Biocryst Pharmaceuticals Inc · S-3/A · On 11/1/99

Filed On 11/1/99   ·   SEC File 333-87669   ·   Accession Number 912057-99-2887

This Filing's "Filed As Of" Date was Corrected by the SEC on 11/1/99.

Pre-Effective Amendment to Registration Statement for Securities Offered Pursuant to a Transaction   ·   Form S-3
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-3/A       Pre-Effective Amendment to Registration Statement     53    260K 
                          for Securities Offered Pursuant to a                   
                          Transaction                                            

Document Table of Contents

S-3/A
1st Page of 53
TOC
Top
Previous
Next
Bottom
Just 1st

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 1999

                                                      REGISTRATION NO. 333-87669
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

AMENDMENT NO. 4 
TO

FORM S-3

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------- 

BIOCRYST PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its Charter)

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

                                                                · Download Table
                                                                               
            DELAWARE                                           62-1413174      
(State or other jurisdiction of                             (I.R.S. Employer   
 incorporation or organization)                          Identification Number)

2190 PARKWAY LAKE DRIVE, BIRMINGHAM, ALABAMA 35244
(205) 444-4600
(Address, including zip code, and telephone number, 
including area code, of Registrant's principal executive offices) 
------------------------

CHARLES E. BUGG, PH.D.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BIOCRYST PHARMACEUTICALS, INC.
2190 PARKWAY LAKE DRIVE 
BIRMINGHAM, ALABAMA 35244 
(205) 444-4600
(Name, address, including zip code, and telephone number, 
including area code, of agent for service of process) 
------------------------

COPIES TO:

                                                                · Download Table
                                                               
   RICHARD R. PLUMRIDGE, ESQ.          JOHN W. WHITE, ESQ.     
   LUCI STALLER ALTMAN, ESQ.         CRAVATH, SWAINE & MOORE   
   BRUCE E. CUNNINGHAM, ESQ.             WORLDWIDE PLAZA       
BROBECK, PHLEGER & HARRISON LLP         825 EIGHTH AVENUE      
370 INTERLOCKEN BLVD., SUITE 500  NEW YORK, NEW YORK 10019-7475
   BROOMFIELD, COLORADO 80021            (212) 474-1000        
        (303) 410-2000                                         

   APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable on or after this Registration Statement is declared effective.      

If the only securities being registered on this Form are being offered  
pursuant to dividend or interest reinvestment plans, please check the following 
box. / /                                                                        

   If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of  
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /                                

If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier        
effective registration statement for the same offering. / /                     

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering. / /                                                      

  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /                                             
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION       
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME     
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING        
PURSUANT TO SECTION 8(A), MAY DETERMINE.                                        

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

S-3/A
2nd Page of 53
TOC
1st
Previous
Next
Bottom
Just 2nd

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 IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR 
SALE IS NOT PERMITTED.                                                          

S-3/A
3rd Page of 53
TOC
1st
Previous
Next
Bottom
Just 3rd

SUBJECT TO COMPLETION, DATED NOVEMBER 1, 1999 

P R O S P E C T U S                                                             

2,000,000 SHARES

[LOGO]

COMMON STOCK
$      PER SHARE
--------- 

We are selling 2,000,000 shares of our common stock. We have granted the
underwriters a 30-day option to purchase up to an additional 300,000 shares to  
cover over-allotments, if any.                                                  

 Our common stock is quoted on the Nasdaq National Market under the symbol
"BCRX." The last reported sale price of our common stock on the Nasdaq National 
Market on October 8, 1999 was $    per share.                                   

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

INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.                                                            

Neither the Securities and Exchange Commission nor any state securities 
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a     
criminal offense.                                                               

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

                                                                · Download Table

                                          PER SHARE         TOTAL     
                                        --------------  --------------
                                                                      
Public Offering Price                   $               $             
Underwriting Discount                   $               $             
Proceeds to BioCryst (before expenses)  $               $             

The underwriters expect to deliver the shares to purchasers on or about 
, 1999.                                                             

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

SALOMON SMITH BARNEY                                                            

HAMBRECHT & QUIST                                       

RAYMOND JAMES & ASSOCIATES, INC.

, 1999                                                              

S-3/A
4th Page of 53
TOC
1st
Previous
Next
Bottom
Just 4th

TABLE OF CONTENTS 

                                                        · Enlarge/Download Table

                                                                                                               PAGE    
                                                                                                            -----------
                                                                                                                       
Prospectus Summary.........................................................................................          3 

Risk Factors...............................................................................................          6 

Information Regarding Forward-Looking Statements...........................................................         14 

Use of Proceeds............................................................................................         15 

Market Price of Common Stock...............................................................................         15 

Dividend Policy............................................................................................         15 

Capitalization.............................................................................................         16 

Dilution...................................................................................................         16 

Selected Financial Data....................................................................................         17 

Management's Discussion and Analysis of Financial Condition and Results of Operations......................         18 

Business...................................................................................................         23 

Management.................................................................................................         37 

Principal Stockholders.....................................................................................         39 

Relationships and Related Party Transactions...............................................................         41 

Underwriting...............................................................................................         42 

Legal Matters..............................................................................................         44 

Experts....................................................................................................         44 

Where You Can Find More Information........................................................................         45 

2 

S-3/A
5th Page of 53
TOC
1st
Previous
Next
Bottom
Just 5th


PROSPECTUS SUMMARY

   THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS"  
SECTION. IN ADDITION, WE INCORPORATE BY REFERENCE IMPORTANT BUSINESS AND        
FINANCIAL INFORMATION IN THIS PROSPECTUS.                                       

OUR COMPANY                                                                     

BioCryst Pharmaceuticals, Inc. is a biotechnology company focused on the
development of pharmaceuticals for the treatment of infectious, cardiovascular  
and other diseases and disorders. We designed our most advanced drug candidate, 
BCX-1812, to treat and prevent influenza. We licensed this drug candidate to The
R.W. Johnson Pharmaceutical Research Institute and Ortho-McNeil Pharmaceutical, 
Inc., both Johnson & Johnson companies.                                         

  We have two other drug development programs underway. The first program is
for development of a drug candidate for the treatment of T-cell cancers, a type 
of cancer that affects cells of the body's immune system. We are also developing
a class of compounds that may help in the treatment of cardiovascular diseases  
and disorders.                                                                  

 Drug development typically occurs in several stages, which we refer to as
early-stage development and late-stage development. Early-stage development     
includes drug discovery, preclinical studies prior to testing in humans and     
Phase I clinical trials in humans. Late-stage development includes Phase II and 
III clinical trials in humans and the regulatory approval process.              

An important element of our business strategy is to control costs and   
overhead through contracting and entering into license agreements with other    
parties to share the risks and benefits of various stages of the drug           
development process. We focus on the discovery and early-stage development of   
our drug candidates and seek to establish partnerships with pharmaceutical      
companies for the late-stage development and commercialization of these         
compounds. This strategy should control our expenses, minimize risks and allow  
us to have a greater number of attractive drug candidates progress to late-stage
development.                                                                    

OUR FLU DRUG CANDIDATE (BCX-1812)                                               

Many people perceive influenza, commonly known as the flu, to be a      
transient, inconvenient viral infection that leaves its sufferers bed-ridden for
a few days. In truth, however, it is a virulent, acute respiratory disease that 
is sometimes deadly. In North America, Western Europe and Japan, an estimated   
70 million to 150 million individuals suffer from influenza annually. The flu is
particularly dangerous to the elderly, young children and debilitated patients  
and accounts for approximately 20,000 deaths in the United States each year. The
flu and associated complications are the sixth leading cause of death in the    
United States. A 1994 article in THE NEW ENGLAND JOURNAL OF MEDICINE estimated  
that the annual cost to the U.S. economy associated with influenza epidemics was
in excess of $12 billion.                                                       

In collaboration with scientists from The University of Alabama at      
Birmingham, we developed BCX-1812, our most advanced drug candidate. We designed
BCX-1812 to inhibit an enzyme, called the neuraminidase enzyme, that helps the  
flu virus to replicate and spread throughout the body. By inhibiting the        
neuraminidase enzyme, we believe that BCX-1812 may be effective in the treatment
and prevention of the flu.                                                      

Our preclinical studies demonstrated that BCX-1812 has the following    
benefits:                                                                       

- excellent safety profile;                                             

- inhibition of both influenza A and B;                                 

3 

S-3/A
6th Page of 53
TOC
1st
Previous
Next
Bottom
Just 6th

- effective when taken orally;                                          

- probable once-a-day dosage; and                                       

   - can be made into a liquid form, allowing for use by the elderly and young
children.                                                           

   In September 1998, we entered into an exclusive worldwide license agreement
with The R.W. Johnson Pharmaceutical Research Institute and Ortho-McNeil, both  
Johnson & Johnson companies. These Johnson & Johnson companies have sole        
responsibility for the development, manufacture, marketing, sales and           
distribution of BCX-1812. We received an initial $6.0 million payment from      
Ortho-McNeil and an additional $6.0 million common stock equity investment from 
Johnson & Johnson Development Corporation. In June 1999, we received a          
$2.0 million payment from Ortho-McNeil in connection with the initiation of     
Phase II clinical testing in the United States. In addition, we may receive cash
payments upon specified developmental and regulatory milestones and royalties on
any product sales.                                                              

Since the collaboration was established, BCX-1812 moved through Phase I 
clinical trials and a Phase II clinical study by August 1999. We recently       
announced preliminary results from a Phase II placebo-controlled, randomized    
study conducted by The R.W. Johnson Pharmaceutical Research Institute for the   
treatment of healthy volunteers infected with a strain of influenza A. The R.W. 
Johnson Pharmaceutical Research Institute advised us that the data from this    
Phase II study indicated a statistically significant reduction of flu virus in  
the body and that the drug was well-tolerated at all dosage levels. They also   
advised us that the planning of the Phase III clinical trials for the 1999/2000 
influenza season is underway.                                                   

 Our principal offices are located at 2190 Parkway Lake Drive, Birmingham,
Alabama 35244, and our telephone number is (205) 444-4600.                      

THE OFFERING                                                                    

                                                        · Enlarge/Download Table
                                                                                        
Common stock offered............................... 2,000,000 shares                    

Common stock to be outstanding after the                                                
  offering......................................... 17,238,672 shares                   

Use of proceeds.................................... For research and development        
                                                    activities, preclinical studies and 
                                                    clinical trials, working capital and
                                                    general corporate purposes.         

  Unless we specifically state otherwise, the information in this prospectus
does not take into account the issuance of up to 300,000 shares of common stock 
which the underwriters have the option to purchase solely to cover              
over-allotments. If the underwriters exercise their over-allotment option in    
full, 17,538,672 shares of common stock will be outstanding after the offering. 

    The number of shares of common stock to be outstanding immediately after the
offering is based upon shares outstanding as of October 8, 1999 and does not    
take into account 2,255,736 shares of common stock issuable upon exercise of    
options outstanding at a weighted average exercise price of $7.52 per share and 
595,707 shares reserved under our existing stock option plan and employee stock 
purchase plan.                                                                  

4 

S-3/A
7th Page of 53
TOC
1st
Previous
Next
Bottom
Just 7th

SUMMARY FINANCIAL DATA

                                                        · Enlarge/Download Table

                                                                                                       SIX MONTHS ENDED    
                                                         YEARS ENDED DECEMBER 31,                          JUNE 30,        
                                        ----------------------------------------------------------  -----------------------
                                           1994        1995        1996        1997        1998        1998        1999    
                                        ----------  ----------  ----------  ----------  ----------  ----------  -----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)                       
                                                                                                                           
STATEMENT OF OPERATIONS DATA:                                                                                              
Revenues:                                                                                                                  
  Collaborative and other research and                                                                                     
    development........................ $      269  $      223  $    1,558  $    1,000  $    6,371  $       --   $   2,408 
  Interest and other...................        465         662       1,094       1,692       1,255         671         633 
                                        ----------  ----------  ----------  ----------  ----------  ----------   --------- 
    Total revenues.....................        734         885       2,652       2,692       7,626         671       3,041 
                                        ----------  ----------  ----------  ----------  ----------  ----------   --------- 
Expenses:                                                                                                                  
  Research and development.............      5,552       7,107       7,586      10,577       9,291       5,353       4,006 
  General and administrative...........      1,904       2,210       2,664       2,682       3,105       1,295       1,683 
  Interest.............................        216         144         100          52          15          10           3 
                                        ----------  ----------  ----------  ----------  ----------  ----------   --------- 
    Total expenses.....................      7,672       9,461      10,350      13,311      12,411       6,658       5,692 
                                        ----------  ----------  ----------  ----------  ----------  ----------   --------- 
Net loss............................... $   (6,938) $   (8,576) $   (7,698) $  (10,619) $   (4,785) $   (5,987)  $  (2,651)
                                        ==========  ==========  ==========  ==========  ==========  ==========   ========= 
Net loss per share..................... $    (1.02) $    (0.96) $    (0.69) $    (0.77) $    (0.34) $    (0.43)  $   (0.18)
                                        ==========  ==========  ==========  ==========  ==========  ==========   ========= 
Weighted average shares outstanding....      6,787       8,905      11,171      13,780      14,120      13,926      14,981 

  The as-adjusted information that follows gives effect to this offering and
assumes no exercise of the underwriters' over-allotment option.                 

                                                        · Enlarge/Download Table

                                                                                                         JUNE 30, 1999     
                                                                                                    -----------------------
                                                                                                      ACTUAL    AS ADJUSTED
                                                                                                    ----------  -----------
                                                                                                        (IN THOUSANDS)     
                                                                                                                           
BALANCE SHEET DATA:                                                                                                        
Cash, cash equivalents and securities held-to-maturity............................................. $   24,317   $  69,827 
Total assets.......................................................................................     26,546      72,056 
Accumulated deficit................................................................................    (55,821)    (55,821)
Total stockholders' equity.........................................................................     25,199      70,709 

5 

S-3/A
8th Page of 53
TOC
1st
Previous
Next
Bottom
Just 8th


RISK FACTORS

AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY OUR COMMON      
STOCK.                                                                          

WE HAVE INCURRED SUBSTANTIAL LOSSES SINCE OUR INCEPTION IN 1986, EXPECT TO      
CONTINUE TO INCUR SUCH LOSSES, MAY NEVER BE PROFITABLE AND MAY NEED ADDITIONAL  
FINANCING                                                                       

    Since our inception in 1986, we have not been profitable. We expect to incur
additional losses for the foreseeable future, and we expect our losses to       
increase as our research and development efforts progress. As of June 30, 1999, 
our accumulated deficit was approximately $55.8 million. To become profitable,  
we must successfully develop drug candidates, enter into profitable agreements  
with other parties and our drug candidates must receive regulatory approval.    
These other parties must then successfully manufacture and market our drug      
candidates. It will be several years, if ever, before we receive royalties under
our existing license agreements or any future license agreements. In addition,  
we never expect to generate revenue directly from product sales. If we do not   
generate revenue, or if our drug development expenses increase, we may need to  
raise additional funds through new or existing collaborations or through private
or public equity or debt financings. If financing is not available on acceptable
terms, or not available at all, we may not have enough capital to continue our  
current business strategy.                                                      

IF THE R.W. JOHNSON PHARMACEUTICAL RESEARCH INSTITUTE AND ORTHO-MCNEIL WERE TO  
TERMINATE, SUBSTANTIALLY MODIFY OR FAIL TO FULFILL THEIR OBLIGATIONS UNDER THEIR
LICENSE AGREEMENT WITH US, WE WOULD LOSE SUBSTANTIALLY ALL OF OUR REVENUE       

If The R.W. Johnson Pharmaceutical Research Institute and Ortho-McNeil  
change their exclusive worldwide license agreement with us, including by        
terminating it or failing to fulfill their obligations, we would lose           
substantially all of our revenue. Approximately 79.2% of our revenues for the   
six months ended June 30, 1999 and approximately 83.5% of our revenues for the  
year ended December 31, 1998 resulted from this license agreement. These        
revenues represent approximately 45.0% of our total revenues since our inception
in 1986.                                                                        

    Under this agreement, The R.W. Johnson Pharmaceutical Research Institute and
Ortho-McNeil have several rights that could delay or stop the development of our
flu drug candidate, including sole discretion on all elements of research and   
development of BCX-1812, including timing and design of further clinical trials,
sole control over the amount of resources devoted to the research and           
development of BCX-1812 and the right to terminate or cancel the agreement,     
which they may do at any time on four months notice.                            

IF OUR DEVELOPMENT COLLABORATIONS WITH OTHER PARTIES FAIL, THE DEVELOPMENT OF   
OUR DRUG CANDIDATES WILL BE DELAYED OR STOPPED                                  

   We rely completely upon other parties for many important stages of our drug
development programs, including:                                                

   - discovery of proteins that cause or enable biological reactions necessary
  for the progression of the disease or disorder, called enzyme targets;

- execution of preclinical studies and late-stage development for our   
compounds and drug candidates; and                                  

  - manufacturing, sales, marketing and distribution of our drug candidates.

 Even more critical to our success is our ability to enter into successful
collaborations for the late-stage clinical development, regulatory approval,    
manufacture, marketing, sales and distribution of our                           

6 

S-3/A
9th Page of 53
TOC
1st
Previous
Next
Bottom
Just 9th

drug candidates. Our strategy is to rely upon other parties for all of these    
steps so that we can focus exclusively on the key areas of our expertise. This  
heavy reliance upon third parties for these critical functions presents several 
risks, including:                                                               

- these contracts may expire or the other parties to the contract may   
   terminate them, as was the case with our Torii Pharmaceutical Co., Ltd.
contract;                                                           

- our partners may choose to pursue alternative technologies, including 
those of our competitors;                                           

- we may have disputes with a partner that could lead to litigation or  
arbitration;                                                        

 - our partners may not devote sufficient capital or resources towards our
drug candidates; and                                                

- our partners may not comply with applicable government regulatory     
requirements.                                                       

If we cannot license enzyme targets from academic institutions or other 
biotechnology companies on acceptable terms, we will be unable to develop new   
drug candidates. If the contract research organizations that conduct our initial
clinical trials breach their obligations to us, our inability to replace them   
would delay or possibly stop the development of our drug candidates. If we are  
unable to avoid all of these risks with our partners, we will not successfully  
complete late-stage development of our drug candidates.                         

IF THE CLINICAL TRIALS OF OUR DRUG CANDIDATES FAIL, WE WILL NOT BE ABLE TO      
MARKET OUR DRUG CANDIDATES                                                      

To receive the regulatory approvals necessary for the sale of our drug  
candidates, we or our licensees must demonstrate through clinical trials that   
each drug candidate is safe and effective. If we or our licensees are unable to 
obtain regulatory approval of our drug candidates, we will not be able to market
our drug candidates, which would result in a decrease in, or complete absence   
of, revenue.                                                                    

The clinical trial process is complex, uncertain and expensive. We incur
substantial expense for, and devote significant time to, clinical trials, yet   
cannot be certain that the trials will ever result in the commercial sale of a  
product. Positive results from preclinical studies and early clinical trials do 
not ensure positive results in clinical trials designed to permit application   
for regulatory approval, called pivotal clinical trials. We may suffer          
significant setbacks in pivotal clinical trials, even after earlier clinical    
trials show promising results. Any of our drug candidates may produce           
undesirable side effects in humans that could cause us or regulatory authorities
to interrupt, delay or halt clinical trials of a drug candidate. We, the FDA or 
foreign regulatory authorities may suspend or terminate clinical trials at any  
time if we or they believe the trial participants face unacceptable health      
risks. Clinical trials may fail to demonstrate that our drug candidates are safe
or effective. Even if we or our licensees successfully complete clinical trials 
for our product candidates, our licensees might not file the required regulatory
submissions in a timely manner and may not receive regulatory approval for the  
drug candidate.                                                                 

 We licensed our drug candidate, BCX-1812, to Ortho-McNeil and to The R.W.
Johnson Pharmaceutical Research Institute, which is in the process of conducting
clinical trials. However, the FDA may not accept The R.W. Johnson Pharmaceutical
Research Institute's clinical protocols, the Phase III clinical trials may not  
begin in 1999, or at all, and any Phase III clinical trials may not be          
successful. Even if The R.W. Johnson Pharmaceutical Research Institute completes
the Phase III trials, we do not know when, if ever, it will receive FDA or      
foreign regulatory agency approvals for, or when Ortho-McNeil will begin        
marketing of, BCX-1812. If The R.W. Johnson Pharmaceutical Research Institute is
unable to begin clinical trials as planned, complete the clinical trials or     
demonstrate the safety and efficacy of our compounds, we will not receive any   
revenues from BCX-1812. Even if the results of The R.W. Johnson Pharmaceutical  
Research Institute's trials are positive, products are not likely to be         
commercially available for several years, if at all.                            

7 

S-3/A
10th Page of 53
TOC
1st
Previous
Next
Bottom
Just 10th

IF WE OR OUR LICENSEES DO NOT OBTAIN AND MAINTAIN GOVERNMENTAL APPROVALS FOR OUR
PRODUCTS UNDER DEVELOPMENT, WE OR OUR PARTNERS WILL NOT BE ABLE TO SELL THESE   
POTENTIAL PRODUCTS                                                              

  In the United States, we or our partners must obtain FDA approval for each
drug that we intend to commercialize. The FDA approval process is typically     
lengthy and expensive, and approval is never certain. Products distributed      
abroad are also subject to foreign government regulation. The FDA or foreign    
regulatory agencies have not approved any of our drug candidates. Because of the
risks and uncertainties in biopharmaceutical development, our drug candidates   
could take a significantly longer time to gain regulatory approval than we      
expect or may never gain approval. If the FDA delays regulatory approval of our 
drug candidates, our management's credibility, our company's value and our      
operating results may suffer. Even if the FDA or foreign regulatory agencies    
approve a drug candidate, the approval may limit the indicated uses for a drug  
candidate and/or may require post-marketing studies.                            

  If we get approval to market our potential products, whether in the United
States or internationally, we will continue to be subject to extensive          
regulatory requirements. These requirements are wide ranging and govern, among  
other things:                                                                   

- adverse drug experience reporting regulations;                        

- product promotion;                                                    

    - product manufacturing, including good manufacturing practice requirements;
and                                                                 

- product changes or modifications.                                     

 Our failure to comply with existing or future regulatory requirements, or
our loss of, or changes to, previously obtained approvals, could have a material
adverse effect on our business because we will not receive royalty revenues if  
we do not receive approval of our products for marketing.                       

   In June 1995, we notified the FDA that we submitted incorrect efficacy data
for our Phase II trials of BCX-34 applied to the skin for the treatment of      
cutaneous T-cell lymphoma and psoriasis. Cutaneous T-cell lymphoma is a skin    
cancer in which T-cells, which normally help fight disease in the body,         
duplicate rapidly and cause skin cancer. Psoriasis is a disease where the immune
system attacks the body's own skin cells. The FDA inspected us and issued to us 
Lists of Inspectional Observations, on Form FDA 483, that cited our failure to  
follow good clinical practices. The FDA also issued a Form FDA 483 to a         
principal investigator at a clinical trial site, and the FDA notified us that   
they will not accept any work performed by this investigator without further    
validation. Because of these investigations by the FDA, our ongoing and future  
clinical studies or trials may receive increased scrutiny, which would delay the
regulatory review process.                                                      

IF OUR DRUG CANDIDATES DO NOT ACHIEVE BROAD MARKET ACCEPTANCE, OUR BUSINESS MAY 
NEVER BECOME PROFITABLE                                                         

  Our drug candidates, including our influenza neuraminidase inhibitors, may
not gain the market acceptance required for us to be profitable even after they 
receive approval for sale by the FDA or foreign regulatory agencies. Influenza  
neuraminidase inhibitors are drugs designed to stop the spread of the flu virus 
in the body. The degree of market acceptance of any drug candidates that we or  
our partners develop will depend on a number of factors, including:             

- cost-effectiveness of our drug candidates;                            

    - their effectiveness relative to alternative treatment methods, such as the
efficacy, cost and ease of use of our flu drug candidate over other 
products, including vaccines, existing drugs such as amantadine and 
rimantadine, Hoffmann-La Roche's and Glaxo Wellcome's influenza     
neuraminidase inhibitors and over-the-counter products;             

8 

S-3/A
11th Page of 53
TOC
1st
Previous
Next
Bottom
Just 11th

- reimbursement policies of government and third-party payors; and      

- marketing and distribution support for our drug candidates.           

Physicians, patients, payors or the medical community in general may not
accept or use our drug candidates even after the FDA or foreign regulatory      
agencies approve the drug candidates. If our drug candidates do not achieve     
significant market acceptance, we will not have enough revenues to become       
profitable.                                                                     

IF COMPETITIVE PRODUCTS FROM OTHER COMPANIES ARE BETTER THAN OUR PRODUCT        
CANDIDATES, OUR FUTURE REVENUES MIGHT FAIL TO MEET OUR EXPECTATIONS AND THOSE OF
FINANCIAL ANALYSTS                                                              

   If our influenza neuraminidase inhibitor drug candidate, BCX-1812, receives
FDA or foreign regulatory approval, it will have to compete with a number of    
products that are already on the market such as vaccines, the drugs amantadine  
and rimantadine and over-the-counter products, and with additional products that
may beat BCX-1812 to the market. If approved, BCX-1812 will be, at best, the    
third neuraminidase inhibitor to the market, because the FDA and foreign        
regulatory agencies approved Glaxo-Wellcome plc's neuraminidase inhibitor       
product, and because the FDA also approved Hoffman-La Roche's neuraminidase     
inhibitor. Both Glaxo-Wellcome and Hoffmann-La Roche are large multinational    
pharmaceutical companies that have significant financial, technical and human   
resources and could therefore establish brand recognition and loyalty with      
consumers before BCX-1812 is on the market. In addition, a vaccine is currently 
in preclinical development that may immunize people against all strains of the  
flu virus, rendering flu drug products like ours obsolete. Products marketed by 
our competitors may prove to be more effective than our own, and our products,  
if any, may not offer an economically feasible or preferable alternative to     
existing therapies.                                                             

IF WE FAIL TO ADEQUATELY PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS OR 
SECURE RIGHTS TO PATENTS OF OTHERS, THE VALUE OF OUR INTELLECTUAL PROPERTY      
RIGHTS WOULD DIMINISH                                                           

Our success will depend in part on our ability and the abilities of our 
licensors to obtain patent protection for our products, methods, processes and  
other technologies to preserve our trade secrets, and to operate without        
infringing the proprietary rights of third parties. To date, the U.S. Patent and
Trademark Office has issued to us nine U.S. patents for our various inventions. 
We have filed additional patent applications and provisional patent applications
with the U.S. Patent and Trademark Office. We have filed a number of            
corresponding foreign patent applications and intend to file additional foreign 
and U.S. patent applications, as appropriate. We cannot predict:                

- the degree and range of protection any patents will afford against    
competitors with similar products;                                  

- if and when patents will issue;                                       

- whether or not others will obtain patents claiming aspects similar to 
those covered by our patent applications; or                        

 - whether we must initiate litigation or administrative proceedings which
may be costly whether we win or lose.                               

If our products, methods, processes and other technologies infringe the 
proprietary rights of other parties, we could incur substantial costs and we may
have to:                                                                        

- obtain licenses or redesign our products or processes to avoid        
infringement;                                                       

- stop using the subject matter claimed in the patents held by others;  

9 

S-3/A
12th Page of 53
TOC
1st
Previous
Next
Bottom
Just 12th

- pay damages; or                                                       

- defend litigation or administrative proceedings which may be costly   
whether we win or lose.                                             

Our success is also dependent upon the skills, knowledge and experience,
none of which is patentable, of our scientific and technical personnel. To help 
protect our rights, we require all employees, consultants, advisors and         
collaborators to enter into confidentiality agreements that prohibit the        
disclosure of confidential information to anyone outside of our company and     
require disclosure and assignment to us of their ideas, developments,           
discoveries and inventions. These agreements may not provide adequate protection
for our trade secrets, know-how or other proprietary information in the event of
any unauthorized use or disclosure or the lawful development by others of such  
information, and if any of our proprietary information is disclosed, our        
business will suffer because our revenues depend upon our ability to license our
technology and any such events would significantly impair the value of such a   
license.                                                                        

OUR FAILURE TO RETAIN OUR EXISTING KEY PERSONNEL OR OUR FAILURE TO ATTRACT AND  
RETAIN ADDITIONAL KEY PERSONNEL WILL DELAY OR STOP THE DEVELOPMENT OF OUR DRUG  
CANDIDATES AND THE EXPANSION OF OUR BUSINESS                                    

   We are highly dependent upon our senior management and scientific team, the
loss of whose services might impede the achievement of our development and      
commercial objectives. Although we maintain, and are the beneficiary of, a      
$2.0 million key-man insurance policy on the life of Charles E. Bugg, Ph.D.,    
Chairman of the Board of Directors and Chief Executive Officer, we do not       
believe the proceeds would be adequate to compensate for his loss. We are       
actively seeking additional members for our senior management team. Competition 
for key personnel with the experience that we require is intense and we expect  
it to increase. Our inability to attract and retain the required number of      
skilled and experienced management, operational and scientific personnel, will  
harm our business because we rely upon these personnel for many critical        
functions of our business.                                                      

In addition, we rely on members of our scientific advisory board and    
consultants to assist us in formulating our research and development strategy.  
All of the members of the scientific advisory board and all of our consultants  
have other jobs and each such member or consultant may have commitments to other
entities that may limit their availability to us.                               

IF USERS OF OUR DRUG CANDIDATES ARE NOT REIMBURSED FOR USE OF OUR DRUG          
CANDIDATES, FUTURE SALES OF OUR DRUG CANDIDATES WILL DECLINE                    

    Most individuals who buy commercial drug products rely on reimbursement from
their insurance provider or the government to cover the cost of the drug        
product. Many factors may determine whether insurance companies or other        
third-party payors will reimburse patients for purchasing our flu drug,         
BCX-1812, including:                                                            

- BCX-1812 only alleviates symptoms of, and does not cure, the flu;     

- in most cases, the flu is not a life-threatening disease; and         

  - BCX-1812 may be more expensive than a vaccine or other drug products for
treatment of the flu, including over-the-counter products.          

IF WE FACE CLINICAL TRIAL LIABILITY CLAIMS RELATED TO THE USE OR MISUSE OF OUR  
COMPOUNDS EITHER IN CLINICAL TRIALS OR AFTER COMMERCIAL INTRODUCTION, THESE     
CLAIMS WILL DIVERT OUR MANAGEMENT'S TIME AND WE WILL INCUR LITIGATION COSTS     

   We face an inherent business risk of liability claims in the event that the
use or misuse of our compounds results in personal injury or death. We may      
experience clinical trial liability claims in the future if our compounds are   
misused or cause harm before regulatory authorities approve them for marketing. 
We currently maintain clinical trial liability insurance coverage in the amount 
of $1.0 million per occurrence and $2.0 million in the aggregate, with an       
additional $5.0 million potentially available                                   

10

S-3/A
13th Page of 53
TOC
1st
Previous
Next
Bottom
Just 13th

under our umbrella policy. The insurance policy may not be sufficient to cover  
claims that may be made against us. Clinical trial liability insurance is       
expensive, difficult to obtain and may not be available in the future on        
acceptable terms, if at all. In addition, after commercial introduction of our  
products we may experience losses due to product liability claims. Although     
clinical trial claims are costly, product liability claims are even more        
complex, expensive and time-consuming and are more difficult to disprove. In    
clinical trial situations, we or our licensees must warn each participant of the
adverse effects of the drug and each participant must sign waivers and          
acknowledgements. After regulatory authorities approve a drug for marketing,    
people who take the drug might not be aware of its potential adverse effects,   
and we would be liable for any harm caused by the drug. Any claims against us,  
regardless of their merit, could materially and adversely affect our financial  
condition, because litigation related to these claims would strain our financial
resources in addition to consuming the time and attention of our management.    

IF OUR COMPUTER SYSTEMS FAIL, WE MAY SUFFER MORE HARM THAN OTHER COMPANIES      

Our drug development activities depend on the security, integrity and   
performance of the computer systems supporting them, and the failure of our     
computer systems would delay or stop our drug development efforts. We currently 
store all of our preclinical and clinical data at our facilities, do not store  
duplicate copies of all data off-site and could lose important data if our      
systems were impaired. Any significant degradation or failure of our computer   
systems could cause us to inaccurately calculate or lose our data. Loss of data 
could result in significant delays in our drug development process. We have not 
undertaken formal system protections, do not have a detailed emergency plan and 
any system failure could harm our business and operations.                      

IF, BECAUSE OF OUR USE OF HAZARDOUS MATERIALS, WE VIOLATE ANY ENVIRONMENTAL     
CONTROLS OR REGULATIONS THAT APPLY TO SUCH MATERIALS, WE MAY INCUR SUBSTANTIAL  
COSTS AND EXPENSES IN OUR REMEDIATION EFFORTS                                   

Our research and development involves the controlled use of hazardous   
materials, chemicals and various radioactive compounds. We are subject to       
federal, state and local laws and regulations governing the use, storage,       
handling and disposal of these materials and some waste products. Accidental    
contamination or injury from these materials could occur. In the event of an    
accident, we could be liable for any damages that result and any liabilities    
could exceed our resources. Compliance with environmental laws and regulations  
could require us to incur substantial unexpected costs which would materially   
and adversely affect our results of operations.                                 

BECAUSE STOCK OWNERSHIP IS CONCENTRATED, YOU AND OTHER INVESTORS WILL HAVE      
MINIMAL INFLUENCE ON STOCKHOLDER DECISIONS                                      

    Prior to this offering, our directors, executive officers and some principal
stockholders and their affiliates, including Johnson & Johnson Development      
Corporation, beneficially own approximately 40.5% of our outstanding common     
stock. As a result, these holders, if acting together, are able to significantly
influence matters requiring stockholder approval, including the election of     
directors. This concentration of ownership may delay, defer or prevent a change 
in our control.                                                                 

WE HAVE ANTI-TAKEOVER PROVISIONS IN OUR CORPORATE CHARTER DOCUMENTS THAT MAY    
RESULT IN OUTCOMES WITH WHICH YOU DO NOT AGREE                                  

   Our board of directors has the authority to issue up to 5,000,000 shares of
undesignated preferred stock and to determine the rights, preferences,          
privileges and restrictions of those shares without further vote or action by   
our stockholders. The rights of the holders of any preferred stock that may be  
issued in the future may adversely affect the rights of the holders of common   
stock. The issuance of preferred stock could make it more difficult for third   
parties to acquire a majority of our outstanding voting stock.                  

11

S-3/A
14th Page of 53
TOC
1st
Previous
Next
Bottom
Just 14th

  In addition, our certificate of incorporation provides for staggered terms
for the members of the board of directors and super majority approval of the    
removal of any member of the board of directors and prevents our stockholders   
from acting by written consent. Our certificate also requires supermajority     
approval of any amendment of these provisions. These provisions and other       
provisions of our by-laws and of Delaware law applicable to us could delay or   
make more difficult a merger, tender offer or proxy contest involving us.       

INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION       

You will incur immediate and substantial dilution of $20.35 in the net  
tangible book value per share of the shares you purchase in this offering. To   
the extent outstanding options to purchase common stock are exercised, there    
will be further dilution. The net tangible book value per share of existing     
stockholders will increase by $2.48 because of this offering.                   

OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE AND THE VALUE OF YOUR INVESTMENT
COULD DECLINE SIGNIFICANTLY                                                     

   The market prices for securities of biotechnology companies in general have
been highly volatile and may continue to be highly volatile in the future.      
Moreover, our stock has fluctuated frequently, and these fluctuations are often 
not related to our financial results. The 52-week range of the market price of  
our stock has ranged from $5.50 to $35.31 per share, which is a significantly   
greater change than that experienced by many other companies. The following     
factors, in addition to other risk factors described in this section, may have a
significant impact on the market price of our common stock:                     

 - announcements of technological innovations or new products by us or our
competitors;                                                        

- developments or disputes concerning patents or proprietary rights;    

- our licensees achieving or failing to achieve development milestones; 

- publicity regarding actual or potential medical results relating to   
products under development by us or our competitors;                

  - regulatory developments in both the United States and foreign countries;

- public concern as to the safety of pharmaceutical products;           

- actual or anticipated fluctuations in our operating results;          

   - changes in financial estimates or recommendations by securities analysts;

- economic and other external factors or other disasters or crises; and 

- period-to-period fluctuations in our financial results.               

PROBLEMS WITH YEAR 2000 COMPLIANCE COULD DISRUPT OUR OPERATIONS                 

Beginning in the year 2000, the date fields coded in certain software   
products and computer systems will need to accept four digit entries in order to
distinguish between years in the 1900s and years dated 2000 and higher (commonly
known as the year 2000 problem). It is not clear what potential problems may    
arise as the biopharmaceutical industry, and other industries, try to resolve   
this year 2000 problem.                                                         

It is possible that our currently installed computer systems, software  
products or other business systems, or those of our suppliers or service        
providers, working either alone or in conjunction with other software or        
systems, will not accept input of, store, manipulate and output dates for the   
year 2000 or subsequent years without error or interruption. We attempted to    
review and resolve those aspects of the year 2000 problem that are within our   
direct control and adjust to or influence those                                 

12

S-3/A
15th Page of 53
TOC
1st
Previous
Next
Bottom
Just 15th

aspects that are not within our direct control. We have completed our assessment
of our systems and expect that we will fully implement remediation and testing  
by the end of 1999. Our potential drug candidates do not have any year 2000     
exposure. We have contacted our major vendors and suppliers with regard to their
year 2000 compliance, and we will continue to monitor their compliance.         

  Some risks associated with the year 2000 problem are beyond our ability to
control, including the extent to which our suppliers and service providers      
address the year 2000 problem. The failure by a third party to adequately       
address the year 2000 issue could have an adverse effect on their operations,   
which could have an adverse effect on us. We are assessing the possible effects 
on our operations of the possible failure of our key suppliers and providers,   
contractors and collaborators to identify and remedy potential year 2000        
problems.                                                                       

13

S-3/A
16th Page of 53
TOC
1st
Previous
Next
Bottom
Just 16th

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT         
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS          
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS  
PROSPECTUS.                                                                     

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. The forward-looking
statements are principally contained in the sections on "Prospectus Summary,"   
"Business" and "Management's Discussion and Analysis of Financial Condition and 
Results of Operations." These statements involve known and unknown risks,       
uncertainties and other factors which may cause our actual results, performance 
or achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward-looking statements.         
Forward-looking statements include, but are not limited to:                     

- the progress of our product development programs, including The R.W.  
      Johnson Pharmaceutical Research Institute and Ortho-McNeil's progress with
respect to our influenza neuraminidase inhibitors;                  

- developments with respect to clinical development of drug candidates, 
clinical trials and the regulatory approval process;                

- our estimates regarding our capital requirements and our needs for    
additional financing;                                               

- developments relating to our selection and licensing of targets; and  

  - our ability to attract development partners with acceptable development,
regulatory and commercialization expertise.                         

   In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "would," "expects," "plans," "anticipates,"   
"believes," "estimates," "projects," "predicts," "potential" and similar        
expressions intended to identify forward-looking statements. These statements   
reflect our current views with respect to future events and are based on        
assumptions and subject to risks and uncertainties. Given these uncertainties,  
you should not place undue reliance on these forward-looking statements. We     
discuss many of these risks in greater detail under the heading "Risk Factors." 
Also, these forward-looking statements represent our estimates and assumptions  
only as of the date of this prospectus.                                         

You should read this prospectus and the documents that we incorporate by
reference in this prospectus completely and with the understanding that our     
actual future results may be materially different from what we expect. We may   
not update these forward-looking statements, even though our situation may      
change in the future. We qualify all of our forward-looking statements by these 
cautionary statements.                                                          

14

S-3/A
17th Page of 53
TOC
1st
Previous
Next
Bottom
Just 17th


USE OF PROCEEDS 

    We estimate that the net proceeds we will receive from the sale of 2,000,000
shares of common stock will be approximately $45.5 million, or approximately    
$52.4 million if the underwriters fully exercise their over-allotment option,   
after deducting the estimated underwriting discounts and offering expenses and  
assuming an offering price of $24.50 per share. We expect to use the net        
proceeds of this offering as follows:                                           

- to fund drug discovery and other research programs;                   

 - to fund preclinical studies and clinical trials of our drug candidates;

- to provide working capital; and                                       

- for general corporate purposes.                                       

    We have not determined the amount of net proceeds to be used for each of the
specific purposes listed. Accordingly, we will have broad discretion to use the 
proceeds as we see fit.                                                         

Based upon the current status of our product development programs, we   
believe that the net proceeds from this offering, together with interest on     
those net proceeds, and our existing capital resources will satisfy our capital 
requirements through 2001.                                                      

    Pending such uses, we intend to invest the net proceeds in interest-bearing,
investment-grade instruments, certificates of deposit or direct or guaranteed   
obligations of the United States or its agencies.                               

MARKET PRICE OF COMMON STOCK

   Our common stock began trading publicly on the Nasdaq National Market under
the symbol "BCRX." We completed the initial public offering of our common stock 
on March 4, 1994. The following table shows the range of high and low sale      
prices per share of our common stock as reported by the Nasdaq National Market  
for the periods indicated.                                                      

                                                        · Enlarge/Download Table

                                                                                            COMMON STOCK PRICE 
                                                                                           --------------------
                                                                                             HIGH        LOW   
                                                                                           ---------  ---------
                                                                                                               
Year ended December 31, 1997                                                                                   
    First Quarter......................................................................... $   17.00  $   11.50
    Second Quarter........................................................................     14.75      10.06
    Third Quarter.........................................................................     13.75       4.25
    Fourth Quarter........................................................................      8.38       6.25
Year ended December 31, 1998                                                                                   
    First Quarter.........................................................................      9.50       6.88
    Second Quarter........................................................................      9.13       6.00
    Third Quarter.........................................................................      8.00       6.00
    Fourth Quarter........................................................................      8.44       4.38
Year ended December 31, 1999                                                                                   
    First Quarter.........................................................................     11.00       6.38
    Second Quarter........................................................................      9.50       6.38
    Third Quarter.........................................................................     35.31       8.38
    Fourth Quarter (through October 8, 1999)..............................................     25.00      23.38

   On October 8, 1999, the last sale price of our common stock reported by the
Nasdaq National Market was $24.50 per share. As of August 1, 1999, there were   
483 holders of record of our common stock.                                      

DIVIDEND POLICY 

   We have not declared or paid cash dividends on our common stock in the past
and do not intend to pay dividends on our common stock in the foreseeable       
future.                                                                         

15

S-3/A
18th Page of 53
TOC
1st
Previous
Next
Bottom
Just 18th


CAPITALIZATION

The following table shows our capitalization as of June 30, 1999 on an  
actual basis and as adjusted to reflect the sale of 2,000,000 shares of common  
stock in this offering, assuming an offering price of $24.50 per share and after
deducting the estimated underwriting discounts and offering expenses. This table
should be read in conjunction with the financial statements and related notes   
incorporated in this prospectus by reference and "Management's Discussion and   
Analysis of Financial Condition and Results of Operations" appearing elsewhere  
in this prospectus.                                                             

                                                        · Enlarge/Download Table

                                                                                               JUNE 30, 1999     
                                                                                          -----------------------
                                                                                                                 
                                                                                            ACTUAL    AS ADJUSTED
                                                                                          ----------   --------- 


                                                                                           (IN THOUSANDS, EXCEPT 
                                                                                                SHARE DATA)      
                                                                                                                 
Capital lease obligations, less current portion.......................................... $       15   $      15 
                                                                                          ----------   --------- 
Stockholders' equity:                                                                                            
  Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued and                                 
    outstanding..........................................................................         --          -- 
  Common stock, $0.01 par value; 45,000,000 shares authorized; 14,987,634 issued and                             
    outstanding, and 16,987,634 shares issued and outstanding as adjusted for this                               
    offering.............................................................................        150         170 
  Additional paid-in capital.............................................................     80,870     126,360 
  Accumulated deficit....................................................................    (55,821)    (55,821)
                                                                                          ----------   --------- 
    Total stockholders' equity...........................................................     25,199      70,709 
                                                                                          ----------   --------- 
      Total capitalization............................................................... $   25,214   $  70,724 
                                                                                          ==========   ========= 

The above data excludes 2,507,501 shares of common stock issuable upon  
exercise of options outstanding as of June 30, 1999 at a weighted average       
exercise price of $7.37 per share.                                              

DILUTION

Our net tangible book value as of June 30, 1999 was approximately       
$25.0 million, or $1.67 per share. Net tangible book value per share represents 
the amount of our total tangible assets less total liabilities divided by the   
total number of shares of common stock outstanding. After giving effect to the  
sale by us of 2,000,000 shares of common stock offered by this prospectus at an 
assumed offering price of $24.50 per share and after deducting estimated        
underwriting discounts and offering expenses, our net tangible book value at    
June 30, 1999 would have been approximately $70.5 million, or $4.15 per share.  
This represents an immediate increase in net tangible book value of $2.48 per   
share to existing stockholders and an immediate dilution of $20.35 per share to 
new investors in this offering, as illustrated by the following table:          

                                                        · Enlarge/Download Table
                                                                                          
Assumed public offering price per share..............................            $   24.50
    Net tangible book value per share before the offering............ $    1.67           
    Increase per share attributable to new investors.................      2.48           
                                                                      ---------           
Net tangible book value per share after the offering.................                 4.15
                                                                                 ---------
Net tangible book value dilution per share to new investors..........            $   20.35
                                                                                 =========

16

S-3/A
19th Page of 53
TOC
1st
Previous
Next
Bottom
Just 19th


SELECTED FINANCIAL DATA 

    The following selected financial data should be read in conjunction with the
financial statements and related notes, incorporated by reference in this       
prospectus, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus. The selected     
historical financial data below as of and for each of the five years ended      
December 31, 1998 have been derived from our audited financial statements. Our  
selected historical financial data as of June 30, 1999 and for each of the six  
months ended June 30, 1998 and 1999 were derived from our unaudited condensed   
financial statements. We believe that the unaudited financial data fairly       
reflects our results of operations and financial condition for the respective   
periods.                                                                        

                                                        · Enlarge/Download Table

                                                                                                   SIX MONTHS ENDED    
                                                     YEARS ENDED DECEMBER 31,                         JUNE 30,         
                                    ----------------------------------------------------------  ---------------------- 
                                       1994        1995        1996        1997        1998        1998        1999    
                                    ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)                        
                                                                                                                       
STATEMENT OF OPERATIONS DATA:                                                                                          
Revenues:                                                                                                              
  Collaborative and other research                                                                                     
    and development................ $      269  $      223  $    1,558  $    1,000  $    6,371  $       --  $    2,408 
  Interest and other...............        465         662       1,094       1,692       1,255         671         633 
                                    ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
    Total revenues.................        734         885       2,652       2,692       7,626         671       3,041 
                                    ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Expenses:                                                                                                              
  Research and development.........      5,552       7,107       7,586      10,577       9,291       5,353       4,006 
  General and administrative.......      1,904       2,210       2,664       2,682       3,105       1,295       1,683 
  Interest.........................        216         144         100          52          15          10           3 
                                    ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
    Total expenses.................      7,672       9,461      10,350      13,311      12,411       6,658       5,692 
                                    ----------  ----------  ----------  ----------  ----------  ----------  ---------- 
Net loss........................... $   (6,938) $   (8,576) $   (7,698) $  (10,619) $   (4,785) $   (5,987) $   (2,651)
                                    ==========  ==========  ==========  ==========  ==========  ==========  ========== 
Net loss per share................. $    (1.02) $    (0.96) $    (0.69) $    (0.77) $    (0.34) $    (0.43) $    (0.18)
                                    ==========  ==========  ==========  ==========  ==========  ==========  ========== 
Weighted average shares                                                                                                
  outstanding......................      6,787       8,905      11,171      13,780      14,120      13,926      14,981 
                                    ==========  ==========  ==========  ==========  ==========  ==========  ========== 

                                                        · Enlarge/Download Table

                                                                          DECEMBER 31,                                 
                                                      -----------------------------------------------------  JUNE 30,  
                                                        1994       1995       1996       1997       1998       1999    
                                                      ---------  ---------  ---------  ---------  ---------  --------- 
                                                                               (IN THOUSANDS)                          
                                                                                                                       
BALANCE SHEET DATA:                                                                                                    
Cash, cash equivalents and securities                                                                                  
  held-to-maturity................................... $  10,873  $  11,414  $  35,785  $  24,643  $  27,012  $  24,317 
Total assets.........................................    12,803     13,056     37,149     26,485     29,100     26,546 
Accumulated deficit..................................   (21,491)   (30,067)   (37,766)   (48,384)   (53,170)   (55,821)
Total stockholders' equity...........................    11,176     11,326     35,403     25,285     27,682     25,199 

17

S-3/A
20th Page of 53
TOC
1st
Previous
Next
Bottom
Just 20th


MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

 YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
OUR FINANCIAL STATEMENTS AND RELATED NOTES INCORPORATED IN THIS PROSPECTUS BY   
REFERENCE.                                                                      

OVERVIEW                                                                        

Since our inception in 1986, we have been engaged in research and       
development activities and organizational efforts, including:                   

- identification and licensing of enzyme targets;                       

- drug discovery;                                                       

- structure-based design of drug candidates;                            

- small-scale synthesis of compounds;                                   

- conducting preclinical studies and clinical trials;                   

- recruiting our scientific and management personnel;                   

- establishing laboratory facilities; and                               

- raising capital.                                                      

Our revenues have generally been limited to license fees, milestone     
payments, interest income, collaboration research, development and option fees. 
Research and development revenue on cost-                                       
reimbursing agreements is recognized as expenses are incurred up to contractual 
limits. Research and development revenues, license fees, milestone payments and 
option fees are recognized as revenue when irrevocably due. Payments received   
that are related to future performance are deferred and taken into income as    
earned over a specified future performance period. We have not received any     
revenue from the sale of pharmaceutical products. It will be several years, if  
ever, before we will recognize significant revenues from royalties received     
pursuant to our license agreements, and we do not expect to ever generate       
revenues directly from product sales. Future revenues, if any, are likely to    
fluctuate substantially from quarter to quarter.                                

We have incurred operating losses since our inception. Our accumulated  
deficit at June 30, 1999 was $55.8 million. We will require substantial         
expenditures relating to the development of our current and future drug         
candidates. During the three years ended December 31, 1998, we spent 44.7% of   
our research and development expenses on contract research and development,     
including:                                                                      

- payments to consultants;                                              

- funding of research at academic institutions;                         

- large scale synthesis of compounds;                                   

- preclinical studies;                                                  

- engaging investigators to conduct clinical trials;                    

- hiring contract research organizations to monitor and gather data on  
clinical trials; and                                                

- using statisticians to evaluate the results of clinical trials.       

    The above expenditures for contract research and development for our current
and future drug candidates will vary from quarter to quarter depending on the   
status of our research and development projects. Changes in our existing and    
future research and development and collaborative relationships will also impact
the status of our research and development projects. While we may, in some      
cases, be able to control the timing of development expenses, in part by        
accelerating or decelerating certain of these costs, many of these costs will be
incurred irrespective of whether or not we are able to discover drug candidates 
or obtain collaborative partners for commercialization. As a result, we believe 
that quarter-to-quarter comparisons of our financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.
If we fail to meet the clinical and financial expectations of securities        
analysts and investors, it could have a material adverse effect on the price of 
our common stock.                                                               

18

S-3/A
21st Page of 53
TOC
1st
Previous
Next
Bottom
Just 21st

RESULTS OF OPERATIONS                                                           

SIX MONTHS ENDED JUNE 30, 1999 AND 1998                                     

  Collaborative and other research and development revenue increased to $2.4
million in the first six months of 1999. This increase is attributable to the   
$2.0 million milestone payment received from Ortho-McNeil in June 1999 and      
approximately $0.4 million of research and development work performed for The   
R.W. Johnson Pharmaceutical Research Institute. There was no such revenue in the
first six months of 1998. Interest and other income declined 5.7% to $633,000 in
the first six months of 1999 from $671,000 in the first six months of 1998. The 
decline in interest and other income is primarily due to a decline in interest  
rates.                                                                          

Research and development expenses decreased 25.2% to $4.0 million in the
first six months of 1999 from $5.4 million in the first six months of 1998. The 
decrease is primarily attributable to a decrease in costs associated with       
conducting clinical trials and a reduction in contracted research costs at The  
University of Alabama at Birmingham. These costs tend to fluctuate from period  
to period depending upon the status of our research projects and collaborative  
efforts.                                                                        

  General and administrative expenses increased 30.0% to $1.7 million in the
first six months of 1999 from $1.3 million in the first six months of 1998. The 
increase is primarily the result of a royalty payment to The University of      
Alabama at Birmingham in connection with the milestone payment received from    
Ortho-McNeil, and increased legal expenses.                                     

 Interest expense decreased to $2,776 in the first six months of 1999 from
$9,914 in the first six months of 1998. The decrease was primarily due to a     
decline in capitalized lease obligations resulting in lesser interest expense.  
We obtained most of our leases in connection with the move to our facilities in 
April 1992.                                                                     

YEARS ENDED DECEMBER 31, 1998 AND 1997                                      

Collaborative and other research and development revenue increased to   
$6.4 million in 1998 from $1.0 million in 1997, primarily due to the            
$6.0 million in up-front fees received from Ortho-McNeil in 1998 for a license  
agreement for our influenza neuraminidase inhibitors compared to the            
$1.0 million milestone payment received from Torii in 1997. Interest and other  
income decreased 25.9% to $1.3 million in 1998 from $1.7 million in 1997,       
primarily due to a decline in the weighted average investment for 1998.         

 Research and development expenses decreased 12.2% to $9.3 million in 1998
from $10.6 million in 1997. Such expenses vary from period to period based on   
the status of our projects. We completed two Phase III clinical trials in 1997. 
In 1998, we commenced two Phase I clinical trials for our complement inhibitor, 
continued our two Phase I/II clinical trials for an oral formulation of our     
purine nucleoside phosphorylase, or PNP, inhibitor and initiated preclinical    
studies for our influenza neuraminidase and complement inhibitors. Overall, the 
decline in costs associated with our PNP inhibitor project were partially offset
by the increases in our complement inhibitor and influenza neuraminidase        
projects. As a result, there was a slight decrease in 1998 in the outside       
research and development efforts associated with our three primary research and 
development projects. We reduced some of our other discretionary costs, which   
were offset by one-time costs associated with signing an exclusive worldwide    
license agreement for our proprietary influenza neuraminidase inhibitors and    
certain related agreements in September 1998.                                   

   General and administrative expenses increased 15.8% to $3.1 million in 1998
from $2.7 million in 1997. The increase was primarily due to the fees and       
expenses incurred in connection with the license agreement and related          
agreements for our influenza neuraminidase inhibitors signed in September 1998. 

 Interest expense decreased 71.1% to $14,986 in 1998 from $51,880 in 1997.
The decrease was primarily due to a decline in capitalized lease obligations    
resulting in lesser interest expense. We obtained most of our leases in         
connection with the move to our facilities in April 1992.                       

19

S-3/A
22nd Page of 53
TOC
1st
Previous
Next
Bottom
Just 22nd

YEARS ENDED DECEMBER 31, 1997 AND 1996                                      

   Collaborative and other research and development revenue decreased 35.8% to
$1.0 million in 1997 from $1.6 million in 1996, primarily due to a $1.0 million 
milestone payment received from Torii in 1997 compared to the $1.5 million      
license fee received from Torii and a federal grant in 1996. Interest and other 
income increased 54.8% to $1.7 million in 1997 from $1.1 million in 1996,       
primarily due to interest earned on funds invested from our public offering in  
September 1996.                                                                 

  Research and development expenses increased 39.4% to $10.6 million in 1997
from $7.6 million in 1996. The increase was primarily attributable to costs     
associated with manufacturing compounds, clinical trials and preclinical studies
and expenses associated with increased personnel. These costs tend to fluctuate 
from period to period depending upon the stage of development and the conduct of
clinical trials.                                                                

  General and administrative expenses increased 0.7% to $2.7 million in 1997
from $2.7 million in 1996. The increase was primarily attributable to increased 
personnel costs and the fact that 1996 expenses were reduced by the reversal of 
a liability recorded in 1995 for use taxes assessed that we successfully        
contested in 1996, and was partially offset by decreased fees and taxes on the  
Torii milestone in 1997 as compared to the fees and taxes on the Torii license  
in 1996 and decreased legal expenses in 1997.                                   

  Interest expense decreased 48.1% to $51,880 in 1997 from $100,031 in 1996.
The decrease was primarily due to a decline in capitalized lease obligations and
the current portion of long-term debt, resulting in lesser interest expense. We 
obtained most of our leases in connection with the move to our facilities in    
April 1992.                                                                     

LIQUIDITY AND CAPITAL RESOURCES                                                 

    Cash expenditures have exceeded revenues since our inception. Our operations
have principally been funded through public offerings and private placements of 
equity and debt securities, equipment lease financing, facility leases,         
collaborative and other research and development agreements, licenses and       
options for licenses, research grants and interest income. In addition, we have 
attempted to contain costs and reduce cash flow requirements by renting         
scientific equipment and facilities, contracting with other parties to conduct  
certain research and development and using consultants. We expect to incur      
additional expenses, resulting in significant losses, as we continue and expand 
our research and development activities and undertake additional preclinical    
studies and clinical trials of compounds which have been or may be discovered.  
We also expect to incur substantial expenses related to the filing, prosecution,
maintenance, defense and enforcement of patent and other intellectual property  
claims.                                                                         

At December 31, 1998, our cash, cash equivalents and securities         
held-to-maturity were $27.0 million, an increase of $2.4 million from           
December 31, 1997, principally due to the $6.0 million equity investment in us  
in connection with the influenza neuraminidase license which offset the cash    
used in operations. At June 30, 1999, our cash, cash equivalents and securities 
held-to-maturity were $24.3 million, a decrease of approximately $2.7 million   
from December 31, 1998, principally due to the cash used by operations for the  
six months ended June 30, 1999.                                                 

    We have financed some of our equipment purchases with lease lines of credit.
We currently have a $500,000 line of credit with our bank to finance capital    
equipment. In January 1992, we entered into an operating lease for our current  
facilities which expires on June 30, 2003. We have an option to renew the lease 
for an additional three years at current market rates. The operating lease      
requires us to pay monthly rent ranging from $21,405 and escalating annually to 
a minimum of $24,814 per month in the final year, and a pro rata share of       
operating expenses and real estate taxes in excess of base year amounts.        

At December 31, 1998, we had long-term capital lease and operating lease
obligations which provide for aggregate minimum payments of $280,254 in 1999,   
$288,128 in 2000 and $285,816 in 2001.                                          

20

S-3/A
23rd Page of 53
TOC
1st
Previous
Next
Bottom
Just 23rd

In 1999, we increased the amount of office space we lease by approximately      
1,700 square feet. This additional space should increase our annual lease       
obligations by less than $15,000 annually.                                      

Under the terms of our license agreement with The R.W. Johnson          
Pharmaceutical Research Institute and Ortho-McNeil for the development and      
commercialization of our influenza neuraminidase inhibitors, we received an     
initial $6.0 million payment from Ortho-McNeil and an additional $6.0 million   
common stock equity investment from Johnson & Johnson Development Corporation.  
In June 1999, we received a $2.0 million milestone payment from Ortho-McNeil in 
connection with the initiation of Phase II clinical testing in the United       
States. In addition, we may receive cash payments upon specified developmental  
and regulatory milestones and royalties on product sales, if any. We cannot     
assure you that The R.W. Johnson Pharmaceutical Research Institute or           
Ortho-McNeil will continue to develop the product or, if they do so, that such  
development will result in receiving milestone payments, obtaining regulatory   
approval or achieving future sales of licensed products.                        

  We previously entered into an exclusive license agreement with Torii under
which Torii paid us $1.5 million in initial license fees and made a             
$1.5 million equity investment in us in 1996. The first milestone payment of    
$1.0 million was received in 1997. This exclusive license agreement was         
terminated by Torii in July 1999.                                               

We plan to finance our needs principally from the following:            

- our existing capital resources and interest earned on that capital;   

- payments under collaborative and licensing agreements with corporate  
partners; and                                                       

  - through lease or loan financing and future public or private financings.

 We believe that our available funds, including the net proceeds from this
offering, will be sufficient to fund our operations at least through 2001.      
However, this is a forward-looking statement, and there may be changes that     
would consume available resources significantly before such time. Our long-term 
capital requirements and the adequacy of our available funds will depend upon   
many factors, including:                                                        

- the progress of our research, drug discovery and development programs;

- changes in existing collaborative relationships;                      

- our ability to establish additional collaborative relationships;      

- the magnitude of our research and development programs;               

- the scope and results of preclinical studies and clinical trials to   
identify drug candidates;                                           

- competitive and technological advances;                               

- the time and costs involved in obtaining regulatory approvals;        

- the costs involved in preparing, filing, prosecuting, maintaining and 
enforcing patent claims;                                            

- our dependence on others, including The R.W. Johnson Pharmaceutical   
      Research Institute and Ortho-McNeil, for development and commercialization
   of our product candidates, in particular, our neuraminidase inhibitors;
and                                                                 

    - successful commercialization of our products consistent with our licensing
strategy.                                                           

Additional funding, whether through additional sales of securities or   
collaborative or other arrangements with corporate partners or from other       
sources, may not be available when needed or on terms acceptable to us. The     
issuance of preferred or common stock or convertible securities, on terms and   
prices significantly more favorable than those of the currently outstanding     
common stock, could have the effect of diluting or adversely affecting the      
holdings or rights of our existing stockholders. In addition, collaborative     
arrangements may require us to transfer certain material rights to such         
corporate partners. Insufficient funds may require us to delay, scale-back or   
eliminate certain of our research and development programs.                     

21

S-3/A
24th Page of 53
TOC
1st
Previous
Next
Bottom
Just 24th

RISKS ASSOCIATED WITH THE YEAR 2000                                             

  The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to represent the year. Thus, computer        
software may recognize a date using "00" as the year 1900 rather than the year  
2000. This could result in system failures or miscalculations causing           
disruptions of operations, including a temporary inability to process certain   
data or engage in similar normal business activities.                           

PLAN AND STATUS.  Our plan to resolve the year 2000 issue involves four 
phases: assessment, remediation, testing and implementation. We have completed  
an assessment of our systems. In 1997, we installed a computer network, upgraded
our desktop computers and upgraded our information technology software to a     
common standard. Most of our information technology systems are identified by   
the manufacturer as year 2000 compliant because of this upgrade. Major vendors  
and suppliers have been contacted with regard to their year 2000 compliance and 
we will continue to monitor their compliance. Systems identified as not being   
year 2000 compliant will be brought into compliance by upgrading either the     
software or hardware. We have begun remediation a