Filed Pursuant to Rule 424(b)(2)
Registration No. 333-56512
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 25, 2001
ALTEON INC.
[ALTEON LOGO] 2,300,000 Shares
of Common Stock
---------------------------
We are selling 2,300,000 shares of common stock with this prospectus
supplement and the accompanying prospectus. The last reported sale price of our
common stock on March 25, 2003 was $3.92 per share. Our common stock is listed
for trading on the American Stock Exchange under the symbol "ALT."
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THE OFFERING PER SHARE TOTAL
------------ --------- --------------
Public Offering Price $3.50 $8,050,000
Placement Agent's Fee $0.14 $ 322,000
Proceeds to Alteon Inc. (before expenses) $3.36 $7,728,000
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE S-3 OF THIS
PROSPECTUS SUPPLEMENT.
We have retained WR Hambrecht+Co, LLC to act, on a best efforts basis, as the
placement agent in making this offering to selected institutional investors. We
expect to deliver the shares of common stock to investors on March 31, 2003.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[WR HAMBRECHT+CO LOGO]
as Placement Agent
The date of this prospectus supplement is March 26, 2003
TABLE OF CONTENTS
PAGE
About this Prospectus Supplement..........................................................S-2
Use of Proceeds...........................................................................S-2
Dilution..................................................................................S-2
Plan of Distribution......................................................................S-3
Risk Factors..............................................................................S-3
Legal Matters............................................................................S-10
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You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and the documents incorporated by
reference. We have not authorized anyone to provide you with information
different from that contained in any of these documents. The information
contained in these documents is accurate only as of the date of each document,
as the case may be, regardless of the time of delivery of this prospectus
supplement and accompanying prospectus or of any sale of common stock. Our
business, financial condition, results of operations and prospects may change
after the date set forth in each document in which the information is presented.
---------------------------
S-1
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our
common stock in two separate documents: (a) the accompanying prospectus, which
provides general information, some of which may not apply to this offering or
may have been superseded by subsequent events or filings with the Securities and
Exchange Commission; and (b) this prospectus supplement, which describes the
specific details regarding this offering. Generally, when we refer to this
"prospectus," we are referring to both documents combined.
If information in this prospectus supplement is inconsistent with the
accompanying prospectus, you should rely on this prospectus supplement.
Statements in this prospectus supplement that are not statements or
descriptions of historical facts are "forward-looking" statements under Section
21E of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995 and are subject to numerous risks and
uncertainties. These forward-looking statements and other forward-looking
statements made by us or our representatives are based on a number of
assumptions. The words "believe," "expect," "anticipate," "intend," "estimate"
or other expressions, which are predictions of or indicate future events and
trends and which do not relate to historical matters, identify forward-looking
statements. You are cautioned not to place undue reliance on these
forward-looking statements as they involve risks and uncertainties, and actual
results could differ materially from those currently anticipated due to a number
of factors. See "Risk Factors", beginning on Page S-3.
Except for special circumstances in which a duty to update arises when
prior disclosure becomes materially misleading in light of subsequent events, we
do not intend to update any of these forward-looking statements to reflect
events or circumstances after the date of this prospectus supplement or to
reflect the occurrence of unanticipated events.
USE OF PROCEEDS
We expect the net proceeds from this sale of common stock to be
approximately $7,655,500 after deducting the placement agent's fee and our
estimated expenses. We intend to use the net proceeds from the sale of the
common stock to fund the continued development of ALT-711 and for general
corporate purposes.
DILUTION
Our net tangible book value as of December 31, 2002 was $14,303,237 or
$0.43 per share of common stock. Net tangible book value per share is determined
by dividing our net tangible book value, which consists of tangible assets less
total liabilities, by the number of shares of common stock outstanding at that
date. Without taking into account any other changes in the net tangible book
value after December 31, 2002, other than to give effect to our receipt of the
estimated net proceeds from this sale of 2,300,000 shares of common stock at an
offering price of $3.50 per share, less estimated placement agent fees and
offering expenses, our net tangible book value as of December 31, 2002 would
have been $21,958,737 or $0.61 per share. This represents an immediate increase
in the net tangible book value per share of $0.18 per share to existing
stockholders and an immediate dilution of $2.89 per share to new investors.
The following table illustrates this per share dilution:
Offering Price Per Share $3.50
Net Tangible Book Value Per Share Before the Offering $0.43
Increase in Net Tangible Book Value Per Share After Giving Effect $0.18
to this Offering
Net Tangible Book Value Per Share as of December 31, 2002 After $0.61
Giving Effect to this Offering
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Dilution Per Share to New Investors $2.89
This table is based on the number of outstanding shares of common stock as
of December 31, 2002 and does not include the following:
- 5,555,807(1) shares of common stock issuable upon conversion of our
outstanding Series G Preferred Stock as of December 31, 2002;
S-2
- 16,684,398(1) shares of common stock issuable upon conversion of our
outstanding Series H Preferred Stock as of December 31, 2002;
- 5,436,279 shares of common stock issuable upon the exercise of outstanding
stock options as of December 31, 2002 at a weighted average exercise price
of $3.08 per share; and
- 1,133,636 and 60,000 shares of common stock issuable upon exercise of
outstanding warrants as of December 31, 2002 at an exercise price of $1.75
and $4.025, respectively.
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(1) Each share of Series G Preferred Stock and Series H Preferred Stock is
convertible, upon 70 days' prior written notice, into the number of
shares of common stock determined by dividing $10,000 by the average of
the closing sales price of the common stock, as reported on the American
Stock Exchange, for the 20 business days immediately preceding the date
of conversion. The number of shares indicated as issuable upon
conversion of the Series G and Series H were, for purposes of this
table, based upon an average closing price of $1.94. Had the table been
calculated as of March 25, 2003, the number of shares issuable upon the
conversion of the Series G and Series H would have been 2,816,336 and
8,457,568, respectively, using an average closing price of $3.83 per
share.
PLAN OF DISTRIBUTION
We are offering the common stock on a best efforts basis principally to
selected institutional investors. We have retained WR Hambrecht+Co, LLC under a
placement agency agreement to act as our exclusive placement agent in connection
with this offering. The placement agent is not obligated and does not intend to
purchase any of the common stock offered hereby.
We have agreed to pay to the placement agent a fee equal to $0.14 per
share of this offering as a selling commission. We have also agreed to indemnify
the placement agent against certain liabilities, including liabilities under the
Securities Act of 1933, and to contribute to payments that the placement agent
may be required to make in respect thereof.
We negotiated the price to the public for the common stock offered in
this offering with the placement agent and the investors. The factors considered
in determining the price to the public included the recent market price of our
common stock, the general condition of the securities market at the time of this
offering, the history of and the prospects for the industry in which we compete,
and our past and present operations.
Our common stock is listed on the American Stock Exchange under the
symbol "ALT."
We estimate that our expenses for the offering will be approximately
$394,500. This amount includes approximately $22,500 for exchange registration
fees, $20,000 in legal fees and expenses, $322,000 for placement agent fees and
$30,000 in miscellaneous expenses.
RISK FACTORS
Investment in our common stock involves substantial risks, including
those described below. You should purchase our common stock only if you can
afford to lose your entire investment. You should carefully consider all of the
information included in this prospectus to evaluate us and our business. You
should make this evaluation before deciding whether to purchase our common
stock. You should understand that additional risks which we cannot predict at
this time may have negative impact on us in the future. You should also
understand that the risks discussed below might affect us more than or in a
different manner than we now predict.
S-3
IF WE DO NOT OBTAIN SUFFICIENT ADDITIONAL FUNDING TO MEET OUR NEEDS, WE MAY HAVE
TO CURTAIL OR DISCONTINUE THE RESEARCH, PRODUCT DEVELOPMENT, PRE-CLINICAL
TESTING AND CLINICAL TRIALS OF SOME OR ALL OF OUR PRODUCT CANDIDATES.
As of December 31, 2002, we had working capital of approximately
$13,786,000, including approximately $17,439,000 of cash, cash equivalents and
short-term investments. During 2002, we sold 6,164,285 shares of common stock,
raising net proceeds of approximately $21,575,000. Our cash used in operations
for the year ended December 31, 2002, 2001 and 2000 was approximately
$14,931,000, $9,032,000 and $8,986,000, respectively. We expect to utilize cash
to fund our operations at levels similar to those used in 2002 through the
expected completion date of the SAPPHIRE and SILVER trials in mid-2003, and
believe we have adequate cash and cash equivalents and short-term investments to
fund such trials. However, we do not believe we will have adequate cash at these
spending levels to complete the fiscal year. As a result, throughout 2003, we
will monitor our liquidity position and the status of our clinical trials.
Depending upon the results of any attempts made by us to raise additional funds
through the sale of additional equity securities, we may be required to
significantly reduce or curtail our research and product development activities
and other operations if our level of cash and cash equivalents fall below
pre-determined levels. We have the intent and ability to quickly and
significantly reduce the cash burn rate, if necessary, as we have limited fixed
commitments. We believe that such actions will enable us to fund our operations
through the first quarter of 2004.
We will require, over the long-term, substantial new funding to pursue
development and commercialization of ALT-711 and our other product candidates
and continue our operations. We believe that satisfying these capital
requirements over the long-term will require successful commercialization of our
product candidates. However, it is uncertain whether or not any products will be
approved or will be commercially successful. The amount of our future capital
requirements will depend on numerous factors, including the progress of our
research and development programs, the conduct of pre-clinical tests and
clinical trials, the development of regulatory submissions, the costs associated
with protecting patents and other proprietary rights, the development of
marketing and sales capabilities and the availability of third-party funding.
Because of our short-term and long-term capital requirements, we, as
stated above, may seek access to the public or private equity markets. This may
have the effect of materially diluting the current holders of our outstanding
stock. We may also seek additional funding through corporate collaborations and
other financing vehicles, potentially including off-balance sheet financing
through limited partnerships or corporations. There can be no assurance that
such funding will be available at all or on terms acceptable to us. If we obtain
funds through arrangements with collaborative partners or others, we may be
required to relinquish rights to certain of our technologies or product
candidates.
IF WE DO NOT SUCCESSFULLY DEVELOP ANY PRODUCTS, WE MAY NOT DERIVE ANY REVENUES.
We have not yet requested or received regulatory approval for any
product from the FDA or any other regulatory body. All of our product candidates
are still in research or clinical development. We may not succeed in the
development and marketing of any therapeutic or diagnostic product. To achieve
profitable operations, we must, alone or with others, successfully identify,
develop, introduce and market proprietary products. Such products will require
significant additional investment, development and pre-clinical and clinical
testing prior to potential regulatory approval and commercialization.
The development of new pharmaceutical products is highly uncertain and
subject to a number of significant risks. Potential products that appear to be
promising at early stages of development may not reach the market for a number
of reasons. Potential products may be found ineffective or cause harmful side
effects during pre-clinical testing or clinical trials, fail to receive
necessary regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. We may not be able to
undertake additional clinical trials. In addition, our product development
efforts may not be successfully completed, we may not obtain regulatory
approvals, and our products, if introduced, may not be successfully marketed or
achieve customer acceptance. We do not expect any of our products, including
ALT-711, to be commercially available for a number of years, if at all.
S-4
CLINICAL TRIALS REQUIRED FOR OUR PRODUCT CANDIDATES ARE EXPENSIVE AND
TIME-CONSUMING, AND THEIR OUTCOME IS UNCERTAIN.
Before obtaining regulatory approvals for the commercial sale of any of
our products under development, we must demonstrate through pre-clinical studies
and clinical trials that the product is safe and effective for use in each
target indication. The length of time necessary to complete clinical trials
varies significantly and may be difficult to predict. Factors which can cause
delay or termination of our clinical trials include: (i) slower than expected
patient enrollment due to the nature of the protocol, the proximity of patients
to clinical sites, the eligibility criteria for the study, competition with
clinical trials for other drug candidates or other factors; (ii) lower than
expected retention rates of patients in a clinical trial; (iii) inadequately
trained or insufficient personnel at the study site to assist in overseeing and
monitoring clinical trials; (iv) delays in approvals from a study site's review
board; (v) longer treatment time required to demonstrate effectiveness or
determine the appropriate product dose; (vi) lack of sufficient supplies of the
product candidate; (vii) adverse medical events or side effects in treated
patients; (viii) lack of effectiveness of the product candidate being tested and
(ix) regulatory changes.
Even if we obtain positive results from pre-clinical or clinical trials
for a particular product, we may not achieve the same success in future trials
of that product. In addition, some or all of the clinical trials we undertake
may not demonstrate sufficient safety and efficacy to obtain the requisite
regulatory approvals, which could prevent the creation of marketable products.
Our product development costs will increase if we have delays in testing or
approvals, if we need to perform more or larger clinical trials than planned or
if our trials are not successful. Delays in our clinical trials may harm our
financial results and the commercial prospects for our products.
IF WE ARE UNABLE TO DERIVE REVENUES FROM PRODUCT SALES, WE MAY NEVER BE
PROFITABLE.
All of our revenues to date have been generated from collaborative
research agreements and financing activities, or interest income earned on these
funds. We have not received any revenues from product sales. We may not realize
product revenues on a timely basis, if at all.
At December 31, 2002, we had an accumulated deficit of approximately
$169,376,000. We anticipate that we will incur substantial, potentially greater,
losses in the future. Our products under development may not be successfully
developed and our products, if successfully developed, may not generate revenues
sufficient to enable us to earn a profit. We expect to incur substantial
additional operating expenses over the next several years as our research,
development and clinical trial activities increase. We do not expect to generate
revenues from the sale of products, if any, for a number of years. Our ability
to achieve profitability depends, in part, on our ability to enter into
agreements for product development, obtain regulatory approval for our products
and develop the capacity, or enter into agreements, for the manufacture,
marketing and sale of any products. We may not obtain required regulatory
approvals, or successfully develop, manufacture, commercialize and market
product candidates, and we may never achieve product revenues or profitability.
PRIOR STOCK OPTION REPRICING MAY HAVE AN ADVERSE EFFECT ON OUR FUTURE FINANCIAL
PERFORMANCE.
Based on the performance of our stock, we repriced certain employee
stock options on February 2, 1999, in order to bolster employee retention. As a
result of this repricing, options to purchase 1.06 million shares of stock were
repriced and certain vesting periods related to these options were modified or
extended. This repricing may have a material adverse impact on future financial
performance based on the Financial Accounting Standards Board Interpretation
No. 44, "Accounting for Certain Transactions Involving Stock Compensation, An
Interpretation of APB Opinion No. 25." This interpretation requires us to
record compensation expense or benefit, which is adjusted every quarter, for
increases or decreases in the fair value of the repriced options based on
changes in our stock price from the value at July 1, 2000, until the repriced
options are exercised, forfeited or expire. The options expire at various dates
through January 2008.
IF WE ARE UNABLE TO FORM THE COLLABORATIVE RELATIONSHIPS THAT OUR BUSINESS
STRATEGY REQUIRES, THEN OUR PROGRAMS WILL SUFFER AND WE MAY NOT BE ABLE TO
DEVELOP PRODUCTS.
Our strategy for developing and deriving revenues from our products
depends, in large part, upon entering into arrangements with research
collaborators, corporate partners and others. We are seeking to establish these
S-5
relationships to provide the funding necessary for continuation of our product
development, but if such efforts are not successful, our programs may suffer and
we may be unable to develop products.
IF WE ARE ABLE TO FORM OUR COLLABORATIVE RELATIONSHIPS, BUT ARE UNABLE TO
MAINTAIN THEM, OUR PRODUCT DEVELOPMENT MAY BE DELAYED AND DISPUTES OVER RIGHTS
TO TECHNOLOGY MAY RESULT.
We may form collaborative relationships that will, in some cases, make
us dependent upon outside partners to conduct pre-clinical testing and clinical
trials and to provide adequate funding for our development programs. Such
corporate partners, if any, may have all or a significant portion of the
development and regulatory approval responsibilities. Failure of the corporate
partners to develop marketable products or to gain the appropriate regulatory
approvals on a timely basis, if at all, would have a material adverse effect on
our business, financial condition, results of operations and liquidity.
In most cases, we will not be able to control the amount and timing of
resources that our corporate partners devote to our programs or potential
products. If any of our corporate partners breached or terminated its agreement
with us or otherwise failed to conduct its collaborative activities in a timely
manner, the pre-clinical or clinical development or commercialization of product
candidates or research programs could be delayed, and we would be required to
devote additional resources to product development and commercialization or
terminate certain development programs.
Disputes may arise in the future with respect to the ownership of rights
to any technology we develop with third parties. These and other possible
disagreements between us and collaborators could lead to delays in the
collaborative research, development or commercialization of product candidates,
or could require or result in litigation or arbitration, which would be
time-consuming and expensive and would have a material adverse effect on our
business, financial condition, results of operations and liquidity.
Any corporate partners we have may develop, either alone or with others,
products that compete with the development and marketing of our products.
Competing products, either developed by the corporate partners or to which the
corporate partners have rights, may result in their withdrawal of support with
respect to all or a portion of our technology, which would have a material
adverse effect on our business, financial condition, results of operations and
liquidity.
IF WE CANNOT SUCCESSFULLY DEVELOP A MARKETING AND SALES FORCE OR MAINTAIN
SUITABLE ARRANGEMENTS WITH THIRD PARTIES TO MARKET AND SELL OUR PRODUCTS, OUR
ABILITY TO DELIVER PRODUCTS MAY BE IMPAIRED.
We currently have no experience in marketing or selling pharmaceutical
products. In order to achieve commercial success for any approved product, we
must either develop a marketing and sales force or, where appropriate or
permissible, enter into arrangements with third parties to market and sell our
products. We might not be successful in developing marketing and sales
capabilities. Further, we may not be able to enter into marketing and sales
agreements with others on acceptable terms, and any such arrangements, if
entered into, may be terminated. If we develop our own marketing and sales
capability, it will compete with other companies that currently have
experienced, well funded and larger marketing and sales operations. To the
extent that we enter into co-promotion or other sales and marketing arrangements
with other companies, revenues will depend on the efforts of others, which may
not be successful.
IF WE CANNOT SUCCESSFULLY FORM AND MAINTAIN SUITABLE ARRANGEMENTS WITH THIRD
PARTIES FOR THE MANUFACTURING OF THE PRODUCTS WE MAY DEVELOP, OUR ABILITY TO
DEVELOP OR DELIVER PRODUCTS MAY BE IMPAIRED.
We have no experience in manufacturing products for commercial purposes
and do not have manufacturing facilities. Consequently, we are dependent on
contract manufacturers for the production of products for development and
commercial purposes. The manufacture of our products for clinical trials and
commercial purposes is subject to cGMP regulations promulgated by the FDA. In
the event that we are unable to obtain or retain third-party manufacturing for
our products, we will not be able to commercialize such products as planned. We
may not be able to enter into agreements for the manufacture of future products
with manufacturers whose facilities and procedures comply with cGMP and other
regulatory requirements. Our current dependence upon others for the manufacture
of our
S-6
products may adversely affect our profit margin, if any, on the sale of future
products and our ability to develop and deliver such products on a timely and
competitive basis.
IF WE ARE NOT ABLE TO PROTECT THE PROPRIETARY RIGHTS THAT ARE CRITICAL TO OUR
SUCCESS, THE DEVELOPMENT AND ANY POSSIBLE SALES OF OUR PRODUCT CANDIDATES COULD
SUFFER AND COMPETITORS COULD FORCE OUR PRODUCTS COMPLETELY OUT OF THE MARKET.
Our success will depend on our ability to obtain patent protection for
our products, preserve our trade secrets, prevent third parties from infringing
upon our proprietary rights and operate without infringing upon the proprietary
rights of others, both in the United States and abroad.
The degree of patent protection afforded to pharmaceutical inventions is
uncertain and our potential products are subject to this uncertainty.
Competitors may develop competitive products outside the protection that may be
afforded by the claims of our patents. We are aware that other parties have been
issued patents and have filed patent applications in the United States and
foreign countries with respect to other agents that have an effect on A.G.E.s or
the formation of A.G.E. crosslinks. In addition, although we have several patent
applications pending to protect proprietary technology and potential products,
these patents may not be issued, and the claims of any patents, which do issue,
may not provide significant protection of our technology or products. In
addition, we may not enjoy any patent protection beyond the expiration dates of
our currently issued patents.
We also rely upon unpatented trade secrets and improvements, unpatented
know-how and continuing technological innovation to maintain, develop and expand
our competitive position, which we seek to protect, in part, by confidentiality
agreements with our corporate partners, collaborators, employees and
consultants. We also have invention or patent assignment agreements with our
employees and certain, but not all, corporate partners and consultants. Relevant
inventions may be developed by a person not bound by an invention assignment
agreement. Binding agreements may be breached, and we may not have adequate
remedies for such breach. In addition, our trade secrets may become known to or
be independently discovered by competitors.
IF WE FAIL TO OBTAIN REGULATORY APPROVALS FOR OUR PRODUCTS, THE COMMERCIAL USE
OF OUR PRODUCTS WILL BE LIMITED.
Our research, pre-clinical testing and clinical trials of our product
candidates are, and the manufacturing and marketing of our products will be,
subject to extensive and rigorous regulation by numerous governmental
authorities in the United States and in other countries where we intend to test
and market our product candidates.
Prior to marketing, any product we develop must undergo an extensive
regulatory approval process. This regulatory process, which includes
pre-clinical testing and clinical trials and may include post-marketing
surveillance of each compound to establish its safety and efficacy, can take
many years and can require the expenditure of substantial resources. Data
obtained from pre-clinical and clinical activities is susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. In
addition, we may encounter delays or rejections based upon changes in Federal
Drug Administration ("FDA") policy for drug approval during the period of
product development and FDA regulatory review of each submitted new drug
application ("NDA"). We may encounter similar delays in foreign countries. We
may not obtain regulatory approval for the drugs we develop. Moreover,
regulatory approval may entail limitations on the indicated uses of the drug.
Further, even if we obtain regulatory approval, a marketed drug and its
manufacturer are subject to continuing review and discovery of previously
unknown problems with a product or manufacturer which may have adverse effects
on our business, financial condition and results of operations, including
withdrawal of the product from the market. Violations of regulatory requirements
at any stage, including pre-clinical testing, clinical trials, the approval
process or post-approval, may result in various adverse consequences, including
the FDA's delay in approving, or its refusal to approve a product, withdrawal of
an approved product from the market and the imposition of criminal penalties
against the manufacturer and NDA holder. None of our products has been approved
for commercialization in the United States or elsewhere. We may not be able to
obtain FDA approval for any products. Failure to obtain requisite governmental
approvals or failure to obtain approvals of the scope requested will delay or
preclude our licensees or marketing partners from marketing our products or
limit the commercial use of such products and will have a material adverse
effect on our business, financial condition, results of operations and
liquidity.
S-7
IF WE ARE NOT ABLE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES IN THE
DEVELOPMENT AND MARKETING OF CURES AND THERAPIES FOR CARDIOVASCULAR DISEASES,
DIABETES AND THE OTHER CONDITIONS FOR WHICH WE SEEK TO DEVELOP PRODUCTS, WE MAY
NOT BE ABLE TO CONTINUE OUR OPERATIONS.
We are engaged in pharmaceutical fields characterized by extensive
research efforts and rapid technological progress. Many established
pharmaceutical and biotechnology companies with resources greater than ours are
attempting to develop products that would be competitive with our products.
Other companies may succeed in developing products that are safer, more
efficacious or less costly than any we may develop and may also be more
successful than us in production and marketing. Rapid technological development
by others may result in our products becoming obsolete before we recover a
significant portion of the research, development or commercialization expenses
incurred with respect to those products.
Certain technologies under development by other pharmaceutical companies
could result in better treatments for cardiovascular disease, or diabetes and
its related complications. Several large companies have initiated or expanded
research, development and licensing efforts to build pharmaceutical franchises
focusing on these medical conditions. It is possible that one or more of these
initiatives may reduce or eliminate the market for some of our products. In
addition, other companies have initiated research in the inhibition or crosslink
breaking of A.G.E.s.
IF GOVERNMENTS AND THIRD-PARTY PAYERS CONTINUE THEIR EFFORTS TO CONTAIN OR
DECREASE THE COSTS OF HEALTHCARE, WE MAY NOT BE ABLE TO COMMERCIALIZE OUR
PRODUCTS SUCCESSFULLY.
In certain foreign markets, pricing and/or profitability of prescription
pharmaceuticals are subject to government control. In the United States, we
expect that there will continue to be federal and state initiatives to control
and/or reduce pharmaceutical expenditures. In addition, increasing emphasis on
managed care in the United States will continue to put pressure on
pharmaceutical pricing. Cost control initiatives could decrease the price that
we receive for any products we may develop and sell in the future and have a
material adverse effect on our business, financial condition and results of
operations. Further, to the extent that cost control initiatives have a material
adverse effect on our corporate partners, our ability to commercialize our
products may be adversely affected.
Our ability to commercialize pharmaceutical products may depend, in
part, on the extent to which reimbursement for the products will be available
from government health administration authorities, private health insurers and
other third-party payers. Significant uncertainty exists as to the reimbursement
status of newly approved healthcare products, and third-party payers, including
Medicare, are increasingly challenging the prices charged for medical products
and services. Third-party insurance coverage may not be available to patients
for any products developed by us. Government and other third-party payers are
attempting to contain healthcare costs by limiting both coverage and the level
of reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted labeling approval. If adequate coverage and
reimbursement levels are not provided by government and other third-party payers
for our products, the market acceptance of these products would be adversely
affected.
IF THE USERS OF THE PRODUCTS WE DEVELOP CLAIM THAT OUR PRODUCTS HAVE HARMED
THEM, WE MAY BE SUBJECT TO COSTLY AND DAMAGING PRODUCT LIABILITY LITIGATION,
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS.
The use of any of our potential products in clinical trials and the sale
of any approved products, including the testing and commercialization of ALT-711
or other compounds, exposes us to liability claims resulting from the use of
products or product candidates. A claim, which was subsequently settled, was
made by a participant in one of our clinical trials, and additional claims might
be made directly by other such participants, consumers, pharmaceutical companies
or others. We maintain product liability insurance coverage for claims arising
from the use of our products in clinical trials. However, coverage is becoming
increasingly expensive, and we may not be able to maintain or acquire insurance
at a reasonable cost or in sufficient amounts to protect us against losses due
to liability that could have a material adverse effect on our business,
financial conditions and results of operations. We may not be able to obtain
commercially reasonable product liability insurance for any product approved for
marketing in the future and insurance coverage and our resources may not be
sufficient to satisfy any liability
S-8
resulting from product liability claims. A successful product liability claim or
series of claims brought against us could have a material adverse effect on our
business, financial condition, results of operations and liquidity.
IF WE ARE UNABLE TO ATTRACT AND RETAIN THE KEY PERSONNEL ON WHOM OUR SUCCESS
DEPENDS, OUR PRODUCT DEVELOPMENT, MARKETING AND COMMERCIALIZATION PLANS COULD
SUFFER.
We are highly dependent on the principal members of our management and
scientific staff. The loss of services of any of these personnel could impede
the achievement of our development objectives. Furthermore, recruiting and
retaining qualified scientific personnel to perform research and development
work in the future will also be critical to our success. We may not be able to
attract and retain personnel on acceptable terms given the competition between
pharmaceutical and healthcare companies, universities and non-profit research
institutions for experienced scientists. In addition, we rely on consultants to
assist us in formulating our research and development strategy. All of our
consultants are employed outside of us and may have commitments to or consulting
or advisory contracts with other entities that may limit their availability to
us.
OUR OPERATIONS INVOLVE A RISK OF INJURY OR DAMAGE FROM HAZARDOUS MATERIALS, AND
IF AN ACCIDENT WERE TO OCCUR, WE COULD BE SUBJECT TO COSTLY AND DAMAGING
LIABILITY CLAIMS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Our research and development activities involve the controlled use of
hazardous materials and chemicals. Although we believe that our safety
procedures for handling and disposing of hazardous materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of an accident, we could be held liable for any damages or fines that
result. Such liability could have a material adverse effect on our business,
financial condition, results of operations and liquidity.
WE ARE OFFERING THE COMMON STOCK ON A BEST EFFORTS BASIS AND WE CANNOT BE
CERTAIN THAT WE WILL RAISE THE FULL AMOUNT CONTEMPLATED IN THIS OFFERING.
We have retained WR Hambrecht+Co, LLC under a placement agency agreement
to act as our exclusive placement agent in connection with this offering. The
placement agent is not obligated and does not intend to purchase any of the
common stock offered hereby. The closing of this offering is not conditioned on
the sale of all of the shares offered hereby, and we may sell all or any portion
of such shares. Accordingly, we cannot be certain of the number of shares that
will be purchased by investors. We currently anticipate that the closing will
take place on March 31, 2003, but we cannot be certain that this will be the
case.
THE COMMON STOCK BEING OFFERED BY THIS PROSPECTUS RANKS JUNIOR TO OUR
OUTSTANDING SHARES OF PREFERRED STOCK.
In addition to our authorized but unissued shares of preferred stock, we
have outstanding 1,079 shares of Series G and 3,241 shares of Series H
Convertible Preferred Stock. In the event of a liquidation, dissolution or
winding-up of our company, the holders of these shares of preferred stock will
have the right to receive distributions of our assets prior to distributions to
the holders of our common stock. This right could adversely affect the voting
power of common stockholders; make it more difficult for a third party to gain
control of us; discourage bids for our common stock at a premium; or otherwise
adversely affect the market price of the common stock.
THERE MAY BE RISKS RELATED TO ALTEON HAVING USED ARTHUR ANDERSEN AS ITS
INDEPENDENT AUDITORS.
Until May 30, 2002, Arthur Andersen, LLP served as Alteon's independent
auditors. Arthur Andersen is not able to consent to the use of its report on
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the 2001 and earlier financial statements and will not be in a position to
perform any post-audit review procedures. Should an event have occurred between
the date of Arthur Andersen's report and the date of this prospectus supplement
that could serve to make inaccurate the statement in Arthur Andersen's report
that the financial statements of Alteon present fairly, in all material
respects, the financial position, results of operations and cash flows of
Alteon for the periods covered by such financial statements, in conformity with
accounting principles generally accepted in the United States, an investor
might be precluded from bringing a claim against Arthur Andersen.
LEGAL MATTERS
Smith, Stratton, Wise, Heher & Brennan, LLP, Princeton, New Jersey, will
pass upon the validity of the common stock offered hereby and other legal
matters on behalf of Alteon Inc. Legal matters in connection with the offering
will be passed upon for the placement agent by Morrison & Foerster LLP, New
York, New York.
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[ALTEAON LOGO]
2,300,000 Shares
ALTEON INC.
Common Stock