas of genetically engineered DNA-based and antibody-based
technologies is intense and expected to increase in the future as a number of
established biotechnology firms and large chemical and pharmaceutical companies
advance in these fields. Many of these competitors may be able to develop
products and processes competitive with or superior to our own for many reasons,
including that they may have:
o significantly greater financial resources
o larger research and development and marketing staffs
o larger production facilities
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o entered into arrangements with, or acquired, biotechnology companies
to enhance their capabilities or
o extensive experience in preclinical testing and human clinical trials.
These factors may enable others to develop products and processes
competitive with or superior to our own or those of our collaborators. In
addition, a significant amount of research in biotechnology is being carried out
in universities and other non-profit research organizations. These entities are
becoming increasingly interested in the commercial value of their work and may
become more aggressive in seeking patent protection and licensing arrangements.
Furthermore, positive or negative developments in connection with a
potentially competing product may have an adverse impact on our ability to raise
additional funding on acceptable terms. For example, if another product is
perceived to have a competitive advantage, or another product's failure is
perceived to increase the likelihood that our product will fail, then investors
may choose not to invest in us on terms we would accept or at all.
Without limiting the foregoing, we are aware that:
o Biogen Inc. has announced that the FDA has approved Amevive(R)to treat
moderate-to-severe chronic plaque psoriasis in adult patients who are
candidates for systematic therapy or phototherapy;
o Centocor Inc., a unit of Johnson & Johnson, has announced that it has
tested its rheumatoid arthritis and Crohn's disease drug, Remicade(R),
in psoriasis showing clinical benefits (and it has been announced that
the drug has shown promising results in patients with psoriatic
arthritis);
o it has been announced that Amgen Inc. tested its rheumatoid arthritis
and psoriatic arthritis drug, Enbrel(R), in a Phase III clinical trial
in patients with moderate-to-severe plaque psoriasis; meeting the
primary endpoint and all secondary endpoints, that the primary and key
secondary endpoints were met in a second Phase III trial, and that a
filing for regulatory approval with the U.S. FDA for this medication
was submitted in July of 2003;
o MedImmune, Inc. has completed enrollment in three Phase II trials to
evaluate its anti-T cell monoclonal antibody in psoriasis;
o GenMab A/S has announced that its investigational new drug application
for HuMax-CD4 for psoriasis has been cleared through the FDA to
initiate a Phase II study;
o Abbott Laboratories has announced the commencement of a Phase II
psoriasis trial and Phase III psoriatic arthritis trial of its
rheumatoid arthritis drug HumiraTM; and
o other companies, including Medarex, Inc., are developing monoclonal
antibody or other products for treatment of inflammatory skin
disorders.
A number of companies are developing monoclonal antibodies targeting
cancers, which may prove more effective than the ING-1 antibody.
It is possible that one or more other companies may be developing one or
more products based on the same human protein as our NEUPREX(R) product, and
these product(s) may prove to be more effective than NEUPREX(R) or receive
regulatory approval prior to NEUPREX(R) or any BPI-derived ophthalmic product
developed by XOMA.
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As We Do More Business Internationally, We Will Be Subject To Additional
Political, Economic And Regulatory Uncertainties.
We may not be able to successfully operate in any foreign market. We
believe that, because the pharmaceutical industry is global in nature,
international activities will be a significant part of our future business
activities and that, when and if we are able to generate income, a substantial
portion of that income will be derived from product sales and other activities
outside the United States. Foreign regulatory agencies often establish standards
different from those in the United States, and an inability to obtain foreign
regulatory approvals on a timely basis could put us at a competitive
disadvantage or make it uneconomical to proceed with a product's development.
International operations may be limited or disrupted by:
o imposition of government controls,
o export license requirements,
o political or economic instability,
o trade restrictions,
o changes in tariffs,
o restrictions on repatriating profits, o exchange rate fluctuations,
o withholding and other taxation, and
o difficulties in staffing and managing international operations.
Because We Are A Relatively Small Biopharmaceutical Company With Limited
Resources, We May Not Be Able To Attract And Retain Qualified Personnel, And The
Loss Of Key Personnel Could Delay Or Prevent Achieving Our Objectives.
Our success in developing marketable products and achieving a competitive
position will depend, in part, on our ability to attract and retain qualified
scientific and management personnel, particularly in areas requiring specific
technical, scientific or medical expertise. There is intense competition for
such personnel. Our research, product development and business efforts would be
adversely affected by the loss of one or more of key members of our scientific
or management staff, particularly our executive officers: John L. Castello, our
Chairman of the Board, President and Chief Executive Officer; Patrick J.
Scannon, M.D., Ph.D., our Senior Vice President and Chief Scientific and Medical
Officer; Clarence L. Dellio, our Senior Vice President and Chief Operating
Officer; Peter B. Davis, our Vice President, Finance and Chief Financial
Officer; and Christopher J. Margolin, our Vice President, General Counsel and
Secretary. We have employment agreements with Mr. Castello, Dr. Scannon and Mr.
Davis. We currently have no key person insurance on any of our employees.
Even If We Bring Products To Market, We May Be Unable To Effectively Price Our
Products Or Obtain Adequate Reimbursement For Sales Of Our Products, Which Would
Prevent Our Products From Becoming Profitable.
If we succeed in bringing our product candidates to the market, they may
not be considered cost-effective, and reimbursement to the patient may not be
available or may not be sufficient to allow us to sell our products on a
competitive basis. In both the United States and elsewhere, sales of medical
products and treatments are dependent, in part, on the availability of
reimbursement to the patient from third-party payors, such as government and
private insurance plans. Third-party payors are increasingly challenging the
prices charged for
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pharmaceutical products and services. Our business is affected by the efforts of
government and third-party payors to contain or reduce the cost of health care
through various means. In the United States, there have been and will continue
to be a number of federal and state proposals to implement government controls
on pricing. In addition, the emphasis on managed care in the United States has
increased and will continue to increase the pressure on the pricing of
pharmaceutical products. We cannot predict whether any legislative or regulatory
proposals will be adopted or the effect these proposals or managed care efforts
may have on our business.
Because We Engage In Human Testing, We Are Exposed To An Increased Risk Of
Product Liability Claims.
The testing and marketing of medical products entails an inherent risk of
allegations of product liability. We believe that we currently have adequate
levels of insurance for our clinical trials, however, in the event of one or
more large, unforeseen awards, such levels may not provide adequate coverage. We
will seek to obtain additional insurance, if needed, if and when our products
are commercialized; however, because we do not know when this will occur, we do
not know whether adequate insurance coverage will be available or be available
at acceptable costs. A significant product liability claim for which we were not
covered by insurance would have to be paid from cash or other assets. To the
extent we have sufficient insurance coverage, such a claim would result in
higher subsequent insurance rates.
We May Be Subject To Increased Risks Because We Are A Bermuda Company.
Alleged abuses by certain companies that have changed their legal domicile
from jurisdictions within the United States to Bermuda have created an
environment where, notwithstanding that we changed our legal domicile in a
transaction that was approved by our shareholders and fully taxable to our
company under U.S. law, we may be exposed to various prejudicial actions,
including:
o "blacklisting" of our common shares by certain pension funds;
o legislation restricting certain types of transactions; and
o punitive tax legislation.
We do not know whether any of these things will happen, but if implemented
one or more of them may have an adverse impact on our future operations or our
share price.
If You Were To Obtain A Judgment Against Us, It May Be Difficult To Enforce
Against Us Because We Are A Foreign Entity.
We are a Bermuda company. All or a substantial portion of our assets may be
located outside the United States. As a result, it may be difficult for
shareholders and others to enforce in United States courts judgments obtained
against us. We have irrevocably agreed that we may be served with process with
respect to actions based on offers and sales of securities made hereby in the
United States by serving Christopher J. Margolin, c/o XOMA Ltd., 2910 Seventh
Street, Berkeley, California 94710, our United States agent appointed for that
purpose. We have been advised by our Bermuda counsel, Conyers Dill & Pearman,
that there is doubt as to whether Bermuda courts would enforce judgments of
United States courts obtained in actions against XOMA or our directors and
officers that are predicated upon the civil liability provisions of the U.S.
securities laws or entertain original actions brought in Bermuda against XOMA or
such persons predicated upon the U.S. securities laws. There is no treaty in
effect between the United States and Bermuda providing for such enforcement, and
there are grounds upon which Bermuda courts may not enforce judgments of United
States courts. Certain remedies available under the United States federal
securities laws may not be allowed in Bermuda courts as contrary to that
nation's policy.
13
Our Shareholder Rights Agreement Or Bye-laws May Prevent Transactions That Could
Be Beneficial To Our Shareholders And May Insulate Our Management From Removal.
In February of 2003, we renewed our shareholder rights agreement, which
could make it considerably more difficult or costly for a person or group to
acquire control of XOMA in a transaction that our board of directors opposes.
Our bye-laws:
o require certain procedures to be followed and time periods to be met
for any shareholder to propose matters to be considered at annual
meetings of shareholders, including nominating directors for election
at those meetings;
o authorize our board of directors to issue up to 1,000,000 preference
shares without shareholder approval and to set the rights, preferences
and other designations, including voting rights, of those shares as
the board of directors may determine; and
o contain provisions, similar to those contained in the Delaware General
Corporation Law, that may make business combinations with interested
shareholders more difficult.
These provisions of our shareholders rights agreement and our bye-laws,
alone or in combination with each other, may discourage transactions involving
actual or potential changes of control, including transactions that otherwise
could involve payment of a premium over prevailing market prices to holders of
common shares, could limit the ability of shareholders to approve transactions
that they may deem to be in their best interests, and could make it considerably
more difficult for a potential acquiror to replace management.
14
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The following documents filed by XOMA with the SEC pursuant to the
Securities Exchange Act are "incorporated by reference" in this prospectus,
which means we can disclose important information to you by referring you to
these documents and they are considered to be a part of this prospectus:
(1) annual report on Form 10-K for the fiscal year ended December 31,
2002 (file no. 0-14710);
(2) quarterly reports on Form 10-Q for the quarterly periods ended
March 31, 2003 and June 30, 2003, respectively (file no. 0-14710);
(3) current report on Form 8-K dated and filed on November 27, 2001,
as amended by amendments on Form 8-K/A dated and filed on December 13,
2001, October 24, 2002 and May 21, 2003, respectively (file no. 0-14710);
(4) current report on Form 8-K dated and filed on April 11, 2003, as
amended by amendment on Form 8-K/A dated and filed on April 18, 2003 (file
no. 0-14710);
(5) current report on Form 8-K dated and filed on June 30, 2003 (file
no. 0-14710); and
(6) the description of the common shares in the registration statement
on Form 8-A dated and filed on April 1, 2003 under Section 12 of the
Securities Exchange Act, including any amendment or report for the purpose
of updating such description (file no. 0-14710).
All documents filed by XOMA with the SEC pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act after the date of this prospectus and
before all of the common shares offered by this prospectus have been sold are
deemed to be incorporated by reference in, and to be part of, this prospectus
from the date any such document is filed.
Any statements contained in a document incorporated by reference in this
prospectus are deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus (or in
any other subsequently filed document which also is incorporated by reference in
this prospectus) modifies or supersedes such statement. Any statement so
modified or superseded is not deemed to constitute a part of this prospectus
except as so modified or superseded.
15
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made in this prospectus are forward-looking in
nature, including those relating to the relative size of the Company's loss for
2003, the sufficiency of its cash resources, the FDA advisory committee review
and the BLA review timeframe, as well as other statements related to current
plans for product development (including the progress of clinical trials and the
regulatory process and the timing of clinical trials and regulatory filings and
approvals) and existing and potential collaborative and licensing relationships,
or that otherwise relate to future periods and other statements that are not
historical facts. The words "believe," "plan," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. We caution you
not to place undue reliance on these forward-looking statements. They apply only
as of the date of this prospectus except that statements incorporated by
reference from previously filed reports apply as of the date made. The
occurrence of the events described, and the achievement of the intended results,
depend on many events, some or all of which are not predictable or not within
our control. Actual results may differ materially from those anticipated in any
forward-looking statements. Many risks and uncertainties are inherent in the
biopharmaceutical industry. Others are more specific to our business. Many of
the significant risks related to our business are described in this prospectus.
These include, among others, the actual loss for 2003 could be higher depending
on revenues from licensees and collaborators, the size and timing of
expenditures and whether there are unanticipated expenditures; the sufficiency
of cash resources could be shortened if expenditures are made earlier or in
larger amounts than anticipated or are unanticipated or if funds are not
available on acceptable terms; and regulatory approvals could be delayed or
denied as a result of safety or efficacy issues regarding the products being
tested, action, inaction or delay by the FDA, European or other regulators, or
their advisors, or issues relating to analysis or interpretation by, or
submission to, these entities or others of scientific data. These and other
risks, including those related to the results of pre-clinical testing, the
design and progress of clinical trials, changes in the status of the existing
collaborative relationships, availability of additional licensing or
collaboration opportunities, the timing or results of pending and future
clinical trials, the ability of collaborators and other partners to meet their
obligations, market demand for products, actions by the U.S. Food and Drug
Administration or the U.S. Patent and Trademark Office, scale-up and marketing
capabilities, competition, international operations, share price volatility, the
Company's financing needs and opportunities, uncertainties regarding the status
of biotechnology patents, uncertainties as to the costs of protecting
intellectual property and risks associated with our status as a Bermuda company
are described in more detail in "Risk Factors." We undertake no obligation to
publicly update any forward-looking statements, regardless of any new
information, future events or other occurrences. We advise you, however, to
consult any additional disclosures we make in our reports to the SEC on Forms
10-K, 10-Q and 8-K.
--------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these common shares or our
solicitation of your offer to buy the common shares in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made hereunder after the date of this prospectus should imply that
the information contained in this prospectus or the affairs of XOMA have not
changed since the date of this prospectus.
16
PRICE RANGE OF COMMON SHARES AND DIVIDEND INFORMATION
XOMA's common shares (such common shares and the common stock of our
predecessor Delaware corporation are referred to in this prospectus as the
common shares) trade on the Nasdaq National Market under the symbol "XOMA." The
following table sets forth the quarterly range of high and low reported sale
prices of the common shares on the Nasdaq National Market for the periods
indicated (in United States dollars):
High Low
2001:
First Quarter $13.875 $6.031
Second Quarter 17.750 5.313
Third Quarter 17.090 6.740
Fourth Quarter 10.500 6.400
2002:
First Quarter $12.190 $7.510
Second Quarter 8.510 3.000
Third Quarter 7.200 3.250
Fourth Quarter 6.250 3.800
2003:
First Quarter $4.600 $2.840
Second Quarter $8.000 $3.790
Third Quarter (through August 11) $8.710 $5.040
On August 11, 2003 the last reported sale price of the common shares as
reported on the Nasdaq National Market was $8.40 per share. As of August 11,
2003, there were approximately 3,103 record holders of XOMA's common shares.
XOMA has not paid dividends on its common equity. XOMA currently does not
intend to pay dividends and intends to retain any earnings for use in its
business and the financing of its capital requirements for the foreseeable
future. The payment of any future cash dividends on XOMA's common shares will
necessarily be dependent upon the earnings and financial needs of XOMA, along
with applicable legal and contractual restrictions.
17
USE OF PROCEEDS
We have used and intend to continue to use the net proceeds from this
offering for general corporate purposes, including current research and
development projects, the development or acquisition of new products or
technologies, equipment acquisitions, general working capital and operating
expenses.
We have not determined the amounts we plan to spend on any of the areas
listed above or the timing of these expenditures. As a result, our management
will have broad discretion to allocate the net proceeds from our sale of the
common shares to the selling shareholders. Pending application of the net
proceeds as described above, we intend to invest the net proceeds in short-term,
investment-grade, interest-bearing securities.
18
DESCRIPTION OF SHARE CAPITAL
The following statements with respect to our share capital are subject to
the detailed provisions of our memorandum of continuance and bye-laws. These
statements do not purport to be complete and, while we believe the descriptions
of the material provisions of the memorandum of continuance and bye-laws
incorporated by reference are accurate statements with respect to such material
provisions, such statements are subject to the detailed provisions in the
memorandum of continuance and bye-laws, to which reference is hereby made for a
full description of such provisions.
COMMON SHARES
General
The memorandum of continuance and the bye-laws provide that our authorized
common share capital is limited to 135,000,000 common shares, par value
U.S.$.0005 per share. As of August 11, 2003, there were 72,629,047 common shares
outstanding.
Voting
The holders of common shares are entitled to one vote per share. All
actions submitted to a vote of shareholders shall be voted on by the holders of
common shares, voting together as a single class (together with the Series A
preference shares (as described below), if any), except as provided by law.
Dividends
Holders of common shares are entitled to participate, on a share for share
basis, with the holders of any other common shares outstanding, with respect to
any dividends declared by our board of directors, subject to the rights of
holders of preference shares. Dividends will generally be payable in U.S.
dollars. We have not paid cash dividends on the common shares. We currently do
not intend to pay dividends and intend to retain any of our earnings for use in
our business and the financing of our capital requirements for the foreseeable
future. The payment of any future cash dividends on the common shares is
necessarily dependent upon our earnings and financial needs, along with
applicable legal and contractual restrictions.
Liquidation
On a liquidation of XOMA, holders of common shares will be entitled to
receive any assets remaining after the payment of our debts and the expenses of
the liquidation, subject to such special rights as may be attached to any other
class of shares.
Redemption
The common shares are not subject to redemption either by us or the holders
thereof.
Variation of Rights
Under our bye-laws, if at any time our share capital is divided into
different classes of shares, the rights attached to any class (unless otherwise
provided by the terms of the issue of the shares of that class) may be varied
with the consent in writing of the holders of a majority of the issued shares of
that class or with the sanction of a resolution passed by the holders of a
majority of such shares at a separate general meeting.
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PREFERENCE SHARES
General
Under our memorandum of continuance and bye-laws, we have the authority to
issue 1,000,000 preference shares, par value U.S.$.05 per share. Of these,
135,000 preference shares have been designated Series A Preference Shares and
8,000 preference shares have been designated Series B Preference Shares. Under
our bye-laws, subject to the special rights attaching to any class of our shares
not being varied and to any resolution approved by the holders of 75% of the
issued shares entitled to vote in respect thereof, our board of directors may
establish one or more classes or series of preference shares having the number
of shares, designations, relative voting rights, dividend rates, liquidation and
other rights, preferences and limitations that the board of directors fixes
without any shareholder approval.
The Series A Preference Shares
There are no Series A preference shares outstanding. Pursuant to the rights
of the Series A preference shares, subject to the rights of holders of any
shares of any series of preference shares ranking prior and superior, the
holders of Series A preference shares are entitled to receive, when, as and if
declared by our board of directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year, commencing on the first dividend payment
date after the first issuance of a share or fraction of a share of Series A
preference shares, in an amount per share equal to the greater of (a) U.S.$1.00
or (b) 1,000 times the aggregate per share amount of all cash dividends, plus
1,000 times the aggregate per share amount of all non-cash dividends or other
distributions, other than a dividend or bonus issue payable in common shares,
declared on the common shares since the immediately preceding dividend payment
date, or, with respect to the first dividend payment date, since the first
issuance of Series A preference shares.
In addition to any other voting rights required by law, holders of Series A
preference shares shall have the right to vote on all matters submitted to a
vote of our shareholders with each share of Series A preference shares entitled
to 1,000 votes. Except as otherwise provided by law, holders of Series A
preference shares, holders of common shares and holders of any other shares
having general voting rights shall vote together as one class on all matters
submitted to a vote of our shareholders.
Unless otherwise provided in the rights attaching to a subsequently
designated series of our preference shares, the Series A preference shares shall
rank junior to any other series of preference shares subsequently issued as to
the payment of dividends and distribution of assets on liquidation, dissolution
or winding-up and shall rank senior to the common shares. Upon any liquidation,
dissolution or winding-up of XOMA, no distributions shall be made to holders of
shares ranking junior to the Series A preference shares unless, prior thereto,
the holders of Series A preference shares shall have received an amount equal to
accrued and unpaid dividends and distributions, whether or not declared, to the
date of such payment, plus an amount equal to the greater of (1) U.S.$100.00 per
share or (2) an aggregate amount per share equal to 1,000 times the aggregate
amount to be distributed per share to holders of common shares or to the holders
of shares ranking on parity with the Series A preference shares, except
distributions made ratably on the Series A preference shares and all other such
parity shares in proportion to the total amount to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding-up.
If we shall enter into any consolidation, amalgamation, merger, combination
or other transaction in which common shares are exchanged for or changed into
cash, other securities and/or any other property, then any Series A preference
shares outstanding shall at the same time be similarly exchanged or changed in
an amount per share equal to 1,000 times the aggregate amount of cash,
securities and/or other property, as the case may be, into which or for which
each common share is changed or exchanged.
The Series A preference shares shall not be redeemable.
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The Series B Preference Shares
There are no Series B preference shares outstanding. The 8,000 Series B
preference shares have been designated for issuance upon conversion of the
convertible subordinated loans to us made and to be made by Genentech in
connection with the funding of the our development costs for Raptiva(TM). Such
loans are and will be convertible into Series B preference shares upon the
occurrence of certain events relating to certain regulatory approvals, payment
defaults, prepayments and other circumstances. Pursuant to the rights of the
Series B preference shares, the holders of Series B preference shares will not
be entitled to receive any dividends on the Series B preference shares.
The Series B preference shares will rank senior with respect to rights on
liquidation, winding-up and dissolution of XOMA to all classes of common shares.
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
XOMA, holders of Series B preference shares will be entitled to receive
U.S.$10,000 per share of Series B preference shares before any distribution is
made on the common shares. The holders of Series B preference shares will have
no voting rights, except as required under Bermuda law.
The holders of Series B preference shares will have the right to convert
Series B preference shares into common shares at a conversion price equal to the
current market price of the common shares (determined as provided below). The
current market price will be determined (a) for Series B preference shares
issued in connection with a conversion of one or more of the convertible
subordinated loans upon certain regulatory approvals, payment defaults or in
certain other circumstances, as of the date on which XOMA gives notice of its
intentions to convert, and (b) for Series B preference shares issued in
connection with certain prepayments of one or more of the convertible
subordinated loans or a conversion thereof in certain other circumstances, as of
the date on which XOMA gives notice of its intentions to prepay.
The Series B preference shares will be automatically converted into common
shares at its then effective conversion rate immediately upon the transfer by
the initial holder to any third party which is not an affiliate of such holder.
We will have the right, at any time and from time to time, to redeem any or
all Series B preference shares for cash in an amount equal to the conversion
price multiplied by the number of common shares into which each such share of
Series B preference shares would then be convertible.
OUTSTANDING WARRANTS
XOMA issued 250,000 common stock purchase warrants to Incyte in July of
1998, of which 125,000 remain outstanding. Each Incyte warrant outstanding
entitles the holder thereof to purchase one common share, subject to
anti-dilution adjustments. A holder may exercise the Incyte warrants at an
exercise price of $6.00 per share on or before July 9, 2008 or earlier upon the
related license becoming fully paid up. Incyte is the holder of these warrants
and received them as part of the consideration for the grant to XOMA of an
exclusive license to all of Incyte's patent rights relating to BPI.
XOMA issued 379,000 warrants to purchase common shares in January of 1999
and March of 1999, of which 175,000 remain outstanding. Each January and March
1999 warrant entitles the holder thereof to purchase one common share, subject
to anti-dilution adjustments. A holder may exercise the January and March 1999
warrants at an exercise price of $5.85 per share on or before January 29, 2004.
Advantage Fund II Ltd. and Koch Investment Group Limited are the holders of
these warrants and received them in connection with their purchase of our common
shares in a private placement in January of 1999.
XOMA issued 150,000 warrants to purchase common shares in July of 1999.
Each July 1999 warrant entitles the holder thereof to purchase one common share,
subject to anti-dilution adjustments. A holder may exercise the July 1999
warrants at an exercise price of $5.75 per share on or before July 21, 2004.
Sutro & Co.
21
Incorporated and Arnhold and S. Bleichroeder, Inc. are the holders of these
warrants and received them as consideration for their services as placement
agents for a private placement of our common shares in July of 1999.
XOMA issued 250,000 warrants to purchase common shares in February of 2000.
Each February 2000 warrant entitles the holder thereof to purchase one common
share, subject to anti-dilution adjustments. A holder may exercise the February
2000 warrants at an exercise price of $5.00 per share on or before February 11,
2005. Sutro & Co. Incorporated and Arnhold and S. Bleichroeder, Inc. are the
holders of these warrants and received them as consideration for their services
as placement agents for a private placement of our common shares in February of
2000.
All of the warrants described above were issued in reliance on the
exemption from registration provided in Section 4(2) of the Securities Act. None
of the warrants described above have been registered under the Securities Act
and none may be transferred except pursuant to an effective registration
statement under the Securities Act or pursuant to an exception from registration
thereunder. Additionally, all of the warrants contain certain restrictions on
their transfer. XOMA is not obligated and does not intend to register the
warrants under the Securities Act.
PLAN OF DISTRIBUTION
We may sell the common shares being offered hereby in one or more of the
following ways from time to time:
o through dealers or agents to the public or to investors;
o to underwriters for resale to the public or to investors;
o directly to investors (including upon conversion, exchange or exercise
of our outstanding securities); or
o through a combination of such methods.
We will set forth in a prospectus supplement the terms of the offering of
securities, including:
o the name or names of any agents, dealers or underwriters;
o the purchase price of the securities being offered and the proceeds we
will receive from the sale;
o any over-allotment options under which underwriters may purchase
additional securities from us;
o any agency fees or underwriting discounts and other items constituting
agents' or underwriters' compensation;
o any discounts or concessions allowed or reallowed or paid to dealers;
and
o any securities exchanges on which such securities may be listed.
LEGAL OPINION
The validity of the common shares to which this prospectus relates has been
passed upon for XOMA by Conyers Dill & Pearman, located in Hamilton, Bermuda.
22
EXPERTS
The consolidated financial statements of XOMA Ltd. appearing in XOMA Ltd.'s
Annual Report (Form 10-K) for the year ended December 31, 2002, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN GET MORE INFORMATION
This prospectus is part of a registration statement that we have filed with
the SEC. The registration statement contains exhibits and other information not
included in this prospectus. At your request, we will provide you, without
charge, a copy of any documents incorporated by reference in, or included as
exhibits to, our registration statement. If you would like more information,
write or call us at:
XOMA Ltd.
2910 Seventh Street
Berkeley, CA 94710 Telephone:
(510) 204-7273
XOMA files annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
and other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
room. XOMA's SEC filings are also available to the public on the SEC Internet
site at http://www.sec.gov.
23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with this offering are as follows:
Amount
to be Paid
SEC registration fee ..................................................................... $8,377
Nasdaq fee ............................................................................... 22,500
Legal fees and expenses (including Blue Sky fees and expenses)............................ 75,000
Accounting fees and expenses ............................................................. 15,000
Miscellaneous ............................................................................ 1,123
-------
Total ........................................................................... $122,000
Item 15. Indemnification of Directors and Officers
Under Bermuda law, a company is permitted to indemnify any officer or
director, out of the funds of the company, against (i) any liability incurred by
him or her in defending any proceedings, whether civil or criminal, in which
judgment is given in his or her favor, or in which he or she is acquitted, or in
connection with any application under relevant Bermuda legislation in which
relief from liability is granted to him or her by the court and (ii) any loss or
liability resulting from negligence, default, breach of duty or breach of trust,
save for his or her fraud or dishonesty.
The bye-laws of XOMA provide for the indemnity by XOMA of the officers,
directors and employees of XOMA to the fullest extent permitted by law.
Expenses (including attorneys' fees) incurred by an officer or director of
XOMA in defending any civil, criminal, administrative or investigative action,
suit or proceeding shall be paid by XOMA in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by XOMA pursuant to the
Companies Act 1981 of Bermuda.
An officer or director of XOMA shall not be personally liable to XOMA or
its shareholders for monetary damages for any breach of fiduciary duty as a
director or officer, except to the extent that such limitation is prohibited by
the Companies Act 1981 of Bermuda.
The indemnification and advancement of expenses and the limitation of
liability provided by the bye-laws shall not be deemed exclusive of any other
rights which any officer, director or employee, as such, may have or hereafter
acquire under the Companies Act 1981 of Bermuda, any other provision of the
bye-laws, or any agreement or otherwise. Any repeal or modification of the
aforementioned provisions of the bye-laws shall not adversely affect any right
or protection existing at the time of such repeal or modification.
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Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Page
------ ----
1.1 Form of equity underwriting agreement (1)
3.1 Memorandum of Continuance of XOMA Ltd. (Exhibit 3.4) (2)
3.2 Bye-Laws of XOMA Ltd. (as amended) (Exhibit 3.2) (2)
4.1 Shareholder Rights Agreement dated as of February 26, 2003 by and
between XOMA Ltd. and Mellon Investor Services LLC as Rights Agent
(Exhibit 4.1) (2)
4.2 Form of Resolution Regarding Preferences and Rights of Series A
Preference Shares (Exhibit 4.2) (2)
4.3 Form of Resolution Regarding Preferences and Rights of Series B
Preference Shares (Exhibit 4.3) (3)
4.4 Form of Common Stock Purchase Warrant (Incyte Warrants) (Exhibit 2)
(4)
4.5 Form of Common Share Purchase Warrant (January and March 1999
Warrants)(Exhibit 5) (5)
4.6 Form of Common Share Purchase Warrant (July 1999 Warrants)
(Exhibit 4) (6)
4.7 Form of Common Share Purchase Warrant (2000 Warrants) (Exhibit 4)
(7)
5.1 Opinion of Conyers Dill & Pearman (1)
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Conyers Dill & Pearman (included in Exhibit 5.1)
24.1 Power of Attorney
--------------------
(1) To be filed by amendment or as an exhibit to a report pursuant to Section
13(a), 13(c) or 15(d) of the Exchange Act.
(2) Incorporated by reference to the referenced exhibit to XOMA's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002 (File No.
0-14710).
(3) Incorporated by reference to the referenced exhibit to XOMA's Registration
Statement on Form S-4 filed November 27, 1998, as amended (File No.
333-68045).
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(4) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 9, 1998 filed July 16, 1998 (File No.
0-14710).
(5) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated January 28, 1999 filed January 29, 1999, as
amended (File No. 0-14710).
(6) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 23, 1999 filed July 26, 1999 (File No.
0-14710).
(7) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated February 11, 2000 filed February 14, 2000 (File
No. 0-14710).
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in the post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Berkeley, State of California, on August 13, 2003.
XOMA LTD.
By: /s/ John L. Castello
---------------------------------------
Name: John L. Castello
Title: Chairman of the Board,
President and Chief
Executive Officer
II-5
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John L. Castello and Christopher J.
Margolin, and each of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) and supplements to this registration
statement, and to file the same, with the SEC and the Bermuda Registrar of
Companies, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
Chairman of the Board, President and Chief August 13, 2003
Executive Officer (Principal Executive
/s/ John L. Castello Officer)
---------------------------------------
John L. Castello
Chief Scientific and Medical Officer and August 13, 2003
/s/ Patrick J. Scannon Director
---------------------------------------
Patrick J. Scannon
Vice President, Finance and Chief Financial August 13, 2003
Officer (Principal Financial and Accounting
/s/ Peter B. Davis Officer)
---------------------------------------
Peter B. Davis
/s/ James G. Andress Director August 13, 2003
---------------------------------------
James G. Andress
/s/ William K. Bowes, Jr. Director August 13, 2003
---------------------------------------
William K. Bowes, Jr.
/s/ Arthur Kornberg Director August 13, 2003
---------------------------------------
Arthur Kornberg
/s/ Steven C. Mendell Director August 13, 2003
---------------------------------------
Steven C. Mendell
/s/ W. Denman Van Ness Director August 13, 2003
---------------------------------------
W. Denman Van Ness
/s/ Patrick J. Zenner Director August 13, 2003
---------------------------------------
Patrick J. Zenner
II-6
EXHIBIT INDEX
Exhibit
Number Page
------ ----
1.1 Form of equity underwriting agreement (1)
3.1 Memorandum of Continuance of XOMA Ltd. (Exhibit 3.4) (2)
3.2 Bye-Laws of XOMA Ltd. (as amended) (Exhibit 3.2) (2)
4.1 Shareholder Rights Agreement dated as of February 26, 2003 by and
between XOMA Ltd. and Mellon Investor Services LLC as Rights Agent
(Exhibit 4.1) (2)
4.2 Form of Resolution Regarding Preferences and Rights of Series A
Preference Shares (Exhibit 4.2) (2)
4.3 Form of Resolution Regarding Preferences and Rights of Series B
Preference Shares (Exhibit 4.3) (3)
4.4 Form of Common Stock Purchase Warrant (Incyte Warrants) (Exhibit 2)
(4)
4.5 Form of Common Share Purchase Warrant (January and March 1999
Warrants) (Exhibit 5) (5)
4.6 Form of Common Share Purchase Warrant (July 1999 Warrants) (Exhibit 4)
(6)
4.7 Form of Common Share Purchase Warrant (2000 Warrants) (Exhibit 4) (7)
5.1 Opinion of Conyers Dill & Pearman (1)
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Conyers Dill & Pearman (included in Exhibit 5.1)
24.1 Power of Attorney
--------------------
(1) To be filed by amendment or as an exhibit to a report pursuant to Section
13(a), 13(c) or 15(d) of the Exchange Act.
(2) Incorporated by reference to the referenced exhibit to XOMA's Annual Report
on Form 10-K for the fiscal year ended December 31, 2002 (File No.
0-14710).
(3) Incorporated by reference to the referenced exhibit to XOMA's Registration
Statement on Form S-4 filed November 27, 1998, as amended (File No.
333-68045).
(4) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 9, 1998 filed July 16, 1998 (File No.
0-14710).
(5) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated January 28, 1999 filed January 29, 1999, as
amended (File No. 0-14710).
(6) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated July 23, 1999 filed July 26, 1999 (File No.
0-14710).
(7) Incorporated by reference to the referenced exhibit to XOMA's Current
Report on Form 8-K dated February 11, 2000 filed February 14, 2000 (File
No. 0-14710).
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EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of XOMA Ltd. for the
registration of 13,000,000 of its common shares and to the incorporation by
reference therein of our report dated February 7, 2003, except for Note 13 as to
which the date is February 28, 2003, with respect to the consolidated financial
statements of XOMA Ltd. included in its Annual Report (Form 10-K) for the year
ended December 31, 2002, filed with the Securities and Exchange Commission.
/S/ ERNST & YOUNG LLP
Palo Alto, California
August 13, 2003
II-3