As filed with the Securities and Exchange Commission on
March 11, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CYPROS PHARMACEUTICAL CORPORATION
(Exact name of Registrant as specified in its charter)
California 2714 West Loker Avenue 33-0476164
(State or other Carlsbad, California 92008 (I.R.S.Employer
jurisdiction (619) 929-9500 Identification
of Number)
Identification
incorporation
organization
(Address, including zip code, and
telephone number, including area code,
of Registrant's principal executive
offices)
David W. Nassif, Esq.
Vice President and Chief Financial Officer
CYPROS PHARMACEUTICAL CORPORATION
2714 Loker Avenue West
Carlsbad, California 92008
(619) 929-9500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
M. Wainwright Fishburn, Esq.
COOLEY GODWARD LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
(619) 550-6000
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date of
this Registration Statement.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following box. [ ]
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [ X ]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462 (b) under the Securities
Act, please check the following box and list the
Securities Act registration statement number of the
earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462 (c) under the Securities Act, check the following
box and list the Securities Act registration statement
number of the earlier effective registration statement for
the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Amount to Proposed Proposed
Amount
class of be maximum maximum of
securities to registered offering aggregate
registra
be registered (1) price offering tion
fee
per price (1)
share (1)
Common Stock, 1,328,969 $5.41 $7,189,722 $2,179.00
no par shares
value
(1) Estimated in accordance with Rule 457(c) solely for the
purpose of computing the amount of the registration fee based on
the average of the high and low prices of the Registrant's Common
Stock as reported on the NASDAQ National Market System on March
6, 1997.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED March 11, 1997
P R O S P E C T U S
1,328,969 Shares
Cypros Pharmaceutical Corporation
Common Stock
______________________________
This Prospectus relates to 1,328,969 shares (the "Shares") of
Common Stock, no par value per share (the "Common Stock"), of
Cypros Pharmaceutical Corporation (the "Company"). The Shares may
be offered by shareholders of the Company (the "Selling
Shareholders") from time to time, as market conditions permit on
the NASDAQ National Market System, or otherwise, through ordinary
brokerage transactions, in negotiated transactions, at fixed
prices which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices
or at negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through brokerdealers,
and all such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling
Shareholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal,
or both (which compensation as to a particular brokerdealer might
be in excess of customary commissions). See "Selling
Shareholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has
agreed to bear certain expenses (other than fees and expenses, if
any, of counsel or other advisors to the Selling Shareholders) in
connection with the registration and sale of the Shares being
offered by the Selling Shareholders. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities,
including certain liabilities under the Securities Act of 1933, as
amended.
The Common Stock of the Company is traded on the NASDAQ National
Market System under the symbol "CYPR." On March 6, 1997, the last
sale price for the Common Stock as reported by NASDAQ was $5.50
per share.
______________________________
The Common Stock offered hereby involves a high degree of risk.
See "Risk Factors" beginning on page 3.
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SE
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is March , 1997
The information contained herein is subject to completion or ame
ndment. A registration statement relating to these securities has
been filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior
to the time the registration statement becomes effective. This
prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
THE COMPANY
Cypros Pharmaceutical Corporation (the "Company") was founded in
California in 1990 and is engaged in the development and marketing
of drug products for the hospital market. It is currently
marketing three injectable products and is developing two small
molecule therapeutic drugs, CPC-111 and CPC-211, for the treatment
of disorders, such as stroke, traumatic head injury, congestive
heart failure, cardiac surgery, sickle cell crisis, and the acute
complications of angioplasty, all of which are characterized by
ischemia (impaired blood flow), which interrupts the delivery of
both glucose and oxygen to tissue. The
Company's executive offices are located at 2714 Loker Avenue West,
Carlsbad, California 92008, and its telephone number is (619) 929-
9500.
RISK FACTORS
Except for the historical information contained herein, the
discussion in this Prospectus contains forward-looking statements
that involve risks and uncertainties. The Company's actual results
could differ materially from those discussed here. Factors that
could cause or contribute to such differences include, but are not
limited to, those discussed in the following risk factors as well
as those discussed elsewhere in this Prospectus and any documents
incorporated herein by reference.
The following factors, in addition to those discussed elsewhere in
this Prospectus, or incorporated herein by reference, should be
carefully considered in evaluating the Company and its business.
Continuing Operating Losses
The Company reported a net loss of $1,493,515 or $0.13 per share
for the quarter ended January 31, 1997, compared to a loss of
$740,460 or $0.06 per share for the prior-year period. The Company
expects that it will continue to incur operating losses as it
increases expenditures for clinical testing, Investigational New
Drug Application and New Drug Application filings and other
regulatory activities, U.S. patent prosecution, and product
acquisition and sales and marketing activities. To achieve
profitable operations, the Company, alone or with others, must
successfully develop, obtain regulatory approval for, introduce,
acquire, market and sell additional products. There can be no
assurance that the Company's product acquisition and development
efforts will result in additional products, that required
regulatory approvals will be obtained with respect to all or any
of its products now under development or that any of these
products will be commercially successful.
Significant Capital Requirements; Need for Additional Financing
The development and commercialization of drugs requires the
commitment of significant capital expenditures. The Company
believes that existing capital resources and the cash flow from
its recently-acquired products will allow it to maintain its
current and planned operations for at least two years. In addition
to funds provided from exercises of its currently outstanding
Redeemable Class B Warrants (the "Class B Warrants"), the Company
is seeking to obtain additional funds through public or private
equity financings, collaborative or other arrangements with
corporate partners or from other sources. There can be no
assurance that such additional financing can be obtained on
desirable terms or at all. If additional funds are not available,
the Company may be required to curtail significantly or eliminate
one or more of its research, discovery or development programs or
obtain funds through arrangements which may require the Company to
relinquish rights to certain of its products.
Uncertainties Associated with Regulatory Approval
A marketed drug, its manufacturer and its manufacturing facilities
are subject to continual review and periodic inspections, and
later discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on such
product or manufacturers, including a
withdrawal of the product from the market. Failure to comply with
the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product
recalls, operating restrictions and criminal prosecution. Further,
additional government regulation may be established which could
suspend or revoke regulatory approval of the Company's products.
Unproven Products
In addition to its three approved drugs, the Company has other
products in various stages of development which are subject to the
risks inherent in drug development, including unforeseen problems,
delays, expenses and complications frequently encountered with the
early phases of research, development and commercialization of
products, the dependence on and attempts to apply new and rapidly
changing technology and the competitive environment of the
pharmaceutical industry. Many of these factors may be beyond the
Company's control, such as unanticipated development requirements,
testing, regulatory compliance and manufacturing, production, and
marketing problems and expenses. The Company does not anticipate
being able to complete the development of its proposed products
for a number of years, if at all. All of the Company's drugs are
subject to extensive regulation and those in development will
require approval from the U.S. Food and Drug Administration (the
"FDA") and other regulatory agencies prior to commercial sales.
The Company may not complete the testing and regulatory approval
process for any of its products in development in the foreseeable
future and, accordingly, is unable to predict whether they will be
commercially successful. Further, there can be no assurance that
the Company's drugs under development will attain acceptance by
providers, payors or patients.
Patents, Proprietary Technology and Licenses
The Company's success is dependent in large measure upon its
ability to obtain patent protection for its drugs, maintain
confidentiality of its trade secrets and know-how and operate
without infringing upon the proprietary rights of third parties.
The Company has licensed rights to five U.S. patents from the
holders of the patents on CPC-111 and CPC-211, but each of these
licenses may be terminated in the event that the Company fails to
achieve certain milestones or accomplish certain other contractual
obligations. Upon any such termination, all of the Company's
rights would revert to the licensor. The termination of the
license covering CPC-111 or CPC-211 would have a material adverse
effect on the Company and would cause the Company to focus its
efforts on its remaining drug development programs which are not
as far advanced. There can be no assurance that the Company will
maintain the licenses in effect through the successful development
and commercialization of these drugs.
The U.S. patent position of pharmaceutical companies involves many
complex legal and technical issues and has recently been the
subject of much litigation. There is no clear policy establishing
the breadth of claims or the degree of protection afforded under
such patents. As a result, there can be no assurance that any of
the U.S. patent applications will be approved, except where claims
under an application have already been examined and allowed, nor
that the Company will develop additional proprietary products that
are patentable. There can be no assurance that any U.S. patents
issued to the Company or its licensors will provide the Company
with any competitive advantages or will not be challenged by any
third parties or that patents issued to others will not have an
adverse effect on the
ability of the Company to conduct its business.
Furthermore, because patent applications in the United States are
maintained in secrecy until issue, and because publication of
discoveries in the scientific and patent literature often lag
behind actual discoveries, the Company cannot be certain that it
was the first chronologically to make the inventions covered by
each of its pending patent applications or that it was the first
to file patent applications for such inventions. In the event
that a third party has also filed a patent application for any of
its inventions, the Company may have to participate in
interference proceedings declared by the United States Patent and
Trademark Office to determine priority of the invention, which
could result in substantial cost to the Company, even if the
eventual outcome is favorable to the Company. In addition, there
can be no assurance that the Company's patents, including those of
the licensors above, would be held valid by a court of law of
competent jurisdiction. If patents are issued to other companies
that contain competitive or conflicting claims which ultimately
may be determined to be valid, there can be no assurance that the
Company would be able to obtain a license to any of these U.S.
patents.
Under Title 35 of the United States Code, as amended by the
General Agreement on Tariffs and Trade implementing the Uruguay
Round Agreement Act of 1994 ("GATT"), patents that issue from
patent applications filed prior to June 8, 1995, will have a 17
year period of enforceability as measured from the date of patent
issue while those that issue from applications filed on or after
June 8, 1995 will have a 20-year period of enforceability as
measured from the date the patent application was filed or the
first claimed priority date, whichever is earlier. Patents that
issue from applications filed on or after June 8, 1995, may be
extended under the term extension provisions of GATT for a period
up to five years to compensate for any period of enforceability
lost due to interference proceedings, government secrecy orders or
appeals to the Board of Patent Appeals or the Federal Circuit.
Under the Drug Price Competition and Patent Term Restoration Act
of 1984, including amendments implemented under GATT (the "Patent
Term Restoration Act"), the period of enforceability of a first or
basic product patent or use patent covering a drug may be extended
for up to five years to compensate the patent holder for the time
required for FDA regulatory review of the product. This law also
establishes a period of time following FDA approval of certain
drug applications during which the FDA may not accept or approve
applications for similar or identical drugs from other sponsors.
Any extension under the Patent Term Restoration Act and any
extension under GATT are cumulative. There can be no assurance
that the Company will be able to take advantage of such patent
term extensions or marketing exclusivity provisions of these laws.
While the Company cannot predict the effect that such changes will
have on its business, the adoption of such changes could have a
material adverse effect on the Company's ability to protect its
proprietary information and sustain the commercial viability of
its products. Furthermore, the possibility of shorter terms of
patent protection, combined with the lengthy FDA review process
and possibility of extensive delays in such process, could
effectively further reduce the term during which a marketed
product could be protected by patents.
The Company also relies on trade secrets and proprietary know-how.
The Company has been and will continue to be required to disclose
its trade secrets and proprietary know-how not only to employees
and consultants, but also to potential corporate partners,
collaborators and contract manufacturers. Although the
Company seeks to protect its trade secrets and proprietary know-
how, in part by entering into confidentiality agreements with such
persons or organizations, there can be no assurance that these
agreements will not be breached, that the Company would have
adequate remedies for any breach or that the Company's trade
secrets will not otherwise become known or be independently
discovered by competitors.
Dependence on Others for Manufacture
The Company currently does not have any capability to manufacture
products under current good manufacturing practices ("cGMP") as
required by the FDA. It relies on third parties to manufacture
and formulate Ethamolin, Glofil and Inulin, its three injectable
drug products currently being marketed, and to manufacture and
formulate CPC-111 and CPC-211, its two drug candidates currently
in clinical trials. Although the Company believes that it will be
able to contract with alternative suppliers for its products if
its current suppliers are unable to supply the Company with its
needs for bulk and formulated drugs, there can be no assurance
that this will be the case or that the need to contract with
additional suppliers will not delay the Company's ability to have
its products manufactured. There can be no assurance that these
manufacturers will meet either the Company's requirements for
quality, quantity and timeliness or the FDA's cGMP requirements or
that the Company would be able to find a substitute manufacturer
for any of its products in the future. In the event that the
Company is unable to obtain or retain contract manufacturers that
can manufacture its products under cGMP requirements, or to obtain
manufacturing on commercially acceptable terms, it may not be able
to commercialize its products as planned.
Potential Claims
Certain members of the Company's Scientific Advisory Board ("SAB")
and certain Scientific Advisors who have developed technology used
for the Company's products are employees of universities, research
hospitals or other institutions. The Company believes that such
institutions have no claim to any of the Company's inventions,
technology or products. While no claim has been asserted by any
such institution, there can be no assurance that such institutions
will not assert claims to any or all of such inventions,
technology or products or that, if any such institution does
assert such rights, the Company, if it so desires, will be able to
acquire the rights thereto from such institution at a commercially
practical cost or at all.
Government Regulation
The Company's development, manufacture and sale of drug products
are subject to extensive and rigorous regulation by federal,
state, local and foreign governmental authorities. In particular,
products for human health are subject to substantial preclinical
and clinical testing and other approval requirements by the FDA
and comparable foreign regulatory authorities. The process for
obtaining the required regulatory approvals from the FDA and other
regulatory authorities takes many years and is very expensive.
There can be no assurance that any drug developed by the Company
will prove to meet all of the applicable standards to receive
marketing approval. There can be no assurance that any such
approvals will be granted on a timely basis, if at all. Delays in
and costs of obtaining these approvals could adversely affect the
Company's ability to commercialize its drugs and to generate
significant sales revenues. If regulatory approval of a drug is
obtained, such approval may involve restrictions and
limitations on the use of the drug.
Other conditions for an approval are based on the drug's
manufacture and the quality control procedures in place, such as
cGMP. Failure to insure compliance with cGMP requirements could
result in delay or termination of clinical trials or withdrawal of
an approval. Following market approval, the drug will continue to
be subject to compliance with applicable federal, state, local and
foreign laws and regulations. There can be no assurance that the
FDA will grant approval of any of the Company's drugs in a timely
manner or at all.
Governmental Reforms
Health care reform is an area of increasing national and
international attention and a priority of many elected officials
in the United States. Several proposals to modify the current
health care system in the United States to improve access and
control costs are currently being considered by federal and state
governments. It is uncertain what legislation, if any, will be
adopted or what actions governmental or private payors for health
care goods and services may take in response to proposed or actual
legislation in the United States. The Company cannot predict the
outcome of health care reform proposals or the effect such reforms
may have on its business.
Clinical Trial and Product Liability Claims and Uninsured Risks
The Company may be exposed to liability resulting from the conduct
of its clinical trials or the commercial use of its drugs. Such
liability might result from claims made directly by patients,
hospitals, clinics or other consumers or by pharmaceutical
companies or others manufacturing such drugs on behalf of the
Company. The Company currently has clinical trial and product
liability insurance, but there can be no assurance that it will be
adequate to protect the Company against liability.
Competition and Technological Change
The products that the Company is marketing and the drugs that the
Company is developing may compete for market share with alternate
therapies. A number of companies are pursuing the development of
novel pharmaceuticals which target the same diseases as the
Company is targeting. Many of these competitors have
substantially greater capital resources, research and development
staffs and facilities than the Company. They may develop and
introduce products and processes competitive with those of the
Company. They represent significant long-term competition for the
Company. For certain of the Company's drugs, an important factor
in competition may be the timing of market introduction of these
competitive products. This timing will be based on the
effectiveness with which the Company or the competition can
complete clinical trials and approval processes and supply
quantities of these products to market. Competition among
products approved for sale will be based on, among other things,
efficacy, safety, reliability, price, marketing capability and
patent position.
The pharmaceutical industry has undergone rapid and significant
technological changes. The Company expects that the technologies
associated with its research and development will continue to
develop rapidly. There can be no assurance that the Company will
be able to establish itself in such fields or, if established,
that it will be able to maintain a competitive position. Further,
there can be no assurance that the development by others
of new or improved processes or products will not make the
Company's products and processes, if any, less competitive or
obsolete.
Dependence on Key Personnel
The Company's success also depends in large part on its ability to
attract and retain other qualified scientific and management
personnel. The Company faces competition for such persons from
other companies, academic institutions, government entities and
other organizations. There can be no assurance that the Company
will be successful in recruiting or retaining personnel of the
requisite caliber or in adequate numbers to enable it to conduct
its business as proposed. Furthermore, the Company's expected
expansion into activities requiring additional expertise in
manufacturing, sales and marketing will place increased demands on
the Company's resources and management skills.
Limited Sales and Marketing Capability
The commercialization of products such as the Company's drugs is
an expensive and time-consuming enterprise. The Company now has a
nine-person sales and marketing department, including six sales
representatives for Ethamolin, Glofil and Inulin, and intends to
hire additional sales representatives as sales of those products
increase and/or other products are acquired by the Company. The
Company believes that it will be able to serve the hospital market
in North America with a 50 to 100 person sales and marketing staff.
There can be no assurance that the Company will be able to
establish successfully sales and distribution capabilities or be
successful in gaining market acceptance for its drugs or to obtain
the assistance of any other pharmaceutical company in these
efforts if it should seek assistance.
Reimbursement
In both domestic and foreign markets, sales of the Company's
products will be dependent in part on the availability of
reimbursement from third party payors, such as government and
private insurance plans. Third party payors are increasingly
challenging the prices charged for medical products and services.
There can be no assurance that the Company's products will be
considered cost-effective, that reimbursement will be available
or, if available, that the payor's reimbursement policies will not
adversely affect the Company's ability to sell its products
profitably.
Outstanding Warrants and Options
There are currently outstanding 4,673,512 Class B Warrants.
Additional shares of Common Stock are issuable as follows: (i)
1,176,937 shares of Common Stock are reserved for issuance
pursuant to outstanding options under the Company's 1992 Stock
Option Plan and (ii) 181,500 shares are reserved for issuance
pursuant to outstanding options under the Company's 1993 Non
Employee Directors' Stock Option Plan. Holders of warrants and
options are likely to exercise them when, in all likelihood, the
Company could obtain additional capital on terms more favorable
than those provided by the warrants and options. Further, while
the warrants and options are outstanding, they may adversely
affect the terms on which the Company could obtain additional
capital.
Potential Volatility of Stock Price
There has been significant volatility in the market price of
securities of biomedical companies in general. Announcements of
technological innovations or new commercial products by the
Company or its competitors, developments concerning proprietary
rights, clinical trial results, government policy or regulation,
relations with licensors or other corporate partners, general
market conditions or public concern as to the safety of biomedical
products and period to period fluctuations in revenues and
financial results may have a significant impact on the Company's
business and on the market price of the Company's securities.
Dividends Not Likely
The Company has not paid any cash dividends on its Common Stock.
For the foreseeable future it is anticipated that earnings, if
any, which may be generated from the Company's operations will be
used to finance the growth of the Company and that cash dividends
will not be paid to holders of Common Stock.
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock of the Selling Shareholders
as of March 5, 1997 and as adjusted to give effect to the sale of
the Shares offered hereby. The Shares are being registered to
permit public secondary trading of the Shares, and the Selling
Shareholders may offer the Shares for resale from time to time.
See "Plan of Distribution."
Name and Address of Number of Number of
BeneficialOwnership
Selling Shareholders Shares Shares After Offering
Beneficiall Being Number ofShares
y Owned Offered Percent
Prior to
Offering
President and Fellows 1,250,000(1) 1,000,000 250,000 *
of Harvard College
c/o Harvard Management
Company, Inc.
600 Atlantic Avenue
Boston, MA 02210
Fernhill Partners 75,000(1) 75,000 0 *
c/o Wood Island
Associates
80 E.Sir Francis Drake
Blvd
Larkspur, CA 94939
Paresco, Inc. 215,874(2) 215,874 0 *
101 Hudson Street
Jersey City, NJ 07302
Liberty View Plus Fund 25,397(2) 25,397 0 *
101 Hudson Street
Jersey City, NJ 07302
Liberty View Fund, LLC 12,698(2) 12,698 0 *
101 Hudson Street
Jersey City, NJ 07302
__________
* Less than one percent.
(1) On March 5, 1997, the Company entered into Common Stock
Purchase Agreements (the "Agreements") with the President and
Fellows of Harvard College ("Harvard") and Fernhill Partners
("Fernhill"), whereby Harvard and Fernhill agreed to purchase
1,000,000 and 75,000 shares, respectively, of the Company's
Common Stock (the "Stock") at $4.645 per share. The Agreements
require that the Company register the Stock with the SEC prior
to closing the transaction.
(2) On April 10, 1996, Paresco, Inc., Liberty View Plus Fund
and Liberty View Fund LLC (the "Purchasers") each purchased a
mandatorily convertible note from the Company in the principal
amounts of $850,000, $100,000 and $50,000, respectively with a
maturity of April 9, 1999 (the "Notes"). The principal amount
of the Notes (or portions thereof is convertible beginning
April 10, 1997), and the remaining principal amount of the Notes
will be automatically converted (if not converted in full
before then) on April 9, 1999. When converted at the
noteholders election, the principal amount being converted will
convert at a 25% discount from the 10-day average of the
closing prices for the Company's Common Stock preceding the
conversion date, subject to a minimum conversion price of
$1.00.
In anticipation of the first date that the Purchasers can
convert the Notes, the Company is registering herein a certain
amount of shares issuable upon conversion of the Notes, which
amount may be increased or decreased over time by means of an
amendment to this registration statement. For SEC purposes, the
number of shares listed above as beneficially owned by the
Purchasers assumes conversion based on a 25% discount from a 10
day average closing price of $5.25 per share. However, the
filing of this registration statement is not intended to
reflect any obligation of the Purchasers to convert all or any
portion of the Notes on April 10, 1997.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling Shareholders may
sell Shares from time to time, as market conditions permit, on
the NASDAQ National Market System, or otherwise, through
ordinary brokerage transactions, in negotiated transactions, at
fixed prices which may be changed, at market prices prevailing
at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. The Selling
Shareholders may effect such transactions by selling the Shares
to or through brokerdealers, and all such broker-dealers may
receive compensation in
the form of discounts, concessions or commissions from the
Selling Shareholders and/or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell
as principal, or both (which compensation as to a particular
broke-rdealer might be in excess of customary commissions). The
aforementioned methods of sale may not be all-inclusive.
Any broker-dealer acquiring the Shares in the over-the-counter
market from the holder may sell the Shares either directly, in
its normal market-making activities, through or to other
brokers on a principal or agency basis or to its customers. Any
such sales may be at prices then prevailing in the over-ther-
counter market, at prices related to such prevailing market
prices or at negotiated prices to its customers or a
combination of such methods. The Selling Shareholders and any
broker-dealers that act in connection with the sale of Shares
hereunder may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act; any commissions
received by them and profits on any resale of the Shares as
principal might be deemed to be underwriting discounts and
commissions under the Securities Act. Any such commissions, as
well as other expenses of the Selling Shareholders and
applicable transfer taxes, are payable by such parties, as the
case may be.
The Company has agreed to indemnify the Selling Shareholders
against certain liabilities, including certain liabilities
under the Securities Act of 1933, as amended.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby have
been passed upon for the Company by Cooley Godward LLP, 4365
Executive Drive, San Diego, California 92121. As of the date of
this Prospectus, a partner of Cooley Godward LLP, holds 45,625
shares of Common Stock and options to purchase 37,500 shares
of Common Stock.
EXPERTS
The financial statements of Cypros Pharmaceutical Corporation
included in Cypros Pharmaceutical Corporation's Annual Report
(Form 10-K) for the year ended July 31, 1996, have been audited
by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein
by reference. Such financial statements are incorporated herein
by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, and in accordance therewith
files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at
the Commission's following Regional Offices: Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, New York, New York 10048. Copies
of such material can also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Company has filed with the Commission a Registration
Statement on Form S-3 under the Securities Act, with respect to
the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock
offered hereby, reference is made to the Registration Statement
and the exhibits and schedules thereto, which may be inspected
without charge at, and copies thereof may be obtained at
prescribed rates from, the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 1996, the Company's Form 8-K dated November 4,
1996, the Company's Form 10-Q for the quarter ended October 31,
1996 filed with the Securities and Exchange Commission (the
"Commission") are hereby incorporated by reference in this
Prospectus except as superseded or modified herein. The
description of the Common Stock which is contained in the
Registration Statement on Form S-1 (No. 33-51682), effective
November 3, 1992, as filed with the Commission under the Act,
including any amendment or reports filed for the purpose of
updating such description, is hereby incorporated by reference
into this Prospectus and shall be deemed to be a part hereof.
All documents filed with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") after the date of
this Prospectus and prior to the termination of the offering
shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of
such documents.
Any statement contained in any document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall
not be deemed, except as modified or superseded, to constitute
a part of this Prospectus. The Company will provide without
charge to each person, including any beneficial owner, to whom
this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the documents that have
been or may be incorporated by reference herein (other than
exhibits to such documents which are not specifically
incorporated by reference into such documents). Such requests
should be directed to the Vice President and Chief Financial
Officer of the Company at the Company's principal executive
offices at 2714 Loker Avenue West, Carlsbad, California 92008.
No person is authorized in connection with any offering made
hereby to give any information or to make any representation
not contained or incorporated by reference in this Prospectus,
and any information or representation not contained or
incorporated herein must not be relied upon as having been
authorized by the Company or the Selling Shareholders. This
Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, by any person in any
jurisdiction in which it is unlawful for such person to make
such offer or solicitation. Neither the delivery of this
Prospectus at any time nor any sale made hereunder shall, under
any circumstances, imply that the information herein is correct
as of any date subsequent to the date hereof.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses payable by the
Registrant in connection with the sale of the Common Stock
being registered. All the amounts shown are estimates except
for the SEC registration fee and the Nasdaq NMS listing
application fee.
SEC Registration fee $ 2,179.00
NASDAQ NMS listing application fee 17,500.00
Legal fees and expenses 6,000.00
Accounting fees and expenses 3,000.00
Total $ 30,679.00
Item 15. Indemnification of Officers and Directors.
Under Section 317 of the California Corporations Code, the
Registrant is authorized to indemnify its directors, officers,
employees and other agents against liabilities they may incur
in such capacities, including liabilities under the Securities
Act of 1933, as amended. The Registrant's Bylaws provide that
the Registrant will indemnify its directors and executive
officers and may indemnify its other officers, employees and
other agents to the full extent permitted by law. The Bylaws
further provide that rights, conferred under such Bylaws shall
not be deemed to be exclusive of any other rights such persons
may have or acquire under any statute, any provisions of the
Registrant's Restated Articles of Incorporation or Bylaws, or
any agreement, vote of the shareholders or disinterested
directors or otherwise.
In addition, the Registrant's Restated Articles of
Incorporation provide that to the fullest extent permitted by
California law, the Company's directors will not be personally
liable for monetary damages for breach of the directors'
fiduciary duty of care to the Company and its shareholders.
This provision in the Restated Articles of Incorporation does
not eliminate the duty of care, and in appropriate
circumstances equitable remedies such as an injunction or other
forms of non-monetary relief would remain available under
California law. Each director will continue to be subject to
liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or
involving intentional misconduct for knowing violations of law,
for actions leading to improper personal benefit, for acts or
omissions that constitute an unexcused pattern of inattention
that amounts to an abdication of the director's duty to the
Registrant or its shareholders and for payment of dividends,
approvals of stock repurchases or redemptions or loans or
guarantees that are unlawful under California law. These
provisions do not affect a director's responsibilities under
any other laws, such as the federal securities laws or the
state or federal environmental laws.
There is no pending material litigation or proceeding involving
a director, officer, employee or other agent of the Registrant
as to which indemnification is being sought, nor is the
Registrant aware of any pending or threatened material
litigation that may result in claims for indemnification by any
director, officer, employee or other agent.
Item 16.
Exhibits.
Exhibit Description of Document
Number
5.1 Opinion of Cooley Godward LLP.
10.1 Common Stock Purchase Agreement.
23.1 Consent of Ernst & Young LLP, Independent
Auditors.
23.2 Consent of Cooley Godward LLP. Reference is
made to Exhibit 5.1.
24.1 Power of Attorney. Reference is made to page
18.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers,
and controlling persons of the Registrant pursuant to the
provisions described in Item 15 or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful
defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided however, that clauses (i) and (ii) do not apply if the
information required to be included in a post-effective
amendment by these clauses is contained in periodic reports
filed by the Registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement; (2) that, for the
purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and (3)
to remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The undersigned Registrant hereby undertakes: (1) for purpose
of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as
part of the registration statement in reliance upon Rule 430A
and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective; (2) for the
purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof; and (3) for purposes of determining
any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3
and has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in
the City of San Diego, County of San Diego, State of
California, on the 7th day of March, 1997.
CYPROS PHARMACEUTICAL CORPORATION
By: ------------------------
Paul J. Marangos
Chairman of the Board,
President and Chief Executive Officer
(Principal executive officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Paul J.
Marangos, Ph.D., and David W. Nassif, and each of them, as his
true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for the undersigned and in
his name, place and stead, in any and all capacities, to sign
any or all amendments (including post-effective amendments) to
the Registration Statement and to file the same, with all
exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneysin-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as he or she might or could
do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- -------------------- Chairman of the Board, March 7,1997
Paul J. Marangos President and Chief
Executive Officer
(Principal executive
officer)
- -------------------- Vice President, Chief March 7,1997
David W. Nassif Financial Officer and
Secretary
(Principal financial
and
accounting officer)
- -------------------- Director March 7,1997
Digby W. Barrios
- -------------------- Director March 7,1997
Robert F. Allnutt
- -------------------- Director March 7,1997
Virgil D.Thompson
- -------------------- Director March 7,1997
Robert A. Vukovich
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
5.1 Opinion of Cooley Godward LLP 21
10.1 Common Stock Purchase Agreement 24
23.1 Consent of Ernst & Young LLP, 43
Independent AuditorsIndependent
Auditors
Exhibit 5.1
March 7, 1997
Cypros Pharmaceutical Corporation
2714 Loker Avenue West
Carlsbad, California 92008
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters
in connection with the filing by Cypros Pharmaceutical
Corporation (the "Company") of a Registration Statement on Form
S-3 (the "Registration Statement") with the Securities and
Exchange Commission covering the offer and sale of up to an
aggregate of one million three hundred twenty eight thousand
nine hundred sixty nine (1,328,969) shares of the Company's
Common Stock, no par value, by certain shareholders, in
connection with the resale of an aggregate of 253,969 shares of
the Company's Common Stock (the "Converted Shares") issuable
upon conversion of three Convertible Notes, each due and
payable as of April 9, 1999 (the "Notes") and 1,075,000 shares
of the Company's Common Stock (the "Shares") issuable upon the
closing of sales pursuant to two Common Stock Purchase
Agreements, each dated as of March 5, 1997 (the "Stock Purchase
Agreements").
In connection with this opinion, we have examined the
Registration Statement and related Prospectus, your Restated
Articles of Incorporation, as amended, your Bylaws, as amended,
the Notes, the Stock Purchase Agreements, and such other
documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion.
We have assumed the genuineness and authenticity of all
documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof,
and the due execution and delivery of all documents where due
execution and delivery are a prerequisite to the effectiveness
thereof.
On the basis of the foregoing, and in reliance thereon, we are
of the opinion that the Converted Shares, when sold and issued
in accordance with the Notes, and that the Shares, when sold
and issued in accordance with the Stock Purchase Agreements,
will be validly issued, fully paid, and nonassessable.
We consent to the reference to our firm under the caption
"Legal Matters" in the Prospectus included in the Registration
Statement and to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Cooley Godward, LLP
By:/s/ M. Wainwright Fishburn, Jr.
Wainwright Fishburn, Jr.
EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made this 5th day of March, 1997, between
CYPROS PHARMACEUTICAL CORPORATION, NASDAQ Symbol ("CYPR")
(the "Company"), a California corporation, with its principal
office at 2714 Loker Avenue West, Carlsbad, CA 92008, and the
PRESIDENT AND FELLOWS OF HARVARD COLLEGE (the "Purchaser"), c/o
Harvard Management Company, Inc. with its principal office at
600 Atlantic Avenue, Boston, MA 02210.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement:
"Closing" means the execution and delivery of the Share
Certificate, the delivery of a final prospectus for the Common
Stock (as that term is defined below) and the receipt of the
wire transfer on the Closing Date.
"Closing Date" means the date agreed to by the parties for the
Closing.
"Common Stock" means the Common Stock of the Company, no par
value.
"Share Certificate" means the duly executed certificate
representing the number of shares of Common Stock being
purchased by the Purchaser hereunder.
Section 2. Authorization and Execution of Agreement.
2.1 Authorization. Subject to the terms and conditions
of this Agreement, the Company has authorized (i) the execution
and delivery to the Purchaser's counsel, Ropes & Gray, One
International Place, Boston, Massachusetts 02110, of this
Agreement and the delivery of the opinion of Cooley Godward
LLP, counsel to the Company, in the form attached hereto as
Exhibit A, covering the matters set forth in Sections 3.1, 3.2,
3.3, and 3.8, and (ii) the execution and delivery on the
Closing Date of one or more Share Certificates representing
1,000,000 shares of Common Stock, along with a copy of the
final prospectus relating to resale of the Common Stock.
2.2 Agreement to Purchase the Common Stock. On the
Closing Date, subject to the terms and conditions of this
Agreement, the Company will issue and sell to the Purchaser,
and, in reliance upon the representations and warranties of the
Company contained in this Agreement, the Purchaser will
purchase from the Company 1,000,000 shares of Common Stock in
exchange for $4,645,000.
2.3 Closing. The Closing shall be held as soon as
possible following the date that the Securities and Exchange
Commission has declared effective the registration statement
required to be filed by the Company pursuant to Section 7 of
this Agreement.
2.4 Payment and Delivery. The Closing shall take place
at the offices of the Purchaser's counsel. At the Closing, the
following shall occur:
(a) Purchaser shall remit by wire transfer $4,645,000 to the
Company pursuant to wire transfer instructions to be delivered
by the Company to the Purchaser at least one day prior to the
Closing.
(b) The Company shall deliver the Share Certificate(s) and the
final prospectus relating to the Registrable Shares (as that
term is defined in Section 7 below).
2.5 Termination of Agreement. If the closing has not
occurred within 60 days of the date hereof, then the Purchaser
may terminate this Agreement immediately by a written notice to
that effect to the Company. In the alternative, the Purchaser
may proceed with the closing, in which case the Company will
continue to use its best efforts to have the SEC declare the
registration statement effective. In the event of termination,
neither party shall have any further responsibility or
liability to the other party.
Section 3. General Representations and Warranties of the
Company. The Company hereby represents and warrants to, and
covenants with, the Purchaser that the following are true and
correct as of the date hereof and as of the Closing Date.
3.1 Organization; Qualification. The Company is a
corporation duly organized and validly existing under the laws
of the State of California and is in good standing under such
laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets,
and to carry on its business as presently conducted. The
Company is qualified to do business as a foreign corporation in
each jurisdiction in which the ownership of its property or the
nature of its business requires such qualification, except
where failure to so qualify would not have a material adverse
effect on the Company.
3.2 Capitalization. The authorized capital stock of the
Company consists of 30,000,000 shares of Common Stock, no par
value, of which 11,857,171 shares are issued and outstanding,
and 1,000,000 shares of Convertible Preferred Stock, none of
which are issued and outstanding. All issued and outstanding
shares of Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable. The Company has
reserved sufficient shares of Common Stock for issuance under
this Agreement.
3.3 Authorization. The Company has all corporate right,
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate
action on the part of the Company, its directors and
stockholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Common Stock
and the performance of the Company's obligations hereunder has
been taken. This Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its
terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of
law governing specific performance, injunctive relief or other
equitable remedies, and to limitations of public policy as they
may apply to the indemnification provisions set forth in
Section 7.3 of this Agreement. Upon issuance and delivery of
the Share Certificate, the Common Stock so issued will be
validly issued, fully paid and nonassessable and will be free
of any liens or encumbrances. The execution and delivery of
this Agreement, and the issuance of the Share Certificate will
not give rise to any preemptive right or right of first refusal
or right of participation on behalf of any person.
3.4 No Conflict. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any
violation of or default (with or without notice or lapse of
time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of
a material benefit, under, any provision of the Restated
Articles of Incorporation, as amended, or Bylaws of the Company
or any material mortgage, indenture, lease or other agreement
or
instrument, permit, concession, franchise, license, judgment,
order, decree statute, law, ordinance, rule or regulation
applicable to the Company, its properties or assets.
3.5 Accuracy of Reports and Information. The Company's
Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All reports required to be filed by the Company with the
Securities and Exchange Commission ("SEC") during the period
from August 1, 1996 to the date of this Agreement pursuant to
Section 13 (a) or 15 (d) of the Exchange Act, including the
Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1996 (the "Form 10-K"), have been duly and timely
filed, were in compliance with the requirements of their
respective forms, were complete and correct in all material
respects as of the dates at which the information was furnished
and do not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements
made therein, in the light of the circumstances under which
they were made, not misleading. Copies of the Form 10-K and the
Form 10-Qs required to be filed by the Company with the SEC
during the period from August 1, 1996 to the date of this
Agreement pursuant to Section 13(a) or 15(d) of the Exchange
Act (the "SEC Reports") have been furnished to the Purchaser.
The Company is an issuer eligible to use Form S-3 under the
Securities Act of 1933 (the "Securities Act") for the
registration of the resale of the Registrable Shares (as that
term is defined below in Section 7.1 (c)).
3.6 Financial Statements and Changes. The audited
financial statements of the Company contained in the Form 10-K,
and the unaudited financial statements contained in the
Company's Form 10-Q for the period ended October 31, 1996,
including the notes relating thereto (the "Financial
Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods covered by such statements (except for
normal year end audit adjustments in the case of the unaudited
financials) and present fairly the Company's financial
condition and results of operations and cash flows as of the
respective dates and for the periods indicated. Since October
31, 1996, there has not been any change in the assets,
liabilities, financial condition or operations of the Company
from that reflected in the Financial Statements except changes
in the ordinary course of business which have not been, either
in any individual case or in the aggregate, materially adverse,
except for the acquisition of the Ethamolin product line, which
has been disclosed by the Company on Form 8-K.
3.7 Absence of Undisclosed Liabilities. The Company has
no material liabilities or obligations, absolute or contingent
(individually or in the aggregate), except as set forth in the
Financial Statements or as incurred in the ordinary course of
business after the date of the Financial Statements.
3.8 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any
governmental authority on the part of the Company is required
in connection with the valid execution and delivery of this
Agreement, or the consummation of any other transaction
contemplated hereby, except the filing with the SEC of a
registration statement on Form S-3 for the purpose of
registering the Common Stock and the filing of a Form D with
the SEC.
3.9 Intellectual Property Rights. Except as disclosed in
the Form 10-K, the Company has sufficient trademarks, trade
names, patent rights, copyrights and licenses to conduct its
business as contemplated in the Form 10-K. To the Company's
knowledge, neither the Company nor its products is infringing
or will infringe any trademark, trade name, patent right,
copyright, license, trade secret or other similar right of
others currently in existence; and there is no claim being made
against the Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual
property right which could have a material adverse effect on
the condition (financial or otherwise), business, results of
operations or prospects of the Company.
3.10 Material Contracts. Except as set forth in the Form
10K, the agreements to which the Company is a party described in
the Form 10-K are valid agreements, in full force and effect,
the Company is not in material breach or material default (with
or without notice or lapse of time, or both) under any of such
agreements, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach
or material default (with or without notice or lapse of time, or
both) under any of such agreements.
3.11 Litigation. There is no action, proceeding or
investigation pending, or to the Company's knowledge threatened,
against the Company which might result, either individually or
in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the
Company. The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company
currently pending or which the Company currently intends to
initiate.
3.12 Title to Assets. Except as set forth in Form 10-K,
the Company has good and marketable title to all properties and
material assets described in the Form 10-K as owned by it, free
and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest other than such as are not material
to the business of the Company.
3.13 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other
corporation, partnership, association or other business entity.
3.14 Required Governmental Permits. The Company is in
possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and
permits from state, federal and other regulatory authorities
which are material to the conduct of its business, all of which
are valid and in full force and effect.
3.15 Securities Act Exemption. Assuming and relying in
part on the truth and accuracy of Purchaser's representations
and warranties in Section 4 of this Agreement, the offer, sale
and issuance of the Common Stock is exempt from registration
under the Securities Act of 1933, as amended.
Section 4. Representations, Warranties and Covenants of the
Purchaser. The Purchaser represents and warrants to, and
covenants with, the Company that the following are true and
correct as of the date hereof and as of the Closing Date.
4.1 Authority. Purchaser has full right, power, authority
and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Purchaser and constitutes a
legal, valid and binding obligation of the Purchaser enforceable
in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to
limitations of public policy as they may apply to the
indemnification provisions set forth in Section 7.3 of this
Agreement.
4.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
Purchaser is aware of the Company's business affairs and
financial condition and has had access to and has acquired
sufficient information about the Company, including the SEC
Reports, to reach an informed and knowledgeable decision to
purchase the Common Stock. Purchaser has substantial experience
in evaluating and investing in private placement transactions of
securities in companies similar to the Company so Purchaser is
capable of evaluating the merits and risks of an investment in
the Company and has the capacity to protect its own interests in
connection with the purchase of the Common Stock.
4.3 Investment Intent. Without limiting its ability to
resell the Common Stock pursuant to an effective registration
statement, Purchaser represents that it is purchasing the Common
Stock for its own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any
distribution thereof. Purchaser understands that its
acquisition of the Common Stock has not been registered under
the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act, or registered or
qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among
other things, the bona fide nature of Purchaser's investment
intent and the accuracy of Purchaser's representations as
expressed herein. Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or
solicit any offers to buy, purchaser or otherwise acquire or
take a pledge of) the Common Stock or any part thereof of except
in compliance with the Securities Act and any applicable state
securities laws, and the rules and regulations promulgated
thereunder.
4.4 Registration or Exemption Requirements. Purchaser
further acknowledges and understands that the Common Stock may
not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state
securities laws or unless an exemption from such registration is
available. Purchaser understands that the Share Certificate
will be imprinted with a legend that prohibits the assignment of
the Share Certificate unless (i) it is registered or such
registration is not required, and (ii) if the transfer is
pursuant to an exemption from registration other than Rule 144
under the Securities Act and, if the Company shall so request in
writing, an opinion of Ropes & Gray or other counsel reasonably
satisfactory to the Company is obtained to the effect that the
transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser
understands that nothing in this Agreement or any other
materials presented to Purchaser in connection with the purchase
of the Common Stock constitutes legal, tax or investment advice.
Purchaser has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Common Stock.
4.6 Purchaser Review. Purchaser hereby represents and
warrants that it has carefully examined the SEC Reports,
including the Form 10-K and the financial statements contained
therein and acknowledges that the Company has made available to
it all documents and information that it has requested relating
to the Company and has provided answers to all of its questions
concerning the Company and the Common Stock. Nothing stated in
the previous two sentences, however, shall be deemed to affect
the representations and warranties of the Company contained in
this Agreement.
Section 5. Conditions to Obligations of Purchaser at Closing
Date. The obligation of the Purchaser to purchase the Common
Stock is subject to the fulfillment on or prior to the Closing
Date of the following conditions, any or all of which may be
waived in writing at the option of the Purchaser:
5.1 Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or
prior to such Closing Date, including the filing of the
registration statement and the acceleration request, shall have
been performed or complied with in all material respects.
5.2 No Order Pending. There shall not then be in effect
any order enjoining or restraining the transactions contemplated
by this Agreement.
5.3 No Law Prohibiting or Restricting Such Sale. There
shall not be in effect any law, rule or regulation prohibiting
or restricting such sale, or requiring any consent or approval
of any person which shall not have been obtained to issue the
Share Certificate (except as otherwise provided in this
Agreement).
5.4 Effectiveness of Registration Statement. The
registration statement filed by the Company pursuant to Section
7.2 shall have become effective, and no stop order suspending
the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the SEC.
Section 6. Conditions to Obligations of Company. The Company's
obligation to execute and deliver the Share Certificate at the
Closing is subject to the fulfillment on or prior to the Closing
Date of the following conditions, any or all of which may be
waived in writing at the option of the Company:
6.1 Representations and Warranties Correct. The
representations and warranties made by the Purchaser in Section
4 hereof shall be true and correct when made, and shall be true
and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of
said date.
6.2 Effectiveness of Registration Statement. The
registration statement filed by the Company pursuant to Section
7.2 shall have become effective, and no stop order suspending
the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or threatened by the SEC.
Section 7. Registration of the Shares; Compliance with the
Securities Act.
7.1 Definitions. For the purpose of this Section 7:
(a) the term "Registration Statement" shall mean any
registration statement required to be filed by Section 7.2
below, and shall include any preliminary prospectus, final
prospectus, exhibit or amendment included in or relating to such
registration statement; and
(b) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or
alleged omission to state in the Registration Statement a
material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) the term "Registrable Shares" shall mean the shares of
Common Stock issued pursuant to this Agreement.
7.2 Registration Procedures and Expenses. The Company
shall as soon as possible after the date hereof:
(a) file with the SEC an S-3 registration statement under the
Securities Act (providing for shelf registration of the Common
Stock under SEC Rule 415) on a form which is appropriate to
register all of the Registrable Shares;
(b) use its best efforts, subject to receipt of necessary
information from the Purchaser, to cause such Registration
Statement to become effective as promptly after filing as
practicable;
(c) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection therewith as may be necessary to keep such
Registration Statement effective until termination of such
obligation as provided in Section 7.9 below;
(d) furnish to the Purchaser (and to each underwriter, if any,
of such Common Stock) such number of copies of prospectuses in
conformity with the requirements of the Securities Act and such
other documents as the Purchaser may reasonably request, in
order to facilitate the public sale or other disposition of all
or any of the Registrable Shares by the Purchaser;
(e) file such documents as may be required of the Company for
normal securities law clearance for the resale of the
Registrable Shares in which states of the United States as may
be reasonably requested by the Purchaser provided, however, that
the Company shall not be required in connection with this
paragraph (e) to qualify as a foreign corporation or execute a
general consent to service of process in any jurisdiction;
(f) advise the Purchaser promptly:
(i) of any request by the SEC for amendments to the
Registration Statement or amendments to the prospectus or for
additional information relating thereto:
(ii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement under the Securities
Act or of the suspension by any state securities commission of
the qualification of the Registrable Shares for offering or sale
in any jurisdiction, or the initiation of any proceeding for any
of the preceding purposes; and
(iii) of the existence of any fact and the happening of any
event that makes any statement of a material fact made in the
Registration Statement, the prospectus, any amendment or
supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to
or changes in the Registration Statement or the prospectus in
order to make the statements therein not misleading;
(g) in connection with the filing of any document that is to be
incorported by reference into the Registration Statement or the
prospectus (after the initial filing) of the Registration
Statement):
(i) use its best efforts to provide copies of such document to
the Purchaser prior to such filing and in any event no later
than concurrently with such filing; and
(ii) make the Company's representative available for discussion
of such document;
(h) use its best efforts to cause all Registrable Shares to be
listed on each securities exchange, if any, on which equity
securities by the Company are then listed; and
(i) bear all expenses in connection with the procedures in
paragraphs (a) through (h) of this Section 7.2 and the
registration of the Registrable Shares on such Registration
Statement and the satisfaction of the blue sky laws of such
states, including NASD fees, listing fees, printing expenses,
accountant's fees, and the reasonable fees and expenses of legal
counsel to the Purchaser in connection with the procedures in
paragraph (a) through (h) of this Section 7.2 and other than
underwriting discounts and selling commissions.
7.3 Indemnification.
(a) The Company agrees to indemnify and hold harmless Purchaser
(and each of its officers, directors, partners or persons, if
any, who controls such Purchaser within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) from
and against any losses, claims, damages or liabilities to which
such Purchaser (and each of officers, directors, partners or
persons, if any, who controls such Purchaser within the meaning
of Section 15 of the Securities Act or Section 20 of the
Exchange Act) may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise
out of, or are based upon, any untrue statement or alleged
untrue statement of a material fact contained in the
Registration Statement or any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each
case on the effective date thereof, or arise out of any failure
by the Company to fulfill any undertaking included in the
Registration Statement, and the Company will, as incurred,
reimburse such Purchaser (and each of its officers, directors,
partners or persons, if any, who controls such Purchaser within
the meaning of Section 15 of the Securities Act) for any legal
or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Company shall not be liable
in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement
or omission or alleged untrue statement or omission made in such
Registration Statement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of
such Purchaser specifically for use in preparation of the
Registration Statement.
(b) The Purchaser agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each officer of the Company who
signs the Registration Statement and each director of the
Company), from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director
or controlling person) may become subject (under the Securities
Act or otherwise),insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement of a
material fact contained in the Registration Statement or any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in each case, on the effective date thereof,
if, and to the extent,such untrue statement was made in reliance
upon and inconformity with written information furnished by or
on behalf of such Purchaser specifically for use in preparation of the
Registration Statement, and such Purchaser will, as incurred,
reimburse the Company (and each of its officers, directors or
controlling persons) for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any
such action, proceeding or claim.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of
which indemnity is to be sought against an indemnifying person
pursuant to this Section 7.3, such indemnified person shall
notify the indemnifying person in writing of such claim or of
the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought
against an indemnified person and such indemnifying person shall
have been notified thereof, such indemnifying person shall be
entitled to participate therein, and, to the extent that it
shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice
from the indemnifying person to such indemnified person of its
election to assume the defense thereof, such indemnifying person
shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in
connection with the defense thereof; provided, however, that if
there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the
indemnified person for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate
or associate thereof, the indemnified person shall he entitled
to retain its own counsel at the expense of such indemnifying
person. The indemnifying party shall not settle an action
without the consent of the indemnified party, which shall not be
unreasonably withheld.
(d) If after proper notice of a claim or the commencement of an
action against the indemnified party, the indemnifying party
does not choose to participate, then the indemnified party shall
defend itself at its own cost and expense until there is an
adjudication at which point the indemnifying party shall then
reimburse the indemnified party for its costs and expenses
unless the indemnified party was found to have made an untrue
statement which gives rise to or is the basis of losses, claims,
damages or liabilities awarded in the adjudication.
(e) If the indemnification provided for in this Section 7.3 is
required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or
liabilities referred to above, then each applicable indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities.
7.4 Information Available. So long as any registration
statement is effective covering the resale of the Registrable
Shares, the Company will furnish to Purchaser:
(a) as soon as possible after available (but in the case of the
Company's Annual Report to Stockholders, within 150 days after
the end of each fiscal year of the Company), one copy of its
Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally
accepted accounting principles in the United States of America
by a national firm of certified public accountants); (ii) if not
included in substance in the Annual Report to Stockholders, its
Annual Report on Form 10-K within 100 days after the end of each
fiscal year of the Company, (iii) its quarterly report on Form
10Q, and (iv) a full copy of the registration statement covering
the Common Stock (the foregoing, in each case, excluding
exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
7.5 Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the SEC which
may at any time permit the sale of the Common Stock to the
public without registration, the Company agrees to use its best
efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act,
at all times;
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144, and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of
the Company and other information in the possession of or
reasonably obtainable by the Company as Purchaser may reasonably
request in availing itself of any rule or regulation of the SEC
allowing Purchaser to sell any such Common Stock without
registration.
7.6 Temporary Cessation of Offers and Sales by Purchaser.
The Purchaser acknowledges that there may occasionally be times
when the Company may be required to suspend the use of the
prospectus forming part of the Registration Statement until such
time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the Commission,
until the prospectus is supplemented or amended to comply with
the Securities Act, or until such time as the Company has filed
an appropriate report with the Commission pursuant to the
Exchange Act. The Company agrees to file any necessary
amendments, supplements and reports as soon as practicable under
the circumstances. Purchaser hereby covenants that it will not
sell any Common Stock pursuant to said prospectus during a
period of not more than 30 days commencing at the time at which
the Company gives the Purchaser notice of the suspension of the
use of said prospectus and ending at the time the Company gives
the Purchaser notice that the Purchaser may thereafter effect
sales pursuant to said prospectus, as the same may have been
supplemented or amended. The Company agrees to use all
reasonable efforts to minimize the duration and frequency of
such periods.
7.7 Prospectus Delivery. Purchaser hereby covenants with
the Company to comply with the prospectus delivery requirements
in connection with the resale of the Registrable Shares.
7.8 Termination of Obligations. The obligations of the
Company pursuant to Sections 7.2, 7.4 and 7.5 hereof shall
cease and terminate upon the earlier to occur of (i) such time
as all of the Registrable Shares have been re-sold, or (ii)
such time as all of the Registrable Shares may be re-sold
pursuant to Rule 144(k).
Section 8. Legal Fees and Expenses. Except as provided in
Section 7.2 (i), each of the parties shall pay its own fees and
expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with
this Agreement and the transactions contemplated hereby.
Section 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be
telecopied or mailed by first class registered or certified
airmail (return receipt requested), postage prepaid, and shall
be deemed given when so telecopied or, if mailed, when
received:
(a) if to the Company, to
Cypros Pharmaceutical Corporation
2714 Loker Avenue West
Carlsbad, CA 92008
Attn: Chief Financial Officer
Telecopier No.: 619/929-8038
or to such other person at such other place as the Company
shall designate to the Purchaser in writing;
(b) if to the Purchaser, to
President and Fellows of Harvard College
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, Massachusetts 02210
Attn: Mr. Phillip T. Gross
Telecopier No.: 617/523-1283
or at such other address or addresses as may have been furnished
to the Company in writing; or
(c) if to any transferee or transferees of the Purchaser, at
such address or addresses as shall have been furnished to the
Company at the time of the transfer or transfers, or at such
other address or addresses as may have been furnished by such
transferee or transferees to the Company in writing.
Section 10. Miscellaneous.
10.1 Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior
oral or written agreements and understandings relating to the
subject matter hereof. No statement, representation, warranty,
covenant or agreement or any kind not expressly set forth in this
Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
10.2 Amendments. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the
Company and by Purchaser.
10.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only
and shall not be deemed to be part of this Agreement.
10.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.
10.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original,
but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered
to the other party.
10.7 Publicity. Neither party shall issue any press
releases or otherwise make any public statement with respect to
the transactions contemplated by this Agreement without the prior
written consent of the other party, except as may be required by
applicable law or regulation.
10.8 Survival. The representations and warranties in this
Agreement shall survive Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be signed by their duly authorized representatives the day and
year first above written.
CYPROS PHARMACEUTICAL
CORPORATION
(Signature)
By David W. Nassif
Its Chief Financial Officer
PRESIDENT AND FELLOWS OF HARVARD COLLEGE
By HARVARD MANAGEMENT COMPANY, INC.
(Signature)
By Jack R. Meyer
Its President
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3) and related
Prospectus of Cypros Pharmaceutical Corporation for the
registration of shares of its common stock and to the
incorporation by reference therein of our report dated August 26,
1996, with respect to the financial statements of Cypros
Pharmaceutical Corporation included in its Annual Report (Form 10-
K) for the year ended July 31, 1996, filed with the Securities
and Exchange Commission.
ERNST & YOUNG LLP
San Diego, California
March 6, 1997
