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P R O S P E C T U S
750,000 Shares
Cypros Pharmaceutical Corporation
Common Stock
______________________________
This Prospectus relates to 750,000 shares (the "Shares") of
Common Stock, no par value per share (the "Common Stock"), of
Cypros Pharmaceutical Corporation (the "Company"). The Shares may
be offered by shareholders of the Company (the "Selling
Shareholders") from time to time, as market conditions permit on
the NASDAQ National Market System, or otherwise, through ordinary
brokerage transactions, in negotiated transactions, at fixed
prices which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices
or at negotiated prices. The Selling Shareholders may effect
such transactions by selling the Shares to or through broker-
dealers, and all such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the
Selling Shareholders and/or the purchasers of the Shares for whom
such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions). See
"Selling Shareholders" and "Plan of Distribution."
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has
agreed to bear certain expenses (other than fees and expenses, if
any, of counsel or other advisors to the Selling Shareholders in
connection with the registration and sale of the Shares being
offered by the Selling Shareholders. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities,
including certain liabilities under the Securities Act of 1933,
as amended.
[R The Common Stock of the Company is traded on the NASDAQ Natio
nal Market System under the symbol "CYPR." On December 27, 1996,
the last sale price for the Common Stock as reported by NASDAQ
was $4.25 per share./R]
______________________________
The Common Stock offered hereby involves a high degree of risk.
See "Risk Factors" beginning on page 3.
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SE
CURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December 30, 1996
RECENT DEVELOPMENTS
During November 1996, Dr. Bernard B. Levine resigned from the
Board of Directors of Cypros Pharmaceutical Corporation (the
"Company") and was replaced by Mr. Robert F. Allnutt.
THE COMPANY
The Company was founded in California in 1990 and is engaged in
the development and marketing of drug products for the hospital
market. It is currently marketing three injectable products and
is developing two small molecule therapeutic drugs, CPC-111 and
CPC-211, for the treatment of disorders, such as stroke,
traumatic head injury, congestive heart failure, cardiac surgery,
sickle cell crisis, and the acute complications of angioplasty,
all of which are characterized by ischemia (impaired blood flow),
which interrupts the delivery of both glucose and oxygen to
tissue. The Company's executive offices are located at 2714 Loker
Avenue West, Carlsbad, California 92008, and its telephone number
is (619) 929-9500.
RISK FACTORS
Except for the historical information contained herein, the
discussion in this Prospectus contains forward-looking statements
that involve risks and uncertainties. The Company's actual
results could differ materially from those discussed here.
Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the following
risk factors as well as those discussed elsewhere in this
Prospectus and any documents incorporated herein by reference.
The following factors, in addition to those discussed elsewhere
in this Prospectus, or incorporated herein by reference, should
be carefully considered in evaluating the Company and its
business.
Continuing Operating Losses
[R The Company reported a net loss of $932,484 or $0.08 per share
for the first quarter ended October 31, 1996 compared to a loss
of $640,480 or $0.06 per share for the prior-year period. The
Company expects that it will continue to incur operating losses
as it increases expenditures for clinical testing,
Investigational New Drug Application and New Drug Application
filings and other regulatory activities, U.S. patent prosecution,
and product acquisition and sales and marketing activities. To
achieve profitable operations, the Company, alone or with others,
must successfully develop, obtain regulatory approval for,
introduce, acquire, market and sell additional products. There
can be no assurance that the Company's product acquisition and
development efforts will result in additional products, that
required regulatory approvals will be obtained with respect to
all or any of its products now under development or that any of
these products will be commercially successful. /R]
Significant Capital Requirements; Need for Additional Financing
The development and commercialization of drugs requires the
commitment of significant capital expenditures. The Company
believes that existing capital resources and the cash flow from
its recently-acquired products will allow it to maintain its
current and planned operations for at least two years. In
addition to funds provided from exercises of its currently
outstanding Redeemable Class B Warrants (the "Warrants"), the
Company is seeking to obtain additional funds through public or
private equity financings, collaborative or other arrangements
with corporate partners or from other sources. There can be no
assurance that such additional financing can be obtained on
desirable terms or at all. If additional funds are not
available, the Company may be required to curtail significantly
or eliminate one or more of its research, discovery or
development programs or obtain funds through arrangements which
may require the Company to relinquish rights to certain of its
products.
Uncertainties Associated with Regulatory Approval
A marketed drug, its manufacturer and its manufacturing
facilities are subject to continual review and periodic
inspections, and later discovery of previously unknown problems
with a product, manufacturer or facility may result in
restrictions on such product or manufacturers, including a
withdrawal of the product from the market. Failure to comply with
the applicable regulatory requirements can, among other things,
result in fines, suspensions of regulatory approvals, product
recalls, operating restrictions and criminal prosecution.
Further, additional government regulation may be established
which could suspend or revoke regulatory approval of the
Company's products.
Unproven Products
In addition to its three approved drugs, the Company has other
products in various stages of development which are subject to
the risks inherent in drug development, including unforeseen
problems, delays, expenses and complications frequently
encountered with the early phases of research, development and
commercialization of products, the dependence on and attempts to
apply new and rapidly changing technology and the competitive
environment of the pharmaceutical industry. Many of these
factors may be beyond the Company's control, such as
unanticipated development requirements, testing, regulatory
compliance and manufacturing, production, and marketing problems
and expenses. The Company does not anticipate being able to
complete the development of its proposed products for a number of
years, if at all. All of the Company's drugs are subject to
extensive regulation and those in development will require
approval from the U.S. Food and Drug Administration (the "FDA")
and other regulatory agencies prior to commercial sales. The
Company may not complete the testing and regulatory approval
process for any of its products in development in the foreseeable
future and, accordingly, is unable to predict whether they will
be commercially successful. Further, there can be no assurance
that the Company's drugs under development will attain acceptance
by providers, payors or patients.
Patents, Proprietary Technology and Licenses
The Company's success is dependent in large measure upon its
ability to obtain patent protection for its drugs, maintain
confidentiality of its trade secrets and know-how and operate
without infringing upon the proprietary rights of third parties.
The Company has licensed rights to five U.S. patents from the
holders of the patents on CPC-111 and CPC-211, but each of these
licenses may be terminated in the event that the Company fails to
achieve certain milestones or accomplish certain other
contractual obligations. Upon any such termination, all of the
Company's rights would revert to the licensor. The termination of
the license covering CPC-111 or CPC-211 would have a material
adverse effect on the Company and would cause the Company to
focus its efforts on its remaining drug development programs
which are not as far advanced. There can be no assurance that the
Company will maintain the licenses in effect through the
successful development and commercialization of these drugs.
The U.S. patent position of pharmaceutical companies involves
many complex legal and technical issues and has recently been the
subject of much litigation. There is no clear policy
establishing the breadth of claims or the degree of protection
afforded under such patents. As a result, there can be no
assurance that any of the U.S. patent applications will be
approved, except where claims under an application have already
been examined and allowed, nor that the Company will develop
additional proprietary products that are patentable. There can
be no assurance that any U.S. patents issued to the Company or
its licensors will provide the Company with any competitive
advantages or will not be challenged by any third parties or that
patents issued to others will not have an adverse effect on the
ability of the Company to conduct its business.
Furthermore, because patent applications in the United States are
maintained in secrecy until issue, and because publication of
discoveries in the scientific and patent literature often lag
behind actual discoveries, the Company cannot be certain that it
was the first chronologically to make the inventions covered by
each of its pending patent applications or that it was the first
to file patent applications for such inventions. In the event
that a third party has also filed a patent application for any of
its inventions, the Company may have to participate in
interference proceedings declared by the United States Patent and
Trademark Office to determine priority of the invention, which
could result in substantial cost to the Company, even if the
eventual outcome is favorable to the Company. In addition, there
can be no assurance that the Company's patents, including those
of the licensors above, would be held valid by a court of law of
competent jurisdiction. If patents are issued to other companies
that contain competitive or conflicting claims which ultimately
may be determined to be valid, there can be no assurance that the
Company would be able to obtain a license to any of these U.S.
patents.
Under Title 35 of the United States Code, as amended by the
General Agreement on Tariffs and Trade implementing the Uruguay
Round Agreement Act of 1994 ("GATT"), patents that issue from
patent applications filed prior to June 8, 1995, will have a 17-
year period of enforceability as measured from the date of patent
issue while those that issue from applications filed on or after
June 8, 1995 will have a 20-year period of enforceability as
measured from the date the patent application was filed or the
first claimed priority date, whichever is earlier. Patents that
issue from applications filed on or after June 8, 1995, may be
extended under the term extension provisions of GATT for a period
up to five years to compensate for any period of enforceability
lost due to interference proceedings, government secrecy orders
or appeals to the Board of Patent Appeals or the Federal Circuit.
Under the Drug Price Competition and Patent Term Restoration Act
of 1984, including amendments implemented under GATT (the "Patent
Term Restoration Act"), the period of enforceability of a first
or basic product patent or use patent covering a drug may be
extended for up to five years to compensate the patent holder for
the time required for FDA regulatory review of the product. This
law also establishes a period of time following FDA approval of
certain drug applications during which the FDA may not accept or
approve applications for similar or identical drugs from other
sponsors. Any extension under the Patent Term Restoration Act and
any extension under GATT are cumulative. There can be no
assurance that the Company will be able to take advantage of such
patent term extensions or marketing exclusivity provisions of
these laws. While the Company cannot predict the effect that such
changes will have on its business, the adoption of such changes
could have a material adverse effect on the Company's ability to
protect its proprietary information and sustain the commercial
viability of its products. Furthermore, the possibility of
shorter terms of patent protection, combined with the lengthy FDA
review process and possibility of extensive delays in such
process, could effectively further reduce the term during which a
marketed product could be protected by patents.
The Company also relies on trade secrets and proprietary know-
how. The Company has been and will continue to be required to
disclose its trade secrets and proprietary know-how not only to
employees and consultants, but also to potential corporate
partners, collaborators and contract manufacturers. Although the
Company seeks to protect its trade secrets and proprietary know-
how, in part by entering into confidentiality agreements with
such persons or organizations, there can be no assurance that
these agreements will not be breached, that the Company would
have adequate remedies for any breach or that the Company's trade
secrets will not otherwise become known or be independently
discovered by competitors.
Dependence on Others for Manufacture
The Company currently does not have any capability to manufacture
products under current good manufacturing practices ("cGMP") as
required by the FDA. It relies on third parties to manufacture
and formulate Ethamolin, Glofil and Inulin and to manufacture and
formulate CPC-111 and CPC-211, its two drug candidates currently
in clinical trials. Although the Company believes that it will be
able to contract with alternative suppliers for its products if
its current suppliers are unable to supply the Company with its
needs for bulk and formulated drugs, there can be no assurance
that this will be the case or that the need to contract with
additional suppliers will not delay the Company's ability to have
its products manufactured. There can be no assurance that these
manufacturers will meet either the Company's requirements for
quality, quantity and timeliness or the FDA's cGMP requirements
or that the Company would be able to find a substitute
manufacturer for any of its products in the future. In the event
that the Company is unable to obtain or retain contract
manufacturers that can manufacture its products under cGMP
requirements, or to obtain manufacturing on commercially
acceptable terms, it may not be able to commercialize its
products as planned.
Potential Claims
Certain members of the Company's Scientific Advisory Board
("SAB") and certain Scientific Advisors who have developed
technology used for the Company's products are employees of
universities, research hospitals or other institutions. The
Company believes that such institutions have no claim to any of
the Company's inventions, technology or products. While no claim
has been asserted by any such institution, there can be no
assurance that such institutions will not assert claims to any or
all of such inventions, technology or products or that, if any
such institution does assert such rights, the Company, if it so
desires, will be able to acquire the rights thereto from such
institution at a commercially practical cost or at all.
Government Regulation
The Company's development, manufacture and sale of drug products
are subject to extensive and rigorous regulation by federal,
state, local and foreign governmental authorities. In particular,
products for human health are subject to substantial preclinical
and clinical testing and other approval requirements by the FDA
and comparable foreign regulatory authorities. The process for
obtaining the required regulatory approvals from the FDA and
other regulatory authorities takes many years and is very
expensive. There can be no assurance that any drug developed by
the Company will prove to meet all of the applicable standards to
receive marketing approval. There can be no assurance that any
such approvals will be granted on a timely basis, if at all.
Delays in and costs of obtaining these approvals could adversely
affect the Company's ability to commercialize its drugs and to
generate significant sales revenues. If regulatory approval of a
drug is obtained, such approval may involve restrictions and
limitations on the use of the drug.
Other conditions for an approval are based on the drug's
manufacture and the quality control procedures in place, such as
cGMP. Failure to insure compliance with cGMP requirements could
result in delay or termination of clinical trials or withdrawal
of an approval. Following market approval, the drug will continue
to be subject to compliance with applicable federal, state, local
and foreign laws and regulations. There can be no assurance that
the FDA will grant approval of any of the Company's drugs in a
timely manner or at all.
Governmental Reforms
Health care reform is an area of increasing national and
international attention and a priority of many elected officials
in the United States. Several proposals to modify the current
health care system in the United States to improve access and
control costs are currently being considered by federal and state
governments. It is uncertain what legislation, if any, will be
adopted or what actions governmental or private payors for health
care goods and services may take in response to proposed or
actual legislation in the United States. The Company cannot
predict the outcome of health care reform proposals or the effect
such reforms may have on its business.
Clinical Trial and Product Liability Claims and Uninsured Risks
The Company may be exposed to liability resulting from the
conduct of its clinical trials or the commercial use of its
drugs. Such liability might result from claims made directly by
patients, hospitals, clinics or other consumers or by
pharmaceutical companies or others manufacturing such drugs on
behalf of the Company. The Company currently has clinical trial
and product liability insurance, but there can be no assurance
that it will be adequate to protect the Company against
liability.
Competition and Technological Change
The products that the Company is marketing and the drugs that the
Company is developing may compete for market share with alternate
therapies. A number of companies are pursuing the development of
novel pharmaceuticals which target the same diseases as the
Company is targeting. Many of these competitors have
substantially greater capital resources, research and development
staffs and facilities than the Company. They may develop and
introduce products and processes competitive with those of the
Company. They represent significant long-term competition for
the Company. For certain of the Company's drugs, an important
factor in competition may be the timing of market introduction of
these competitive products. This timing will be based on the
effectiveness with which the Company or the competition can
complete clinical trials and approval processes and supply
quantities of these products to market. Competition among
products approved for sale will be based on, among other things,
efficacy, safety, reliability, price, marketing capability and
patent position.
The pharmaceutical industry has undergone rapid and significant
technological changes. The Company expects that the technologies
associated with its research and development will continue to
develop rapidly. There can be no assurance that the Company will
be able to establish itself in such fields or, if established,
that it will be able to maintain a competitive position.
Further, there can be no assurance that the development by others
of new or improved processes or products will not make the
Company's products and processes, if any, less competitive or
obsolete.
Dependence on Key Personnel
The Company's success also depends in large part on its ability
to attract and retain other qualified scientific and management
personnel. The Company faces competition for such persons from
other companies, academic institutions, government entities and
other organizations. There can be no assurance that the Company
will be successful in recruiting or retaining personnel of the
requisite caliber or in adequate numbers to enable it to conduct
its business as proposed. Furthermore, the Company's expected
expansion into activities requiring additional expertise in
manufacturing, sales and marketing will place increased demands
on the Company's resources and management skills.
Limited Sales and Marketing Capability
The commercialization of products such as the Company's drugs is
an expensive and time-consuming enterprise. The Company now has
six sales representatives for Ethamolin, Glofil and Inulin and
intends to hire additional sales representatives as sales of
those products increase and/or other products are acquired by the
Company. The Company believes that it will be able to serve
the hospital market in North America with a 50 to 100 person
sales and marketing staff. There can be no assurance that the
Company will be able to establish successfully sales and
distribution capabilities or be successful in gaining market
acceptance for its drugs or to obtain the assistance of any other
pharmaceutical company in these efforts if it should seek
assistance.
Reimbursement
In both domestic and foreign markets, sales of the Company's
products will be dependent in part on the availability of
reimbursement from third party payors, such as government and
private insurance plans. Third party payors are increasingly
challenging the prices charged for medical products and services.
There can be no assurance that the Company's products will be
considered cost-effective, that reimbursement will be available
or, if available, that the payor's reimbursement policies will
not adversely affect the Company's ability to sell its products
profitably.
Outstanding Warrants and Options
There are currently outstanding 4,673,512 Class B Warrants.
Additional shares of Common Stock are issuable as follows: (i)
1,013,913 shares of Common Stock are reserved for issuance
pursuant to outstanding options under the Company's 1992 Stock
Option Plan and (ii) 86,500 shares are reserved for issuance
pursuant to outstanding options under the Company's 1993 Non-
Employee Directors' Stock Option Plan. Holders of warrants and
options are likely to exercise them when, in all likelihood, the
Company could obtain additional capital on terms more favorable
than those provided by the warrants and options. Further, while
the warrants and options are outstanding, they may adversely
affect the terms on which the Company could obtain additional
capital.
Potential Volatility of Stock Price
There has been significant volatility in the market price of
securities of biomedical companies in general. Announcements of
technological innovations or new commercial products by the
Company or its competitors, developments concerning proprietary
rights, clinical trial results, government policy or regulation,
relations with licensors or other corporate partners, general
market conditions or public concern as to the safety of
biomedical products and period to period fluctuations in revenues
and financial results may have a significant impact on the
Company's business and on the market price of the Company's
securities.
Dividends Not Likely
The Company has not paid any cash dividends on its Common Stock.
For the foreseeable future it is anticipated that earnings, if
any, which may be generated from the Company's operations will be
used to finance the growth of the Company and that cash dividends
will not be paid to holders of Common Stock.
SELLING SHAREHOLDERS
[R The following table sets forth certain information regarding
the beneficial ownership of Common Stock of the Selling
Shareholders as of December 27, 1996 and as adjusted to give
effect to the sale of the Shares offered hereby. The Shares are
being registered to permit public secondary trading of the
Shares, and the Selling Shareholders may offer the Shares for
resale from time to time. See "Plan of Distribution." /R]