AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ISIS PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 33-0336973
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2292 Faraday Avenue
Carlsbad, California 92008
(760) 931-9200
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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B. Lynne Parshall, Esq.
Executive Vice President and Chief Financial Officer
ISIS PHARMACEUTICALS, INC.
2292 Faraday Avenue
Carlsbad, California 92008
(760) 931-9200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
Julie M. Robinson, Esq. Donald J. Murray, Esq.
Cooley Godward LLP Dewey Ballantine LLP
4365 Executive Drive, Suite 1100 1301 Avenue of the Americas
San Diego, CA 92121 New York, NY 10019
(858) 550-6000 (212) 259-8000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
Common Stock, $.001 per
share.................. 5,750,000 $17.78 $102,235,000 $25,559
(1) Includes 750,000 shares of our common stock which may be purchased by the
Underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933 based upon the average
of the high and low prices of our common stock as reported on the Nasdaq
National Market on October 2, 2001.
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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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8 (A),
MAY DETERMINE.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION OCTOBER 9, 2001
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT 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 WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE IN WHICH THE OFFER OR SALE IS NOT PERMITTED.
5,000,000 SHARES
[LOGO]
COMMON STOCK
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We are selling all of the 5,000,000 shares of common stock offered by this
prospectus.
Our common stock is quoted on the Nasdaq National Market under the symbol
"ISIP." On October 8, 2001, the last reported sales price of our common stock on
the Nasdaq National Market was $18.30 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. BEFORE BUYING
ANY SHARES YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS OF INVESTING IN OUR
COMMON STOCK IN "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PER SHARE TOTAL
Public offering price..................................... $ $
Underwriting discount and commissions..................... $ $
Proceeds, before expenses, to us.......................... $ $
The underwriters may also purchase from us up to an additional 750,000
shares of our common stock at the public offering price less the underwriting
discount, to cover over-allotments, if any, within 30 days of the date of this
prospectus.
The underwriters are offering the shares of our common stock as described in
"Underwriting."
Delivery of the shares will be made on or about , 2001.
UBS WARBURG
ROBERTSON STEPHENS
NEEDHAM & COMPANY, INC.
FORTIS SECURITIES INC.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS,
INCLUDING INFORMATION INCORPORATED BY REFERENCE. WE HAVE NOT AUTHORIZED ANYONE
ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THIS PROSPECTUS OR THAT ANY DOCUMENT INCORPORATED BY REFERENCE IS
ACCURATE AS OF ANY DATE OTHER THAN ITS FILING DATE. YOU SHOULD NOT CONSIDER THIS
PROSPECTUS TO BE AN OFFER OR SOLICITATION RELATING TO THE SECURITIES IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION RELATING TO THE SECURITIES
IS NOT AUTHORIZED. FURTHERMORE, YOU SHOULD NOT CONSIDER THIS PROSPECTUS TO BE AN
OFFER OR SOLICITATION RELATING TO THE SECURITIES IF THE PERSON MAKING THE OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR IF IT IS UNLAWFUL FOR YOU TO
RECEIVE SUCH AN OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PAGE
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Prospectus summary.......................................... 1
Risk factors................................................ 5
Disclosure regarding forward-looking statements............. 11
Use of proceeds............................................. 11
Capitalization.............................................. 12
Dilution.................................................... 13
Market price of common stock................................ 14
Dividend policy............................................. 14
Selected consolidated financial data........................ 15
Underwriting................................................ 16
Where you can find more information......................... 18
Incorporation of certain documents by reference............. 18
Legal matters............................................... 19
Experts..................................................... 19
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ISIS PHARMACEUTICALS-TM-, GENETROVE-TM- AND IBIS THERAPEUTICS-TM- ARE
TRADEMARKS OF ISIS. VITRAVENE-REGISTERED TRADEMARK- IS A REGISTERED TRADEMARK OF
NOVARTIS AG. THIS PROSPECTUS ALSO CONTAINS TRADEMARKS AND SERVICEMARKS OF OTHER
COMPANIES.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU.
THIS PROSPECTUS INCLUDES INFORMATION ABOUT THE SHARES WE ARE OFFERING, AS WELL
AS INFORMATION REGARDING OUR BUSINESS AND DETAILED FINANCIAL DATA. WE ENCOURAGE
YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY, INCLUDING THE DOCUMENTS
INCORPORATED BY REFERENCE. AS USED IN THIS PROSPECTUS, UNLESS OTHERWISE
SPECIFIED OR THE CONTEXT REQUIRES OTHERWISE, THE TERMS "ISIS," "WE," "OUR" AND
"US" REFER TO ISIS PHARMACEUTICALS, INC.
BUSINESS OVERVIEW
We are a biopharmaceutical company pioneering RNA-based drug discovery
technologies to identify and commercialize novel drugs to treat significant
unmet medical needs. RNA, or ribonucleic acid, is a molecule that provides to a
cell the information needed to produce proteins, some of which are involved in
disease. Interference with RNA can keep proteins involved in disease from being
produced. We have strong proprietary positions in RNA-based drug discovery
technologies. With our primary technology, antisense, we create inhibitors
designed to bind with high specificity to their intended RNA target. With our
Ibis technology, we use our expertise in RNA to design small molecule
therapeutics that interfere with RNA. We also use our antisense technology in
collaborations with pharmaceutical company partners to identify and prioritize
attractive gene targets for their drug discovery programs. We believe we have
established a leadership position in exploiting RNA as a target for therapeutic
intervention.
We have used our antisense technology to commercialize our first product,
Vitravene. Vitravene demonstrates our ability to meet FDA regulatory
requirements and to commercially manufacture antisense drugs. We have 12
products in our development pipeline with eight in human clinical trials
designed to assess efficacy. Our products in development address numerous
therapeutic areas with major market potential, including cancer, psoriasis,
rheumatoid arthritis, hepatitis C and diabetes. We are expanding the therapeutic
opportunities for antisense drugs by developing a variety of formulations to
enhance patient compliance and convenience. We are also pursuing
second-generation drugs that may be able to be dosed as infrequently as once per
month and that may be able to be dosed orally.
ISIS 3521, our most advanced product currently under development, is
undergoing Phase III clinical trials in combination with traditional
chemotherapy cancer drugs. We initiated this Phase III trial in late 2000 for
patients with non-small cell lung cancer, the most common form of lung cancer,
based on promising results in patients in the Phase II trial. Results from this
study showed a median survival time of 15.9 months in patients using our drug in
combination with standard chemotherapy. The typical median survival time of
similar cancer patients receiving standard chemotherapy alone is approximately
seven or eight months. In November 2000, the FDA granted ISIS 3521 fast track
review status. Prior to the end of 2001, we also plan to initiate Phase III
clinical trials for another product, ISIS 2302, in an inflammatory bowel disease
known as Crohn's disease. We have five additional products undergoing Phase II
clinical trials.
Our GeneTrove division uses our antisense technology as a tool to provide
pharmaceutical companies with important information about genes that these
companies are interested in targeting for their drug discovery programs. We
provide this information rapidly and efficiently, using the same proprietary
methods and systems that we developed to create antisense drugs. We have
collaborations in place with five major pharmaceutical partners for these
services, including Eli Lilly and Company, Celera Genomics Group, Abbott
Laboratories Inc., Aventis (Rhone-Poulenc Rorer) and the R.W. Johnson
Pharmaceutical Research Institute, a member of the Johnson & Johnson family of
companies. We have supplemented our GeneTrove services business with the
introduction in August 2001 of a subscription database product in August 2001.
This database is expected to contain proprietary information about the function
of thousands of genes, which we believe pharmaceutical
1
companies will find valuable in designing and prioritizing their drug discovery
programs. Our GeneTrove division is generating near-term revenues while
enhancing our own antisense drug discovery efforts and our patent portfolio.
Our Ibis Therapeutics division designs small molecule drugs that work by
binding to RNA, in contrast to traditional drugs, which bind to proteins. Our
scientists have invented methods of identifying RNA targets and screening for
drugs which bind to RNA. Since its inception, Ibis has received significant
financial support from various federal government agencies to use its technology
for the development of RNA-based countermeasures to biological warfare. In
June 2000, Ibis initiated its first collaboration with a pharmaceutical industry
partner, Agouron Pharmaceuticals, Inc., a Pfizer company, in a research
partnership worth up to $37 million. In May 2001, we received a $2.5 million
milestone payment under this collaboration.
We have a broad patent portfolio relating to our technologies. We own or
have an exclusive license to more than 800 issued patents, which we believe
represents the largest antisense and RNA-oriented patent estate in the
pharmaceutical industry. Our intellectual property is a strategic asset of the
company. We are exploiting our patent estate to generate near-term revenues for
the company.
RECENT DEVELOPMENTS
ELI LILLY AND COMPANY. In August 2001, we entered into a broad strategic
relationship with Lilly that has four key components:
- Lilly purchased $75 million of our common stock at $18 per share.
- We licensed to Lilly rights to ISIS 3521, our antisense drug in Phase III
trials for the treatment of non-small cell lung cancer.
- We initiated with Lilly a four-year antisense drug discovery collaboration in
the areas of metabolic and inflammatory diseases and a related GeneTrove
collaboration to determine the function of up to 1,000 genes.
- Lilly committed to lend us, interest-free, up to $100 million over a four-year
period to fund our obligations under the drug discovery collaboration. This
loan is repayable at our option in either cash or our common stock, valued at
$40 per share.
If this collaboration is successful, the cumulative contingent funds over
the life of the development process have the potential to exceed these committed
funds.
MERCK & CO., INC. In May 2001, we licensed to Merck our preclinical
antisense drug candidate, ISIS 113715, for adult onset, or Type 2, diabetes.
Under the agreement, Merck has agreed to develop and commercialize ISIS 113715
in exchange for an upfront fee and milestone payments and royalties upon its
successful development and approval. In August 2001, we received a $2 million
milestone payment under this agreement.
CELERA GENOMICS GROUP. In July 2001, Celera and our GeneTrove division
entered into a collaboration to identify the biological role of more than 200
genes. Celera has the right to select for study a portfolio of genes, from which
Celera can further select a limited number of genes for their exclusive use. The
data for the remainder of the genes will be included in our human gene function
database. We retain the rights to develop and commercialize antisense drugs to
genes in the collaboration. Celera has agreed to pay us fees for this 18-month
collaboration.
2
THE OFFERING
Common Stock offered...................... 5,000,000 shares
Common Stock outstanding after the 52,087,796 shares
offering................................
Use of proceeds........................... For research, drug discovery and development activities,
including preclinical and clinical studies, production
of compounds for studies, capital expenditures, and
other general corporate purposes. See "Use of Proceeds."
Nasdaq National Market symbol............. ISIP
Unless we specifically state otherwise, the information in this prospectus
assumes that the underwriters do not exercise their option to purchase up to
750,000 shares of common stock to cover over-allotments.
The number of shares of our common stock to be outstanding after the
offering in the table above is based on the number of shares outstanding as of
September 30, 2001, and does not include, as of that date:
- 8,443,801 shares of our common stock issuable upon exercise of outstanding
options issued under our equity incentive plans at a weighted average
exercise price of $9.47 per share and an additional 2,228,952 shares of
common stock available for future grants under our equity incentive plans;
- 1,029,881 shares of our common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $25.16 per share;
- 1,562,020 shares of our common stock issuable upon conversion of our
outstanding Series A and Series B Convertible Preferred Stock and related
accreted dividends, assuming a stock price of $17.05 per share, the
closing price of our common stock on September 30, 2001;
- 3,007,182 shares of our common stock issuable upon the conversion of our
outstanding indebtedness assuming a stock price of $17.05 per share, the
closing price of our common stock on September 30, 2001; and
- shares of our common stock issuable to Hybridon, with a maximum of
2,071,429 shares and a minimum of 673,077 shares.
OTHER INFORMATION
Isis Pharmaceuticals, Inc. was incorporated in California in January 1989,
and in April 1991 we changed our state of incorporation to Delaware. Our
executive offices are located at 2292 Faraday Avenue, Carlsbad, California
92008, and our telephone number is (760) 931-9200. Information contained on our
website, www.isip.com, does not constitute part of this prospectus.
Our research and development programs have continued to evolve subsequent to
our description of those programs in documents incorporated by reference in this
prospectus. Some programs may have been deferred or abandoned, and some programs
may have been added. While these changes may be material as to any particular
program, we do not believe that, except as may be described herein or in a
document incorporated by reference, they are material to our business overall.
3
SUMMARY CONSOLIDATED FINANCIAL DATA
The as adjusted balance sheet data gives effect to the sale of 5,000,000
shares of our common stock in this offering at an assumed price of $18.30 per
share, after deducting the underwriting discount and estimated offering
expenses. The following data should be read together with the financial
statements, the related notes and other financial information included in this
prospectus and incorporated herein by reference.
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
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2000 1999 1998 1997 1996 2001 2000
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(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Total revenues...................... $37,255 $33,925 $39,171 $32,722 $22,663 $12,225 $11,039
Research and development expenses... 57,014 66,413 62,200 55,940 45,653 39,059 25,985
Net loss applicable to common
stock............................. (54,699) (59,645) (42,983) (31,066) (26,521) (46,532) (33,216)
Basic and diluted net loss per
share............................. (1.48) (2.08) (1.60) (1.17) (1.04) (1.15) (0.95)
Shares used in computing basic and
diluted net loss per share........ 37,023 28,703 26,873 26,456 25,585 40,322 35,021
AS OF JUNE 30, 2001
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ACTUAL AS ADJUSTED(1)
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(IN THOUSANDS, UNAUDITED)
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments......... $106,298 $191,998
Working capital........................................... 85,007 170,707
Total assets.............................................. 187,528 273,228
Long-term debt and capital lease obligations, less current
portion................................................. 115,666 115,666
Accumulated deficit....................................... (357,992) (357,992)
Stockholders' equity...................................... 45,928 131,628
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(1) The financial data above excludes shares issued and the proceeds received
from the sale of such shares, subsequent to June 30, 2001, including
4,523,810 shares issued to Lilly and Hybridon and $75 million in proceeds
received from Lilly.
4
RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO
THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW BEFORE PURCHASING OUR COMMON STOCK. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS COULD BE MATERIALLY HARMED, AND OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY
AFFECTED. AS A RESULT, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND
YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT.
IF WE OR OUR PARTNERS FAIL TO OBTAIN REGULATORY APPROVAL FOR OUR PRODUCTS, WE
WILL NOT BE ABLE TO SELL THEM.
We and our partners must conduct time-consuming, extensive and costly
clinical trials to show the safety and efficacy of each of our drug candidates,
before a drug candidate can be approved for sale. We must conduct these trials
in compliance with U.S. Food and Drug Administration regulations and with
comparable regulations in other countries. If the FDA or another regulatory
agency believes that we or our partners have not sufficiently demonstrated the
safety or efficacy of our drug candidates, it will not approve them or will
require additional studies which can be time consuming and expensive, and which
will delay commercialization of a drug candidate. We and our partners may not be
able to obtain necessary regulatory approvals on a timely basis, if at all, for
any of our drug candidates. Failure to receive these approvals or delays in such
receipt could prevent or delay commercial introduction of a product and, as a
result, could negatively impact our ability to generate revenue from product
sales. In addition, following approval of a drug candidate, we and our
partners must comply with comprehensive government regulations regarding how we
manufacture, market and distribute products. If we fail to comply with these
regulations, regulators could force us to withdraw a drug candidate from the
market or impose other penalties or requirements that could have a similar
negative impact.
We have only introduced one commercial product, Vitravene. We cannot
guarantee that any of our other drug candidates will be safe and effective, be
approved for commercialization or will be successfully commercialized by us or
our partners.
IF THE RESULTS OF CLINICAL TESTING INDICATE THAT ANY OF OUR DRUGS UNDER
DEVELOPMENT ARE NOT SUITABLE FOR COMMERCIAL USE, OR IF ADDITIONAL TESTING IS
REQUIRED TO DEMONSTRATE SUCH SUITABILITY, WE MAY NEED TO ABANDON ONE OR MORE OF
OUR DRUG DEVELOPMENT PROGRAMS.
Drug discovery and development has inherent risks, including the risk that
molecular targets prove not to be important in a particular disease, the risk
that compounds that demonstrate attractive activity in preclinical studies do
not demonstrate similar activity in human beings, and the risk that a compound
is not safe or effective for use in humans. Antisense technology in particular
is relatively new and unproven. Most of our resources are being applied to
create safe and effective drugs for human use; any of the risks described above
could prevent us from doing so. In the past, we have invested in clinical
studies of drug candidates, including some that remain in our pipeline, that
have not resulted in proof of efficacy against targeted indications.
IF OUR PRODUCTS ARE NOT ACCEPTED BY THE MARKET, WE ARE NOT LIKELY TO GENERATE
SIGNIFICANT REVENUES OR BECOME PROFITABLE.
Our success will depend upon the medical community, patients and third party
payors accepting our products as medically useful, cost-effective and safe. We
cannot guarantee that any of our products in development, if approved for
commercialization, will be used by doctors to treat patients. We currently have
one commercially available product, Vitravene, a treatment for CMV retinitis in
AIDS patients, which addresses a small market. We and our partners may not be
successful in commercializing additional products.
5
The degree of market acceptance for any of our products depends upon a
number of factors, including:
- the receipt and scope of regulatory approvals;
- the establishment and demonstration in the medical and patient community
of the efficacy and safety of our drug candidates and their potential
advantages over competing products;
- the cost of our drug candidates compared to other available therapies;
- the patient convenience of the dosing regimen for our drug candidates; and
- reimbursement policies of government and third-party payors.
Based on the profile of our drug candidates, physicians, patients, patient
advocates, payors or the medical community in general may not accept and use any
products that we may develop.
IF ANY OF OUR COLLABORATIVE PARTNERS FAIL TO FUND OUR COLLABORATIVE PROGRAMS OR
DEVELOP OR SELL ANY OF OUR PRODUCTS UNDER DEVELOPMENT, OR IF WE ARE UNABLE TO
OBTAIN ADDITIONAL PARTNERS, PROGRESS ON OUR DRUG DEVELOPMENT PROGRAMS COULD BE
DELAYED OR STOP.
We have entered into collaborative arrangements with third parties to
develop certain product candidates. We enter into these collaborations in order
to:
- fund our research and development activities;
- access manufacturing by third parties;
- seek and obtain regulatory approvals; and
- successfully commercialize existing and future product candidates.
If any of our partners fails to develop or sell any drug in which we have
retained a financial interest, our business may be negatively affected. We
cannot be sure that any of these collaborations will be continued or result in
commercialized drugs. Our collaborators can terminate their relationships with
us under certain circumstances, some of which are outside of our control. Our
most advanced drug candidate, ISIS 3521, is being developed collaboratively with
Lilly, with the development funded by Lilly. Additional drug candidates in our
development pipeline are being developed and/or funded by corporate partners
including Merck & Company, Inc. and Elan Corporation, plc. Failure by any of
these pharmaceutical company partners to continue to fund and/or develop these
drug candidates would have a material adverse effect on our business.
Certain of our partners are pursuing other technologies or developing other
drug candidates either on their own or in collaboration with others, including
our competitors, to develop treatments for the same diseases targeted by our own
collaborative programs. Such competition may negatively impact the partners'
focus on and commitment to our drug candidate and, as a result, could delay or
otherwise negatively affect the commercialization of such drug candidate.
Historically, corporate partnering has played a key role in our strategy to
fund our development programs and to add key development resources. We plan to
continue to rely on additional collaborative arrangements to develop and
commercialize our products. However, we may not be able to negotiate additional
attractive collaborative arrangements, and, even if negotiated, the
collaborative arrangements may not be successful.
6
IF OUR GENETROVE BUSINESS IS UNABLE TO MARKET ITS PRODUCTS AND SERVICES AS
PLANNED, WE COULD LOSE OUR INVESTMENT IN THIS TECHNOLOGY.
Our business could suffer if pharmaceutical companies do not avail
themselves of our GeneTrove target validation or gene functionalization
services. We have invested in the development of a gene target validation and
gene functionalization service business for validation and functionalization of
gene targets for drug discovery. If pharmaceutical companies fail to use these
services due to competition or other factors, our GeneTrove business could fail
to make the planned contribution to our financial performance.
If we fail to introduce our human gene function database in a timely fashion
or if potential customers do not subscribe to the database at the level we have
planned, our GeneTrove business could fail to make the planned contribution to
our financial performance.
WE HAVE INCURRED LOSSES, AND OUR BUSINESS WILL SUFFER IF WE FAIL TO ACHIEVE
PROFITABILITY IN THE FUTURE.
Because drug discovery and development and the development of database
products and research services require substantial lead time and money prior to
commercialization, our expenses have exceeded our revenues since we were founded
in January 1989. As of June 30, 2001, our accumulated losses were approximately
$358 million. Most of the losses resulted from costs incurred in connection with
our research and development programs and from general and administrative costs
associated with our operations. Most of our revenue has come from collaborative
arrangements, with additional revenue from interest income and research grants
and the sale or licensing of patents. Our current product revenues are derived
solely from sales of Vitravene. This product has limited sales potential. We
expect to incur additional operating losses over the next several years, and
these losses may increase if we cannot increase or sustain revenue. We may not
successfully develop any additional products or services, or achieve or sustain
future profitability.
IF WE FAIL TO OBTAIN TIMELY FUNDING, WE MAY NEED TO CURTAIL OR ABANDON SOME OF
OUR PROGRAMS.
Most of our product candidates are still undergoing clinical trials or are
in the early stages of research and development. All of our products under
development will require significant additional research, development,
preclinical and/or clinical testing, regulatory approval and a commitment of
significant additional resources prior to their commercialization. Based on our
current operating plan, we believe that our available cash and existing sources
of revenue and credit, together with the proceeds from this offering, will be
adequate to satisfy our capital needs for the foreseeable future. If we fail to
meet our goals regarding commercialization of our drug products, gene function
database product and research services and licensing of our proprietary
technologies, we may need additional funding in the future. Our future capital
requirements will depend on many factors, such as the following:
- the profile and launch timing of our drugs;
- continued scientific progress in our research, drug discovery and
development programs;
- the size of these programs and progress with preclinical and clinical
trials;
- the time and costs involved in obtaining regulatory approvals;
- competing technological and market developments, including the
introduction of new therapies that address our markets;
- success in the marketing of our gene function database and research
service products; and
- changes in existing collaborative relationships and our ability to
establish and maintain additional collaborative arrangements.
7
If we need additional funds we may need to raise them through public or
private financing. Additional financing may not be available, at all or on
acceptable terms. If additional funds are raised by issuing equity securities,
the shares of existing stockholders will be diluted and their price may decline.
If adequate funds are not available, we may be required to cut back on one or
more of our research, drug discovery or development programs or obtain funds
through arrangements with collaborative partners or others. These arrangements
may require us to give up rights to certain of our technologies, product
candidates or products.
IF WE CANNOT MANUFACTURE OUR PRODUCTS OR CONTRACT WITH A THIRD PARTY TO
MANUFACTURE OUR PRODUCTS AT COSTS THAT ALLOW US TO CHARGE COMPETITIVE PRICES TO
BUYERS, WE WILL NOT BE ABLE TO MARKET PRODUCTS PROFITABLY.
If we are successful commercializing any of our drug candidates, we may be
required to establish large-scale commercial manufacturing capabilities. In
addition, as our drug development pipeline increases and matures, we will have a
greater need for clinical trial and commercial manufacturing capacity.
Pharmaceutical products of the chemical class represented by our drug
candidates, called "oligonucleotides", have never been manufactured on a large
scale, and to our knowledge there is no commercial scale oligonucleotide
manufacturer in business today. We have a limited number of suppliers for
certain capital equipment and raw materials that we use to manufacture our
drugs, and some of these suppliers will need to increase their scale of
production to meet our projected needs for commercial manufacturing. Further, we
must continue to improve our manufacturing processes to allow us to reduce our
product costs. We may not be able to manufacture at a cost or in quantities
necessary to make commercially successful products.
Also, manufacturers, including us, must adhere to the FDA's current Good
Manufacturing Practices regulations, which are enforced by the FDA through its
facilities inspection program. The manufacturers may not be able to comply or
maintain compliance with Good Manufacturing Practices regulations.
Non-compliance could significantly delay our receipt or marketing approval or
result in FDA enforcement action.
IF WE FAIL TO COMPETE EFFECTIVELY, OUR PRODUCTS WILL NOT CONTRIBUTE SIGNIFICANT
REVENUES.
Our competitors are engaged in all areas of drug discovery throughout the
world, are numerous, and include, among others, major pharmaceutical companies
and specialized biopharmaceutical firms. Other companies are engaged in
developing antisense technology. Our competitors may succeed in developing drug
candidates that are more effective than any drug candidates that we are
developing. These competitive developments could make our products obsolete or
non-competitive.
Our GeneTrove division competes with others in the use of antisense
technology for gene target validation and gene functionalization, as well as
with other technologies useful for target validation and gene functionalization.
Our competition may provide services having more value to potential customers or
may market their services more effectively to such potential customers. In
either case, our gene functionalization and target validation businesses may not
contribute to our financial performance as planned.
Many of our competitors have substantially greater financial, technical and
human resources than we do. In addition, many of these competitors have
significantly greater experience than we do in conducting preclinical testing
and human clinical trials of new pharmaceutical products and in obtaining FDA
and other regulatory approvals of products for use in health care. Accordingly,
our competitors may succeed in obtaining regulatory approval for products
earlier than we do. We will also compete with respect to marketing and sales
capabilities, areas in which we have limited or no experience.
8
IF WE ARE UNABLE TO PROTECT OUR PATENTS OR OUR PROPRIETARY RIGHTS, OTHERS MAY BE
ABLE TO COMPETE MORE DIRECTLY AGAINST US.
Our success depends to a significant degree upon our ability to develop and
secure intellectual property rights to proprietary products and services.
However, patents may not be granted on any of our pending patent applications in
the United States or in other countries. In addition, the scope of any of our
issued patents may not be sufficiently broad to adequately protect our
competitive advantage. Furthermore, our issued patents or patents licensed to us
could potentially be successfully challenged, invalidated or circumvented so
that our patent rights would not create an effective competitive barrier.
INTELLECTUAL PROPERTY LITIGATION COULD BE EXPENSIVE AND PREVENT US FROM PURSUING
OUR PROGRAMS.
It is possible that in the future we may have to defend our intellectual
property rights. In the event of an intellectual property dispute, we may be
forced to litigate to defend our rights or assert them against others. Disputes
could involve litigation or proceedings declared by the US Patent and Trademark
Office or the International Trade Commission. Intellectual property litigation
can be extremely expensive, and this expense, as well as the consequences should
we not prevail, could seriously harm our business.
On July 9, 2001, we initiated litigation against Sequitur, Inc. alleging
infringement of U.S. Patent 6,001,653. If we do not prevail in the defense of
this patent, it could impact our ability to realize future licensing revenues.
If a third party claims that our products or technology infringe their
patents or other intellectual property rights, we might be forced to discontinue
an important product or product line, alter our products and processes, pay
license fees or cease certain activities. We may not be able to obtain a license
to such intellectual property on favorable terms, if at all. There are many
patents issued or applied for in the biotechnology industry, and we may not be
aware of patents or applications held by others that relate to our business.
This is especially true since patent applications in the US are filed
confidentially. Moreover, the validity and breadth of biotechnology patents
involve complex legal and factual questions for which important legal issues
remain unresolved.
IF WE DO NOT PROGRESS IN OUR PROGRAMS AS ANTICIPATED, OUR STOCK PRICE COULD
DECREASE.
For planning purposes, we estimate the timing of a variety of clinical,
regulatory and other milestones, such as when a certain product candidate will
enter the clinic, when a clinical trial will be completed or when an application
for marketing approval will be filed. Some of our estimates are included in this
prospectus. Our estimates are based on present facts and a variety of
assumptions. Many of the underlying assumptions are outside of our control. If
milestones are not achieved when we expect them to be, investors could be
disappointed and our stock price would likely decrease.
THE LOSS OF KEY PERSONNEL, OR THE INABILITY TO ATTRACT AND RETAIN HIGHLY SKILLED
PERSONNEL, COULD MAKE IT MORE DIFFICULT TO RUN OUR BUSINESS AND REDUCE OUR
LIKELIHOOD OF SUCCESS.
We are dependent on the principal members of our management and scientific
staff. We do not have employment agreements with any of our management. The loss
of our management and key scientific employees might slow the achievement of
important research and development goals. It is also critical to our success
that we recruit and retain qualified scientific personnel to perform research
and development work. We may not be able to attract and retain skilled and
experienced scientific personnel on acceptable terms, because of intense
competition for experienced scientists among many pharmaceutical and health care
companies, universities and non-profit research institutions. Our collaboration
with Lilly requires us to add a significant number of skilled scientific
personnel. Our inability to add these employees may impact the success of our
Lilly collaboration.
9
OUR STOCK PRICE MAY CONTINUE TO BE HIGHLY VOLATILE. THIS COULD MAKE IT HARDER
FOR YOU TO LIQUIDATE YOUR INVESTMENT AND COULD INCREASE YOUR RISK OF SUFFERING
A LOSS.
The market price of our common stock, like that of the securities of many
other biopharmaceutical companies, has been and is likely to continue to be
highly volatile. During the twelve months preceding September 28, 2001, the
market price of our common stock has ranged from $7.875 to $18.05 per share. The
market price can be affected by many factors, including, for example,
fluctuations in our operating results, announcements of collaborations, clinical
trial results, technological innovations or new drug products being developed by
us or our competitors, governmental regulation, regulatory approval,
developments in patent or other proprietary rights, public concern regarding the
safety of our drugs and general market conditions.
PROVISIONS IN OUR CERTIFICATE OF INCORPORATION, OTHER AGREEMENTS AND DELAWARE
LAW MAY PREVENT STOCKHOLDERS FROM RECEIVING A PREMIUM FOR THEIR SHARES.
Our certificate of incorporation provides for classified terms for the
members of our board of directors. Our certificate also includes a provision
that requires at least 66 2/3% of our voting stockholders to approve a merger or
certain other business transactions with, or proposed by, any holder of 15% or
more of our voting stock, except in cases where certain directors approve the
transaction or certain minimum price criteria and other procedural requirements
are met.
Our certificate of incorporation also requires that any action required or
permitted to be taken by our stockholders must be taken at a duly called annual
or special meeting of stockholders and may not be taken by written consent. In
addition, special meetings of our stockholders may be called only by the board
of directors, the chairman of the board or the president, or by any holder of
10% or more of our outstanding common stock. We also have implemented a
stockholders' rights plan, which is also called a "poison pill," which could
make it uneconomical for a third party to acquire our company on a hostile
basis. These provisions, as well as Delaware law and other of our agreements,
may discourage certain types of transactions in which our stockholders might
otherwise receive a premium for their shares over then current market prices,
and may limit the ability of our stockholders to approve transactions that they
think may be in their best interests. In addition, our board of directors has
the authority to fix the rights and preferences of and issue shares of preferred
stock, which may have the effect of delaying or preventing a change in control
of our company without action by our stockholders.
IF REGISTRATION RIGHTS THAT WE HAVE PREVIOUSLY GRANTED ARE EXERCISED, THEN OUR
STOCK PRICE MAY BE NEGATIVELY AFFECTED.
We have granted registration rights in connection with the issuance of our
securities to Elan International Services, Ltd., Eli Lilly and Company,
Hybridon, Inc. and Reliance Insurance Company. In the aggregate, these
registration rights cover approximately 5,732,273 shares of our common stock
which are currently outstanding, an additional $14.5 million of our common stock
we are obligated to issue to Hybridon, and additional shares of our common stock
which may become outstanding upon the conversion of outstanding convertible
securities. If these registration rights are exercised by the holders, it will
bring additional shares of our common stock into the market, which may have an
adverse effect on our stock price. In addition, Reliance has registration rights
with respect to the approximately $66 million of notes we issued to Reliance.
IF YOU PURCHASE OUR COMMON STOCK IN THIS OFFERING, YOU WILL INCUR IMMEDIATE AND
SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR SHARES.
You will experience an immediate and substantial dilution of $16.47 per
share in the net tangible book value per share of our common stock, assuming a
public offering price of $18.30 per share. After giving effect to this offering,
and to other issuances of our common stock as described in the
10
"Dilution" section of this prospectus, our pro forma adjusted net tangible book
value as of June 30, 2001, would have been $1.83 per share. In addition, this
dilution will be increased to the extent that holders of outstanding options and
warrants to purchase our common stock at prices below our net tangible book
value per share after this offering exercise those options or warrants.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
forward-looking statements regarding our business and the therapeutic and
commercial potential of our technologies and products in development. Such
statements are subject to certain risks and uncertainties, particularly those
inherent in discovering, developing and commercializing drugs that are safe and
effective for use as human therapeutics, in the process of conducting gene
functionalization and target validation activities and in launching new products
and services for or with collaborators, and the endeavor of building a business
around such potential products. Actual results could differ materially from
those discussed in this Prospectus. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in the section
entitled "Risk Factors" beginning on page 5 of this prospectus. As a result, you
are cautioned not to rely on these forward-looking statements.
USE OF PROCEEDS
The net proceeds to us from the sale of the 5,000,000 shares of common stock
we are offering will be approximately $85.7 million. If the underwriters
exercise the over-allotment option in full, the net proceeds to us will be
approximately $98.6 million. For the purpose of estimating net proceeds, we are
assuming that the public offering price will be $18.30 per share. "Net proceeds"
is what we expect to receive after we pay the underwriting discount and other
estimated expenses for this offering.
We intend to use the net proceeds of this offering for research, drug
discovery and development programs, and for other general corporate purposes.
Expenses to be funded with the offering proceeds include costs of preclinical
and clinical studies, the production of compounds for these studies and capital
expenditures. We have not identified precisely the amounts we plan to spend on
each research, drug discovery and development program or the timing of these
expenditures. However, we currently plan that a portion of the proceeds will be
used to support our planned research and development efforts. The remaining
proceeds will be used for general corporate purposes. The amounts actually
expended for each purpose may vary significantly depending upon numerous
factors, including the amount and timing of the proceeds from this offering,
progress of our research, drug discovery and development programs, the results
of preclinical and clinical studies, the timing of regulatory approvals,
technological advances, determinations as to commercial potential of our
compounds and the status of competitive products. In addition, expenditures will
also depend upon the establishment of collaborative research arrangements with
other companies, the availability of other financing and other factors.
We may use a portion of the net proceeds to acquire or invest in businesses,
products or technologies that are complementary to our own. However, we are not
currently a party to any agreement regarding a material acquisition and no
portion of the net proceeds have been allocated for any specific acquisition.
Pending any of the above uses, the net proceeds will be invested in
investment-grade, interest-bearing debt securities.
11
CAPITALIZATION
The following table sets forth our capitalization at June 30, 2001:
- on an actual basis; and
- on an as adjusted basis to give effect to the sale of the 5,000,000 shares
of common stock offered by us, assuming a public offering price of $18.30
per share and after deducting underwriting discounts and commissions and
estimated offering expenses to be paid by us:
AS
ACTUAL ADJUSTED(1)
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
Cash, cash equivalents and short term investments........... $106,298 $191,998
======== ========
Long-term debt and capital lease obligations, less current
portion................................................... $115,666 $115,666
Stockholders' equity:
Series A Convertible Exchangeable 5% Preferred stock,
$.001 par value; 120,150 shares authorized, issued and
outstanding, actual and adjusted........................ 12,015 12,015
Accretion of Series A Preferred stock dividends........... 1,376 1,376
Series B Convertible Exchangeable 5% Preferred stock,
$.001 par value; 16,620 shares authorized, 12,015 shares
issued and outstanding, actual and adjusted............. 12,015 12,015
Accretion of Series B Preferred stock dividends........... 899 899
Common stock, $.001 par value; 100,000,000 shares
authorized, 42,247,956 shares issued and outstanding,
actual; and 47,247,956 shares issued and outstanding, as
adjusted................................................ 42 47
Additional paid-in capital................................ 377,333 463,028
Deferred compensation..................................... (329) (329)
Accumulated other comprehensive income.................... 569 569
Accumulated deficit....................................... (357,992) (357,992)
-------- --------
Total stockholders' equity.............................. 45,928 131,628
-------- --------
Total capitalization.................................... $161,594 $247,294
======== ========
(1) The financial data above excludes shares issued and proceeds received from
the sale of such shares, subsequent to June 30, 2001, including 4,523,810
shares issued to Lilly and Hybridon and $75 million in proceeds received
from Lilly.
The table should be read in conjunction with our consolidated financial
statements and the related notes appearing elsewhere in this prospectus.
12
DILUTION
Our net tangible book value as of June 30, 2001 was $978,000 or
approximately $0.02 per share of common stock. Net tangible book value per share
represents the amount of our tangible assets less total liabilities, divided by
42,247,956 shares of common stock.
Net tangible book value dilution per share represents the difference between
the amount per share paid by purchasers of shares of common stock in this
offering and the pro forma adjusted net tangible book value per share of common
stock immediately after completion of this offering. After giving effect to the
sale of 5,000,000 shares of common stock in this offering at an assumed public
offering price of $18.30 per share and the receipt of the estimated net proceeds
therefrom (after deducting estimated offering expenses), our pro forma adjusted
net tangible book value as of June 30, 2001 would have been $86,678,000, or
$1.83 per share, an immediate increase of $1.81 per share over the net tangible
book value to existing stockholders and an immediate dilution of $16.47 per
share to the adjusted net tangible book value to purchasers of common stock in
this offering, as illustrated in the following table:
Assumed public offering price per share..................... $18.30
Net tangible book value per share at June 30, 2001.......... $0.02
Increase per share attributable to new investors in this
offering.................................................. 1.81
-----
Pro forma adjusted net tangible book value per share after
offering.................................................. 1.83
------
Net tangible book value dilution per share to new investors
in this offering.......................................... $16.47
======
To the extent that outstanding options and warrants are exercised, or our
outstanding convertible preferred stock or convertible debt is converted, there
could be further dilution to new investors.
13
MARKET PRICE OF COMMON STOCK
Our common stock is traded publicly through the Nasdaq National Market under
the symbol "ISIP." The following table presents quarterly information on the
price range of our common stock. This information indicates the high and low
sale prices reported by the Nasdaq National Market. These prices do not include
retail markups, markdowns or commissions.
COMMON STOCK
PRICE
-------------------
HIGH LOW
-------- --------
FISCAL YEAR ENDED DECEMBER 31, 1999
First Quarter............................................. $15.25 $ 8.94
Second Quarter............................................ $12.19 $ 9.25
Third Quarter............................................. $13.81 $ 9.16
Fourth Quarter............................................ $17.38 $ 3.88
FISCAL YEAR ENDED DECEMBER 31, 2000
First Quarter............................................. $39.00 $ 5.75
Second Quarter............................................ $16.25 $ 8.06
Third Quarter............................................. $15.75 $10.50
Fourth Quarter............................................ $14.75 $ 8.81
FISCAL YEAR ENDED DECEMBER 31, 2001
First Quarter............................................. $13.00 $ 7.97
Second Quarter............................................ $13.17 $ 7.88
Third Quarter............................................. $18.05 $ 9.75
Fourth Quarter (through October 8, 2001).................. $18.95 $16.70
On October 8, 2001, the last reported sale price for our common stock was
$18.30 per share, and there were approximately 1,054 stockholders of record of
our common stock.
DIVIDEND POLICY
We have not paid any dividends and do not anticipate paying cash dividends
in the foreseeable future. We currently intend to retain all available funds and
any future earnings for use in the operation of our business. Under the terms of
certain of our term loans, we are restricted from paying cash dividends until
the loans are fully repaid.
14
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the five years ended
December 31, 2000 are derived from the audited consolidated financial statements
of ISIS Pharmaceuticals, Inc. The financial data for the six-month periods ended
June 30, 2001 and 2000 are derived from unaudited consolidated financial
statements. The unaudited financial statements include all adjustments,
consisting of normal recurring accruals, which the Company considers necessary
for a fair presentation of the financial position and the results of operations
for these periods. Operating results for the six months ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 2001. The data should be read in conjunction with the
consolidated financial statements, the related notes, and other financial
information incorporated by reference herein.
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
2000 1999 1998 1997 1996 2001 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Total revenues....................... $37,255 $33,925 $39,171 $32,722 $22,663 $ 12,225 $11,039
Research and development expenses.... 57,014 66,413 62,200 55,940 45,653 39,059 25,985
Net loss applicable to common
stock.............................. (54,699) (59,645) (42,983) (31,066) (26,521) (46,532) (33,216)
Basic and diluted net loss per
share.............................. (1.48) (2.08) (1.60) (1.17) (1.04) (1.15) (0.95)
Shares used in computing basic and
diluted net loss per share......... 37,023 28,703 26,873 26,456 25,585 40,322 35,021
AS OF
AS OF DECEMBER 31, JUNE 30,
-------------------------------------------------------- -----------
2000 1999 1998 1997 1996 2001
-------- --------- --------- --------- --------- -----------
(IN THOUSANDS) (UNAUDITED)
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments............ $127,262 $ 52,839 $ 58,848 $ 86,786 $ 77,624 $ 106,298
Working capital..................... 118,568 44,213 40,651 62,573 56,300 85,007
Total assets........................ 183,256 103,107 96,074 117,881 101,305 187,528
Long-term debt and capital lease
obligations, less current
portion........................... 102,254 87,254 77,724 56,452 19,864 115,666
Accumulated deficit................. (311,460) (256,761) (197,116) (154,133) (123,067) (357,992)
Stockholders' equity (deficit)...... 66,366 869 (4,186) 34,852 58,385 45,928
15
UNDERWRITING
We and the underwriters for this offering named below have entered into an
underwriting agreement concerning the shares being offered. Subject to
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. UBS Warburg LLC, Robertson
Stephens, Inc., Needham & Company, Inc. and Fortis Securities Inc. are the
representatives of the underwriters.
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
UBS Warburg LLC.............................................
Robertson Stephens, Inc.....................................
Needham & Company, Inc......................................
Fortis Securities Inc.......................................
---------
Total....................................................... 5,000,000
=========
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have a 30-day option to buy up to 750,000 shares
from us at the public offering price less the underwriting discounts and
commissions to cover these sales. If any shares are purchased under this option,
the underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us:
NO EXERCISE FULL EXERCISE
----------- -------------
Per share............................................. $ $
Total........................................... $ $
We estimate that the total expenses of this offering payable by us,
excluding underwriting discounts and commissions, will be about $310,000.
Shares sold by the underwriters to the public will initially be offered at
the public offering price set forth on the cover of this prospectus. Any shares
sold by the underwriters to securities dealers may be sold at a discount of up
to $ per share from the public offering price. Any of these securities
dealers may resell any shares purchased from the underwriters to other brokers
or dealers at a discount of up to $ per share from the public offering
price. If all the shares are not sold at the public offering price, the
representatives may change the offering price and the other selling terms.
We and each of our directors and executive officers have agreed with the
underwriters not to offer, sell, contract to sell, hedge or otherwise dispose
of, directly or indirectly, any of our common stock or securities convertible
into or exchangeable for shares of common stock during the period from the date
of this prospectus continuing through the date 90 days after the date of this
prospectus without the prior written consent of UBS Warburg LLC.
In connection with this offering, the underwriters may purchase and sell
shares of our common stock in the open market. These transactions may include
stabilizing transactions, short sales and purchases to cover positions created
by short sales. Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market price of our
common stock while this offering is in progress. Short sales involve the sale by
the underwriters of a greater number of shares than they are required to
purchase in this offering. Short sales may be either "covered short sales" or
"naked short sales." Covered short sales are sales made in an amount not greater
than the underwriters' over-allotment option to purchase additional shares in
this offering. The underwriters may close out any covered short position by
either exercising their over-allotment option or purchasing
16
shares in the open market. In determining the source of shares to close out the
covered short position, the underwriters will consider, among other things, the
price of shares available for purchase in the open market as compared to the
price at which they may purchase shares through the over-allotment option. Naked
short sales are sales in excess of the over-allotment option. The underwriters
must close out any naked short position by purchasing shares in the open market.
A naked short position is more likely to be created if the underwriters are
concerned there may be downward pressure on the price of shares in the open
market after pricing that could adversely affect investors who purchase in this
offering.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of our common stock. As a result, the price of our
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market or otherwise.
In addition, in connection this offering certain of the underwriters (and
selling group members) may engage in passive market making transactions in the
common stock on the Nasdaq National Market prior to the pricing and completion
of the offering. Passive market making consists of displaying bids on the Nasdaq
National Market no higher than the bid prices of independent market makers and
making purchases at prices no higher than these independent bids and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the common stock during a specified period and must be
discontinued when such limit is reached. Passive market making may cause the
price of the common stock to be higher than the price that otherwise would exist
in the open market in the absence of such transactions. If passive market making
is commenced, it may be discontinued at any time.
We have agreed to indemnify the several underwriters against some
liabilities, including liabilities under the Securities Act of 1933, and to
contribute to payments that the underwriters may be required to make in respect
thereof.
An affiliate of Fortis Securities, Inc. has in the past provided financial
advisory services to us. For these services we have paid them customary
compensation. In the ordinary course of their respective businesses, the
underwriters and certain of their affiliates may in the future engage in
investment and commercial banking or other transactions with us, including the
provision of certain advisory services and making loans to us.
17
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission. Certain information in the
registration statement has been omitted from this prospectus in accordance with
the rules of the SEC. We are a public company and file proxy statements and
annual, quarterly and special reports and other information with the SEC. You
can inspect and copy the registration statement as well as the reports, proxy
statements and other information we have filed with the SEC at the public
reference room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC Regional Offices located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You can call the SEC
at 1-800-732-0330 for further information about the public reference rooms. We
are also required to file electronic versions of these documents with the SEC,
which may be accessed from the SEC's World Wide Web site at http://www.sec.gov.
Reports, proxy and information statements and other information concerning Isis
may be inspected at The Nasdaq Stock Market at 1735 K Street, N.W., Washington,
D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in those documents is considered part of this prospectus. Information
that we file with the SEC after the effective date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, until all the shares of
common stock that are part of this offering are sold.
The following documents filed with the SEC are incorporated by reference in
this prospectus:
1. Our Annual Report on Form 10-K/A for the year ended December 31, 2000.
2. Our Quarterly Report on Form 10-Q for the period ended March 31, 2001
and our Quarterly Report on Form 10-Q, as amended on August 15, 2001, for
the period ended June 30, 2001.
3. Our Current Report on Form 8-K, filed with the SEC on August 29, 2001.
4. Our Current Report on Form 8-K/A, filed with the SEC on October 5, 2001.
5. The description of our common stock in our Registration Statement on
Form 8-A filed with the SEC on April 12, 1991, as updated by our
Certificate of Amendment of our Restated Certificate of Incorporation
filed with our Quarterly Report on Form 10-Q for the period ended
June 30, 2001.
All documents that we file with the SEC pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this prospectus and before the
termination of the offering of the common stock offered in this prospectus shall
be deemed incorporated by reference into this prospectus and to be a part of
this prospectus from the respective dates of filing such documents.
We will furnish without charge to you, on written or oral request, a copy of
any or all of the documents incorporated by reference, other than exhibits to
those documents. You should direct any requests for documents to Vice President
of Finance at Isis' principal executive offices at 2292 Faraday Avenue,
Carlsbad, California 92008, telephone number (760) 931-9200.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed modified,
superseded or replaced for purposes of this prospectus to the extent that a
statement contained in this prospectus or in any subsequently filed document
that also is or is deemed to be incorporated by reference in this prospectus
modifies, supersedes or replaces such
18
statement. Any statement so modified, superseded or replaced shall not be
deemed, except as so modified, superseded or replaced, to constitute a part of
this prospectus.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Cooley Godward LLP, San Diego, California. Dewey
Ballantine LLP, New York, New York, is counsel for the underwriters in
connection with the offering.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K, as amended on
April 2, 2001, for the year ended December 31, 2000, as set forth in their
report, which is incorporated by reference in this prospectus and elsewhere in
the registration statement. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
19
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by us in connection with
the sale of the 5,750,000 shares of common stock being registered. All the
amounts shown are estimates except for the registration fee.
SEC registration fee........................................ $ 25,559
NASD filing fee............................................. 10,724
Blue Sky fees and expenses.................................. 7,500
Printing and engraving expenses............................. 100,000
Legal fees and expenses..................................... 85,000
Accounting fees and expenses................................ 30,000
Miscellaneous............................................... 51,217
--------
Total................................................. $310,000
========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933.
The Registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its directors and officers to
the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify it present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interest of the corporation, and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
These provisions do not eliminate the directors' duty of care, and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available under Delaware Law. In addition,
each director will continue to be subject to liability for breach of the
directors' duty of loyalty to the Registrant, for acts or omissions not in good
faith or involving intentional misconduct, for knowing violations of law, for
acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the directors' duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper
distributions to stockholders and loans to directors and officers. The provision
also does not affect a director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
II-1
The Registrant has entered into indemnity agreements with each of its
directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such persons reasonably
believed to be in or not opposed to the best interests of the Registrant and,
with respect to any criminal proceeding, has no reasonable cause to believe his
conduct was unlawful. The indemnification agreements also set forth certain
procedures that will apply in the event of a claim for indemnification
thereunder.
At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought, nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
*1.1 Form of Underwriting Agreement.
4.1 Amended and Restated Certificate of Incorporation filed June
19, 1991.(1)
4.2 Certificate of Amendment to Restated Certificate of
Incorporation filed April 9, 2001. (7)
4.3 Bylaws.(7)
4.4 Certificate of Designation of the Series A Convertible
Preferred Stock.(2)
4.5 Certificate of Designation of the Series B Convertible
Preferred Stock.(6)
4.6 Certificate of Designation of the Series C Junior
Participating Preferred Stock.(8)
4.7 Specimen Common Stock Certificate.(1)
4.8 Specimen Series A Preferred Stock Certificate.(9)
4.9 Specimen Series B Preferred Stock Certificate.(9)
4.10 Form of Right Certificate.(8)
4.11 Purchase Agreement between the Registrant and Reliance
Insurance Company for 14% Senior Subordinated Discount Notes
due November 1, 2007 and Warrants for Common Stock dated
October 24, 1997 (with certain confidential information
deleted).(3)
4.12 First Supplement to Purchase Agreement between the
Registrant and Reliance Insurance Company for 14% Senior
Subordinated Discount Notes due November 1, 2007 and
Warrants for Common Stock dated May 1, 1998 (with certain
confidential information deleted).(4)
4.15 Stock Purchase Agreement between the Registrant and
Boehringer Ingelheim International GmbH, dated as of July
18, 1995 (with certain confidential information
deleted).(10)
4.16 Subscription, Joint Development and Operating Agreement,
dated April 20, 1999 among the Registrant, Elan Corporation,
plc, Elan International Services, Ltd. and Orasense Ltd.
(with certain confidential information deleted), together
with the related Securities Purchase Agreement, Convertible
Promissory Note, Warrant to Purchase Shares of Common Stock,
Registration Rights Agreement and License Agreements. (5)
4.17 Agreement dated August 31, 1999 between Boehringer Ingelheim
International GmbH and the Registrant, together with the
related Amendment to the Stock Purchase Agreement. (11)
II-2
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
4.18 Subscription, Joint Development and Operating Agreement
dated January 14, 2000 among the Registrant, Elan
Corporation, plc, Elan International Services, Ltd. and
HepaSense, Ltd. (with certain confidential information
deleted), together with the related Securities Purchase
Agreement, Convertible Promissory Note, Warrant to Purchase
Shares of Common Stock, Registration Rights Agreement and
License Agreements.(6)
4.19 Securities Purchase Agreement, dated August 17, 2001,
between the Registrant and Eli Lilly and Company. (12)
4.20 Registration Rights and Standstill Agreement, dated August
17, 2001, between the Registrant and Eli Lilly and
Company.(12)
4.21 Loan Agreement, dated August 17, 2001, between the
Registrant and Eli Lilly and Company.(12)
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1.
24.1 Power of Attorney. Reference is made to page II-5
------------------------
* To be filed by amendment.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-39640) or amendments thereto and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form S-3
(No. 333-71911) or amendments thereto and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997, and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 and incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's report on Form 8-K dated April 20,
1999 and incorporated herein by reference.
(6) Filed as an exhibit to the Registrant's report on Form 8-K dated
January 28, 2000, as amended on October 5, 2001, and incorporated herein by
reference.
(7) Filed as an exhibit to the Registrant's report on Form 10-Q for the quarter
ended June 30, 2001 and incorporated herein by reference.
(8) Filed as an exhibit to the Registrant's Report on Form 8-K dated
December 8, 2000 and incorporated herein by reference.
(9) Filed as an exhibit to the Registrant's Report on Form 10-Q/A for the
quarter ended June 30, 2000 and incorporated herein by reference.
(10) Filed as an exhibit to the Registrant's Report on Form 8-K dated July 18,
1995 and incorporated herein by reference.
(11) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 31, 1999 and incorporated herein by reference.
(12) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 29, 2001 and incorporated herein by reference.
II-3
ITEM 17. UNDERTAKINGS
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 in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against pubic 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 by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes: (1) to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the
prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the Registration Statement; provided however, that clauses
(i) and (ii) do not apply if the information required to be included in a
post-effective amendment by these clauses 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, 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; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) of Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant undertakes that: (1) for purpose of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of the registration statement in reliance upon
Rule 430A and contained in the 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 the registration statement as of the time it was declared
effective; (2) for the purpose of determining any liability under the Securities
act of 1933, 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; and (3) 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 offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the city of Carlsbad, County of San Diego, State of California,
on the 8th day of October, 2001.
ISIS PHARMACEUTICALS, INC.
By: /s/ B. LYNNE PARSHALL
-----------------------------------------
B. Lynne Parshall
EXECUTIVE VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, DIRECTOR (PRINCIPAL
FINANCIAL AND ACCOUNTING OFFICER)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints STANLEY T. CROOKE and B. LYNNE PARSHALL, and each
of them, as his or her true and lawful attorney-in-fact and agents, with full
power of substitution and resubstitution, for the undersigned and in his or her
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) to this Registration Statement and to sign
any Registration Statement that is to be effective on filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, and all post-effective
amendments thereto, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange commission,
granting unto said attorneys-in-fact and agents, and each of them, full power of
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, each acting alone, or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated and on the dates indicated.
NAME TITLE DATE
---- ----- ----
Chairman of the Board and
/s/ STANLEY T. CROOKE Chief Executive Officer
------------------------------------------- (Principal executive October 8, 2001
Stanley T. Crooke, M.D., Ph.D. officer)
Executive Vice President
/s/ B. LYNNE PARSHALL and Chief Financial
------------------------------------------- Officer (Principal October 8, 2001
B. Lynne Parshall financial and accounting
officer), Director
II-5
NAME TITLE DATE
---- ----- ----
/s/ CHRISTOPHER F.O. GABRIELI
------------------------------------------- Director October 8, 2001
Christopher F.O. Gabrieli
/s/ WILLIAM R. MILLER
------------------------------------------- Director October 8, 2001
William R. Miller
/s/ FREDERICK T. MUTO
------------------------------------------- Director October 8, 2001
Frederick T. Muto
/s/ MARK B. SKALETSKY
------------------------------------------- Director October 8, 2001
Mark B. Skaletsky
/s/ JOSEPH H. WENDER
------------------------------------------- Director October 8, 2001
Joseph H. Wender
II-6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
*1.1 Form of Underwriting Agreement.
4.1 Amended and Restated Certificate of Incorporation filed
June 19, 1991.(1)
4.2 Certificate of Amendment to Restated Certificate of
Incorporation filed April 9, 2001.(7)
4.3 Bylaws.(7)
4.4 Certificate of Designation of the Series A Convertible
Preferred Stock.(2)
4.5 Certificate of Designation of the Series B Convertible
Preferred Stock.(6)
4.6 Certificate of Designation of the Series C Junior
Participating Preferred Stock.(8)
4.7 Specimen Common Stock Certificate.(1)
4.8 Specimen Series A Preferred Stock Certificate.(9)
4.9 Specimen Series B Preferred Stock Certificate.(9)
4.10 Form of Right Certificate.(8)
4.11 Purchase Agreement between the Registrant and Reliance
Insurance Company for 14% Senior Subordinated Discount Notes
due November 1, 2007 and Warrants for Common Stock dated
October 24, 1997 (with certain confidential information
deleted).(3)
4.12 First Supplement to Purchase Agreement between the
Registrant and Reliance Insurance Company for 14% Senior
Subordinated Discount Notes due November 1, 2007 and
Warrants for Common Stock dated May 1, 1998 (with certain
confidential information deleted).(4)
4.15 Stock Purchase Agreement between the Registrant and
Boehringer Ingelheim International GmbH, dated as of
July 18, 1995 (with certain confidential information
deleted).(10)
4.16 Subscription, Joint Development and Operating Agreement,
dated April 20, 1999 among the Registrant, Elan Corporation,
plc, Elan International Services, Ltd. and Orasense Ltd.
(with certain confidential information deleted), together
with the related Securities Purchase Agreement, Convertible
Promissory Note, Warrant to Purchase Shares of Common Stock,
Registration Rights Agreement and License Agreements.(5)
4.17 Agreement dated August 31, 1999 between Boehringer Ingelheim
International GmbH and the Registrant, together with the
related Amendment to the Stock Purchase Agreement.(11)
4.18 Subscription, Joint Development and Operating Agreement
dated January 14, 2000 among the Registrant, Elan
Corporation, plc, Elan International Services, Ltd. and
HepaSense, Ltd. (with certain confidential information
deleted), together with the related Securities Purchase
Agreement, Convertible Promissory Note, Warrant to Purchase
Shares of Common Stock, Registration Rights Agreement and
License Agreements.(6)
4.19 Securities Purchase Agreement, dated August 17, 2001,
between the Registrant and Eli Lilly and Company.(12)
4.20 Registration Rights and Standstill Agreement, dated
August 17, 2001, between the Registrant and Eli Lilly and
Company.(12)
4.21 Loan Agreement, dated August 17, 2001, between the
Registrant and Eli Lilly and Company.(12)
5.1 Opinion of Cooley Godward LLP.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to
Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page II-5
------------------------
* To be filed by amendment.
(1) Filed as an exhibit to the Registrant's Registration Statement on Form S-1
(No. 333-39640) or amendments thereto and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's Registration Statement on Form S-3
(No. 333-71911) or amendments thereto and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997, and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 and incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's report on Form 8-K dated April 20,
1999 and incorporated herein by reference.
(6) Filed as an exhibit to the Registrant's report on Form 8-K dated
January 28, 2000, as amended on October 5, 2001, and incorporated herein by
reference.
(7) Filed as an exhibit to the Registrant's report on Form 10-Q for the quarter
ended June 30, 2001 and incorporated herein by reference.
(8) Filed as an exhibit to the Registrant's Report on Form 8-K dated
December 8, 2000 and incorporated herein by reference.
(9) Filed as an exhibit to the Registrant's Report on Form 10-Q/A for the
quarter ended June 30, 2000 and incorporated herein by reference.
(10) Filed as an exhibit to the Registrant's Report on Form 8-K dated July 18,
1995 and incorporated herein by reference.
(11) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 31, 1999 and incorporated herein by reference.
(12) Filed as an exhibit to the Registrant's Report on Form 8-K dated
August 29, 2001 and incorporated herein by reference.
EXHIBIT 5.1
[Cooley Godward Logo] ATTORNEYS AT LAW Broomfield, CO
4401 Eastgate Mall 720 566-4000
San Diego, CA Denver, CO
92121-1909 303 606-4800
Main 858 550-6000 Kirkland, WA
Fax 858 425 893-7700
550-6420 Menlo Park, CA
650 843-5100
October 9, 2001 Palo Alto, CA
650 843-5000
Reston, VA
www.cooley.com 703 456-8000
San Francisco, CA
ISIS PHARMACEUTICALS, INC. 415 693-2000
2292 Faraday Avenue
Carlsbad, CA 92008
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by ISIS PHARMACEUTICALS, INC., a Delaware corporation (the
"Company") of a Registration Statement on Form S-3 (the "Registration
Statement") with the Securities and Exchange Commission, covering an
underwritten public offering of up to 5,750,000 shares of Common Stock (the
"Shares"), including 750,000 shares subject to the Underwriters' over-allotment
option.
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Certificate of
Incorporation and Bylaws, as amended, and the originals or copies certified to
our satisfaction of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when issued and sold in accordance with the Registration
Statement and related Prospectus, will be validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
Cooley Godward LLP
By: ____/s/ Julie M. Robinson____
Julie M. Robinson
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Isis
Pharmaceuticals, Inc. for the registration of 5,750,000 shares of its common
stock and to the incorporation by reference therein of our report dated
February 2, 2001, with respect to the consolidated financial statements of Isis
Pharmaceuticals, Inc. included in its Annual Report (Form 10-K, as amended on
April 2, 2001) for the year ended December 31, 2000, to be filed with the
Securities and Exchange Commission on or about October 9, 2001.
/s/ Ernst & Young LLP_________________
ERNST & YOUNG LLP
San Diego, California
October 8, 2001
