As filed with the Securities and Exchange Commission on July 21, 2005
Registration No. 333-----------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HEMISPHERX BIOPHARMA, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
52-0845822
(I.R.S. Employer Identification No.)
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1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
(215) 988-0080
(Address, including zip code, and
telephone number, including
area code, of registrant's
principal executive
offices)
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William A. Carter, M.D., Chief Executive Officer
Hemispherx Biopharma, Inc.
1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
(215) 988-0080
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of all communications to:
Richard Feiner, Esq.
Silverman Sclar Shin & Byrne PLLC
381 Park Avenue South, Suite 1601
New York, New York, 10016
(212) 779-8600
Fax (212) 779-8858
Approximate date of proposed sale to the public: From time to time or
at one time after the effective date of this Registration Statement.
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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 ("Securities Act"), other than securities offered only in connection with
dividend or 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 462(c) under
the Securities Act, check the following box and list the Securities Act
registration 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. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered(1) Share(2) Price Registration Fee
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Common Stock 10,845,597 (1) $1.69 $18,329,059 $2,157.33
============================================= ================ ================== ====================== =====================
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Total Registration Fee $2,157.33
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(1) The shares being registered consist of (i) 452,798 shares of our common
stock issued and outstanding, (ii) 10,392,799 shares issuable to Fusion
Capital Fund II, LLC, and such indeterminate number of additional
shares of common stock issuable for no additional consideration by
reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration,
which results in an increase in the number of outstanding shares of our
common stock. In the event of a stock split, stock dividend or similar
transaction involving our common stock, in order to prevent dilution,
the number of shares registered shall be automatically increased to
cover the additional shares in accordance with Rule 416(a) under the
Securities Act of 1933.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with Rules 457(c) of the Securities Act based on the closing
price of the shares of common stock of the Registrant reported on the
American Stock Exchange on July 18, 2005.
The Registrant hereby amends this registration statement on the 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, as amended, or until the registration statement shall
become effective on a date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be amended. Neither
we nor the selling stockholders may sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where an offer or sale is not
permitted.
Subject to Completion
Preliminary Prospectus Dated July 21, 2005
HEMISPHERX BIOPHARMA, INC.
10,845,597 Shares of Common Stock
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The Offering:
This prospectus relates to the sale of up to 10,795,597 shares of our
common stock by Fusion Capital Fund II, LLC and up to 50,000 shares of our
common stock by JMBL LLC. We will not receive proceeds from the sale of our
shares by the selling stockholders.
Our common stock is listed on the American Stock Exchange under the symbol
HEB. The reported last sale price on the American Stock Exchange on July 19,
2005 was $1.75.
The selling stockholders may sell their shares from time to time on the
American Stock Exchange or otherwise, in one or more transactions at fixed
prices, at prevailing market prices at the time of sale or at prices negotiated
with purchasers. The selling stockholders will be responsible for any
commissions or discounts due to brokers or dealers. We will pay substantially
all expenses of registration of the shares covered by this prospectus.
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Please see the risk factors beginning on page 4 to read about certain
factors you should consider before buying shares of common stock.
Fusion Capital is an "underwriter" within the meaning of the Securities
Act of 1933.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is July 21, 2005
PROSPECTUS SUMMARY
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission, or SEC, utilizing a "shelf" registration
statement. The selling stockholders may from time to time sell their shares of
our common stock in one or more transactions. This prospectus provides you with
a general description of the common stock being offered. You should read this
prospectus, including all documents incorporated herein by reference, together
with additional information described under the heading "Where You Can Find More
Information."
The registration statement that contains this prospectus, including the
exhibits to the registration statement, contains additional information about us
and the securities being offered under this prospectus. You should read the
registration statement and the accompanying exhibits for further information.
The registration statement and exhibits can be read and are available to the
public over the Internet at the SEC's website at http://www.sec.gov as described
under the heading "Where You Can Find More Information."
About Hemispherx
We are a biopharmaceutical company engaged in the clinical development,
manufacture, marketing and distribution of new drug entities based on natural
immune system enhancing technologies for the treatment of viral and immune based
chronic disorders. We were founded in the early 1970s, as a contract researcher
for the National Institutes of Health. After almost 30 years, we have
established a strong foundation of laboratory, pre-clinical, and clinical data
with respect to the development of nucleic acids to enhance the natural
antiviral defense system of the human body and to aid the development of
therapeutic products for the treatment of chronic diseases. We own a U.S. Food
and Drug Administration ("FDA") approved GMP (good manufacturing practice)
manufacturing facility in New Jersey, and our corporate offices are in
Philadelphia, PA.
Our flagship products include Ampligen and Alferon. Ampligen is an
experimental drug undergoing clinical trials for the treatment of: Myalgic
Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS), HIV, and HIV/Hepatitis C
co-infection. In August 2004, we completed a Phase III clinical trial treating
over 230 ME/CFS patients with Ampligen and are in the process of preparing a new
drug application to be filed with the FDA. Alferon N Injection is the registered
trademark for our injectable formulation of Natural Alpha Interferon, which is
approved by the FDA for the treatment of genital warts. Alferon N is also in
clinical development for treating Hepatitis C ("HEP-C"), Multiple Sclerosis,
Human Immunodeficiency Virus (HIV), West Nile Virus ("WNV") and Severe Acute
Respiratory Syndrome (SARS).
We have over 140 patents worldwide with 10 additional patents pending
comprising our core intellectual property, a fully commercialized product
(Alferon), and a GMP certified manufacturing facility.
In March 2004, we completed the acquisition from Interferon Sciences,
Inc. ("ISI") of ISI's commercial assets, Alferon N inventory, a worldwide
license for the production, manufacture, use, marketing and sale of Alferon N.
We also acquired a 43,000 square foot manufacturing facility in New Jersey and
all intellectual property related to Alferon. Alferon N is a natural alpha
interferon that has been approved by the FDA for commercial sale for the
intra-lesional treatment of refractory or recurring external genital warts in
patients 18 years of age or older. The acquisition was completed in Spring 2004
with the acquisition of all world wide commercial rights, the FDA approval and
the acquisition of intellectual property related to Alferon.
We outsource certain components of our research and development,
manufacturing, marketing and distribution while maintaining control over the
entire process through our quality assurance group and our clinical monitoring
group.
Our principal executive offices are located at One Penn Center, 1617
JFK Boulevard, Philadelphia, Pennsylvania 19103, and its telephone number is
215-988-0080.
Securities Offered
On July 8, 2005, we entered into a common stock purchase agreement with
Fusion Capital Fund II, LLC, pursuant to which Fusion Capital has agreed, under
certain conditions, to purchase on each trading day $40,000 of our common stock
up to an aggregate of $20.0 million over approximately a 25 month period,
subject to earlier termination at our discretion. In our discretion, we may
elect to sell less of our common stock to Fusion Capital than the daily amount
and we may increase the daily amount as the market price of our stock increases.
The purchase price of the shares of common stock will be equal to a price based
upon the future market price of the common stock without any fixed discount to
the market price. Fusion Capital does not have the right or the obligation to
purchase shares of our common stock in the event that the price of our common
stock is less than $1.00
Fusion Capital, is offering for sale up to 10,795,597 shares of our
common stock. However, in the event that we decide to issue more than
10,113,278, i.e. greater than 19.99% of our outstanding shares of common stock
as of the date of the agreement, we would first seek stockholder approval in
order to be in compliance with American Stock Exchange rules. Assuming Fusion
Capital purchases all $20.0 million of common stock, we estimate that the
maximum number of shares we will sell to Fusion Capital under the common stock
purchase agreement will be 10,000,000 shares (exclusive of the 785,597 shares
issued and to be issued to Fusion Capital as the commitment fee and 10,000
shares issued to Fusion Capital as a partial expense reimbursement). In the
event we elect to issue more than 10,795,597 shares offered hereby, we will be
required to file a new registration statement and have it declared effective by
the SEC. The number of shares ultimately offered for sale by Fusion Capital is
dependent upon the number of shares purchased by Fusion Capital under the common
stock purchase agreement. The other selling stockholder, JMBL LLC, is offering
for sale up to 50,000 shares of our common stock.
As of July 8, 2005, there were 50,984,488 shares outstanding, including
the 402,798 shares that we have issued to Fusion Capital and 50,000 shares
offered by JMBL LLC, but excluding 10,392,799 shares offered by Fusion Capital
pursuant to this prospectus which it has not yet purchased from us. If all of
shares offered by this prospectus were issued and outstanding as of the date
hereof, the number of shares offered by this prospectus would represent 21.3 %
of the total common stock outstanding as of July 8, 2005.
We are also registering for sale any additional shares of common stock
which may become issuable by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt of
consideration, which results in an increase in the number of outstanding shares
of our common stock.
RISK FACTORS
Special Note Regarding Forward-Looking Statements
Certain statements in this prospectus constitute "forwarding-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1995
(collectively, the "Reform Act"). Certain, but not necessarily all, of such
forward-looking statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
All statements other than statements of historical fact, included in this
prospectus regarding our financial position, business strategy and plans or
objectives for future operations are forward-looking statements. Without
limiting the broader description of forward-looking statements above, we
specifically note that statements regarding potential drugs, their potential
therapeutic effect, the possibility of obtaining regulatory approval, our
ability to manufacture and sell any products, market acceptance or our ability
to earn a profit from sales or licenses of any drugs or our ability to discover
new drugs in the future are all forward-looking in nature.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors, including but not limited to, the risk factors
discussed below, which may cause the actual results, performance or achievements
of Hemispherx and its subsidiaries to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements and other factors referenced in this prospectus. We
do not undertake and specifically decline any obligation to publicly release the
results of any revisions which may be made to any forward-looking statement to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
The following cautionary statements identify important factors that
could cause our actual result to differ materially from those projected in the
forward-looking statements made in this prospectus. Among the key factors that
have a direct bearing on our results of operations are:
Risks Associated With Our Business
No assurance of successful product development
Ampligen(R) and related products. The development of Ampligen(R) and
our other related products is subject to a number of significant risks.
Ampligen(R) may be found to be ineffective or to have adverse side effects, fail
to receive necessary regulatory clearances, be difficult to manufacture on a
commercial scale, be uneconomical to market or be precluded from
commercialization by proprietary right of third parties. Our products are in
various stages of clinical and pre-clinical development and, require further
clinical studies and appropriate regulatory approval processes before any such
products can be marketed. We do not know when, if ever, Ampligen(R) or our other
products will be generally available for commercial sale for any indication.
Generally, only a small percentage of potential therapeutic products are
eventually approved by the FDA for commercial sale.
ALFERON N Injection(R). Although ALFERON N Injection(R) is approved for
marketing in the United States for the intralesional treatment of refractory or
recurring external genital warts in patients 18 years of age or older; to date
it has not been approved for other indications. We face many of the risks
discussed above, with regard to developing this product for use to treat other
ailments such as multiple sclerosis and cancer.
Our drug and related technologies are investigational and subject to regulatory
approval. If we are unable to obtain regulatory approval, our operations will be
significantly affected.
All of our drugs and associated technologies other than ALFERON N
Injection(R) are investigational and must receive prior regulatory approval by
appropriate regulatory authorities for general use and are currently legally
available only through clinical trials with specified disorders. At present,
ALFERON N Injection(R) is only approved for the intralesional treatment of
refractory or recurring external genital warts in patients 18 years of age or
older. Use of ALFERON N Injection(R) for other indications will require
regulatory approval. In this regard, ISI, the company from which we obtained our
rights to ALFERON N Injection(R), conducted clinical trials related to use of
ALFERON N Injection(R) for treatment of HIV and Hepatitis C. In both instances,
the FDA determined that additional studies were necessary in order to fully
evaluate the efficacy of ALFERON N Injection(R) in the treatment of HIV and
Hepatitis C diseases. We have no obligation or immediate plans to conduct these
additional studies at this time.
Our products, including Ampligen(R), are subject to extensive
regulation by numerous governmental authorities in the U.S. and other countries,
including, but not limited to, the FDA in the U.S., the Health Protection Branch
("HPB") of Canada, and the European Medical Evaluation Agency ("EMEA") in
Europe. Obtaining regulatory approvals is a rigorous and lengthy process and
requires the expenditure of substantial resources. In order to obtain final
regulatory approval of a new drug, we must demonstrate to the satisfaction of
the regulatory agency that the product is safe and effective for its intended
uses and that we are capable of manufacturing the product to the applicable
regulatory standards. We require regulatory approval in order to market
Ampligen(R) or any other proposed product and receive product revenues or
royalties. We cannot assure you that Ampligen(R) will ultimately be demonstrated
to be safe or efficacious. In addition, while Ampligen(R) is authorized for use
in clinical trials in the United States, we cannot assure you that additional
clinical trial approvals will be authorized in the United States or in other
countries, in a timely fashion or at all, or that we will complete these
clinical trials. If Ampligen(R) or one of our other products does not receive
regulatory approval in the U.S. or elsewhere, our operations most likely will be
materially adversely affected.
We may continue to incur substantial losses and our future profitability is
uncertain.
We began operations in 1966 and last reported net profit from 1985
through 1987. Since 1987, we have incurred substantial operating losses, as we
pursued our clinical trial effort and expanded our efforts in Europe. As of
March 31, 2005 our accumulated deficit was approximately $141,000,000. We have
not yet generated significant revenues from our products and may incur
substantial and increased losses in the future. We cannot assure that we will
ever achieve significant revenues from product sales or become profitable. We
require, and will continue to require, the commitment of substantial resources
to develop our products. We cannot assure that our product development efforts
will be successfully completed or that required regulatory approvals will be
obtained or that any products will be manufactured and marketed successfully, or
be profitable.
We may require additional financing which may not be available.
The development of our products will require the commitment of
substantial resources to conduct the time-consuming research, preclinical
development, and clinical trials that are necessary to bring pharmaceutical
products to market. As of March 31, 2005, we had approximately $14,407,000 in
cash and cash equivalents and short-term investments. These funds should be
sufficient to meet our operating cash requirements including debt service for
the near term. However, we may need to raise additional funds through additional
equity or debt financing or from other sources in order to complete the
necessary clinical trials and the regulatory approval processes including the
commercializing of Ampligen(R) products. There can be no assurances that we will
raise adequate funds which may have a material adverse effect on our ability to
develop our products. Also, we have the ability to curtail discretionary
spending, including some research and development activities, if required to
conserve cash.
We only have the right to receive $40,000 per trading day under the
agreement with Fusion Capital unless our stock price equals or exceeds $2.00, in
which case the daily amount may be increased under certain conditions as the
price of our common stock increases. Fusion Capital shall not have the right nor
the obligation to purchase any shares of our common stock on any trading days
that the market price of our common stock is less than $1.00. Since we initially
registered herein 10,000,000 shares purchasable by Fusion Capital pursuant to
the common stock purchase agreement, the selling price of our common stock to
Fusion Capital will have to average at least $2.00 per share for us to receive
the maximum proceeds of $20.0 million without registering additional shares of
common stock. Assuming a purchase price of $1.75 per share (the closing sale
price of the common stock on July 19, 2005) and the purchase by Fusion Capital
of the full 10,000,000 shares under the common stock purchase agreement,
proceeds to us would only be $17,500,000 unless we choose to register more than
10,000,000 shares, which we have the right, but not the obligation, to do.
Subject to approval by our board of directors, we have the right but not the
obligation to issue more than 10,000,000 shares to Fusion Capital. In the event
we elect to issue more than 10,000,000 shares offered hereby, we will be
required to file a new registration statement and have it declared effective by
the Securities and Exchange Commission. In the event that we decide to issue
more than 10,113,278 (19.99% of our outstanding shares of common stock as of the
date of our agreement), we would first be required to seek shareholder approval
in order to be in compliance with the American Stock Exchange Market rules.
The extent we rely on Fusion Capital as a source of funding will depend
on a number of factors including, the prevailing market price of our common
stock and the extent to which we are able to secure working capital from other
sources. Specifically, Fusion Capital shall not have the right nor the
obligation to purchase any shares of our common stock on any trading days that
the market price of our common stock is less than $1.00. If obtaining sufficient
financing from Fusion Capital were to prove unavailable or prohibitively
dilutive and if we are unable to commercialize and sell Ampligen(R) and/or
increase sales of ALFERON N Injection(R) or our other products, we will need to
secure another source of funding in order to satisfy our working capital needs.
Even if we are able to access the full $20.0 million under the common stock
purchase agreement with Fusion Capital, we may still need additional capital to
fully implement our business, operating and development plans. Should the
financing we require to sustain our working capital needs be unavailable or
prohibitively expensive when we require it, the consequences would be a material
adverse effect on our business, operating results, financial condition and
prospects.
We may not be profitable unless we can protect our patents and/or receive
approval for additional pending patents.
We need to preserve and acquire enforceable patents covering the use of
Ampligen(R) for a particular disease in order to obtain exclusive rights for the
commercial sale of Ampligen(R) for such disease. We obtained all rights to
ALFERON N Injection(R), and we plan to preserve and acquire enforceable patents
covering its use for existing and potentially new diseases. Our success depends,
in large part, on our ability to preserve and obtain patent protection for our
products and to obtain and preserve our trade secrets and expertise. Certain of
our know-how and technology is not patentable, particularly the procedures for
the manufacture of our drug product which are carried out according to standard
operating procedure manuals. We have been issued certain patents including those
on the use of Ampligen(R) and Ampligen(R) in combination with certain other
drugs for the treatment of HIV. We also have been issued patents on the use of
Ampligen(R) in combination with certain other drugs for the treatment of chronic
Hepatitis B virus, chronic Hepatitis C virus, and a patent which affords
protection on the use of Ampligen(R) in patients with Chronic Fatigue Syndrome.
We have not yet been issued any patents in the United States for the use of
Ampligen(R) as a sole treatment for any of the cancers, which we have sought to
target. With regard to ALFERON N Injection(R), we have acquired from ISI its
patents for natural alpha interferon produced from human peripheral blood
leukocytes and its production process. We cannot assure that our competitors
will not seek and obtain patents regarding the use of similar products in
combination with various other agents, for a particular target indication prior
to our doing such. If we cannot protect our patents covering the use of our
products for a particular disease, or obtain additional patents, we may not be
able to successfully market our products.
The patent position of biotechnology and pharmaceutical firms is highly
uncertain and involves complex legal and factual questions.
To date, no consistent policy has emerged regarding the breadth of
protection afforded by pharmaceutical and biotechnology patents. There can be no
assurance that new patent applications relating to our products or technology
will result in patents being issued or that, if issued, such patents will afford
meaningful protection against competitors with similar technology. It is
generally anticipated that there may be significant litigation in the industry
regarding patent and intellectual property rights. Such litigation could require
substantial resources from us and we may not have the financial resources
necessary to enforce the patent rights that we hold. No assurance can be made
that our patents will provide competitive advantages for our products or will
not be successfully challenged by competitors. No assurance can be given that
patents do not exist or could not be filed which would have a materially adverse
effect on our ability to develop or market our products or to obtain or maintain
any competitive position that we may achieve with respect to our products. Our
patents also may not prevent others from developing competitive products using
related technology.
There can be no assurance that we will be able to obtain necessary licenses if
we cannot enforce patent rights we may hold. In addition, the failure of third
parties from whom we currently license certain proprietary information or from
whom we may be required to obtain such licenses in the future, to adequately
enforce their rights to such proprietary information, could adversely affect the
value of such licenses to us.
If we cannot enforce the patent rights we currently hold we may be
required to obtain licenses from others to develop, manufacture or market our
products. There can be no assurance that we would be able to obtain any such
licenses on commercially reasonable terms, if at all. We currently license
certain proprietary information from third parties, some of which may have been
developed with government grants under circumstances where the government
maintained certain rights with respect to the proprietary information developed.
No assurances can be given that such third parties will adequately enforce any
rights they may have or that the rights, if any, retained by the government will
not adversely affect the value of our license.
There is no guarantee that our trade secrets will not be disclosed or known by
our competitors.
To protect our rights, we require certain employees and consultants to
enter into confidentiality agreements with us. There can be no assurance that
these agreements will not be breached, that we would have adequate and
enforceable remedies for any breach, or that any trade secrets of ours will not
otherwise become known or be independently developed by competitors.
If our distributors do not market our products successfully, we may not generate
significant revenues or become profitable.
We have limited marketing and sales capability. We are dependent upon
existing and, possibly future, marketing agreements and third party distribution
agreements for our products in order to generate significant revenues and become
profitable. As a result, any revenues received by us will be dependent on the
efforts of third parties, and there is no assurance that these efforts will be
successful. Our agreement with Accredo offers the potential to provide some
marketing and distribution capacity in the United States while agreements with
Bioclones (Proprietary), Ltd, Biovail Corporation and Laboratorios Del Dr.
Esteve S.A. may provide a sales force in South America, Africa, United Kingdom,
Australia and New Zealand, Canada, Spain and Portugal. On December 27, 2004, we
initiated a lawsuit in Federal Court identifying a conspiratorial group seeking
to illegally manipulate our stock for purposes of bringing about the hostile
takeover of Hemispherx. This conspiratorial group includes Bioclones and the
potential legal action may adversely effect our agreement with Bioclones and the
potential for marketing and distribution capacity in South America, Africa,
United Kingdom, Australia and New Zealand.
We cannot assure that our domestic or foreign marketing partners will
be able to successfully distribute our products, or that we will be able to
establish future marketing or third party distribution agreements on terms
acceptable to us, or that the cost of establishing these arrangements will not
exceed any product revenues. The failure to continue these arrangements or to
achieve other such arrangements on satisfactory terms could have a materially
adverse effect on us.
There are no long-term agreements with suppliers of required materials. If we
are unable to obtain the required raw materials, we may be required to scale
back our operations or stop manufacturing ALFERON N Injection and/or
Ampligen(R).
A number of essential materials are used in the production of ALFERON N
Injection(R), including human white blood cells. We do not have long-term
agreements for the supply of any of such materials. There can be no assurance we
can enter into long-term supply agreements covering essential materials on
commercially reasonable terms, if at all.
At present, we do not have any agreements with third parties for the
supply of any polymers for use in manufacturing Ampligen. We have consolidated
relevant manufacturing operations into our New Brunswick, New Jersey facility
for the production of Ampligen raw materials. This consolidation and transfer of
manufacturing operations has been implemented as an inspection of the Ribotech
facility in South Africa, our previous supplier of Ampligen(R) raw materials,
indicated that it did not, at present, meet the necessary GMP standards for a
fully certified commercial process. The transfer of Ampligen(R) raw materials
manufacture to our own facilities, while having obvious advantages with respect
to regulatory compliance (other parts of the 43,000 sq. ft. wholly owned
facility are already in compliance for Alferon N manufacture), may delay certain
steps in the commercialization process, specifically a targeted NDA filing.
If we are unable to obtain the required raw materials, we may be
required to scale back our operations or stop manufacturing. The costs and
availability of products and materials we need for the production of Ampligen(R)
and the commercial production of ALFERON N Injection(R) and other products which
we may commercially produce are subject to fluctuation depending on a variety of
factors beyond our control, including competitive factors, changes in
technology, and FDA and other governmental regulations and there can be no
assurance that we will be able to obtain such products and materials on terms
acceptable to us or at all.
There is no assurance that successful manufacture of a drug on a limited scale
basis for investigational use will lead to a successful transition to
commercial, large-scale production.
Small changes in methods of manufacturing may affect the chemical
structure of Ampligen(R) and other RNA drugs, as well as their safety and
efficacy. Changes in methods of manufacture, including commercial scale-up may
affect the chemical structure of Ampligen(R) and can, among other things,
require new clinical studies and affect orphan drug status, particularly, market
exclusivity rights, if any, under the Orphan Drug Act. The transition from
limited production of pre-clinical and clinical research quantities to
production of commercial quantities of our products will involve distinct
management and technical challenges and will require additional management and
technical personnel and capital to the extent such manufacturing is not handled
by third parties. There can be no assurance that our manufacturing will be
successful or that any given product will be determined to be safe and
effective, capable of being manufactured economically in commercial quantities
or successfully marketed.
We have limited manufacturing experience and capacity.
Ampligen(R) has been only produced in limited quantities for use in our
clinical trials and we are dependent upon third party suppliers for key
components of our products and for substantially all of the production process.
The failure to continue these arrangements or to achieve other such arrangements
on satisfactory terms could have a material adverse affect on us. Also, to be
successful, our products must be manufactured in commercial quantities in
compliance with regulatory requirements and at acceptable costs. To the extent
we are involved in the production process, our current facilities are not
adequate for the production of our proposed products for large-scale
commercialization, and we currently do not have adequate personnel to conduct
commercial-scale manufacturing. We intend to utilize third-party facilities if
and when the need arises or, if we are unable to do so, to build or acquire
commercial-scale manufacturing facilities. We will need to comply with
regulatory requirements for such facilities, including those of the FDA and HPB
pertaining to current Good Manufacturing Practices ("cGMP") regulations. There
can be no assurance that such facilities can be used, built, or acquired on
commercially acceptable terms, or that such facilities, if used, built, or
acquired, will be adequate for our long-term needs.
In connection with settling various manufacturing infractions
previously noted by the FDA, Schering-Plough ("Schering") entered into a
"Consent Decree" with the FDA whereby, among other things, it agreed to
discontinue various contract (third party) manufacturing activities at various
facilities including its San Juan, Puerto Rico, plant. Ampligen(R) (which was
not involved in any of the cited infractions) was produced at this Puerto Rico
plant from year 2000-2004. Operating under instructions from the Consent Decree,
Schering has advised us that it would no longer manufacture Ampligen(R) in this
facility beyond 2004 and would assist us in an orderly transfer of said
activities to other non Schering facilities. Accordingly, we have entered into a
Confidentiality Agreement with Mayne Pharma Pty, Ltd ("Mayne") to lead to
reinitiation and expansion of its Ampligen(R) manufacturing program. Senior
management at Mayne's Mulgrave operations in Australia recently informed us that
they are ceasing to continue with all development activities associated with
potential contract customers and all other contract business will be
progressively scaled down over the next couple of years. Therefore, Mayne's
Mulgrave facility in Australia will no longer be a possibility for
manufacturing. We have obtained two proposals from manufacturers in the US and
expect to obtain at least two more for the manufacturing of Ampligen. We want to
qualify at least two GMP facilities in order to maintain a minimum of two
independent production sites. If we are unable to engage a contract manufacturer
in a timely manner, our plans to file an NDA for Ampligen(R) and, eventually, to
market and sell Ampligen(R) will be delayed.
The purified drug concentrate utilized in the formulation of ALFERON N
Injection(R) is manufactured in our New Brunswick, New Jersey facility and
ALFERON N Injection(R) was formulated and packaged at a production facility
formerly owned and operated by Abbott Laboratories located in Kansas. Abbott
Labs has sold the facility to Hospira and we are currently in discussions with
two other production facilities for this work. We currently have 12,000 vials at
Hospira in purified drug concentrate form. Hospira will complete the labeling
and packaging of this lot. We have identified four new potential contract
manufacturers and obtained proposals for the future formulation and packaging of
Alferon. If we are unable to secure a new facility within a reasonable period of
time to formulate and package ALFERON N Injection(R) at an acceptable cost, our
ability to sell ALFERON N Injection(R) and to generate profits therefrom will be
adversely affected.
We may not be profitable unless we can produce Ampligen(R) or other products in
commercial quantities at costs acceptable to us.
We have never produced Ampligen(R) or any other products in large
commercial quantities. We must manufacture our products in compliance with
regulatory requirements in large commercial quantities and at acceptable costs
in order for us to be profitable. We intend to utilize third-party manufacturers
and/or facilities if and when the need arises or, if we are unable to do so, to
build or acquire commercial-scale manufacturing facilities. If we cannot
manufacture commercial quantities of Ampligen(R) or enter into third party
agreements for its manufacture at costs acceptable to us, our operations will be
significantly affected. Also, each production lots of Alferon N Injection(R) is
subject to FDA review and approval prior to releasing the lots to be sold. This
review and approval process could take considerable time, which would delay our
having product in inventory to sell. Alferon N Injection(R) presently has a
shelf life of 18 months after having been bottled. Studies were completed in
2004 to possibly extend the shelf life to 24 months. We filed our annual report
with the FDA in December 2004 informing them of the extension of shelf-life for
Alferon N Injection(R). We filed the request with the FDA in May 2005 requesting
approval to relabel the first 2,000 vials with an extended shelf-life of 24
months. We anticipate a response from the FDA by the end of June 2005. The FDA
responded to our relabeling request of Alferon N Injection(R) in June 2005.
After reviewing the information submitted, the FDA determined the submission as
a "Prior Approval Supplement". Under this designation, the FDA has six months,
as of May 2005, to approve the request to relabel Alferon N Injection(R) with
the extended shelf-life. We further anticipate a response from the FDA by
November 2005.
Rapid technological change may render our products obsolete or non-competitive.
The pharmaceutical and biotechnology industries are subject to rapid
and substantial technological change. Technological competition from
pharmaceutical and biotechnology companies, universities, governmental entities
and others diversifying into the field is intense and is expected to increase.
Most of these entities have significantly greater research and development
capabilities than us, as well as substantial marketing, financial and managerial
resources, and represent significant competition for us. There can be no
assurance that developments by others will not render our products or
technologies obsolete or noncompetitive or that we will be able to keep pace
with technological developments.
Our products may be subject to substantial competition.
Ampligen(R). Competitors may be developing technologies that are, or in
the future may be, the basis for competitive products. Some of these potential
products may have an entirely different approach or means of accomplishing
similar therapeutic effects to products being developed by us. These competing
products may be more effective and less costly than our products. In addition,
conventional drug therapy, surgery and other more familiar treatments may offer
competition to our products. Furthermore, many of our competitors have
significantly greater experience than us in pre-clinical testing and human
clinical trials of pharmaceutical products and in obtaining FDA, HPB and other
regulatory approvals of products. Accordingly, our competitors may succeed in
obtaining FDA, HPB or other regulatory product approvals more rapidly than us.
There are no drugs approved for commercial sale with respect to treating ME/CFS
in the United States. The dominant competitors with drugs to treat HIV diseases
include Gilead Pharmaceutical, Pfizer, Bristol-Myers, Abbott Labs, Glaxo
Smithkline, Merck and Schering-Plough Corp. These potential competitors are
among the largest pharmaceutical companies in the world, are well known to the
public and the medical community, and have substantially greater financial
resources, product development, and manufacturing and marketing capabilities
than we have. Although we believe our principal advantage is the unique
mechanism of action of Ampligen(R) on the immune system, we cannot assure that
we will be able to compete.
ALFERON N Injection(R). Many potential competitors are among the
largest pharmaceutical companies in the world, are well known to the public and
the medical community, and have substantially greater financial resources,
product development, and manufacturing and marketing capabilities than we have.
ALFERON N Injection(R) currently competes with Schering's injectable recombinant
alpha interferon product (INTRON(R) A) for the treatment of genital warts. 3M
Pharmaceuticals also received FDA approval for its immune-response modifier,
Aldara(R), a self-administered topical cream, for the treatment of external
genital and perianal warts. ALFERON N Injection(R) also competes with surgical,
chemical, and other methods of treating genital warts. We cannot assess the
impact products developed by our competitors, or advances in other methods of
the treatment of genital warts, will have on the commercial viability of ALFERON
N Injection(R). If and when we obtain additional approvals of uses of this
product, we expect to compete primarily on the basis of product performance. Our
potential competitors have developed or may develop products (containing either
alpha or beta interferon or other therapeutic compounds) or other treatment
modalities for those uses. In the United States, three recombinant forms of beta
interferon have been approved for the treatment of relapsing-remitting multiple
sclerosis. There can be no assurance that, if we are able to obtain regulatory
approval of ALFERON N Injection(R) for the treatment of new indications, we will
be able to achieve any significant penetration into those markets. In addition,
because certain competitive products are not dependent on a source of human
blood cells, such products may be able to be produced in greater volume and at a
lower cost than ALFERON N Injection(R). Currently, our wholesale price on a per
unit basis of ALFERON N Injection(R) is higher than that of the competitive
recombinant alpha and beta interferon products.
General. Other companies may succeed in developing products earlier
than we do, obtaining approvals for such products from the FDA more rapidly than
we do, or developing products that are more effective than those we may develop.
While we will attempt to expand our technological capabilities in order to
remain competitive, there can be no assurance that research and development by
others or other medical advances will not render our technology or products
obsolete or non-competitive or result in treatments or cures superior to any
therapy we develop.
Possible side effects from the use of Ampligen(R) or ALFERON N Injection(R)
could adversely affect potential revenues and physician/patient acceptability of
our product.
Ampligen(R). We believe that Ampligen(R) has been generally well
tolerated with a low incidence of clinical toxicity, particularly given the
severely debilitating or life threatening diseases that have been treated. A
mild flushing reaction has been observed in approximately 15% of patients
treated in our various studies. This reaction is occasionally accompanied by a
rapid heart beat, a tightness of the chest, urticaria (swelling of the skin),
anxiety, shortness of breath, subjective reports of "feeling hot," sweating and
nausea. The reaction is usually infusion-rate related and can generally be
controlled by slowing the infusion rate. Other adverse side effects include
liver enzyme level elevations, diarrhea, itching, asthma, low blood pressure,
photophobia, rash, transient visual disturbances, slow or irregular heart rate,
decreases in platelets and white blood cell counts, anemia, dizziness,
confusion, elevation of kidney function tests, occasional temporary hair loss
and various flu-like symptoms, including fever, chills, fatigue, muscular aches,
joint pains, headaches, nausea and vomiting. These flu-like side effects
typically subside within several months. One or more of the potential side
effects might deter usage of Ampligen(R) in certain clinical situations and
therefore, could adversely affect potential revenues and physician/patient
acceptability of our product.
ALFERON N Injection(R). At present, ALFERON N Injection(R) is only
approved for the intralesional (within the lesion) treatment of refractory or
recurring external genital warts in adults. In clinical trials conducted for the
treatment of genital warts with ALFERON N Injection(R), patients did not
experience serious side effects; however, there can be no assurance that
unexpected or unacceptable side effects will not be found in the future for this
use or other potential uses of ALFERON N Injection(R) which could threaten or
limit such product's usefulness.
We may be subject to product liability claims from the use of Ampligen(R) or
other of our products which could negatively affect our future operations.
We face an inherent business risk of exposure to product liability
claims in the event that the use of Ampligen(R) or other of our products results
in adverse effects. This liability might result from claims made directly by
patients, hospitals, clinics or other consumers, or by pharmaceutical companies
or others manufacturing these products on our behalf. Our future operations may
be negatively affected from the litigation costs, settlement expenses and lost
product sales inherent to these claims. While we will continue to attempt to
take appropriate precautions, we cannot assure that we will avoid significant
product liability exposure. Although we currently maintain product liability
insurance coverage, there can be no assurance that this insurance will provide
adequate coverage against Ampligen and/or Alferon N Injection product liability
claims. A successful product liability claim against us in excess of Ampligen's
$1,000,000 in insurance coverage; $3,000,000 in aggregate, or in excess of
Alferon's $5,000,000 in insurance coverage; $5,000,000 in aggregate; or for
which coverage is not provided could have a negative effect on our business and
financial condition.
The loss of Dr. William A. Carter's services could hurt our chances for success.
Our success is dependent on the continued efforts of Dr. William A.
Carter because of his position as a pioneer in the field of nucleic acid drugs,
his being the co-inventor of Ampligen(R), and his knowledge of our overall
activities, including patents and clinical trials. The loss of Dr. Carter's
services could have a material adverse effect on our operations and chances for
success. We have secured key man life insurance in the amount of $2,000,000 on
the life of Dr. Carter and we have an employment agreement with Dr. Carter that,
as amended, runs until May 8, 2008. However, Dr. Carter has the right to
terminate his employment upon not less than 30 days prior written notice. The
loss of Dr. Carter or other personnel, or the failure to recruit additional
personnel as needed could have a materially adverse effect on our ability to
achieve our objectives.
Uncertainty of health care reimbursement for our products.
Our ability to successfully commercialize our products will depend, in
part, on the extent to which reimbursement for the cost of such products and
related treatment will be available from government health administration
authorities, private health coverage insurers and other organizations.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and from time to time legislation is proposed, which, if
adopted, could further restrict the prices charged by and/or amounts
reimbursable to manufacturers of pharmaceutical products. We cannot predict
what, if any, legislation will ultimately be adopted or the impact of such
legislation on us. There can be no assurance that third party insurance
companies will allow us to charge and receive payments for products sufficient
to realize an appropriate return on our investment in product development.
There are risks of liabilities associated with handling and disposing of
hazardous materials.
Our business involves the controlled use of hazardous materials,
carcinogenic chemicals, flammable solvents and various radioactive compounds.
Although we believe that our safety procedures for handling and disposing of
such materials comply in all material respects with the standards prescribed by
applicable regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an
accident or the failure to comply with applicable regulations, we could be held
liable for any damages that result, and any such liability could be significant.
We do not maintain insurance coverage against such liabilities.
Risks Associated With and Investment in Our Common Stock
The market price of our stock may be adversely affected by market volatility.
The market price of our common stock has been and is likely to be
volatile. In addition to general economic, political and market conditions, the
price and trading volume of our stock could fluctuate widely in response to many
factors, including:
o announcements of the results of clinical trials by us or our competitors;
o adverse reactions to products;
o governmental approvals, delays in expected governmental approvals or
withdrawals of any prior governmental approvals or public or regulatory
agency concerns regarding the safety or effectiveness of our products;
o changes in U.S. or foreign regulatory policy during the period of product
development;
o developments in patent or other proprietary rights, including any third
party challenges of our intellectual property rights;
o announcements of technological innovations by us or our competitors;
o announcements of new products or new contracts by us or our competitors;
o actual or anticipated variations in our operating results due to the level
of development expenses and other factors;
o changes in financial estimates by securities analysts and whether our
earnings meet or exceed the estimates;
o conditions and trends in the pharmaceutical and other industries; new
accounting standards; and
o the occurrence of any of the risks described in these "Risk Factors."
Our common stock is listed for quotation on the American Stock
Exchange. For the 12-month period ended June 30, 2005, the price of our common
stock has ranged from $1.25 to $3.54 per share. We expect the price of our
common stock to remain volatile. The average daily trading volume of our common
stock varies significantly. Our relatively low average volume and low average
number of transactions per day may affect the ability of our stockholders to
sell their shares in the public market at prevailing prices and a more active
market may never develop.
In the past, following periods of volatility in the market price of the
securities of companies in our industry, securities class action litigation has
often been instituted against companies in our industry. If we face securities
litigation in the future, even if without merit or unsuccessful, it would result
in substantial costs and a diversion of management attention and resources,
which would negatively impact our business.
Our stock price may be adversely affected if a significant amount of shares,
primarily those registered herein and in a prior registration statement, are
sold in the public market.
We have registered 10,795,597 shares herein for sale by Fusion Capital
and 50,000 shares for sale by JMBL LLC. As of July 18, 2005, approximately
657,072 shares of our common stock, constituted "restricted securities" as
defined in Rule 144 under the Securities Act of 1933, 179,323 of which are
registered in prior registration statements. In addition, we have registered
8,989,720 shares issuable (i) upon conversion of approximately 135% of
Debentures that we issued in 2003 and 2004; (ii) as payment of 135% of the
interest on all of the Debentures; (iii) upon exercise of 135% of certain
warrants; and (iv) upon exercise of certain other warrants. Registration of the
shares permits the sale of the shares in the open market or in privately
negotiated transactions without compliance with the requirements of Rule 144. To
the extent the exercise price of the warrants is less than the market price of
the common stock, the holders of the warrants are likely to exercise them and
sell the underlying shares of common stock and to the extent that the conversion
price and exercise price of these securities are adjusted pursuant to
anti-dilution protection, the securities could be exercisable or convertible for
even more shares of common stock. We also may issue shares to be used to meet
our capital requirements or use shares to compensate employees, consultants
and/or directors. We are unable to estimate the amount, timing or nature of
future sales of outstanding common stock. Sales of substantial amounts of our
common stock in the public market could cause the market price for our common
stock to decrease. Furthermore, a decline in the price of our common stock would
likely impede our ability to raise capital through the issuance of additional
shares of common stock or other equity securities.
The sale of our common stock to Fusion Capital may cause dilution and the sale
of the shares of common stock acquired by Fusion Capital could cause the price
of our common stock to decline.
The sale by the selling stockholders of our common stock as
contemplated by this prospectus will increase the number of our publicly traded
shares, which could depress the market price of our common stock. Moreover, the
mere prospect of resales by the selling stockholders as contemplated by this
prospectus could depress the market price for our common stock. The issuance of
shares to Fusion Capital under the common stock purchase agreement will dilute
the equity interest of existing stockholders and could have an adverse effect on
the market price of our common stock.
The purchase price for the common stock to be sold to Fusion Capital
pursuant to the common stock purchase agreement will fluctuate based on the
price of our common stock. All shares in this offering are freely tradable.
Fusion Capital may sell none, some or all of the shares of common stock
purchased from us at any time. We expect that the shares offered by this
prospectus will be sold over a period of in excess of 25 months from the date of
this prospectus. Depending upon market liquidity at the time, a sale of shares
under this offering at any given time could cause the trading price of our
common stock to decline. The sale of a substantial number of shares of our
common stock under this offering, or anticipation of such sales, could make it
more difficult for us to sell equity or equity-related securities in the future
at a time and at a price that we might otherwise wish to effect sales.
Provisions of our Certificate of Incorporation and Delaware law could defer a
change of our management which could discourage or delay offers to acquire us.
Provisions of our Certificate of Incorporation and Delaware law may
make it more difficult for someone to acquire control of us or for our
stockholders to remove existing management, and might discourage a third party
from offering to acquire us, even if a change in control or in management would
be beneficial to our stockholders. For example, our Certificate of Incorporation
allows us to issue shares of preferred stock without any vote or further action
by our stockholders. Our Board of Directors has the authority to fix and
determine the relative rights and preferences of preferred stock. Our Board of
Directors also has the authority to issue preferred stock without further
stockholder approval. As a result, our Board of Directors could authorize the
issuance of a series of preferred stock that would grant to holders the
preferred right to our assets upon liquidation, the right to receive dividend
payments before dividends are distributed to the holders of common stock and the
right to the redemption of the shares, together with a premium, prior to the
redemption of our common stock. In this regard, in November 2002, we adopted a
stockholder rights plan and, under the Plan, our Board of Directors declared a
dividend distribution of one Right for each outstanding share of Common Stock to
stockholders of record at the close of business on November 29, 2002. Each Right
initially entitles holders to buy one unit of preferred stock for $30.00. The
Rights generally are not transferable apart from the common stock and will not
be exercisable unless and until a person or group acquires or commences a tender
or exchange offer to acquire, beneficial ownership of 15% or more of our common
stock. However, for Dr. Carter, our chief executive officer, who already
beneficially owns 10.9% of our common stock, the Plan's threshold will be 20%,
instead of 15%. The Rights will expire on November 19, 2012, and may be redeemed
prior thereto at $.01 per Right under certain circumstances.
Because the risk factors referred to above could cause actual results
or outcomes to differ materially from those expressed in any forward-looking
statements made by us, you should not place undue reliance on any such
forward-looking statements. Further, any forward-looking statement speaks only
as of the date on which it is made and we undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or reflect the occurrence of
unanticipated events. New factors emerge from time to time, and it is not
possible for us to predict which will arise. In addition, we cannot assess the
impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Our research in clinical efforts
may continue for the next several years and we may continue to incur losses due
to clinical costs incurred in the development of Ampligen(R) for commercial
application. Possible losses may fluctuate from quarter to quarter as a result
of differences in the timing of significant expenses incurred and receipt of
licensing fees and/or cost recovery treatment revenues in Europe, Canada and in
the United States.
SELLING STOCKHOLDERS
The following table provides information regarding the selling
stockholders and the number of shares of common stock they are offering.
Unless otherwise indicated in the footnotes below, we believe that the
persons and entities named in the table have sole voting and investment power
with respect to all shares beneficially owned. The information regarding shares
beneficially owned after the offering assumes the sale of all shares offered by
each of the selling stockholders. The percentage ownership data is based on
50,984,488 shares of our common stock issued and outstanding as of July 8, 2005.
Neither of the selling stockholder has had any position, office or
other material relationship with us or any of our affiliates within the past
three years, other than as a stockholder, unless otherwise disclosed in the
footnotes.
Common Stock Common Stock
Owned Prior No. of Shares Owned After
Selling Stockholder To Offering Being Offered The Offering
---------------------------------------------- ---------------------- ------------------ ----------------------
Fusion Capital Fund II, LLC (1) (2) 402,798 10,795,597 0
---------------------------------------------- ---------------------- ------------------ ----------------------
---------------------------------------------- ---------------------- ------------------ ----------------------
JMBL LLC (3) 50,000 50,000 0
---------------------------------------------- ---------------------- ------------------ -----------------------
(1) As of the date hereof, 402,798 shares of our common stock have been
acquired by Fusion Capital under the common stock purchase agreement.
Fusion Capital may acquire up to an additional 10,000,000 shares under the
common stock purchase agreement, plus 392,799 shares as an additional
commitment fee. Fusion Capital may not purchase shares of our common stock
under the common stock purchase agreement if Fusion Capital, together with
its affiliates, would beneficially own more than 9.9% of our common stock
outstanding at the time of the purchase by Fusion Capital. Fusion Capital
has the right at any time to sell any shares purchased under the common
stock purchase agreement which would allow it to avoid the 9.9% limitation.
Therefore, we do not believe that Fusion Capital will ever reach the 9.9%
limitation.
(2) Steven G. Martin and Joshua B. Scheinfeld, the principals of Fusion
Capital, are deemed to be beneficial owners of all of the shares of common
stock owned by Fusion Capital. Messrs. Martin and Scheinfeld have shared
voting and investment power over the Fusion Capital shares being offered
under this prospectus.
(3) Jeffrey M. Busch, the principal of JMBL LLC, is deemed to be the beneficial
owner of all shares of common stock owned by JMBL LLC. Mr. Busch has voting
and investment power over the JMBL LLC shares being offered under this
prospectus.
The Fusion Transaction
General
On July 8, 2005 we entered into a common stock purchase agreement with
Fusion Capital Fund II, LLC, pursuant to which Fusion Capital has agreed, under
certain conditions, to purchase on each trading day $40,000 of our common stock
up to an aggregate of $20.0 million over a period of approximately 25 months,
subject to earlier termination at our discretion. The purchase price of the
shares of common stock will be equal to a price based upon the future market
price of the common stock. Fusion Capital does not have the right or the
obligation to purchase shares of our common stock in the event that the price of
our common stock is less than $1.00.
Fusion Capital is offering for sale up to 10,795,597 shares of our
common stock, which includes up to 10,000,000 shares of our common stock that we
authorized for sale to Fusion Capital pursuant to the common stock purchase
agreement for a maximum proceeds of $20.0 million. Assuming Fusion Capital
purchases all $20.0 million of our common stock, we estimate that the maximum
number of shares we will sell to Fusion Capital under the common stock purchase
agreement will be 10,000,000 shares (exclusive of the 785,597 shares issued and
to be issued to Fusion Capital as the commitment fee and 10,000 shares issued to
Fusion Capital as a partial expense reimbursement). In the event we elect to
issue more than 10,795,597 shares offered hereby, we will be required to file a
new registration statement and have it declared effective by the SEC. In the
event that we decide to issue more than 10,113,278, i.e. greater than 19.99% of
our outstanding shares of common stock as of the date of the agreement, we would
first be required to seek stockholder approval in order to be in compliance with
American Stock Exchange rules. The number of shares ultimately offered for sale
by Fusion Capital is dependent upon the number of shares purchased by Fusion
Capital under the common stock purchase agreement.
Purchase Of Shares Under The Common Stock Purchase Agreement
Under the common stock purchase agreement, on each trading day Fusion
Capital is obligated to purchase a specified dollar amount of our common stock.
Subject to our right to suspend such purchases at any time, and our right to
terminate the agreement with Fusion Capital at any time, each as described
below, Fusion Capital shall purchase on each trading day during the term of the
agreement $40,000 of our common stock. This daily purchase amount may be
decreased by us at any time. We also have the right to increase the daily
purchase amount at any time, provided however, we may not increase the daily
purchase amount above $40,000 unless our stock price is above $2.00 per share
for five consecutive trading days.
The purchase price per share is equal to the lesser of:
o the lowest sale price of our common stock on the purchase date; or
o the average of the three lowest closing sale prices of our
common stock during the twelve consecutive trading days prior
to the date of a purchase by Fusion Capital.
The purchase price will be adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction.
Fusion Capital may not purchase shares of our common stock under the common
stock purchase agreement if Fusion Capital, together with its affiliates, would
beneficially own more than 9.9% of our common stock outstanding at the time of
the purchase by Fusion Capital. Fusion Capital has the right at any time to sell
any shares purchased under the common stock purchase agreement which would allow
it to avoid the 9.9% limitation. Therefore, we do not believe that Fusion
Capital will ever reach the 9.9% limitation.
The following table sets forth the amount of proceeds we would receive
from Fusion Capital from the sale of shares of our common stock offered by this
prospectus at varying purchase prices. It is for illustrative purposes only.
Actual results will differ because it assumes that purchases will be made at a
constant price.
Proceeds from
Percentage of the Sale of
Shares Shares to Fusion
Number of Shares Outstanding Capital Under
to be After Giving the Common Stock
Assumed Average issued if Full Effect to the Purchase
Purchase Price Purchase Issuance to Agreement
Fusion Capital(1)
---------------- ------------------ ------------------ ------------------
$1.00 10,000,000 16.3 % $ 10,000,000
$1.75(2) 10,000,000 16.3 % $ 17,500,000
---------------------------------------------------------------------------
$2.00 10,000,000 16.3 % $ 20,000,000
$3.00 6,666,667 11.5 % $ 20,000,000
---------------------------------------------------------------------------
$4.00 5,000,000 8.9 % $ 20,000,000
(1) Based on 50,984,488 shares outstanding as of July 8, 2005 which
includes the issuance to Fusion Capital of 10,000 shares of common
stock as partial expense reimbursement and 392,798 shares as a partial
commitment fee. Also includes the balance of commitment fee shares to
be issued (see "Commitment Shares Issued to Fusion Capital" below) and
the number of shares issuable at the corresponding assumed purchase
price set forth in the adjacent column.
(2) Closing sale price of our common stock on July 19, 2005.
In connection with entering into the agreement, we authorized the sale
to Fusion Capital of up to 10,000,000 shares of our common stock. We estimate
that we will issue no more than 10,000,000 shares to Fusion Capital under the
common stock purchase agreement (exclusive of the 785,597 shares issued and to
be issued to Fusion Capital as the commitment fee and 10,000 shares issued to
Fusion Capital as a partial expense reimbursement), all of which are included in
this offering. We have the right to terminate the agreement without any payment
or liability to Fusion Capital at any time, including in the event that all
10,000,000 shares are sold to Fusion Capital under the common stock purchase
agreement. In the event we elect to issue more than the 10,795,597 shares
offered hereby, we will be required to file a new registration statement and
have it declared effective by the SEC. In the event that we decide to issue more
than 10,113,278, i.e. greater than 19.99% of our outstanding shares of common
stock as of the date of the agreement, we would first be required to seek
stockholder approval in order to be in compliance with American Stock Exchange
rules.
Minimum Purchase Price
Under the common stock purchase agreement, we have set a minimum
purchase price ("floor price") of $1.00. Fusion Capital shall not have the right
nor the obligation to purchase any shares of our common stock in the event that
the purchase price would be less than the floor price.
Our Right To Suspend Purchases
We have the unconditional right to suspend purchases at any time for
any reason effective upon one trading day's notice. Any suspension would remain
in effect until our revocation of the suspension.
Our Right To Increase and Decrease the Amount to be Purchased
Under the common stock purchase agreement, Fusion Capital has agreed to
purchase on each trading day during a period of approximately 25 months, $40,000
of our common stock or an aggregate of $20.0 million. We have the unconditional
right to decrease the daily amount to be purchased by Fusion Capital at any time
for any reason effective upon one trading day's notice.
In our discretion, we may elect to sell more of our common stock to
Fusion Capital than the minimum daily amount. First, in respect of the daily
purchase amount, we have the right to increase the daily purchase amount as the
market price of our common stock increases. Specifically, for every $0.15
increase in Threshold Price (as defined below) above $1.85, we have the right to
increase the daily purchase amount by up to an additional $10,000. For example,
if the Threshold Price is $2.15 we would have the right to increase the daily
purchase amount by up to an aggregate of $60,000. The "Threshold Price" is the
lowest sale price of our common stock during the five trading days immediately
preceding our notice to Fusion Capital to increase the daily purchase amount. If
at any time during any trading day the sale price of our common stock is below
the Threshold Price, the applicable increase in the daily purchase amount will
be void.
In addition to the daily purchase amount, we may elect to require
Fusion Capital to purchase on any single trading day our shares in an amount up
to $250,000, provided that our share price is above $2.00 during the five
trading days prior thereto. The price at which such shares would be purchased
will be the lowest Purchase Price (as defined above) during the previous ten
trading days prior to the date that such purchase notice was received by Fusion
Capital. We may increase this amount to $500,000 if our share price is above
$4.00 during the five trading days prior to our delivery of the purchase notice
to Fusion Capital. We may deliver multiple purchase notices; however at least
ten trading days must have passed since the most recent non-daily purchase was
completed.
Events of Default
Generally, Fusion Capital may terminate the common stock purchase
agreement without any liability or payment to us upon the occurrence of any of
the following events of default:
o the effectiveness of the registration statement of which this prospectus is
a part of lapses for any reason (including, without limitation, the
issuance of a stop order) or is unavailable to Fusion Capital for sale of
our common stock offered hereby and such lapse or unavailability continues
for a period of ten (10) consecutive trading days or for more than an
aggregate of thirty (30) trading days in any 365-day period;
o suspension by our principal market of our common stock from trading for a
period of three consecutive trading days;
o the de-listing of our common stock from the American Stock Exchange, our
principal market, provided our common stock is not immediately thereafter
trading on the Nasdaq National Market, the Nasdaq SmallCap Market or the
New York Stock Exchange or the OTC Bulleting Board;
o the transfer agent's failure for five (5) trading days to issue to Fusion
Capital shares of our common stock which Fusion Capital is entitled to
under the common stock purchase agreement;
o any material breach of the representations or warranties or covenants
contained in the common stock purchase agreement or any related agreements
which has or which could have a material adverse affect on us subject to a
cure period of ten (10) trading days;
o any participation or threatened participation in insolvency or bankruptcy
proceedings by or against us;
o a material adverse change in our business, properties, operations,
financial condition or results of operations; or
o
the issuance of an aggregate of 10,113,278 shares to Fusion Capital under
our agreement and we fail to obtain the requisite stockholder approval.
Our Termination Rights
We have the unconditional right at any time for any reason to give
notice to Fusion Capital terminating the common stock purchase agreement. Such
notice shall be effective one trading day after Fusion Capital receives such
notice.
Effect of Performance of the Common Stock Purchase Agreement on Our Stockholders
All shares registered in this offering will be freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to 25 months from the date of this prospectus. The sale of a significant
amount of shares registered in this offering at any given time could cause the
trading price of our common stock to decline and to be highly volatile. Fusion
Capital may ultimately purchase all of the 10,000,000 shares of common stock
registered in this offering, and it may sell some, none or all of the shares of
common stock it acquires upon purchase. Therefore, the purchases under the
common stock purchase agreement may result in substantial dilution to the
interests of other holders of our common stock. However, we have the right at
any time for any reason to: (1) reduce the daily purchase amount, (2) suspend
purchases of the common stock by Fusion Capital and (3) terminate the common
stock purchase agreement.
No Short-Selling or Hedging by Fusion Capital
Fusion Capital has agreed that neither it nor any of its affiliates
shall engage in any direct or indirect short-selling or hedging of our common
stock during any time prior to the termination of the common stock purchase
agreement.
Commitment Shares Issued to Fusion Capital
Under the terms of the common stock purchase agreement Fusion Capital
has received 392,798 shares of our common stock as a partial commitment fee and
is entitled to receive up to an additional 392,799 commitment shares. These
additional commitment shares will be issued in an amount equal to the product of
(x) 392,799 and (y) the Purchase Amount Fraction. The "Purchase Amount Fraction"
means a fraction, the numerator of which is the purchase price at which the
shares are being purchased by Fusion Capital and the denominator of which is
$20,000,000. Unless an event of default occurs these shares must be held by
Fusion Capital until 25 months from the date of the common stock purchase
agreement or the date the common stock purchase agreement is terminated or in
the event that we cannot commence sales of stock to Fusion Capital prior to
October 31, 2005.
No Variable Priced Financings
Until the termination of the common stock purchase agreement, we have
agreed not to issue, or enter into any agreement with respect to the issuance
of, any variable priced equity or variable priced equity-like securities unless
we have obtained Fusion Capital's prior written consent.
Participations Rights
For a period of 20 months from July 8, 2005, the date of the common
stock purchase agreement, we have granted to Fusion Capital the right to
participate in the purchase of any New Securities (as defined below) that we
may, from time to time, propose to issue and sell in connection with any
financing transaction to a third party. In particular, Fusion Capital can
purchase up to 20% of such New Securities at the same price and on the same
terms as such other investor. "New Securities" means any shares of our Common
Stock, preferred stock or any other equity securities or securities convertible
or exchangeable for such equity securities, provided, however, that New
Securities does not include, (i) shares of Common Stock issuable upon conversion
or exercise of any securities outstanding as of the date of the common stock
purchase agreement, (ii) shares, options or warrants for Common Stock granted to
our officers, directors and employees pursuant to stock option plans approved by
our board of directors, (iii) shares of common stock issued by us pursuant to
our 2004 Equity Incentive Plan and shares of common stock issuable upon exercise
of options and rights issued pursuant to this plan, (iv) shares of Common Stock
issued pursuant to the program authorized in 2003 to pay vendors for services
rendered, (v) shares of Common Stock or securities convertible or exchangeable
for Common Stock issued pursuant to the acquisition of another company by
consolidation, merger, or purchase of all or substantially all of the assets of
such company or (vi) shares of Common Stock or securities convertible or
exchangeable into shares of Common Stock issued in connection with a strategic
transaction involving us and issued to an entity or an affiliate of such entity
that is engaged in the same or substantially related business as we are. Fusion
Capital's participation rights shall not prohibit or limit us from selling any
securities so long as we make the same offer to Fusion Capital.
PLAN OF DISTRIBUTION
The common stock offered by this prospectus is being offered by the
selling stockholders. The common stock may be sold or distributed from time to
time by the selling stockholders only for cash directly to one or more
purchasers or through brokers, dealers, or underwriters who may act solely as
agents at market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The sale of the common stock offered by this Prospectus may be effected
in one or more of the following methods:
o ordinary brokers' transactions;
o transactions involving cross or block trades;
o through brokers, dealers or underwriters who may act solely as agents;
o "at the market" into an existing market for the common stock;
o in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
o in privately negotiated transactions;
o any combination of the foregoing methods of sale; and
o any other method permitted pursuant to applicable law.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in the state or an exemption
from the registration or qualification requirement is available and complied
with.
Brokers, dealers, underwriters, or agents participating in the
distribution of the shares as agents may receive compensation in the form of
commissions, discounts, or concessions from the selling stockholders and/or
purchasers of the common stock for whom the broker-dealers may act as agent. The
compensation paid to a particular broker-dealer may be less than or in excess of
customary commissions.
Fusion Capital is an "underwriter" within the meaning of the Securities Act
of 1933. JMBL LLC and any broker-dealers or agents that are involved in selling
the shares for the selling stockholders may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 in connection with such sales..
Neither we nor the selling stockholders can presently estimate the amount
of compensation that any agent will receive. We know of no existing arrangements
between the selling stockholders, any other stockholder, broker, dealer,
underwriter, or agent relating to the sale or distribution of the shares offered
by this Prospectus. At the time a particular offer of shares is made, a
prospectus supplement, if required, will be distributed that will set forth the
names of any agents, underwriters, or dealers and any compensation from the
selling stockholder, and any other required information.
We will pay all of the expenses incident to the registration, offering,
and sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers, or agents. We have also agreed to indemnify Fusion
Capital and related persons against specified liabilities, including liabilities
under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons, we
have been advised that in the opinion of the SEC this indemnification is against
public policy as expressed in the Securities Act and is therefore,
unenforceable.
Fusion Capital and its affiliates have agreed not to engage in any
direct or indirect short selling or hedging of our common stock during the term
of the common stock purchase agreement.
We have advised Fusion Capital that while it is engaged in a
distribution of the shares included in this Prospectus it is required to comply
with Regulation M promulgated under the Securities Exchange Act of 1934, as
amended. With certain exceptions, Regulation M precludes the selling
stockholders, any affiliated purchasers, and any broker-dealer or other person
who participates in the distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of the shares offered hereby this
Prospectus.
This offering will terminate on the date that all shares offered by
this Prospectus have been sold by the selling stockholders.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of common stock
offered by the selling stockholders. However, We may receive up to $20.0 million
in proceeds from the sale of our common stock to Fusion Capital under the common
stock purchase agreement. We intend to use such proceeds to extend our New
Brunswick facility for the production of Ampligen(R) and Alferon N injections
and for general corporate purposes.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the Securities and Exchange Commission's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the public reference rooms. Many of our Securities and Exchange Commission
filings are also available to the public from the Securities and Exchange
Commission's Website at "http://www.sec.gov."
We have filed with the Securities and Exchange Commission a
registration statement (which contains this prospectus) on Form S-3 under the
Securities Act of 1933. The registration statement relates to the securities
offered by the selling stockholders. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedules to the registration statement. Please refer to the registration
statement and its exhibits and schedules for further information with respect to
us, the common stock and the Warrants. Statements contained in this prospectus
as to the contents of any contract or other document are not necessarily
complete and, in each instance, we refer you to the copy of that contract or
document filed as an exhibit to the Registration Statement. You may read and
obtain a copy of the registration statement and its exhibits and schedules from
the SEC, as described in the preceding paragraph.
INFORMATION INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" the information
that we file with them, which means that we can disclose important information
to you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later information
that we file with the Commission will automatically update and supercede this
information. We incorporate by reference the following documents and any future
filing made with the Commission under Sections 13(a), 14 or 15(d) of the
Securities Exchange Act of 1934 until we and the selling stockholders sell all
the securities included in this prospectus:
(a) Our annual report on Form 10-K for our fiscal year ended December 31, 2004,
SEC File No. 1-13441.
(b) Our quarterly report on Form 10-Q for the quarterly period ended March 31,
2005, SEC File No. 1-13441.
(c) Our proxy statement on schedule 14A for our 2005 annual meeting, SEC File
No. 1-13441.
(d) Our current report on Form 8-K dated July 11, 2005, SEC File No. 1-13441.
(e) A description of our common stock contained in our registration statement
on Form S-1, SEC File No. 33-93314, and any amendment or report filed for
the purpose of updating this description filed subsequent to the date of
this prospectus and prior to the termination of this offering.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Hemispherx Biopharma, Inc., 1617 JFK
Boulevard, Philadelphia, Pennsylvania 19103, telephone number 215-988-0080.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not, and the selling
stockholders have not, authorized anyone else to provide you with different
information. We and the selling stockholders will not make offers to these
shares in any state where the offer is not permitted. You should not assume that
the information in this prospectus or any supplement is accurate as of any date
other that the date on the front of those documents.
LEGAL MATTERS
The validity of the common stock offered in this prospectus has been passed
upon for us by Silverman Sclar Shin & Byrne PLLC, 381 Park Avenue South, Suite
1601, New York, New York 10016.
EXPERTS
Our financial statements incorporated by reference in this Prospectus which
are included in our Annual Report on Form 10-K for the year ended December 31,
2004 have been audited by BDO Seidman, LLP, an independent registered public
accounting firm, to the extent and for the periods set forth in their report,
and are included in reliance upon such report given upon the authority of said
firm as experts in auditing and accounting.
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No dealer, salesman or any 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
these securities and it is not a solicitation of an offer to buy these
securities in any state where the offer or sale is not permitted. The
information contained in this Prospectus is current only as of this date.
TABLE OF CONTENTS
Page
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Prospectus Summary.............. 2
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Risk Factors........................ 4
Selling Stockholders............. 18
Plan of Distribution............... 25
Use of Proceeds................... 27
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Where you can find
More information................. 27
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Information Incorporated
By Reference....................... 27
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Legal Matters..................... 28
Experts........................... 28
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10,845,597 SHARES OF
COMMON STOCK
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HEMISPHERX BIOPHARMA, INC.
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PROSPECTUS
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July 21, 2005
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Filing Fees..................................................$ 2,157.33
American Stock Exchange Listing Fee*.............................$22,500.00
Printing and Engraving Expenses*.................................$ 4,000.00
Accounting Fees and Expenses*....................................$ 6,000.00
Legal Fees and Expenses*.........................................$12,000.00
Transfer Agent and Registrar Fees*...............................$ 1,500.00
Miscellaneous*...................................................$ 3,842.67
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Total Expenses*..............................................$52,000.00
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* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Amended and Restated Certificate of Incorporation provides
that the Registrant shall indemnify to the extent permitted by Delaware law any
person whom it may indemnify thereunder, including directors, officers,
employees and agents of the Registrant. Such indemnification (other than an
order by a court) shall be made by the Registrant only upon a determination that
indemnification is proper in the circumstances because the individual met the
applicable standard of conduct. Advances for such indemnification may be made
pending such determination. In addition, the Registrant's Amended and Restated
Certificate of Incorporation eliminates, to the extent permitted by Delaware
law, personal liability of directors to the Registrant and its stockholders for
monetary damages for breach of fiduciary duty as directors.
The Registrant's authority to indemnify its directors and officers is governed
by the provisions of Section 145 of the Delaware General Corporation Law, as
follows:
(a) A corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in the right of
the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that
the person's conduct was unlawful.
(b) A corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a corporation
has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in subsections (a) and (b) of this section,
or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the present
or former director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b) of this section. Such determination shall
be made, with respect to a person who is a director or officer at the time
of such determination (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum,
or (2) by a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel in
a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director in
defending a civil or criminal action, suit or proceeding may be paid by the
corporation in advance of the final disposition or 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
such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses incurred by former directors and
officers and other employees and agents may be so paid upon such terms and
conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
by, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as
to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
such person against such liability under this section.
(h) For purposes of this section, references to the "corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had the power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving corporation
as such person would have with respect to such constituent corporation if
its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans, references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit
plan, and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee, or agent with respect
to any employee benefit plan, its participants or beneficiaries, and a
person who acted in good faith and in a manner such person reasonably
believed to be in the interest of the participants and beneficiaries of any
employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all actions for advancement of expenses or indemnification
brought under this section, or under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
ITEM 16. EXHIBITS.
Exhibit No. Description
4.1 Common Stock Purchase Agreement, dated July 8, 2005, by and among the
Company and Fusion Capital.*
4.2 Registration Rights Agreement, dated July 8, 2005, by and among the Company
and Fusion Capital.*
5.1 Opinion of Silverman Sclar Shin & Byrne PLLC, legal counsel.
23.1 Consent of BDO Seidman, LLP, independent registered public accounting firm.
23.2 Consent of Silverman Sclar Shin & Byrne PLLC, legal counsel (included in
Exhibit 5.1).
24.1 Powers of Attorney (included in Signature Pages to this Registration
Statement on Form S-3).
* Incorporated by reference from the exhibits to the Registrant's Current Report
on Form 8-K (SEC File No. 1-13441) filed on July 11, 2005.
ITEM 17. UNDERTAKINGS
A. 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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective 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.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(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.
B. 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
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. 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 its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, this 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 Philadelphia, Commonwealth of Pennsylvania, on the
21st day of July, 2005.
HEMISPHERX BIOPHARMA, INC.
(Registrant)
By: /s/William A. Carter
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William A. Carter, M.D.,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints William A. Carter acting alone, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for such person in his name, place and stead, in any and all capacities, in
connection with the Registrant's registration statement on Form S-3 under the
Securities Act of 1933, including, without limiting the generality of the
foregoing, to sign the registration statement in the name and on behalf of the
Registrant or on behalf of the undersigned as a director or officer of the
Registrant, and any and all amendments or supplements to the registration
statement, including any and all stickers and post-effective amendments to the
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission and any applicable securities exchange or securities self-regulatory
body, granting unto said attorney-in-fact and agents, each acting alone, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, 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 their substitutes or substitute, may
lawfully do or cause to be done by virtue hereof:
Signature Title Date
/s/William A. Carter Chairman of the Board, July 21, 2005
----------------------- Chief Executive Officer
William A. Carter, M.D. (Principal Executive)
and Director
July __, 2005
-----------------
Richard C. Piani Director
/s/Robert E. Peterson Chief Financial Officer July 15, 2005
--------------------- and Chief Accounting
Robert E. Peterson Officer
/s/Ransom W. Etheridge Secretary, General July 21, 2005
---------------------- Counsel And Director
Ransom W. Etheridge
/s/William M. Mitchell Director July 18, 2005
----------------------
William M. Mitchell, M.D., Ph.D.
/s/Steven D. Spence Director July 17, 2005
------------------
Steven D. Spence
-------------------- Director July __, 2005
Iraj-Eqhbal Kiani, M.D.
Hemispherx Biopharma, Inc.
Form S-3
Index to Exhibits
Exhibit No. Description
5.1 Opinion of Silverman Sclar Shin & Byrne PLLC, legal counsel.
23.1 Consent of BDO Seidman, LLP, independent registered public accounting firm.
Exhibit 5.1
SILVERMAN SCLAR SHIN & BYRNE PLLC
381 Park Avenue South, Suite 1601
New York, New York 10016
Tel. No. 212-779-8600
Telecopy Number - (212) 779-8858
July 19, 2005
Board of Directors
Hemispherx Biopharma, Inc.
1617 JFK Boulevard
Philadelphia, PA 19103
Re: Hemispherx Biopharma, Inc. - Registration Statement on Form S-3
---------------------------------------------------------------
Gentlemen:
We have acted as counsel for Hemispherx Biopharma, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of the registration
statement on Form S-3 (the "Registration Statement") relating to the
registration under the Securities Act of 1933, as amended (the "Act"), covering
the offering for resale of an aggregate of 10,845,597 shares of the Company's
Common Stock, par value $0.001 per share, consisting of : (i) 402,798 shares of
Common Stock (the "Issued Shares") issued to Fusion Capital Fund II LLC ("Fusion
Capital") in July, 2005; (ii) an aggregate of up to an additional 392,799 shares
of Common Stock (the "Additional Commitment Shares") issuable to Fusion Capital
pursuant to the Fusion Capital common stock purchase agreement dated July 8,
2005 (the "Fusion Agreement"); (iii) an aggregate of up to 10,000,000 shares of
Common Stock (the "Purchase Shares") issuable to Fusion Capital pursuant to the
terms of the Fusion Agreement; and (iv) an aggregate of 50,000 shares (the
"Additional Shares") issued to JMBL LLC in May 2005.
We have reviewed and are familiar with such corporate proceedings and other
matters as we have deemed necessary for this opinion. Based upon the foregoing,
we are of the opinion that (i) the Additional Commitment Shares to be offered
and sold by Fusion Capital have been duly authorized to be issued in accordance
with the terms of the Fusion Agreement and, when issued by the Company in
accordance with the terms of the Fusion Agreement, will be legally issued, fully
paid and nonassessable; (ii) the Purchase Shares to be offered and sold by
Fusion Capital have been duly authorized to be issued in accordance with the
terms of the Fusion Agreement and, when issued and paid for in accordance with
the terms of the Fusion Agreement, will be validly issued, fully paid and
non-assessable; (iii) the Additional Shares to be offered and sold by the
Selling Stockholders have been duly authorized, legally issued, fully paid and
nonassessable, and (iv) the Issued Shares to be offered and sold by the Selling
Stockholders have been duly authorized, legally issued, fully paid and
nonassessable.
This opinion is limited to matters governed by the General Corporation Law of
the State of Delaware. No opinion is expressed as to the effect that the law of
any other jurisdiction may have upon the subject matter of the opinion expressed
herein under conflicts of law principles, rules and regulations or otherwise.
This opinion is limited to the specific issues addressed herein, and no opinion
may be inferred or implied beyond that expressly stated herein. We assume no
obligation to revise or supplement this opinion should the present laws of the
State of Delaware be changed by legislative action, judicial decision or
otherwise.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
This opinion is furnished to you in connection with the filing of the
Registration Statement and is not to be used, circulated, quoted or otherwise
relied upon for any other purposes.
Very truly yours,
/s/ Silverman Sclar Shin & Byrne PLLC
--------------------------------------
Silverman Sclar Shin & Byrne PLLC
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Hemispherx Biopharma, Inc.
Philadelphia, Pennsylvania
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our reports dated February
4, 2005, relating to the consolidated financial statements and the effectiveness
of Hemispherx Biopharma, Inc.'s internal control over financial reporting
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Philadelphia, Pennsylvania
July 21, 2005