Aradigm Corp – ‘424B1’ on 7/1/98

As of:  Wednesday, 7/1/98   ·   Accession #:  950149-98-1244   ·   File #:  333-52081

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Prospectus   —   Rule 424(b)(1)
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Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Filed Pursuant to Rule 424(B)(1) - 333-52081          15     92K 

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                                                FILED PURSUANT TO RULE 424(B)(1)
                                            REGISTRATION STATEMENT NO. 333-52081

PROSPECTUS                                                                      

ARADIGM CORPORATION 
1,111,100 SHARES OF COMMON STOCK

    This Prospectus relates to up to 1,111,100 shares (the "Shares") of common
stock, no par value (the "Common Stock"), of Aradigm Corporation, a California  
corporation ("Aradigm" or the "Company"), which may be offered for sale by      
certain shareholders of the Company named in this Prospectus (the "Selling      
Shareholders"). Such sales may be effected from time to time by the Selling     
Shareholders through one or more underwriters, brokers, dealers or agents, and  
directly to one or more purchasers, in one or more transactions on the Nasdaq   
National Market pursuant to and in accordance with the rules of the Nasdaq      
National Market, in negotiated transactions or otherwise, at prices related to  
the prevailing market prices or at negotiated prices. The Company will not      
receive any of the proceeds from the sale of the Shares by the Selling          
Shareholders. See "Selling Shareholders" and "Plan of Distribution."            

  The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "ARDM." On June 30, 1998 the last reported sale price for the Common 
Stock of the Company as reported on the Nasdaq National Market was $13.563 per  
share.                                                                          

------------------------

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. 
SEE "RISK FACTORS" ON PAGE 5. 

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES 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 Company will bear substantially all expenses of the offering of the
Shares, except that the Selling Shareholders will pay any applicable            
underwriting fees, discounts or commissions and transfer taxes. Estimated       
expenses payable by the Company in connection with this offering are estimated  
to be $20,000. The aggregate proceeds to the Selling Shareholders from the      
Common Stock will be the purchase price of the Common Stock sold less the       
aggregate agents' commissions and underwriters' discounts, if any, and other    
expenses of issuance and distribution not borne by the Company. See "Plan of    
Distribution."                                                                  

 The Selling Shareholders and any agents, broker-dealers or underwriters
that participate in the distribution of the Common Stock may be deemed to be    
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commission received by them and any profit on the    
resale of the Common Stock purchased by them may be deemed to be underwriting   
discounts or commission under the Securities Act. The Company has agreed to     
indemnify the Selling Shareholders and certain other persons against certain    
liabilities, including liabilities under the Securities Act.                    

July 1, 1998

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AVAILABLE INFORMATION 

    The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), 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 Commission's Public Reference Section located at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located  
at 7 World Trade Center, Suite 1300, New York, New York, 10048, and 500 West    
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material    
also can be obtained from the Public Reference Section of the Commission at 450 
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission 
also makes electronic filings publicly available on the Internet. The           
Commission's Internet address is http://www.sec.gov. The Commission's web site  
also contains reports, proxy and information statements and other information   
regarding the Company that has been filed with the Commission. The Common Stock 
of the Company is quoted on the Nasdaq National Market. Reports, proxy          
statements and other information concerning the Company may be inspected at the 
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,        
Washington, D.C. 20006.                                                         

    This Prospectus constitutes a part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act, including    
amendments thereto, (the "Registration Statement") relating to the Common Stock 
offered hereby with the Commission. This Prospectus does not contain all of the 
information set forth in the Registration Statement and the exhibits and        
schedules thereto, certain portions of which have been omitted pursuant to the  
rules and regulations of the Commission. 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, or
otherwise filed with the Commission, each such statement being qualified in all 
respects by such reference. The Registration Statement, including exhibits      
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and copies of all or any part thereof may be obtained from the
Public Reference Section, Securities and Exchange Commission, Washington, D.C., 
20549, upon payment of the prescribed fees.                                     

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

   The following documents, filed with the Commission under the Exchange Act
are hereby incorporated by reference into this Prospectus:                      

          (a) The Company's Annual Report on Form 10-K for the fiscal year ended
    December 31, 1997, filed on or about March 24, 1998, as amended, including
all material incorporated by reference therein;                       

          (b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998, including all material incorporated by reference
therein;                                                              

    (c) The Company's Proxy Statement for its 1998 Annual Meeting of
Shareholders; and                                                     

      (d) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A.                                   

     All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the    
termination of this offering shall be deemed to be incorporated by reference    
herein and to be a part hereof from the date of filing of such documents. Any   
statement contained in this Prospectus or in a 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 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 so 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                  
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that have been incorporated by reference herein (not including exhibits to such 
documents, unless such exhibits are specifically incorporated by reference      
herein or into such documents). Such request may be directed to: Investor       
Relations Department, Aradigm Corporation, 26219 Eden Landing Road, Hayward,    
California 94545, telephone number (510) 783-0100.                              

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THE COMPANY 

Aradigm Corporation ("Aradigm" or the "Company") is engaged in the    
development of novel pulmonary drug delivery systems designed to enhance the    
delivery and effectiveness of a number of existing and development stage drugs  
and reduce the need for injectable drug therapy. Aradigm's principal product    
development programs are based on its AERx system, which uses proprietary       
technologies to create aerosols from liquid drug formulations for delivery      
systemically via the lung or locally to the lung. The Company believes that its 
systems can potentially be used to deliver a number of existing drugs for a     
variety of applications and may also offer a promising means of delivery for    
many new drugs being developed by pharmaceutical and biotechnology companies.   

   The Company was incorporated in California in January 1991. The Company's
principal executive offices are located at 26219 Eden Landing Road, Hayward, CA 
94545, and its telephone number is (510) 783-0100. For a more detailed          
discussion of the business of the Company, see the Company's Annual Report on   
Form 10-K for the year ended December 31, 1997, which is incorporated by        
reference herein.                                                               

     Aradigm(TM), AERx(TM) and SmartMist(R) are trademarks of the Company. Trade
names and trademarks of other companies appearing in this Prospectus are the    
property of their respective holders.                                           

RECENT DEVELOPMENTS 

In June 1998, the Company entered into a product development and      
commercialization agreement with Novo Nordisk A/S ("Novo Nordisk") covering the 
use of the AERx Diabetes Management System to deliver blood glucose regulating  
medicines. The initial focus of the development will be on insulin and the      
parties expect to evaluate at least one additional compound as a candidate for  
clinical development. Under the terms of the agreement, Novo Nordisk has been   
granted worldwide sales and marketing rights to the AERx Diabetes Management    
System.                                                                         

 Pursuant to the Novo Nordisk agreement, Aradigm could receive up to $50
million in milestones and equity investments by the time the insulin product is 
commercialized. Of these amounts, the Company to date has received $5 million   
resulting from the purchase of Aradigm Common Stock by Novo Nordisk. Additional 
milestone and product development payments will be paid if the Company and Novo 
Nordisk decide to jointly develop additional AERx products incorporating blood  
glucose regulating medicines. In addition, Novo Nordisk will fund all product   
development costs incurred by the Company, while the Company and Novo Nordisk   
will co-fund final development of the AERx device to be used in the system. The 
Company will be the initial manufacturer of all the products covered by the     
agreement, and will receive a share of the overall gross profits resulting from 
Novo Nordisk's sales of the systems.                                            

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RISK FACTORS

In addition to the other information in this Prospectus and in the    
documents incorporated by reference herein, the following Risk Factors should be
carefully considered in evaluating the Company and its business before          
purchasing the Common Stock offered by this Prospectus. Except for historical   
information contained herein, the discussion in this section contains           
forward-looking statements, including, without limitation, statements regarding 
timing and results of clinical trials, the establishment of corporate partnering
arrangements, the anticipated commercial introduction of the Company's products 
and the timing of the Company's cash requirements. These forward-looking        
statements involve certain risks and uncertainties that could cause actual      
results to differ materially from those in such forward-looking statements.     

EARLY STAGE OF COMPANY                                                          

     Aradigm, incorporated in January 1991, is in an early stage of development,
has a limited history of operations and has generated only limited revenues to  
date. The Company has only one product, the SmartMist Respiratory Management    
System, cleared for commercial sale, and virtually all of its potential products
are in an early stage of research or development. There can be no assurance that
the Company's research and development efforts will be successful, that any     
potential products will be proven safe and effective, that regulatory clearance 
or approval for the sale of any of its potential products will be obtained or   
that the SmartMist system or any of the Company's potential products can be     
manufactured in commercial quantities or at an acceptable cost or marketed      
successfully.                                                                   

HISTORY OF LOSSES; ANTICIPATED FUTURE LOSSES                                    

    The Company has not been profitable since inception and, through March 31,
1998, has incurred a cumulative deficit of approximately $39.6 million. The     
Company expects to continue to incur substantial losses over at least the next  
several years as the Company's research and development efforts, preclinical and
clinical testing activities, marketing and manufacturing scale-up efforts expand
and as the Company plans and builds its late stage clinical and early commercial
production capabilities. To achieve and sustain profitable operations, the      
Company must successfully partner with third parties to market and sell the     
SmartMist Respiratory Management System and develop, obtain regulatory approval 
for, manufacture, introduce, and partner with third parties to market and sell  
products utilizing the Company's AERx technologies. There can be no assurance   
that the Company's partners can generate sufficient product revenue to become   
profitable or to sustain profitability.                                         

UNCERTAINTY OF SUCCESSFUL PRODUCT DEVELOPMENT                                   

 The Company's AERx systems are at an early stage of development and are
being tested using patient-operated prototypes. The AERx systems will require   
substantial additional development, preclinical and clinical testing and        
investment before they can be commercialized. To further develop its AERx       
systems, the Company must address many engineering and design issues, including 
ensuring that the device has the ability to deliver a reproducible amount of    
drug into the bloodstream and can be manufactured successfully as a hand-held   
system. No assurance can be made that the Company will be successful in         
addressing these design, engineering and manufacturing issues. Additionally, the
Company may need to formulate and will need to package drugs for delivery by its
AERx systems. There can be no assurance that the Company will be able to        
successfully formulate and package such drugs. The Company will need to         
demonstrate that drugs delivered by its AERx systems remain safe and efficacious
and that over time and under differing storage conditions, such drugs will not  
be subject to physical or chemical instability or other problems that would     
prohibit the AERx systems from being commercially viable. While development     
efforts are at different stages for different products, there can be no         
assurance that the Company will be successful in any of its product development 
efforts, or that the Company will not abandon some or all of its proposed       
products. Failure by the Company to successfully develop its potential products 
in a timely manner would have a material adverse effect on the Company.         

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UNCERTAINTY OF SUCCESSFUL PRODUCT COMMERCIALIZATION                             

 The Company's success in commercializing its products will be dependent
upon many factors, including acceptance by health care professionals and        
patients. Acceptance of the Company's products will largely depend on           
demonstrating that the Company's products are competitive with alternate        
delivery systems with respect to safety, efficacy, ease of use and price. The   
Company believes that market acceptance of its SmartMist system will depend     
largely upon health care professionals and third-party payors determining that  
the SmartMist system offers medical and economic benefits over existing asthma  
therapies. In addition, the SmartMist system is specifically designed for the   
canisters currently used by some of the leading manufacturers of MDIs. If, among
other things, manufacturers decide to change the dimensions of their canisters, 
the Company could be adversely affected. Moreover, MDIs use chlorofluorocarbons 
("CFCs") as a propellant for the medication. The Company is aware of initiatives
and international agreements to ban CFCs, which could have an adverse effect on 
the Company. In order to commercialize the SmartMist system, the Company is     
pursuing collaborations with pharmaceutical firms, disease management companies 
and managed care organizations in order to develop the market for this product  
and to realize its potential as a part of a broader pulmonary disease management
program. There can be no assurance that the SmartMist system or the Company's   
products in development will prove competitive or that the Company will be      
successful in taking products from their current state of development to        
commercial introduction or success. Failure by the Company to successfully      
commercialize its potential products in a timely manner would have a material   
adverse effect on the Company.                                                  

DEPENDENCE UPON COLLABORATIVE PARTNERS AND NEED FOR ADDITIONAL COLLABORATIVE    
PARTNERS                                                                        

The Company's commercialization strategy is dependent on the Company's
ability to enter into agreements with collaborative partners. The Company's     
ability to successfully develop and commercialize its first AERx system, the    
AERx Pain Management System, is dependent on the Company's corporate partnership
with SmithKline Beecham. SmithKline Beecham has agreed to undertake certain     
collaborative activities with the Company, fund research and development        
activities with the Company, make certain payments to the Company upon          
achievement of certain milestones and pay royalties to the Company if and when a
product is commercialized. If SmithKline Beecham fails to conduct these         
collaborative activities in a timely manner or at all, the preclinical or       
clinical development or commercialization of the AERx Pain Management System    
will be delayed. In addition, the agreement may be terminated by SmithKline     
Beecham and there can be no assurance that development and milestone payments   
will be received. Should the Company fail to receive development funds or       
achieve milestones set forth in the agreement, or should SmithKline Beecham     
breach or terminate the agreement, the Company's business, financial condition  
and results of operations would be materially adversely affected.               

  The Company will need to enter into additional agreements with corporate
partners to conduct the clinical trials, manufacturing, marketing and sales     
necessary to commercialize its other potential products. In addition, the       
Company's ability to apply the AERx system to any proprietary drugs, including  
new drugs, biotechnology drugs or established drugs in proprietary formulations,
will depend on the Company's ability to establish and maintain corporate        
partnerships or other collaborative arrangements with the holders of proprietary
rights to such drugs. There can be no assurance that the Company will be able to
establish such additional corporate partnerships or collaborative arrangements  
on favorable terms or at all, or that its existing or any future corporate      
partnerships or collaborative arrangements will be successful. In addition,     
there can be no assurance that existing or future corporate partners or         
collaborators will not pursue alternative technologies or develop alternative   
products either on their own or in collaboration with others, including the     
Company's competitors. There can be no assurance that disputes will not arise in
the future with the Company's existing or future corporate partners or          
collaborators, and any such disagreements could lead to delays in the research, 
development or commercialization of any potential products or result in         
litigation or arbitration which would be time consuming and expensive. Should   
any corporate partner or collaborator fail to develop or commercialize          
successfully any product to which it has obtained rights from the Company, the  
Company's business, financial condition and results of operations may be        
materially adversely affected.                                                  

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LIMITED MANUFACTURING EXPERIENCE                                                

    The Company has only limited experience in manufacturing. In the event the
SmartMist system achieves market acceptance, the Company will need to further   
increase its current manufacturing capacity or enter into an agreement with a   
collaborative partner to provide such manufacturing capacity. In addition, the  
Company is in the process of increasing the production of disposable drug       
packets for the AERx system for later stage clinical trials. The Company        
anticipates making significant expenditures to attempt to provide for the high  
volume manufacturing required for multiple AERx products, if such products are  
successfully developed. There can be no assurance that manufacturing and quality
control problems will not arise as the Company attempts to scale-up, or that any
such scale-up can be achieved in a timely manner or at a commercially reasonable
cost. Any failure to surmount such problems could delay or prevent late stage   
clinical testing and commercialization of the Company's products. The Company's 
manufacturing facilities and those of its contract manufacturers will be subject
to periodic regulatory inspections by the FDA and other federal and state       
regulatory agencies and such facilities must comply with the good manufacturing 
practice ("GMP") requirements of the FDA, which outline the appropriate         
practices for methods used in, and the facilities and controls used for, the    
manufacture, packaging and storage of all finished devices intended for human   
use. The Company is also subject to the Medical Device Reporting regulations,   
which provide mechanisms for the FDA and manufacturers to identify and monitor  
significant adverse events involving medical devices such that problems may be  
detected and corrected in a timely manner. These regulations require the Company
to, among other things, report adverse device-related events, submit annual     
baseline reports to the FDA using specified forms, and certify, on an annual    
basis, the number of medical device reports submitted to the FDA using          
prescribed FDA forms. Further, the Reports of Corrections and Removals require a
manufacturer of a device to establish procedures for implementing the reports of
corrections and removals provisions of the Safe Medical Devices Act of 1990.    
Under this regulation, a manufacturer must promptly report to the FDA any       
corrections or removals of a device undertaken to reduce a health risk posed by 
the device or to remedy a violation of the Federal Food, Drug and Cosmetic Act. 
There can be no assurance the Company will satisfy such regulatory requirements 
and any failure to satisfy GMP and other requirements could have a material     
adverse effect on the Company.                                                  

The Company uses contract manufacturers to produce key components,    
assemblies and subassemblies for its SmartMist devices and intends to use       
contract manufacturers in a similar way in connection with clinical and         
commercial manufacturing of its AERx devices. There can be no assurance that    
Aradigm will be able to enter into or maintain satisfactory contract            
manufacturing arrangements. Certain components of Aradigm's current and         
potential products are or will be available initially only from single sources. 
While the Company has contingency plans for alternate suppliers, there can be no
assurance that the Company could find alternate suppliers for such components.  
Even if new suppliers are secured, there can be no assurance that this would not
significantly reduce or eliminate the Company's ability to supply product during
any transition. A delay of or interruption in production could have a material  
adverse effect on the Company's business, financial condition and results of    
operations.                                                                     

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING                         

   The Company's operations to date have consumed substantial and increasing
amounts of cash. The negative cash flow from operations is expected to continue 
in the foreseeable future. The development of the Company's technology and      
proposed products will require a commitment of substantial funds. In addition,  
costly and time-consuming research and preclinical and clinical testing         
activities must be conducted to develop, refine and commercialize such          
technology and proposed products. The Company's future capital requirements will
depend on many factors, including continued progress in the research and        
development of the Company's technology and drug delivery systems, the ability  
of the Company to establish and maintain favorable collaborative arrangements   
with others, progress with preclinical studies and clinical trials, the time and
costs involved in obtaining regulatory approvals, the cost of development and   
the rate of scale-up of the Company's production technologies, the cost involved
in preparing, filing, prosecuting, maintaining and enforcing patent claims and  
the need to acquire licenses or other rights to new technology.                 

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   The Company has financed its operations since inception primarily through
$42.3 million in private placements and $24.7 million in public offerings of its
capital stock, $7.4 million in contract research revenue, $3.3 million in       
proceeds from financings of equipment acquisitions, and $3.1 million in interest
earned on investments. The Company anticipates that its existing resources,     
anticipated payments from its existing corporate partners and projected interest
income, will enable the Company to maintain its current and planned operations  
through 1998. However, there can be no assurance that the Company will not need 
to raise substantial additional capital to fund its operations prior to such    
time. There can be no assurance that additional financing will be available on  
acceptable terms or at all. If additional funds are raised by issuing equity    
securities, substantial dilution to shareholders may result. If adequate funds  
are not available, the Company may be required to delay, reduce the scope of, or
eliminate one or more of its research or development programs or obtain funds   
through arrangements with collaborative partners or others that may require the 
Company to relinquish rights to certain of its technologies, product candidates 
or products that the Company would not otherwise relinquish.                    

DEPENDENCE UPON PROPRIETARY TECHNOLOGY; UNCERTAINTY OF PATENTS AND PROPRIETARY  
TECHNOLOGY                                                                      

    The field of aerosolized drug delivery is crowded and a substantial number
of patents have been issued in this field. Competitors and institutions may have
applied for other patents and may obtain additional patents and proprietary     
rights relating to products or processes competitive with those of the Company. 
Patents or other publications may hinder or prevent the Company from obtaining  
patent protection being sought or draw into question the validity of patents    
already issued to the Company. In addition, patents issued to others might      
provide competitors with the ability to prevent the Company from making its     
products or carrying out processes necessary for use of its products. The       
Company may not be able to obtain a license under any such patent and may       
thereby be prevented from making products or carrying out processes which are   
important or essential to the business of the Company. Although issued patents  
are presumed valid under federal law, none of the patents of the Company has    
been challenged in litigation. There can be no assurance that any of such       
patents will be found valid if challenged. There also can be no assurance that  
any of the applications will issue or if issued will later be found valid if    
challenged. Further, there can be no assurance that any issued patents or       
applications which might later issue as patents will provide the Company with a 
degree of market exclusivity sufficient for the Company to profitably compete   
against its competitors. Pending United States applications are maintained in   
secret until they are issued as patents and as such can not be searched by the  
Company. There may be pending applications which will later issue as patents    
which will create infringement issues for the Company. Further, patents already 
issued to the Company or applications of the Company which are pending may      
become involved in interferences that could be resolved in favor of competitors 
of the Company and involve the expenditure of substantial financial and human   
resources of the Company.                                                       

Company policy is to require its officers, employees, consultants and 
advisors to execute proprietary information and invention assignment agreements 
upon commencement of their relationships with the Company. There can be no      
assurance, however, that these agreements will provide meaningful protection for
the Company's inventions, trade secrets or other proprietary information in the 
event of unauthorized use or disclosure of such information. Violations of such 
agreements are difficult to police.                                             

GOVERNMENT REGULATION; UNCERTAINTY WITH PRECLINICAL AND CLINICAL TESTING        

   All medical devices and new drugs, including the Company's products under
development, are subject to extensive and rigorous regulation by the federal    
government, principally the FDA, and by state and local governments. Such       
regulations govern the development, testing, manufacture, labeling, storage,    
premarket clearance or approval, advertising, promotion, sale and distribution  
of such products. If medical devices or drug products are marketed abroad, they 
also are subject to regulation by foreign governments.                          

    The regulatory process for obtaining FDA premarket clearances or approvals
for medical devices and drug products is generally lengthy, expensive and       
uncertain. Securing FDA marketing clearances and approvals often requires the   
submission of extensive clinical data and supporting information to the FDA.    
Product clearances and approvals, if granted, can be withdrawn for failure to   
comply with regulatory requirements or upon the occurrence of unforeseen        
problems following initial marketing.                                           
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     There can be no assurance that the Company will be able to obtain necessary
regulatory clearances or approvals on a timely basis, if at all, for any of its 
products under development, and delays in receipt or failure to receive such    
clearances or approvals or failure to comply with existing or future regulatory 
requirements could have a material adverse effect on the Company. Moreover,     
regulatory clearances or approvals for products such as medical devices and new 
drugs, even if granted, may include significant limitations on the uses for     
which such products may be marketed. Certain changes to marketed medical devices
and new drugs are subject to additional FDA review and clearance or approval.   
There can be no assurance that any clearances or approvals that are required,   
once obtained, will not be withdrawn or that compliance with other regulatory   
requirements can be maintained. Further, failure to comply with applicable FDA  
and other regulatory requirements can result in sanctions being imposed on the  
Company or the manufacturers of its products, including warning letters, fines, 
product recalls or seizures, injunctions, refusals to permit products to be     
imported into or exported out of the United States, refusals of FDA to grant    
premarket clearance or premarket approval of medical devices and drugs or to    
allow the Company to enter into government supply contracts, withdrawals of     
previously approved marketing applications and criminal prosecutions.           

The Company received 510(k) clearance from the FDA in 1996 for the    
SmartMist system. The Company has made modifications to the SmartMist system    
since receiving clearance, which the Company believes do not require the        
submission of new 510(k) notifications to the FDA. There can be no assurance,   
however, that the FDA would agree with any of the Company's determinations not  
to submit a new 510(k) notice for any of these changes or would not require the 
Company to submit a new 510(k) notice for any of the changes made to the device.
If the FDA requires the Company to submit a new 510(k) notice for any           
modification to the SmartMist system, the Company and any potential partners may
be prohibited from marketing the modified device until the 510(k) notice is     
cleared by the FDA, which could have a material adverse effect on the Company.  

The Company may also be subject to certain user fees that the FDA is  
authorized to collect under the Prescription Drug User Fees Act of 1992 for     
certain drugs, including insulin and morphine. This act expired on September 30,
1997, and legislation to reauthorize it has been passed by the House and Senate.
It must be reconciled in a House-Senate conference and signed by the President  
to become law.                                                                  

 Before the Company can file for regulatory approvals for the commercial
sale of the Company's potential AERx products, the FDA will require extensive   
preclinical and clinical testing to demonstrate the safety and efficacy of such 
potential products. To date, the Company has tested an early prototype          
patient-operated version of the AERx Pain Management System with morphine on a  
limited number of healthy volunteers in Phase I and Phase II clinical trials in 
the United States. Failure of the Company to complete or progress to more       
advanced clinical trials would have a material adverse effect on the Company.   
There can be no assurance that the Company will be able to manufacture          
sufficient quantifies of the disposable unit-dose packets to support any future 
clinical trials of the AERx system, or that the design requirements of the AERx 
system will make it feasible for development beyond the prototype currently     
being used.                                                                     

    The timing of completion of clinical trials is dependent upon, among other
factors, the enrollment of patients. Patient recruitment is a function of many  
factors, including the size of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the study and the existence of  
competitive clinical trials. Delays in planned patient enrollment in the        
Company's current trials or future clinical trials may result in increased      
costs, program delays or both, which could have a material adverse effect on the
Company.                                                                        

The Company also is developing applications of its AERx system for the
delivery of insulin and other compounds. These applications are in an early     
stage of development and the regulatory requirements associated with obtaining  
the necessary marketing approvals from the FDA and other regulatory agencies are
not known. There can be no assurance that these applications of the AERx system 
will prove to be viable or that any necessary regulatory approvals will be      
obtained in a timely manner, if at all. Although the Company believes the data  
regarding the Company's potential products is encouraging, the results of       
initial preclinical and clinical testing of the products under development by   
the Company are not necessarily predictive of results that will be obtained from
subsequent or more extensive preclinical and clinical testing. Furthermore,     
there can be no assurance that clinical trials of products under development    
will demonstrate the safety and                                                 

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efficacy of such products at all or to the extent necessary to obtain regulatory
approvals. Companies in the medical device, pharmaceutical and biotechnology    
industries have suffered significant setbacks in advanced clinical trials, even 
after promising results in earlier trials. The failure to demonstrate adequately
the safety and efficacy of a therapeutic product under development could delay  
or prevent regulatory approval of the product and would have a material adverse 
effect on the Company.                                                          

     In addition, due to limited experience with chronic administration of drugs
delivered via the lung for systemic effect, the FDA may require clinical data to
demonstrate that such chronic administration is safe. There can be no assurance 
that the Company will be able to present such data in a timely manner, or at    
all.                                                                            

     The FDA and other regulatory agency requirements for manufacturing, product
testing and marketing can vary depending upon whether the product is a medical  
device or a drug. Manufacturers of medical devices and drugs also are required  
to comply with the applicable GMP requirements, which relate to product testing 
and quality assurance as well as the corresponding maintenance of records and   
documentation. There can be no assurance that the Company will be able to comply
with the applicable GMP and other FDA regulatory requirements as it scales up   
its manufacturing operations. Such failure could have a material adverse effect 
on the Company.                                                                 

    In addition, in order for the Company to market its products in Europe and
in certain other foreign jurisdictions, the Company and its distributors and    
agents must obtain required regulatory approvals and clearances and otherwise   
comply with extensive regulations regarding safety and quality. These           
regulations, including the requirements for approvals or clearance to market and
the time required for regulatory review, vary from country to country. There can
be no assurance that the Company will obtain regulatory approvals in such       
countries or that it will not be required to incur significant costs in         
obtaining or maintaining its foreign regulatory approvals. Delays in receipt of 
approvals to market the Company's products, failure to receive these approvals, 
or future loss of previously received approvals could have a material adverse   
effect on the Company's business, financial condition and results of operations.

    Because the Company's AERx Pain Management System clinical studies involve
morphine, the Company is registered with the Drug Enforcement Agency ("DEA") and
its facilities are subject to inspection and DEA export, import, security and   
production quota requirements. There can be no assurance that the Company will  
not be required to incur significant costs to comply with DEA regulations in the
future or that such regulations will not have a material adverse effect on the  
Company.                                                                        

HIGHLY COMPETITIVE MARKETS; RISK OF ALTERNATIVE THERAPIES                       

    The medical device, pharmaceutical and biotechnology industries are highly
competitive and rapidly evolving. The Company's success will depend on its      
ability to successfully develop products and technologies for pulmonary drug    
delivery. If a competing company were to develop or acquire rights to a better  
pulmonary delivery device, the Company could be materially and adversely        
affected.                                                                       

   The Company is in competition with pharmaceutical, biotechnology and drug
delivery companies and other entities engaged in the development of alternative 
drug delivery systems or new drug research and testing, as well as with entities
producing and developing injectable drugs. The Company is aware of a number of  
companies currently seeking to develop new products and non-invasive            
alternatives to injectable drug delivery, including oral, intranasal and        
transdermal delivery systems and colonic absorption systems. The Company also is
aware of other companies currently engaged in the development and               
commercialization of pulmonary drug delivery systems and enhanced injectable    
drug delivery systems. Many of the Company's competitors have greater research  
and development capabilities, experience, manufacturing, marketing, sales,      
financial and managerial resources than the Company and represent significant   
competition for the Company. Acquisitions of competing drug delivery companies  
by large pharmaceutical companies or partnering arrangements between such       
companies could enhance competitors' financial, marketing and other resources.  
The Company's competitors may succeed in developing competing technologies,     
obtaining FDA approval for products more rapidly than the Company and gaining   
greater market acceptance of their products than the Company's products. There  
can be no assurance that developments by others will not render some or all of  
the                                                                             

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Company's proposed products or technologies uncompetitive or obsolete, which    
would have a material adverse effect on the Company.                            

DEPENDENCE ON KEY PERSONNEL                                                     

The Company is dependent upon a limited number of key management and  
technical personnel. The loss of the services of one or more of such key        
employees could have a material adverse effect on the Company. In addition, the 
Company's success will depend upon its ability to attract and retain additional 
highly qualified marketing, management, manufacturing, engineering and research 
and development personnel. The Company faces intense competition in its         
recruiting activities, and there can be no assurance that the Company will be   
able to attract or retain qualified personnel.                                  

EXPOSURE TO PRODUCT LIABILITY                                                   

The research, development and commercialization of medical devices and
therapeutic products entails significant product liability risks. If the Company
succeeds in commercializing products using the SmartMist system or the AERx     
system and if it succeeds in developing additional devices and new products, the
use of such products in clinical trials and the commercial sale of such products
may expose the Company to liability claims. These claims might be made directly 
by consumers or by pharmaceutical companies or others selling such products.    
Companies often address the exposure of such risk by obtaining product liability
insurance. Although the Company currently maintains $6 million of product       
liability insurance, there can be no assurance that the Company will be able to 
obtain additional or maintain existing insurance on acceptable terms, or at all,
or in amounts sufficient to protect the Company. A successful claim brought     
against the Company in excess of the Company's insurance coverage would have a  
material adverse effect on the Company's business.                              

UNCERTAINTY RELATED TO THIRD-PARTY REIMBURSEMENT                                

  In both domestic and foreign markets, sales of the Company's current and
potential products, if any, will depend in part on the availability of          
reimbursement from third-party payors such as government health administration  
authorities, private health insurers and other organizations. Third-party payors
are increasingly challenging the price and cost-effectiveness of medical        
products and services. Significant uncertainty exists as to the reimbursement   
status of newly approved health care products. There can be no assurance that   
any of the Company's current and potential products will be reimbursable by     
third-party payors. In addition, there can be no assurance that the Company's   
current and potential products will be considered cost-effective or that        
adequate third-party reimbursement will be available to enable Aradigm to       
maintain price levels sufficient to realize a profit. Legislation and           
regulations affecting the pricing of pharmaceuticals may change before the      
Company's current and potential products are approved for marketing and any such
changes could further limit reimbursement.                                      

HAZARDOUS MATERIALS                                                             

     The Company's operations involve the controlled use of hazardous materials,
chemicals and various radioactive compounds. Although the Company believes that 
its safety procedures for handling and disposing of such materials comply with  
the standards prescribed by state and federal regulations, the risk of          
accidental contamination or injury from these materials cannot be completely    
eliminated. In the event of such an accident, the Company could be held liable  
for any damages that result and such liability could exceed the resources of the
Company.                                                                        

POSSIBLE VOLATILITY OF STOCK PRICE                                              

    The market prices for securities of many companies, including the Company,
engaged in pharmaceutical development activities historically have been highly  
volatile and the market from time to time has experienced significant price and 
volume fluctuations that are unrelated to the operating performance of          
particular companies. Prices for the Company's Common Stock may be influenced by
many factors, including investor                                                

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perception of the Company, fluctuations in the Company's operating results and  
market conditions relating to the pharmaceutical industry. In addition,         
announcements of technological innovations or new commercial products by the    
Company or its competitors, delays in the development or approval of the        
Company's product candidates, developments or disputes concerning patent or     
proprietary rights, publicity regarding actual or potential developments        
relating to products under development by the Company or its competitors,       
regulatory developments in both the United States and foreign countries, public 
concern as to the safety of drug technologies and economic and other external   
factors, as well as period-to-period fluctuations in financial results, may have
a significant impact on the market price of the Common Stock. Finally, future   
sales of substantial amounts of Common Stock by existing shareholders could also
adversely affect the prevailing price of the Common Stock. In the past,         
following periods of volatility in the market price of a company's securities,  
class action securities litigation has often been instituted against such a     
company. Any such litigation instigated against the Company could result in     
substantial costs and a diversion of management's attention and resources, which
could have a material adverse effect on the Company's business, financial       
condition and operating results.                                                

DIVIDEND POLICY                                                                 

  The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to finance   
the growth and development of its business and therefore does not anticipate    
paying any cash dividends in the foreseeable future.                            

USE OF PROCEEDS 

    The Company will not receive any proceeds from the sale of Common Stock by
the Selling Shareholders in this offering.                                      

  The net proceeds to the Company from the sale of the 1,111,100 shares of
Common Stock privately placed by the Company in April 1998 was approximately $12
million. The Company anticipates that it will use approximately 40% of the net  
proceeds for manufacturing process development and to increase manufacturing    
capacity and approximately 30% of the net proceeds to fund the Company's        
research and development efforts. The Company will use the remaining 30% of the 
net proceeds for working capital and general corporate purposes.                

SELLING SHAREHOLDERS

     In April 1998, Aradigm sold 1,111,100 shares of Common Stock of the Company
to certain purchasers pursuant to the Common Stock Purchase Agreement dated     
April 3, 1998 by and among the Company and the Purchasers named therein (the    
"Purchase Agreement"). In connection with such sale, the Company agreed to file 
a registration statement with the Commission covering the shares issued to each 
Selling Shareholder and agreed to indemnify each Selling Shareholder against    
claims made against them arising out of, among other things, statements made in 
such registration statement. The Company has agreed to cause this registration  
statement to remain effective until all the Shares have been re-sold or April 7,
1999, whichever is earlier.                                                     

   In connection with the Purchase Agreement, the Company has also agreed to
issue warrants to FB Invemed Fund, L.P. and certain affiliates of the general   
partner of such fund to purchase an aggregate of 166,665 shares of Common Stock 
of the Company. The Company has also agreed to grant registration rights to the 
holders of such warrants. Each warrant has a five year term.                    

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 The following table provides certain information with respect to Shares
held and to be offered under this Prospectus from time to time by each Selling  
Shareholder. Because the Selling Shareholders may sell all or part of their     
Common Stock pursuant to this Prospectus, and this offering is not being        
underwritten on a firm commitment basis, no estimate can be given as to the     
number and percentage of shares of Common Stock that will be held by each       
Selling Shareholder upon termination of this offering. See "Plan of             
Distribution."                                                                  

The Company is unaware of any material relationship between any of the
Selling Shareholders and the Company in the past three years other than as a    
result of the ownership of the Shares.                                          

                                                        [Enlarge/Download Table]

                                      SHARES BENEFICIALLY                      SHARES BENEFICIALLY 
                                             OWNED                                    OWNED        
                                       PRIOR TO OFFERING                        AFTER OFFERING(2)  
                                     ----------------------  NUMBER OF SHARES  --------------------
        SELLING STOCKHOLDER           NUMBER     PERCENT(1)   BEING OFFERED    NUMBER    PERCENT(1)
        -------------------          ---------   ----------  ----------------  -------   ----------
                                                                                                   
Deutsche                                                                                           
  Vermogensbildungsgesellschaft mbH                                                                
  (DVG)............................    300,000     2.55%          200,000      100,000         *   
FB Invemed Fund, L.P...............    462,900     3.94%          462,900           --         *   
GSAM Oracle Fund...................    109,000         *           60,000       49,000         *   
Haussmann Holdings, N.V. ..........     27,400         *           17,600       19,800         *   
Oracle Institutional Partners,                                                                     
  L.P. ............................     67,200         *           25,000       45,200         *   
Oracle Offshore Limited............     37,400         *            7,000       30,400         *   
Oracle Partners, L.P. .............    225,600     1.92%          108,600      117,000         *   
State of Oregon....................    246,000     2.09%          230,000       16,000         *   
                                     ---------                  ---------      -------             
          Total....................  1,475,500                  1,111,100      377,400             

---------------                                                                 
*  Less than one percent.                                                     

(1) Applicable percentage of ownership is based on 11,750,598 shares of Common  
Stock outstanding on June 1, 1998.                                      

(2) Assumes the sale of all shares offered hereby.                              

PLAN OF DISTRIBUTION

The Company is registering the shares of Common Stock offered by the  
Selling Shareholders hereunder pursuant to contractual registration rights      
contained in the Purchase Agreement. Sales may be made on the Nasdaq National   
Market or in private transactions or in a combination of such methods of sale,  
at fixed prices that 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 and any persons who participate in the         
distribution of Common Stock hereby may be deemed to be underwriters within the 
meaning of the Securities Act, and any discounts, commissions or concessions    
received by them and any provided pursuant to the sales of shares by them might 
be deemed underwriting discounts and commissions under the Securities Act.      

In order to comply with the securities laws of certain states, if     
applicable, the Common Stock may be sold in such jurisdictions only through     
registered or licensed brokers or dealers. In addition, in certain states the   
Common Stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.                                                               

    The Company has agreed in the Purchase Agreement to register the shares of
Aradigm Common Stock received by the Selling Shareholders pursuant to the       
Purchase Agreement under applicable Federal and state securities laws under     
certain circumstances and certain times. Pursuant to the Purchase Agreement, the
Company has filed a Registration Statement related to the Shares offered hereby 
and has agreed to keep such Registration Statement effective until the earliest 
of (i) April 7, 1999 or (ii) the sale of all the Shares registered thereunder.  
The Company will pay substantially all of the expenses incident to the offering 
and sale of the Common Stock to the public, other than commissions, concessions 
and discounts of underwriters, dealers or agents. Such expenses (excluding such 
commissions and discounts), are estimated to be $20,000. The Purchase Agreement 
provides for cross-indemnification of the Selling Shareholders and the Company  
to                                                                              

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the extent permitted by law, for losses, claims, damages, liabilities and       
expenses arising, under certain circumstances, out of any registration of the   
Common Stock.                                                                   

LEGAL MATTERS 

     The validity of the Common Stock offered hereby will be passed upon for the
Company by Cooley Godward LLP, Palo Alto, California.                           

EXPERTS 

   The financial statements of the Company appearing in the Company's Annual
Report (Form 10-K) for the year ended December 31, 1997, as amended, 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.    

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======================================================                          

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY      
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS   
PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND REPRESENTATIONS    
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS          
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE  
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON   
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY OF THIS    
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS 
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.                                      

------------------------

TABLE OF CONTENTS 

                                                                [Download Table]

                                        PAGE
                                        ----
                                            
Available Information.................    2 
Incorporation of Certain Documents by       
  Reference...........................    2 
The Company...........................    4 
Recent Developments...................    4 
Risk Factors..........................    5 
Use of Proceeds.......................   12 
Selling Shareholders..................   12 
Plan of Distribution..................   13 
Legal Matters.........................   14 
Experts...............................   14 

======================================================                          
======================================================                          
1,111,100 SHARES

COMMON STOCK
ARADIGM 
CORPORATION 

------------------------

PROSPECTUS
JULY 1, 1998
======================================================                          

Dates Referenced Herein   and   Documents Incorporated by Reference

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		3/31/98		2		5			10-Q,  10-Q/A
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