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As filed with the Securities and Exchange Commission on --------,
2004
Registration No. 333-----
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
A.P. Pharma, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 94-2875566
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
123 Saginaw Drive, Redwood City, California 94063 (650) 366-2626
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(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Michael O'Connell
President and Chief Executive Officer
A.P. Pharma, Inc.
123 Saginaw Drive
Redwood City, California 94063
(650) 366-2626
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(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
Copies to:
Richard A. Peers, Esq.
Heller Ehrman White & McAuliffe LLP
2775 Sand Hill Road
Menlo Park, California 94025
(650) 324-7000 (phone)
(650) 324-0638 (fax)
Approximate date of commencement of proposed sale to the public:
From time to time as soon as practicable after this Registration
Statement become effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box.[ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended, other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act of
1933, as amended, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, as amended, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
=====================================================
Title of
each class Proposed
of securities Maximum Amount of
to be Offering Registration
Registered Price (2) Fee
- -----------------------------------------------------
Common Stock (3) N/A (1) N/A (1)
================ ========== ============
Total $15,000,000(4) $1,900.50
=====================================================
(1) Not applicable pursuant to General Instruction II(D) to Form
S-3 under the Securities Act of 1933, as amended.
(2) Estimated solely for purposes of calculating the
registration fee in accordance with Rule 457(o) under the
Securities Act of 1933, as amended.
(3) Subject to note (4) below, this Registration Statement
registers an indeterminate number of shares of common stock
that the Registrant may sell from time to time.
(4) The aggregate offering price for all common stock that the
Registrant may sell from time to time pursuant to this
Registration Statement will not exceed $15,000,000. The
aggregate amount of the Registrant's common stock registered
hereunder that may be sold in "at the market" offerings for
the account of the Registrant is limited to that which is
permissible under Rule 415(a)(4) under the Securities Act of
1933, as amended.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may
determine.
PROSPECTUS (Subject to Completion) Dated May 4, 2004
The information in this Prospectus is not complete and may be
changed. We are not allowed to sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This Prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
A.P. PHARMA, INC.
$15,000,000
Common Stock
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The shares of common stock of A.P. Pharma, Inc. covered by
this prospectus may be offered and sold to the public from time
to time in one or more issuances.
Our common stock trades on the Nasdaq National Market under
the symbol "APPA". On May 3, 2004, the last reported sale price
of the common stock on the Nasdaq National Market was $3.28 per
share.
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission utilizing a
"shelf" registration process. This prospectus provides you with a
general description of the shares that we may offer in one of
more offerings. Each time we offer shares, we will provide a
supplement to this prospectus that will contain more specific
information about the terms of that offering. We may also add,
update or change in the prospectus supplement any of the
information contained in this prospectus. This prospectus may not
be used to sell any of our common stock unless accompanied by a
prospectus supplement. You should read both this prospectus and
any prospectus supplement together with additional information
described under the heading "Where You Can Find More Information"
before you make your investment decision.
The aggregate offering price of all common stock sold under
this prospectus will not exceed $15,000,000.
Beginning on page 4, we have listed several "RISK FACTORS"
which you should consider. You should read the entire prospectus
carefully before you make your investment decision.
We may sell shares to or through underwriters or dealers, through
agents, or directly to investors.
------
The Securities and Exchange Commission and state regulatory
authorities have not approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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The Date of this Prospectus is------------, 2004
ABOUT THIS PROSPECTUS
We have not authorized any dealer, salesman or other person
to give any information or to make any representation other than
those contained or incorporated by reference in this prospectus
and the accompanying supplement to this prospectus. You must not
rely upon any information or representation not contained or
incorporated by reference in this prospectus or the accompanying
prospectus supplement. This prospectus and the accompanying
supplement to this prospectus do not constitute an offer to sell
or the solicitation of an offer to buy common stock, nor do this
prospectus and the accompanying supplement to this prospectus
constitute an offer to sell or the solicitation of an offer to
buy common stock in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
You should not assume that the information contained in this
prospectus and the accompanying prospectus supplement is accurate
on any date subsequent to the date set forth on the front of the
document or that any information we have incorporated by
reference is correct on any date subsequent to the date of the
document incorporated by reference, even though this prospectus
and any accompanying prospectus supplement is delivered or common
stock is sold on a later date.
This prospectus is part of a registration statement that we
filed with the Securities and Exchange Commission, or SEC, using
a "shelf" registration process. Under this shelf registration
process, we may, from time to time, issue and sell to the public
any part of the shares described in this prospectus in one or
more offerings up to a total dollar amount of $15,000,000.
This prospectus provides you with a general description of
the common stock we may offer. Each time we sell the common
stock, we will provide a prospectus supplement containing
specific information about the terms of that offering. The
prospectus supplement may also add, update or change information
in this prospectus or in documents incorporated by reference in
this prospectus. To the extent that any statement that we make in
a prospectus supplement is inconsistent with statements made in
this prospectus or in documents incorporated by reference in this
prospectus, the statements made or incorporated by reference in
this prospectus will be deemed modified or superseded by those
made in the prospectus supplement. You should carefully read both
this prospectus and any prospectus supplement together with the
additional information described under the heading "Where You Can
Find More Information" before buying any common stock in this
offering.
The registration statement containing this prospectus,
including exhibits to the registration statement, provides
additional information about us and the common stock offered
under this prospectus. The registration statement can be read at
the SEC web site or at the SEC offices mentioned under the
heading "Where You Can Find More Information."
In this prospectus, the "company," the "Registrant," "A.P.
Pharma," "APP," "we," "us," and "our" refer to A.P. Pharma, Inc.
ABOUT THE COMPANY
We are a specialty pharmaceutical company focused on the
development of pharmaceutical products utilizing our proprietary
polymer-based drug delivery systems. Our focus is the
development and commercialization of our patented bioerodible
injectable and implantable systems under the trade name
Biochronomer (TM).
Our business strategy is twofold:
* to develop selected proprietary products, funding them through
the preliminary phases of regulatory review before entering
into partnerships to share costs and to earn a share of future
profits; and
* to license our proprietary technologies to corporate partners
after the successful completion of reimbursed feasibility
studies to earn research and development fees, licensing fees,
milestone payments and royalties.
Initial targeted areas of application for our drug delivery
technologies include pain management; anti-nausea, anti-
inflammatory, anti-infective, oncology and ophthalmology
applications; device coatings and DNA delivery. Product
development programs have been funded primarily by royalties from
topical prescription products currently marketed by our
pharmaceutical partners, Johnson & Johnson and Aventis, proceeds
from the divestiture of our cosmeceutical and toiletry product
lines in July 2000, fees we receive from collaborative partners,
and proceeds from the sale of our Analytical Standards business
in February 2003.
Bioerodible polymers are of increasing interest within the
pharmaceutical and biotechnology community for use in both drug
delivery applications and as devices. We have made substantial
progress in developing the Biochronomer bioerodible polymers that
potentially represent a significant improvement over existing
drug delivery systems. A major point of difference with other
delivery systems is that our polymers have been specifically
designed as drug delivery systems and are versatile. Over one
hundred in vivo and in vitro studies have been completed to
advance understanding of this innovative drug delivery
technology. Importantly, the initial toxicology data indicate
that the technology is safe for use in humans. Studies
demonstrate complete and controlled bioerosion of the polymers.
Erosion times can be varied from hours to days, weeks or months
and mechanical properties can be adjusted to produce materials as
diverse as injectable gels, coatings, strands, wafers, films or
microspheres. In addition, the manufacturing is reproducible,
has been scaled up under GMP conditions and the polymers are
stable, provided they are stored under appropriate conditions.
In studies, the polymers were observed to erode to completion
and, once the drug was released, no polymer remained. In
addition, the polymers bioerode with low acidity, thus
potentially allowing the delivery of sensitive proteins and DNA.
Our first Biochronomer product candidate is APF112 for the
treatment of post-surgical pain. APF112 incorporates the well-
known analgesic mepivacaine in our Biochronomer system. It is
designed to provide 24 to 36 hours of post-surgical pain relief
and to minimize the use of morphine-like drugs (opioids) which
are used extensively in post-surgical pain management. Opioids
are associated with a wide range of side effects, such as nausea,
sedation, dizziness, constipation, vomiting, urinary retention,
and in some situations, life-threatening respiratory depression.
We completed Phase 1 human clinical trials for APF112 in 2002.
In 2003, we initiated Phase 2 clinical trials. Our initial
target is pain management following inguinal hernia repair. The
first part of the trial was an open-label study which was
successfully completed. Results of the Part 1 study indicate
that the pharmacokinetic measurements demonstrated meaningful
levels of mepivacaine over a three day period consistent with
observations made in preclinical studies with APF112. No severe
or serious adverse events were reported and wound healing in all
patients was observed to be normal over a 30-day follow-up
period. The second part of the Phase 2 trial which is currently
ongoing is a blinded study involving 90 patients and compares two
doses of APF112 with the current standard treatment for post-
surgical pain. The endpoints for the trial will include a visual
analog score of pain intensity, the standard means of measuring
pain, and reduction in use of opioid-type pain medication by
patients. We believe that more than 20 million surgical
procedures are performed annually in the U.S. which could benefit
from this product.
Our second product candidate is APF530 for the prevention of
nausea and vomiting following chemotherapy or surgery. We
commenced human clinical trials in the second quarter of 2004.
Using the Company's proprietary Biochronomer(TM) bioerodible drug
delivery system, APF530 is designed to provide three to five days
of continuous relief from chemotherapy-induced nausea and
vomiting following a single subcutaneous injection. APF530
combines A.P. Pharma's Biochronomer drug delivery system with
granisetron, one of a class of 5-HT3 antagonists which have
revolutionized the treatment of nausea and vomiting during and
after chemotherapy. The drug is currently administered by
intravenous (IV) injection, followed by oral administration for a
number of days. Biochronomer delivery of granisetron is a
potential alternative to the IV and subsequent oral
administration in the $2 billion annual market for anti-emetics.
In animal studies, APF530 utilizing the Biochronomer bioerodible
drug delivery system demonstrated sustained release at constant
and therapeutically equivalent blood drug levels.
The initial clinical study is designed to determine the safety
and tolerability of APF530, and will include approximately 18
healthy volunteers at a single clinical site in the United
Kingdom. A.P. Pharma is also finalizing pre-clinical work prior
to filing an Investigational New Drug (IND) application in the
U.S. that could allow the Company to go directly into U.S. Phase
2 studies in cancer patients with APF530.
We have also entered into fee-paying feasibility studies with
several companies to develop a variety of products using our
Biochronomer(TM) delivery systems. These products are being
developed in the areas of vaccines, ophthalmology, device
coatings and DNA delivery. In general, these research and
development arrangements provide for us to receive research and
development fees from our collaborators. Three of these
development programs have moved into in vivo testing and, if they
are concluded successfully, could lead to licensing agreements
under which a partner would pay for development costs and we
would receive a license fee, research and development fees,
milestone payments and a royalty upon a product's marketing
clearance and commercialization.
In February 1997, we received FDA marketing clearance for our
first pharmaceutical product based on our original patented
Microsponge(R) technology, Retin-A Micro(R), which was licensed
to Ortho Neutrogena, a member of the Johnson & Johnson family of
companies. This product was launched in the United States in
March 1997. Retin-A Micro was also launched in Canada in the
third quarter of 2001 and Phase 3 clinical trials were completed
in Europe in 2002. In May 2002, the FDA granted marketing
clearance for a new low-dose formulation of Retin-A Micro, which
was launched in the U.S. in July 2002. The Company is eligible
to receive royalty income based on sales of these products over
the life of the applicable patents, until 2016.
We licensed to Dermik Laboratories, an Aventis company, a
Microsponge-based formulation incorporating 5-fluorouracil (5-FU)
for the treatment of actinic keratoses, a precancerous skin
condition. The product was launched in the first quarter of 2001
under the brand name Carac(TM). This product has a number of
advantages over other topical therapies, including less
irritation with shorter duration of therapy and reduced dosage
frequency. The Company is eligible to receive royalty income
based on the sales of this product over the life of the
applicable patents, until 2021.
In February 2003, we sold the assets of our wholly-owned
subsidiary, APS Analytical Standards, Inc., to GFS Chemicals of
Columbus, Ohio, for $2.1 million in cash and the right to receive
royalties for the next five years. The Company, founded in
February 1983 as a California corporation under the name AMCO
Polymerics, Inc., changed its name to Advanced Polymer Systems,
Inc. in 1984 and was reincorporated in Delaware in 1987. The
name was changed to A.P. Pharma, Inc. in May 2001 to reflect the
new pharmaceutical focus of the Company.
FORWARD-LOOKING INFORMATION
Statements made in this prospectus or in the documents
incorporated by reference herein that are not statements of
historical fact are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). A number of risks and
uncertainties, including those discussed under the caption "Risk
Factors" below and the documents incorporated by reference herein
could affect such forward-looking statements and could cause
actual results to differ materially from the statements made.
RISK FACTORS
You should consider carefully the following risk factors,
along with other information contained or incorporated by
reference in this prospectus, in deciding whether to invest in
our securities. These factors, among others, may cause actual
results, events or performances to differ materially from those
expressed in any forward-looking statements we made in this
prospectus.
Our bioerodible drug delivery system business is at an early
stage of development.
Our bioerodible drug delivery system business is at an early
stage of development. Our ability to produce bioerodible drug
delivery systems that progress to and through clinical trials is
subject to, among other things:
- success with our research and development efforts;
- selection of appropriate therapeutic compounds for delivery;
- the required regulatory approval.
Successful development of delivery systems will require
significant preclinical and clinical testing prior to regulatory
approval in the United States and elsewhere. In addition, we
will need to determine whether any potential products can be
manufactured in commercial quantities at an acceptable cost. Our
efforts may not result in a product that can be marketed.
Because of the significant scientific, regulatory and commercial
milestones that must be reached for any of our research programs
to be successful, any program may be abandoned, even after
significant resources have been expended.
We will need additional capital to conduct our operations and to
develop our products and our ability to obtain the necessary
funding on favorable terms in the future is uncertain.
We will require additional capital resources in order to conduct
our operations and develop our products. While we estimate that
our existing capital resources, royalty income and interest
income will be sufficient to fund our current level of operations
for at least the next year based on current business plans, we
cannot guarantee that this will be the case. The timing and
degree of any future capital requirements will depend on many
factors, including:
- continued scientific progress in our research and development
programs;
- the magnitude and scope of our research and development
programs;
- our ability to establish and maintain strategic collaborations
or partnerships for research, development, clinical testing,
manufacturing and
marketing;
- our progress with preclinical and clinical trials;
- the time and costs involved in obtaining regulatory approvals;
- the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims.
We intend to acquire additional funding through strategic
collaborations, in the form of license fees, research and
development fees and milestone payments. In the event that
additional funds are obtained through arrangements with
collaborative partners, these arrangements may require us to
relinquish rights to some of our technologies, product candidates
or products that we would otherwise seek to develop and
commercialize ourselves. If sufficient funding is not available,
we may be required to delay, reduce the scope of or eliminate one
or more of our research or development programs, each of which
could have a material adverse effect on our business.
If we are unable to recruit and retain skilled employees, we may
not be able to achieve our objectives.
Retaining our current employees and recruiting qualified
scientific personnel to perform future research and development
work will be critical to our success. Competition is intense for
experienced scientists, and we may not be able to retain or
recruit sufficient skilled personnel to allow us to pursue
collaborations and develop our products and core technologies to
the extent otherwise possible.
We are reliant on single source third party contractors for the
manufacture and production of raw materials and product
candidates.
We currently, and for the foreseeable future will, rely upon
outside contractors to manufacture, supply and package for us key
intermediates, active pharmaceutical ingredients and formulated
drug product for our product candidates. Our current dependence
upon others for the manufacture of our raw materials and product
candidates and our anticipated dependence upon others for the
manufacture of any products that we may develop, may adversely
affect our ability to develop our product candidates in a timely
manner and
may adversely affect future profit margins and our ability to
commercialize any products that we may develop on a timely and
competitive basis.
Entry into clinical trials with one or more products may not
result in any commercially viable products.
We do not expect to generate any significant revenues from
product sales for a period of several years. We may never
generate revenues from product sales or become profitable because
of a variety of risks inherent in our business, including risks
that:
- clinical trials may not demonstrate the safety and efficacy of
our products;
- - we need to perform extensive final formulation and stability
work on our polymer and product candidates and if this is
unsuccessful, our product candidates may not be commercially
viable;
- completion of clinical trials may be delayed, or costs of
clinical trials may exceed anticipated amounts;
- we may not be able to obtain regulatory approval of our
products, or may experience delays in obtaining such approvals;
- we and our licensees may not be able to successfully market
our products.
Because we or our collaborators must obtain regulatory approval
to market our products in the United States and foreign
jurisdictions, we cannot predict whether or when we will be
permitted to commercialize our products.
Federal, state and local governments in the United States and
governments in other countries have significant regulations in
place that govern many of our activities. The preclinical
testing and clinical trials of the products that we develop
ourselves or that our collaborators develop are subject to
government regulation and may prevent us from creating
commercially viable products from our discoveries. In addition,
the sale by us or our collaborators of any commercially viable
product will be subject to government regulation from several
standpoints, including the processes of:
- manufacturing;
- advertising and promoting;
- selling and marketing;
- labeling; and
- distributing.
We may not obtain regulatory approval for the products we develop
and our collaborators may not obtain regulatory approval for the
products they develop. Regulatory approval may also entail
limitations on the indicated uses of a proposed product.
The regulatory process, particularly for biopharmaceutical
products like ours, is uncertain, can take many years and
requires the expenditure of substantial resources. Any product
that we or our collaborative partners develop must receive all
relevant regulatory agency approvals or clearances, if any,
before it may be marketed in the United States or other
countries. In particular, human pharmaceutical therapeutic
products are subject to rigorous preclinical and clinical testing
and other requirements by the Food and Drug Administration in the
United States and similar health authorities in foreign
countries. The regulatory process, which includes extensive
preclinical testing and clinical trials of each product in order
to establish its safety and efficacy, is uncertain, can take many
years and requires the expenditure of substantial resources.
Data obtained from preclinical and clinical activities is
susceptible to varying interpretations that could delay, limit or
prevent regulatory agency approvals or clearances. In addition,
delays or rejections may be encountered as a result of changes in
regulatory agency policy during the period of product development
and/or the period of review of any application for regulatory
agency approval or clearance for a product. Delays in obtaining
regulatory agency approvals or clearances could:
- significantly harm the marketing of any products that we or
our collaborators develop;
- impose costly procedures upon our activities or the activities
of our collaborators;
- diminish any competitive advantages that we or our
collaborative partners may attain; or
- adversely affect our ability to receive royalties and generate
revenues and profits.
In addition, the marketing and manufacturing of drugs and
biological products are subject to continuing FDA review, and
later discovery of previously unknown problems with a product,
its manufacture or its marketing may result in the FDA requiring
further clinical research or restrictions on the product or the
manufacturer, including withdrawal of the product from the
market.
We depend on our collaborators to help us complete the process of
developing and testing our products and our ability to develop
and commercialize products may be impaired or delayed if our
collaborative partnerships are unsuccessful.
Our strategy for the development, clinical testing and
commercialization of our products requires entering into
collaborations with corporate partners, licensors, licensees and
others. We are dependent upon the subsequent success of these
other parties in performing their respective responsibilities and
the cooperation of our partners. Our collaborators may not
cooperate with us or perform their obligations under our
agreements with them. We cannot control the amount and timing of
our collaborators' resources that will be devoted to our research
activities related to our collaborative agreements with them.
Our collaborators may choose to pursue existing or alternative
technologies in preference to those being developed in
collaboration with us.
Under agreements with collaborators, we may rely significantly on
them, among other activities, to:
- fund research and development activities with us;
- pay us fees upon the achievement of milestones; and
- market with us any commercial products that result from our
collaborations.
Our reliance on the research activities of our non-employee
scientific advisors and other research institutions, whose
activities are not wholly within our control, may lead to delays
in technological developments.
We have relationships with scientific advisors at academic and
other institutions, some of whom conduct research at our request.
These scientific advisors are not our employees and may have
commitments to, or consulting or advisory contracts with, other
entities that may limit their availability to us. We have
limited control over the activities of these advisors and, except
as otherwise required by our collaboration and consulting
agreements, can expect only limited amounts of their time to be
dedicated to our activities. If our scientific advisors are
unable or refuse to contribute to the development of any of our
potential discoveries, our ability to generate significant
advances in our technologies will be significantly harmed.
The loss of key personnel could slow our ability to conduct
research and develop products.
Our future success depends to a significant extent on the skills,
experience and efforts of our executive officers and key members
of our scientific staff. We may be unable to retain our current
personnel or attract or assimilate other highly qualified
management and scientific personnel in the future. The loss of
any or all of these individuals could harm our business and might
significantly delay or prevent the achievement of research,
development or business objectives.
We face intense competition from other companies.
Most or all of the products we could develop or commercialize
will face competition from different therapeutic agents intended
for treatment of the same indications or from other products
incorporating drug delivery technologies. The competition
potentially includes all of the pharmaceutical companies in the
world. Many of these pharmaceutical companies have more
financial resources, technical staff and manufacturing and
marketing capabilities than we do. To the extent that we develop
or market products incorporating drugs that are off-patent, or
are being developed by multiple companies, we will face
competition from other companies developing and marketing similar
products.
Pharmaceutical companies are increasingly using advertising,
including direct-to-consumer advertising, in marketing their
products. The costs of such advertising are very high and are
increasing. It may be difficult for our company to compete with
larger companies investing greater resources in these marketing
activities.
Other pharmaceutical companies are aggressively seeking to obtain
new products by licensing products or technology from other
companies. We will be competing to license or acquire products
or technology with companies with far greater financial and other
resources.
Inability to obtain special materials could slow down our
research and development process.
Some of the critical materials and components used in our
developed products are sourced from a single supplier. An
interruption in supply of a key material could significantly
delay our research and development process.
Special materials must often be manufactured for the first time
for use in drug delivery systems, or materials may be used in the
systems in a manner different from their customary commercial
uses. The quality of materials can be critical to the
performance of a drug delivery system, so a reliable source of a
consistent supply of materials is important. Materials or
components needed for our drug delivery systems may be difficult
to obtain on commercially reasonable terms, particularly when
relatively small quantities are required, or if the materials
traditionally have not been used in pharmaceutical products.
Patents and other intellectual property protection may be
difficult to obtain or ineffective.
Patent protection generally has been important in the
pharmaceutical industry. Our existing patents may not cover
future products, additional patents may not be issued, and
current patents or patents issued in the future may not provide
meaningful protection or prove to be of commercial benefit.
In the United States, patents are granted for specified periods
of time. Some of our earlier patents have expired, or will
expire, over the next several years.
Other companies may successfully challenge our patents in the
future. Others may also challenge the validity or enforceability
of our patents in litigation. If any challenge is successful,
other companies may then be able to use the invention covered by
the patent without payment. In addition, if other companies are
able to obtain patents that cover any of our technologies or
products, we may be subject to liability for damages and our
activities could be blocked by legal action unless we can obtain
licenses to those patents.
In addition, we utilize significant unpatented proprietary
technology and rely on unpatented trade secrets and proprietary
know-how to protect certain aspects of our products and
technologies and the methods used to manufacture them. Other
companies have or may develop similar technology which will
compete with our technology.
Our royalty revenues could decline.
Our royalty revenues in future periods could vary significantly.
Major factors which could have an effect on our royalty revenues
include, but are
not limited to:
- our partners' decisions about amounts and timing of
advertising support for Retin-A Micro and Carac.
- our partners' decisions about other promotion and marketing
support for Retin-A Micro and Carac.
- the timing of approvals for new product applications both in
the United States and abroad.
- the expiration or invalidation of patents.
- decreases in licensees' sales of product due to competition,
manufacturing difficulties or other factors that affect sales of
product, including
regulatory restrictions on the advertising of pharmaceutical
products.
USE OF PROCEEDS
We will retain broad discretion over the use of the net
proceeds from the sale of our common stock offered hereby. Except
as described in any prospectus supplement, we currently
anticipate using the net proceeds from the sale of our common
stock hereby primarily for clinical trials, research and
development expenses and general and administrative expenses. The
amounts and timing of the expenditures may vary significantly
depending on numerous factors, such as the progress of our
research and development efforts, participation from potential
partnerships, technological advances and the competitive
environment for our products. We may also use a portion of the
net proceeds to acquire or invest in complementary businesses,
products and technologies. Although we have no specific
arrangements with respect to acquisitions, we evaluate
acquisition opportunities and engage in related discussions with
other companies from time to time.
Pending the use of the net proceeds, we intend to invest the
net proceeds in short-term, interest-bearing, investment-grade
securities.
DESCRIPTION OF CAPITAL STOCK
As of the date of this registration statement, we have authorized
50,000,000 shares of $0.01 par value common stock and 2,500,000
shares of $0.01 par value preferred stock.
Common Stock
- ------------
As of May 3, 2004, there were 20,744,735 shares of common stock
outstanding held of record by --- stockholders. The holders of
common stock have one vote for each share on all matters
submitted to a vote of the stockholders. Subject to preferences
that may be applicable to any outstanding preferred stock,
holders of common stock will receive ratably any dividends
declared by the board of directors out of funds legally available
for payment of dividends. In the event of a liquidation,
dissolution or winding up of the company, holders of common stock
will share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any outstanding
preferred stock. Holders of common stock have no preemptive
rights, no right to convert their common stock into any other
securities, and no right to vote cumulatively for the election of
directors. The outstanding shares of common stock are fully paid
and nonassessable.
On August 19, 1996, the board of directors adopted a stockholders
rights plan, which allows stockholders to purchase common stock
at discount in the event of a tender offer or when any person
acquires 20% or more of our outstanding common stock, subject to
some exceptions.
We have not paid cash dividends on our common stock and do not
plan to pay any such dividends in the foreseeable future. Under
lending agreements we are party to, we are restricted from
declaring or paying dividends on our common stock.
Preferred Stock
- ---------------
The board of directors may provide for the issuance of up to
2,500,000 shares of preferred stock in one or more series and fix
the rights, preferences, privileges and restrictions thereof,
including:
- dividend rights,
- conversion rights,
- voting rights,
- terms of redemption,
- liquidation preferences, and
- the number of shares constituting any series, or the
designation of such series, without any further vote or action by
the stockholders.
The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of the company
without action by the shareholders and could adversely affect the
rights and powers, including voting rights, of the holders of
common stock. In certain circumstances, the issuance of
preferred stock could depress the market price of common stock.
As of May 3, 2004, there were no shares of preferred stock
outstanding.
PLAN OF DISTRIBUTION
We may sell the common stock:
* to or through one or more underwriters or dealers;
* directly to purchasers, through agents; or
* through a combination of any of these methods of sale.
We may distribute the common stock:
* from time to time in one or more transactions at a
fixed price or prices, which may be changed from time
to time;
* at market prices prevailing at the times of sale;
* at prices related to such prevailing market prices; or
* at negotiated prices.
We will describe the method of distribution of the common
stock in the applicable prospectus supplement.
We may determine the price or other terms of the common
stock offered under this prospectus by use of an electronic
auction. We will describe how any auction will determine the
price or any other terms, how potential investors may participate
in the auction and the nature of the obligations of the
underwriter, dealer or agent in the applicable prospectus
supplement.
Underwriters, dealers or agents may receive compensation in
the form of discounts, concessions or commissions from us or our
purchasers (as their agents in connection with the sale of the
common stock). In addition, underwriters may sell common stock to
or through dealers, and those dealers may receive compensation in
the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they
act as agent. These underwriters, dealers or agents may be
considered to be underwriters under the Securities Act of 1933,
as amended. As a result, discounts, commissions, or profits on
resale received by the underwriters, dealers or agents may be
treated as underwriting discounts and commissions. Each
applicable prospectus supplement will identify any such
underwriter, dealer or agent, and describe any compensation
received by them from us. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
We may enter into agreements that provide for
indemnification against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended, or for
contribution with respect to payments made by the underwriters,
dealers or agents and to reimburse these persons for certain
expenses.
We may grant underwriters who participate in the
distribution of the common stock an option to purchase additional
shares of common stock to cover over-allotments, if any, in
connection with the distribution. Underwriters or agents and
their associates may be customers of, engage in transactions
with, or perform services for us in the ordinary course of
business.
In connection with the offering of the common stock, certain
underwriters and selling group members and their respective
affiliates, may engage in transactions that stabilize, maintain
or otherwise affect the market price of the common stock. These
transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M promulgated by the SEC
pursuant to which these persons may bid for or purchase common
stock for the purpose of stabilizing its market price.
The underwriters in an offering of the common stock may also
create a "short position" for their account by selling more
common stock in connection with the offering than they are
committed to purchase from us. In that case, the underwriters
could cover all or a portion of the short position by either
purchasing common stock in the open market or by exercising any
over-allotment option granted to them by us. In addition, any
managing underwriter may impose "penalty bids" under contractual
arrangements with other underwriters, which means that they can
reclaim from an underwriter (or any selling group member
participating in the offering) for the account of the other
underwriters, the selling concession for the common stock that is
distributed in the offering but subsequently purchased for the
account of the underwriters in the open market. Any of the
transactions described in this paragraph or comparable
transactions that are described in any accompanying prospectus
supplement may result in the maintenance of the price of the
common stock at a level above that which might otherwise prevail
in the open market. None of the transactions described in this
paragraph or in an accompanying prospectus supplement are
required to be taken by any underwriters and, if they are
undertaken, may be discontinued at any time.
LEGAL MATTERS
The validity of the shares offered hereby will be passed
upon for us by Heller Ehrman White & McAuliffe, LLP, Palo Alto,
California, counsel to the company. Julian N. Stern, the
Secretary of the company, is the owner of [179,000] shares of
common stock and is the sole stockholder and employee of a
professional corporation that is a partner of Heller Ehrman White
& McAuliffe LLP.
EXPERTS
The consolidated financial statements of A.P. Pharma, Inc.
appearing in A.P. Pharma's Annual Report (Form 10-K) for the year
ended December 31, 2003, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy
statements, and other documents with the Securities and Exchange
Commission (the "SEC"). You may read and copy any document we
file at the SEC's public reference room at Judiciary Plaza
Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. You should call 1-800-SEC-0330 for more information on the
public reference room. The SEC maintains an internet site at
http://www.sec.gov where certain information regarding issuers
(including A.P. Pharma) may be found.
This prospectus is part of a registration statement that we
filed with the SEC (Registration No. --------). The registration
statement contains more information than this prospectus
regarding A.P. Pharma and its common stock, including certain
exhibits and schedules. You can get a copy of the registration
statement from the SEC at the address listed above or from its
internet site.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate" into this prospectus
information we file with the SEC in other documents. This means
that we can disclose important information to you by referring to
other documents that contain that information. The information
may include documents filed after the date of this prospectus
which update and supersede the information you read in this
prospectus. We incorporate by reference the documents listed
below, except to the extent information in those documents is
different from the information contained in this prospectus, and
all future documents filed with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
we terminate the offering of these shares.
SEC Filing
(File No. ) Period/Filing Date
-------------- ------------------
Annual Report on Form 10-K Year ended December 31, 2003
Registration Statement on
Form 8-A describing the
common stock Filed on August 7, 1987
You may request a copy of these documents, at no cost, by writing
to:
A.P. Pharma, Inc.
123 Saginaw Drive
Redwood City, California 94063
Attention: Investor Relations
Telephone: (650) 366-2626.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses Of Issuance And Distribution.
The following table sets forth various expenses in
connection with the sale and distribution of the securities being
registered. All of the amounts shown are estimates except for the
Securities and Exchange Commission Registration Fee.
Securities and Exchange
Commission Registration Fee $ 1,900.50
Accounting Fees 10,000.00
Legal Fees and Expenses 25,000.00
Printing and Engraving Expenses 25,000.00
Miscellaneous 1,099.50
---------
TOTAL $63,000.00
=========
Item 15. Indemnification Of Officers And Directors.
The registrant has the power to indemnify its officers and
directors against liability for certain acts pursuant to Section
145 of the General Corporation Law of the State of Delaware.
Section B of Article VI of the registrant's
Certificate of Incorporation provides:
"(1) Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director or officer, of the Corporation or is or was serving at
the request of the Corporation, as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in
connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this
Section B shall be a contract right and shall include the right
to be paid by the Corporation the expenses incurred in defending
any such proceeding in advance of its final disposition;
provided, however, that, if the General Corporation Law of the
State of Delaware requires, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director
or officer is not entitled to be indemnified under this Section
or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(2) Non-Exclusivity of Rights. The right to indemnification
and the payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Section B
shall not be exclusive of any other rights which any person may
have or hereafter acquire under any statute, provisions of this
Certificate of Incorporation, Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
(3) Insurance. The Corporation may maintain insurance, at
its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such
expense, liability or loss under Delaware General Corporation
Law." Registrant maintains directors' and officers' liability
insurance in the amount of $7,000,000 which covers civil
liabilities. Such insurance helps the Registrant to attract
qualified officers and directors, by providing a means for the
Company to pay the costs and expenses involved in the event civil
litigation is brought against of one of the Registrant's officers
or directors."
Item 16. Exhibits.
EXHIBIT DESCRIPTION
1.1* -- Form of Underwriting Agreement
5.1* -- Opinion of Heller, Ehrman, White & McAuliffe
23.1* -- Consent of Heller, Ehrman, White & McAuliffe (filed as
part of Exhibit 5)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of Attorney (See Page II-4)
* To be filed by amendment or as an exhibit to a current report
on Form 8-K and incorporated herein by reference.
Item 17. Undertakings.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such
information in the Registration Statement;
Provided, however, that paragraphs (i) and (ii) shall not apply
if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
B. That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offering therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
provisions described under Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized in
Redwood City, State of California, on the 4th day of May, 2004.
A.P. PHARMA, INC.
By: /S/ Michael P.J. O'Connell
---------------------------
Michael P.J. O'Connell
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Michael P.J.
O'Connell and Gordon Sangster, or either of them, with the power
of substitution, her or his attorney in fact, to sign any
amendments to this Registration Statement (including post-
effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the
Securities and Exchange Commission, to act on and file any
supplement to any prospectus included in this registration
statement or any such amendment or any subsequent registration
statement filed pursuant to Rule 462(b) under the Securities Act,
hereby ratifying and confirming all that each of said attorney-
in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- -----------------------------------------------------------------
/S/ Michael O'Connell President and Chief May 4, 2004
- ---------------------- Executive Officer -----------
Michael P.J. O'Connell (Principal Executive
Officer)
/S/ Gordon Sangster Chief Financial Officer May 4, 2004
- ---------------------- (Principal Accounting -----------
Gordon Sangster Officer)
/S/ Paul Goddard Chairman of the Board May 4, 2004
- ---------------------- of Directors -----------
Paul Goddard
/S/ Stephen Drury Director May 4, 2004
- ---------------------- -----------
Stephen Drury
/S/ Peter Riepenhausen Director May 4, 2004
- ---------------------- -----------
Peter Riepenhausen
/S/ Toby Rosenblatt Director May 4, 2004
- ---------------------- -----------
Toby Rosenblatt
/S/ Gregory H. Turnbull Director May 4, 2004
- ---------------------- -----------
Gregory H. Turnbull
/S/ Dennis Winger Director May 4, 2004
- ---------------------- -----------
Dennis Winger
/S/ Robert Zerbe Director May 4, 2004
- ---------------------- -----------
Robert Zerbe
A.P. PHARMA, INC.
EXHIBIT INDEX
-------------
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGES
- ------- ----------- --------------
1.1* -- Form of Underwriting Agreement
5.1* -- Opinion of Heller, Ehrman, White & McAuliffe
23.1* -- Consent of Heller, Ehrman, White & McAuliffe (filed
as part of Exhibit 5)
23.2 -- Consent of Ernst & Young LLP
24 -- Power of Attorney (See Page II-4)
* To be filed by amendment or as an exhibit to a current report
on Form 8-K and incorporated herein by reference.
19
Exhibit 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement on Form S-3 and
related Prospectus of A.P. Pharma, Inc. for the
registration of common stock and to the incorporation by
reference therein of our report dated February 20, 2004,
with respect to the consolidated financial statements and
schedule of A.P. Pharma, Inc. included in its Annual Report
on Form 10-K for the year ended December 31, 2003, filed
with the Securities and Exchange Commission.
/S/ ERNST & YOUNG, LLP
- ----------------------
Palo Alto, California
April 30, 2004