Filed Pursuant to Rule 424(b)(2)
Registration No. 333-56512
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JULY 25, 2001
ALTEON INC.
(ALTEON LOGO) 4,457,146 SHARES
OF COMMON STOCK
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We are selling 4,457,146 shares of common stock with this prospectus
supplement and the accompanying prospectus. The last reported sale price of our
common stock on October 13, 2003 was $2.03 per share. Our common stock is listed
for trading on the American Stock Exchange under the symbol "ALT."
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THE OFFERING PER SHARE TOTAL
------------ --------- -----
Public Offering Price $1.75 $7,800,005.50
Proceeds to Alteon Inc. (before expenses) 1.75 7,800,005.50
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE S-3 OF THIS
PROSPECTUS SUPPLEMENT.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is October 15, 2003
TABLE OF CONTENTS
PAGE
----
About this Prospectus Supplement........................................ S-2
Use of Proceeds......................................................... S-2
Dilution................................................................ S-2
Plan of Distribution.................................................... S-3
Risk Factors............................................................ S-3
Recent Developments..................................................... S-9
Legal Matters........................................................... S-9
You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and the documents incorporated by
reference. We have not authorized anyone to provide you with information
different from that contained in any of these documents. The information
contained in these documents is accurate only as of the date of each document,
as the case may be, regardless of the time of delivery of this prospectus
supplement and accompanying prospectus or of any sale of common stock. Our
business, financial condition, results of operations and prospects may change
after the date set forth in each document in which the information is presented.
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S-1
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our common
stock in two separate documents: (a) the accompanying prospectus, which provides
general information, some of which may not apply to this offering or may have
been superseded by subsequent events or filings with the Securities and Exchange
Commission; and (b) this prospectus supplement, which describes the specific
details regarding this offering. Generally, when we refer to this "prospectus,"
we are referring to both documents combined.
If information in this prospectus supplement is inconsistent with the
accompanying prospectus, you should rely on this prospectus supplement.
Statements in this prospectus supplement that are not statements or descriptions
of historical facts are "forward-looking" statements under Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private Securities
Litigation Reform Act of 1995 and are subject to numerous risks and
uncertainties. These forward-looking statements and other forward-looking
statements made by us or our representatives are based on a number of
assumptions. The words "believe," "expect," "anticipate," "intend," "estimate"
or other expressions, which are predictions of or indicate future events and
trends and which do not relate to historical matters, identify forward-looking
statements. You are cautioned not to place undue reliance on these
forward-looking statements as they involve risks and uncertainties, and actual
results could differ materially from those currently anticipated due to a number
of factors. See "Risk Factors" beginning on Page S-3.
Except for special circumstances in which a duty to update arises when
prior disclosure becomes materially misleading in light of subsequent events, we
do not intend to update any of these forward-looking statements to reflect
events or circumstances after the date of this prospectus supplement or to
reflect the occurrence of unanticipated events.
USE OF PROCEEDS
We expect the net proceeds from this sale of common stock to be
approximately $7,762,006 after deducting our estimated expenses. We intend to
use the net proceeds from the sale of the common stock to fund the continued
development of ALT-711 and for general corporate purposes.
DILUTION
Our net tangible book value as of June 30, 2003 was $13,293,732 or $0.37
per share of common stock. Net tangible book value per share is determined by
dividing our net tangible book value, which consists of tangible assets less
total liabilities, by the number of shares of common stock outstanding at that
date. Without taking into account any other changes in the net tangible book
value after June 30, 2003, other than to give effect to our receipt of the
estimated net proceeds from this sale of 4,457,146 shares of common stock at an
offering price of $1.75 per share, less estimated offering expenses, our net
tangible book value as of June 30, 2003 would have been $21,055,738 or $0.52 per
share. This represents an immediate increase in the net tangible book value per
share of $0.15 per share to existing stockholders and an immediate dilution of
$1.23 per share to new investors. The following table illustrates this per share
dilution:
Offering Price Per Share $ 1.75
Net Tangible Book Value Per Share Before the Offering $ 0.37
Increase in Net Tangible Book Value Per Share After Giving Effect to this Offering $ 0.15
Net Tangible Book Value Per Share as of June 30, 2003 After Giving Effect to this Offering $ 0.52
Dilution Per Share to New Investors $ 1.23
This table is based on the number of outstanding shares of common stock as
of June 30, 2003 and does not include the following:
- 2,271,898(1) shares of common stock issuable upon conversion of our
outstanding Series G Preferred Stock as of June 30, 2003;
- 6,822,659(1) shares of common stock issuable upon conversion of our
outstanding Series H Preferred Stock as of June 30, 2003;
S-2
- 5,614,076 shares of common stock issuable upon the exercise of
outstanding stock options as of June 30, 2003 at a weighted average
exercise price of $3.0879 per share; and
- 1,133,636 and 60,000 shares of common stock issuable upon exercise
of outstanding warrants as of June 30, 2003 at an exercise price of
$2.25 and $4.025, respectively.
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(1) Each share of Series G Preferred Stock and Series H Preferred Stock is
convertible, upon 70 days' prior written notice, into the number of shares
of common stock determined by dividing $10,000 by the average of the
closing sales price of the common stock, as reported on the American Stock
Exchange, for the 20 business days immediately preceding the date of
conversion. The number of shares indicated as issuable upon conversion of
the Series G and Series H were, for purposes of this table, based upon an
average closing price of $4.9526. Had the table been calculated as of
September 30, 2003, the number of shares issuable upon the conversion of
the Series G and Series H would have been 5,344,004 and 16,048,397,
respectively, using an average closing price of $2.1055 per share.
PLAN OF DISTRIBUTION
We have entered into a stock purchase agreement dated as of October 15,
2003 with WHI Growth Fund, LP, WHI Select Fund, LP, Panacea Fund, LLC, Vertical
Ventures, LLC, Joseph Klein III, Trustee Joseph Klein III 5% Charitable
Remainder Unitrust Under Agreement dated 11/1/88, Xmark Fund, Ltd, Xmark Fund,
L.P., Mainfield Enterprises, Inc., Bluegrass Growth Fund LP, North Sound Legacy
Fund, North Sound Legacy Institutional Fund LLC, and North Sound Legacy
International Ltd. as Purchasers, with respect to the shares being offered by
this prospectus supplement. Subject to certain conditions, we have agreed to
sell to the Purchasers, and the Purchasers have agreed to purchase from us, the
4,457,146 shares of common stock offered hereby at $1.75 per share.
Our common stock is listed on the American Stock Exchange under the symbol
"ALT."
We estimate that our expenses for the offering will be approximately
$38,000. This amount includes approximately $22,500 for exchange registration
fees, $12,500 in legal fees and expenses and $3,000 in miscellaneous expenses.
We have agreed to indemnify the Purchasers against some liabilities,
including liabilities under the Securities Act, or to contribute to the payments
the Purchasers may be required to make because of any of those liabilities.
RISK FACTORS
Investment in our common stock involves substantial risks, including those
described below. You should purchase our common stock only if you can afford to
lose your entire investment. You should carefully consider all of the
information included in this prospectus to evaluate us and our business. You
should make this evaluation before deciding whether to purchase our common
stock. You should understand that additional risks which we cannot predict at
this time may have negative impact on us in the future. You should also
understand that the risks discussed below might affect us more than or in a
different manner than we now predict.
If we do not obtain sufficient additional funding to meet our needs, we may have
to curtail or discontinue the research, product development, pre-clinical
testing and clinical trials of some or all of our product candidates.
As of June 30, 2003, we had working capital of $13,047,854, including
$15,864,688 of cash and cash equivalents and short-term investments. During
March 2003, we sold 2,300,000 shares of common stock, raising net proceeds of
$7,657,355. Our cash used in operations for the six months ended June 30, 2003
was $9,191,795, and for the year ended December 31, 2002 was $14,931,030.
In July 2003, we announced results from two Phase 2b efficacy trials of
ALT-711, the SAPPHIRE and SILVER trials. The results demonstrated efficacy
against systolic hypertension, but did not meet the primary
S-3
endpoints. We continue to assess the data and are working with our external
advisors to determine the appropriate clinical development strategy and timeline
of additional Phase 2 trials of ALT-711. However, we will require additional new
funding to complete any new clinical trials we initiate. During the period prior
to the initiation of any new trials, we expect to reduce the cash burn rate,
initially through the reduction of research and development expenses, including
clinical trial expenses and discretionary spending. We currently have adequate
resources to sustain our operations, exclusive of the full cost of any new
clinical trials, into the second half of 2004. Throughout the next 12 months, we
will continue to monitor our liquidity position and continue to explore fund
raising alternatives. Depending upon the results of any attempts made by us to
raise additional funds through the sale of additional equity securities or
through strategic collaborations, we may be required to further reduce or
curtail our research and product development activities and other operations
(including any new clinical trials) if cash and cash equivalents fall below
pre-determined levels.
We will require, over the long-term, substantial new funding to pursue
development and commercialization of ALT-711 and our other product candidates to
continue our operations. We believe that satisfying these capital requirements
over the long-term will require successful commercialization of our product
candidates. However, it is uncertain whether any products will be approved or
will be commercially successful. The amount of our future capital requirements
will depend on numerous factors, including the progress of our research and
development programs, the conduct of pre-clinical tests and clinical trials, the
development of regulatory submissions, the costs associated with protecting
patents and other proprietary rights, the development of marketing and sales
capabilities and the availability of third-party funding.
Because of our near-term and long-term capital requirements, we will seek
access to the public or private equity markets whenever conditions are
favorable. This may have the effect of materially diluting the current holders
of our outstanding stock. We may also seek additional funding through corporate
collaborations and other financing vehicles, potentially including off-balance
sheet financing through limited partnerships or corporations. There can be no
assurance that such funding will be available at all or on terms acceptable to
us. If adequate funds are not available, we may be required to curtail
significantly one or more of our research or development programs. If we obtain
funds through arrangements with collaborative partners or others, we may be
required to relinquish rights to certain of our technologies or product
candidates.
If we do not successfully develop any products, we may not derive any REVENUES.
We have not yet requested or received regulatory approval for any product
from the United States Food and Drug Administration ("FDA") or any other
regulatory body. All of our product candidates, including our lead candidate,
ALT-711, are still in research or clinical development. We may not succeed in
the development and marketing of any therapeutic or diagnostic product. To
achieve profitable operations, we must, alone or with others, successfully
identify, develop, introduce and market proprietary products. Such products will
require significant additional investment, development and pre-clinical and
clinical testing prior to potential regulatory approval and commercialization.
The development of new pharmaceutical products is highly uncertain
and subject to a number of significant risks. Potential products that appear to
be promising at early stages of development may not reach the market for a
number of reasons. Potential products may be found ineffective or cause harmful
side effects during pre-clinical testing or clinical trials, fail to receive
necessary regulatory approvals, be difficult to manufacture on a large scale, be
uneconomical, fail to achieve market acceptance or be precluded from
commercialization by proprietary rights of third parties. We may not be able to
undertake additional clinical trials. In addition, our product development
efforts may not be successfully completed, we may not obtain regulatory
approvals, and our products, if introduced, may not be successfully marketed or
achieve customer acceptance. We do not expect any of our products, including
ALT-711, to be commercially available for a number of years, if at all.
Clinical trials required for our product candidates are expensive and
time-consuming, and their outcome is uncertain.
Before obtaining regulatory approvals for the commercial sale of any
of our products under development, we must demonstrate through pre-clinical
studies and clinical trials that the product is safe and effective for use in
each target indication. The length of time necessary to complete clinical trials
varies significantly and may be
S-4
difficult to predict. Factors which can cause delay or termination of our
clinical trials include: (i) slower than expected patient enrollment due to the
nature of the protocol, the proximity of patients to clinical sites, the
eligibility criteria for the study, competition with clinical trials for other
drug candidates or other factors; (ii) lower than expected retention rates of
patients in a clinical trial; (iii) inadequately trained or insufficient
personnel at the study site to assist in overseeing and monitoring clinical
trials; (iv) delays in approvals from a study site's review board; (v) longer
treatment time required to demonstrate effectiveness or determine the
appropriate product dose; (vi) lack of sufficient supplies of the product
candidate; (vii) adverse medical events or side effects in treated patients;
(viii) lack of effectiveness of the product candidate being tested and (ix)
regulatory changes.
Even if we obtain positive results from pre-clinical or clinical
trials for a particular product, we may not achieve the same success in future
trials of that product. In addition, some or all of the clinical trials we
undertake may not demonstrate sufficient safety and efficacy to obtain the
requisite regulatory approvals, which could prevent the creation of marketable
products. Our product development costs will increase if we have delays in
testing or approvals, if we need to perform more or larger clinical trials than
planned or if our trials are not successful. Delays in our clinical trials may
harm our financial results and the commercial prospects for our products.
If we are unable to derive revenues from product sales, we may never be
profitable.
All of our revenues to date have been generated from collaborative
research agreements and financing activities, or interest income earned on these
funds. We have not received any revenues from product sales. We may not realize
product revenues on a timely basis, if at all.
At June 30, 2003, we had an accumulated deficit of $181,500,289. We
anticipate that we will incur substantial, potentially greater, losses in the
future. Our products under development may not be successfully developed and our
products, if successfully developed, may not generate revenues sufficient to
enable us to earn a profit. We expect to incur substantial additional operating
expenses over the next several years as our research, development and clinical
trial activities increase. We do not expect to generate revenues from the sale
of products, if any, for a number of years. Our ability to achieve profitability
depends, in part, on our ability to enter into agreements for product
development, obtain regulatory approval for our products and develop the
capacity, or enter into agreements, for the manufacture, marketing and sale of
any products. We may not obtain required regulatory approvals, or successfully
develop, manufacture, commercialize and market product candidates, and we may
never achieve product revenues or profitability.
Prior stock option repricing may have an adverse effect on our future financial
performance.
Based on the performance of our stock, we repriced certain employee
stock options on February 2, 1999, in order to bolster employee retention. As a
result of this repricing, options to purchase 1.06 million shares of stock were
repriced and certain vesting periods related to these options were modified or
extended. This repricing may have a material adverse impact on future financial
performance based on the Financial Accounting Standards Board ("FASB")
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation, An Interpretation of APB Opinion No. 25." This
interpretation requires us to record compensation expense or benefit, which is
adjusted every quarter, for increases or decreases in the fair value of the
repriced options based on changes in our stock price from the value at July 1,
2000, until the repriced options are exercised, forfeited or expire. The options
expire at various dates through January 2008.
If we are unable to form the collaborative relationships that our business
strategy requires, then our programs will suffer and we may not be able to
develop products.
Our strategy for developing and deriving revenues from our products
depends, in large part, upon entering into arrangements with research
collaborators, corporate partners and others. We are seeking to establish these
relationships to provide the funding necessary for continuation of our product
development, but if such efforts may not be successful, our programs may suffer
and we may be unable to develop products.
S-5
If we are able to form our collaborative relationships, but are unable to
maintain them, our product development may be delayed and disputes over rights
to technology may result.
We may form collaborative relationships that will, in some cases, make
us dependent upon outside partners to conduct pre-clinical testing and
clinical trials and to provide adequate funding for our development programs.
Such corporate partners, if any, may have all or a significant portion of the
development and regulatory approval responsibilities. Failure of the corporate
partners to develop marketable products or to gain the appropriate regulatory
approvals on a timely basis, if at all, would have a material adverse effect on
our business, financial condition and results of operations.
In most cases, we will not be able to control the amount and timing of
resources that our corporate partners devote to our programs or potential
products. If any of our corporate partners breached or terminated its agreement
with us or otherwise failed to conduct its collaborative activities in a timely
manner, the pre-clinical or clinical development or commercialization of product
candidates or research programs could be delayed, and we would be required to
devote additional resources to product development and commercialization or
terminate certain development programs.
Disputes may arise in the future with respect to the ownership of
rights to any technology we develop with third parties. These and other possible
disagreements between us and collaborators could lead to delays in the
collaborative research, development or commercialization of product candidates,
or could require or result in litigation or arbitration, which would be
time-consuming and expensive and would have a material adverse effect on our
business, financial condition, results of operations and liquidity.
Any corporate partners we have may develop, either alone or with
others, products that compete with the development and marketing of our
products. Competing products, either developed by the corporate partners or to
which the corporate partners have rights, may result in their withdrawal of
support with respect to all or a portion of our technology, which would have a
material adverse effect on our business, financial condition, results of
operations and liquidity.
If we cannot successfully develop a marketing and sales force or maintain
suitable arrangements with third parties to market and sell our products, our
ability to deliver products may be impaired.
We currently have no experience in marketing or selling
pharmaceutical products. In order to achieve commercial success for any approved
product, we must either develop a marketing and sales force or, where
appropriate or permissible, enter into arrangements with third parties to market
and sell our products. We might not be successful in developing marketing and
sales capabilities. Further, we may not be able to enter into marketing and
sales agreements with others on acceptable terms, and any such arrangements, if
entered into, may be terminated. If we develop our own marketing and sales
capability, it will compete with other companies that currently have
experienced, well funded and larger marketing and sales operations. To the
extent that we enter into co-promotion or other sales and marketing arrangements
with other companies, revenues will depend on the efforts of others, which may
not be successful.
If we cannot successfully form and maintain suitable arrangements with third
parties for the manufacturing of the products we may develop, our ability to
develop or deliver products may be impaired.
We have no experience in manufacturing products for commercial
purposes and do not have manufacturing facilities. Consequently, we are
dependent on contract manufacturers for the production of products for
development and commercial purposes. The manufacture of our products for
clinical trials and commercial purposes is subject to current Good Manufacturing
Practice ("cGMP")regulations promulgated by the FDA. In the event that we are
unable to obtain or retain third-party manufacturing for our products, we will
not be able to commercialize such products as planned. We may not be able to
enter into agreements for the manufacture of future products with manufacturers
whose facilities and procedures comply with cGMP and other regulatory
requirements.
Our current dependence upon others for the manufacture of our products may
adversely affect our profit margin, if any, on the sale of future products and
our ability to develop and deliver such products on a timely and competitive
basis.
S-6
If we are not able to protect the proprietary rights that are critical to our
success, the development and any possible sales of our product candidates could
suffer and competitors could force our products completely out of the market.
Our success will depend on our ability to obtain patent protection for
our products, preserve our trade secrets, prevent third parties from
infringing upon our proprietary rights and operate without infringing upon the
proprietary rights of others, both in the United States and abroad.
The degree of patent protection afforded to pharmaceutical inventions
is uncertain and our potential products are subject to this uncertainty.
Competitors may develop competitive products outside the protection that may
be afforded by the claims of our patents. We are aware that other parties have
been issued patents and have filed patent applications in the United States and
foreign countries with respect to other agents that have an effect on A.G.E.s.
or the formation of A.G.E. crosslinks. In addition, although we have several
patent applications pending to protect proprietary technology and potential
products, these patents may not be issued, and the claims of any patents, which
do issue, may not provide significant protection of our technology or products.
In addition, we may not enjoy any patent protection beyond the expiration dates
of our currently issued patents.
We also rely upon unpatented trade secrets and improvements, unpatented
know-how and continuing technological innovation to maintain, develop and
expand our competitive position, which we seek to protect, in part, by
confidentiality agreements with our corporate partners, collaborators, employees
and consultants. We also have invention or patent assignment agreements with our
employees and certain, but not all, corporate partners and consultants. Relevant
inventions may be developed by a person not bound by an invention assignment
agreement. Binding agreements may be breached, and we may not have adequate
remedies for such breach. In addition, our trade secrets may become known to or
be independently discovered by competitors.
If we fail to obtain regulatory approvals for our products, the commercial use
of our products will be limited.
Our research, pre-clinical testing and clinical trials of our product
candidates are, and the manufacturing and marketing of our products will be,
subject to extensive and rigorous regulation by numerous governmental
authorities in the United States and in other countries where we intend to test
and market our product candidates.
Prior to marketing, any product we develop must undergo an extensive
regulatory approval process. This regulatory process, which includes
pre-clinical testing and clinical trials and may include post-marketing
surveillance of each compound to establish its safety and efficacy, can take
many years and can require the expenditure of substantial resources. Data
obtained from pre-clinical and clinical activities is susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. In
addition, we may encounter delays or rejections based upon changes in FDA policy
for drug approval during the period of product development and FDA regulatory
review of each submitted new drug application ("NDA"). We may encounter similar
delays in foreign countries. We may not obtain regulatory approval for the drugs
we develop. Moreover, regulatory approval may entail limitations on the
indicated uses of the drug. Further, even if we obtain regulatory approval, a
marketed drug and its manufacturer are subject to continuing review and
discovery of previously unknown problems with a product or manufacturer which
may have adverse effects on our business, financial condition and results of
operations, including withdrawal of the product from the market. Violations of
regulatory requirements at any stage, including pre-clinical testing, clinical
trials, the approval process or post-approval, may result in various adverse
consequences, including the FDA's delay in approving, or its refusal to approve
product, withdrawal of an approved product from the market and the imposition of
criminal penalties against the manufacturer and NDA holder. None of our products
has been approved for commercialization in the United States or elsewhere. We
may not be able to obtain FDA approval for any products. Failure to obtain
requisite governmental approvals or failure to obtain approvals of the scope
requested will delay or preclude our licensees or marketing partners from
marketing our products or limit the commercial use of such products and will
have a material adverse effect on our business, financial condition, results of
operations and liquidity.
S-7
If we are not able to compete successfully with other companies in the
development and marketing of cures and therapies for cardiovascular diseases,
diabetes and the other conditions for which we seek to develop products, we may
not be able to continue our operations.
We are engaged in pharmaceutical fields characterized by extensive
research efforts and rapid technological progress. Many established
pharmaceutical and biotechnology companies with resources greater than ours are
attempting to develop products that would be competitive with our products.
Other companies may succeed in developing products that are safer, more
efficacious or less costly than any we may develop and may also be more
successful than us in production and marketing. Rapid technological development
by others may result in our products becoming obsolete before we recover a
significant portion of the research, development or commercialization expenses
incurred with respect to those products.
Certain technologies under development by other pharmaceutical companies
could result in better treatments for cardiovascular disease, or diabetes and
its related complications. Several large companies have initiated or expanded
research, development and licensing efforts to build pharmaceutical franchises
focusing on these medical conditions. It is possible that one or more of these
initiatives may reduce or eliminate the market for some of our products. In
addition, other companies have initiated research in the inhibition or crosslink
breaking of A.G.E.s.
If governments and third-party payers continue their efforts to contain or
decrease the costs of healthcare, we may not be able to commercialize our
products successfully.
In certain foreign markets, pricing and/or profitability of prescription
pharmaceuticals are subject to government control. In the United States, we
expect that there will continue to be federal and state initiatives to control
and/or reduce pharmaceutical expenditures. In addition, increasing emphasis on
managed care in the United States will continue to put pressure on
pharmaceutical pricing. Cost control initiatives could decrease the price that
we receive for any products we may develop and sell in the future and have a
material adverse effect on our business, financial condition and results of
operations. Further, to the extent that cost control initiatives have a material
adverse effect on our corporate partners, our ability to commercialize our
products may be adversely affected.
Our ability to commercialize pharmaceutical products may depend, in
part, on the extent to which reimbursement for the products will be available
from government health administration authorities, private health insurers and
other third-party payers. Significant uncertainty exists as to the reimbursement
status of newly approved healthcare products, and third-party payers, including
Medicare, are increasingly challenging the prices charged for medical products
and services. Third-party insurance coverage may not be available to patients
for any products developed by us. Government and other third-party payers are
attempting to contain healthcare costs by limiting both coverage and the level
of reimbursement for new therapeutic products and by refusing in some cases to
provide coverage for uses of approved products for disease indications for which
the FDA has not granted labeling approval. If adequate coverage and
reimbursement levels are not provided by government and other third-party payers
for our products, the market acceptance of these products would be adversely
affected.
If the users of the products we develop claim that our products have harmed
them, we may be subject to costly and damaging product liability litigation,
which could have a material adverse effect on our business, financial conditions
and results of operations.
The use of any of our potential products in clinical trials and the sale
of any approved products, including the testing and commercialization of
ALT-711 or other compounds, exposes us to liability claims resulting from the
use of products or product candidates. A claim, which was subsequently settled,
was made by a participant in one of our clinical trials, and additional claims
might be made directly by other such participants, consumers, pharmaceutical
companies or others. We maintain product liability insurance coverage for claims
arising from the use of our products in clinical trials. However, coverage is
becoming increasingly expensive, and we may not be able to maintain or acquire
insurance at a reasonable cost or in sufficient amounts to protect us against
losses due to liability that could have a material adverse effect on our
business, financial conditions and results of operations. We may not be able to
obtain commercially reasonable product liability insurance for any product
approved for marketing in the future and insurance coverage and our resources
may not be sufficient to satisfy any liability
S-8
resulting from product liability claims. A successful product liability claim or
series of claims brought against us could have a material adverse effect on our
business, financial condition, results of operations and liquidity.
If we are unable to attract and retain the key personnel on whom our success
depends, our product development, marketing and commercialization plans could
suffer.
We are highly dependent on the principal members of our management and
scientific staff. The loss of services of any of these personnel could
impede the achievement of our development objectives. Furthermore, recruiting
and retaining qualified scientific personnel to perform research and development
work in the future will also be critical to our success. We may not be able to
attract and retain personnel on acceptable terms given the competition between
pharmaceutical and healthcare companies, universities and non-profit research
institutions for experienced scientists. In addition, we rely on consultants to
assist us in formulating our research and development strategy. All of our
consultants are employed outside of us and may have commitments to or consulting
or advisory contracts with other entities that may limit their availability to
us.
Our operations involve a risk of injury or damage from hazardous materials, and
if an accident were to occur, we could be subject to costly and damaging
liability claims, which could have a material adverse effect on our business,
financial condition and results of operations.
Our research and development activities involve the controlled use of
hazardous materials and chemicals. Although we believe that our safety
procedures for handling and disposing of hazardous materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of an accident, we could be held liable for any damages or fines that
result. Such liability could have a material adverse effect on our business,
financial condition, results of operations and liquidity.
RECENT DEVELOPMENTS
The lease for our office and laboratory space in Ramsey, New Jersey
expires on November 1, 2003. We expect to sign in the near future a three-year
lease for 10,800 square feet of office space in Parsippany, New Jersey. Annual
rent over the term of the lease ranges from approximately $260,000 in the first
year to $280,000 in the third year.
LEGAL MATTERS
Smith, Stratton, Wise, Heher & Brennan, LLP, Princeton, New Jersey, will
pass upon the validity of the common stock offered hereby and other legal
matters on behalf of Alteon Inc.
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S-9
(ALTEON LOGO)
4,457,146 SHARES
ALTEON INC.
COMMON STOCK
OCTOBER 15, 2003