As Filed with the Securities and Exchange Commission on February 8, 2002
Registration No. 333-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SONUS PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4343413
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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22026 20TH AVENUE S.E., BOTHELL, WASHINGTON 98021
(425) 487-9500
(Address, including zip code, and telephone number, including area code of
registrant's principal executive offices)
RICHARD J. KLEIN
CHIEF FINANCIAL OFFICER
SONUS PHARMACEUTICALS, INC.
22026 20TH AVENUE S.E.
BOTHELL, WASHINGTON 98021
(425) 487-9500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
K.C. SCHAAF, ESQ.
CHRISTOPHER D. IVEY, ESQ.
STRADLING YOCCA CARLSON & RAUTH,
A PROFESSIONAL CORPORATION
660 NEWPORT CENTER DRIVE, SUITE 1600
NEWPORT BEACH, CALIFORNIA 92660
Approximate date of commencement of proposed sale to public: FROM TIME
TO TIME 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
PROPOSED PROPOSED
TITLE OF SHARES AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED(1) OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
PER SHARE (2) PRICE
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Common Stock ($.001 par value) 2,489,300 $5.56 $13,840,508.00 $1,273.33
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(1) Pursuant to the terms of that certain Registration Rights Agreement, dated as of January 18, 2002, among the Registrant and the selling security holders, the Registrant is hereby registering the resale of (A) 1,929,000 shares of its common stock issued to such security holders pursuant to the terms of a Securities Purchase Agreement dated as of January 18, 2002 ("Purchase Agreement") and (B) 385,800 shares of its common stock issuable upon exercise of warrants granted on January 18, 2002 pursuant to the Purchase Agreement. The Registrant is also registering the resale of 174,500 shares of its common stock issuable upon exercise of warrants granted on June 15, 2001. Pursuant to Rule 416 under the Securities Act, this Registration Statement also covers such additional number of shares of common stock as may be issuable upon a stock split, stock dividend or similar transaction.
(2) The offering price is estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c), using the average of the high and low prices of the Registrant's Common Stock as reported on The Nasdaq National Market on February 6, 2002, which was approximately $5.56 per share.
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 which 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 Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED FEBRUARY 8, 2002
PROSPECTUS
SONUS PHARMACEUTICALS, INC.
2,489,300 SHARES OF COMMON STOCK
($0.001 PAR VALUE)
This prospectus relates to the offer and sale from time to time of up to 1,929,000 shares of our outstanding common stock, and up to 560,300 shares of our common stock issuable upon the exercise of warrants, which are held by certain stockholders named in this prospectus.
The prices at which such stockholders may sell the shares in this offering will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any of the proceeds from the sale of the shares.
Our common stock is traded on The Nasdaq National Market under the symbol "SNUS." On February 7, 2002, the last reported sale price of our common stock was $5.20 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 TO READ ABOUT THE RISKS YOU SHOULD
CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT CONTAINING THIS PROSPECTUS, WHICH WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 8, 2002.
TABLE OF CONTENTS
PAGE
About Sonus Pharmaceuticals............................................... 1
Recent Developments....................................................... 1
Risk Factors.............................................................. 3
Forward-Looking Statements................................................ 9
Use of Proceeds........................................................... 9
Selling Stockholders...................................................... 10
Plan of Distribution...................................................... 11
Legal Matters............................................................. 13
Experts................................................................... 13
Where You Can Find Additional Information................................. 14
Incorporation by Reference................................................ 14
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ABOUT SONUS PHARMACEUTICALS
In this prospectus, the terms "Sonus", the "Company", "we", "us", and "our" refer to Sonus Pharmaceuticals, Inc.
We are a specialty pharmaceutical company focused on the development of therapeutic drugs utilizing our proprietary TOCOSOL(TM) drug delivery technology. The Company's lead product for cancer therapy, TOCOSOL Paclitaxel (S-8184), is in a Phase I clinical study and has been developed with the goal of overcoming a number of limitations of the currently marketed paclitaxel products. Based upon the results of our Phase I study to date, we believe TOCOSOL Paclitaxel has unique features that may reduce side effects from the delivery vehicle, allow for a faster administration time and enhance the efficacy of the active drug, paclitaxel. The Company expects to complete the Phase I study in mid-2002 and initiate Phase 2 efficacy studies with TOCOSOL Paclitaxel in early 2002. Sonus is also developing TOCOSOL Amiodarone (S-2646), a cardiovascular product, and S-9156, an oxygen delivery product.
More comprehensive information about our products and us is available through our World Wide Web site at www.sonuspharma.com. The information on our Web site is not incorporated by reference into this prospectus. Our executive offices are located at 22026 20th Avenue S.E., Bothell, Washington 98021; telephone (425) 487-9500.
RECENT DEVELOPMENTS
On January 18, 2002, we sold 1,929,000 shares of common stock and
warrants to purchase up to 385,800 shares of our common stock at an exercise
price of $9.40 per share under the terms of a Securities Purchase Agreement to
accredited investors in conformity with Rule 506 under Regulation D and under
Section 4(2) of the Securities Act for an aggregate purchase price of
approximately $13.6 million, resulting in net proceeds to the Company of
approximately $12.5 million. The resale of the shares being offered under this
prospectus, which shares were sold, or are issuable upon the exercise of
warrants that were sold, in the January 2002 private placement, has been
registered pursuant to a Registration Rights Agreement among the Company and the
investors.
On January 22, 2001, we entered into a multi-year supply agreement with Indena SpA for the supply of paclitaxel. Paclitaxel is the active pharmaceutical ingredient in our lead product for cancer therapy, TOCOSOL Paclitaxel. Indena is a company dedicated to the identification, development and production of active ingredients derived from plants for use in the pharmaceutical, health food and cosmetics industries.
On January 29, 2002, we announced financial results for the year ended December 31, 2001. For the year ended December 31, 2001, we reported net income of $542,000, or $0.05 per share, compared with a net loss of $2.1 million, or $0.23 per share, in the same period of 2000. The 2001 results included $8.5 million received under agreements with Nycomed Amersham and Chugai Pharmaceutical Co. for rights to our ultrasound contrast intellectual property, further allowing us to focus our efforts on the development of the TOCOSOL drug delivery technology platform and products. Pursuant to the agreement with Nycomed, we retained a license to use the ultrasound contrast intellectual property for limited purposes. Total operating expenses were $8.5 million for the year ended December 31, 2001, compared to $7.6 million for the prior year period. Total operating expenses are expected to increase over time in 2002 to an average of approximately
$1.1 million per month as the Company broadens and accelerates its research activities and initiates Phase 2 studies with TOCOSOL Paclitaxel. Cash and marketable securities totaled $15.1 million at December 31, 2001, which excludes the $12.5 million in net proceeds raised from our private placement received in January 2002.
RISK FACTORS
Your investment in our common stock involves a high degree of risk. You should consider the risks described below and the other information contained in this prospectus and incorporated by reference in this prospectus carefully before deciding to invest in our common stock. If any of the following risks actually occur, our business, financial condition and operating results would be harmed. As a result, the trading price of our common stock could decline, and you could lose a part or all of your investment.
IF WE FAIL TO DEVELOP PRODUCTS, THEN WE MAY NEVER REALIZE REVENUE FROM
PRODUCT COMMERCIALIZATION.
A key element of our business strategy is to utilize our technologies for the development and commercialization of drug delivery products. Our drug delivery technology, TOCOSOL, is a new approach to the formulation of water insoluble compounds for therapeutic applications. Significant expenditures in additional research and development, clinical testing, regulatory, manufacturing, and sales and marketing activities will be necessary in order for us to demonstrate the efficacy of our products, or commercialize any products developed with our technology. There can be no assurance that TOCOSOL Paclitaxel or any of our other current products under development or any future product will be safe or efficacious.
Even if we are successful in developing our products, there is no assurance that such products will receive regulatory approval or that a commercially viable market will develop. While it is our strategy to develop additional products under our drug delivery technology by entering into feasibility study agreements with companies who own active compounds, there can be no assurance that we will enter into any feasibility studies. Moreover, there can be no assurance that these feasibility studies will result in development or license agreements. Without feasibility studies or development or license agreements, we may need to scale back or terminate our efforts to develop other products using our drug delivery technology.
WE HAVE A HISTORY OF OPERATING LOSSES, AND WE MAY NEVER BECOME
PROFITABLE.
We have experienced significant accumulated losses since our inception, and are expected to incur net losses for the foreseeable future. These losses have resulted primarily from expenses associated with our research and development activities, including nonclinical and clinical trials, and general and administrative expenses. We reported net income of $542,000 for the year ended December 31, 2001, incurred a net loss of $2.1 million for the year ended December 31, 2000, net income of $435,000 for the year ended December 31, 1999 and a net loss of $11.2 million for the year ended December 31, 1998. As of December 31, 2001, our accumulated deficit totaled $28.7 million. We anticipate that our operating losses will continue as we further invest in research and development for our products. Even if we generate significant product revenues, there can be no assurance that we will be able to sustain profitability. Our results of operations have varied and will continue to vary significantly and depend on, among other factors:
- The timing and costs of clinical trials and regulatory approvals;
- Entering into new collaborative or product license agreements;
- The timing of payments, if any, under collaborative partner agreements; and
- Costs related to obtaining, defending and enforcing patents.
GOVERNMENTAL REGULATORY REQUIREMENTS ARE LENGTHY AND EXPENSIVE AND FAILURE TO OBTAIN NECESSARY APPROVALS WILL PREVENT US OR OUR COLLABORATORS FROM COMMERCIALIZING A PRODUCT.
We are subject to uncertain governmental regulatory requirements and a lengthy approval process for our products prior to any commercial sales of our products. The development and commercial use of our products are regulated by the U.S. Food and Drug Administration, or FDA, the European Medicines Evaluation Agency, or EMEA, and comparable international regulatory agencies. The regulatory approval process for new products is lengthy and expensive. Before we can file an application with the FDA and comparable international agencies, the product candidate must undergo extensive testing, including animal studies and human clinical trials that can take many years and may require substantial expenditures. Data obtained from such testing may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. In addition, changes in regulatory policy for product approval may cause additional costs in our efforts to secure necessary approvals.
Our drug delivery and oxygen delivery products are subject to significant uncertainty because they are in the early stages of development and are subject to regulatory approval. We have filed an Investigational New Drug Application, or IND, with the FDA and initiated Phase I human clinical studies in late 2000 for the first application of our TOCOSOL Paclitaxel drug delivery technology. We expect to complete the Phase I study with TOCOSOL Paclitaxel in mid-2002 and initiate Phase 2 studies in early 2002. There can be no assurance that the clinical studies will demonstrate that TOCOSOL Paclitaxel will be safe or efficacious or that we will file a new drug application. We are also currently engaged in pre-clinical testing of a formulation of our TOCOSOL drug delivery product for cardiovascular treatment and our oxygen delivery product. The results of pre-clinical and clinical testing of our products are uncertain and regulatory approval of our products may take longer or be more expensive than anticipated, which could materially adversely affect our business, financial condition and results of operations. We cannot predict if or when any of our products under development will be commercialized.
WE DEPEND ON THIRD PARTIES FOR FUNDING, CLINICAL DEVELOPMENT AND
DISTRIBUTION.
We are dependent, or may in the future be dependent, on third parties for performance of a variety of key activities including research, clinical development, manufacturing, marketing, sales and distribution of our products. If we are unable to establish these arrangements with third parties, if they are terminated or the collaborations are not successful, we will be required to identify alternative partners to fund or perform research, clinical development, manufacturing, marketing, sales and/or distribution, which could have a material adverse effect on our business, financial condition and results of operations. Our success depends in part upon the performance by these collaborators of their responsibilities under these arrangements. We have no control over the resources that any potential partner may devote to the development and commercialization of products under these collaborations and our partners may fail to conduct their collaborative activities successfully or in a timely manner.
FUTURE U.S. OR INTERNATIONAL LEGISLATIVE OR ADMINISTRATIVE ACTIONS ALSO
COULD PREVENT OR DELAY REGULATORY APPROVAL OF OUR PRODUCTS.
Even if regulatory approvals are obtained, they may include significant limitations on the indicated uses for which a product may be marketed. A marketed product also is subject to continual FDA, EMEA and other regulatory agency review and regulation. Later discovery of previously unknown problems or failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market, as well as possible civil or criminal sanctions. In addition, if marketing approval is obtained, the FDA, EMEA or other regulatory agency may require post-marketing testing and surveillance programs to monitor the product's efficacy and side effects. Results of these post-marketing programs may prevent or limit the further marketing of a product.
WE WILL NEED ADDITIONAL CAPITAL IN THE FUTURE, AND IF IT IS NOT AVAILABLE ON TERMS ACCEPTABLE TO US, OR AT ALL, WE MAY NEED TO SCALE BACK OUR DEVELOPMENT AND COMMERCIALIZATION ACTIVITIES.
Our development efforts to date have consumed substantial amounts of cash, and we have generated only limited revenues from payments received from our contractual agreements and from the transfer of substantially all of our ultrasound contrast intellectual property. Based on our current operating plan, including planned clinical trials and other product development costs, we estimate that existing cash and marketable securities, will be sufficient to meet our cash requirements for approximately 24 months from the date of this prospectus. We will need additional capital to meet our cash requirements in the future. Our future capital requirements depend on many factors including:
- Our ability to obtain and retain funding from third parties under contractual agreements;
- Our progress on research and development programs and clinical trials;
- The time and costs required to gain regulatory approvals;
- The costs of filing, prosecuting and enforcing patents, patent applications, patent claims and trademarks;
- The costs of marketing and distributing our products, if approved;
- The status of competing products; and
- The market acceptance and third-party reimbursement of our products, if approved.
Any future equity financing, if available, may result in substantial dilution to existing stockholders, and debt financing, if available, may include restrictive covenants. If we are unable to raise additional financing, we may have to reduce our expenditures, scale back our development of new products or license to others products that we otherwise would seek to commercialize ourselves.
THE HEALTHCARE INDUSTRY IS EXTREMELY COMPETITIVE, AND IF WE FAIL TO
COMPETE EFFECTIVELY, IT WOULD NEGATIVELY IMPACT OUR BUSINESS.
The health care industry is characterized by extensive research efforts and rapid technological change. Competition in the development of pharmaceutical products is intense and expected to increase. We also believe that other medical and pharmaceutical companies will compete with us in the areas of research and development, acquisition of products and technology licenses, and the manufacturing and marketing of our products. Success in these fields will be based primarily on:
- Efficacy;
- Safety;
- Ease of administration;
- Breadth of approved indications; and
- Physician, healthcare payer and patient acceptance.
Many of our competitors and potential competitors have substantially greater financial, technical and human resources than we do and have substantially greater experience in developing products, obtaining regulatory approvals and marketing and manufacturing medical products. Accordingly, these competitors may succeed in obtaining FDA approval for their products more rapidly than us. In addition, other technologies or products may be developed that have an entirely different approach that would render our technology and products noncompetitive or obsolete. If we fail to compete effectively, it would have a material adverse effect on our business, financial condition and results of operations.
WE RELY ON THIRD PARTY SUPPLIERS AND MANUFACTURERS TO PRODUCE PRODUCTS THAT WE DEVELOP AND FAILURE TO RETAIN SUCH SUPPLIERS AND MANUFACTURERS WOULD ADVERSELY IMPACT OUR ABILITY TO COMMERCIALIZE OUR PRODUCTS.
We currently rely on third parties to supply the chemical ingredients necessary for our drug delivery and oxygen delivery products. Currently, Indena is our primary supplier of Paclitaxel, a necessary ingredient for TOCOSOL Paclitaxel. The chemical ingredients for our products are manufactured by a limited number of vendors. The inability of these vendors to supply medical-grade materials to us could delay the manufacturing of, or cause us to cease the manufacturing of our products. We also rely on third parties to manufacture our products for research and development and clinical trials. Suppliers and manufacturers of our products must operate under GMP regulations, as required by the FDA, and there are a limited number of contract manufacturers that operate under GMP regulations. We are currently analyzing whether or not to develop an in-house manufacturing capability. If we do not develop an in-house manufacturing capability or we are not able to identify and qualify alternative contract manufacturers, we may not be able to produce the required amount of our products for research and development and clinical trials. Failure to retain qualified suppliers and manufacturers will delay our research and development efforts as well as the time it takes to commercialize our products, which could materially adversely affect our business, financial condition and results of operations.
IF WE FAIL TO SECURE ADEQUATE INTELLECTUAL PROPERTY PROTECTION OR BECOME INVOLVED IN AN INTELLECTUAL PROPERTY DISPUTE, IT COULD SIGNIFICANTLY HARM OUR FINANCIAL RESULTS AND ABILITY TO COMPETE.
Our success will depend, in part, on our ability to obtain and defend patents and protect trade secrets. We currently have 14 patent applications filed in the United States pertaining to our TOCOSOL drug delivery technology as well as counterpart filings in Europe and key countries in Asia and Latin America. The patent position of medical and pharmaceutical companies is highly uncertain and involves complex legal and factual questions. There can be no assurance that any claims which are included in pending or future patent applications will be issued, that any issued patents will provide us with competitive advantages or will not be challenged by third parties, or that the existing or future patents of third parties will not have an adverse effect on our ability to commercialize our products. Furthermore, there can be no assurance that other companies will not independently develop similar products, duplicate any of our products or design around patents that may be issued to us. Litigation may be necessary to enforce any patents issued to us or to determine the scope and validity of others' proprietary rights in court or administrative proceedings. Any litigation or administrative proceeding could result in substantial costs to us and distraction of our management. An adverse ruling in any litigation or administrative proceeding could have a material adverse effect on our business, financial condition and results of operations.
OUR COMMERCIAL SUCCESS WILL DEPEND IN PART ON NOT INFRINGING PATENTS
ISSUED TO COMPETITORS.
There can be no assurance that patents belonging to competitors will not require us to alter our products or processes, pay licensing fees or cease development of our current or future products. Any litigation regarding infringement could result in substantial costs to us and distraction of our management, and any adverse ruling in any litigation could have a material adverse effect on our business, financial condition and results of operations. Further, there can be no assurance that we will be able to license other technology that we may require at a reasonable cost or at all. Failure by us to obtain a license to any technology that we may require to commercialize our products would have a material adverse effect on our business, financial condition and results of operations. In addition, to determine the priority of inventions and the ultimate ownership of patents, we may participate in interference, reissue or re-examination proceedings conducted by the U.S. Patent and Trademark Office or in proceedings before international agencies with respect to any of our existing patents or patent applications or any future patents or applications, any of which could result in loss of ownership of existing, issued patents, substantial costs to us and distraction of our management.
THE SUCCESS OF OUR PRODUCTS WILL DEPEND ON THE ACCEPTANCE OF OUR
PRODUCTS BY THIRD PARTY PAYERS.
Our ability to successfully commercialize products that we develop will depend, in part, upon the extent to which reimbursement of the cost of such products will be available from domestic and international health administration authorities, private health insurers and other payer organizations. Third party payers are increasingly challenging the price of medical and pharmaceutical products and services or restricting the use of certain procedures in an attempt to limit costs. Further, significant uncertainty exists as to the reimbursement status of newly approved health care products, and there can be no assurance that adequate third party coverage will be available.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED SCIENTIFIC AND MANAGEMENT PERSONNEL, WE MAY BE UNABLE TO BECOME PROFITABLE.
We are highly dependent on our key executives. The loss of any of these key executives or the inability to recruit and retain qualified scientific personnel to perform research and development and qualified management personnel could have a material adverse effect on our business, financial condition and results of operations. We do not have employment contracts with any of our key personnel and we do not maintain insurance policies that would compensate us for the loss of their services. There can be no assurance that we will be able to attract and retain such personnel on acceptable terms, if at all, given the competition for experienced scientists and other personnel among numerous medical and pharmaceutical companies, universities and research institutions.
FAILURE TO SATISFY NASDAQ NATIONAL MARKET LISTING REQUIREMENTS MAY
RESULT IN OUR STOCK BEING DELISTED FROM THE NASDAQ NATIONAL MARKET.
Our common stock is currently listed on The Nasdaq National Market under the symbol "SNUS." For continued inclusion on The Nasdaq National Market, we must maintain among other requirements net tangible assets of at least $4.0 million, a minimum bid price of $1.00 per share, and a market value of our public float of at least $5.0 million. Effective November 1, 2002, we must maintain stockholders' equity of at least $10.0 million or market capitalization of at least $50.0 million for continued inclusion on The Nasdaq National Market. In the event that we fail to satisfy the listing standards on a continuous basis, our common stock may be removed from listing on The Nasdaq National Market. If our common stock is delisted from The Nasdaq National Market, trading of our common stock, if any, would be conducted in the over-the-counter market in the so-called "pink sheets" or, if available, the NASD's "Electronic Bulletin Board." As a result, stockholders could find it more difficult to dispose of, or to obtain accurate quotations as to the value of, our common stock, and the trading price per share could be reduced.
THE VALUE OF OUR COMMON STOCK COULD CHANGE SIGNIFICANTLY OVER A SHORT
PERIOD OF TIME.
The market price of our common stock has fluctuated significantly. In the first quarter of 2001, the price of our common stock closed as high as $2.84 per share and as low as $.58 per share. In the second quarter of 2001, the price of our common stock closed as high as $3.68 per share and as low as $.94 per share. In the third quarter of 2001, the price of our common stock closed as high as $4.50 per share and as low as $2.85 per share. In the fourth quarter of 2001, our common stock closed as high as $8.31 per share and as low as $3.75 per share. The market price of our common stock may continue to fluctuate significantly and these fluctuations may be unrelated to operating performance.
Announcements by us or our perceived competitors concerning clinical trial results, technological innovations, new products, proposed governmental regulations or actions, developments or disputes relating to patents or other proprietary rights, and other factors that affect the market generally could significantly impact our business and the market price of our common stock.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this prospectus contain forward-looking statements that are based on current expectations, estimates and projections about our industry, management's beliefs, and assumptions made by management. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any forward-looking statements. The risks and uncertainties include those noted in "Risk Factors" above and in the documents incorporated by reference. We undertake no duty to update any of these forward-looking statements.
USE OF PROCEEDS
The proceeds from the sale of each selling stockholder's common stock will belong to that selling stockholder. We will not receive any proceeds from such sales.
SELLING STOCKHOLDERS
We issued 1,929,000 shares of common stock and warrants to purchase an additional 385,800 shares of common stock on January 18, 2002 in a private placement to certain stockholders set forth below. Pursuant to a Registration Rights Agreement dated January 18, 2002, we agreed to file a registration statement of which this prospectus is a part with the Securities and Exchange Commission to register the resale of the shares of our common stock we issued, and which we will issue upon exercise of warrants, to those stockholders and to keep the registration statement effective until either the shares registered hereunder are sold or the shares registered hereunder can be sold without registration and without restriction. The registration statement of which this prospectus is a part also registers for resale up to 174,500 shares of our common stock issuable upon the exercise of warrants issued on June 15, 2001 pursuant to registration rights granted to the holders of such warrants. None of the selling stockholders have any position, office or material relationship with the Company.
The following table sets forth: (1) the name of each of the selling stockholders for whom we are registering the resale of shares under this registration statement; (2) the number of shares of our common stock owned by each such selling stockholder prior to this offering; (3) the number of shares of our common stock being offered pursuant to this prospectus; and (4) the number of shares, and (if one percent or more) the percentage of the total of the outstanding shares, of our common stock to be owned by each such selling stockholder after this offering.
Domain Public Equity Partners 85,106 85,106 0 0
L.P. (10)
Wayne P. Rothbaum (9) 43,625 43,625 0 0
Mitchell D. Silber (9) 43,625 43,625 0 0
Welch Entrepreneurial Fund, 40,224 40,224 0 0
Ltd. (11)
Welch Life Sciences Fund, 32,772 32,772 0 0
Ltd. (12)
Symmetry Capital Management 24,000 24,000 0 0
LLC (13)
Total 2,489,300 2,489,300 0 0
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(1) Includes 110,475 shares subject to warrants which are currently exercisable.
(2) Includes 110,475 shares subject to warrants which are currently exercisable.
(3) Includes 34,940 shares subject to warrants which are currently exercisable.
(4) Includes 28,369 shares subject to warrants which are currently exercisable.
(5) Includes 20,648 shares subject to warrants which are currently exercisable.
(6) Includes 17,824 shares subject to warrants which are currently exercisable.
(7) Includes 17,021 shares subject to warrants which are currently exercisable.
(8) Includes 15,698 shares subject to warrants which are currently exercisable.
(9) Consists solely of those shares of common stock issuable upon the exercise of warrants issued to such investors as part of a private placement on June 15, 2001, which warrants are currently exercisable.
(10) Includes 14,184 shares subject to warrants which are currently exercisable.
(11) Includes 6,704 shares subject to warrants which are currently exercisable.
(12) Includes 5,462 shares subject to warrants which are currently exercisable.
(13) Includes 4,000 shares subject to warrants which are currently exercisable.
PLAN OF DISTRIBUTION
We will not receive any part of the proceeds from the sale of common stock offered pursuant to this prospectus. The shares of our common stock offered pursuant to this prospectus may be offered and sold from time to time by the selling stockholders listed in the preceding section, or their
donees, transferees, pledgees or other successors in interest that receive such shares as a gift or other non-sale related transfer. These selling stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. All or a portion of the common stock offered by this prospectus may be offered for sale from time to time on The Nasdaq National Market or on one or more exchanges, or otherwise at prices and terms then obtainable, or in negotiated transactions. The distribution of these securities may be effected in one or more transactions that may take place on the over-the-counter market, including, among others, ordinary brokerage transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling stockholders.
To the extent required, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. In effecting sales, broker-dealers engaged by the selling stockholders may arrange for other broker-dealers to participate in the resales. Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the selling stockholders. Broker-dealers or agents may also receive compensation from the purchasers of the shares for whom they act as agents or to whom they sell as principals, or both. Compensation as to a particular broker-dealer might be in excess of customary commissions and will be in amounts to be negotiated in connection with the sale. Broker-dealers or agents and any other participating broker-dealers or the selling stockholders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933 in connection with sales of the shares offered pursuant to this prospectus. Accordingly, any such commission, discount or concession received by them and any profit on the resale of the shares purchased by them may be deemed to be underwriting discounts or commissions under the Securities Act of 1933. Because the selling stockholders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933, the selling stockholders will be subject to the prospectus delivery requirements of the Securities Act of 1933.
In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 promulgated under the Securities Act of 1933 or other exemption from registration may be sold under Rule 144 or other exemption rather than pursuant to this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of shares by the selling stockholders. The shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states the shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
Under current applicable rules and regulations of the Securities Exchange Act of 1934, any person engaged in the distribution of the shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement of such distribution. In addition, each selling stockholder will be subject to applicable provisions of the Securities Exchange Act of 1934 and the associated rules and regulations under the Securities Exchange Act of 1934, including Regulation M, which provisions may limit the timing of purchases and sales of shares of our common stock by the selling stockholders. We will make copies of this prospectus available to the selling stockholders and have informed them of the need for delivery of copies of this prospectus to purchasers at or prior to the time of any sale of the shares being offered pursuant to this prospectus.
The selling security holders are not obligated to, and there is no assurance that the selling security holders will, sell any or all of the shares.
We will bear all costs, expenses and fees in connection with the registration of the resale of the shares covered by this prospectus. The selling stockholders will pay any applicable underwriters' commissions and expenses, brokerage fees or transfer taxes. The selling stockholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act of 1933.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed on by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2000, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form S-3 with the Securities and Exchange Commission relating to the common stock offered by this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. For further information with respect to us and the common stock offered hereby, reference is made to such registration statement, exhibits and schedules.
We are subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934, as amended, and in accordance therewith
file reports, proxy statements and other information with the Securities and
Exchange Commission. Such reports, proxy statements, other information and a
copy of the registration statement may be inspected by anyone without charge and
copies of these materials may be obtained upon the payment of the fees
prescribed by the Securities and Exchange Commission, at the Public Reference
Room maintained by the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The public may obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The registration statement and the reports, proxy statements
and other information filed by us are also available through the Securities and
Exchange Commission's website on the World Wide Web at the following address:
http://www.sec.gov.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by reference" the information we file with the Securities and Exchange Commission, which means that we can disclose important information to you by referring to those documents. We incorporate by reference the documents listed below and any additional documents filed by us with the Securities and Exchange Commission under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of securities is terminated. The information we incorporate by reference is an important part of this prospectus, and any information that we file later with the Securities and Exchange Commission will automatically update and supersede this information.
We hereby incorporate by reference the following documents:
1. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2000 filed with the SEC on March 7, 2001, as amended by the Form 10-K/A filed with the SEC on September 28, 2001;
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 as filed with the SEC on May 10, 2001, as amended by the Form 10-Q/A filed with the SEC on September 28, 2001;
3. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 as filed with the SEC on August 7, 2001, as amended by the Form 10-Q/A filed with the SEC on September 28, 2001;
4. Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 as filed with the SEC on November 13, 2001;
5. The description of our common stock contained in our
Registration Statement on Form 8-A, filed with the SEC under
Section 12 of the Securities Exchange Act of 1934, including
any amendment or report filed for the purpose of updating such
description; and
6. All other reports filed by us pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934
prior to the termination of the offering.
You may request a copy of these filings, at no cost, by writing or calling us at Sonus Pharmaceuticals, Inc., 22026 20th Avenue S.E., Bothell, Washington 98021, telephone number (425) 487-9500.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the common stock being registered hereunder. All of the amounts shown are estimates except for the SEC registration fee.
TO BE PAID BY
SONUS PHARMACEUTICALS
---------------------
SEC registration fee...................................... $ 1,273
Nasdaq National Market listing fee........................ 24,893
Legal fees................................................ 15,000
Accounting fees........................................... 10,000
Miscellaneous expenses.................................... 5,000
-------------
Total............................................ $ 56,166
=============
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ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) As permitted by the Delaware General Corporation Law, our Certificate of Incorporation eliminates the liability of directors to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent otherwise prohibited by the Delaware General Corporation Law.
(b) Our Certificate of Incorporation provides that we will indemnify each person who was or is made a party to any proceeding by reason of the fact that such person is or was a director or officer of the Company against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith to the fullest extent authorized by the Delaware General Corporation Law. Our Bylaws provide for a similar indemnity to our directors and officers to the fullest extent authorized by the Delaware General Corporation Law.
(c) Our Certificate of Incorporation also gives us the ability to enter into indemnification agreements with each of our officers and directors. We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements provide for the indemnification of directors and officers against any and all expenses, judgements, fines, penalties and amounts paid in settlement, to the fullest extent permitted by law.
ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
5.1 Opinion of Stradling Yocca Carlson & Rauth.
10.1 Supply Agreement dated January 22, 2002 between Indena SpA and Sonus Pharmaceuticals, Inc.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Stradling Yocca Carlson & Rauth (see Exhibit 5.1).
24.1 Power of Attorney (Included in the signature pages hereof).
|
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and
(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 those clauses is confirmed in our periodic reports filed with or furnished to the Commission pursuant to Section 13 of Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, to treat the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 as part of this registration statement as of the time it was declared effective.
(2) For purposes 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 as the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of registrant pursuant to the foregoing provisions 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 Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us 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, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Bothell, State of Washington, on the 7th day of February, 2002.
SONUS PHARMACEUTICALS, INC.
By: /s/ Michael A. Martino
-----------------------------------------------
Michael A. Martino
President, Chief Executive Officer and Director
(Principal Executive Officer)
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POWER OF ATTORNEY
We, the undersigned directors and officers of Sonus Pharmaceuticals, Inc., do hereby constitute and appoint Michael A. Martino and Richard J. Klein, or either of them, our true and lawful attorneys and agents, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations, and requirements of the Securities and Exchange Commission, in connection with this registration statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) to this registration statement, or any related registration statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended; and we do hereby ratify and confirm all that the said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Michael A. Martino President, Chief Executive Officer February 7, 2002
--------------------------------------- and Director
Michael A. Martino (Principal Executive Officer)
/s/ Richard J. Klein Vice President of Finance and February 7, 2002
--------------------------------------- Chief Financial Officer
Richard J. Klein (Principal Financial and Accounting Officer)
/s/ George W. Dunbar, Jr. Director, Co-Chairman of the Board of February 7, 2002
--------------------------------------- Directors
George W. Dunbar, Jr.
/s/ Christopher S. Henney Director February 7, 2002
---------------------------------------
Christopher S. Henney, Ph.D, D. Sc.
/s/ Robert E. Ivy Director, Co-Chairman of the Board of February 7, 2002
--------------------------------------- Directors
Robert E. Ivy
/s/ Dwight Winstead Director February 7, 2002
---------------------------------------
Dwight Winstead
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EXHIBIT INDEX
Exhibit Sequential
Number Description Page Number
------ ----------- -----------
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation. --
10.1 Supply Agreement dated January 22, 2002 between Indena SpA and Sonus
Pharmaceuticals, Inc.
23.1 Consent of Ernst & Young LLP, Independent Auditors. --
--
23.2 Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (included in the Opinion filed as Exhibit 5.1).
24.1 Power of Attorney (Included in the signature page hereof). --
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EXHIBIT 5.1
[STRADLING YOCCA CARLSON & RAUTH LETTERHEAD]
February 6, 2002
Sonus Pharmaceuticals, Inc.
22026 20th Avenue S.E.
Bothell, Washington 98021
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3 to be filed by Sonus Pharmaceuticals, Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission (as may be amended or supplemented, the "Registration Statement"), in connection with the registration under the Securities Act of 1933 of 2,489,300 shares of Common Stock of the Company, $.001 par value, (the "Securities"). The Securities may be sold from time to time for the account of the selling stockholders set forth in the Registration Statement.
We have examined the proceedings heretofore taken and are familiar with additional proceedings proposed to taken by you in connection with the authorization, issuance and sale of the Securities.
Based on the foregoing, and assuming that the full consideration for the Securities has been received by the Company, it is our opinion that the Securities, when issued and sold in the manner described in the Registration Statement, will be legally issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registation Statement and to the use of our name under the caption "Legal Matters" in the Prospectus which is a part of the Registration Statement.
Very truly yours,
STRADLING YOCCA CARLSON & RAUTH
/s/ Stradling Yocca Carlson & Rauth |
EXHIBIT 10.1
SUPPLY AGREEMENT
This Agreement is made to be effective as of 22nd January 2002 by and between INDENA SPA, a company organized and existing under the laws of Italy, having offices at Viale Ortles 12, 20139 Milano, Italy ("Indena") and SONUS PHARMACEUTICALS, INC., a company organized and existing under the laws of the State of Delaware, USA, having offices at 22026 20th Avenue SE, Bothell, WA 98021 USA ("SONUS"). Indena and SONUS are each acting on behalf of itself and of the respective Affiliates. Indena and its Affiliates are hereinafter collectively referred to as "SUPPLIER" and SONUS and its Affiliates are hereinafter collectively referred to as "PURCHASER".
WHEREAS
A. Supplier engages in the production, marketing and sale of vegetal extracts, derivatives and active principles; and
B. Purchaser is interested to purchase from Supplier medical grade paclitaxel for use in the manufacture of a pharmaceutical speciality and Supplier desires to supply paclitaxel to Purchaser, upon the terms and conditions set out hereinafter,
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS.
1. CERTAIN DEFINED TERMS
As used in this Agreement, the following terms shall have the following meanings (with the understanding that terms importing the singular also include the plural and vice-versa):
(a) "AGREEMENT" shall mean this Supply Agreement of which the Exhibits attached hereto form an integral and substantive part;
(b) "EFFECTIVE DATE" shall mean the date first written above;
(c) "PRODUCT" shall mean medical grade paclitaxel conforming to the specifications set forth on Exhibit 1 attached hereto (the "Specifications") and Supplier's DMF filed with FDA;
(d) "FINISHED PRODUCT" shall mean the new pharmaceutical product containing the Product to be manufactured, marketed and sold by Purchaser in the Territory;
(e) "TERRITORY" shall mean any country of the world;
(f) "FDA" shall mean the United States Food and Drug Administration;
(g) "FDA APPROVAL" shall mean approval by the FDA of the NDA relating to the Finished Product and of Supplier as supplier of Product;
(h) "NDA" shall mean the New Drug Application required to manufacture, market and sell the Finished Product in the United States;
(i) "DMF" shall mean Supplier's Drug Master File required to manufacture, market and sell the Product in the Territory;
(j) "cGMP" shall mean current good manufacturing practices as the same are or shall from time to time be established by governmental authority in the Territory;
(k) "AFFILIATES" of a party hereto shall mean any company or other entity directly or indirectly controlling, or controlled by, such party or under common control as such party, the term "control" meaning ownership of the majority of shares carrying the right to vote at General Meetings or the power to direct the policies and management of a company or entity; and
(l) "USP" shall mean the United States Pharmacopoeia, current edition.
2. SALE AND PURCHASE OF PRODUCT
During the term hereof Supplier undertakes to supply, and Purchaser undertakes to purchase the Product for use to manufacture the Finished Product pursuant to purchase orders delivered by Purchaser to Supplier from time to time as provided herein. Nothing herein shall be deemed or construed as imposing any obligation of either party to deal exclusively with the other party or any obligation of Purchaser to purchase its requirements of the Product from Supplier.
3. INITIAL SUPPLIES
3.1 In year 2002, Supplier undertakes to supply, and Purchaser undertakes to purchase, 1000 grams of Product to be used by Purchaser to manufacture the Finished Product (the "Initial Supplies").
3.2 Orders for each lot of Product to be delivered in year 2002 shall be placed with Supplier at least 90 days before the requested date of supply.
4. FURTHER SUPPLIES
Regular supplies of Product (the "Further Supplies") shall begin starting by January 2003 or such other date as the parties may agree in writing, as provided in Section 5 below.
5. FORECASTS AND ORDERS
5.1 By October 31 of each year during the term hereof starting from year 2002, Purchaser shall submit to Supplier an estimated rolling forecast of the quantities of Product that Purchaser expects to order during the two following calendar years.
The forecast for the first following calendar year divided by quarters shall be binding and shall be considered a firm purchase commitment. Purchaser shall confirm each binding purchase commitment by a purchase order. Each purchase order and any confirmation shall be governed and superseded by the terms and provisions of this Agreement.
The forecast for the second calendar year also divided by quarters shall be non-binding, provided that the relevant firm order must be consistent (plus or minus 15%) with the forecasted quantities.
5.2 By no later than November 30 of each year during the term hereof starting from 2002 Indena will confirm in writing to Purchaser the receipt and acceptance of firm orders.
5.3 In the event that the parties agree on a date other than January 2003 for the beginning of regular supplies the dates set out in the preceding Sections may be revised by mutual agreement.
6. SHIPMENTS
6.1 The Product shall be shipped CIP, Seattle, Washington, USA. Supplier shall be responsible for all export, import, or customs taxes or duties, and any sales use, or value-added taxes of any jurisdiction that may apply to the purchase and sales of the Product hereunder.
6.2 Unless otherwise specifically provided, trade terms used herein are as defined in Incoterms (2000) issued by the International Chamber of Commerce.
7. PRICE; PAYMENT TERMS
7.1 The Price for the Initial Supplies of the Product shall be as specified in the quotation and appended hereto as Exhibit 2.
7.2 The price for Further Supplies of the Product applicable in each two-year period will be mutually agreed by October 31 of the preceding year, provided that if there are unforeseeable material increases in the costs borne by Supplier to manufacture the Product which are not the result of fault or negligence of Supplier, the parties shall promptly consult and negotiate in good faith on a new price of supply.
7.3 Payment by Purchaser of each lot of Product supplied hereunder shall be made at 30 days from the date of the relevant invoice by Supplier by wire transfer to the bank account designated by Supplier in the invoice.
8. WARRANTIES, LIABILITIES, INDEMNITY
8.1 Supplier represents and warrants as follows.
(a) The Product supplied hereunder shall be in compliance with the Specifications and the relevant DMF.
(b) The Product shall conform in all respects to the applicable laws, regulations and approvals governing the manufacture, importation, distribution and use of the Product. Without limiting the generality of the foregoing, Supplier represents and warrants that the Product shall not be adulterated or misbranded within the meaning of the U.S. Federal Food Drug and Cosmetic Act, as amended, as well as any applicable foreign law or regulation of any country, as such Act and such laws are constituted and are effective at the time of delivery.
(c) The manufacture of the Product shall be manufactured in an FDA approved facility in accordance with cGMP. Purchaser's representatives shall have the right to inspect Supplier's Product manufacturing facilities, once per calendar year during regular business hours and upon at least 30 working days prior notice, to verify Supplier's compliance with the foregoing.
(d) All laboratory, scientific technical and/or other data submitted by or on behalf of Supplier relating to the Product shall be true and correct and shall not contain any misrepresentation or omission.
(e) An approved Certificate of Analysis, showing conformance of the Product to the relevant Product Specifications and requirements, shall accompany each lot within each shipment of the Product.
(f) Each Product shipment shall have at minimum 1.5 years remaining before retest date according to the Certificate of Analysis.
(g) Upon publication as a monograph in the USP, the Product shall conform in all respects to the applicable requirements for paclitaxel, USP.
OTHER THAN AS SPECIFICALLY SET FORTH IN THIS AGREEMENT. SUPPLIER HEREBY EXPRESSLY EXCLUDES AND DISCLAIMS ALL WARRANTIES (WHETHER IMPLIED OR EXPRESS), INCLUDING, WITHOUT LIMITATION: (i) ANY WARRANTY OF MERCHANTABILITY; OR (ii) ANY WARRANTY OF FITNESS OF THE PRODUCT SUPPLIED UNDER THIS AGREEMENT FOR THE PARTICULAR PURPOSE FOR WHICH PURCHASER INTENDS TO USE IT.
8.2 Within 30 days from receipt Purchaser shall analyze each lot of Product delivered by Supplier hereunder and if any quantity of the Product delivered by Supplier hereunder fails to meet the Specifications, or the terms or provisions of this Agreement, or is otherwise defective, Purchaser shall give notice to Supplier, except for claims based on hidden defects, with respect to which the above 30 day period shall be computed from the date of discovery. Failure by Purchaser to give this notice within the 30 day period shall constitute a waiver by Purchaser of all claims under this Agreement with respect to the Product.
If Supplier accepts the claim, Purchaser shall return to Supplier the defective or non-conforming lot at Supplier's expense, unless the parties
agree otherwise, and Supplier shall at its care and expense and as soon as technically possible replace the non-conforming or defective lot. In the event of disagreement between the parties about non-conformity or other defects alleged by Purchaser, the matter shall be finally settled by an independent laboratory at the expense of the party whose findings are not confirmed by the independent laboratory.
8.3 FOR DELIVERIES OF NON-CONFORMING OR DEFECTIVE PRODUCT BY SUPPLIER TO PURCHASER, PURCHASER'S EXCLUSIVE REMEDY AND SUPPLIER'S EXCLUSIVE LIABILITY HEREUNDER (WHETHER IN CONTRACT, IN TORT, UNDER ANY WARRANTY, OR OTHERWISE), FOR ANY AND ALL LOSSES, DAMAGES OR INJURIES, WHETHER TO PERSONS OR PROPERTY, RESULTING FROM PRODUCT USED AS SUCH OR IN THE FINISHED PRODUCT, OR FROM ANY OTHER CAUSE, SHALL BE LIMITED TO THE REPLACEMENT BY SUPPLIER OF ANY NON-CONFORMING OR DEFECTIVE PRODUCT SOLD TO PURCHASER HEREUNDER, FREE OF CHARGE.
8.4 Supplier shall indemnify and hold Purchaser harmless from and against any third party claim or action (and loss, liability, damage or expense including, without limitation, reasonable attorney's fees deriving therefrom) arising from or related to (i) any negligent act or omission of Supplier or willful misconduct of Supplier, or any directors, officers, employees or agents of Supplier, or (ii) any breach of any representation, warranty, or covenant by Supplier under this Agreement, subject to the provisions of Section 8.3.
8.5 Purchaser shall indemnify and hold Supplier harmless from and against any third party claim or action (and loss, liability, damage or expense including, without limitation, reasonable attorney's fees deriving therefrom) arising from or related to Purchaser's handling, storage or use of the Product or distribution, marketing or sale of any Finished Product containing the Product except to the extent attributable to Supplier pursuant to this Section 8.
8.6 If either party expects to seek indemnification from the other party under the preceding two paragraphs, the party seeking indemnification shall promptly give notice to the other party of any such claim or suit threatened, made or filed against it which forms the basis for such claim of indemnification and to co-operate fully with the other party in the investigation and defense of all such claims or suits. The indemnifying party shall have the option to assume the other party's defense in any such claim or suit with counsel reasonably satisfactory to the other party. No settlement or compromise shall
be binding on a party hereto without its prior written consent, unless such settlement fully releases the other party without any liability, loss, cost or obligation to such party.
8.7 THE REMEDIES PROVIDED FOR IN THIS SECTION 8 SHALL BE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO THE PARTIES HEREUNDER FOR THE VIOLATION BY THE OTHER PARTY OF ANY REPRESENTATION OR WARRANTY CONTAINED IN THIS AGREEMENT, AND ANY RIGHT OF EITHER PARTY TO PROSPECTIVE PROFITS OR SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES, IS HEREBY EXPRESSLY EXCLUDED AND EXPRESSLY WAIVED BY THE PARTIES HERETO.
8.8 This Section 8 and the obligations contained herein shall survive the expiration or termination of this Agreement for any reasons whatsoever.
9. REGULATORY MATTERS
9.1 Supplier shall maintain a complete DMF for the Product, complying with all applicable FDA and other applicable regulatory authority requirements and will provide to Purchaser copies of all correspondence with the FDA, inspection reports and other reports issued by the FDA with respect to the Product and Supplier's manufacturing facilities. Supplier shall further provide authorization for the regulatory agencies to refer to the DMF during the review of any regulatory submission made by Purchaser.
9.2 Purchaser shall use its commercially reasonable best efforts to file an NDA and to obtain FDA Approval as soon as practicable; provided, however, that nothing herein shall impose any obligation on Purchaser to continue to pursue FDA approval if in its reasonable business judgement, it would be commercially impractical to do so.
9.3 Supplier hereby authorizes Purchaser to reference Supplier's DMF in Purchaser's regulatory submissions. If Supplier intends to amend the DMF, Supplier shall send 60 days advance notice to Purchaser to permit it to request amendment to the FDA Approval, if required.
9.4 Supplier shall advise Purchaser immediately in the event it intends to change its process to manufacture the Product corresponding which may or could reasonably be expected to affect Supplier's DMF, Purchaser's regulatory submissions or the Finished Product.
9.5 Supplier shall not institute any such change without first filing a complete and compliant DMF and shall provide Purchaser with Product manufactured without such change until (i) Purchaser has qualified the new Product and (ii) the approval of any amendment or supplement to Purchaser's regulatory submissions necessitated by and referencing such change and the new DMF, is obtained.
10. INSURANCE
10.1 Purchaser and Supplier each agree to maintain in force product
liability insurance, during the term of this Agreement and for a period
of 2 years after expiration or termination hereof for any reason.
During the period prior to commercialization of Finished Product, the
following minimum product liability insurance coverage shall be in
place:
Purchaser: U.S. $ 5 Million.
Supplier: U.S. $ 5 Million.
Upon commercialization of Finished Product, the coverage limits will be
reviewed and modified as appropriate.
10.2 Each party shall upon request provide to the other copy of the relevant
insurance policy.
11. FORCE MAJEURE
11.1 Supplier shall not be liable to Purchaser for any loss, cost, expense,
damage or injury suffered by Purchaser, any third person or any
property, whether direct or indirect, incidental or consequential, for
failure to deliver or delay in delivering the Product (or any portion
of the Product duly ordered by Purchaser and accepted by Supplier) and
Purchaser shall not be liable to Supplier for any loss, cost, expense,
damage or injury suffered by Supplier, any third person or any
property, whether direct or indirect, incidental or consequential, for
failure to accept or delay in accepting the Product (or any portion of
the Product ordered by Purchaser from Supplier), when any such failure
is due to force majeure and without the fault or negligence of the
party so failing or delaying. For purposes of this Agreement, "Force
Majeure" is defined as causes beyond the control of the party affected,
including, without limitation (as each of the following relates to a
party or a supplier to a party): acts of God; acts, regulations,
decrees, restrictions
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(including restrictions on the exportation or importation of the Product
or crops or materials related to the manufacture of the Product) or laws
of, or inaction by, any government; embargoes; seizure of cargo; wars
(whether or not declared); civil commotion; destruction of production
facilities or materials by fire, food, drought, earthquake, explosion or
storm; labor disturbances; epidemics; and failure of public utilities or
common carriers.
11.2 The party affected by Force Majeure shall give prompt notice to the
other party (the "Force Majeure Notice") and take any reasonable steps as
are necessary to relieve the effects thereof as rapidly as possible.
11.3 If Force Majeure lasts for more than 3 months the party which received
a Force Majeure Notice may terminate this Agreement by written notice of
termination mailed to the other by registered letter return receipt
requested.
12. CONFIDENTIALITY
12.1 Any confidential information pertaining to the Product that has been or
will be communicated by Supplier to Purchaser, and any confidential
information pertaining to the Finished Product communicated by Purchaser
to Supplier, including without limitation, trade secrets, business
methods and plans, pricing, costs, suppliers, manufacturing and customer
information, shall be kept strictly secret by Purchaser and Supplier,
respectively, and their respective affiliates, officers, directors,
employees, agents and representatives, provided, however, that the
restrictions and prohibitions set forth in this Section 12 shall not
apply to the extent that such information:
(a) is available to the public in public literature or otherwise, or
after disclosure by one party to the other becomes public
knowledge through no fault of the party receiving such
confidential information;
(b) was known to the party receiving such information prior to
disclosure by the other party as demonstrated by written records
or documentation;
(c) is obtained by the party receiving such information from a third
party entitled to disclose it without breaching confidentiality
obligations to the disclosing party;
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(d) is required to be disclosed pursuant to any order of a court having jurisdiction or any lawful action of a governmental or regulatory agency; or
(e) is independently developed by the party receiving such
information, without use of confidential information disclosed by
the other party as demonstrated by written records or
documentation.
12.2 Each party shall take all precautions as it normally takes with its own
confidential information to prevent any improper disclosure of such
confidential information to any independent third party; provided,
however, that such confidential information may be disclosed within the
limits required to obtain any authorization from regulatory authorities
in the Territory or, with the prior written consent of the other party,
which shall not be unreasonably withheld, as may otherwise be required in
connection with the purpose of this Agreement.
12.3 This Section 12 and the obligations contained herein shall survive for a
period of seven years from the date of expiration or termination of this
Agreement for any reason whatsoever.
13. TERMINATION
13.1 Either party shall be entitled to terminate this Agreement by written
notice mailed to the other party by registered letter return receipt
requested in the event that Purchaser publicly announces that it has
terminated efforts to obtain FDA Approval for Finished Product.
Furthermore, should not Purchaser pursue regulatory approval or
commercialization in a particular region or country, Supplier shall be
entitled to enter an exclusive supply agreement with another party for
that particular region or country, and the Territory shall be reduced
accordingly.
13.2 Either party shall have the right to terminate this Agreement in
accordance with the following provisions:
(a) immediately upon written notice of such termination to the other
party, if the other party does not generally pay its debts as such
debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the
benefit or creditors; or any proceeding shall be instituted by or
against the other party seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization or
relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, or other similar official
for it or for any substantial part of its property, or the other
party takes any corporate action to authorize any of the actions
set forth above; or
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(b) if the other party is in breach of any of its material obligations
under this Agreement, the injured party will have the right,
without prejudice to any other rights to terminate this Agreement,
by giving 60 days' written notice to the party who has breached,
and such notice will automatically become effective unless the
party who has breached remedies such breach to the reasonable
satisfaction of the party seeking termination within such sixty
day period.
13.3 The termination of this Agreement, for any reason, shall not affect any
right or obligation already accrued hereunder nor the stipulations that
are expressly stated to survive.
If the Agreement is terminated Purchaser shall cease to use any
confidential data and information received from Supplier hereunder and
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shall cease to refer to Supplier's DMF, provided that if the Agreement is terminated by Purchaser pursuant to Section 13.2 Purchaser shall have a period of 12 months to comply with these obligations in order to dispose of stock of Product on hand at the date of termination.
14. TERM
14.1 This Agreement enters into force as of the Effective Date and, unless
earlier terminated in accordance herewith, shall last until December 31,
2006 (the "INITIAL TERM").
14.2 At the expiration of the Initial Term, this Agreement shall be
automatically renewed for another two-year period, and so on, unless
either party sends notice of termination to the other party by registered
letter return receipt requested mailed at least 12 months before the
original or any subsequent expiration date.
15. MISCELLANEA
15.1 This Agreement shall inure to the benefit of, and shall be binding upon,
each of the parties hereto and their respective successors and any
purchaser of a substantial part of either party's assets or operations.
The assignment of this Agreement or of rights and obligations deriving
therefrom to a third party shall be otherwise subject to the obtaining of
the written consent of the other party, provided that no consent shall be
required for any such assignment by either party to one of its
Affiliates.
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15.2 This Agreement contains the entire agreement between the parties hereto,
and supersedes any general terms and conditions of sale or purchase of
the parties hereto. It may be amended or modified only by a writing
signed by both parties hereto.
15.3 This Agreement is on a principal to principal basis. Neither party is
authorized to assume commitments in the name or on behalf of the other
party nor shall it incur any liability whatsoever for which the other may
become directly, indirectly or contingently liable.
15.4 Should any term or condition of this Agreement be held invalid,
unenforceable or anyhow in conflict with applicable laws or regulations
this shall not affect the validity and enforceability of the other
provisions of this Agreement and the parties shall agree in good faith
and substitute the invalid, unenforceable or conflicting provision with
other valid and enforceable provisions which achieve to the maximum
extent permitted the same financial and economic balance originally
provided.
15.5 Without prejudice to other express provisions contained herein, any
notice which shall or may be given by one party to the other in
connection with this Agreement shall be valid only if delivered in person
or sent by registered letter return receipt requested or by telefax as
follows:
- if to Supplier:
INDENA SpA
Viale Ortles, 12
20139 Milano
(Italy)
telefax: (+39)(02) 57496236
attention: Director of Business Development
and Agreements
- if to Purchaser:
SONUS PHARMACEUTICALS, INC.
22026 20th Avenue SE
Bothell, WA 98021
USA
Telefax: 425-489-0626
attention: Vice President, Business Development
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Any change of these addresses shall be promptly communicated in writing
from either party to the other party in accordance herewith.
Notices delivered in person shall be effective immediately. Notices sent
by telefax shall be effective immediately if received on a working day;
if not, they shall be effective the following working day. Notices sent
by letter shall be effective upon receipt, unless the letter merely
confirms a previous notice by telefax.
15.6 The Section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.7 This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without regard to conflict of laws
principles and the United Nations Convention on Contracts for the
International Sale of Goods.
15.8 Any dispute which may arise between the parties out of, or relating to,
this Agreement or supplies hereunder (including, not by way of
limitation, those concerning validity, interpretation, breach,
termination, prejudicial or competence matters), which the parties are
unable to settle amicably in good faith, shall be finally settled by
three arbitrators appointed and acting pursuant to the then prevailing
Rules of Conciliation and Arbitration of the International Chamber of
Commerce. The Arbitration shall be held in New York and the English
language shall be used throughout the proceedings.
15.9 This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement may be executed by either
party by copy transmitted by telefax and the executed counterpart so
transmitted shall be as effective as a manually executed counterpart.
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IN WITNESS WHEREOF, the authorized representatives of the parties have executed this Agreement on the dates indicated below.
INDENA SpA SONUS PHARMACEUTICALS, INC.
By: /s/ Dario Bonacorsi By: Michael A. Martino
------------------------ ---------------------------
(Dario Bonacorsi) (Michael A. Martino)
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Title: Chief Executive Officer Title: President and CEO
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 Sonus Pharmaceuticals, Inc. for the registration of 2,489,300 shares of its common stock and to the incorporation by reference therein of our report dated January 18, 2001, with respect to the financial statements of Sonus Pharmaceuticals, Inc. included in its Annual Report (Form 10-K/A) for the year ended December 31, 2000 filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Seattle, Washington
February 4, 2002
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