As filed pursuant
to Rule 424(b)(3)
Registration No. 333-140187
2,943,000 Shares
TARGETED
GENETICS CORPORATION
___________________
Common
Stock
___________________
On
January 11, 2007, the selling shareholders listed on page 15, or the Selling
Shareholders, acquired 2,180,000 shares of our common stock and warrants to
purchase up to 763,000 shares of our common stock directly from us in a private
placement that was exempt from the registration requirements of the federal
securities laws. Under this prospectus, the Selling Shareholders and their
transferees may offer and resell up to 2,943,000 shares of our common stock
for their own accounts. We will not receive any of the proceeds from the sale
of
these shares by the Selling Shareholders, but we will receive proceeds from
the
exercise of warrants, if exercised for cash.
Our
common stock is quoted on the NASDAQ Capital Market under the symbol “TGEN.” On
February 7, 2007, the last reported sale price of our common stock was
$4.01 per share.
The
Selling Shareholders may sell their shares from time to time on the NASDAQ
Capital Market or otherwise. They may sell the shares at prevailing market
prices or at prices negotiated with purchasers. The Selling Shareholders will
be
responsible for any commissions or discounts due to brokers or dealers. The
amount of these commissions or discounts cannot be known now because they will
be negotiated at the time of the sales. We will pay certain of the other
offering expenses.
You
should read this prospectus carefully before you invest.
Investing
in this stock involves a high degree of risk.
See
“Risk Factors” beginning on page 4.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
_____________________
The
date of this prospectus is February 8, 2007.
TABLE
OF CONTENTS
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Page
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Prospectus
Summary |
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3 |
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Risk
Factors |
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4 |
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Use
of Proceeds |
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14 |
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Selling
Shareholders |
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14 |
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Plan
of Distribution |
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16 |
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Legal
Matters |
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18 |
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Experts |
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18 |
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Special
Note Regarding Forward-Looking
Statements |
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18 |
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Where
You Can Find More Information |
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19 |
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You
should rely only on the information provided or incorporated by reference in
this prospectus. Neither we nor the Selling Shareholders have authorized anyone
to provide you with additional or different information or representations.
You
should not assume that the information in this prospectus is accurate as of
any
date other than its date, regardless of the time of delivery of this prospectus
or any sale of common stock.
This
prospectus is an offer to sell and a solicitation of an offer to buy the
securities offered by this prospectus only in jurisdictions where the offer
or
sale is permitted.
In
this
prospectus, “Targeted Genetics,” “we,” “us” and “our” refer to Targeted Genetics
Corporation and its subsidiaries. References to the “Securities Act,” refer to
the Securities Act of 1933, as amended.
Prospectus
Summary
The
following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information appearing elsewhere in this
prospectus and incorporated by reference herein. Before you decide to invest
in
our common stock, you should read the entire prospectus carefully.
About
This Prospectus
This
prospectus is part of a registration statement on Form S-3 filed by us with
the
Securities and Exchange Commission, or SEC, to register 2,943,000 shares of
our common stock, consisting of 2,180,000 shares of common stock currently
issued and outstanding, or the Common Shares, as well as up to
763,000 shares of common stock, or the Warrant Shares, issuable upon
exercise of warrants, or the Warrants. Together the Common Shares and the
Warrant Shares are referred to in this prospectus as the “Shares.” The Common
Shares and Warrants were sold to the Selling Shareholders in connection with
our
private placement, which closed on January 11, 2007, as described in Current
Reports on Form 8-K filed by us with the SEC on January 8, 2007 and January
11,
2007. The Shares are being registered for resale or other disposition by the
Selling Shareholders. We will not receive any proceeds from the sale or other
disposition of the Common Shares registered hereunder, or interests therein.
We
will, however, receive proceeds from the exercise of any Warrants, if the
exercise price is paid in cash. If all of the Warrants are exercised for cash,
we will receive proceeds of approximately $4.1 million, which we currently
intend to use for general corporate purposes.
About
Targeted Genetics Corporation
This
summary does not contain all the information about us that may be important
to
you. You should read the more detailed information and consolidated financial
statements and related notes that are incorporated by reference and are
considered to be a part of this prospectus.
We
are a
clinical-stage
biotechnology company
focused
on the development of targeted molecular therapies for the prevention and
treatment of acquired and inherited diseases with unmet medical need. Our
product development efforts target inflammatory arthritis, AIDS prophylaxis,
congestive heart failure and Huntington's disease.
We
develop gene therapy products and technologies for treating both acquired and
inherited diseases. Our gene therapy product candidates are designed to treat
disease by appropriately modifying cellular function at a genetic level. This
involves introducing genetic material into target cells and expressing it in
a
manner that provides the desired effect. We have assembled a broad base of
proprietary intellectual property that we believe gives us the potential to
address the significant diseases that are the primary focus of our business.
Our
proprietary intellectual property includes gene therapy uses of certain genes,
methods of transferring genetic material into cells, processes to manufacture
our AAV-based product candidates and other proprietary technologies and
processes. In addition, we have established expertise and development
capabilities focused in the areas of preclinical research and development,
manufacturing and manufacturing process scale-up, quality control, quality
assurance, regulatory affairs and clinical trial design and implementation.
We
have
two product candidates in clinical trials. The first, tgAAC94, is an AAV-based
product candidate being developed for the treatment of inflammatory arthritis.
The second is an AAV-based prophylactic vaccine candidate for high-risk
populations in developing nations to protect against HIV-AIDS. We are developing
this program in collaboration with the International AIDS Vaccine Initiative,
or
IAVI, a non-profit organization, the Columbus Children’s Research Institute at
Children’s Hospital in Columbus, Ohio, or CCRI, and The Children’s Hospital of
Philadelphia, or CHOP. The National Institute of Allergy and Infectious Disease,
or NIAID, has awarded a $21.75 million contract to us and our
scientific collaborators at CHOP and CCRI. We have a subcontract with CHOP
to
complete work related to the NIAID contract, under which we may receive up
to
$18.2 million over the five-year period of the contract. As of December 31,
2006, we have earned approximately $1.5 million under this subcontract. The
purpose of the NIAID award is to develop AAV-based vaccines against HIV strains
most prevalent in North America and Europe.
In
December 2004, we formed a collaboration with Celladon Corporation, or Celladon,
to evaluate AAV-based delivery of the SERCA2a gene and phospholamban gene
variants, which may have a therapeutic benefit in the treatment of congestive
heart failure. We are also partnered with Sirna Therapeutics, Inc., or Sirna,
a
wholly-owned subsidiary of Merck & Co., Inc., in a collaboration formed in
January 2005, to develop short interfering RNA, AAV-based therapies for the
treatment of Huntington’s disease.
The development of pharmaceutical products, including our potential inflammatory
arthritis, prophylactic AIDS vaccine, congestive heart failure, and Huntington’s
disease product candidates discussed above, involves extensive preclinical
development followed by human clinical trials that take several years or more
to
complete. The length of time required to completely develop any product
candidate varies substantially according to the type, complexity and novelty
of
the product candidate, the degree of involvement by a development partner and
the intended use of the product candidate. Our commencement and rate of
completion of clinical trials may vary or be delayed for many reasons, including
those discussed in the section entitled “Risk Factors” presented below.
We were incorporated in the state of Washington in 1989. Our executive offices
are located at 1100 Olive Way, Suite 100, Seattle, Washington 98101, and
our telephone number is (206) 623-7612.
For more information about us, you should read this prospectus, including the
information described in the section of this prospectus entitled “Where You Can
Find More Information,” together with our consolidated financial statements and
related notes.
RISK
FACTORS
An investment in our common stock involves a high degree of risk. You should
carefully consider the following risk factors related to the Shares offered
by
this prospectus and to our business. You should also carefully consider the
other information in this prospectus and in the documents incorporated by
reference herein. If any of the following risks actually occurs, our business,
financial condition or results of operations may suffer. As a result, the
trading price of our common stock could decline, and you could lose all or
a
substantial portion of your investment in our common stock.
Risks
Related to Our Business
If
we are unable to raise additional capital when needed, we will be unable to
conduct our operations and develop our potential
products.
Because
internally generated cash flow will not fund development and commercialization
of our product candidates, we will require substantial additional financial
resources. Our future capital requirements will depend on many factors,
including:
•
|
the
rate and extent of scientific progress in our research and development
programs;
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•
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the
timing, costs and scope of, and our success in, conducting clinical
trials, obtaining regulatory approvals and pursuing patent
prosecutions;
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•
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competing
technological and market developments;
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•
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the
timing and costs of, and our success in, any product commercialization
activities and facility expansions, if and as required;
and
|
•
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the
existence and outcome of any litigation or administrative proceedings
involving intellectual
property.
|
We
estimate that our cash and cash equivalents on hand, which includes the net
proceeds of approximately $8.1 million received from the Selling Shareholders
in
the January 11, 2007 private placement of the Shares, plus the expected funding
from our partners, will be sufficient to fund our operations into the fourth
quarter of 2007. Prior to that time, we will need to raise additional capital
to
continue to fund operations at their current level. This estimate is based
on
our ability to perform planned research and development activities and the
receipt of expected funding from our partners. In addition, as of December
31,
2006, we owed to Biogen Idec Inc., or Biogen Idec, approximately $1.5 million
in
aggregate principal amount pursuant to a note. The terms of the note require
us
to make annual interest payments and scheduled principal payments of $1.0
million in August 2007 and $0.5 million in August 2008. We will need to
raise additional capital to perform planned research and development activities
and make these scheduled payments. Additional sources of financing could involve
one or more of the following:
•
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entering
into additional product development
collaborations;
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mergers
and acquisitions;
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issuing
equity in the public or private markets;
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•
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extending
or expanding our current
collaborations;
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•
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selling
or licensing our technology or product candidates;
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•
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borrowing
under loan or equipment financing arrangements;
or
|
Additional
funding may not be available to us on reasonable terms, if at all. Our ability
to issue equity, and our ability to issue it at the current market price, may
be
adversely affected by the fact that we are presently ineligible under SEC rules
to utilize Form S-3 for primary offerings of our securities because the
aggregate market value of our outstanding common stock held by non-affiliates
is
less than $75.0 million.
The
perceived risk associated with the possible sale of a large number of shares
of
our common stock could cause some of our shareholders to sell their stock,
thus
causing the price of our stock to decline. In addition, actual or anticipated
downward pressure on our stock price due to actual or anticipated sales of
stock
could cause some institutions or individuals to engage in short sales of our
common stock, which may itself cause the price of our stock to decline.
If
our
stock price declines, we may be unable to raise additional capital. A sustained
inability to raise capital could force us to go out of business. Significant
declines in the price of our common stock could also impair our ability to
attract and retain qualified employees, reduce the liquidity of our common
stock
and result in the delisting of our common stock from the NASDAQ Capital
Market.
The
funding that we expect to receive from our collaborations depends on continued
scientific progress under the collaborations and our collaborators’ ability and
willingness to continue or extend the collaboration. If we are unable to
successfully access additional capital, we may need to scale back, delay or
terminate one or more of our development programs, curtail capital expenditures
or reduce other operating activities. We may also be required to relinquish
some
rights to our technology or product candidates or grant or take licenses on
unfavorable terms, either of which would reduce the ultimate value to us of
our
technology or product candidates.
We
expect to continue to operate at a loss and may never become
profitable.
Substantially all of our revenue has been derived under collaborative research
and development agreements relating to the development of our potential product
candidates. We have incurred, and will continue to incur for the foreseeable
future, significant expense to develop our research and development programs,
conduct preclinical studies and clinical trials, seek regulatory approval for
our product candidates and provide general and administrative support for these
activities. As a result, we have incurred significant net losses since
inception, and we expect to continue to incur substantial additional losses
in
the future. As of September 30, 2006, we had an accumulated deficit of
$284.8 million. We may never generate profits and, if we do become
profitable, we may be unable to sustain or increase profitability.
All
of our product candidates are in early-stage clinical trials or preclinical
development, and if we are unable to successfully develop and commercialize
our
product candidates we will be unable to generate sufficient capital to maintain
our business.
In
November 2005, IAVI initiated a Phase II trial for our HIV/AIDS vaccine
product candidate in South Africa. In March 2006, we initiated a Phase I/II
trial for our inflammatory arthritis product candidate in the United States
and
Canada. We will not generate any product revenue for at least several years
and
then only if we can successfully develop and commercialize our product
candidates. Commercializing our potential products depends on successful
completion of additional research and development and testing, in both
preclinical development and clinical trials. Clinical trials may take several
years or more to complete. The commencement, cost and rate of completion of
our
clinical trials may vary or be delayed for many reasons. If we are unable to
successfully complete preclinical and clinical development of some or all of
our
product candidates in a timely manner, we may be unable to generate sufficient
product revenue to maintain our business.
Even if our potential products succeed in clinical trials and are approved
for
marketing, these products may never achieve market acceptance. If we are
unsuccessful in commercializing our product candidates for any reason, including
greater effectiveness or economic feasibility of competing products or
treatments, the failure of the medical community or the public to accept or
use
any products based on gene delivery, inadequate marketing and distribution
capabilities or other reasons discussed elsewhere in this section, we will
be
unable to generate sufficient product revenue to maintain our business.
Failure
to recruit subjects could delay or prevent clinical trials of our potential
products, which could delay or prevent the development of potential
products.
Identifying and qualifying subjects to participate in clinical trials of our
potential products is critically important to our success. The timing of our
clinical trials depends on the speed at which we can recruit subjects to
participate in testing our product candidates. We have experienced delays in
some of our clinical trials, and we may experience similar delays in the future.
If subjects are unwilling to participate in our gene therapy trials because
of
negative publicity from adverse events in the biotechnology or gene therapy
industries or for other reasons, including competitive clinical trials for
similar patient populations, the timeline for recruiting subjects, conducting
trials and obtaining regulatory approval of potential products will be delayed.
These delays could result in increased costs, delays in advancing our product
development, delays in testing the effectiveness of our technology or
termination of the clinical trials altogether.
The
regulatory approval process for our product candidates is costly, time-consuming
and subject to unpredictable changes and delays, and our product candidates
may
never receive regulatory approval.
No gene therapy products have received regulatory approval for marketing from
the U.S. Food and Drug Administration, or FDA. Because our product
candidates involve new and unproven technologies, we believe that the regulatory
approval process may proceed more slowly compared to clinical trials involving
traditional drugs. The FDA and applicable state and foreign regulators must
conclude at each stage of clinical testing that our clinical data suggest
acceptable levels of safety in order for us to proceed to the next stage of
clinical trials. In addition, gene therapy clinical trials conducted at
institutions that receive funding for recombinant DNA research from the National
Institutes of Health, or NIH, are subject to review by the NIH’s Office of
Biotechnology Activities Recombinant DNA Advisory Committee, or RAC. Although
NIH guidelines do not have regulatory status, the RAC review process can impede
the initiation of the trial, even if the FDA has reviewed the trial and approved
its initiation. Moreover, before a clinical trial can begin at an NIH-funded
institution, that institution’s Institutional Biosafety Committee must review
the proposed clinical trial to assess the safety of the trial.
The regulatory process for our product candidates is costly, time-consuming
and
subject to unpredictable delays. The clinical trial requirements of the FDA,
NIH
and other agencies and the criteria these regulators use to determine the safety
and efficacy of a product candidate vary substantially according to the type,
complexity, novelty and intended use of the potential products. In addition,
regulatory requirements governing gene therapy products have changed frequently
and may change in the future. Accordingly, we cannot predict how long it will
take or how much it will cost to obtain regulatory approvals for clinical trials
or for manufacturing or marketing our potential products. Some or all of our
product candidates may never receive regulatory approval. A product candidate
that appears promising at an early stage of research or development may not
result in a commercially successful product. Our clinical trials may fail to
demonstrate the safety and efficacy of a product candidate or a product
candidate may generate unacceptable side effects or other problems during or
after clinical trials. Should this occur, we may have to delay or discontinue
development of the product candidate, and the partner, if any, that supports
development of such product candidate may terminate its support. Delay or
failure to obtain, or unexpected costs in obtaining, the regulatory approval
necessary to bring a potential product to market will decrease our ability
to
generate sufficient product revenue to maintain our business.
If
we are unable to obtain or maintain licenses for necessary third-party
technology on acceptable terms or to develop alternative technology, we may
be
unable to develop and commercialize our product
candidates.
We have entered into exclusive and nonexclusive license agreements that give
us
and our partners rights to use technologies owned or licensed by commercial
and
academic organizations in the research, development and commercialization of
our
potential products. For example, we have a gene therapy technology license
agreement with Amgen Inc., or Amgen, as the successor to Immunex Corporation,
or
Immunex, under which we have licensed rights to certain Immunex proprietary
technology specifically applicable to gene therapy applications. In a February
2004 letter, Amgen took the position that we are not licensed, either
exclusively or nonexclusively, to use Immunex intellectual property covering
TNFR:Fc or therapeutic uses for TNFR:Fc. We have responded with a letter
confirming our confidence that the gene therapy technology license agreement
provides us with an exclusive worldwide license to use the gene construct coding
for TNFR:Fc for gene therapy applications. We have had and continue to have
further communications with Amgen regarding our differences. Notwithstanding
our
confidence, it is possible that a resolution of those differences, through
litigation or otherwise, could cause delay or discontinuation of our development
of tgAAC94 or our inability to commercialize any resulting product.
We believe that we will need to obtain additional licenses to use patents and
unpatented technology owned or licensed by others for use, compositions,
methods, processes to manufacture compositions, processes to manufacture and
purify gene delivery product candidates and other technologies and processes
for
our present and potential product candidates. If we are unable to maintain
our
current licenses for third-party technology or obtain additional licenses on
acceptable terms, we may be required to expend significant time and resources
to
develop or license replacement technology. If we are unable to do so, we may
be
unable to develop or commercialize the affected product candidates. In addition,
the license agreements for technology for which we hold exclusive licenses
typically contain provisions that require us to meet minimum development
milestones in order to maintain the license on an exclusive basis for some
or
all fields of the license. We also have license agreements for some of our
technologies, which may require us to sublicense certain of our rights. If
we do
not meet these requirements, our licensor may convert all or a portion of the
license to a nonexclusive license or, in some cases, terminate the license.
In many cases, patent prosecution of our licensed technology is controlled
solely by the licensor. If our licensors fail to obtain and maintain patent
or
other protection for the proprietary intellectual property we license from
them,
we could lose our rights to the intellectual property or our exclusivity with
respect to those rights, and our competitors could market competing products
using the intellectual property. Licensing of intellectual property is of
critical importance to our business and involves complex legal, business and
scientific issues and is complicated by the rapid pace of scientific discovery
in our industry. Disputes may arise regarding intellectual property subject
to a
licensing agreement, including:
• |
the scope of rights granted under
the license
agreement and other interpretation-related issues; |
|
|
• |
the extent to which our technology
and
processes infringe on intellectual property of the licensor that
is not
subject to the licensing agreement; |
|
|
• |
the sublicensing of patent and other
rights
under our collaborative development relationships; |
|
|
• |
the ownership of inventions and know-how
resulting from the joint creation or use of intellectual property
by our
licensors and us and our partners; and |
|
|
• |
the priority of invention of patented
technology. |
If disputes over intellectual property that we have licensed prevent or impair
our ability to maintain our current licensing arrangements on acceptable terms,
we may be unable to successfully develop and commercialize the affected product
candidates.
Litigation
involving intellectual property, product liability or other claims and product
recalls could strain our resources, subject us to significant liability, damage
our reputation or result in the invalidation of our proprietary
rights.
As our product development efforts progress, most particularly in potentially
significant markets such as HIV/ AIDS, congestive heart failure or inflammatory
arthritis therapies, the risk increases that others may claim that our processes
and product candidates infringe on their intellectual property rights. In
addition, administrative proceedings, litigation or both may be necessary to
enforce our intellectual property rights or determine the rights of others.
Defending or pursuing these claims, regardless of their merit, would be costly
and would likely divert management’s attention and resources away from our
operations. If there were to be an adverse outcome in litigation or an
interference proceeding, we could face potential liability for significant
damages or be required to obtain a license to the patented process or technology
at issue, or both. If we are unable to obtain a license on acceptable terms,
or
to develop or obtain alternative technology or processes, we may be unable
to
manufacture or market any product or potential product that uses the affected
process or technology.
Clinical trials and the marketing of any potential products may expose us to
liability claims resulting from the testing or use of our products. Gene therapy
treatments are new and unproven, and potential known and unknown side effects
of
gene therapy may be serious and potentially life-threatening. Product liability
claims may be made by clinical trial participants, consumers, healthcare
providers or other sellers or users of our products. Although we currently
maintain liability insurance, the costs of product liability and other claims
against us may exceed our insurance coverage. In addition, we may require
increased liability coverage as additional product candidates are used in
clinical trials or commercialized. Liability insurance is expensive and may
not
continue to be available on acceptable terms. A product liability or other
claim
or product recall not covered by or exceeding our insurance coverage could
significantly harm our financial condition. In addition, adverse publicity
resulting from a product recall or a liability claim against us, one of our
partners or another gene therapy company could significantly harm our reputation
and make it more difficult to obtain the funding and collaborative partnerships
necessary to maintain our business.
If
we lose our collaborative partners, we may be unable to develop our potential
products.
A portion of our operating expenses are funded through our collaborative
agreements with third parties. We currently have strategic partnerships with
two
biotechnology companies, Sirna and Celladon, one public health organization,
IAVI, and through a contract with a U.S. government agency, NIAID, that provide
for funding, collaborative development, intellectual property rights or
expertise to develop certain of our product candidates. With limited exceptions,
each collaborator has the right to terminate its obligation to provide research
funding at any time for scientific or business reasons. In addition, to the
extent that funding is provided by a collaborator for non-program-specific
uses,
the loss of significant amounts of collaborative funding could result in
the delay, reduction or termination of additional research and development
programs, a reduction in capital expenditures or business development and other
operating activities, or any combination of these measures. For example, we
have
a collaboration and license agreement with Celladon that may be terminated
at
will by Celladon subject to a notice provision in the agreement. We expect
Celladon to provide us with funding to reimburse research and development and
manufacturing expenses that we incur in connection with the collaboration.
If
we do not attract and retain qualified personnel, we may be unable to develop
and commercialize some of our potential products.
Our future success depends in large part on our ability to attract and retain
key technical and management personnel. All of our employees, including our
executive officers, can terminate their employment with us at any time. We
have
programs in place designed to retain personnel, including competitive
compensation packages and programs to create a positive work environment. Other
companies, research and academic institutions and other organizations in our
field compete intensely for employees, however, and we may be unable to retain
our existing personnel or attract additional qualified employees and
consultants. If we experience significant turnover or difficulty in recruiting
new personnel, our research and development of product candidates could be
delayed and we could experience difficulty in generating sufficient revenue
to
maintain our business.
If
our partners or scientific consultants terminate, reduce or delay our
relationships with them, we may be unable to develop our potential
products.
Our partners provide funding, manage regulatory filings, aid and augment our
internal research and development efforts and provide access to important
intellectual property and know-how. Their activities include, for example,
support in processing the regulatory filings of our product candidates and
funding clinical trials. Our outside scientific consultants and contractors
perform research, develop technology and processes to advance and augment our
internal efforts and provide access to important intellectual property and
know-how. Their activities include, for example, clinical evaluation of our
product candidates, product development activities performed under our research
collaborations, research under sponsored research agreements and contract
manufacturing services. Collaborations with established pharmaceutical and
biotechnology companies and academic, research and public health organizations
often provide a measure of validation of our product development efforts in
the
eyes of securities analysts, investors and the medical community. The
development of certain of our potential products, and therefore the success
of
our business, depends on the performance of our partners, consultants and
contractors. If they do not dedicate sufficient time, regulatory or other
technical resources to the research and development programs for our product
candidates or if they do not perform their obligations as expected, we may
experience delays in, and may be unable to continue, the preclinical or clinical
development of those product candidates. Each of our collaborations and
scientific consulting relationships concludes at the end of the term specified
in the applicable agreement unless we and our partners agree to extend the
relationship. Any of our partners may decline to extend the collaboration,
or
may be willing to extend the collaboration only with a significantly reduced
scope. Competition for scientific consultants and partners in gene therapy
is
intense. We may be unable to successfully maintain our existing relationships
or
establish additional relationships necessary for the development of our product
candidates on acceptable terms, if at all. If we are unable to do so, our
research and development programs may be delayed or we may lose access to
important intellectual property or know-how.
The
success of our clinical trials and preclinical studies may not be indicative
of
results in a large number of subjects of either safety or
efficacy.
The successful results of our technology in preclinical studies using animal
models may not be predictive of the results that we will see in our clinical
trials. In addition, results in early-stage clinical trials are based on limited
numbers of subjects and generally test for drug safety rather than efficacy.
Our
reported progress and results from our early phases of clinical testing of
our
product candidates may not be indicative of progress or results that will be
achieved from larger populations, which could be less favorable. Moreover,
we do
not know if the favorable results we have achieved in clinical trials will
have
a lasting or repeatable effect. If a larger group of subjects does not
experience positive results or if any favorable results do not demonstrate
a
beneficial effect, our product candidates that we advance to clinical trials
may
not receive approval from the FDA for further clinical trials or
commercialization. For example, in March 2005, we discontinued the development
of tgAAVCF, our product candidate for the treatment of cystic fibrosis,
following the analysis of Phase II clinical trial data in which tgAAVCF
failed to achieve the efficacy endpoints of the trial.
We
may be unable to adequately protect our proprietary rights domestically or
overseas, which may limit our ability to successfully market any product
candidates.
Our success depends substantially on our ability to protect our proprietary
rights and operate without infringing on the proprietary rights of others.
We
own or license patents and patent applications, and will need to license
additional patents, for genes, processes, practices and techniques critical
to
our present and potential product candidates. If we fail to obtain and maintain
patent or other intellectual property protection for this technology, our
competitors could market competing products using those genes, processes,
practices and techniques. The patent process takes several years and involves
considerable expense. In addition, patent applications and patent positions
in
the field of biotechnology are highly uncertain and involve complex legal,
scientific and factual questions. Our patent applications may not result in
issued patents and the scope of any patent may be reduced both before and after
the patent is issued. Even if we secure a patent, the patent may not provide
significant protection and may be circumvented or invalidated.
We also rely on unpatented proprietary technology and technology that we have
licensed on a nonexclusive basis. While we take precautions to protect our
proprietary unpatented technology, we may be unable to meaningfully protect
this
technology from unauthorized use or misappropriation by a third party. Our
competitors could also obtain rights to our nonexclusively licensed proprietary
technology. In any event, other companies may independently develop equivalent
proprietary information and techniques. If our competitors develop and market
competing products using our unpatented or nonexclusively licensed proprietary
technology or substantially similar technology, our products, if successfully
developed, could suffer a reduction in sales or be forced out of the market.
If
we do not develop adequate development, manufacturing, sales, marketing and
distribution capabilities, either alone or with our business partners, we will
be unable to generate sufficient product revenue to maintain our
business.
Our potential products require significant development of new processes and
design for the advancement of the product candidate through manufacture,
preclinical and clinical testing. We may be unable to continue development
or
meet critical milestones with our partners due to technical or scientific issues
related to manufacturing or development. We currently do not have the physical
capacity to manufacture large-scale quantities of our potential products. This
could limit our ability to conduct large clinical trials of a product candidate
and to commercially launch a successful product candidate. In order to
manufacture product at such scale, we will need to expand or improve our current
facilities and staff or supplement them through the use of contract providers.
If we are unable to obtain and maintain the necessary manufacturing
capabilities, either alone or through third parties, we will be unable to
manufacture our potential products in quantities sufficient to sustain our
business. Moreover, we are unlikely to become profitable if we, or our contract
providers, are unable to manufacture our potential products in a cost-effective
manner.
In addition, we have no experience in sales, marketing and distribution. To
successfully commercialize any products that may result from our development
programs, we will need to develop these capabilities, either on our own or
with
others. We intend to enter into collaborations with other entities to utilize
their mature marketing and distribution capabilities, but we may be unable
to
enter into marketing and distribution agreements on favorable terms, if at
all.
If our current or future collaborative partners do not commit sufficient
resources to timely marketing and distributing our future products, if any,
and
we are unable to develop the necessary marketing and distribution capabilities
on our own, we will be unable to generate sufficient product revenue to sustain
our business.
Post-approval
manufacturing or product problems or failure to satisfy applicable regulatory
requirements could prevent or limit our ability to market our
products.
Commercialization of any products will require continued compliance with FDA
and
other federal, state and local regulations. For example, our current
manufacturing facility, which is designed for manufacturing our AAV vectors
for
clinical and development purposes, is subject to the Good Manufacturing
Practices requirements and other regulations of the FDA, as well as to other
federal, state and local regulations such as the Occupational Health and Safety
Act, the Toxic Substances Control Act, the Resource Conservation and Recovery
Act and the Environmental Protection Act. Any future manufacturing facility
that
we may construct for large-scale commercial production will also be subject
to
regulation. We may be unable to obtain regulatory approval for or maintain
in
operation this or any other manufacturing facility. In addition, we may be
unable to attain or maintain compliance with current or future regulations
relating to manufacture, safety, handling, storage, record keeping or marketing
of potential products. If we fail to comply with applicable regulatory
requirements or discover previously unknown manufacturing, contamination,
product side effects or other problems after we receive regulatory approval
for
a potential product, we may suffer restrictions on our ability to market the
product or be required to withdraw the product from the market.
Risks
Related to Our Industry
Adverse
events in the field of gene therapy could damage public perception of our
potential products and negatively affect governmental approval and
regulation.
Public perception of our product candidates could be harmed by negative events
in the field of gene transfer. For example, in 2003, fourteen subjects in a
French academic clinical trial being treated for x-linked severe combined
immunodeficiency in a gene therapy trial using a retroviral vector showed
correction of the disease, although three of the subjects subsequently developed
leukemia. Serious adverse events, including patient deaths, have occurred in
clinical trials. Adverse events in our clinical trials and the resulting
publicity, as well as any other adverse events in the field of gene therapy
that
may occur in the future, could result in a decrease in demand for any products
that we may develop. The commercial success of our product candidates will
depend in part on public acceptance of the use of gene therapy for preventing
or
treating human diseases. If public perception is influenced by claims that
gene
therapy is unsafe, our product candidates may not be accepted by the general
public or the medical community. The public and the medical community may
conclude that our technology is unsafe.
Future adverse events in gene therapy or the biotechnology industry could also
result in greater governmental regulation, unfavorable public perception,
stricter labeling requirements and potential regulatory delays in the testing
or
approval of our potential products. Any increased scrutiny could delay or
increase the costs of our product development efforts or clinical trials.
Our
use of hazardous materials exposes us to liability risks and regulatory
limitations on their use, either of which could reduce our ability to generate
product revenue.
Our research and development activities involve the controlled use of hazardous
materials, including chemicals, biological materials and radioactive compounds.
Our safety procedures for handling, storing and disposing of these materials
must comply with federal, state and local laws and regulations, including,
among
others, those relating to solid and hazardous waste management, biohazard
material handling, radiation and air pollution control. We may be required
to
incur significant costs in the future to comply with environmental or other
applicable laws and regulations. In addition, we cannot eliminate the risk
of
accidental contamination or injury from hazardous materials. If a hazardous
material accident were to occur, we could be held liable for any resulting
damages, and this liability could exceed our insurance and financial resources.
Accidents unrelated to our operations could cause federal, state or local
regulatory agencies to restrict our access to hazardous materials needed in
our
research and development efforts, which could result in delays in our research
and development programs. Paying damages or experiencing delays caused by
restricted access could reduce our ability to generate revenue and make it
more
difficult to fund our operations.
The
intense competition and rapid technological change in our market may result
in
failure of our potential products to achieve market
acceptance.
We face increasingly intense competition from a number of commercial entities
and institutions that are developing gene therapy technologies. Our competitors
include early-stage and more established gene delivery companies, other
biotechnology companies, pharmaceutical companies, universities, research
institutions and government agencies developing gene therapy products or other
biotechnology-based therapies designed to treat the diseases on which we focus.
We also face competition from companies using more traditional approaches to
treating human diseases, such as surgery, medical devices and pharmaceutical
products. If our product candidates become commercial gene therapy products,
they may affect commercial markets of the analogous protein or traditional
pharmaceutical therapy. This may result in lawsuits, demands, threats or patent
challenges by others in an effort to reduce our ability to compete. In addition,
we compete with other companies to acquire products or technology from research
institutions or universities. Many of our competitors have substantially more
resources, including research and development personnel, capital and
infrastructure, than we do. Many of our competitors also have greater experience
and capabilities than we do in:
• research
and development;
• clinical
trials;
• obtaining
FDA and other regulatory approvals;
• manufacturing; and
• marketing
and distribution.
In addition, the competitive positions of other companies, institutions and
organizations, including smaller competitors, may be strengthened through
collaborative relationships. Consequently, our competitors may be able to
develop, obtain patent protection for, obtain regulatory approval for, or
commercialize new products more rapidly than we do, or manufacture and market
competitive products more successfully than we do. This could limit the prices
we could charge for the products that we are able to market or result in our
products failing to achieve market acceptance.
Gene therapy is a rapidly evolving field and is expected to continue to undergo
significant and rapid technological change and competition. Rapid technological
development by our competitors, including development of technologies, products
or processes that are more effective or more economically feasible than those
we
have developed, could result in our actual and proposed technologies, products
or processes losing market share or becoming obsolete.
Healthcare
reform measures and the unwillingness of third-party payors to provide adequate
reimbursement for the cost of our products could impair our ability to
successfully commercialize our potential products and become
profitable.
Sales of medical products and treatments depends substantially, both
domestically and abroad, on the availability of reimbursement to the consumer
from third-party payors. Our potential products may not be considered
cost-effective by third-party payors, who may not provide coverage at the price
set for our products, if at all. If purchasers or users of our products are
unable to obtain adequate reimbursement, they may forego or reduce their use
of
our products. Even if coverage is provided, the approved reimbursement amount
may not be high enough to allow us to establish or maintain pricing sufficient
to realize a sufficient return on our investment.
Increasing efforts by governmental and third-party payors, such as Medicare,
private insurance plans and managed care organizations, to cap or reduce
healthcare costs will affect our ability to commercialize our product candidates
and become profitable. We believe that third-party payors will attempt to reduce
healthcare costs by limiting both coverage and level of reimbursement for new
products approved by the FDA. There have been and will continue to be a number
of federal and state proposals to implement government controls on pricing,
the
adoption of which could affect our ability to successfully commercialize our
product candidates. Even if the government does not adopt any such proposals
or
reforms, their announcement could impair our ability to raise capital.
Risks
Related to Our Common Stock
If
we sell additional shares, our stock price may decline as a result of the
dilution that will occur to existing shareholders.
Until we are profitable, we will need significant additional funds to develop
our business and sustain our operations. Any additional sales of shares of
our
common stock are likely to have a dilutive effect on our then-existing
shareholders. Subsequent sales of these shares in the open market could also
have the effect of lowering our stock price, thereby increasing the number
of
shares we may need to issue in the future to raise the same dollar amount and
consequently further diluting our outstanding shares. These future sales could
also have an adverse effect on the market price of our shares and could result
in additional dilution to the holders of our shares.
The perceived risk associated with the possible sale of a large number of shares
could cause some of our shareholders to sell their stock, thus causing the
price
of our stock to decline. In addition, actual or anticipated downward pressure
on
our stock price due to actual or anticipated sales of stock could cause some
institutions or individuals to engage in short sales of our common stock, which
may itself cause the price of our stock to decline.
If our stock price declines, we may be unable to raise additional capital.
A
sustained inability to raise capital could force us to go out of business.
Significant declines in the price of our common stock could also impair our
ability to attract and retain qualified employees, reduce the liquidity of
our
common stock and result in the delisting of our common stock from the NASDAQ
Capital Market.
Concentration
of ownership of our common stock may give certain shareholders significant
influence over our business.
A small number of investors own a significant number of shares of our common
stock. As of January 18, 2007, Elan International Services, Ltd., or Elan,
held
approximately 1.2 million shares and Biogen Idec held approximately 2.2 million
shares of our common stock. Together these holdings represent approximately
25%
of our common shares outstanding as of January 18, 2007. This concentration
of
stock ownership may allow these shareholders to exercise significant control
over our strategic decisions and block, delay or substantially influence all
matters requiring shareholder approval, such as:
• election
of directors;
• amendment
of our charter documents; or
• approval
of significant corporate transactions, such as a change of control of
us.
The interests of these shareholders may conflict with the interests of other
holders of our common stock with regard to such matters. Furthermore, this
concentration of ownership of our common stock could allow these shareholders
to
delay, deter or prevent a third party from acquiring control of us at a premium
over the then-current market price of our common stock, which could result
in a
decrease in our stock price.
Both Biogen Idec and Elan have sold shares of our common stock and may continue
to do so. Sales of significant value of stock by these investors may introduce
increased volatility to the market price of our common stock. In accordance
with
the termination agreement that we entered into with Elan in March 2004, Elan
is
only permitted to sell quantities of our stock equal to 175% of the volume
limitation set forth in Rule 144(e)(1) promulgated under the Securities
Act.
Market
fluctuations or volatility could cause the market price of our common stock
to
decline and limit our ability to raise capital.
The stock market in general and the market for biotechnology-related companies
in particular have experienced extreme price and volume fluctuations, often
unrelated to the operating performance of the affected companies. The market
price of the securities of biotechnology companies, particularly companies
such
as ours without earnings and product revenue, has been highly volatile and
is
likely to remain so in the future. Any report of clinical trial results that
are
below the expectations of financial analysts or investors could result in a
decline in our stock price. We believe that in the past, similar levels of
volatility have contributed to the decline in the market price of our common
stock, and may do so again in the future. Trading volumes of our common stock
can increase dramatically, resulting in a volatile market price for our common
stock. The trading price of our common stock could decline significantly as
a
result of sales of a substantial number of shares of our common stock, or the
perception that significant sales could occur. In addition, the sale of
significant quantities of stock by Elan, Biogen Idec or other holders of
significant amounts of shares of our stock, could adversely impact the price
of
our common stock.
USE
OF PROCEEDS
We will not receive any proceeds from the sale or other disposition by the
Selling Shareholders of the Common Shares registered hereunder, or
interests therein. We will, however, receive proceeds from the exercise of
any
Warrants, if the exercise price is paid in cash. If all of the Warrants are
exercised for cash, we will receive proceeds of approximately $4.1 million,
which we currently intend to use for general corporate purposes.
SELLING
SHAREHOLDERS
The
following table provides information regarding the Selling Shareholders and
the
number of Shares each Selling Shareholder is offering, including the Warrant
Shares held by each Selling Shareholder. We have prepared this table based
on
information furnished to us by or on behalf of the Selling Shareholders. Under
the rules of the SEC, beneficial ownership includes shares over which the
indicated beneficial owner exercises voting or investment power. Beneficial
ownership is determined under Section 13(d) of the Exchange Act and generally
includes voting or investment power with respect to securities and including
any
securities that grant the Selling Shareholder the right to acquire common stock
within 60 days of January 18, 2007. Unless otherwise indicated in the footnotes
below, we believe that the Selling Shareholders have sole voting and investment
power with respect to all shares beneficially owned. The percentage ownership
data is based on 13,107,235 shares of our common stock issued and
outstanding as of January 18, 2007. Since the date on which they provided us
with the information below, the Selling Shareholders may have sold, transferred
or otherwise disposed of some or all of their Shares in transactions exempt
from
the registration requirements of the Securities Act.
The
Shares may be sold by the Selling Shareholders, by those persons or entities
to
whom they transfer, donate, devise, pledge or distribute their Shares or by
other successors in interest. The information regarding shares beneficially
owned after this offering assumes the sale of all Shares offered by each of
the
Selling Shareholders. The Selling Shareholders may sell less than all of the
Shares listed in the table. In addition, the Shares listed below may be sold
pursuant to this prospectus or in privately negotiated transactions.
Accordingly, we cannot estimate the number of Shares the Selling Shareholders
will sell under this prospectus.
Except
as
described in this prospectus, the Selling Shareholders have not held any
position or office or had any other material relationship with us or any of
our
predecessors or affiliates within the past three years.
The
Selling Shareholders have represented to us that they purchased the Common
Shares (and the right to acquire shares pursuant to exercise of the Warrants)
for their own account, for investment only and not with a view toward selling
or
distributing them in violation of the Securities Act, except in sales either
registered under the Securities Act, or sales that are exempt from registration.
In recognition of the fact that the Selling Shareholders, even though purchasing
their shares for investment, may wish to be legally permitted to sell their
Shares when they deem appropriate, we agreed with the Selling Shareholders
to
file a registration statement to register the resale of the Shares. We have
also
agreed to prepare and file all amendments and supplements necessary to keep
the
registration statement effective until the earlier of (i) the date on which
the Selling Shareholders may resell all the Shares covered by the registration
statement without registration pursuant to Rule 144(k) under the Securities
Act or any successor rule thereto and (ii) the date on which the Selling
Shareholders have sold all the Shares covered by the registration
statement.
|
|
Shares
Beneficially Owned Before Offering (1)
|
|
|
|
Shares
Beneficially
Owned
After Offering (1)
|
|
Name
of Selling Shareholders
|
|
Number
|
|
Percentage
(%)
|
|
Shares
Offered Hereby(2)
|
|
Number
|
|
Percentage
(%)
|
|
SRB
Greenway Capital, L.P. (3)
|
|
|
85,050
|
|
|
*
|
|
|
85,050
|
|
|
0
|
|
|
-
|
|
SRB
Greenway Capital, Q.P., L.P. (3)
|
|
|
831,600
|
|
|
6.2
|
|
|
831,600
|
|
|
0
|
|
|
-
|
|
SRB
Greenway Offshore Operating Fund, L.P. (3)
|
|
|
28,350
|
|
|
*
|
|
|
28,350
|
|
|
0
|
|
|
-
|
|
Millennium
Partners, L.P.
|
|
|
339,945
|
|
|
2.6
|
|
|
337,500
|
|
|
2,445
|
|
|
|
|
PGE
Partner Fund LP (4)
|
|
|
78,840
|
|
|
*
|
|
|
|
|
|
0
|
|
|
-
|
|
PGE
Partner Fund II LP (4)
|
|
|
29,160
|
|
|
*
|
|
|
29,160
|
|
|
0
|
|
|
-
|
|
Special
Situations Fund III, Q.P., L.P. (5)
|
|
|
708,750
|
|
|
5.3
|
|
|
708,750
|
|
|
0
|
|
|
-
|
|
Special
Situations Life Sciences Fund, L.P. (5)
|
|
|
506,250
|
|
|
3.8
|
|
|
506,250
|
|
|
0
|
|
|
-
|
|
Tang
Capital Partners, L.P.
|
|
|
337,500
|
|
|
2.6
|
|
|
337,500
|
|
|
0
|
|
|
-
|
|
_____________
*
Less
than 1%.
|
|
(1) |
Includes an aggregate of 763,000 shares
of
common stock issuable under the Warrants that are exercisable after
July
11, 2007, which Warrant Shares are deemed outstanding for computing
the
percentage ownership of the Selling Shareholder holding Warrant Shares
before the offering and after giving effect to the offering, but
are not
deemed outstanding for computing the beneficial ownership of any
other
Selling Shareholder. |
(2) |
We do not know when or in what amounts
a
Selling Shareholder may offer Shares for sale. The Selling Shareholders
may not sell any or all of the Shares offered by this prospectus.
Because
the Selling Shareholders may offer all or some of the Shares pursuant
to
this offering and because there are currently no agreements, arrangements
or undertakings with respect to the sale of any of the Shares, we
cannot
estimate the number of Shares that will be held by the Selling
Shareholders after completion of this offering. However, for purposes
of
this table, we have assumed that, after completion of this offering,
none
of the Shares covered by this prospectus will be held by the Selling
Shareholders. |
(3) |
SRB
Greenway Capital, L.P, SRB Greenway Capital, Q.P., L.P. and SRB Greenway
Offshore Operating Fund, L.P. are affiliated entities. BC Advisors,
LLC
(“BCA”) is the general partner of SRB Management, L.P. (“SRB Management”).
SRB Management is the general partner of SRB Greenway Capital, L.P.,
SRB
Greenway Capital (Q.P.), L.P. and SRB Greenway Offshore Operating
Fund,
L.P. Steven R. Becker is the sole principal of BCA. Through his control
of
BCA, Mr. Becker possesses sole voting and investment control over
the
portfolio securities of each of the funds listed above. |
(4) |
PGE Partner Fund LP and PGE Partner
Fund II
LP are affiliated entities. In addition, each entity is an affiliate
of Pacific Growth Equities, LLC, our exclusive placement agent in
the
private placement in which the Selling Shareholders purchased the
Common
Shares and Warrants. |
(5) |
Special Situations Fund III, Q.P.,
L.P. and
Special Situations Life Sciences Fund, L.P. are affiliated entities.
MGP
Advisors Limited (“MGP”) is the general partner of Special Situations
Fund III, QP, L.P. AWM Investment Company, Inc. (“AWM”) is the general
partner of MGP and the investment adviser to Special Situations Fund
III,
QP, L.P. and Special Situations Life Sciences Fund, L.P. Austin W.
Marxe
and David M. Greenhouse are the principal owners of MGP and AWM.
Through
their control of MGP and AWM, Messrs. Marxe and Greenhouse share
voting
and investment control over the portfolio securities of each of the
funds
listed above. |
PLAN
OF DISTRIBUTION
The
Selling Shareholders, which as used in this prospectus includes donees,
pledgees, transferees or other successors-in-interest selling Shares or
interests in Shares received after the date of this prospectus from a Selling
Shareholder as a gift, pledge, partnership distribution or other transfer,
may,
from time to time, sell, transfer or otherwise dispose of any or all of the
Shares or interests in the Shares on any stock exchange, market or trading
facility on which the Shares are traded or in private transactions. These
dispositions may be at fixed prices, at prevailing market prices at the time
of
sale, at prices related to the prevailing market price, at varying prices
determined at the time of sale, or at negotiated prices.
The
Selling Shareholders may use any one or more of the following methods when
disposing of Shares or interests therein:
• |
ordinary brokerage transactions
and
transactions in which the broker-dealer solicits purchasers; |
|
|
• |
block trades in which the broker-dealer
will
attempt to sell the Shares as agent, but may position and resell
a portion
of the block as principal to facilitate the transaction; |
|
|
• |
purchases by a broker-dealer as
principal and
resale by the broker-dealer for its account; |
|
|
• |
an exchange distribution in accordance
with
the rules of the applicable exchange; |
|
|
• |
privately negotiated
transactions; |
|
|
• |
short sales effected after the date
the
registration statement of which this prospectus is a part is declared
effective by the SEC; |
|
|
• |
through the writing or settlement
of options
or other hedging transactions, whether through an options exchange
or
otherwise; |
|
|
• |
agreement between broker-dealers
and the
Selling Shareholders to sell a specified number of the Shares at
a
stipulated price per share; and |
|
|
• |
a combination of any such methods
of sale.
|
The
Selling Shareholders may, from time to time, pledge or grant a security interest
in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the Shares, from time to time, under this prospectus, or under
an
amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act amending the list of Selling Shareholders to include
the
pledgee, transferee or other successors-in-interest as Selling Shareholders
under this prospectus. The Selling Shareholders also may transfer the Shares
in
other circumstances, in which case the transferees, pledgees or other
successors-in-interest will be the selling beneficial owners for purposes of
this prospectus.
In
connection with the sale of the Shares or interests therein, the Selling
Shareholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Shareholders may also sell Shares short and deliver Shares to close out their
short positions, or loan or pledge the Shares to broker-dealers that in turn
may
sell these securities. The Selling Shareholders may also enter into option
or
other transactions with broker-dealers or other financial institutions or the
creation of one or more derivative securities that require the delivery to
such
broker-dealer or other financial institution of Shares offered by this
prospectus, which Shares such broker-dealer or other financial institution
may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The
aggregate proceeds to the Selling Shareholders from the sale of the Shares
offered by them will be the purchase price of the Shares less discounts or
commissions, if any. Each of the Selling Shareholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole
or
in part, any proposed purchase of Shares to be made directly or through agents.
We will not receive any of the proceeds from this offering. Upon any exercise
of
the Warrants by payment of cash, however, we will receive the exercise price
of
the Warrants.
The
Selling Shareholders also may resell all or a portion of the Shares in open
market transactions in reliance on Rule 144 under the Securities Act, provided
that they meet the criteria and conform to the requirements of that rule.
The
Selling Shareholders and any underwriters, broker-dealers or agents that
participate in the sale of the Shares or interests therein may be deemed
“underwriters” within the meaning of Section 2(11) of the Securities Act.
Specifically, the Selling Shareholders who are registered broker-dealers are
deemed to be “underwriters” within the meaning of the Securities Act. In
addition, Selling Shareholders who are affiliates of registered broker-dealers
may be deemed to be “underwriters” within the meaning of the Securities Act if
such Selling Shareholder (i) did not acquire the Shares in the ordinary
course of business or (ii) had any agreement or understanding, directly or
indirectly, with any person to distribute the Shares. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act, and such Selling Shareholders
may be subject to certain additional regulations and statutory liabilities
under
the Securities Act and the Exchange Act. To our knowledge and based on
information we received from the Selling Shareholders, (i) each Selling
Shareholder that is a registered broker-dealer or affiliated with a registered
broker-dealer acquired the Shares in the ordinary course of business,
(ii) such Selling Shareholder did not have any agreement or understanding,
directly or indirectly, with any person to distribute the Shares, and
(iii) no such Selling Shareholder received any securities as underwriting
compensation. However, Pacific Growth Equities, LLC, an affiliate of Pacific
Growth Equity Management, LLC, received a warrant to purchase approximately
25,000 shares of our common stock as part of its compensation for acting as
the
placement agent in connection with the private placement. We are also not aware
of any underwriting plan or agreement, underwriters’ or dealers’ compensation,
or passive market making or stabilizing transactions involving the purchase
or
distribution of the Shares.
Any
discounts, commissions, concessions or profit the Selling Shareholders earn
on
any resale of the Shares may be underwriting discounts and commissions under
the
Securities Act. Selling Shareholders who are “underwriters” within the meaning
of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act.
To
the
extent required, the Shares to be sold, the names of the Selling Shareholders,
the respective purchase prices and public offering prices, the names of any
agents, dealers or underwriters, any applicable commissions or any discounts
with respect to a particular offer will be set forth in an accompanying
prospectus supplement or a post-effective amendment to the registration
statement that includes this prospectus, or, if appropriate, a filing pursuant
to the Exchange Act.
In
order
to comply with the securities laws of some states, if applicable, the Shares
may
be sold in these jurisdictions only through registered or licensed brokers
or
dealers. In addition, in some states the Shares may not be sold unless they
have
been registered or qualified for sale or an exemption from registration or
qualification requirements is available and is complied with.
We
have
advised the Selling Shareholders that the anti-manipulation rules of Regulation
M under the Exchange Act may apply to sales of Shares in the market and to
the
activities of the Selling Shareholders and their affiliates. In addition, to
the
extent applicable, we will make copies of this prospectus (as it may be
supplemented or amended from time to time) available to the Selling Shareholders
for the purpose of satisfying the prospectus delivery requirements of the
Securities Act. The Selling Shareholders may indemnify any broker-dealer that
participates in transactions involving the sale of the Shares against certain
liabilities, including liabilities arising under the Securities Act.
We
have
agreed to indemnify the Selling Shareholders against liabilities, including
liabilities under the Securities Act and state securities laws, relating to
the
registration of the Shares offered by this prospectus.
We
have
agreed with the Selling Shareholders to keep the registration statement of
which
this prospectus constitutes a part effective until the earlier of:
• |
such time as all of the Shares covered
by
this prospectus have been disposed of pursuant to and in accordance
with
the registration statement, and |
|
|
• |
the date on which the Shares may be
sold
pursuant to Rule 144 of the Securities
Act. |
LEGAL
MATTERS
The
validity of the Shares covered by this prospectus was passed upon by Orrick,
Herrington & Sutcliffe LLP, Seattle, Washington.
EXPERTS
Ernst
& Young LLP, an independent registered public accounting firm, has audited
our consolidated financial statements included in our Annual Report on Form
10-K
for the year ended December 31, 2005, and management’s assessment of the
effectiveness of our internal control over financial reporting as of December
31, 2005, as set forth in their reports, which are incorporated by reference
in
this prospectus and registration statement. Our consolidated financial
statements and management’s assessment are, and audited consolidated financial
statements and management’s assessments to be included in subsequently filed
documents will be, incorporated by reference in reliance on Ernst & Young
LLP’s reports (to the extent covered by consents filed with the SEC), given on
their authority as experts in accounting and auditing.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents incorporated by reference herein contain
forward-looking statements that involve risks and uncertainties. Forward-looking
statements include statements about our product development and
commercialization goals and expectations, potential market opportunities, our
plans for and anticipated results of our clinical development activities and
the
potential advantage of our product candidates, our future cash requirements
and
the sufficiency of our cash and cash equivalents to meet these requirements,
our
ability to raise capital when needed and other statements that are not
historical facts. Words such as “may,” “will,” “believes,” “estimates,”
“expects,” “anticipates,” “plans” and “intends,” or statements concerning
“potential” or “opportunity” and other words of similar meaning, or the negative
thereof, may identify forward-looking statements, but the absence of these
words
does not mean that the statement is not forward-looking. In making these
statements, we rely on a number of assumptions and make predictions about the
future. Our actual results could differ materially from those stated in, or
implied by, forward-looking statements for a number of reasons, including the
risks described in the section entitled “Risk Factors” beginning on page 4 of
this prospectus.
You
should not unduly rely on these forward-looking statements, which speak only
to
our expectations as of the date of this prospectus. We undertake no obligation
to publicly revise any forward-looking statement after the date of this
prospectus to reflect circumstances or events occurring after the date of this
prospectus or to conform the statement to actual results or changes in our
expectations. You should, however, review the factors, risks and other
information we provide in the reports we file from time to time with the SEC,
including after the date of this prospectus.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and current reports, proxy statements and other information
with the SEC. Our SEC filings are available to the public over the Internet
at
the SEC’s website at http://www.sec.gov. The SEC’s website contains reports,
proxy statements and other information regarding issuers, such as us, that
file
electronically with the SEC. You may also read and copy any document we file
with the SEC at the SEC’s public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. You may also obtain copies of the documents at
prescribed rates by writing to the SEC’s public reference room at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information about its public reference room.
The
SEC
allows us to “incorporate by reference” into this prospectus the information and
reports we file with the SEC. This means that we can disclose important
information to you by referring to another document. The information that we
incorporate by reference is considered to be part of this prospectus, and later
information that we file with the SEC automatically updates and supersedes
this
information. We incorporate by reference the following documents:
· |
Our
annual report on Form 10-K for the year ended December 31, 2005,
which contains audited consolidated financial statements for the
most
recent fiscal year for which such statements have been
filed;
|
· |
Our
quarterly reports on Form 10-Q for the quarters ended March 31,
2006, June 30, 2006 and September 30,
2006;
|
· |
Our
current reports on Form 8-K filed on January 19, 2006, January 25,
2006, March 8, 2006, March 10, 2006, March 15, 2006, March 16, 2006,
April
28, 2006, May 9, 2006, May 12, 2006, June 2, 2006, June 16, 2006,
June 21,
2006, June 28, 2006, August 18, 2006, September 5, 2006, September
20,
2006, November 1, 2006, November 7, 2006, November 15, 2006, December
14,
2006, January 8, 2007 and January 11, 2007;
and
|
· |
The
description of our common stock contained in our registration statements
on Form 8-A filed on April 26, 1994 and October 22, 1996 under Section
12(g) of the Exchange Act, including any amendments or reports filed
for
the purpose of updating that description.
|
We
also
incorporate by reference into this prospectus all documents we file under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (a) after the
initial filing date of the registration statement of which this prospectus
is a
part and before the effectiveness of the registration statement and
(b) after the effectiveness of the registration statement and before the
Shares offered by this prospectus have been sold. The most recent information
that we file with the SEC automatically updates and supersedes older
information. The information contained in any such filing will be deemed to
be a
part of this prospectus as of the date on which the document is filed, and
any
older information that has been modified or superseded will not be deemed to
be
a part of this prospectus. Unless specifically stated to the contrary, none
of
the information that we disclose under Item 9 or 12 of any Current Report on
Form 8-K that we may from time to time furnish to the SEC will be incorporated
by reference into, or otherwise included in, this prospectus.
Upon
request, we will provide to each person who receives this prospectus a copy
of
the information that
has
been incorporated by reference into this prospectus. Please direct your request,
either in writing or by telephone, to the Secretary, Targeted Genetics
Corporation, 1100 Olive Way, Suite 100, Seattle, Washington 98101,
(206) 623-7612.
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted.
You
should not assume that the information in this prospectus is accurate as of
any
date other than the date on the front of this prospectus.
NO
PERSON
HAS BEEN AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE UNDER THIS PROSPECTUS
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR THE SELLING SHAREHOLDERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS
WILL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THERE HAS BEEN NO CHANGE IN OUR
AFFAIRS OR THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE AS OF WHICH THE INFORMATION IS GIVEN. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
ANY
OF THE SECURITIES OFFERED UNDER THIS PROSPECTUS TO ANYONE IN ANY JURISDICTION
IN
WHICH THE OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT
IS
UNLAWFUL TO MAKE THE OFFER OR SOLICITATION.