As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-74464
$200,000,000
REGENERON PHARMACEUTICALS, INC.
5 1/2% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2008
AND SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
On October 17, 2001, we issued and sold $200,000,000 aggregate principal
amount of our 5 1/2% Convertible Senior Subordinated Notes due 2008 in a private
placement. This prospectus will be used by selling securityholders to resell the
notes and register and sell the common stock issuable upon conversion of the
notes.
The notes are convertible, at the option of the holder, at any time on or
prior to maturity into shares of our common stock at a conversion price of
approximately $30.25 per share, which is equal to a conversion rate of 33.0565
shares per $1,000 principal amount of notes, subject to adjustment.
We will pay interest on the notes on April 17 and October 17 of each year,
beginning April 17, 2002. The notes will mature on October 17, 2008.
We may provisionally redeem some or all of the notes at any time before
October 17, 2004 at prices set forth in this prospectus under "Description of
Notes -- Provisional Redemption by Regeneron." We may also optionally redeem
some or all of the notes at any time on or after October 17, 2004, at prices set
forth in this prospectus under "Description of Notes -- Optional Redemption by
Regeneron."
The notes are unsecured (except to the extent described in this prospectus)
and subordinated to our existing and future senior indebtedness. The notes will
rank equally with our existing and future senior subordinated indebtedness.
We have pledged a portfolio of U.S. government securities as security for
the notes, in an amount sufficient to pay the first six scheduled interest
payments on the notes.
Our common stock is quoted on the Nasdaq National Market under the symbol
"REGN." On January 18, 2002, the closing bid price of our common stock as
reported on the Nasdaq National Market was $27.43 per share.
INVESTING IN THE NOTES INVOLVES RISKS THAT ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
If the selling securityholders use any broker-dealers, any commission paid
to broker-dealers and, if broker-dealers purchase any notes or shares of common
stock as principals, any profits received by such broker-dealers on the resale
of the notes or shares of common stock may be deemed to be underwriting
discounts or commissions under the Securities Act.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is January 24, 2002.
TABLE OF CONTENTS
PAGE
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Summary..................................................... 1
Risk Factors................................................ 5
Ratio of Earnings to Fixed Charges.......................... 14
Use of Proceeds............................................. 14
Dividend Policy............................................. 14
Description of the Notes.................................... 15
Description of Capital Stock................................ 30
Selling Securityholders..................................... 32
Plan of Distribution........................................ 34
Legal Matters............................................... 36
Experts..................................................... 36
------------------------
In this prospectus, "Regeneron," "our company," "we," "us," "the issuer,"
"the registrant," and "our" refer to Regeneron Pharmaceuticals, Inc., references
to our "common stock" shall include the rights attached to such common stock in
accordance with our shareholder rights plan and references to our "common
shares" shall mean, collectively, our shares of common stock and Class A stock.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), under which we
file periodic reports, proxy statements and other information with the SEC.
Copies of the reports, proxy statements and other information may be examined
without charge at the Public Reference Section of the SEC, 450 Fifth Street,
N.W. Room 1024, Washington, D.C. 20549, and the SEC's regional office located at
233 Broadway, New York, NY 10279 or 500 West Madison Street, Suite 1400,
Chicago, IL 60600 or on the Internet at http://www.sec.gov. Copies of all or a
portion of such materials can be obtained from the Public Reference Section of
the SEC upon payment of prescribed fees. Please call the SEC at 800-SEC-0330 for
further information about the Public Reference Room.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and all future filings we make with the
SEC after the date of the initial registration statement and prior to
effectiveness of the registration statement and any filings thereafter and prior
to the termination of this offering with the SEC under Section 13(a), 13(c), 14,
or 15(d) of the Securities Exchange Act of 1934:
(1) our definitive Proxy Statements filed on April 30, 2001 and November
21, 2001;
(2) our Annual Report on Form 10-K for the year ended December 31, 2000;
(3) our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2001, June 30, 2001 and September 30, 2001;
(4) our Current Reports on Form 8-K filed on October 12, 2001; and
(5) the description of our common stock contained in Item 1 of our
Registration Statement on Form 8-A filed on February 20, 1991, as
amended by a Form 8 filed on March 27, 1991.
i
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Regeneron Pharmaceuticals, Inc.
777 Old Saw Mill River Road
Tarrytown, New York 10591-6707
(917) 347-7000
Attention: Murray A. Goldberg
Chief Financial Officer
Exhibits to the filings will not be sent, however, unless those exhibits
have specifically been incorporated by reference in this document.
ii
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference herein include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events. These
forward-looking statements include, among other things, statements relating to:
- our anticipated business strategies;
- our anticipated clinical trials;
- our intention to introduce new product candidates;
- our relationships with collaborators;
- anticipated trends in our businesses;
- future capital expenditures; and
- our ability to conduct clinical trials and obtain regulatory approval.
The forward-looking statements included in this prospectus or in the
documents incorporated by reference herein are subject to risks, uncertainties
and assumptions about us. Our actual results of operations may differ materially
from the forward-looking statements as a result of, among other things, the
success or failure of our clinical trials, the speed at which our clinical
trials progress, the success of our competitors in developing products equal or
superior to ours, the success of our collaborative relationships and the other
reasons described under "Risk Factors." We undertake no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by law. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed
in this prospectus might not occur.
For these statements, we claim the protection of the safe harbor for
forward-looking statements contained in Section 21E of the Exchange Act.
iii
SUMMARY
The following summary highlights information contained in other parts of
this prospectus or incorporated by reference in this prospectus. You should read
this summary together with the more detailed information elsewhere in this
prospectus and in our financial statements and accompanying notes and other
information incorporated by reference in this prospectus.
REGENERON PHARMACEUTICALS, INC.
We are a biopharmaceutical company that discovers, develops and intends to
commercialize therapeutic drugs for the treatment of serious medical conditions.
Our product pipeline includes product candidates for the treatment of obesity,
rheumatoid arthritis and other inflammatory conditions, cancer and related
disorders, allergies, asthma, and other diseases and disorders. Since inception,
we have not generated sales or any profits from the commercialization of any of
our product candidates.
Our core business strategy is to combine our strong foundation in science
and technology with state-of-the-art manufacturing and clinical development
capabilities to build a successful, integrated
biopharmaceutical company. Our efforts have yielded a diverse and growing
pipeline of product candidates that have the potential to address a variety of
unmet medical needs. Our ability to develop product candidates results from the
application of our technology platforms. In contrast to basic genomics
approaches which attempt to identify every gene in a cell or genome, our
technology platforms are designed to discover specific genes of therapeutic
interest for a particular disease or cell type. We will continue to invest in
the development of enabling technologies to assist in our efforts to identify,
develop, and commercialize new product candidates.
------------------------
We are a New York corporation organized on January 8, 1988. Our executive
offices are at 777 Old Saw Mill River Road, Tarrytown, New York 10591-6707 and
our telephone number is (914) 347-7000.
1
THE OFFERING
The following is a brief summary of the terms of the notes. For a more
complete description of the notes, see "Description of the Notes" in this
prospectus.
Issuer........................ Regeneron Pharmaceuticals, Inc.
Notes offered................. $200,000,000 aggregate principal amount of
5 1/2% Convertible Senior Subordinated Notes
due 2008.
Maturity...................... October 17, 2008.
Interest...................... 5 1/2% per annum on the principal amount,
payable semi-annually on April 17 and October
17 of each year, beginning April 17, 2002.
Conversion rights............. The notes are convertible at the option of the
holder at any time on or prior to maturity into
shares of our common stock at a conversion
price of approximately $30.25 per share, which
is equal to a conversion rate of 33.0565 shares
per $1,000 principal amount of notes. The
conversion price is subject to adjustment.
Security...................... We have purchased and pledged to the trustee
under the indenture, as security for the notes
and for the exclusive benefit of the holders of
the notes, $31.6 million of U.S. government
securities, which will be sufficient upon
receipt of scheduled principal and interest
payments thereon, to provide for the payment in
full of the first six scheduled interest
payments on the notes when due. The notes will
not otherwise be secured.
Provisional Redemption........ We may redeem the notes, in whole or in part,
at any time before October 17, 2004 at a
redemption price equal to $1,000 per $1,000
principal amount of notes to be redeemed, plus
accrued and unpaid interest, if any, to the
date of the provisional redemption if (i) the
closing price of our common stock has exceeded
150% of the conversion price then in effect for
at least 20 trading days within a period of 30
consecutive trading days ending on the trading
day before the date on which we mail the
provisional redemption notice and (ii) during
the period that we are obligated under the
registration rights agreement to keep this
shelf registration statement effective, such
shelf registration statement covering resales
of the notes and the common stock issuable upon
conversion of the notes is effective and
available for use as of, and including, the
date on which we mail the provisional
redemption notice through and including the
provisional redemption date.
Upon any provisional redemption, we will make
an additional "make-whole" payment in cash with
respect to the notes called for redemption in
an amount equal to $165 per $1,000 principal
amount of notes, less the amount of any
interest actually paid on the notes before the
provisional redemption date. We will be
obligated to make this additional payment on
all notes called for provisional redemption,
including any notes converted after the
provisional redemption notice date and before
the provisional redemption date.
2
Optional redemption........... We may redeem all or a portion of the notes on
or after October 17, 2004 at $1,000 per $1,000
principal amount of the notes, plus accrued and
unpaid interest, if any, if the closing price
of our common stock has exceeded 140% of the
conversion price then in effect for at least 20
trading days within a period of 30 consecutive
trading days ending on the trading day before
the date on which we mail the optional
redemption notice.
Repurchase Upon Change of
Control....................... Holders of the notes may require us to
repurchase all or part of the holder's notes at
100% of their principal amount, plus accrued
and unpaid interest, if any, in certain
circumstances involving a change of control.
The repurchase price is payable:
- in cash; or
- at our option, subject to the satisfaction of
certain conditions, in shares of our common
stock. The number of shares of common stock
will equal the repurchase price divided by
95% of the average closing sales prices of
our common stock for the five-trading-day
period ending on the third business day prior
to the repurchase date.
Ranking....................... The notes are our unsecured (except to the
extent described under "Description of the
Notes -- Security") senior subordinated
obligations. They rank junior in right of
payment to all of our existing and future
Senior Indebtedness (as defined herein), and
rank equally with all of our existing and
future senior subordinated indebtedness. We had
approximately $21.8 million of Senior
Indebtedness outstanding as of December 31,
2001.
Form and denomination......... The notes were issued in fully registered form.
The notes are represented by one or more global
notes, deposited with the trustee as a
custodian for the Depository Trust Company
("DTC") and registered in the name of Cede &
Co., DTC's nominee. Beneficial interests in the
global notes are shown on, and any transfers
are effected only through, records maintained
by DTC and its participants.
Use of proceeds............... We will not receive any of the proceeds from
the sale by any selling securityholder of the
notes or shares of common stock offered under
this prospectus.
Trading....................... The notes sold to qualified institutional
buyers are eligible for trading in the PORTAL
market; however, the notes resold pursuant to
this prospectus will no longer trade on the
PORTAL market. We do not intend to list the
notes on any national securities exchange or
the Nasdaq National Market.
Nasdaq symbol for our common
stock......................... Our common stock is quoted on the Nasdaq
National Market under the symbol "REGN."
Common Shares................. As of December 31, 2001, there were 41,264,280
shares of common stock and 2,562,689 shares of
Class A stock issued and outstanding, our Class
A stock together with our common stock
3
are our common shares. Holders of our Class A
stock are entitled to ten votes per share and
the holders of our common stock are entitled to
one vote per share. The outstanding shares of
Class A stock represented approximately 38.3%
of the combined voting power of our outstanding
common shares, on that date. The holders of our
Class A stock and the holders of our common
stock have identical rights, except with
respect to voting and conversion rights and
restrictions on transferability.
Risk Factors.................. See "Risk Factors" and other information in
this prospectus for a discussion of factors you
should carefully consider before deciding to
invest in the notes.
4
RISK FACTORS
You should carefully consider the following risk factors together with the
other information contained in or incorporated into this prospectus before you
decide to buy our notes. If any of these risks actually occurs, our business,
financial condition, operating results or cash flows could be materially
adversely affected. This could cause the trading price of the notes or our
common stock to decline and you may lose part or all of your investment.
RISKS RELATED TO OUR BUSINESS, INDUSTRY AND STRATEGY
Our research and development programs may be unsuccessful and may not lead to
the development of any commercially successful products.
Only a small minority of all research and development programs ultimately
result in commercially successful drugs. We are attempting to develop drugs for
human therapeutic uses. In order to begin the development process, we need to
identify potential product candidates. Although we currently have several
product candidates, our research and development activities may not successfully
identify new product candidates. Our ability to commercialize the product
candidates we do identify depends on completing clinical trials which
demonstrate their safety and efficacy to the satisfaction of the United States
Food and Drug Administration (FDA) and applicable foreign regulatory
authorities. Clinical trials are a multi-step process as the product candidate
is tested in larger populations, and a product candidate could fail at any step.
Each stage of clinical development is more costly than the prior stage and we
may expend substantial resources on a product candidate and then determine it
cannot be successfully commercialized. For example, following a review of the
clinical trial data, we and Amgen discontinued the development of Brain-Derived
Neurotrophic Factor (BDNF) for the treatment of amyotrophic lateral sclerosis in
January 2001.
We may never obtain regulatory approval for any of our product candidates.
Even if the safety and efficacy of our product candidates are demonstrated in
clinical trials and the necessary regulatory approvals are obtained, the
commercial success of any of our product candidates will depend on our ability
to successfully develop, manufacture, and market our product candidates and upon
their acceptance by patients, the medical community, and third-party payors. If
our products are not successfully commercialized, we will not be able to recover
the significant investment we have made in developing such products and our
business would be severely harmed.
We may be required to suspend, repeat, or terminate our clinical trials, which
could have a material adverse effect on our business.
In order to obtain regulatory approval for the commercialization of our
product candidates, we will be required to complete extensive clinical trials in
humans to demonstrate safety and efficacy of the product candidates. We have
limited experience in conducting clinical trials. A clinical trial may be
suspended or terminated by us or the FDA, or otherwise fail, for a number of
reasons, including:
- the product candidate may cause unforeseen adverse sides effects,
including immune reactions;
- the time required to determine whether the product candidate is effective
may be longer than expected;
- the product candidate may not appear to be more effective than current
available therapies;
- the failure to enroll a sufficient number of patients meeting eligibility
requirements;
- the clinical investigators, trial monitors, or trial subjects may fail to
comply with the trial plan or protocol; or
- the failure to be able to supply sufficient quantities of the product
candidate to complete the trial.
5
Success in preclinical and early clinical trials may not be predictive of
the results in large-scale trials. Any failure or substantial delay in
successfully completing clinical trials and obtaining regulatory approval for
our product candidates could severely harm our business.
We may not be successful in our attempt to broaden our product pipeline as it
will require expertise and resources we do not currently have.
We have expanded from our initial focus on degenerative neurologic diseases
and broadened our product pipeline to include drug candidates for the treatment
of other diseases. As our scientific efforts lead us in new directions into
conditions or diseases outside of our areas of experience and expertise, we will
require additional internal expertise or external collaborations in areas in
which we currently do not have substantial resources and personnel. As we
develop drug candidates independently, we will require additional resources that
may be difficult to obtain. If we have to enter into collaboration arrangements
with others, we may be required to relinquish rights to some of our
technologies, product candidates, or products that we would otherwise pursue
independently. We may not be able to acquire the necessary expertise internally
or be able to enter into collaboration arrangements on acceptable terms to
develop additional drug candidates.
We have never generated sales or profits and expect to incur losses over the
next several years.
We have not received revenue from the commercialization of our product
candidates. We do not expect to receive any revenue from the commercialization
of our product candidates for at least the next several years. We intend to
continue to invest significantly in our product candidates. We have incurred
losses in each year since inception of operations in 1988. As of September 30,
2001, we had an accumulated deficit of $271.3 million. We may never have an
approved or commercially successful product or achieve significant revenues or
profitable operations. If we fail to gain approval from the FDA to commercialize
a product candidate, we may not be able to earn sufficient revenue to continue
as a going concern.
We currently receive revenue from third parties; if we do not receive these
revenues, we may need to find alternative sources of funding for our research
and development activities.
To date, we have received revenues from (1) our licensees and collaborators
for research and development efforts, (2) Merck & Co. Inc. and Sumitomo
Pharmaceuticals Co., Ltd. for contract manufacturing, and (3) investment income.
We may not continue to receive these revenues or the amount of these revenues
may be dramatically reduced. In the absence of these revenues, we will have to
obtain other sources of funding to continue to conduct our research and
development activities.
For example, in January 2001, Amgen-Regeneron Partners discontinued all
clinical development of BDNF, which is licensed to Sumitomo Pharmaceuticals for
development in Japan. As a result, we do not expect to receive further payments
from Sumitomo Pharmaceuticals in connection with the licensing of BDNF. We
recognized revenue from Sumitomo Pharmaceuticals of $0.2 million in the nine
months ended September 30, 2001, $7.6 million in 2000, $0.1 million in 1999, and
$8.8 million in 1998.
We may require additional financing, which may be difficult to obtain and may
dilute the ownership interest of shareholders.
We have had negative cash flow from operations in each year since our
inception. We expect that the funding requirements for our activities will
remain substantial and could increase significantly if our development or
clinical trial programs are successful or our research is expanded. For example,
the costs of conducting our Phase III clinical program for AXOKINE, if
successful, would likely exceed $75 million or more.
We anticipate that the net proceeds from our sale on October 17, 2001 of
$200 million aggregate principal amount of our 5 1/2% Convertible Senior
Subordinated Notes due 2008, together with our cash, cash equivalents, and
marketable securities of $268.0 million as of September 30, 2001, will be
6
sufficient for our working capital needs until 2003. However, we may need
additional funding sooner due to a number of factors, including:
- the speed with which some of our earlier stage developmental products
move into later stage clinical development;
- the identification of additional product candidates;
- the identification of new indications for a potential product in later
stage clinical trials;
- the termination of any of our collaboration agreements;
- the acquisition of technologies or product candidates;
- the pursuit of new business opportunities;
- the cost of developing a marketing or sales force; and
- the cost of developing or defending our patents, patent applications, and
other intellectual property rights.
We have no established banking arrangements through which we can obtain
short-term financing or a line of credit. We may seek additional funding through
collaborative arrangements and public or private financing. Additional financing
may not be available to us on acceptable terms or at all. If we are unable to
obtain additional funding when needed, we may have to delay or scale back some
of our programs or grant to third parties rights to development or other product
rights. If we raise additional funds by issuing equity securities or
equity-related securities, further dilution to our then existing shareholders
may result.
Undesirable and unintended side effects of AXOKINE may terminate, interrupt or
delay clinical studies and could ultimately prevent or limit its commercial
use.
Various side-effects have been reported during the clinical trials of
AXOKINE, our only product candidate that has completed Phase II trials. During
the Phase I study that was conducted in 1999, incidents of nausea, vomiting, and
recurrence of herpes simplex virus, or HSV, were reported by patients taking
AXOKINE. Recurrence of HSV was also reported in previous clinical studies of
CNTF, AXOKINE's parent molecule. In addition, in the Phase I study, one patient
who was HSV positive prior to treatment and had been previously diagnosed with
Bell's palsy, had a recurrence of Bell's palsy approximately two weeks after the
patient's last administration of AXOKINE. In the recently completed Phase II
study of AXOKINE, reported side effects included injection site reactions,
nausea, cough, and vomiting.
Although AXOKINE was generally well tolerated in the recently completed
Phase II trial, it is possible that as we test AXOKINE in a large and extended
Phase III trial, these side effects, as well as side effects that did not occur
or went undetected in smaller clinical trials, will become apparent.
We face substantial competition which may result in others discovering,
developing or commercializing products before or more successfully than we do.
There is substantial competition in the biotechnology and pharmaceutical
industries from pharmaceutical, biotechnology, and chemical companies. Our
competition includes Hoffmann-La Roche, Inc., Merck, Abbott Laboratories, Inc.,
Immunex Corporation, Amgen Inc. and others. Each have products under development
or currently available for sale that address the same or similar medical
conditions as some of our product candidates. Many of our competitors have
substantially greater research, preclinical, and clinical product development
and manufacturing capabilities, and financial, marketing and human resources
than we do. Our smaller competitors may also obtain a significant competitive
advantage if they acquire or discover patentable inventions, form collaborative
arrangements, or merge with large pharmaceutical companies. Even if we achieve
product commercialization, one or more of our competitors may achieve product
commercialization earlier than we do or obtain patent protection that can
exclude us from the market or adversely affect our activities. Our ability to
compete will depend on how fast we can develop
7
safe and effective product candidates, obtain patent protection, complete
clinical testing, obtain regulatory approval to commercialize our product
candidates, and supply commercial quantities of the product to the market.
If a competitor announces a successful clinical study involving a product
that may be competitive with one of our product candidates or an approval by a
regulatory agency to market a competing product, such announcement may have a
material adverse effect on our operations, or future prospects, the price of our
common stock and the notes.
We also compete with academic institutions, governmental agencies, and
other public or private research organizations, which conduct research, seek
patent protection and establish collaborative arrangements for the development
and marketing of products that would provide royalties for use of their
technology. These institutions are becoming more active in seeking patent
protection and licensing arrangements to collect royalties for use of the
technology that they have developed. Products developed in this manner may
compete directly with products we develop. We also compete with others in
acquiring technology from such institutions, agencies, and organizations.
Collaborative efforts with our academic and corporate partners may fail or be
terminated, resulting in significant delays and substantial increases in our
costs for research, development, and commercialization of some of our product
candidates.
We are party to various arrangements with academic and corporate partners
and others. Our collaborators may also be our competitors, such as Amgen. The
successful development of product candidates covered by these arrangements
depends upon these outside parties fully performing their contractual
responsibilities. If any of our collaborators breaches, or terminates its
agreement with us or otherwise fails to conduct its collaborative activities in
a timely manner consistent with the applicable contractual terms, the
development or commercialization of the product candidate or research program
under such collaborative arrangement may be delayed. If that is the case, we may
be required to undertake unforeseen additional responsibilities or to devote
unforeseen additional funds or other resources to such development or
commercialization, or such development or commercialization could be terminated.
For example, our collaboration agreement with Procter & Gamble has an
"opt-out" provision whereby a party may decline to participate further in a
research or product development program. In such cases, the opting-out party
will generally not have any further funding obligation and will not have any
rights to the product or program in question (but may be entitled to a royalty
on any product sales). If Procter & Gamble were to opt out of a product
development program, and we were not to find a new partner, we would bear the
full cost of the program which may be substantial. In addition, disagreements
between collaborators and us could lead to delays in the collaborative research,
development, or commercialization of certain products or could require or result
in formal legal process or arbitration for resolution. These consequences could
be time-consuming and expensive and could have material adverse effects on us.
We may seek additional collaborative arrangements to develop and
commercialize our products in the future. We may not be able to negotiate
collaborative arrangements on favorable terms and these collaborative
arrangements may not be successful. In addition, our collaborative partners may
pursue alternative technologies or develop alternative compounds independently
or in collaboration with others as a means of developing treatments for the
diseases targeted by their collaborative programs with us.
If we cannot successfully manufacture our product candidates in an efficient
manner, our ability to conduct clinical trials and commercialize our product
candidates would be impaired.
Our ability to conduct timely preclinical and clinical research and
development programs, obtain regulatory approval, commercialize our product
candidates and fulfill our contract manufacturing obligations to others will
depend, in part, upon our ability to manufacture our products, either directly
or through third parties, in accordance with FDA and other regulatory
requirements.
8
We may not be able to manufacture products successfully or in a
cost-effective manner at our facilities. We may also have difficulties obtaining
the raw materials and supplies necessary to manufacture our product candidates
or the products we manufacture for others. If we are unable to use our own
manufacturing facilities or to contract with a third-party to manufacture our
products on acceptable terms, we may not be able to conduct certain future
preclinical and clinical testing or to supply commercial quantities of our
product candidates. Our dependence upon third parties for the manufacture of
some of our products and related therapies may adversely affect our profit
margins and our ability to develop and deliver products on a timely and
competitive basis. For example, we are aware of only one supplier of the reagent
necessary to produce a pegylated formulation of AXOKINE, which is substantially
longer acting than unmodified AXOKINE in preclinical studies. Any problems with
the supply of reagent from this vendor could result in the delay or interruption
in the development of any pegylated form of AXOKINE.
In addition, if our manufacturing facilities fail to comply with FDA and
other regulatory requirements, we will be required to suspend manufacturing.
This will have a material adverse effect on our financial condition, results of
operations, and cash flow.
Since we have no sales and marketing experience or infrastructure, we may have
to engage third parties to market our products or develop this experience and
infrastructure internally which would be time consuming and expensive.
We have no internal sales, marketing, and distribution experience or
infrastructure and may have to rely significantly on arrangements with third
parties in order to perform these functions. If we choose to depend on third
parties for the marketing and sale of our products, the cost of using such third
parties may adversely affect our profit margins. If we decide to perform sales,
marketing, and distribution functions ourselves we would face a number of
additional risks, including:
- we may not be able to attract and build a significant marketing or sales
force;
- the significant cost of establishing a marketing or sales force may not
be justifiable in light of any product revenues; and
- our direct sales and marketing efforts may not be successful.
We may not be able to attract or retain qualified scientific and management
personnel, including our key personnel, on acceptable terms.
We may not be able to retain our key personnel, in particular (1) our
Chairman, P. Roy Vagelos, M.D., (2) our President and Chief Executive Officer,
Leonard S. Schleifer, M.D., Ph.D., and (3) our Chief Scientific Officer, George
D. Yancopoulos, M.D., Ph.D., on terms that are acceptable to us. In addition,
our anticipated growth and expansion into new areas requiring additional
expertise will place increased demands on our resources and require additional
management personnel and the development of additional expertise by existing
management personnel. Attracting and retaining qualified personnel is critical
to our success. Many of our competitors are established pharmaceutical and
biotechnology companies that may have greater success in recruiting skilled
scientific workers from the limited pool of available talent. The failure to
attract and retain management and scientific personnel could have a material
adverse effect on our research and development work and on the operation of our
business.
We could be exposed to significant liability claims and our insurance coverage
may not be adequate to cover these claims.
The testing, manufacturing, and marketing of human pharmaceutical products
entails significant inherent risks. Their use in clinical trials and their sale
may expose us to substantial liability claims. These claims might be made
directly by patients, consumers, pharmaceutical companies, or others selling the
products. We are insured by product liability insurance policies, the purpose of
which is to cover certain claims that could arise during the clinical trials of
our product candidates. We may not be able to
9
maintain or renew the insurance we have or obtain additional coverage. If our
insurance coverage is insufficient, a significant product liability claim or
recall would have a material adverse effect on us.
If we were required to register as an investment company we would become
subject to substantial regulation and our business adversely affected.
The Investment Company Act of 1940, as amended (the "1940 Act"), requires
the registration of, and imposes various substantive restrictions on, certain
companies that engage primarily, or propose to engage primarily, in the business
of investing, reinvesting or trading in securities, or fail certain statistical
tests regarding the composition of assets and sources of income and are not
primarily engaged in businesses other than investing, holding, owning, or
trading securities. We presently satisfy these statistical tests and intend to
remain primarily engaged in businesses other than investing, reinvesting,
owning, holding, or trading securities. In addition, we are relying on an SEC
position that biotechnology companies such as our company are not investment
companies required to register under the 1940 Act. We expect to continue to be
able to avoid registration requirements of the 1940 Act. If we were required to
register as an investment company under the 1940 Act, we would become subject to
substantial regulations with respect to our capital structure, management,
operations, transactions with affiliates described in the 1940 Act and other
matters. Application of the provisions of the 1940 Act would have a material
adverse effect on our business.
RISKS RELATED TO INTELLECTUAL PROPERTY
We may not be able to obtain and adequately protect our intellectual property
rights or avoid infringing the rights of others.
Our success depends to a large part upon our own, our licensors' and our
collaborators' ability to obtain and defend patent rights and other intellectual
property rights that are important to the commercialization of our product
candidates. We or our licensors or collaborators have filed patent applications
on products and processes relating to AXOKINE, Cytokine Traps, VEGF Trap,
Angiopoietins, and NT-3, as well as other technologies and inventions in the
United States and in certain foreign countries. Although we have obtained a
number of U.S. patents, patent applications owned or licensed by us may not
result in patents being issued. Moreover, these patents may not afford us
protection against competitors with similar technology or products.
Parts of our technology, techniques, and product candidates may conflict
with patents owned by or granted to others. Any patent holders could sue us for
damages and seek to prevent us from selling or developing our product
candidates.
In September 2000, Immunex Corporation filed a request with the European
Patent Office seeking the declaration of an Opposition regarding the scope of
our European patent relating to Cytokine Traps. This is a legal challenge to the
validity and scope of our patent. Although we plan to defend the patent
diligently, the scope of the patent may be adversely affected following the
outcome of the Opposition.
Uncertainties resulting from the litigation and continuation of patent
litigation or other proceedings could have a material adverse effect on our
ability to compete in the marketplace. Any patent litigation or other proceeding
even if resolved in our favor, absorbs significant financial resources and
management time. Some of our competitors may be able to sustain these costs more
effectively than we can because of their substantially greater financial and
managerial resources. If a patent litigation or other intellectual property
proceeding is resolved unfavorably to us, we may be enjoined from manufacturing
or selling our products and services without a license from the other party and
be held liable for significant damages. We may not be able to obtain any
required license on commercially acceptable terms, if at all.
10
If we are not able to keep our trade secrets confidential, our technology and
information may be used by others to compete against us.
In addition to our reliance on patents, we attempt to protect our
proprietary products and processes by relying on trade secret laws,
nondisclosure and confidentiality agreements, and exclusive licensing
arrangements with our employees and certain other persons who have access to our
proprietary products or processes or have licensing or research arrangements
exclusive to us. These agreements or arrangements may not provide meaningful
protection for our proprietary products and processes in the event of
unauthorized use or disclosure of such information. Others may independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to our trade secrets or technology which will adversely
affect our competitive position.
If we breach any of the agreements under which we license technology from
others, we could lose license rights that are important to our business.
We are a party to technology licenses that are important to our business
and expect to enter into additional licenses in the future. These licenses
impose commercialization, sublicensing, royalty, insurance and other obligations
on us. If we fail to comply with these requirements, our licensors may have the
right to terminate our licenses which would have a negative impact on our
business.
RISKS RELATING TO OUR COMMON STOCK
Our stock price could be volatile.
Since the notes are convertible into shares of our common stock,
fluctuations in the trading price of our common stock may affect the price of
the notes. There has been a history of significant volatility in the market
price of shares of biotechnology companies, including our shares, and it is
likely that the market price of our common stock will continue to be highly
volatile. The following factors may have a significant effect on the market
price of our common stock:
- fluctuations in our operating results;
- clinical trial results;
- announcements of technological innovations or new commercial therapeutic
products introduced by us or our competitors;
- governmental regulation;
- regulatory delays;
- litigation;
- developments in patent or other proprietary rights;
- public concern as to the safety or other implications of the drugs sought
to be developed by us or the genetic engineering involved in their
production; and
- general market conditions.
Any clinical trial results that are below the expectations of financial
analysts or investors would most likely cause our stock price to drop
dramatically.
Our existing shareholders may be able to exert significant influence over
matters requiring shareholder approval.
Holders of Class A stock, who are the shareholders who purchased their
stock from us before our initial public offering, are entitled to ten votes per
share and holders of common stock are entitled to one vote per share. As of
December 31, 2001, holders of Class A stock held 5.8% of the total of our
outstanding shares of common stock and Class A stock, or collectively, our
common shares, and had
11
38.3% of the combined voting power of the common shares. These shareholders, if
acting together, will be in position to significantly influence the election of
our directors and to effect or prevent certain corporate transactions that
require majority or supermajority approval of the combined classes, including
mergers and other business combinations. This may result in the company taking
corporate actions that you may not consider to be in your best interest and may
affect the price of our common stock. As of December 31, 2001:
- our current officers and directors held 8.8% of our outstanding common
shares and 36.8% of the combined voting power of our common shares; and
- our five largest shareholders held 48.6% of our outstanding common shares
and 32.2% of the combined voting power of our common shares, in each
case, assuming conversion of notes held by them.
We have anti-takeover defenses that could delay or prevent an acquisition and
could adversely affect the price of our common stock.
New York corporate law and our amended and restated certificate of
incorporation and by-laws contain provisions that could have the effect of
delaying or preventing a change in control of our company or our management that
shareholders may consider favorable or beneficial. These provisions could
discourage proxy contests and make it more difficult for you and other
shareholders to elect directors and take other corporate actions. These
provisions could also limit the price that investors might be willing to pay in
the future for shares of our common stock. These provisions include:
- authorization to issue "blank check" preferred stock, which is preferred
stock that can be created and issued by the board of directors without
prior shareholder approval, with rights senior to our common
stockholders; and
- a staggered board of directors, so that it would take three successive
annual meetings to replace all of our directors.
In addition, we have a shareholders rights plan which will make it more
difficult for a third party to acquire us without the support of our board of
directors and principal shareholders.
A significant number of our shares are eligible for resale. This could reduce
our share price and impair our ability to raise funds in new share offerings.
As of December 31, 2001, our five largest shareholders held 48.6% of our
outstanding common shares, assuming conversion of notes held by them. Any of
these shareholders acting individually could cause a significant number of
shares of our common stock to be sold in the public market which could cause our
stock price to decline.
As of December 31, 2001, we had 43,826,969 common shares outstanding. In
addition, we had 9,328,039 outstanding stock options held by our directors,
officers and employees as of December 31, 2001. Sales of substantial amounts of
shares of our common stock into the public market after this offering, or the
perception that those sales may occur, could cause the market price of our
common stock to decline. Those sales also might make it more difficult for us to
sell equity and equity-related securities in the future at a time and at a price
that we consider appropriate.
RISKS RELATED TO THE NOTES
The notes are subordinated to any existing and future Senior Indebtedness.
The notes are contractually subordinated in right of payment to our
existing and future Senior Indebtedness (as the term is defined in the
indenture). This means that the payment of the principal and interest on the
notes is subordinated to the prior payment in full of all of our existing and
future Senior Indebtedness. However, payment from the money or the proceeds from
the U.S. government securities pledged to the trustee as security for the
exclusive benefit of the holders of the notes, as described under "Description
of the Notes -- Security" or amounts deposited with the trustee to pay and
discharge all
12
outstanding notes, as described under "Description of the Notes -- Satisfaction
and Discharge," will not be subordinated to any Senior Indebtedness or subject
to the subordination restrictions described in this offering memorandum. As of
December 31, 2001, we had approximately $21.8 million of Senior Indebtedness.
Our Senior Indebtedness ranks prior in right of payment to the notes.
The indenture does not limit the creation of additional indebtedness. Any
significant additional indebtedness incurred may adversely affect our ability to
service our debt, including the notes. Due to the subordination provisions, in
the event of our insolvency, funds which we would otherwise use to pay the
holders of the notes will be used to pay the holders of Senior Indebtedness to
the extent necessary to pay the Senior Indebtedness in full. As a result of
these payments, our general creditors may recover more, ratably, than the
holders of the notes. In addition, the holders of Senior Indebtedness may
restrict or prohibit us from making payments on the notes.
We may not be able to repurchase the notes, if required.
In some circumstances involving a Change of Control (as defined below), the
holders of the notes may require us to repurchase some or all of the notes. We
may not have sufficient financial resources at such time, or the ability to
arrange financing to pay the repurchase price of the notes. Our ability to
repurchase the notes in such event may be limited by law, the indenture, by the
terms of other agreements relating to our Senior Indebtedness and as such
indebtedness and agreements may be entered into, replaced, supplemented or
amended from time to time. We may be required to refinance our Senior
Indebtedness in order to make such payments.
Our outstanding indebtedness will increase substantially with the issuance of
the notes and we may not be able to pay our debt and other obligations.
As of December 31, 2001, we had approximately $200.6 million in long-term
debt which includes $200 million incurred in connection with the sale of the
notes. This increased indebtedness will:
- make it more difficult for us to obtain any necessary financing in the
future for working capital, capital expenditures, debt service
requirements or other purposes;
- significantly increase our interest expense and related debt service
costs; and
- make us more vulnerable in the event of a downturn in our business.
Currently, we do not have any product sales and we are not generating
sufficient cash flow to satisfy the annual debt service payments that will be
required as a result of the consummation of the sale of the notes. This may
require us to use a portion of the proceeds from the sale of the notes to pay
interest or borrow additional funds or sell additional equity to meet our debt
service obligations after the first three years when the notes are no longer
secured. If we are unable to satisfy our debt service requirements, we will
default on the notes.
An active trading market for the notes may not develop.
The notes are a new issue of securities for which there is currently no
trading market. Although the notes that were sold to qualified institutional
buyers pursuant to Rule 144 A are eligible for trading in the PORTAL market, the
notes resold pursuant to this prospectus will no longer trade on the PORTAL
market. As a result, there may be a limited market for the notes. Accordingly,
we cannot predict whether an active trading market for the notes will develop or
be sustained. If an active trading market for the notes fails to develop or be
sustained, the notes could trade at prices that may be lower than the initial
offering price of the notes. Whether or not the notes will trade at lower prices
depends on many factors, including:
- prevailing interest rates and the markets for similar securities;
- the market price of our common stock;
- general economic conditions; and
- our financial condition, financial performance and future prospects.
13
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the fiscal years indicated are
stated below. For purposes of computing the ratios, earnings represent income
(loss) from continuing operations before fixed charges and taxes, and fixed
charges represent gross interest expense and a portion of rental expense, which
is deemed to be representative of the interest factor.
FISCAL
YEAR RATIO
------ -----
2000 *
1999 *
1998 *
1997 *
1996 *
For the nine months ended September 30, 2001, the ratio of earnings to
fixed charges was *.
* Due to the registrant's losses in the years ended December 31, 2000,
1999, 1998, 1997 and 1996 and the nine-months ended September 30, 2001, the
ratio coverage was less than 1:1. The registrant must generate additional
earnings of $17.1 million, $18.9 million, $6.1 million, $8.2 million, $18.2
million and $46.7 million for the years ended December 31, 2000, 1999, 1998,
1997 and 1996 and for the nine-months ended September 30, 2001, respectively, to
achieve a coverage of 1:1.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by any selling
securityholder of the notes or shares of common stock offered under this
prospectus.
DIVIDEND POLICY
We have never paid cash dividends and do not anticipate paying any in the
foreseeable future.
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DESCRIPTION OF THE NOTES
The notes were issued under an indenture between us and American Stock
Transfer & Trust Company, as trustee, to be dated October 17, 2001. The terms of
the notes include those provided in the indenture and those provided in the
pledge agreement and the registration rights agreement, which we entered into
with the initial purchasers. As used in this description, the words "we," "us,"
"our" or "Regeneron" do not include any current or future subsidiary of
Regeneron Pharmaceuticals, Inc.
The following description of provisions of the notes is not complete and is
subject to, and qualified in its entirety by reference to, the notes, the
indenture, the pledge agreement and the registration rights agreement.
GENERAL
The notes represent general unsecured (except to the extent described under
"-- Security") obligations of Regeneron and will rank junior in right of payment
to all of our existing and future senior debt. This means that the payment of
the principal, premium, if any, and interest on the notes is subordinated to the
prior payment in full of all of our existing and future Senior Indebtedness (as
defined below). However, payment from the money or the proceeds from the U.S.
government securities pledged to the trustee as security for the notes and for
the exclusive benefit of the holders of the notes, as described under
"-- Security" or amounts deposited with the trustee to pay and discharge all
outstanding notes, as described under "-- Satisfaction and Discharge," will not
be subordinated to any Senior Indebtedness or subject to the subordination
restrictions described in this prospectus. The notes will rank equally with all
our existing and future senior subordinated indebtedness. The notes will be
convertible into shares of our common stock as described under "-- Conversion
Rights." The notes are limited to $200 million aggregate principal amount, and
will mature on October 17, 2008, unless earlier redeemed by us or repurchased by
us at the option of the holder upon the occurrence of a Change of Control (as
defined below).
The notes bear interest from October 17, 2001 at the rate of 5 1/2% per
year. Interest is payable semi-annually on April 17 and October 17 of each year
to holders of record at the close of business on the immediately preceding April
2 and October 2, respectively, beginning April 17, 2002. We may pay interest on
notes represented by certificated notes by check mailed to such holders.
However, a holder of notes with an aggregate principal amount in excess of $10
million may elect to be paid by wire transfer in immediately available funds.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
Principal will be payable, and the notes may be presented for conversion,
registration of transfer and exchange, without service charge, at our office or
agency in New York City, which shall initially be the office or agency of the
trustee in New York, New York.
The indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of our securities or the incurrence
of Senior Indebtedness or any other indebtedness. The indenture also does not
contain any covenants or other provisions that afford protection to holders of
notes in the event of a highly leveraged transaction or a change of control of
Regeneron except to the extent described under "-- Repurchase at Option of
Holders Upon a Change of Control" below.
SECURITY
On October 17, 2001, we purchased and pledged to the trustee as security
for the notes and for the exclusive benefit of the holders of the notes (and not
for the benefit of our other creditors), $31.6 million of U.S. government
securities. These securities, when held and invested by the trustee in
accordance with the terms of the pledge agreement that we entered into with the
trustee, will be sufficient upon receipt of scheduled interest and principal
payments of such securities to provide for payment in full of the first six
scheduled interest payments due on the notes when due.
15
The U.S. government securities were pledged by us to the trustee for the
exclusive benefit of the holders of the notes and are being held by the trustee
in a pledge account. Immediately prior to an interest payment date, the trustee
will release from the pledge account proceeds sufficient to pay interest then
due on the notes. We may also make additional payments to the trustee to ensure
that sufficient funds are available to pay interest then due on the notes if
necessary. A failure to pay interest on the notes when due through the first six
scheduled interest payment dates will constitute an Event of Default (as defined
below) under the indenture.
The pledged U.S. government securities and the pledge account will also
secure the repayment of the principal amount on the notes. If prior to October
17, 2004:
- an Event of Default under the notes or the indenture occurs and is
continuing; and
- the trustee or the holders of 25% in aggregate principal amount of the
notes accelerate the notes by declaring the principal amount of the notes
to be immediately due and payable (by written consent, at a meeting of
note holders or otherwise), except for the occurrence of an Event of
Default relating to our bankruptcy, insolvency or reorganization, upon
which the notes will be accelerated automatically,
then the proceeds from the pledged U.S. government securities will be promptly
released for payment to note holders, subject to the automatic stay provisions
of bankruptcy law, if applicable. Distributions from the pledge account will be
applied:
- first, to any accrued and unpaid interest on the notes; and
- second, to the extent available, to the repayment of a portion of the
principal amount of the notes.
If any Event of Default is not cured prior to the acceleration of the notes
by the trustee or holders of the notes referred to above, the trustee and the
holders of the notes will be able to accelerate the notes as a result of that
Event of Default.
For example, if the first two interest payments were made when due but the
third interest payment was not made when due and the note holders promptly
exercised their right to declare the principal amount of the notes to be
immediately due and payable, then, assuming automatic stay provisions of
bankruptcy law are inapplicable and the proceeds of the pledged U.S. government
securities are promptly distributed from the pledge account,
- an amount equal to the interest payment due on the third interest payment
would be distributed from the pledge account as accrued interest; and
- the balance of the proceeds of the pledge account would be distributed as
a portion of the principal amount of the notes.
In addition, note holders would have an unsecured claim against us for the
remainder of the principal amount of their notes.
Once we make the first six scheduled interest payments on the notes, all of
the remaining pledged U.S. government securities and cash, if any, will be
released to us from the pledge account and thereafter the notes will be
unsecured.
CONVERSION RIGHTS
The holders of notes may, at any time prior to the close of business on the
final maturity date of the notes, convert any outstanding notes (or portions
thereof) into shares of our common stock, initially at the conversion price of
$30.2512 per share is subject to adjustment as described below. Holders may
convert notes only in denominations of $1,000 and whole multiples of $1,000.
Except as described below, no adjustment will be made to the conversion price of
any notes for interest accrued thereon or dividends paid on any common stock.
16
If notes are converted after a record date for an interest payment but
prior to the next interest payment date, those notes, other than notes called
for provisional or optional redemption, must be accompanied by funds equal to
the interest payable on the next interest payment date on the principal amount
so converted. No such payment will be required from a holder if we exercise our
right to redeem such notes. We are not required to issue fractional shares of
our common stock upon conversion of the notes. Instead, we will pay a cash
adjustment based upon the market price of our common stock on the last business
day before the date of the conversion. In the case of notes called for
redemption, conversion rights will expire at the close of business on the
business day preceding the date fixed for redemption, and in the case of notes
tendered for repurchase in connection with a Change of Control, conversion
rights will expire at the close of business on the date specified in the Change
of Control notice, unless we default in payment of the redemption or Change of
Control repurchase price.
The conversion price will be adjusted for certain events, including:
(1) the issuance of our common stock as a dividend or distribution on
our common stock;
(2) certain subdivisions and combinations of our common stock;
(3) the issuance to all holders of our common stock of certain rights
or warrants to purchase our common stock (or securities convertible into
our common stock) at less than (or having a conversion price per share less
than) the then current market price of our common stock;
(4) the dividend or other distribution to all holders of our common
stock of shares of our capital stock (other than common stock) or our debt
instruments or our assets (including securities, but excluding: (A) those
rights and warrants referred to in item (3) above, (B) dividends or
distributions in connection with a reclassification, consolidation, merger,
combination, sale or conveyance resulting in a change in the conversion
consideration pursuant to the second succeeding paragraph and (C) dividends
or distributions paid exclusively in cash);
(5) dividends or other distributions consisting exclusively of cash to
all holders of our common stock to the extent that such distributions,
combined together with (A) all other such all-cash distributions made
within the preceding 12 months for which no adjustment has been made plus
(B) any cash and the fair market value of other consideration paid for any
tender offers by us or any of our subsidiaries for our common stock
concluded within the preceding 12 months for which no adjustment has been
made, exceeds 5% of our market capitalization on the record date for such
distribution; market capitalization is the product of the then current
market price of our common stock and the number of shares of our common
stock then outstanding; and
(6) the purchase of our common stock pursuant to a tender offer made
by us or any of our subsidiaries which involves an aggregate consideration
that, together with (A) any cash and the fair market value of any other
consideration paid in any other tender offer by us or any of our
subsidiaries for our common stock expiring within the 12 months preceding
such tender offer for which no adjustment has been made plus (B) the
aggregate amount of any all-cash distributions referred to in clause (5)
above to all holders of our common stock within 12 months preceding the
expiration of that tender offer for which no adjustments have been made,
exceeds 5% of our market capitalization on the expiration of such tender
offer.
In the event that we pay a dividend or make a distribution on shares of our
common stock consisting of capital stock of, or similar equity interests in, a
subsidiary or other business unit of ours, the conversion rate will be adjusted
based on the market value of the securities so distributed relative to the
market value of our common stock, in each case, based on the average closing
prices of those securities for the 10 trading days commencing on and including
the fifth trading day after the date on which the "ex-dividend trading"
commences for such dividend or distribution on the principal United States
securities exchange or market on which the securities are then listed or quoted.
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect at such time. However, any adjustment that would
17
otherwise be required to be made but for the fact that such 1% threshold has not
been met shall be carried forward and taken into account for the purposes of any
subsequent adjustments. Except as stated above, the conversion price will not be
adjusted for the issuance of our common stock or any securities convertible into
or exchangeable for our common stock or carrying the right to purchase any of
the foregoing.
In the case of:
- any reclassification of or change in our common stock (other than changes
resulting from a subdivision or combination); or
- a consolidation, merger or combination involving us or a sale or
conveyance to another corporation of all or substantially all of our
property and assets,
in each case, as a result of which holders of our common stock are entitled to
receive stock, other securities, other property or assets (including cash or any
combination thereof) with respect to or in exchange for our common stock, the
holders of the notes then outstanding will be entitled thereafter to convert
those notes into the kind and amount of shares of stock, other securities or
other property or assets (including cash or any combination thereof) which they
would have owned or been entitled to receive upon such reclassification, change,
consolidation, merger, combination, sale or conveyance had such notes been
converted into our common stock immediately prior to such reclassification,
change, consolidation, merger, combination, sale or conveyance. We may not
become a party to any such transaction unless its terms are consistent with the
foregoing.
If a taxable distribution to holders of our common stock or other
transaction occurs which results in any adjustment of the conversion price, the
holders of notes may, in certain circumstances, be deemed to have received a
distribution subject to United States federal income tax as a dividend. In
certain other circumstances, the absence of an adjustment may result in a
taxable dividend to the holders of common stock. See "Certain United States
Federal Income Tax Considerations."
We may from time to time, to the extent permitted by law, reduce the
conversion price of the notes by any amount for any period of at least 20 days.
In that case, we will give at least 15 days' notice of such decrease. We may
make such reductions in the conversion price, in addition to those set forth
above, as our board of directors deems advisable to avoid or diminish any income
tax to holders of our common stock resulting from any dividend or distribution
of stock (or rights to acquire stock) or from any event treated as such for
income tax purposes.
PROVISIONAL REDEMPTION BY REGENERON
We may redeem the notes, in whole or in part, at any time prior to October
17, 2004, at a redemption price equal to $1,000 per $1,000 principal amount of
notes to be redeemed plus accrued and unpaid interest, if any, to, but
excluding, the provisional redemption date if:
- the closing price of our common stock has exceeded 150% of the conversion
price then in effect for at least 20 trading days within a period of 30
consecutive trading days ending on the trading day prior to the date on
which we mail the provisional redemption notice (which date shall be at
least 30 days but not more than 60 days prior to the provisional
redemption date); and
- during the period that we are obligated under the registration rights
agreement to keep the shelf registration statement effective, such shelf
registration statement covering resales of the notes and the common stock
issuable upon conversion of the notes is effective and available for use
as of, and including, the date on which we mail the provisional
redemption notice through and including the provisional redemption date.
If we do not redeem all of the notes, the trustee will select the notes to
be redeemed in principal amounts of $1,000 or whole multiples of $1,000 by lot
or on a pro rata basis. If any notes are to be redeemed in part only, a new note
or notes in principal amount equal to the unredeemed principal portion
18
thereof will be issued. If a portion of a holder's notes is selected for partial
redemption and the holder thereafter converts a portion of its notes, the
converted portion will be deemed to be taken from the portion selected for
redemption.
Upon any provisional redemption, we will make an additional "make-whole"
payment in cash with respect to the notes called for redemption to holders on
the notice date in an amount equal to $165 per $1,000 principal amount of notes,
less the amount of any interest actually paid on the notes on or prior to the
provisional redemption date. We will be obligated to make this additional
payment on all notes called for provisional redemption, including any notes
converted after the notice date and before the provisional redemption date.
OPTIONAL REDEMPTION BY REGENERON
At any time on or after October 17, 2004, we may redeem some or all of the
notes on at least 30 days' but not more than 60 days' notice, at a price equal
to $1,000 per $1,000 principal amount, plus accrued and unpaid interest to, but
excluding, the date fixed for redemption, subject to the right of holders of
record on the relevant record dates to receive interest payments due on an
interest payment date, if the closing price of our common stock has exceeded
140% of the conversion price then in effect for at least 20 trading days within
a period of 30 consecutive trading days ending on the trading day prior to the
date on which we mail the optional redemption notice.
If we do not redeem all of the notes, the trustee will select the notes to
be redeemed in principal amounts of $1,000 or whole multiples of $1,000 by lot
or on a pro rata basis. If any notes are to be redeemed in part only, a new note
or notes in principal amount equal to the unredeemed principal portion thereof
will be issued. If a portion of a holder's notes is selected for partial
redemption and the holder thereafter converts a portion of its notes, the
converted portion will be deemed to be taken from the portion selected for
redemption.
SINKING FUND
No sinking fund is provided for the notes.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
If a Change of Control (as defined below) occurs, each holder of notes will
have the right to require us to repurchase all of that holder's notes not
previously called for redemption, or any portion of those notes that is equal to
$1,000 or a whole multiple of $1,000, on the date that is no later than 30 days
after the date we give notice of the occurrence of a Change in Control (such
date being the repurchase date) at a repurchase price equal to 100% of the
principal amount of the notes to be repurchased, together with interest accrued
and unpaid to, but excluding, the repurchase date.
We may elect to pay the repurchase price in common stock instead of cash if
we so specify in our Change of Control notice referred to below. The number of
shares of common stock a holder will receive will equal the repurchase price
divided by 95% of the average of the closing prices of our common stock for the
five-trading-day period ending on the third business day prior to the repurchase
date. However, we may not pay in common stock unless we satisfy certain
conditions prior to the repurchase date, as provided in the indenture.
Within 30 days after the occurrence of a Change of Control, we are required
to give notice to all holders of notes, as provided in the indenture, of the
occurrence of the Change of Control and of their resulting repurchase right and
specifying our form of payment. We must also deliver a copy of our notice to the
trustee. In order to exercise the repurchase right, a holder of notes must
deliver, on or prior to the 30th day after the date of our notice, written
notice to the trustee of the holder's exercise of the holder's repurchase right,
together with the notes with respect to which the repurchase right is being
exercised.
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Under the indenture, a "Change of Control" of Regeneron will be deemed to
have occurred at such time after the original issuance of the notes when the
following has occurred:
- the acquisition by any person (other than permitted holders) of
beneficial ownership, directly or indirectly, through a purchase, merger
or other acquisition transaction or series of transactions of shares of
our capital stock entitling that person to exercise 50% or more of the
total voting power of all shares of our capital stock entitled to vote
generally in elections of directors, other than any acquisition by us,
any of our subsidiaries or any of our employee benefit plans;
- any permitted holder files a schedule, form or report in connection with
a transaction or event disclosing that such person has become the
beneficial owner of 50% or more of the total voting power of all shares
of our capital stock entitled to vote generally in elections of
directors, as a result of which (i) our common stock ceases (or, upon
consummation of or immediately following such transaction or event, will
cease) to be listed on a United States national securities exchange or
approved for quotation on the Nasdaq National Market or any similar
United States system for automated dissemination of quotations of
securities prices or (ii) less than 5 million shares of our common stock
remain held by persons other than permitted holders; or
- our consolidation or merger with or into any other person, any merger of
another person into us, or any conveyance, transfer, sale, lease or other
disposition of all or substantially all of our properties and assets to
another person, other than:
(1) any transaction pursuant to which holders of our capital stock
immediately prior to the transaction have the entitlement to exercise,
directly or indirectly, 50% or more of the total voting power of all
shares of our capital stock entitled to vote generally in the election
of directors of the continuing or surviving person immediately after the
transaction; and
(2) any merger solely for the purpose of changing our jurisdiction
of incorporation and resulting in a reclassification, conversion or
exchange of outstanding shares of common stock solely into shares of
common stock of the surviving entity.
For the purposes of the foregoing, "permitted holders" shall mean (A)
Leonard S. Schleifer, M.D., Ph.D., our Chief Executive Officer and President,
and P. Roy Vagelos, M.D., our Chairman of the Board, and their respective
spouses, immediate family members, estates, lineal descendants, executors or
administrators, or (B) any trust, corporation or other entity, the
beneficiaries, stockholders or other persons beneficially holding an 80% or more
controlling interest of which consist of persons or entities referred to in
clause (A).
The beneficial owner shall be determined in accordance with Rule 13d-3
promulgated by the SEC under the Exchange Act. The term "person" includes any
syndicate or group which would be deemed to be a "person" under Section 13(d)(3)
of the Exchange Act.
Rule 13e-4 under the Exchange Act, as amended, requires the dissemination
of information to security holders if an issuer tender offer occurs and may
apply if the repurchase option becomes available to holders of the notes. We
will comply with this rule to the extent applicable at that time.
The foregoing provisions would not necessarily protect holders of the notes
if highly leveraged or other transactions involving us occur that may adversely
affect holders.
Our ability to repurchase notes upon the occurrence of a Change of Control
is subject to important limitations. The occurrence of a Change of Control could
cause an Event of Default under, or be prohibited or limited by, the terms of
our existing or future senior debt. As a result, any repurchase of the notes
would, absent a waiver, be prohibited under the subordination provisions of the
indenture until all of our senior debt is paid in full. Further, we cannot
assure you that we would have the financial resources, or would be able to
arrange financing, to pay the repurchase price for all the notes that might be
delivered by holders of notes seeking to exercise the repurchase right. Any
failure by us to repurchase the notes when required following a Change of
Control would result in an event of default under the indenture, whether or
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not such repurchase is permitted by the subordination provisions of the
indenture. Any such default may, in turn, cause a default under our existing or
future senior debt. See "-- Subordination" below.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the notes
(other than payments made toward the first six scheduled interest payments due
on the notes, which payments are derived from the U.S. government securities
pledged by us to the trustee for the exclusive benefit of the holders of the
notes (hereinafter referred to as "Permitted Interest Payments")) will be
subordinated in right of payment, as set forth in the indenture, to the prior
payment in full in cash or cash equivalents of all Senior Indebtedness (as
defined below), whether outstanding on the date of the indenture or thereafter
incurred.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relating to Regeneron or to its assets, or any
liquidation, dissolution or other winding-up of Regeneron, whether voluntary or
involuntary, or any assignment for the benefit of creditors or other marshaling
of assets or liabilities of Regeneron (except in connection with the
consolidation or merger of Regeneron or its liquidation or dissolution following
the conveyance, transfer or lease of all or substantially all of its properties
and assets upon the terms and conditions described under "-- Mergers and Sales
of Assets" below), the holders of Senior Indebtedness will be entitled to
receive payment in full in cash or cash equivalents of all Senior Indebtedness,
or provision shall be made for such payment in full, before the holders of notes
will be entitled to receive any payment or distribution of any kind or character
(other than Permitted Interest Payments and other than any payment or
distribution in the form of equity securities or subordinated securities of
Regeneron or any successor obligor that, in the case of any such subordinated
securities, are subordinated in right of payment to all Senior Indebtedness that
may at the time be outstanding to at least the same extent as the notes are so
subordinated (such equity securities or subordinated securities hereinafter
being "Permitted Junior Securities")) on account of principal of, or premium, if
any, or interest on the notes; and any payment or distribution of assets of
Regeneron of any kind or character, whether in cash, property or securities
(other than a payment or distribution in the form of Permitted Junior
Securities), by set-off or otherwise, to which the holders of the notes or the
trustee would be entitled but for the provisions of the indenture relating to
subordination shall be paid by the liquidating trustee or agent or other person
making such payment or distribution directly to the holders of Senior
Indebtedness or their representatives ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness to the extent necessary
to make payment in full of all Senior Indebtedness remaining unpaid, after
giving effect to any current payment or distribution to the holders of such
Senior Indebtedness.
No payment or distribution of any assets of Regeneron of any kind or
character, whether in cash, property or securities (other than Permitted
Interest Payments and Permitted Junior Securities), may be made by or on behalf
of Regeneron on account of principal of, premium, if any, or interest on the
notes or on account of the purchase, redemption or other acquisition of notes
upon the occurrence of any default in payment (whether at scheduled maturity,
upon scheduled installment, by acceleration or otherwise) of principal of,
premium, if any, or interest on Designated Senior Indebtedness (as defined
below) beyond any applicable grace period (a "Payment Default") until such
Payment Default shall have been cured or waived in writing or shall have ceased
to exist or such Designated Senior Indebtedness shall have been discharged or
paid in full in cash or cash equivalents.
No payment or distribution of any assets of Regeneron of any kind or
character, whether in cash, property or securities (other than Permitted
Interest Payments and Permitted Junior Securities), may be made by or on behalf
of Regeneron on account of principal of, premium, if any, or interest on the
notes or on account of the purchase, redemption or other acquisition of notes
during the period specified below (a "Payment Blockage Period") upon the
occurrence of any default or event of default with respect to any Designated
Senior Indebtedness other than any Payment Default, pursuant to which the
maturity thereof may be accelerated (a "Non-Payment Default"), and receipt by
the trustee of written notice thereof from
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Regeneron or the representative of holders of the Designated Senior Indebtedness
or the trustee for any such holder.
The Payment Blockage Period will commence upon the date of receipt by the
trustee of written notice from Regeneron or the representative of the holders of
the Designated Senior Indebtedness in respect of which the Non-Payment Default
exists, or the trustee for any such holder, and shall end on the earliest of:
(1) 179 days thereafter (provided that any Designated Senior
Indebtedness as to which such written notice was given shall not
theretofore have been accelerated);
(2) the date on which such Non-Payment Default is cured, waived or
ceases to exist;
(3) the date on which such Designated Senior Indebtedness is
discharged or paid in full; or
(4) the date on which such Payment Blockage Period shall have been
terminated by written notice to the trustee or Regeneron from the trustee
or such other representative initiating such Payment Blockage Period,
after which Regeneron will resume making any and all required payments in
respect of the notes, including any missed payments. In any event, not more than
one Payment Blockage Period may be commenced during any period of 365
consecutive days. No Non-Payment Default that existed or was continuing on the
date of the commencement of any Payment Blockage Period will be, or can be made,
the basis for the commencement of a subsequent Payment Blockage Period, unless
such Non-Payment Default has been cured or waived for a period of not less than
90 consecutive days subsequent to the commencement of such initial Payment
Blockage Period.
In the event that, notwithstanding the provisions of the preceding four
paragraphs, if any payment or distribution shall be received by the trustee or
any holder of the notes that is prohibited by such provisions, then and in such
event such payment shall be paid over and delivered by such trustee or holder to
the trustee or any other representative of holders of Senior Indebtedness, as
their interest may appear, for application toward our Senior Indebtedness. Until
all of our Senior Indebtedness is paid in full, holders of the notes shall be
subrogated (equally and ratably with all other indebtedness that is equal in
right of payment to the notes) to the rights of holders of Senior Indebtedness
to receive distributions.
Failure by Regeneron to make any required payment in respect of the notes
when due or within any applicable grace period, whether or not occurring during
a Payment Blockage Period, will result in an Event of Default (as defined below)
and, thereafter, holders of the notes will have the right to accelerate the
maturity thereof. See "-- Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency of Regeneron, our general creditors may recover
less, ratably, than holders of senior debt and such general creditors may
recover more, ratably, than holders of notes.
At December 31, 2001, on a pro forma basis, giving effect to the offering
of notes:
- the total outstanding Senior Indebtedness of Regeneron would have been
approximately $221.8 million; and
- Regeneron would have had no subordinated indebtedness other than the
notes.
"Designated Senior Indebtedness" means any Senior Indebtedness which, at
the time of determination, has an aggregate principal amount outstanding of at
least $25.0 million and that has been specifically designated in the instrument
evidencing such Senior Indebtedness as "Designated Senior Indebtedness" of
Regeneron.
"indebtedness" means, with respect to any person, without duplication:
- all liabilities of such person for borrowed money (including overdrafts)
or for the deferred purchase price of property or services, excluding any
trade payables and other accrued current liabilities incurred in the
ordinary course of business, but including, without limitation, all
obligations,
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contingent or otherwise, of such person in connection with any letters of
credit and acceptances issued under letter of credit facilities,
acceptance facilities or other similar facilities;
- all obligations of such person evidenced by bonds, notes, debentures or
other similar instruments;
- indebtedness of such person created or arising under any conditional sale
or other title retention agreement with respect to property acquired by
such person (even if the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession
or sale of such property), but excluding trade payables arising in the
ordinary course of business;
- all capitalized lease obligations of such person;
- all obligations of such person under or in respect of interest rate
agreements or currency agreements;
- all indebtedness referred to in (but not excluded from) the preceding
clauses of other persons and all dividends of other persons, the payment
of which is secured by (or for which the holder of such indebtedness has
an existing right, contingent or otherwise, to be secured by) any lien or
with respect to property (including, without limitation, accounts and
contract rights) owned by such person, even though such person has not
assumed or become liable for the payment of such indebtedness (the amount
of such obligation being deemed to be the lesser of the value of such
property or asset or the amount of the obligation so secured);
- all guarantees by such person of indebtedness referred to in this
definition or of any other person;
- all Redeemable Capital Stock of such person valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus accrued and
unpaid dividends; and
- the present value of the obligation of such person as lessee for net
rental payments (excluding all amounts required to be paid on account of
maintenance and repairs, insurance, taxes, assessments, water, utilities
and similar charges to the extent included in such rental payments)
during the remaining term of the lease included in such sale and
leaseback transaction including any period for which such lease has been
extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of
interest implicit in such transaction, determined in accordance with
accounting principles generally accepted in the United States.
"Redeemable Capital Stock" means any class of our capital stock that,
either by its terms, by the terms of any securities into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed (whether by sinking
fund or otherwise) prior to the date that is 91 days after the final scheduled
maturity of the notes or is redeemable at the option of the holder thereof at
any time prior to such date, or is convertible into or exchangeable for debt
securities at any time prior to such date (unless it is convertible or
exchangeable solely at our option).
"Senior Indebtedness" or "senior debt" means:
- all obligations of Regeneron, now or hereafter existing, under or in
respect of the documents and instruments executed in connection
therewith, whether for principal, premium, if any, interest (including
interest accruing after the filing of, or which would have accrued but
for the filing of, a petition by or against Regeneron under bankruptcy
law, whether or not such interest is allowed as a claim after such filing
in any proceeding under such law) and other amounts due in connection
therewith (including, without limitation, any fees, premiums, expenses,
reimbursement obligations with respect to letters of credit and
indemnities), whether outstanding on the date of the indenture or
thereafter created, incurred or assumed; and
- the principal of, premium, if any, and interest on all other indebtedness
of Regeneron (other than the notes), whether outstanding on the date of
the indenture or thereafter created, incurred or assumed, unless, in the
case of any particular indebtedness, the instrument creating or
evidencing
23
the same or pursuant to which the same is outstanding expressly provides
that such indebtedness shall not be senior in right of payment to the
notes.
Notwithstanding the foregoing, "Senior Indebtedness" and "senior debt"
shall not include:
- indebtedness evidenced by the notes offered hereby;
- indebtedness of Regeneron that is expressly subordinated in right of
payment to Senior Indebtedness of Regeneron;
- indebtedness of Regeneron that by operation of law is subordinate to any
general unsecured obligations of Regeneron;
- any liability for federal, state or local taxes or other taxes, owed or
owing by Regeneron;
- accounts payable or other liabilities owed or owing by Regeneron to trade
creditors (including guarantees thereof or instruments evidencing such
liabilities);
- amounts owed by Regeneron for compensation to employees or for services
rendered to Regeneron;
- indebtedness of Regeneron to any subsidiary or any other affiliate of
Regeneron or any of such affiliate's subsidiaries;
- capital stock of Regeneron;
- indebtedness evidenced by any guarantee of any indebtedness ranking equal
or junior in right of payment to the notes; and
- indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11 of the United States Code, is without
recourse to Regeneron.
EVENTS OF DEFAULT
Each of the following constitutes an "Event of Default" under the
indenture:
(1) our failure to pay when due the principal of or premium, if any,
on any of the notes at maturity, upon redemption or exercise of a
repurchase right or otherwise, whether or not such payment is prohibited by
the subordination provisions of the indenture;
(2) our failure to pay an installment of interest (including
liquidated damages, if any) on any of the notes that continues for 30 days
after the date when due, whether or not such payment is prohibited by the
subordination provisions of the indenture; provided that a failure to make
any of the first six scheduled interest payments on the notes within three
business days of the applicable interest payment dates will constitute an
Event of Default with no additional grace or cure period;
(3) our failure to deliver shares of common stock, together with cash
in lieu of fractional shares, when such common stock or cash in lieu of
fractional shares is required to be delivered upon conversion of a note or
upon the exercise of a repurchase right that continues for ten days after
such delivery date;
(4) our failure to perform or observe any other term, covenant or
agreement contained in the notes or the indenture for a period of 60 days
after written notice of such failure, requiring us to remedy the same,
shall have been given to us by the trustee, or to us and the trustee by the
holders of at least 25% in aggregate principal amount of the notes then
outstanding;
(5) (A) one or more defaults in the payment of principal of or
premium, if any, on any of our indebtedness aggregating $10.0 million or
more, when the same becomes due and payable at the scheduled maturity
thereof, and such default or defaults shall have continued after any
applicable grace period and shall not have been cured or waived within a
thirty day period after the date of such default or (B) any of our
indebtedness aggregating $10.0 million or more shall have been accelerated
or otherwise declared due and payable, or required to be prepaid or
repurchased (other than by
24
regularly scheduled required prepayment) prior to the scheduled maturity
thereof and such acceleration is not rescinded or annulled within a
thirty-day period after the date of such acceleration;
(6) certain events of our bankruptcy, insolvency or reorganization or
that of any significant subsidiaries;
(7) our filing of a voluntary petition seeking liquidation,
reorganization arrangement, readjustment of debts or for any other relief
under the federal bankruptcy code; and
(8) the agreement made by us in favor of the trustee governing the
disbursements of funds from the pledge account, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time,
shall cease to be in full force and effect or enforceable in accordance
with its terms, other than in accordance with its terms.
The indenture provides that the trustee shall, within 90 days of the
occurrence of a default, give to the registered holders of the notes notice of
all uncured defaults known to it, but the trustee shall be protected in
withholding such notice if it, in good faith, determines that the withholding of
such notice is in the best interest of such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on any of the notes when due or in the payment of any redemption or
repurchase obligation.
If an Event of Default specified in clause (6) or clause (7) above occurs
and is continuing, then, automatically, the principal of all the notes and the
interest thereon shall become immediately due and payable. If an Event of
Default shall occur and be continuing, other than with respect to clause (6) or
clause (7) above (such default not having been cured or waived as provided under
"-- Modifications and Waiver" below), the trustee or the holders of at least 25%
in aggregate principal amount of the notes then outstanding may declare the
notes due and payable at their principal amount together with accrued interest,
and thereupon the trustee may, at its discretion, proceed to protect and enforce
the rights of the holders of notes by appropriate judicial proceedings. Such
declaration may be rescinded or annulled with the written consent of the holders
of a majority in aggregate principal amount of the notes then outstanding upon
the conditions provided in the indenture.
The indenture contains a provision entitling the trustee, subject to the
duty of the trustee during default to act with the required standard of care, to
be indemnified by the holders of notes before proceeding to exercise any right
or power under the indenture at the request of such holders. The indenture
provides that the holders of a majority in aggregate principal amount of the
notes then outstanding through their written consent may direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred upon the trustee.
We will be required to furnish annually to the trustee a statement as to
the fulfillment of our obligations under the indenture.
CERTAIN COVENANTS
The indenture provides that we will not, and will not permit our
subsidiaries or other business units to, incur, create, assume, guarantee or in
any other manner become directly or indirectly liable with respect to or
responsible for, or permit to remain outstanding (other than if required by
law), any indebtedness that is subordinate or junior in right of payment to
Senior Indebtedness unless such indebtedness ranks equal or junior in right of
payment to the notes. We have the right to incur, create, assume or guarantee or
in any other manner become directly or indirectly liable with respect to, or
responsible for, or permit to remain outstanding, different layers of Senior
Indebtedness that may be subordinate to other Senior Indebtedness.
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MERGERS AND SALES OF ASSETS
We may, without the consent of the holders of notes, consolidate with,
merge into or transfer all or substantially all of our assets to any other
corporation organized under the laws of the United States or any of its
political subdivisions provided that:
- the surviving corporation assumes all our obligations under the indenture
and the notes;
- at the time of such transaction, no Event of Default, and no event which,
after notice or lapse of time, would become an Event of Default, shall
have happened and be continuing; and
- certain other conditions are met.
MODIFICATIONS AND WAIVER
The indenture (including the terms and conditions of the notes) may be
modified or amended by us and the trustee, without the consent of the holder of
any note, for the purposes of, among other things:
- adding to our covenants for the benefit of the holders of notes;
- surrendering any right or power conferred upon us;
- providing for conversion rights of holders of notes if any
reclassification or change of our common stock or any consolidation,
merger or sale of all or substantially all of our assets occurs;
- providing for the assumption of our obligations to the holders of notes
in the case of a merger, consolidation, conveyance, transfer or lease;
- reducing the conversion price, provided that the reduction will not
adversely affect the interests of holders of notes in any material
respect;
- complying with the requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act of 1939,
as amended;
- making any changes or modifications to the indenture necessary in
connection with the registration of the notes under the Securities Act,
as contemplated by the registration rights agreement, provided that this
action does not adversely affect the interests of the holders of the
notes in any material respect;
- curing any ambiguity or correcting or supplementing any defective
provision contained in the indenture; provided that such modification or
amendment does not, in the good faith opinion of our board of directors
and the trustee, adversely affect the interests of the holders of the
notes in any material respect;
- adding or modifying any other provisions which we and the trustee may
deem necessary or desirable and which will not adversely affect the
interests of the holders of notes in any material respect; or
- to evidence and provide for the appointment of a successor trustee.
Modifications and amendments to the indenture or to the terms and
conditions of the notes may also be made, and past default by us may be waived,
with the written consent of the holders of at least a majority in aggregate
principal amount of the notes at the time outstanding.
However, no such modification, amendment or waiver may, without the written
consent of the holder of each note affected:
- change the maturity of the principal of or any installment of interest on
any note (including any payment of liquidated damages);
- reduce the principal amount of, or any premium or interest on (including
any payment of liquidated damages), any note;
- change the currency of payment of such note or interest thereon;
26
- impair the right to institute suit for the enforcement of any payment on
or with respect to any note;
- modify our obligations to maintain an office or agency in New York City;
- except as otherwise permitted or contemplated by provisions concerning
corporate reorganizations, adversely affect the repurchase option of
holders upon a change of control or the conversion rights of holders of
the notes;
- modify the subordination provisions of the notes in a manner adverse to
the holders of notes; or
- reduce the percentage in aggregate principal amount of notes outstanding
necessary to modify or amend the indenture or to waive any past default.
SATISFACTION AND DISCHARGE
We may discharge our obligations under the indenture while notes remain
outstanding, subject to certain conditions, if:
- all outstanding notes have become due and payable or will become due and
payable at their scheduled maturity within one year, or
- all outstanding notes are scheduled for redemption within one year; and
- in either case, we have deposited with the trustee an amount sufficient
to pay and discharge all outstanding notes on the date of their scheduled
maturity or the scheduled date of redemption; provided that we shall
remain obligated to issue shares upon conversion of the notes.
GOVERNING LAW
The indenture and the notes are governed by, and will be construed in
accordance with, the law of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
American Stock Transfer & Trust Company, as trustee under the indenture,
has been appointed by us as paying agent, conversion agent, registrar and
custodian with regard to the notes. American Stock Transfer & Trust Company is
also the transfer agent and registrar for our common stock. The trustee or its
affiliates may from time to time in the future provide other services to us in
the ordinary course of their business.
REGISTRATION RIGHTS
We entered into a registration rights agreement with the initial purchasers
of the notes. If you sell the notes or shares of common stock issued upon
conversion of the notes under this registration statement, you generally will be
required to be named as a selling securityholder in this prospectus, deliver
this prospectus to purchasers and be bound by applicable provisions of the
registration rights agreement, including some indemnification provisions.
In the registration rights agreement, we agreed to use our reasonable best
efforts to keep the registration statement effective until the earlier of (1)
October 17, 2003; (2) the date when the holders of the notes and the common
stock issuable upon conversion of the notes are able to sell all such securities
immediately without restriction pursuant to the volume limitation provisions of
Rule 144 under the Securities Act or any successor rule thereto or otherwise; or
(3) the sale pursuant to this shelf registration statement of all securities
registered hereunder.
We may suspend the use of this prospectus under certain circumstances
relating to pending corporate developments, public filings with the SEC and
similar events for a period not to exceed 45 days in any three-month period and
not to exceed an aggregate of 120 days in any 12-month period. We also agreed to
pay liquidated damages to holders of the notes and shares of common stock issued
upon conversion of the
27
notes if this registration statement is not timely filed or made effective or if
the prospectus is unavailable for periods in excess of those permitted above.
You should refer to the registrations rights agreement for a description of
these liquidated damages.
BOOK-ENTRY SYSTEM
The notes were originally issued in the form of a global security issued in
reliance on Rule 144A. Upon the issuance of a global security, DTC (referred to
as the depository) or its nominee credited the accounts of persons holding
through it with the respective principal amounts of the notes represented by
such global security. Such accounts were designated by the initial purchasers
with respect to notes placed by the initial purchasers for us. The notes that
are sold under this prospectus will be represented by a new unrestricted global
security. Upon issuance of this new global security, the depository or its
nominee will credit the accounts of persons holding through it with the
respective principal amounts of the notes represented by the new unrestricted
global security. Ownership of beneficial interests in a global security is
limited to persons that have accounts with the depository ("participants") or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in a global security is shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
depository for such global security. Ownership of beneficial interests in such
global security by persons that hold through participants will be shown on, and
the transfer of those ownership interests through such participant will be
effected only through, records maintained by such participant. The foregoing may
impair the ability to transfer beneficial interests in a global security.
We will make payment of principal, premium, if any, and interest on notes
represented by any such global security to the depository or its nominee, as the
case may be, as the sole holder of the notes represented thereby for all
purposes under the indenture. None of Regeneron, the trustee, any agent of
Regeneron, or the trustee or the initial purchasers will have any responsibility
or liability for any aspect of the depository's records relating to or payments
made on account of beneficial ownership interests in global security
representing any notes or for maintaining, supervising or reviewing any of the
depository's records relating to such beneficial ownership interests. We have
been advised by the depository that, upon receipt of any payment of principal,
premium, if any, or interest on any global security, the depository will
immediately credit, on its book-entry registration and transfer system, the
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global security
as shown on the records of the depository. Payments by participants to owners of
beneficial interests in a global security held through such participants will be
governed by standing instructions and customary practices as is now the case
with securities held for customer accounts registered in "street name," and will
be the sole responsibility of such participants.
A global security may not be transferred except as a whole by the
depository for such global security to a nominee of such depository or by a
nominee of such depository to such depository or another nominee of such
depository or by such depository or any such nominee to a successor of such
depository or a nominee of such successor. If the depository is at any time
unwilling or unable to continue as depository and a successor depository is not
appointed by us or the depository within 90 days, we will issue notes in
definitive form in exchange for the global security. In either instance, an
owner of a beneficial interest in the global security will be entitled to have
notes equal in principal amount to such beneficial interest registered in its
name and will be entitled to physical delivery of such notes in definitive form.
Notes so issued in definitive form will be issued in denominations of $1,000 and
integral multiples thereof and will be issued in registered form only, without
coupons. We will pay principal, premium, if any, and interest on the notes and
the notes may be presented for registration of transfer or exchange, at the
offices of the trustee.
So long as the depository for a global security, or its nominee, is the
registered owner of such global security, such depository or such nominee, as
the case may be, will be considered the sole holder of the notes represented by
such global security for the purposes of receiving payment on the notes,
receiving notices and for all other purposes under the indenture and the notes.
Beneficial interests in notes will be evidenced only by, and transfers thereof
will be effected only through, records maintained by the
28
depository and its participants. The depository has nominated Cede & Co. as the
nominee. Except as provided above, owners of beneficial interests in a global
security will not be entitled to have the notes represented by the global
security registered in their name, will not be entitled to receive physical
delivery of certificated notes and will not be considered the holders thereof
for any purposes under the indenture. Accordingly any such person owning a
beneficial interest in such a global security must rely on the procedures of the
depository, and, if any such person is not a participant, on the procedures the
participant through which such person owns its interest, to exercise any rights
of a holder under the indenture. The indenture provides that the depository may
grant proxies and otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action which
a holder is entitled to give or take under the indenture. We understand that
under existing industry practices, in the event that we request any action of
holders or that an owner of a beneficial interest in such a global security
desires to give or take any action which a holder is entitled to give or take
under the indenture, the depository would authorize the participants holding the
relevant beneficial interest to give or take such action and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
The depository has advised us that the depository is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act. The depository was created to hold the securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The depository's participants
include securities brokers and dealers (including the initial purchasers),
banks, trust companies, clearing corporations and certain other organizations,
some of whom (and/or their representatives) own the depository. Access to the
depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
29
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 160,000,000 shares of common
stock, par value $.001 per share, 40,000,000 shares of Class A stock, par value
$.001 per share, and 30,000,000 shares of preferred stock, par value $.01 per
share. As of December 31, 2001, 41,264,280 shares of our common stock were
outstanding and held by 623 shareholders of record and 2,562,689 shares of our
Class A stock were outstanding and held by 63 shareholders of record. The
following is a summary description of our capital stock. For more information,
see our Restated Certificate of Incorporation, a copy of which is incorporated
by reference as an exhibit to our annual report on Form 10-K for the fiscal year
ended December 31, 2000.
COMMON STOCK AND CLASS A STOCK
General. The rights of holders of common stock and holders of Class A
stock are identical except for voting and conversion rights, and restrictions on
transferability.
Voting Rights. The holders of Class A stock are entitled to ten votes per
share and the holders of common stock are entitled to one vote per share. Except
as otherwise required by law or as described below, holders of Class A stock
will vote together as a single class on all matters presented to the
shareholders for their vote or approval, including the election of directors.
Shareholders are not entitled to vote cumulatively for the election of directors
and no class of outstanding common stock acting alone is entitled to elect any
directors.
Transfer Restrictions. Class A stock is subject to certain limitations on
transfer that do not apply to the common stock.
Dividends and Liquidation. Holders of Class A stock and holders of our
common stock have an equal right to receive dividends when and if declared by
our board of directors out of funds legally available therefor. If a dividend or
distribution payable in Class A stock is made on the Class A stock, we must also
make a pro rata and simultaneous dividend or distribution on the common stock
payable in shares of common stock. Conversely, if a dividend or distribution
payable in common stock is made on the common stock, we must also make a pro
rata and simultaneous dividend or distribution on the Class A stock payable in
shares of Class A stock. In the event of our liquidation, dissolution, or
winding up, holders of the shares of Class A stock and common stock are entitled
to share equally, share-for-share, in the assets available for distribution
after payment of all creditors and the liquidation preferences of our preferred
stock.
Optional Conversion Rights. Each share of Class A stock may, at any time
and at the option of the holder, be converted into one fully paid and
nonassessable share of common stock. Upon conversion, such shares of common
stock would not be subject to restrictions on transfer that applied to the
shares of Class A stock prior to conversion except to the extent such
restrictions are imposed under applicable securities laws.
The shares of common stock are not convertible into or exchangeable for
shares of Class A stock or any other of our shares or securities.
Other Provisions. Holders of Class A stock and common stock have no
preemptive rights to subscribe to any additional securities of any class which
we may issue and there are no redemption provisions or sinking fund provisions
applicable to either such class, nor is the Class A stock or the common stock
subject to calls or assessments.
Nasdaq National Market Listing. Our common stock is quoted on the Nasdaq
National Market. The current rules of the National Association of Securities
Dealers, Inc. (the "NASD") effectively preclude the trading or quotation through
the Nasdaq National Market of any securities of an issuer which has issued
securities or taken other corporate action that would have the effect of
nullifying, restricting, or disparately reducing the per share voting of an
outstanding class or classes of equity securities registered under section 12 of
the Exchange Act. Certain national securities exchanges have adopted similar
rules or
30
policies. We do not intend to issue any additional shares of any stock that
would make it ineligible for inclusion on the Nasdaq National Market or any
national securities exchange. However, if we issue additional stock that causes
us to become ineligible for continued inclusion on the Nasdaq National Market,
then the ineligibility would be likely to materially reduce the liquidity of an
investment in our common stock and would likely depress its market value below
that which would otherwise prevail.
Transfer Agent and Registrar. The Transfer Agent and Registrar for our
common stock is American Stock Transfer & Trust Company.
PREFERRED STOCK
Our Restated Certificate of Incorporation allows us to issue up to
30,000,000 shares of preferred stock in one or more series and as may be
determined by our board of directors who may establish from time to time the
number of shares to be included in each such series, to fix the designation,
powers, preference and rights of the shares of each such series and any
qualifications, limitations, or restrictions thereof and to increase or decrease
the number of shares of any such series without any further vote or action by
the shareholders. Our board of directors may authorize, without shareholder
approval, the issuance of preferred stock with voting and conversion rights that
could adversely affect the voting power and other rights of holders of our
common stock. Preferred stock could thus be issued quickly with terms designed
to delay or prevent a change in control or to make the removal of management
more difficult. In certain circumstances, this could have the effect of
decreasing the market price of our common stock.
REGISTRATION RIGHTS OF CERTAIN HOLDERS
Certain of our shareholders have registration rights. Under the agreements
between us and the holders of registration rights, certain holders may under
certain circumstances request that we file a registration statement under the
Securities Act and, upon such request and subject to certain minimum size
conditions, we will generally be required to use our best efforts to effect any
such registration. We are not generally required to effect more than two such
registrations. However, we are required under certain circumstances to effect an
unlimited number of Form S-3 or similar short form registrations for such
holders. We are generally obligated to bear the expenses, other than
underwriting discounts and sales commissions, of all of these registrations.
In addition, if we propose to register any of our securities, either for
our own account or for the account of other shareholders, with certain
exceptions, we are required to notify the holders noted above and to include in
such registration all of the shares of our common stock requested to be included
by such holders. In connection with this shelf registration statement, we have
notified each of the holders who have registration rights and each holder, other
than the selling securityholders listed in this prospectus or any supplement
thereto, has either waived its rights to exercise its respective registration
rights or is subject to a lock-up agreement.
RIGHTS PLAN
In September 1996, we adopted a Shareholder Rights Plan. Our rights
agreement provides that each of our common shares will have one right to
purchase a unit consisting of one-thousandth of a preferred share at a purchase
price of $120 per unit.
Initially, the rights under our rights agreement are attached to
outstanding certificates representing our common shares and no separate
certificates representing the rights will be distributed. The rights will
separate from our common shares and be represented by separate certificates
approximately 10 days after someone acquires or commences a tender offer for 20%
of our outstanding common shares.
After the rights separate from our common shares, certificates representing
the rights will be mailed to record holders of our common stock. Once
distributed, the rights certificates alone will represent the rights.
31
All of our common shares issued prior to the date the rights separate from
the common shares will be issued with the rights attached. The rights are not
exercisable until the date the rights separate from the common shares. We may
redeem the rights by action of the Board of Directors, at which time the rights
will terminate and the holder of the rights will have only the right to receive
$0.01 per right. The rights will expire automatically on October 18, 2006 unless
earlier redeemed or exchanged by us.
If an acquiror obtains or has the right to obtain 20% or more of our common
shares, then each right will entitle the holder to purchase a number of our
common shares initially equal to two times the purchase price of each right,
unless the acquisition is made pursuant to a tender or exchange offer for all of
our outstanding shares at a price determined by a majority of our independent
directors. In this event, rights held by the acquiring person shall become null
and void.
In certain circumstances, a right will entitle the holder to purchase a
number of shares of common stock of the acquiror having a then current market
value of twice the right's purchase price.
Holders of rights will have no rights as our shareholders, including the
right to vote or receive dividends, simply by virtue of holding the rights.
Our rights agreement may have anti-takeover effects. The rights may cause
substantial dilution to a person or group that attempts to acquire us.
Accordingly, the existence of the rights may deter acquirors from making
takeover proposals or tender offers. However, the rights are not intended to
prevent a takeover, but rather are designed to enhance the ability of our board
to negotiate with an acquiror on behalf of all the shareholders. In addition,
the rights should not interfere with a proxy contest.
SELLING SECURITYHOLDERS
The notes were originally issued by us and sold by Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Robertson Stephens, Inc. (the "initial
purchasers") in transactions exempt from the registration requirements of the
Securities Act to persons reasonably believed by the initial purchasers to be
"qualified institutional buyers" as defined by Rule 144A under the Securities
Act. The selling securityholders may from time to time offer and sell pursuant
to this prospectus any or all of the notes listed below and the shares of common
stock issued upon conversion of such notes. When we refer to the "selling
securityholders" in this prospectus, we mean those persons listed in the table
below, as well as the pledgees, donees, assignees, transferees, successors and
others who later hold any of the selling securityholders' interests.
The table below sets forth the name of each selling securityholder, the
principal amount at maturity of notes that each selling securityholder may offer
pursuant to this prospectus and the number of shares of common stock into which
such notes are convertible. Unless set forth below, to our knowledge, none of
the selling securityholders has, or within the past three years has had, any
material relationship with us or any of our predecessors or affiliates or
beneficially owns in excess of 1% of the outstanding common stock.
The principal amounts of the notes provided in the table below is based on
information provided to us by each of the selling securityholders as of January
23, 2002, and the percentages are based on $200,000,000 principal amount at
maturity of notes outstanding. The number of shares of common stock that may be
sold is calculated based on the current conversion price of $30.2512 per share.
Since the date on which each selling securityholder provided this
information, each selling securityholder identified below may have sold,
transferred or otherwise disposed of all or a portion of its notes in a
transaction exempt from the registration requirements of the Securities Act.
Information concerning the selling securityholders may change from time to time
and any changed information will be set forth in supplements to this prospectus
to the extent required. In addition, the conversion ratio, and therefore the
number of shares of our common stock issuable upon conversion of the notes, is
subject to adjustment. Accordingly, the number of shares of common stock
issuable upon conversion of the notes may increase or decrease.
32
The selling securityholders may from time to time offer and sell any or all
of the securities under this prospectus. Because the selling securityholders are
not obligated to sell the notes or the shares of common stock issuable upon
conversion of the notes, we cannot estimate the amount of the notes or how many
shares of common stock that the selling securityholders will hold upon
consummation of any such sales.
AGGREGATE PRINCIPAL NUMBER OF SHARES PERCENTAGE OF
AMOUNT AT PERCENTAGE OF OF COMMON STOCK SHARES OF
MATURITY OF NOTES NOTES THAT MAY COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING BE SOLD(1) OUTSTANDING(2)
---- ------------------- ------------- ---------------- -----------------
Aristeia International
Limited.................... $ 5,460,000 2.73% 180,488 *
Aristeia Partners, L.P....... $ 1,540,000 * 50,907 *
Baker Biotech Fund I, L.P.... $ 9,000,000 4.5% 297,508(3) *
Baker Biotech Fund II,
L.P........................ $ 9,525,000 4.76% 314,863(4) *
Baker Bros. Investments,
L.P........................ $ 750,000 * 24,792(5) *
Baker Bros. Investments II,
L.P........................ $ 3,000,000 1.5% 99,169(6) *
Baker/Tisch Investments,
L.P........................ $ 3,000,000 1.5% 99,169(7) *
Calamos Market Neutral
Fund....................... $ 3,225,000 1.61% 106,607 *
Clinton Multistrategey Master
Fund, Ltd.................. $ 4,000,000 2.0% 132,226 *
Clinton Riverside Convertible
Portfolio Limited.......... $ 7,500,000 3.75% 247,923 *
Common Fund Event-Driven
Company Ltd. .............. $ 90,000 * 2,975 *
Consulting Group Capital
Market Funds............... $ 250,000 * 8,264 *
Continental Casualty
Company.................... $ 4,000,000 2.0% 132,226 *
Deutsche Banc Alex Brown
Inc........................ $ 18,000,000 9.0% 595,017 1.34%
Fidelity Select Portfolios:
Biotechnology Portfolio.... $ 10,000,000 5.0% 330,565(8) *
Fidelity Financial Trust:
Fidelity Convertible
Securities Fund............ $ 1,750,000 * 57,848 *
First Union International
Capital Markets Inc........ $ 5,000,000 2.5% 165,282 *
Four Partners................ $ 20,000,000 10.0% 661,130(9) 1.49%
Fresno County Employees'
Retirement Association..... $ 800,000 * 26,445 *
General Electric Pension
Trust...................... $ 1,800,000 * 59,501 *
Global Bermuda Limited
Partnership................ $ 400,000 * 13,222 *
HFR Master Fund, Ltd. ....... $ 25,000 * 826 *
Highbridge International
LLC........................ $ 13,000,000 6.5% 429,734 *
Honeywell International
Pension Trust.............. $ 1,400,000 * 46,279 *
JP Morgan Securities Inc..... $ 12,000,000 6.0% 396,678(10) *
Lakeshore International,
Ltd. ...................... $ 1,600,000 * 52,890 *
Levco Alternative Fund,
Ltd. ...................... $ 2,534,000 1.27% 83,765 *
Lawrence N. Brandt........... $ 1,250,000 * 41,320 *
Lyxor Master Fund............ $ 188,000 * 6,214 *
Merrill Lynch, Pierce, Fenner
& Smith Incorporated....... $ 8,775,000 4.39% 290,070 *
Purchase Associates, L.P. ... $ 688,000 * 22,742 *
Robertson Stephens........... $ 15,000,000 7.5% 495,847 1.12%
Royal Bank of Canada......... $ 2,500,000 1.25% 82,641(11) *
TQA Master Plus Fund, Ltd.... $ 3,750,000 1.88% 123,961 *
33
AGGREGATE PRINCIPAL NUMBER OF SHARES PERCENTAGE OF
AMOUNT AT PERCENTAGE OF OF COMMON STOCK SHARES OF
MATURITY OF NOTES NOTES THAT MAY COMMON STOCK
NAME THAT MAY BE SOLD OUTSTANDING BE SOLD(1) OUTSTANDING(2)
---- ------------------- ------------- ---------------- -----------------
UBS O'Connor LLC F/B/O UBS
Global Equity Arbitrage
Master Fund Ltd. .......... $ 6,000,000 3.0% 198,339 *
UBS Warburg LLC.............. $ 3,995,000 2.0% 132,060 *
Vanguard Equity Income
Fund....................... $ 6,000,000 3.0% 198,339 *
Yield Strategies Fund I,
L.P. ...................... $ 3,000,000 1.5% 99,169 *
Zurich Institutional
Benchmarks................. $ 250,000 * 8,264 *
All other holders of notes or
future transferees,
pledges, donees, assignees
or successors of any such
holders(12)(13)............ $ 8,955,000 4.48% 296,035 *
------------ ----- --------- -----
Total........................ $200,000,000 100% 6,611,300(14) 13.11%(15)
============ ===== ========= =====
---------------
* Less than one percent (1%).
(1) Assumes conversion of all of the holder's notes at a conversion rate of
33.0565 shares of common stock per $1,000 principal amount at maturity of
the notes. This conversion rate is subject to adjustment, however, as
described under "Description of the Notes -- Conversion Rights." As a
result, the number of shares of common stock issuable upon conversion of
the notes may increase or decrease in the future.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act, using 43,826,969
common shares outstanding as of December 31, 2001. In calculating this
amount for each holder, we treated as outstanding the number of shares of
common stock issuable upon conversion of all that holder's notes, but we
did not assume conversion of any other holder's notes.
(3) Does not include 1,042,600 shares of common stock owned by Baker Biotech
Fund I, L.P. in addition to the common stock into which such holder's notes
are convertible.
(4) Does not include 1,691,000 shares of common stock owned by Baker Biotech
Fund II, L.P. in addition to the common stock into which such holder's
notes are convertible.
(5) Does not include 225,630 shares of common stock owned by Baker Bros.
Investments, L.P. in addition to the common stock into which such holder's
notes are convertible.
(6) Does not include 80,000 shares of common stock owned by Baker Bros.
Investments II, L.P. in addition to the common stock into which such
holder's notes are convertible.
(7) Does not include 296,150 shares of common stock owned by Baker/Tisch
Investments, L.P. in addition to the common stock into which such holder's
notes are convertible.
(8) Does not include 914,300 shares of common stock owned by Fidelty Select
Portfolios: Biotechnology Portfolio in addition to the common stock into
which such holders notes are convertible.
(9) Does not include 2,000,000 shares of common stock owned by Four Partners in
addition to the common stock into which such holder's notes are
convertible.
(10) Does not include 3,850 shares of common stock owned by JP Morgan
Securities Inc. in addition to the common stock into which such holder's
notes are convertible.
(11) Does not include 10,400 shares of common stock owned by Royal Bank of
Canada in addition to the common stock into which such holder's notes are
convertible.
(12) Information about other selling shareholders will be set forth in
prospectus supplements, if required.
(13) Assumes that any other holders of the notes or any future pledges, donees,
assignees, transferees or successors of or from any other such holders of
the notes, do not beneficially own any shares of common stock other than
the common stock issuable upon conversion of the notes at the initial
conversion rate.
(14) Represents the number of shares of common stock into which $200,000,000 of
notes would be convertible at the conversion rate described in footnote 1
above.
(15) Represents the amount which the selling securityholders may sell under this
prospectus divided by the sum of the common stock outstanding as of
December 31, 2001 plus the 6,611,300 shares of common stock into which the
notes are convertible.
34
PLAN OF DISTRIBUTION
The selling securityholders will be offering and selling all of the
securities offered and sold under this prospectus. We will not receive any of
the proceeds from the offering of the notes or the shares of common stock by the
selling securityholders. In connection with the initial offering of the notes,
we entered into a registration rights agreement dated October 17, 2001 with the
initial purchasers of the notes. Securities may only be offered or sold under
this prospectus pursuant to the terms of the registration rights agreement.
However, selling securityholders may resell all or a portion of the securities
in open market transactions in reliance upon Rule 144 or Rule 144A under the
Securities Act, provided they meet the criteria and conform to the requirements
of one of these rules. We are registering the notes and shares of common stock
covered by this prospectus to permit holders to conduct public secondary trading
of these securities from time to time after the date of this prospectus. We have
agreed, among other things, to bear all expenses, other than underwriting
discounts and selling commissions, in connection with the registration and sale
of the notes and the shares of common stock covered by this prospectus.
The selling securityholders may sell all or a portion of the notes and
shares of common stock beneficially owned by them and offered hereby from time
to time:
- directly; or
- through underwriters, broker-dealers or agents, who may receive
compensation in the form of discounts, commissions or concessions from
the selling securityholders and/or from the purchasers of the notes and
shares of common stock for whom they may act as agent.
The notes and the shares of common stock may be sold from time to time in
one or more transactions at:
- fixed prices, which may be changed;
- prevailing market prices at the time of sale;
- varying prices determined at the time of sale; or
- negotiated prices.
These prices will be determined by the holders of the securities or by
agreement between these holders and underwriters or dealers who may receive fees
or commissions in connection with the sale. The aggregate proceeds to the
selling securityholders from the sale of the notes or shares of common stock
offered by them hereby will be the purchase price of the notes or shares of
common stock less discounts and commissions, if any. The selling securityholders
may be deemed to be "underwriters" as defined in the Securities Act of 1933, as
amended. Any profits realized by the selling securityholders may be deemed to be
underwriting commissions.
The sales described in the preceding paragraph may be effected in
transactions:
- on any national securities exchange or quotation service on which the
notes or shares of common stock may be listed or quoted at the time of
sale, including the Nasdaq National Market in the case of the shares of
common stock;
- in the over-the counter market;
- in transactions otherwise than on such exchanges or services or in the
over-the-counter market; or
- through the writing of options.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the notes and shares of common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers. These broker-dealers may in turn engage in short sales of the
notes and shares of common stock in the course of hedging their positions. The
selling securityholders may also sell the notes and shares of common stock short
and deliver the notes
35
and shares of common stock to close out short positions, or loan or pledge notes
and shares of common stock to broker-dealers that in turn may sell the notes and
shares of common stock.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholders and any underwriter,
broker-dealer or agent regarding the sale of the notes and the shares of common
stock by the selling securityholders. Selling securityholders may not sell any,
or may not sell all, of the notes and the shares of common stock offered by them
pursuant to this prospectus. In addition, we cannot assure you that a selling
securityholder will not transfer, devise or gift the notes and the shares of
common stock by other means not described in this prospectus. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A
rather than pursuant to this prospectus.
The notes were issued and sold in October 2001 in transactions exempt from
the registration requirements of the Securities Act to persons reasonably
believed by the initial purchasers to be "qualified institutional buyers," as
defined in Rule 144A under the Securities Act. Pursuant to the registration
rights agreement, we have agreed to indemnify the initial purchasers and each
selling securityholder, and each selling securityholder has agreed to indemnify
us against specified liabilities arising under the Securities Act. The selling
securityholders may also agree to indemnify any broker-dealer or agent that
participates in transactions involving sales of the securities against some
liabilities, including liabilities that arise under the Securities Act.
The selling securityholders and any other person participating in such
distribution will be subject to the Exchange Act. The Exchange Act rules
include, without limitation, Regulation M, which may limit the timing of
purchases and sales of any of the notes and the underlying shares of common
stock by the selling securityholders and any such other person. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the notes and the underlying shares of common stock to
engage in market-making activities with respect to the particular notes and the
underlying shares of common stock being distributed for a period of up to five
business days prior to the commencement of distribution. This may affect the
marketability of the notes and the underlying shares of common stock and the
ability of any person or entity to engage in market-making activities with
respect to the notes and the underlying shares of common stock.
Under the registration rights agreement, we are obligated to use our
reasonable best efforts to keep the registration statement of which this
prospectus is a part effective until the earlier of:
- October 17, 2003;
- the date when the notes and the shares of common stock issuable upon
conversion of the notes (i) may be resold immediately without restriction
pursuant to the volume limitation provisions of Rule 144(k) under the
Securities Act or (ii) cease to be outstanding; and
- the sale, pursuant to the registration statement to which this prospectus
relates, of all the securities registered thereunder.
Our obligation to keep the registration statement to which this prospectus
relates effective is subject to specified, permitted exceptions set forth in the
registration rights agreement. In these cases, we may prohibit offers and sales
of the notes and shares of common stock pursuant to the registration statement
to which this prospectus relates.
We may suspend the use of this prospectus if we learn of any event that
causes this prospectus to include an untrue statement of a material fact
required to be stated in the prospectus or necessary to make the statements in
the prospectus not misleading in light of the circumstances then existing. If
this type of event occurs, a prospectus supplement or post-effective amendment,
if required, will be distributed to each selling securityholder. Each selling
securityholder has agreed not to trade securities from the time the selling
securityholder receives notice from us of this type of event until the selling
securityholder receives a prospectus supplement or amendment. This time period
will not exceed 45 days in any three-month period and will not exceed an
aggregate of 120 days in any 12 month-period.
36
LEGAL MATTERS
Certain legal matters regarding the notes and the shares of common stock
into which those notes are convertible will be passed upon for Regeneron by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
EXPERTS
The financial statements of Regeneron Pharmaceuticals, Inc. incorporated in
this prospectus by reference to the Annual Report on Form 10-K of Regeneron
Pharmaceuticals, Inc. for the year ended December 31, 2000, except as they
relate to Amgen-Regeneron Partners, have been audited by PricewaterhouseCoopers
LLP, independent accountants, and, insofar as they relate to Amgen-Regeneron
Partners, by Ernst & Young LLP, independent auditors, whose report thereon is
incorporated by reference herein. Such financial statements have been so
incorporated in reliance on the report of such independent accountants given on
the authority of such firm as experts in auditing and accounting.
Ernst & Young LLP, independent auditors, have audited the financial
statements of Amgen-Regeneron Partners included in our Annual Report on Form
10-K 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. The Amgen-Regeneron Partners' financial statements are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
37