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As Of Filer Filing As/For/On Docs:Pgs Issuer Agent 7/25/08 AutoGenomics/Inc S-1 6:243 RR Donnelley/FA
Document/Exhibit Description Pages Size
1: S-1 Registration Statement (General Form) HTML 1,254K
2: EX-4.2 Form of Common Stock Warrant HTML 31K
3: EX-10.2 2000 Equity Incentive Plan HTML 152K
4: EX-10.7 Registration Rights Agreement HTML 57K
5: EX-23.1 Consent of Independent Registered Public HTML 5K
Accounting Firm
6: EX-23.3 Consent of Svb Analytics, Inc. HTML 7K
| Form S-1 |
As filed with the Securities and Exchange Commission on July 24, 2008
Registration No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AutoGenomics, Inc.
(Exact name of registrant as specified in its charter)
| California (before reincorporation) Delaware (after reincorporation) |
3826 | 04-3440258 | ||
| (State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
2251 Rutherford Road
(760) 804-7378
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Fareed Kureshy
President and Chief Executive Officer
AutoGenomics, Inc.
2251 Rutherford Road
(760) 804-7378
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy to:
| J. Scott Hodgkins David A. Zaheer (213) 485-1234 |
Alan F. Denenberg Davis Polk & Wardwell 1600 El Camino Real (650) 752-2000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
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, check the following box. ¨
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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ¨ |
Accelerated filer ¨ | |
| Non-accelerated filer x (Do not check if a smaller reporting company) |
Smaller reporting company ¨ |
CALCULATION OF REGISTRATION FEE
| Title of Each Class of Securities to be Registered |
Proposed Maximum Aggregate Offering Price (1)(2) |
Amount of Registration Fee | ||||
| Common Stock, $0.01 par value |
$86,300,000 | $3,391.59 | ||||
| (1) | Estimated solely for the purpose of computing the amount of the registration fee, in accordance with Rule 457(o) promulgated under the Securities Act of 1933. |
| (2) | Includes offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any. |
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated July 24, 2008
Prospectus
shares
AutoGenomics, Inc.
Common shares
This is an initial public offering of common shares by AutoGenomics, Inc. We are selling common shares. We expect the initial public offering price to be between $ and $ per share.
We intend to apply to list our common shares on the NASDAQ Global Market under the symbol AGMX.
| Per share | Total | |||
| Initial public offering price |
$ | $ | ||
| Underwriting discounts and commissions |
$ | $ | ||
| Proceeds to AutoGenomics, Inc., before expenses |
$ | $ | ||
We have granted the underwriters an option for a period of 30 days to purchase up to additional common shares.
The underwriters are offering the common stock as set forth under “Underwriting.” Delivery of the shares will be made on our about , 2008.
Investing in our common shares involves a high degree of risk. See “Risk factors” beginning on page 13.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
| JPMorgan | ||
| Deutsche Bank Securities | ||
| Pacific Growth Equities, LLC | Robert W. Baird & Co. | |
, 2008
| Page | ||
| 1 | ||
| 13 | ||
| 34 | ||
| 34 | ||
| 35 | ||
| 36 | ||
| 38 | ||
| Management’s discussion and analysis of financial condition and results of operations |
40 | |
| 57 | ||
| 89 | ||
| 118 | ||
| 120 | ||
| 123 | ||
| 128 | ||
| Material United States federal income tax consequences to non-U.S. holders |
131 | |
| 135 | ||
| 139 | ||
| 139 | ||
| 139 | ||
| F-1 | ||
INFINITI™, BioFilmChip™, Intellipac™ and Qmatic™ are our trademarks. All other service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners.
We are presently a California corporation. We intend to reincorporate in Delaware prior to the consummation of the offering. In connection with our reincorporation, we intend to effectuate a for reverse stock split of our common stock.
You should rely only on the information contained in this prospectus. Neither we, nor the underwriters, have authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
No action is being taken in any jurisdiction outside the United States to permit a public offering of the common shares or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.
Until , 2008 (25 days after the date of this prospectus), all dealers that buy, sell or trade in our common shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
i
This summary highlights the information contained elsewhere in this prospectus. Because this is only a summary, it does not contain all of the information that may be important to you. For a more complete understanding of the information that you may consider important in making your investment decision, we encourage you to read this entire prospectus. Among the other information in this prospectus, you should carefully consider the information set forth under the heading “Risk Factors” and our financial statements and accompanying notes included elsewhere in this prospectus. Unless the context requires otherwise, the words “we,” “us,” “our,” “Company” and “AutoGenomics” refer to AutoGenomics, Inc.
Overview
We design, develop, manufacture and market a fully integrated molecular diagnostics system called the INFINITI™ that automates the discrete processes of genetic testing performed by clinical laboratories. Our system is capable of running a broad menu of tests, the results of which assist in detecting the predisposition to and presence of disease, monitoring disease progression and/or guiding appropriate therapy. We believe that the versatility of our system to run the broad menu of tests that we currently offer and are developing will facilitate the acceptance and rapid adoption of our system and reduce the need for multiple testing technologies, platforms and specialized technicians in the laboratory. Our system is cost-effective, easy to use, highly sensitive and designed to test for multiple biomarkers on the same sample simultaneously. We believe these attributes could significantly improve laboratory productivity, workflow and cost per reportable result over existing technologies and methods and could allow a broader range of laboratories, including those operated by smaller hospitals, to perform molecular diagnostics tests. Our system is designed to permit us to develop new and enhanced applications without modification to our platform. The INFINITI™ system is also capable of proteomic analysis.
The INFINITI™ system consists of the INFINITI™ Analyzer (the bench top instrument on which our diagnostics tests are performed) and the consumable products used to run tests on our system, including the BioFilmChip™ Microarray and the Intellipac™ Reagent Management Module. The INFINITI™ system is designed to address the major areas of infectious disease, cancer, genetic disorders, personalized medicine (pharmacogenetics), cardiovascular disease/thrombophilia, women’s health, newborn screening and central nervous system disorders. As of June 30, 2008, we offered 26 applications, and we plan to introduce six additional applications by the end of the first quarter of 2009. Our leading offerings include: (i) tests designed to identify mutations in patients that may cause an increased sensitivity to Warfarin, marketed as Coumadin, the most-prescribed anticoagulant for thromboembolic therapy in North America and Europe; (ii) primary screening and genotyping (risk profiling) tests for Human Papillomavirus (HPV), the primary cause of cervical cancer; (iii) a test designed to identify genetic mutations associated with an increased risk of developing cystic fibrosis, an inherited chronic disease that affects the lungs and digestive system; and (iv) a test designed to identify variants of CYP450 2D6, a gene estimated to be involved in the metabolism of as many as 20% of commonly prescribed drugs, and which is used to guide appropriate therapies.
We received 510(k) clearance from the U.S. Food and Drug Administration (FDA) in February 2007 for commercial sale of the INFINITI™ Analyzer. In addition, we have received 510(k) clearance for
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four of our tests, specifically a test for Warfarin sensitivity and our Factor II, Factor V and Factor II-V panel tests, which aid in the determination of an individual’s risk for the development of blood clots. We have also submitted notifications for 510(k) clearance to the FDA for two additional tests and intend to pursue clearance or approval as required by the FDA for our other tests. We have submitted a proposed clinical protocol to the FDA for our pre-investigational device exemption (pre-IDE) meeting to determine the clinical trial necessary to support a premarket approval (PMA) application to the FDA for our HPV screening test. Like other companies offering molecular tests on a commercial basis, most of the tests that we offer have not been cleared or approved for diagnostic use by the FDA. These molecular tests are available to laboratories on a research use only, or RUO, basis. As required by FDA regulations, these tests must be labeled, “For Research Use Only. Not for use in diagnostic procedures.” Although many laboratories may use our products in their own laboratory-developed diagnostic tests, we are not permitted to market these products for diagnostic purposes. In June 2008, the CE marking of conformity was affixed to the INFINITI™ Analyzer in accordance with the European In Vitro Diagnostic Devices (IVDD) Directive. The CE marking allows the INFINITI™ Analyzer to be marketed in the European Economic Area. Certain aspects of the method and design of the INFINITI™ system, including certain of the microarray and reagent management technologies used in our system, are covered by eight issued patents (including two in the U.S and six foreign counterparts) and 33 pending patent applications (including 11 in the U.S., 20 foreign counterparts and two Patent Cooperation Treaty applications).
We attribute our growth prospects to the following:
| • | Disruptive and enabling technology. We believe the INFINITI™ system is one of the few self-contained, integrated systems commercially available. Our proprietary BioFilmChip™ microarray technology and our automated platform are specifically designed to address the workflow and labor issues facing clinical laboratories while also giving them the capability to test for multiple biomarkers on the same sample simultaneously. We believe that the ease of use, cost-effectiveness and broad application menu offered by our system will generate demand from hospitals and smaller laboratories for whom it is uneconomical to develop their own tests and who would prefer to offer molecular diagnostics tests in house. |
| • | Growing application menu. We believe we have one of the broadest menus of commercially available tests provided on a single platform. As we increase the number of available applications, laboratories using our system will be able to broaden their molecular diagnostics offerings without additional capital investment or operator training. Our system is designed to permit us to develop new and enhanced applications without modification to our platform. |
| • | Ability to test multiple patient samples on a chip. Our newest generation BiofilmChip™, which we call the QUAD BioFilmChip™, is capable of testing up to four different patient samples simultaneously on one chip. This, combined with our system’s automation, allows up to 48 patient samples to be processed in a single run and over 100 patient samples in a 24 hour period. We are developing applications which will allow up to eight different patient samples to be tested on one BiofilmChip™. For example, we are developing a test designed to detect the presence of hospital acquired infections (HAIs), including methicillin-resistant staphylococcus aureus (MRSA), using this technology. |
As of June 30, 2008, we had an installed base of 58 INFINITI™ Analyzers in reference laboratories, hospital laboratories and specialty clinics in North America, including ARUP Laboratories, Cleveland Clinic, The Johns Hopkins Hospital, Louisiana State University Hospital Health Science Center, Montreal Heart Institute, New York Presbyterian Hospital and San Francisco General Hospital.
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Market opportunity
Molecular diagnostics tests, a new and expanding part of the in vitro diagnostics market, are used to detect the presence of genetic and protein biomarkers associated with a particular disease or condition. Currently, the clinical market for molecular diagnostics is primarily genetic testing. Kalorama Information, an independent market research firm, estimated that the U.S. molecular diagnostics market was $3.2 billion in 2007. Kalorama Information also has estimated that this market will grow from $3.2 billion to $5.4 billion between 2007 and 2012, which represents a compound annual growth rate of 11%. Kalorama Information further states that a large portion of molecular diagnostic tests are currently conducted using “home-brew” tests and are not included in these estimates. We believe there are a number of trends that will increase the demand for molecular diagnostics tests, including the discovery of biomarkers associated with diseases, tailoring of therapies based on a patient’s genetic profile, decentralization of the molecular diagnostics market, relabeling of drugs by the FDA and increased regulation of molecular diagnostics tests.
Current genetic testing technologies are often practiced through “home-brew” tests and commercially available kits which are largely manually operated and use discrete instrumentation and results-interpretation techniques requiring highly skilled labor. These existing technologies suffer from a number of limitations which have significantly limited the use of molecular diagnostics testing, including limited automation, shortages of specialized laboratory technicians, an inability to multiplex, limited testing menus, high cost per result or a lack of standardization. These limitations have created the need in the molecular diagnostics market for a fully integrated system to perform standardized, automated and cost-effective tests with a high degree of accuracy and sensitivity.
Our solution
The INFINITI™ system is cost-effective, easy to use, highly sensitive and designed to test for multiple biomarkers on the same sample simultaneously. To use our system, an operator only needs to load prepared test samples into the bench-top INFINITI™ Analyzer, along with the specific BioFilmChips™ and Intellipac™ Reagent Management Modules that support a broad menu of applications. Once the INFINITI™ Analyzer is loaded and the tests are initiated, no supervision is required. After the test is completed, the system generates an electronic report that can be transmitted directly to a laboratory information system. Our system has several key advantages, including:
| • |
Cost-effective and easy to use. The “load and go” design of the INFINITI™ Analyzer eliminates manual intervention and complex protocols, which simplifies work flow and allows the instrument to be operated without the need for specialized laboratory technicians. In addition, the INFINITI™ Analyzer can run multiple tests on different patient samples simultaneously, which eliminates the need to run tests in batches and should reduce the cost of a test. |
| • | Broad menu of applications. As of June 30, 2008, we offered 26 applications in the areas of infectious disease, cancer, genetic disorders, personalized medicine, cardiovascular disease/thrombophilia, women’s health, newborn screening and central nervous system disorders and plan to introduce six additional applications by the end of the first quarter of 2009. We offer and intend to develop tests with established reimbursement protocols by public and private |
3
| payors. Four of our applications are cleared by the FDA for diagnostic use and 22 of our applications are currently sold on an RUO basis. We intend to seek FDA clearance or approval as required by the FDA for our other tests. Although we do not currently offer any applications that test for protein markers, the INFINITI™ system is capable of performing protein testing, and we may develop tests in this area in the future based on the market opportunity for the particular test. |
| • | Ability to multiplex. Many diseases are caused by multiple genetic mutations which necessitate testing for multiple genetic markers to diagnose the disease. Our system is able to test for multiple biomarkers at the same time, or to multiplex, to assess multiple disease signatures from a single sample. As a result this reduces the size of the sample needed for the test and the time required to run the test. |
| • | Quick turnaround and high-throughput. We believe our system can substantially increase a laboratory’s throughput over “home-brew” and other manual and semi-automated tests through automation, multiplexing from a single sample and the ability to detect multiple biomarkers of multiple patients simultaneously. |
| • | Increased accuracy of results. Our system provides more accurate and repeatable test results than manual and semi-manual tests by automating molecular diagnostics testing processes and significantly reducing the chance of human error and contamination. In addition, we believe our fluorescence amplification method produces results that are more sensitive and specific than existing testing methods. |
Our strategy
Our objective is to become a leading provider of molecular diagnostics products to hospitals, reference laboratories and specialty clinics. To achieve our objective, we intend to:
| • | Establish an installed base. We intend to establish a large base of INFINITI™ Analyzers. A large installed base should generate significant recurring demand for testing consumables, including our BioFilmChips™ and Intellipac™ Reagent Management Modules. |
| • | Develop and launch new applications to expand our test menu. We are developing a broad menu of applications to run on our system which increases the value of our system and drives additional placements and increased consumable purchases. Our system is designed to permit us to develop new and enhanced applications without modification to our platform. We offer and intend to develop tests with established reimbursement protocols by public and private payors. |
| • | Align with key opinion leaders and increase scientific awareness. We have focused on key opinion leaders and clinical research laboratories to increase awareness of our system, to demonstrate its benefits relative to existing technologies and to accelerate its adoption in the molecular diagnostics market. |
| • | Pursue FDA clearance or approval for tests as required by the FDA. We believe there is strong market demand for FDA cleared or approved tests that do not require validation by the laboratory. We have already received FDA clearance for four of our tests, submitted notifications for 510(k) clearance to the FDA for two additional tests and intend to pursue clearance or approval as required by the FDA for our other tests. |
4
| • | Target key customer segments. We focus our sales efforts on reference laboratories, specialty clinics and hospital laboratories. We are marketing and selling the INFINITI™ system in the U.S. through our own sales and marketing organization. To execute our marketing strategy, we have established a direct sales force of 18 sales persons located in key metropolitan cities in the U.S. We currently have distributors in Asia, Canada, the European Union and Switzerland. We plan to expand our distribution networks in those locations to increase international sales. |
Our HPV opportunity
Certain types of Human Papillomavirus (HPV) are the primary causes of cervical cancer. A leading company in the HPV DNA testing market estimates that the U.S. HPV testing market in 2007 was approximately $400 million, and that the potential market size may exceed one billion dollars by 2010. Our strategy is to become a key provider of HPV testing products. We have developed two HPV tests, one for primary screening of high-risk types of HPV and the other for genotyping, which are available for sale on an RUO basis. Our HPV-QUAD screening test is designed to simultaneously detect the presence of high-risk types of HPV in four different patient samples on a single BioFilmChip™. Our HPV genotyping test is designed to identify 26 high and low risk HPV types. We believe our tests will offer several competitive advantages over existing tests such as full automation, low sample requirement, reducing the incidence of QNS (Quantity Not Sufficient) samples (not a sufficient amount of sample left after pap specimen processing for ancillary testing) and a high degree of accuracy and specificity. We submitted a proposed clinical protocol to the FDA to be discussed during an upcoming meeting. At this meeting, we will seek to obtain the FDA’s input regarding the design of the clinical trial necessary to pursue PMA approval of the HPV-QUAD screening test. We believe that this PMA process will take two to three years to complete, although it could take longer depending on the definitive requirements imposed by the FDA and approval is not assured. We intend to submit a 510(k) notification to the FDA for our HPV genotyping test in 2009.
5
6
Additionally, we expect that our near-term offerings will include a test to detect the presence of four infections that are associated with the development of pelvic inflammatory disease, a pharmacogenetic test to identify gene mutations that affect the toxicity and efficacy of the cancer drug Fluorouracil, a pharmacogenetic test to identify patients that may respond to certain lung cancer treatments and a test to detect the presence of certain types of nontuberculous mycobacteria. We intend to pursue FDA clearance or approval for each of these tests.
Sales and marketing
Our sales and marketing strategy is to focus on key customers and customer segments to quickly establish a large installed base and to generate sales of testing consumables, including our BioFilmChips™ and Intellipac™ Reagent Management Modules. We focus our sales efforts on reference laboratories, specialty clinics and hospital laboratories and emphasize the low cost, ease of use, bench-top convenience and high quality and consistent results of our system, as well as the potential versatility afforded by a broad test menu on a single system. We offer the INFINITI™ Analyzer through direct sale and a Reagent Access Plan where an INFINITI™ Analyzer is placed at the customer’s location at no direct cost to the customer in return for a commitment by the customer to purchase a minimum volume of consumables, through which the direct cost of the equipment is recouped. To execute our marketing strategy, we have established a direct sales force of 18 sales persons located in key metropolitan cities in the U.S. We currently have distributors in Asia, Canada, the European Union and Switzerland. We plan to expand our distribution networks in those locations to increase international sales.
Risks affecting us
Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary, including the following:
| • | There is limited information available to evaluate our business since we have a limited operating history and limited current revenues. |
| • | We have a history of losses since our inception and expect continued losses for the foreseeable future. |
| • | Our financial results depend on commercial acceptance of the INFINITI™ system and its tests and the development of additional tests. |
| • | Our competitors are large and well capitalized, and we face significant competition. |
| • | Our failure to comply with regulatory requirements or receive regulatory clearance or approval for our products or operations in the U.S. or abroad would adversely affect our revenues and potential for future growth. |
| • | If third-party payors do not reimburse our customers for the use of our clinical diagnostic products or if they reduce reimbursement levels, our ability to sell our products will be materially and adversely affected. |
| • | Our success will depend partly on our ability to operate without infringing or misappropriating the proprietary rights of others and on our ability to license intellectual property from third parties for certain test applications and manufacturing processes needed for our business. |
7
Corporate history and information
We were incorporated in California in April 1999 as Neuron Technologies, Incorporated, changed our name to AutoGenomics Incorporated in August 2000 and changed our name to AutoGenomics, Inc. in October 2002. We intend to reincorporate in Delaware prior to the consummation of the offering. Our principal executive offices are located at 2251 Rutherford Road, Carlsbad, California 92008. Our telephone number is (760) 804-7378. Our website address is www.autogenomics.com. Information contained on our website is not incorporated by reference into this prospectus and should not be considered to be part of this prospectus.
8
Summary of the offering
| Common stock offered |
shares |
| Underwriters’ option to purchase additional shares |
shares |
| Common stock to be outstanding after this offering |
shares, or shares if the underwriters exercise their option to purchase additional shares in full |
| Use of proceeds |
We estimate that the net proceeds from the sale of shares by us in the offering (based on an initial public offering price of $ per share, the midpoint of the estimated price range shown on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses, will be $ million. |
| We anticipate that we will use (i) approximately $ to expand our commercial infrastructure and to fund research and development activities, and (ii) approximately $ to fund clinical studies and clinical trials of our applications, including a clinical trial to support a PMA for our HPV screening test. We anticipate that we will use the remainder of the net proceeds from this offering for additional working capital and general corporate purposes. See “Use of proceeds.” |
| Proposed NASDAQ Global Market symbol |
AGMX |
The number of shares of common stock to be outstanding after this offering is based on the following (all as of March 31, 2008): 7,285,668 shares of common stock, 1,554,982 shares of Series A Convertible Preferred Stock, 4,302,040 shares of Series B Convertible Preferred Stock, 6,405,089 shares of Series C Convertible Preferred Stock and 3,423,258 shares of Series D Convertible Preferred Stock, and excludes as of that date:
| • | 3,176,405 shares of common stock issuable upon exercise of options outstanding at a weighted average price of $0.31 per share; |
| • | 3,187,927 shares of common stock reserved for future issuance under our 2008 Equity Incentive Award Plan and 2008 Employee Stock Purchase Plan, which we expect will be approved by our stockholders prior to the completion of this offering; and |
| • | 250,000 warrants to purchase shares of common stock, 34,618 warrants to purchase shares of Series A Convertible Preferred Stock, 213,818 warrants to purchase shares of Series B Convertible Preferred Stock and 444,909 warrants to purchase shares of Series C Convertible Preferred Stock. |
9
Effective immediately prior to the completion of this offering, each outstanding share of Series A Convertible Preferred Stock will automatically convert into two shares of our common stock and each outstanding share of our Series B, Series C and Series D Convertible Preferred Stock will convert into one share of our common stock.
Except as otherwise indicated, all information contained in this prospectus assumes:
| • | no exercise of the underwriters’ option to purchase additional shares of common stock from us to cover over-allotments; and |
| • | the filing of our Delaware certificate of incorporation and the adoption of our bylaws prior to the completion of this offering. |
The information in this prospectus does not reflect the for reverse stock split of our common stock that we plan to complete in connection with our reincorporation in Delaware.
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Summary financial data
The following tables provide our summary financial data and should be read in conjunction with our audited financial statements, the related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The summary statement of operations data for each of the years ended December 31, 2006 and 2007 and the nine months ended December 31, 2005 were derived from our audited financial statements appearing elsewhere in this prospectus. (Our fiscal year ended December 31, 2005 included nine months because we changed our fiscal year end from March 31 to December 31 in 2005.) The summary statement of operations data for the three months ended March 31, 2007 and 2008 and the summary balance sheet data as of March 31, 2008 were derived from our unaudited financial statements appearing elsewhere in this prospectus. The unaudited financial data, in management’s opinion, has been prepared on the same basis as the audited financial statements and related notes included elsewhere in this prospectus and includes all adjustments, consisting only of normal recurring adjustments, that our management considers necessary for a fair presentation of the information for the periods presented. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the full fiscal year or any other period.
| Nine months ended December 31, |
Years ended December 31, |
Three months ended March 31, |
|||||||||||||
| 2005 | 2006 | 2007 | 2007 | 2008 | |||||||||||
| Statement of operations data: |
|||||||||||||||
| Product sales |
$ 311,068 | $ 499,961 | $ 1,606,631 | $ 141,045 | $ 185,161 | ||||||||||
| Cost of sales |
1,005,184 | 2,078,846 | 3,654,519 | 600,017 | 952,547 | ||||||||||
| Gross loss |
(694,116 | ) | (1,578,885 | ) | (2,047,888 | ) | (458,972 | ) | (767,386 | ) | |||||
| Operating expenses: |
|||||||||||||||
| Research and development |
1,796,733 | 2,296,165 | 2,565,926 | 652,869 | 667,028 | ||||||||||
| General and administrative |
826,567 | 1,474,902 | 2,423,077 | 482,049 | 666,705 | ||||||||||
| Sales and marketing |
670,486 | 975,019 | 2,685,432 | 553,183 | 866,557 | ||||||||||
| Total operating expenses |
3,293,786 | 4,746,086 | 7,674,435 | 1,688,101 | 2,200,290 | ||||||||||
| Loss from operations |
(3,987,902 | ) | (6,324,971 | ) | (9,722,323 | ) | (2,147,073 | ) | (2,967,676 | ) | |||||
| Interest income |
65,765 | 70,316 | 283,692 | 95,852 | 52,177 | ||||||||||
| Interest expense |
(370 | ) | (235,029 | ) | (1,206 | ) | (347 | ) | (101,640 | ) | |||||
| Other income/(expense), net |
244 | 412 | 8,210 | 183 | (9,203 | ) | |||||||||
| Change in fair value of warrant liabilities |
32,776 | 75,916 | 138,905 | 32,742 | (180,683 | ) | |||||||||
| Net loss |
(3,889,487 | ) | (6,413,356 | ) | (9,292,722 | ) | (2,018,643 | ) | (3,207,025 | ) | |||||
| Accretion to liquidation value of preferred stock |
(447,108 | ) | (817,823 | ) | (74,451 | ) | (76,332 | ) | 94,824 | ||||||
| Net loss attributable to common stockholders |
$(4,336,595 | ) | $(7,231,179 | ) | $(9,367,173 | ) | $(2,094,975 | ) | $(3,112,201 | ) | |||||
| Basic and diluted net loss per share attributable to common stockholders |
$ (0.76 | ) | $ (1.19 | ) | $ (1.40 | ) | $ (0.34 | ) | $ (0.43 | ) | |||||
| Shares used to compute basic and diluted net loss per share attributable to common stockholders |
5,708,755 | 6,065,728 | 6,671,063 | 6,167,771 | 7,276,657 | ||||||||||
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| March 31, 2008 | |||||
| Actual | As adjusted (1) | ||||
| Balance sheet data: |
|||||
| Cash and cash equivalents |
$ 9,279,839 | ||||
| Current assets |
12,618,336 | ||||
| Total assets |
14,210,107 | ||||
| Convertible preferred stock (2) |
45,483,942 | ||||
| Total stockholders’ equity (deficit) |
(34,215,411 | ) | |||
| (1) | On an as adjusted basis after giving effect to (i) the conversion of all outstanding series of convertible preferred stock into common stock, and (ii) the sale of shares of our common stock in this offering at an assumed initial offering price of $ , the midpoint of the range on the cover page of this prospectus and after deducting underwriting discounts and commissions and estimated offering expenses. A $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease, as applicable, the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses. |
| (2) | Our convertible preferred stock had been classified as temporary equity on our balance sheets instead of in stockholders’ deficit in accordance with EITF Abstracts Topic No. D-98, Classification and Measurement of Redeemable Securities. Upon certain change in control events that are outside of our control, including our liquidation, sale or transfer of control, holders of the convertible preferred stock can cause its redemption. Accordingly, these shares are considered contingently redeemable. We have adjusted the carrying values of the convertible preferred stock to their liquidation values at each period end. |
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Before deciding to invest in our common stock, you should carefully consider each of the following risk factors and all of the other information set forth in this prospectus. The following risks and the risks described elsewhere in this prospectus, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” could materially harm our business, financial condition, future results and cash flow. If that occurs, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business.
Risks relating to our business
Since we have a limited operating history and limited current revenues, there is limited information available to evaluate our business.
We have a limited operating history upon which one can evaluate our business and our products. We only recently started selling our products. As an early commercial-stage company in the new and rapidly evolving market for molecular diagnostics, we face numerous risks and uncertainties. Some of these risks relate to our ability to:
| • | obtain regulatory approvals to market and sell our products; |
| • | attract and retain customers for our products; |
| • | anticipate and adapt to changes in the molecular diagnostics market; |
| • | generate revenues; |
| • | maintain and develop strategic relationships with vendors and manufacturers to acquire necessary materials and the production of our products; |
| • | implement an effective marketing strategy to promote awareness of our products; |
| • | protect our systems from any equipment- or software-related system failures; |
| • | develop and operate computer systems and related infrastructure that are adequate to manage our growth and provide our services effectively; |
| • | attract, retain and motivate qualified personnel; |
| • | drive adoption of our system; |
| • | scale our manufacturing capacity to meet potential demand; |
| • | demonstrate and maintain the accuracy of our tests; and |
| • | protect our proprietary technology. |
Our operations are subject to all of the risks inherent in the growth of a new business enterprise. The likelihood of our success must be evaluated in light of the challenges, expenses, difficulties, complications and delays frequently encountered in the operation of a new business. We cannot assure you that we will achieve anticipated revenue growth and become profitable. Our failure to meet any of these goals could have a material adverse effect on us and may force us to reduce or cease our operations.
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We have a history of losses since our inception and expect continued losses for the foreseeable future.
Since our inception, we have not been profitable. We have incurred substantial costs to develop our technology. We expect to continue to spend substantial financial and other resources on developing our technology, engaging in laboratory testing, manufacturing new products, introducing new tests and expanding our sales and marketing activities. As a result, we need to generate significant revenue to achieve and maintain profitability.
We expect operating losses and negative cash flows to continue for the future as we continue to incur significant expenses. We cannot assure you that we will be successful in implementing our business strategies or in addressing the risks and uncertainties facing us. Even if we do address these risks successfully, we may not become profitable. If we were to achieve profitability, we cannot assure you that we would be able to sustain or increase profitability on a quarterly or annual basis in the future.
Our operating results may be variable and unpredictable.
The sales cycles for our products may be lengthy, which will make it difficult for us to accurately forecast revenues in a given period, and may cause revenues and operating results to vary significantly from period to period. In addition to its length, the sales cycle associated with our products is subject to a number of significant risks, including the budgetary constraints of our customers, their inventory management practices and possibly internal acceptance reviews and the timing of FDA approval and review, all of which are beyond our control. Sales of our products will also involve the purchasing decisions of large, medium and small hospitals and laboratories, which can require many levels of pre-approvals, further lengthening sales time. These purchasing decisions are subject to a number of significant risk factors beyond their and our control. For example, hospitals and laboratories may purchase fewer of our consumable products due to a decline in the volumes of tests needed at these facilities. As a result, we may expend considerable resources on unsuccessful sales efforts or we may not be able to complete sales as anticipated.
We may not be able to meet our cash requirements without obtaining additional capital from external sources, and if we are unable to do so, we may have to curtail or cease operations.
We expect capital outlays and operating expenditures to increase over the next several years as we expand our infrastructure, commercialization, manufacturing and research and development activities. We anticipate that our current cash and cash equivalents and cash provided by our operating activities, together with the net proceeds of this offering, will be sufficient to meet our currently estimated needs for at least the next 12 months. However, we operate in a market that makes our prospects difficult to evaluate, and we may need additional financing to execute on our current or future business strategies. The amount of additional capital we may need to raise depends on many factors, including: