We are offering 5,500,000 shares of common stock, par value
$0.001 per share, and warrants to purchase up to 2,200,000 shares of our common stock (and the shares of common stock that are
issuable from time to time upon exercise of the warrants) in this offering. The common stock and warrants will be sold in combination,
with one warrant to purchase 0.40 shares of common stock for each share of common stock sold. The combined purchase price for each
share of common stock and accompanying warrant is $3.001. The shares of common stock and warrants are immediately separable and
will be issued separately. Our common stock is listed on The New York Stock Exchange (“NYSE”) under the symbol “KDMN”.
On September 22, 2017, the last reported sale price of our common stock on the NYSE was $3.52 per share.
The warrants will become exercisable on the date of issuance,
and will remain exercisable until September 28, 2022. The exercise price for the warrants initially will be $3.35 per whole share
of common stock, and will be subject to adjustments as described herein.
There is no established public trading market for the warrants
and we do not expect a market to develop. In addition, we do not intend to list the warrants on the NYSE, any other national securities
exchange or any other nationally recognized trading system.
We are offering to sell 18,500,000 shares of common stock and
warrants to purchase up to 7,400,000 shares of our common stock in connection with a concurrent underwritten public offering. We
refer to this transaction as the concurrent underwritten offering. The closing of this offering and the closing of the concurrent
underwritten offering are not contingent upon each other.
Delivery of the shares of common stock and warrants is expected
to be made to certain investors on or about September 28, 2017 and to certain other investors on or about October 10, 2017.
Forward
Looking Statements
This prospectus supplement and the documents
incorporated by reference herein contain forward looking statements. All statements other than statements of historical facts contained
in this prospectus supplement may be forward looking statements. Statements regarding our future results of operations and financial
position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding
future capital expenditures and debt service obligations, are forward looking statements. In some cases, you can identify forward
looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,”
“believes,” “estimates,” “predicts,” “potential” or “continue” or the
negative of these terms or other similar expressions.
Forward looking statements involve known and
unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward looking statements. We believe
that these factors include, but are not limited to, the following:
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the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development
programs;
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our ability to advance product candidates into, and successfully complete, clinical trials;
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our reliance on the success of our product candidates;
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the timing or likelihood of regulatory filings and approvals;
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our ability to expand our sales and marketing capabilities;
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the commercialization of our product candidates, if approved;
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the pricing and reimbursement of our product candidates, if approved;
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the implementation of our business model, strategic plans for our business, product candidates and technology;
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the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates
and technology;
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our ability to operate our business without infringing the intellectual property rights and proprietary technology of third
parties;
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costs associated with defending intellectual property infringement, product liability and other claims;
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regulatory developments in the United States, Europe and other jurisdictions;
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estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
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the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;
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our ability to maintain and establish collaborations or obtain additional grant funding;
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the rate and degree of market acceptance of our product candidates, if approved;
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developments relating to our competitors and our industry, including competing therapies;
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our ability to effectively manage our anticipated growth;
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our ability to attract and retain qualified employees and key personnel;
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our ability to achieve cost savings and benefits from our efforts to streamline our operations and to not harm our business
with such efforts;
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our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;
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statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and share performance;
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litigation, including costs associated with prosecuting or defending pending or threatened claims and any adverse outcomes
or settlements, whether or not covered by insurance;
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our expectations regarding uses of our sources of liquidity;
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the future trading price of the shares of our common stock and impact of securities analysts’ reports on these prices;
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the execution of this offering and the concurrent underwritten offering; and/or
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other risks and uncertainties, including those listed under the caption “Risk Factors.”
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The forward looking statements in this prospectus
supplement are only predictions, and we may not actually achieve the plans, intentions or expectations included in our forward
looking statements. We have based these forward looking statements largely on our current expectations and projections about future
events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward
looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should
not rely on these forward looking statements as predictions of future events. The events and circumstances reflected in our forward
looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward
looking statements.
Additional factors are discussed under the
caption “Risk Factors” contained in this prospectus supplement and the accompanying prospectus and under similar headings
in the other documents that are incorporated by reference into this prospectus supplement. New risks and uncertainties arise from
time to time, and it is impossible for us to predict these events or how they may affect us. It should be remembered that the price
of the shares and any income from them can go down as well as up. We disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future events and/or otherwise, except as may be required by
law.
Prospectus
Summary
This summary highlights the more detailed
information contained elsewhere or incorporated by reference in this prospectus supplement, and does not contain all of the information
that you should consider before deciding to invest in our common stock and warrants. You should carefully read the entire prospectus
supplement and the accompanying prospectus, including the risks of investing in our common stock and warrants discussed under the
heading “Risk Factors” contained in this prospectus supplement, and under similar headings in the other documents that
are incorporated by reference into this prospectus supplement.
Company Overview
We are a fully integrated biopharmaceutical
company engaged in the discovery, development and commercialization of small molecules and biologics within autoimmune and fibrotic
diseases, oncology and genetic diseases. We identify and develop our novel product candidates internally, by leveraging our research
and clinical development team members, who prior to joining Kadmon brought more than 15 drugs to market, and our small molecule
and biologics platforms as well as by in-licensing products and product candidates. By retaining global commercial rights to our
clinical-stage product candidates, we believe we have the ability to progress these candidates ourselves while maintaining flexibility
for commercial and licensing arrangements.
Our Clinical-Stage Pipeline
We maintain global rights to the following
product candidates:
Our Strategy
Our goal is to develop first-in-class, innovative
therapies for indications with significant unmet medical needs, including in autoimmune and fibrotic diseases, oncology and genetic
diseases, and for which we plan, in many cases, to seek breakthrough and/or orphan designation from the Food and Drug Administration
(the “FDA”). Our key strategies to achieve this goal are listed below:
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Develop KD025 and our ROCK inhibitor platform to produce novel treatments for autoimmune, fibrotic and neurodegenerative
diseases.
We are developing KD025 for the treatment of autoimmune and fibrotic diseases.
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We have three ongoing Phase 2 clinical studies of KD025: an open-label study in chronic graft versus host disease
(“cGVHD”), a randomized, open-label study in IPF and a randomized, placebo-controlled study in moderate to severe psoriasis.
We have reported interim Phase 2 data from the first cohort of our cGVHD study and plan to report additional data from these
clinical trials by the end of 2017. We have also generated a portfolio of highly selective Rho-associated coiled-coil kinase
2 (“ROCK2”) and pan-Rho-associated coiled-coil kinase (“ROCK”) inhibitors with varying specificity, distribution and solubility
characteristics to treat specific autoimmune, fibrotic and neurodegenerative diseases.
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Advance tesevatinib for the treatment of autosomal dominant polycystic kidney disease (“ADPKD”) and autosomal
recessive polycystic kidney disease (“ARPKD”).
We are evaluating the safety and tolerability of tesevatinib
in ADPKD in an ongoing single-agent Phase 2a clinical study and in ARPKD in a Phase 1 clinical study. Due to tesevatinib’s
activity against epidermal growth factor receptor (“EGFR”) and proto-oncogene tyrosine-protein kinase (“Src”)
and its accumulation in the kidneys, we are investigating treatment at a significantly lower dosage compared to oncology indications,
with the goal of minimizing dose-dependent side effects. PKD is a disease that requires lifelong treatment, and we believe that
tesevatinib’s tolerability profile makes it an attractive therapeutic product candidate for this indication. To address ARPKD,
a pediatric disease closely related to ADPKD, we have developed a proprietary liquid formulation of tesevatinib for administration
to children. We recently initiated a Phase 1 clinical study in ARPKD and are preparing to initiate a Phase 2, randomized, placebo-controlled
study of tesevatinib in ADPKD.
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Advance tesevatinib in non-small cell lung cancer (“NSCLC”) with brain metastases and/or leptomeningeal metastases.
We are developing tesevatinib for NSCLC with activating EGFR mutations in patients with brain metastases and/or leptomeningeal
metastases and have an ongoing Phase 2 clinical study in these indications. We plan to conduct a randomized Phase 2 clinical trial
of tesevatinib as first-line treatment in NSCLC with activating EGFR mutations in patients who present with brain metastases. We
believe that these indications represent the fastest potential path to FDA approval due to the lack of currently approved treatments
for these patients.
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Leverage our drug discovery platforms to identify and develop new product candidates for additional unmet medical needs.
Our drug discovery platforms are focused on biologics as well as small molecule chemistry and support the future growth of our
pipeline. Our most advanced preclinical product candidate, KD035, is an anti-angiogenic antibody targeting the VEGFR2 receptor,
which inhibits the formation of new blood vessels, blocking blood supply to tumors. We are also developing KD033, an anti-PD-L1/IL-15
fusion protein, which inhibits the PD L1 pathway to reduce immune checkpoint blockade while simultaneously directing an IL 15 stimulated,
specific immune response to the tumor microenvironment.
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Leverage our commercial infrastructure to market therapies for Wilson’s disease and support our clinical development
programs.
We are developing a portfolio of trientine hydrochloride formulations for the treatment of Wilson’s disease
(“KD034”). We are seeking approval for a generic formulation of trientine hydrochloride (in a bottled capsule and in
blister packaging) for the treatment of Wilson’s disease under Abbreviated New Drug Applications (“ANDAs”) for
a generic of Syprine (trientine hydrochloride). In addition, we plan to seek approval for our proprietary formulation and packaging
of trientine hydrochloride for the treatment of Wilson’s disease under a Section 505(b)(2) New Drug Application (“NDA”)
pathway. We intend to use Kadmon Pharmaceuticals to market these formulations, if approved, and to continue to support our development
programs for our clinical-stage product candidates.
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Risk Factors
An investment in our common stock and warrants
involves risk. You should carefully consider the information set forth in the section of this prospectus supplement entitled “Risk
Factors” beginning on page S-6, as well as other information included or incorporated by reference in this prospectus supplement
and the accompanying prospectus, before deciding whether to invest in our common stock and warrants.
Company Information
Our principal executive offices are located at 450 East 29th Street, New York, New York 10016, and
our telephone number is (212) 308-6000. Our website address is www.kadmon.com. We make available on or through our website
certain reports and amendments to those reports that we file with, or furnish to, the U.S. Securities and Exchange Commission
(the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended, or the Exchange Act. These include our Annual
Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make this information available on or through
our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish
it to, the SEC. The information on, or that can be accessed through, our website is not incorporated by reference into this
prospectus supplement or any other filings we make with the SEC.
The Offering
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Shares of common stock offered by us
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5,500,000 shares.
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Warrants offered by us
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Warrants to purchase up to 2,200,000
shares of common stock offered in combination with the shares of common stock offered hereby. The warrants will
become exercisable on the date
of issuance, and will remain
exercisable
until September 28, 2017.
The initial exercise price for the warrants will be $3.35 per whole share of common stock. The exercise price will be subject to
certain further adjustments as described herein. For more information, see the section
entitled “Description of Securities We Are Offering — Warrants” on page S-19
of this prospectus supplement. This prospectus supplement also relates to the offering of the shares
of common stock issuable upon exercise of the warrants.
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Concurrent underwritten offering
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We are offering to sell
18,500,000 shares of common stock and warrants to purchase up
to 7,400,000 shares of our
common stock in connection with a concurrent underwritten public offering. We refer to this transaction as the
concurrent underwritten offering. The closing of this offering and the closing of the concurrent underwritten offering are
not contingent upon each other. We can offer no assurance that the concurrent underwritten offering will close, and if it does not close,
the amount of our net proceeds will be limited to the net proceeds from this offering.
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Shares of common stock to be outstanding
following this offering and the concurrent underwritten offering
(1)
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75,846,521 shares (or
78,621,521 shares if the
underwriters elect to exercise in full their option in the concurrent underwritten offering to purchase additional shares
from us).
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Use of proceeds
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We intend to use the net proceeds from this offering and the concurrent underwritten offering for preclinical and clinical development of our lead product candidates, discovery, research and preclinical studies of our other product candidates, and other general corporate purposes. See “Use of Proceeds.”
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Risk factors
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Your investment in shares of our common stock and warrants involves substantial risk. You should consider the matters referred to under the heading “Risk Factors” in this prospectus supplement and the accompanying prospectus, including the risk factors incorporated by reference herein and therein from our filings with the SEC.
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The New York Stock Exchange symbol
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“KDMN”
We do not intend to list the warrants on
the NYSE, any other national securities exchange or any other nationally recognized trading system.
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(1)
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The number of shares of common stock shown above to be outstanding after this offering and the concurrent underwritten
offering is based on 51,846,521 shares outstanding as of June 30, 2017, assumes no exercise of the warrants offered hereby
or in the concurrent underwritten offering and excludes
2,775,000 shares issuable upon exercise of the
underwriters’ option in the concurrent underwritten
offering to purchase additional shares and/or warrants to purchase up to 1,110,000 shares of our common stock as well
as:
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6,256,941 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2017 at a weighted-average
exercise price of $8.29 per share pursuant to awards under our 2016 Equity Incentive Plan;
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4,035,590 shares of common stock issuable upon the exercise of warrants outstanding as of June 30, 2017 at a weighted-average
exercise price of $11.92 per share;
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3,269,968 shares of common stock issuable upon conversion of our 5% convertible preferred stock as of June 30, 2017;
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2,266,205 shares of common stock available for future issuance under our 2016 Equity Incentive Plan as of June 30, 2017;
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1,801,180 shares of common stock available for future issuance under our 2016 Employee Stock Purchase Plan as of June 30, 2017;
and
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9,750 equity appreciation rights units (“EARs”)
issued under our 2014 Long-Term Incentive Plan (“2014 LTIP”), as amended, as of June 30, 2017 which is payable at
our option in 3,605,665 shares of common stock.
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Unless
otherwise indicated, all information contained in this prospectus supplement assumes:
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no exercise or conversion of the options, warrants or preferred stock described above;
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no exercise of the warrants offered hereby or in the concurrent underwritten offering; and
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no exercise of the option granted to the underwriters in the concurrent underwritten offering to purchase up to
2,775,000
additional shares of common stock and/or warrants to purchase up to 1,110,000 shares of our common stock from us.
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Risk Factors
An investment in our common stock and warrants
involves a high degree of risk. You should carefully consider and evaluate the risks and uncertainties described in Part I, Item
1A of our Annual Report on Form 10-K for the year ended December 31, 2016, which is incorporated by reference herein, together
with the other information set forth or incorporated by reference in this prospectus supplement and the accompanying prospectus,
before you decide to purchase our securities. Any of the risks we set forth herein or therein could cause our business, financial
condition and/or operating results to suffer. The market price of our shares could decline if one or more of these risks and uncertainties
develop into actual events. You could lose all or part of your investment.
Risks Related to this Offering, the Concurrent Underwritten
Offering and Our Common Stock
There is no public market for the warrants to purchase
shares of our common stock being offered in this offering and the concurrent underwritten offering.
There is no established public trading market
for the warrants being offered in this offering and the concurrent underwritten offering, and we do not expect a market to develop.
In addition, we do not intend to apply to list the warrants on any national securities exchange or other nationally recognized
trading system, including the NYSE. Without an active market, the liquidity of the warrants will be limited.
The warrants are speculative in nature. You may
not be able to recover your investment in the warrants, and the warrants may expire worthless.
If our common stock price does not increase
to an amount sufficiently above the applicable exercise price of the warrants during the period the warrants are exercisable, you
will be unable to recover any of your investment in the warrants. There can be no assurance that the market price of the common
stock will ever equal or exceed the exercise price of the warrants, and consequently, whether it will ever be profitable for holders
of the warrants to exercise the warrants.
Holders of the warrants will have no rights as common
stockholders until they acquire our common stock.
Until you acquire shares of our common stock
upon exercise of the warrants, you will have no rights with respect to our common stock issuable upon exercise of the warrants,
including the right to receive dividend payments, vote or respond to tender offers. Upon exercise of your warrants, you will be
entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after the exercise
date.
We expect that our stock price will fluctuate significantly.
The trading prices of the securities of pharmaceutical
and biotechnology companies have been highly volatile. The trading price of our common stock also may be highly volatile and could
be subject to wide fluctuations in response to various factors, some of which are beyond our control. In addition to the factors
discussed in this “Risk Factors” section, these factors include:
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adverse results or delays in the planned clinical trials of our product candidates or any future clinical trials we may conduct,
or changes in the development status of our product candidates;
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any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development
with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s
issuance of a “refusal to file” letter or a request for additional information;
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regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable
to our products and product candidates, including clinical trial requirements for approvals;
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our inability to obtain or delays in obtaining adequate product supply for any approved product or inability to do so at acceptable
prices;
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failure to commercialize our product candidates or if the size and growth of the markets we intend to target fail to meet expectations;
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additions or departures of key scientific or management personnel;
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unanticipated serious safety concerns related to the use of our product candidates;
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introductions or announcements of new products offered by us or significant acquisitions, strategic collaborations, joint ventures
or capital commitments by us, our collaborators or our competitors and the timing of such introductions or announcements;
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our ability or inability to effectively manage our growth;
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changes in the structure of healthcare payment systems;
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our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
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publication of research reports about us or our industry, or positive or negative recommendations or withdrawal of research
coverage by securities analysts;
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market conditions in the pharmaceutical and biotechnology sectors or the economy generally;
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our ability or inability to raise additional capital through the issuance of equity or debt or collaboration arrangements and
the terms on which we raise it;
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trading volume of our common stock;
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disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain
patent protection for our technologies; and/or
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significant lawsuits, including patent or stockholder litigation.
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The stock market in general, and market prices
for the securities of pharmaceutical companies like ours in particular, have from time to time experienced volatility that often
has been unrelated to the operating performance of the underlying companies. These broad market and industry fluctuations may adversely
affect the market price of our common stock, regardless of our operating performance. Stock prices of many pharmaceutical companies
have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In several recent situations
when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against
the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, the defense and disposition of
the lawsuit could be costly and divert the time and attention of our management and harm our operating results.
If securities or industry analysts do not publish
research reports about our business, or if they issue an adverse opinion about our business, our stock price and trading volume
could decline.
The trading market for our common stock may
be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently
have, and may never obtain research coverage by securities and industry analysts. If no or few analysts commence research coverage
of us, or one or more of the analysts who cover us issues an adverse opinion about our company, our stock price would likely decline.
If one or more of these analysts ceases research coverage of us or fails to regularly publish reports on us, we could lose visibility
in the financial markets, which in turn could cause our stock price or trading volume to decline.
We may allocate the net proceeds from this offering
and the concurrent underwritten offering in ways that you and other stockholders may not approve.
While the concurrent underwritten offering is not contingent upon this offering, we currently intend to
use the net proceeds of this offering and the concurrent underwritten offering for preclinical and clinical development of our
lead product candidates, discovery, research and preclinical studies of our other product candidates and other general corporate
purposes.
This expected use of the net proceeds from this offering and the concurrent underwritten offering represents
our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary
significantly depending on numerous factors, including the progress of our development efforts, the status of and results from
clinical trials, as well as any collaborations that we may enter into with third parties for our product candidates, and any unforeseen
cash needs. Because the number and variability of factors that will determine our use of the proceeds from this offering and the
concurrent underwritten offering, their ultimate use may vary substantially from their currently intended use. As a result, our
management will retain broad discretion over the allocation of the net proceeds from this offering and the concurrent underwritten
offering and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our
common stock. See “Use of Proceeds.”
If you purchase our common stock in this offering,
you will incur immediate and substantial dilution in the book value of your shares.
The public offering price of our common stock
is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our
common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share
after this offering and the concurrent underwritten offering.
Based on the public offering price of $3.00
per share in this offering and the concurrent underwritten offering, and net tangible book value per share of our common stock
of $(41.9) million as of June 30, 2017, if you purchase shares in this offering, you will suffer immediate and substantial dilution
of $2.66 per share in the net tangible book value of common stock purchased. To the extent shares are issued under outstanding
options, warrants or 5% convertible preferred stock, you will incur further dilution. See "Dilution" for a more detailed
description of the dilution to new investors in the offering.
Future sales of our common stock or securities convertible
into our common stock in the public market could cause our stock price to fall.
Our stock price could decline as a result
of sales of a large number of shares of our common stock or securities convertible into our common stock or the perception that
these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to
sell equity securities in the future at a time and at a price that we deem appropriate.
Shares issued upon the exercise of stock options
outstanding under our equity incentive plans or pursuant to future awards granted under those plans will become available for sale
in the public market to the extent permitted by the provisions of applicable vesting schedules, any applicable market stand-off
and lock-up agreements, Rule 144 and Rule 701 under the Securities Act of 1933, as amended (the “Securities Act”),
as well as, to the extent applicable, under the registration statement on Form S-8 that we have filed.
Once we register the offer and sale of shares
to be issued under our equity incentive plans, they can be freely sold in the public market upon issuance or resale (as applicable).
In addition, in the future, we may
issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with
a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result
in substantial dilution to our existing stockholders and could cause our stock price to decline. For example, in March 2017,
we raised $22.7 million in gross proceeds, $21.3 million net of $1.4 million in placement agent fees, from the issuance
of 6,767,855 shares of our common stock, at a price of $3.36 per share, and warrants to purchase 2,707,138 shares of our
common stock at an initial exercise price of $4.50 per share for a term of 13 months from the date of issuance. In connection
with the March 2017 offering, we filed a registration statement to register the shares of common stock and the shares of
common stock underlying the warrants for resale on April 10, 2017, which was declared effective on April 21, 2017.
If we fail to maintain an effective system of internal
control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result,
stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price
of our common stock.
Effective internal controls over financial
reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures,
are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their
implementation could cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors
to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common
stock. In addition, any future testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent
testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting
that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or
identify other areas for further attention or improvement.
We will be required, pursuant to Section 404
of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control
over financial reporting as early as our annual report on Form 10-K for the fiscal year ending December 31, 2017. However,
for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting
firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404.
We could be an emerging growth company for up to five years following the date of our IPO. An independent assessment of the effectiveness
of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses
in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
The holders of the convertible preferred stock will
be entitled to be paid a liquidation preference, which under some circumstances will include a substantial premium.
In the event of a liquidation (as defined
in the certificate of designations governing our convertible preferred stock), certain bankruptcy events, a material breach by
us of the exchange agreement or a failure to make any payment due on our or our subsidiaries’ indebtedness after giving
effect to any applicable cure period, the holders of the convertible preferred stock will be entitled to payment of a liquidation
preference. The liquidation preference for each share of convertible preferred stock will equal the greater of (i) (A) (I) the
original purchase price per share of convertible preferred stock plus dividend arrearages thereon in cash
plus
(II) any
dividends accrued and unpaid thereon from the last dividend payment date to the date of the final distribution to such holder
plus
(B) in the majority of the events identified in the previous sentence, a premium equal to 20.2% of the amount
described in clause (i)(A) of this sentence at such time or (ii) an amount per share of convertible preferred stock
equal to the amount which would have been payable or distributable if each share of convertible preferred stock been converted
into shares of our common stock immediately before the liquidation event.
Until the holders of the convertible preferred
stock have been paid their liquidation preference in full, no payment will be made to any holder of common stock. If our assets,
or the proceeds from their sale, distributable among the holders of the convertible preferred stock are not sufficient to pay the
liquidation preference in full and the liquidating payments on any parity securities, then those assets or proceeds will be distributed
among the holders of the convertible preferred stock and those parity securities on a pro rata basis. In that case, there would
be no assets or proceeds remaining to be distributed to holders of our common stock, which would have a material adverse effect
on the trading price of our common stock.
The holders of the convertible preferred stock are
entitled to have their shares of convertible preferred stock redeemed at a substantial premium in certain events.
Our convertible preferred stock is redeemable
if we or our significant subsidiaries are the subject of certain bankruptcy events, upon the occurrence of a material breach by
us of the exchange agreement and upon the failure to make payments of amounts due on our or any of our subsidiaries’ indebtedness
after giving effect to any applicable cure period. Upon the occurrence of any of these events, the holders of our convertible preferred
stock shall, in their sole discretion, be entitled to receive an amount equal to the original purchase price per share of convertible
preferred stock plus dividend arrearages thereon
plus
any dividends accrued and unpaid thereon from the last dividend payment
date to, but excluding, the date of such redemption
plus
the premium described under “—The holders of the convertible
preferred stock will be entitled to be paid a liquidation preference, which under some circumstances will include a substantial
premium.” If we were to become obligated to redeem all or a substantial portion of the outstanding convertible preferred
stock, that could have a material adverse effect on the trading price of our common stock.
Shares of our convertible preferred stock are convertible
into shares of our common stock and, upon conversion, will dilute your percentage of ownership.
Concurrently
with the closing of our IPO, we issued 30,000 shares of our convertible preferred stock pursuant to an exchange agreement
with holders of our Senior Convertible Term Loan. Holders of the convertible preferred stock shall be entitled to receive a
cumulative dividend at an annual rate of 5% of the sum of the original purchase price per share of convertible preferred
stock plus any dividend arrearages. In addition, holders of the convertible preferred stock shall be entitled to receive
dividends paid or payable on our common stock with respect to the number of shares of our common stock into which each share
of convertible preferred stock is then convertible at the then applicable conversion price. Shares of our convertible
preferred stock are convertible at any time at the option of the holder into shares of our common stock at a conversion price
equal to their original purchase price plus any accrued but unpaid dividends. At June 30, 2017, 3,269,968 shares of our
common stock are issuable upon conversion of our convertible preferred stock. This issuance of common stock upon the
conversion will dilute the percentage ownership of holders of our common stock by approximately 6.3% at June 30, 2017.
The dilutive effect of the conversion of these securities may adversely affect our ability to obtain additional equity
financing.
Holders of the convertible preferred stock may exert
substantial influence over us and may exercise their control in a manner adverse to your interests.
So long as shares of our convertible preferred
stock remain outstanding, without the consent of at least a majority of the then outstanding shares of the convertible preferred
stock, we may not: (i) authorize or approve the issuance of any convertible preferred stock, senior securities or parity securities
(or, in each case, any security convertible into, or convertible or exchangeable therefor or linked thereto) or authorize or create
or increase the authorized amount of any convertible preferred stock, senior securities or parity securities (or, in each case,
any security convertible into, or convertible or exchangeable therefor or linked thereto); (ii) authorize or approve the purchase
or redemption of any parity securities or junior securities; (iii) amend, alter or repeal any of the provisions of the certificate
of designations, our certificate of incorporation
or our by-laws in a manner that would adversely affect the powers, designations, preferences and rights of the convertible preferred
stock; (iv) contract, create, incur, assume or suffer to exist any indebtedness or guarantee any such indebtedness with an
aggregate value of more than $5,000,000 (subject to certain exceptions); or (v) agree to take any of the above actions. The
holders of convertible preferred stock will have one vote for each share of common stock into which such holders’ shares
could then be converted at the time, and with respect to such vote, will have voting rights and powers equal to the voting rights
and powers of the holders of our common stock.
The certificate of designations governing
the convertible preferred stock also provides that no amendment or waiver of any provision of the certificate of designations or
our charter or bylaws shall, without the prior written consent of all holders of the convertible preferred stock who are known
to us to hold, together with their affiliates, more than 5% of the convertible preferred stock then outstanding: (i) reduce
any amounts payable or that may become payable to holders of the convertible preferred stock; (ii) postpone the payment date
of any amount payable to holders of the convertible preferred stock or waive or excuse any payment; (iii) modify or waive
the conversion rights of the convertible preferred stock in a manner that would adversely affect any holder of the convertible
preferred stock; or (iv) change any of the voting-related provisions or any other provision of the certificate of designations
specifying the number or percentage of holders of the convertible preferred stock which are required to waive, amend or modify
any rights under the certificate of designations or make any determination or grant any consent under that document.
In addition, for so long as affiliates of
GoldenTree Asset Management LP collectively own at least 7.5% of our common stock (calculated on an “as if” converted
basis and taking into account the exercise of all other options, warrants and other equity-linked securities held by such GoldenTree
affiliated entities), GoldenTree Asset Management LP will have the right, at its option, to designate (i) one director
to our board of directors and, upon such designation, the board of directors shall recommend to the stockholders to vote for the
election of GoldenTree Asset Management LP’s designee at any meeting of stockholders convened to elect our directors
and use commercially reasonable efforts to cause that designee to be elected at that meeting or (ii) one observer to our board
of directors. As a result of these contractual rights, holders of our convertible preferred stock may exert substantial influence
over our company and may exercise their control in a manner that is adverse to the interests of other holders of our common stock.
As of the date of this Annual Report, GoldenTree has not designated a director or observer to our board of directors.
We will require additional capital in the future,
which may not be available to us. Issuances of our equity securities to provide this capital may dilute your ownership in us.
We will need to raise additional funds through
public or private debt or equity financings in order to:
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take advantage of expansion opportunities;
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·
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acquire complementary products, product candidates or technologies;
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·
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develop new products or technologies; and/or
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·
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respond to competitive pressures.
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Pursuant to the third amendment to the
2015 Credit Agreement we entered into on March 31, 2017, we are under a contractual obligation to raise $17.0 million of
additional equity capital by December 31, 2017, and a failure to comply with this covenant is an event of default under our
2015 Credit Agreement. Upon the closing of this offering and the concurrent underwritten offering, this obligation will have
been satisfied. Any additional capital raised through the issuance of our equity securities may dilute your percentage
ownership interest in us. Furthermore, any additional financing we may need may not be available on terms favorable to us or
at all. The unavailability of needed financing could adversely affect our ability to execute our business strategy.
Our principal stockholders and management own a
significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.
Our executive officers, directors and holders
of 5% or more of our capital stock, together with their respective affiliates, beneficially owned 56.8% of our capital stock at
June 30, 2017, of which 4.9% is beneficially owned by our executive officers. Accordingly, our executive officers, directors
and principal stockholders are able to determine the composition of the board of directors, retain the voting power to approve
all matters requiring stockholder approval, including mergers and other business combinations, and continue to have significant
influence over our operations. This concentration of ownership could have the effect of delaying or preventing a change in our
control or otherwise discouraging a potential acquirer from attempting to obtain control of us that you may believe are in your
best interests as one of our stockholders. This in turn could have a material adverse effect on our stock price and may prevent
attempts by our stockholders to replace or remove the board of directors or management.
Anti-takeover provisions in our charter documents
and under Delaware law could make an acquisition of us difficult, limit attempts by our stockholders to replace or remove our current
management and adversely affect our stock price.
Provisions of our certificate of incorporation
and bylaws may delay or discourage transactions involving an actual or potential change in our control or change in our management,
including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders
might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock.
Among other things, our certificate of incorporation and bylaws:
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permit the board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges
as they may designate;
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·
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provide that the authorized number of directors may be changed only by resolution of the board of directors;
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·
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provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the
affirmative vote of a majority of directors then in office, even if less than a quorum; and
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·
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require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders
and may not be taken by written consent.
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In addition, because we are incorporated in
Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits
a Delaware corporation from engaging in any of a broad range of business combinations with any stockholder owning in excess of
15.0% of our outstanding stock for a period of three years following the date on which the stockholder obtained such 15.0% equity
interest in us.
We will continue to incur significant costs by being
a public company.
As a public company, we incur significant
legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company
reporting requirements. We also anticipate that we will incur costs associated with corporate governance requirements, including
requirements of the SEC and the NYSE. We expect these rules and regulations to continue to increase our legal and financial compliance
costs and to make some activities more time-consuming and costly. We also expect that these rules and regulations may continue
to make it more difficult and expensive for us to obtain director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it
may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers.
We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount
of additional costs we may incur or the timing of such costs.
When we cease to be an “emerging growth
company” and when our independent registered public accounting firm is required to undertake an assessment of our internal
control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Moreover, if
we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be
material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the
SEC or other regulatory authorities, which would require additional financial and management resources.
We are an “emerging growth company,”
as defined in the JOBS Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth
companies, our common stock may be less attractive to investors.
We are an “emerging growth company,”
as defined in the JOBS Act, and we take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not “emerging growth companies” including, but not limited to, not being required
to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors
will find our common stock less attractive because we rely on these exemptions. If some investors find our common stock less attractive
as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We will take
advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging
growth company” until the earliest of: (i) the last day of the fiscal year in which we have total annual gross revenues
of $1.07 billion or more, (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion
of our IPO, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous
three years or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Our management has broad discretion in using our
cash and cash equivalents and our other capital resources.
We expect to continue to use our cash and
cash equivalents and our other capital resources to fund the clinical development of our pipeline and for general corporate purposes.
Our management has broad discretion in the application of our cash and cash equivalents and our other capital resources and could
spend the funds in ways that do not improve our results of operations or enhance the value of our equity. The failure by our management
to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, diminish
available cash flows available to service our debt, cause the value of our equity to decline and delay the development of our product
candidates. Pending their use, we may invest the cash and cash equivalents and our other capital resources in a manner that does
not produce income or that loses value.
Because we do not anticipate paying any cash dividends
on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid cash dividends
on our common stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of
our business. In addition, the terms of existing or any future debt agreements may preclude us from paying dividends. As a result,
capital appreciation, if any, of our equity securities will likely be your sole source of gain for the foreseeable future.
Use of Proceeds
We estimate that the proceeds from this offering
of our shares of common stock and warrants and the concurrent underwritten offering will be approximately $67.4 million (or $75.3
million if the underwriters exercise their option in the concurrent underwritten offering to purchase additional shares and/or
warrants in full), after deducting the underwriters’ discount and estimated fees and expenses payable by us. The foregoing
description of estimated net proceeds does not give effect to the potential exercise of the warrants offered hereby or in the concurrent
underwritten offering. In addition, we can offer no assurance that the concurrent underwritten offering will close, and if it does
not close, the amount of our net proceeds will be limited to the net proceeds from this offering.
We currently estimate that we will use the
net proceeds from this offering and the concurrent underwritten offering for preclinical and clinical development of our lead product
candidates and discovery, research and preclinical studies of our other product candidates and for other general corporate purposes.
This expected use of the net proceeds from
this offering and the concurrent underwritten offering represents our intentions based upon our current plans and business conditions.
The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the progress
of our development efforts, the status of and results from clinical trials, as well as any collaborations that we may enter into
with third parties for our product candidates, and any unforeseen cash needs. As a result, our management will retain broad discretion
over the allocation of the net proceeds from this offering and the concurrent underwritten offering.
If the underwriters exercise their
option in the concurrent underwritten offering to purchase additional securities, we intend to use
the net proceeds to us from the sale of the additional securities for general corporate purposes.
Pending our use of the net proceeds from this
offering and the concurrent underwritten offering described above, we intend to invest the net proceeds in short-term, interest
bearing, investment-grade securities.
Market Prices
and Dividend Policy
Our common stock began trading on the NYSE
on July 27, 2016 under the symbol “KDMN.”
The following table sets forth, for the periods
indicated, the high and low sales prices for our common stock, as reported by NYSE, from commencement of trading on July 27, 2016.
As of June 30, 2017 there were approximately 2,850 stockholders of record.
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High
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Low
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Year ending December 31, 2017
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Third Quarter (through September 22, 2017)
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$
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4.12
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$
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2.05
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Second Quarter
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$
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4.20
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$
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2.25
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First Quarter
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$
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5.50
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$
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3.10
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Year ending December 31, 2016
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Fourth Quarter
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$
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7.82
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$
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4.13
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Third Quarter (starting July 27)
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$
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11.73
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$
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7.01
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The closing price for our common stock on
September 22, 2017 is set forth on the cover page of this prospectus supplement.
We currently expect to retain all future earnings,
if any, for use in the operation and expansion of our business and repayment of debt. We have never declared nor paid any dividends
on our common stock and do not anticipate paying cash dividends to holders of our common stock in the foreseeable future. In addition,
the 2015 Credit Agreement (as amended), as well as any future borrowings, will restrict our ability to pay dividends. See “Risk
Factors—Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation
if any, will be your sole source of gain.” Any determination to pay dividends on our common stock in the future will be at
the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition,
capital requirements and covenants in our existing financing arrangements and any future financing arrangements. Holders of the
5% convertible preferred stock shall be entitled to receive a cumulative dividend at an annual rate of 5% of the original purchase
price per share of convertible preferred stock, when and as declared by our board of directors and to the extent of funds legally
available for the payment of dividends. Holders of the 5% convertible preferred stock shall also be entitled to participate in
all dividends declared and paid to holders of our common stock on an “as if” converted basis.
Capitalization
The following table sets forth our cash and
cash equivalents and capitalization as of June 30, 2017:
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on an actual basis; and
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·
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on an as adjusted basis to give effect to this offering (excluding shares of our common stock issuable upon exercise of the
warrants offered hereby), the concurrent underwritten offering (excluding shares of our common stock issuable upon exercise of
the warrants offered thereby) and the receipt of the net proceeds by us from such offerings as described under “Use of Proceeds,”
after deducting underwriters’ discounts and estimated offering fees and expenses payable by us.
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We can offer no assurance that the concurrent
underwritten offering will close, and if it does not close, the amount of our net proceeds will be limited to the net proceeds
from this offering. The information in this table should be read in conjunction with the financial statements and the notes thereto
incorporated by reference into this prospectus supplement.
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As of June 30, 2017
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Actual
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As Adjusted
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(in thousands)
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Cash and cash equivalents
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$
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26,226
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$
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93,906
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Indebtedness
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Secured term debt—current
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$
|
32,678
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$
|
32,678
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Secured term debt—net of current portion and discount
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—
|
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—
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Total indebtedness
|
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32,678
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|
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32,678
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Convertible Preferred Stock, $0.001 par value; 10,000,000 shares authorized; 30,000 shares issued and outstanding
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39,240
|
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39,240
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Common Stock, $0.001 par value; 200,000,000 shares
authorized; 51,846,521 and
75,846,521 shares
issued and outstanding on an actual and as adjusted basis
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52
|
|
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|
76
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Additional paid-in capital
|
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118,955
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|
|
|
186,611
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Accumulated deficit
(1)
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|
|
(196,524
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)
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|
|
(196,524
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)
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Total stockholders’ deficit
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$
|
(38,277
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)
|
|
$
|
29,403
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Total capitalization
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$
|
(5,599
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)
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$
|
62,081
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(1)
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Evaluation of the accounting treatment for the warrants is ongoing. If the warrants are deemed to be a liability, in the
future the warrants will be recorded at fair value in each reporting period.
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The table above does not include:
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6,256,941 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2017 at a weighted-average
exercise price of $8.29 per share pursuant to awards under our 2016 Equity Incentive Plan;
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4,035,590 shares of common stock issuable upon the exercise of warrants outstanding as of June 30, 2017 at a weighted-average
exercise price of $11.92 per share;
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3,269,968 shares of common stock issuable upon conversion of our 5% convertible preferred stock as of June 30, 2017;
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2,266,205 shares of common stock available for future issuance under our 2016 Equity Incentive Plan as of June 30, 2017;
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1,801,180 shares of common stock available for future issuance under our 2016 Employee Stock Purchase Plan as of June 30, 2017;
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9,750 EAR issued under the 2014 LTIP, as amended, as of June 30, 2017 which is payable at our option in 3,605,665 shares of
common stock; and
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·
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exercise of the warrants offered hereby or in the concurrent underwritten offering.
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Dilution
If you invest in our common stock and warrants
in this offering, your ownership interest will be diluted immediately to the extent of the difference between the amount per share
and accompanying warrant paid by purchasers and the as adjusted net tangible book value per share of our common stock after this
offering and the concurrent underwritten offering.
Our historical net tangible book value as
of June 30, 2017 was $(41.9) million, or $(0.81) per share of our common stock. Historical net tangible book value per share represents
the amount of our total tangible assets less total liabilities, divided by 51,846,521 shares of our common stock then outstanding.
After giving effect to the sale of 5,500,000
shares of common stock and accompanying warrants to purchase 2,200,000 shares of our common stock in this offering (excluding the
proceeds, if any, from the exercise of the warrants issued pursuant to this offering) and the sale of 18,500,000 shares of common
stock and accompanying warrants to purchase 7,400,000 shares of our common stock in the concurrent underwritten offering (excluding
the proceeds, if any, from the exercise of the warrants issued pursuant to the concurrent underwritten offering) at the public
offering price of $3.00 per share, our as adjusted net tangible book value as of June 30, 2017 would have been $25.8 million, or
$0.34 per share. This represents an immediate increase in as adjusted net tangible book value per share of $1.15 per share to existing
stockholders and immediate dilution of $2.66 per share in as adjusted net tangible book value per share to new investors purchasing
common stock in this offering and the concurrent underwritten offering.
Dilution per share to new investors is determined
by subtracting as adjusted net tangible book value per share after this offering and the concurrent underwritten offering from
the public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis.
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Public offering price per share
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|
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$
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3.00
|
|
Historical net tangible book value per share as of June 30, 2017
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$
|
(0.81)
|
|
|
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|
Increase in net tangible book value per share attributable to new investors participating in this offering and the concurrent underwritten offering
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|
1.15
|
|
|
|
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Pro forma as adjusted net tangible book value per share after this offering and the concurrent underwritten offering
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|
|
|
0.34
|
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Dilution per share to new investors
|
|
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$
|
2.66
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If the underwriters were to fully exercise
their option to purchase in the concurrent underwritten offering from us up to an additional 2,775,000 shares and/or warrants to
purchase 1,110,000 shares of our common stock at the public offering price of $3.00 per share of common stock and $0.001 per warrant
to purchase 0.40 shares of common stock, in each case less the applicable underwriting discounts and commissions, the as adjusted
net tangible book value per share after the offering and the concurrent underwritten offering would be $0.43 per share, and the
dilution per share to new investors would be $2.57 per share.
To the extent that outstanding options or
warrants are exercised or our convertible preferred stock is converted into common stock, you will experience further dilution.
In addition, we may choose to offer securities in other offerings due to market conditions or strategic considerations. To the
extent that we raise additional capital through the sale of common stock or securities exercisable or convertible into common stock,
the issuance of such securities may result in further dilution of our stockholders.
The number of shares of common stock shown
above to be outstanding after this offering and the concurrent underwritten offering is based on 51,846,521 shares outstanding
as of June 30, 2017, excluding:
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·
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6,256,941 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2017 at a weighted-average
exercise price of $8.29 per share pursuant to awards under our 2016 Equity Incentive Plan;
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|
·
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4,035,590 shares of common stock issuable upon the exercise of warrants outstanding as of June 30, 2017 at a weighted-average
exercise price of $11.92 per share;
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|
·
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3,269,968 shares of common stock issuable upon conversion of our 5% convertible preferred stock as of June 30, 2017;
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|
|
·
|
2,266,205 shares of common stock available for future issuance under our 2016 Equity Incentive Plan as of June 30, 2017;
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|
·
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1,801,180 shares of common stock available for future issuance under our 2016 Employee Stock Purchase Plan as of June 30, 2017;
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|
|
·
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9,750 EARs issued under the 2014 LTIP, as amended, as of June 30, 2017 which is payable at our option in 3,605,665 shares of
common stock; and
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·
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exercise of the warrants offered hereby or in the concurrent underwritten offering.
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Description
of the Securities We Are Offering
Common Stock
The material terms and provisions of our common
stock are described under the caption "Description of Capital Stock—Common Stock" starting on page 12 of the accompanying
prospectus. Our common stock is listed on the NYSE under the symbol "KDMN." The transfer agent and registrar for our
common stock is American Stock Transfer & Trust Company, LLC.
Warrants
The following is a brief summary of certain
terms and conditions of the warrants and is subject in all respects to the provisions contained in the warrants. You should review
a copy of the form of common stock purchase warrant for a complete description of the terms and conditions applicable to the warrants.
Term
The warrants are exercisable during the period
beginning on the date of issuance and ending at 11:59 P.M. on September 28, 2022. The term can also be extended by us at our sole
discretion.
Exercise Price
The initial exercise price of the
warrants is $3.35 per whole share of common stock. The exercise price is subject to appropriate adjustment in the event of
certain stock splits, dividends, recapitalizations or similar events affecting our common stock.
Exercisability
Holders may exercise the warrants beginning
on the date of issuance and at any time during the applicable term of the warrant. The warrants will be exercisable, at the option
of each holder, in whole or in part, by delivering to us a written notice and, within one trading day of delivering such notice,
payment in full for the number of shares of our common stock purchased upon such exercise. The holder may, in its sole discretion,
elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number
of shares of common stock determined according to the formula set forth in the warrant.
Exercise Limitation
Holders shall not have the right to exercise the warrant, to
the extent that after giving effect to such exercise, such holder, together with such holder’s affiliates and any other persons
acting as a group together with the holder or any of the holder’s affiliates, would beneficially own in excess of 9.99% of
the shares of common stock outstanding immediately after giving effect to such exercise.
No Fractional Shares
No fractional shares of common stock will
be issued upon exercise of the warrants. If there is a fractional share issuable upon exercise, it will be rounded down to the
nearest whole share.
Transferability
Subject to applicable laws and the restriction
on transfer set forth in the warrant, the warrant may be transferred at the option of the holder upon surrender of the warrant
to us together with the appropriate instruments of transfer.
Authorized Shares
During the period the warrants are outstanding,
we will reserve from our authorized and unissued common stock a sufficient number of shares to provide for the issuance of shares
of common stock underlying the warrants upon the exercise of the warrants.
Exchange Listing
We do not plan on applying to list the warrants
on the NYSE, any other national securities exchange or any other nationally recognized trading system.
Fundamental Transactions
In the event of any fundamental transaction,
as defined in the warrants and generally including any consolidation or merger with or into another entity, the sale of all or
substantially all of our assets, tender offer or exchange offer, reorganization or recapitalization through
which another entity acquires us, or reclassification of our common stock, then (i) the successor entity in such transaction will
assume in writing all of our obligations under the warrant pursuant to written agreements, including an adjusted exercise price
equal to the value for the shares of common stock reflected by the terms of such fundamental transaction, and exercisable for a
corresponding number of shares of capital stock equivalent to the shares of common stock acquirable and receivable upon exercise
of the warrant prior to such fundamental transaction, provided such successor entity is a publicly traded corporation whose common
stock is quoted on or listed for trading on an eligible market or (ii) each holder shall receive notice of the anticipated consummation
of a fundamental transaction not less than ten (10) business days prior to the consummation of such transaction and an opportunity
to exercise the warrants prior to the consummation of the transaction.
Failure to Timely Deliver Securities
If we fail for any reason to deliver to a holder the number
of shares of common stock due to the holder pursuant to the holder’s written notice on or before the second trading day following
receipt of such notice, we will pay to the holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of shares
of common stock subject to such exercise, $10 per trading day (increasing to $20 per trading day on the fifth trading day after
such liquidated damages begin to accrue) for each trading day until such shares of common stock are delivered or the holder rescinds
such exercise.
Right as a Stockholder
Except as otherwise provided in the warrants
or by virtue of such holder's ownership of shares of our common stock, the holders of the warrants do not have the rights or privileges
of holders of our common stock, including any voting rights, until they exercise their warrants.
Waivers and Amendments
Any term of the warrants issued in the offering
may be amended or waived with our written consent and the written consent of holders representing at least a majority of the shares
of common stock issuable upon exercise of the warrants then outstanding.
Enforceability of Rights by Holders
of Warrants
Each warrant agent will act solely as our
agent under the applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder
of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will
have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any duty
or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may,
without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right
to exercise, and receive the securities purchasable upon exercise of, its warrants.
Material
U.S. Federal Income and Estate Tax Consequences for Holders of Common Stock and Warrants
The following are the material U.S. federal
income and estate tax consequences of the ownership and disposition of our common stock and warrants acquired in this offering. However,
this discussion does not purport to be a comprehensive description of all tax considerations that may be relevant to a particular
person’s decision to acquire the common stock or warrants. This discussion applies only to a holder that holds
common stock and warrants as capital assets for U.S. federal income tax purposes. In addition, it does not address all
of the tax consequences that may be relevant to you in light of your particular circumstances or if you are a holder subject to
special rules, such as:
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certain financial institutions;
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dealers or traders in securities who use a mark-to-market method of tax accounting;
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persons holding common stock or warrants as part of a straddle, wash sale, or conversion transaction
or persons entering into a constructive sale with respect to the common stock or warrants;
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U.S. Holders (as defined below) whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
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entities classified as partnerships for U.S. federal income tax purposes;
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tax-exempt entities; or
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Non-U.S. Holders (as defined below) that own, or are deemed to own, more than 5% of the common stock of the Company.
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If an entity that is classified
as a partnership for U.S. federal income tax purposes holds common stock or warrants, the U.S. federal income tax treatment of
a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding common
stock or warrants and partners in such partnerships should consult their tax advisers as to their particular U.S. federal
income tax consequences of holding and disposing of the common stock or warrants.
This discussion is based on the Internal Revenue
Code of 1986, as amended to the date hereof (the “Code”), administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations, changes to any of which subsequent to the date of this prospectus supplement may affect
the tax consequences described herein, possibly with retroactive effect. This discussion does not describe all of the
tax consequences that may be relevant to you in light of your particular circumstances, including alternative minimum tax and Medicare
contribution tax consequences and does not address any aspect of state, local or non-U.S. taxation, or any taxes other than income
and estate taxes. You should consult your tax adviser with regard to the application of the U.S. federal tax laws to
your particular situation, as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
In determining their tax basis for the common
stock and warrant purchased together, holders should allocate their total purchase price between the common stock and warrant
on the basis of their relative fair market values at the time of issuance. The Company expects, and this discussion assumes,
that the price per share and price per warrant indicated on the cover of this prospectus supplement reflect the relative fair
market value of the common stock and the warrants at the time of the issuance.
Tax Consequences to U.S. Holders
This section applies only to U.S. Holders. You
are a “U.S. Holder” if for U.S. federal income tax purposes you are a beneficial owner of a security that is:
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an individual who is a citizen or resident of the United States;
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a corporation, or other entity taxable as a corporation, created or organized in or under the
laws of the United States, any state therein or the District of Columbia; or
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an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
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Distributions on Common Stock
As discussed above under “Market Prices
and Dividend Policy,” we do not currently expect to make distributions on our common stock. In the event that we do make
distributions of cash or other property, distributions paid on common stock, other than certain
pro rata
distributions of
common stock, will be treated as a dividend to the extent paid out of our current or accumulated earnings and profits and will
be includible in income by the U.S. Holder and taxable as ordinary income when received. If a distribution exceeds our
current and accumulated earnings and profits, the excess will be first treated as a tax-free return of the U.S. Holder’s
investment, up to the U.S. Holder’s tax basis in the common stock. Any remaining excess will be treated as a capital
gain. Subject to applicable limitations, dividends paid to certain non-corporate U.S. Holders may be eligible for taxation
as “qualified dividend income” and therefore may be taxable at rates applicable to long-term capital gains. U.S.
Holders should consult their tax advisers regarding the availability of the reduced tax rate on dividends in their particular circumstances. Dividends
received by a corporate U.S. Holder will be eligible for the dividends-received deduction if the U.S. Holder meets certain holding
period and other applicable requirements.
Constructive Dividends on Warrants
If we were to pay a taxable dividend
to our shareholders and, in accordance with the anti-dilution provisions of the warrants, the exercise price of the warrants were
decreased, that decrease would be deemed to be the payment of a taxable dividend to a U.S. Holder of the warrants to the extent
of our earnings and profits, notwithstanding the fact that the U.S. Holder will not receive a cash payment. If the exercise price
is adjusted in certain other circumstances (or in certain circumstances, there is a failure to make adjustments), that adjustment
may also result in the deemed payment of a taxable dividend to a U.S. Holder. U.S. Holders should consult their tax advisers regarding
the proper treatment of any adjustments to the warrants.
Sale or Other Disposition of
Common Stock
For U.S. federal income tax purposes, gain
or loss realized on the sale or other disposition of common stock will be capital gain or loss, and will be long-term capital gain
or loss if the U.S. Holder held the common stock for more than one year. The amount of the gain or loss will equal the
difference between the U.S. Holder’s tax basis in the common stock disposed of and the amount realized on the disposition. Long-term
capital gains recognized by non-corporate U.S. Holders will be subject to reduced tax rates. The deductibility of capital
losses is subject to limitations.
Sale or Other Disposition,
Exercise or Expiration of Warrants
For U.S. federal income tax purposes,
gain or loss realized on the sale or other disposition of a warrant (other than by exercise) will be capital gain or loss and will
be long-term capital gain or loss if the U.S. Holder held the warrant for more than one year at the time of the sale or other disposition.
The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in the warrants disposed of
and the amount realized on the disposition.
In general, a U.S. Holder will
not be required to recognize income, gain or loss upon the exercise of a warrant by payment of the exercise price. A U.S. Holder’s
tax basis in a share of common stock received upon exercise will be equal to the sum of (1) the U.S. Holder’s tax basis in
the warrant and (2) the exercise price of the warrant. A U.S. Holder’s holding period in the stock received upon exercise
will commence on the day after such U.S. Holder exercises the warrants.
Although there is no direct legal authority as to the U.S. federal
income tax treatment of an exercise of a warrant on a cashless basis, we intend to take the position that such exercise will not
be taxable, either because the exercise is not a gain realization event or because it qualifies as a tax-free recapitalization.
In the former case, the holding period of the common stock should commence on the day after the warrant is exercised. In the latter
case, the holding period of the common stock would include the holding period of the exercised warrants. However, our position
is not binding on the IRS and the IRS may treat a cashless exercise of a warrant as a taxable exchange. U.S. Holders are urged
to consult their tax advisers as to the consequences of an exercise of a warrant on a cashless basis.
If a warrant expires without being
exercised, a U.S. Holder will recognize a capital loss in an amount equal to such U.S. Holder’s tax basis in the warrant.
This loss will be long-term capital loss if, at the time of the expiration, the U.S. Holder’s holding period in the warrant
is more than one year. The deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
Payments of dividends (including
constructive dividends) and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries
generally are subject to information reporting, and may be subject to backup withholding, unless (i) the U.S. Holder is a corporation
or other exempt recipient or (ii) in the case of backup withholding, the U.S. Holder provides a correct taxpayer identification
number and certifies that it is not subject to backup withholding.
The amount of any backup withholding
from a payment to a U.S. Holder will be allowed as a credit against the holder’s U.S. federal income tax liability and may
entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service
(“IRS”).
Tax Consequences to Non-U.S. Holders
This section applies only to Non-U.S.
Holders. You are a “Non-U.S. Holder” if for U.S. federal income tax purposes you are a beneficial owner
of our common stock that is:
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a nonresident alien individual;
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a foreign corporation; or
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a foreign estate or trust.
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You are not a Non-U.S. Holder if you are a
nonresident alien individual present in the United States for 183 days or more in the taxable year of disposition, or if you are
a former citizen or former resident of the United States for U.S. federal income tax purposes. If you are such a person,
you should consult your tax adviser regarding the U.S. federal income tax consequences of the ownership and disposition of our
common stock.
Distributions on Common Stock and Constructive
Dividends on Warrants
As discussed under “Market
Prices and Dividend Policy” above, we do not currently expect to make distributions on our common stock. In the
event that we do make, or are deemed to make, distributions of cash or other property with respect to our common stock or warrants
(including deemed dividends described above under “Tax Consequences to U.S. Holders—Constructive Dividends on Warrants”),
those distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed
our current and accumulated earnings and profits, they will constitute a return of capital, which will first reduce your basis
in our common stock or warrants, as applicable, but not below zero, and then will be treated as gain from the sale of our common
stock or warrants, as applicable, as described below under “—Sale or Other Disposition of Common Stock or Warrants.”
Dividends paid to you generally will be subject
to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain
a reduced rate of withholding, you will be required to provide a properly executed applicable IRS Form W-8 certifying your entitlement
to benefits under a treaty.
If dividends paid to you are effectively connected
with your conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable
to a permanent establishment or fixed base maintained by you in the United States), you will generally be taxed on the dividends
in the same manner as a U.S. person. In this case, you will be exempt from the withholding tax discussed in the preceding
paragraph, although you will be required to provide a properly executed IRS Form W-8ECI in order to claim an exemption from withholding.
You
should consult your tax adviser with respect to other U.S. tax consequences of the ownership and disposition of our common stock
or warrants, including the possible imposition of a branch profits tax at a rate of 30% (or a lower treaty rate) if you are a corporation.
In the case of any constructive dividend,
it is possible that the U.S. federal tax on the constructive dividend would be withheld from shares of common stock, sales proceeds
subsequently paid or credited, or other amounts payable or distributable to a Non-U.S. Holder. Non-U.S. Holders who
are subject to withholding tax under such circumstances should consult their tax advisers as to whether it can obtain a refund
for all or a portion of the withholding tax.
Sale or Other Disposition of
Common Stock or Warrants
Subject to the discussions below under “—Information
Reporting and Backup Withholding” and “—FATCA,” you generally will not be subject to U.S. federal income
or withholding tax on gain realized on a sale or other taxable disposition of our common stock or warrants unless:
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the gain is effectively connected with your conduct of a trade or business in the United States (and, if required
by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by you in the United
States), or
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we are or have been a “United States real property holding corporation,” as defined in the Code, at any time within
the five-year period preceding the disposition or your holding period, whichever period is shorter, and our common stock has ceased
to be regularly traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition
occurs.
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We believe that we are not, and do not anticipate
becoming, a United States real property holding corporation.
If you recognize gain on a sale or other disposition
of our common stock or warrants that is effectively connected with your conduct of a trade or business in the United States (and
if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by you in
the United States), you will generally be taxed on such gain in the same manner as a U.S. person. You should consult
your tax adviser with respect to other U.S. tax consequences of the ownership and disposition of our common stock, including the
possible imposition of a branch profits tax at a rate of 30% (or a lower treaty rate) if you are a corporation.
Exercise of Warrants
In general, a Non-U.S. Holder will not be
required to recognize income, gain or loss upon the exercise of a warrant by payment of the exercise price. However, if a cashless
exercise of warrants results in a taxable exchange, as described in “—Tax Consequences Applicable to U.S. Holders—Sale
or Other Disposition, Exercise or Expiration of Warrants,” the rules described above under “Sale or Other Disposition
of Common Stock or Warrants” would apply.
Information Reporting and Backup Withholding
Information returns are required to be filed
with the IRS in connection with payments of dividends (including constructive dividends). Unless you comply with certification
procedures to establish that you are not a U.S. person, information returns may also be filed with the IRS in connection with the
proceeds from a sale or other disposition of our common stock or warrants. You may be subject to backup withholding
on payments of dividends or on the proceeds from a sale or other disposition of our common stock or warrants unless you comply
with certification procedures to establish that you are not a U.S. person or otherwise establish an exemption. Your
provision of a properly executed applicable IRS Form W-8 certifying your non-U.S. status will permit you to avoid backup withholding. Amounts
withheld under the backup withholding rules are not additional taxes and may be refunded or credited against your U.S. federal
income tax liability, provided the required information is timely furnished to the IRS.
FATCA
Provisions of the Code commonly referred to
as “FATCA” require withholding of 30% on payments of dividends, as well as of gross proceeds of dispositions occurring
after December 31, 2018 of our common stock or warrants, to “foreign financial institutions” (which is broadly defined
for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information
reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those
entities) have been satisfied, or an exemption applies. An intergovernmental agreement between the United States and
an applicable foreign country may modify these requirements. If FATCA withholding is imposed, a beneficial owner that
is not a foreign financial institution generally may obtain a refund of any amounts withheld by filing a U.S. federal income tax
return (which may entail significant administrative burden). You should consult your tax adviser regarding the effects
of FATCA on your investment in our common stock or warrants.
Federal Estate Tax
Individual Non-U.S. Holders and entities the
property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for
example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers),
should note that, absent an applicable treaty exemption, our common stock and warrants will be treated as U.S.-situs property subject
to U.S. federal estate tax.
Plan
of Distribution
We are offering 5,500,000 shares of common
stock and warrants to purchase up to 2,200,000 shares of our common stock (and the shares of common stock that are issuable from
time to time upon exercise of the warrants) under this prospectus supplement directly to certain institutional investors in a privately
negotiated transaction in which no party is acting as an underwriter or placement agent. Subject to the terms of a securities purchase
agreement dated the date of this prospectus supplement, the investors have agreed to purchase and we have agreed to sell to the
investors an aggregate of 5,500,000 shares of common stock and warrants to purchase up to 2,200,000 shares of common stock at a
combined purchase price for each share of common stock and accompanying warrant of $3.00. The warrants will become exercisable
on the date of issuance, and will remain exercisable until September 28, 2022. We determined the price per share and price per
warrant through negotiations with the investors. In addition, we will pay a financial advisory fee of approximately $1.0 million
to Angel Pond Capital LLC (the “financial advisor”), an affiliate of one of the institutional investors participating
in this offering, within ten business days of the closing of this offering. The financial advisor may be deemed to be an underwriter
under the Securities Act.
We expect to deliver the shares of
common stock and warrants to purchase shares of common stock through the book entry facilities of The Depository Trust
Company against payment of the aggregate purchase price for the shares of common stock and warrants purchased on or about the
respective dates specified in the last paragraph of the cover page of this prospectus supplement. In the case of certain
investors, such date will be the tenth business day following the pricing of the shares of common stock and warrants (such
settlement cycle being herein referred to as “T + 10”). Under Rule 15c6-1 under the Exchange Act, trades in the
secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree
otherwise. Accordingly, certain purchasers in this offering who wish to trade shares of common stock and warrants on the date
of pricing or the next business day will be required, by virtue of the fact that the certain of the shares of common stock
and warrants initially will settle T + 10, to specify an alternate settlement cycle at the time of any such trade to prevent
a failed settlement. Such purchasers of the shares of common stock and warrants in this offering who wish to trade the shares
of common stock and warrants on the date of pricing of the shares of common stock and warrants or the next business day
should consult their own advisor.
Legal Matters
The validity of the issuance of
the shares of common stock and warrants offered hereby will be passed upon for us by Davis Polk & Wardwell LLP, New York,
New York.
Experts
The consolidated financial statements of Kadmon
Holdings, Inc. as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 incorporated
by reference in this prospectus supplement have been so incorporated in reliance on the report of BDO USA, LLP, an independent
registered public accounting firm, (the report on the financial statements contains an explanatory paragraph regarding our
ability to continue as a going concern) incorporated herein by reference, given on the authority of said firm as experts in accounting
and auditing.
Where You
Can Find More Information
This prospectus supplement is part of a registration
statement we filed with the SEC. This prospectus supplement, which constitutes a part of the registration statement, does not contain
all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information
about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto.
Statements contained in this prospectus supplement regarding the contents of any contract or any other document that is filed as
an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by
reference to the full text of such contract or other document filed as an exhibit to the registration statement. You may read and
copy this information at the Public Reference Room of the U.S. Securities and Exchange Commission, 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet website that contains reports, proxy statements and other information about registrants, like
us, that file electronically with the SEC. The address of that site is www.sec.gov.
We are subject to the full informational requirements
of the Securities Exchange Act of 1934, as amended. We will fulfill our obligations with respect to such requirements by filing
periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated
financial statements certified by an independent public accounting firm. We also maintain an Internet site at www.kadmon.com. Our
website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus
supplement or the registration statements of which it forms a part.
Information
Incorporated by Reference
The rules of the SEC allow us to incorporate
by reference information into this prospectus supplement. The information incorporated by reference is considered to be a part
of this prospectus supplement. This prospectus supplement incorporates by reference the documents listed below:
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our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 22, 2017;
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our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 15, 2017, and for the quarter
ended June 30, 2017, filed with the SEC on August 3, 2017;
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the information specifically incorporated by reference into our annual report on Form 10-K for the year ended December 31,
2016 from our definitive proxy statement on Schedule 14A, filed with the SEC on May 10, 2017;
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our Current Reports on Form 8-K filed with the SEC on January 6, 2017, January 18, 2017, January 20, 2017, February 17, 2017,
March 8, 2017 (except Item 7.01), as amended, April 3, 2017, April 4, 2017, June 14, 2017, June 23, 2017, June 29, 2017, July 11,
2017, July 25, 2017, August 14, 2017 and September 25, 2017; and
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the description of our common stock set forth in our Registration Statement on Form 8-A filed with the SEC on July 21, 2016,
including any amendments or reports filed for the purpose of updating such description.
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All reports and other documents we subsequently
file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus supplement and prior to
termination of the offering under this prospectus supplement prior to the termination of this offering, but excluding any information
furnished to, rather than filed with, the SEC, will also be incorporated by reference into this prospectus supplement and deemed
to be part of this prospectus supplement from the date of the filing of such reports and documents.
Any statement made in this prospectus supplement
or in a document incorporated by reference in this prospectus supplement will be deemed to be modified or superseded for purposes
of this prospectus supplement to the extent that a statement contained in this prospectus supplement modifies or supersedes that
statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part
of this prospectus supplement.
You can obtain any of the filings incorporated
by reference in this prospectus supplement through us or from the SEC through the SEC’s Internet site at www.sec.gov. We
will provide without charge to each person, including any beneficial owner, to whom a copy of this prospectus supplement is delivered,
upon written or oral request of such person, a copy of any or all of the documents referred to above which have been or may be
incorporated by reference in this prospectus supplement. You should direct requests for those documents to the Corporate Secretary,
Kadmon Holdings, Inc., 450 East 29th Street, New York, NY 10016 (telephone: (212) 308-6000). Our Annual Report on Form 10-K and
our Quarterly Reports on Form 10-Q may also be found on the Investor Relations portion of our website at investors.kadmon.com.
Our website and the information contained in it or connected to it shall not be deemed to be incorporated into this prospectus
supplement or the registration statements of which it forms a part.
Kadmon Holdings, Inc.
$150,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Purchase Contracts
Units
and
20,985,231 Shares of
Common Stock Offered by the Selling Stockholders
We may offer and sell from time to time
common stock, preferred stock, debt securities, warrants, purchase contracts or units. We may offer and sell these securities to
or through one or more underwriters, dealers and agents, or directly to purchasers, on a continuous or delayed basis. Specific
amounts and terms of these securities will be provided in supplements to this prospectus. The aggregate initial offering price
of all securities sold by us will not exceed approximately $150,000,000.
In addition, the selling stockholders named
in this prospectus may from time to time offer and sell up to 20,985,231 shares of our common stock. We are registering these shares
of our common stock pursuant to registration rights agreements that we entered into with certain of the selling stockholders. The
selling stockholders may offer and sell their shares of our common stock in public or private transactions, or both. These sales
may occur at fixed prices, at market prices prevailing at the time of sale, at prices related to prevailing market prices, or at
negotiated prices. See “Plan of Distribution” for more information on how the selling stockholders may conduct sales
of their shares of our common stock. We will not receive any proceeds from any sale of these shares of our common stock by the
selling stockholders.
Each time we offer and sell securities,
we will provide a supplement to this prospectus that contains specific information about the offering and the amounts, prices and
terms of the securities. The supplement may also add, update or change information contained in this prospectus with respect to
that offering. You should carefully read this prospectus and the applicable prospectus supplement before you invest in any of our
securities.
Our common stock is listed on the New York
Stock Exchange (“NYSE”) under the symbol “KDMN.” On August 1, 2017, the last sale price of our common stock
as reported on the NYSE was $2.39 per share.
Investing in our common stock involves
risks. See “Risk Factors” beginning on page 6 of this prospectus and any similar section contained in the applicable
prospectus supplement or free writing prospectus concerning factors you should consider before investing in our securities.
Neither the U.S. Securities and Exchange
Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is August 15,
2017.
table
of contents
___________________
Page
|
About This Prospectus
|
ii
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|
Prospectus Summary
|
1
|
|
Forward Looking Statements
|
3
|
|
Risk Factors
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5
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|
Use of Proceeds
|
6
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|
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
|
6
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|
Selling Stockholders
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7
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|
Description of Capital Stock
|
12
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|
Description of Debt Securities
|
17
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|
Description of Warrants
|
20
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|
Description of Purchase Contracts
|
21
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|
Description of Units
|
22
|
|
Form of Securities
|
22
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|
Plan of Distribution
|
26
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|
Legal Matters
|
28
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|
Experts
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28
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|
Where You Can Find More Information
|
28
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|
Information Incorporated by Reference
|
28
|
About This
Prospectus
Except where the context otherwise requires
or where otherwise indicated, the terms “Kadmon,” “we,” “us,” “our,” “our
company” and “our business” refer, prior to the corporate conversion on July 26, 2016 pursuant to which Kadmon
Holdings, Inc. succeeded to the business of Kadmon Holdings, LLC and its consolidated subsidiaries, and the unitholders of Kadmon
Holdings, LLC became stockholders of Kadmon Holdings, Inc. (the “Corporate Conversion”), to Kadmon Holdings, LLC, and
after the Corporate Conversion, to Kadmon Holdings, Inc., formed under the laws of Delaware on July 26, 2016.
This prospectus is part of a registration
statement that we filed with the U.S. Securities and Exchange Commission, or the SEC, using a “shelf” registration
process. By using a shelf registration statement, we may sell securities from time to time and in one or more offerings up to a
total dollar amount of $150,000,000 as described in this prospectus. In addition, under this shelf registration statement, the
selling stockholders named in this prospectus may sell, from time to time, up to 20,985,231 shares of our common stock. Each time
that we or the selling stockholders offer and sell securities, we will provide a prospectus supplement or free writing prospectus
to this prospectus that contains specific information about the securities being offered and sold and the specific terms of that
offering. The prospectus supplement or free writing prospectus may also add, update or change information contained in this prospectus
with respect to that offering. If there is any inconsistency between the information in this prospectus and the applicable prospectus
supplement or free writing prospectus, you should rely on the prospectus supplement or free writing prospectus. Before purchasing
any securities, you should carefully read both this prospectus and the applicable prospectus supplement or free writing prospectus,
together with the additional information described under the headings “Where You Can Find More Information” and “Incorporation
by Reference.”
We have not, and any underwriter has not,
authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus,
any document incorporated by reference, any applicable prospectus supplement or any free writing prospectus prepared by or on behalf
of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any
other information that others may give you. We will not make an offer to sell these securities in any jurisdiction where the offer
or sale is not permitted. You should assume that the information appearing in this prospectus and the applicable prospectus supplement
or free writing prospectus to this prospectus is accurate as of the date on its respective cover, and that any information incorporated
by reference is accurate only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business,
financial condition, results of operations and prospects may have changed since those dates.
Prospectus
Summary
This summary highlights the more detailed
information contained elsewhere or incorporated by reference in this prospectus, and does not contain all of the information that
you should consider before deciding to invest in our securities. You should carefully read the entire prospectus, the applicable
prospectus supplement or free writing prospectus including the risks of investing in our securities discussed under the heading
“Risk Factors” contained in the applicable prospectus supplement or free writing prospectus, and under similar headings
in the other documents that are incorporated by reference into this prospectus.
Company Overview
We are a fully integrated biopharmaceutical
company engaged in the discovery, development and commercialization of small molecules and biologics within autoimmune and fibrotic
diseases, oncology and genetic diseases. We identify and develop our novel product candidates internally, by leveraging our research
and clinical development team members, who prior to joining Kadmon brought more than 15 drugs to market and our small molecule
and biologics platforms as well as by in-licensing products and product candidates. By retaining global commercial rights to our
clinical product candidates, we believe we have the ability to progress these candidates ourselves while maintaining flexibility
for commercial and licensing arrangements.
Our principal executive offices are located
at 450 East 29th Street, New York, New York 10016, and our telephone number is (212) 308-6000. Our website address is www.kadmon.com.
We make available on or through our website certain reports and amendments to those reports that we file with, or furnish to, the
SEC in accordance with the Securities Exchange Act of 1934, as amended, or the Exchange Act. These include our Annual Reports on
Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act. We make this information available on or through our website free of charge
as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. The information
on, or that can be accessed through, our website is not incorporated by reference into this Form S-3 Registration Statement or
any other filings we make with the SEC.
Our operations to date have been focused
on developing first-in-class innovative therapies for indications with significant unmet medical needs while leveraging our commercial
infrastructure. We have never been profitable and had an accumulated deficit of $196.5 million at June 30, 2017. Our net losses
were $39.9 million and $70.2 million for the six months ended June 30, 2017 and 2016, respectively, and $22.3 million and $37.0
million for the three months ended June 30, 2017 and 2016, respectively. Although our commercial business generates revenue, we
expect to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our development
of, and seek regulatory approvals for, our additional product candidates, hire additional personnel and initiate commercialization
of approved products. We anticipate that our expenses will increase substantially if, or as, we:
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·
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invest significantly to further develop our most advanced product candidates, including KD025 and tesevatinib;
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·
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initiate additional clinical trials and preclinical studies for our other product candidates;
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seek regulatory approval for our product candidates that successfully complete clinical trials;
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continue to invest in our rho-associated coiled-coil kinase “ROCK” inhibitors and other research platforms;
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seek to identify additional product candidates;
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scale up our sales, marketing and distribution infrastructure and product sourcing capabilities;
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acquire or in-license other product candidates and technologies;
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scale up our operational, financial and management information systems and personnel, including personnel to support our product
development;
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make milestone or other payments under any in-license agreements;
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maintain, expand and protect our intellectual property portfolio; or
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·
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operate as a public company.
|
On July 26, 2016, prior to the closing
of our initial public offering (“IPO”), we completed a corporate conversion transaction whereby we converted from a
Delaware limited liability company into a Delaware corporation and changed our name to Kadmon Holdings, Inc., which we refer
to herein as the “Corporate Conversion.”
As required by the Second
Amended and Restated Limited Liability Company Agreement of Kadmon Holdings, LLC, the Corporate Conversion was approved by
our then board of managers. In connection with the Corporate Conversion, holders of our outstanding units received one share of
common stock for every 6.5 membership units held immediately prior to the Corporate Conversion, and options and warrants to purchase
units became options and warrants to purchase one share of common stock for each unit underlying such options or warrants immediately
prior to the Corporate Conversion, at the same aggregate exercise price in effect prior to the Corporate Conversion.
Private Placement of Common Stock and Warrants
On March 13, 2017, we raised
approximately $23.0 million in gross proceeds from the issuance of 6,767,855 shares of our common stock, at a price of $3.36
per share, and warrants to purchase 2,707,138 million shares of our common stock at an initial exercise price of $4.50 per
share with a term of 13 months from the date of issuance (the “March 2017 warrants”).
Forward
Looking Statements
This prospectus and the documents incorporated
by reference herein contain forward looking statements. All statements other than statements of historical facts contained in this
prospectus may be forward looking statements. Statements regarding our future results of operations and financial position, business
strategy and plans and objectives of management for future operations, including, among others, statements regarding future capital
expenditures and debt service obligations, are forward looking statements. In some cases, you can identify forward looking statements
by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,”
“could,” “intends,” “targets,” “projects,” “contemplates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of these terms
or other similar expressions.
Forward looking statements involve known
and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to
be materially different from any future results, performance or achievements expressed or implied by the forward looking statements.
We believe that these factors include, but are not limited to, the following:
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the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development
programs;
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our ability to advance product candidates into, and successfully complete, clinical trials;
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our reliance on the success of our product candidates;
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the timing or likelihood of regulatory filings and approvals;
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·
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our ability to expand our sales and marketing capabilities;
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·
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the commercialization of our product candidates, if approved;
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·
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the pricing and reimbursement of our product candidates, if approved;
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·
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the implementation of our business model, strategic plans for our business, product candidates and technology;
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·
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the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates
and technology;
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·
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our ability to operate our business without infringing the intellectual property rights and proprietary technology of third
parties;
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·
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costs associated with defending intellectual property infringement, product liability and other claims;
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regulatory developments in the United States, Europe and other jurisdictions;
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estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
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·
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the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;
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·
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our ability to maintain and establish collaborations or obtain additional grant funding;
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·
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the rate and degree of market acceptance of our product candidates, if approved;
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·
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developments relating to our competitors and our industry, including competing therapies;
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our ability to effectively manage our anticipated growth;
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our ability to attract and retain qualified employees and key personnel;
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our ability to achieve cost savings and benefits from our efforts to streamline our operations and to not harm our business
with such efforts;
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·
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our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;
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·
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statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and share performance;
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·
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litigation, including costs associated with prosecuting or defending pending or threatened claims and any adverse outcomes
or settlements, whether or not covered by insurance;
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·
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our expectations regarding uses of our sources of liquidity;
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·
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the future trading price of the shares of our common stock and impact of securities analysts’ reports on these prices;
and/or
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·
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other risks and uncertainties, including those listed under the caption “Risk Factors”.
|
The forward looking statements in this
prospectus are only predictions, and we may not actually achieve the plans, intentions or expectations included in our forward
looking statements. We have based these forward looking statements largely on our current expectations and projections about future
events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward
looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should
not rely on these forward looking statements as predictions of future events. The events and circumstances reflected in our forward
looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward
looking statements.
Additional factors are discussed under
the caption “Risk Factors” contained in this prospectus, all applicable prospectus supplements or free writing prospectus
and under similar headings in the other documents that are incorporated by reference into this prospectus. New risks and uncertainties
arise from time to time, and it is impossible for us to predict these events or how they may affect us. It should be remembered
that the price of the shares and any income from them can go down as well as up. We disclaim any intention or obligation to update
or revise any forward-looking statements, whether as a result of new information, future events and/or otherwise, except as may
be required by law.
Risk Factors
An investment in our securities involves
significant risks. Before purchasing any securities, you should carefully consider and evaluate all of the information included
and incorporated by reference or deemed to be incorporated by reference in this prospectus or the applicable prospectus supplement,
including the risk factors incorporated by reference herein from our Annual Report on Form 10-K for the year ended December 31,
2016 and any updates to those risk factors in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed thereafter,
as updated by annual, quarterly and other reports and documents we file with the SEC after the date of this prospectus and that
are incorporated by reference herein or in the applicable prospectus supplement. Our business, results of operations or financial
condition could be adversely affected by any of these risks or by additional risks and uncertainties not currently known to us
or that we currently consider immaterial.
Use of Proceeds
We will retain broad discretion over the
use of the net proceeds from the sale of the securities offered hereby. Except as described in any applicable prospectus supplement
or free writing prospectus that we may authorize to be provided to you in connection with a specific offering, we currently intend
to use the net proceeds from the sale of the securities offered hereby to fund our clinical development programs, including the
clinical development programs for KD025 and tesevatinib and for working capital and other general corporate purposes. We may also
use a portion of the net proceeds to invest in or acquire businesses or technologies that we believe are complementary to our own.
However, as of the date of this prospectus, we have no current plans, commitments or agreements with respect to such material acquisitions.
We will set forth in the applicable prospectus supplement or free writing prospectus our intended use for the net proceeds received
from the sale of any securities sold pursuant to the prospectus supplement or free writing prospectus.
RATIO OF
EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The
following table sets forth, for each of the periods presented, our ratio of earnings to fixed charges and the ratio of earnings
to combined fixed charges and preferred stock dividends for each of the periods indicated (dollars in thousands). You should read
this table in conjunction with the financial statements and notes incorporated by reference in this prospectus.
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Six months ended
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Year ended
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June 30,
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December 31,
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2017
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2016
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2015
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2014
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Ratio of earnings to fixed charges (1)
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N/A
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N/A
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N/A
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N/A
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Ratio of earnings to combined fixed charges and preferred stock dividends(1)
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N/A
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N/A
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N/A
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N/A
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(1) For purposes of this ratio, earnings is defined as net loss
plus fixed charges. Fixed charges consist of interest expense including an estimate of interest expense within rental expense.
Our earnings were insufficient to cover fixed charges in all periods presented, and therefore we are unable to disclose a ratio
of earnings to fixed charges for all periods presented.
Earnings were inadequate to cover fixed
charges and preferred stock dividends by $40.5 million for the six months ended June 30, 2017, $230.1 million for the year ended
December 31, 2016, $147.1 million for the year ended December 31, 2015, and $64.4 million for the year ended December 31, 2014.
Selling
Stockholders
The shares of common stock being offered
by the selling stockholders are those previously issued to the selling stockholders and those issuable to the selling stockholders
upon exercise of the March 2017 warrants, as well as those issuable upon exercise of certain other warrants and conversion of the
5% convertible preferred stock held by selling stockholders who have piggyback registration rights under certain registration rights
agreements. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale
from time to time. Except for the ownership of the shares of common stock, the warrants and the 5% convertible preferred stock,
the selling stockholders have not had any material relationship with us within the past three years, unless otherwise indicated
in the footnotes to the table below.
The table below lists the selling stockholders
and other information regarding the beneficial ownership of the shares of the common stock held by each of the selling stockholders.
The second column lists the number of shares of common stock beneficially owned by each selling stockholder, based on its ownership
of the shares of common stock, the warrants and the 5% convertible preferred stock, as of August 1, 2017, assuming exercise of
the warrants and conversion of the 5% convertible preferred stock held by the selling stockholders on that date, without regard
to any limitation on exercise. The third column lists the shares of common stock being registered in this prospectus by the selling
stockholders.
In accordance with the terms of registration
rights agreements with the holders of the shares of common stock, the warrants and the 5% convertible preferred stock, this prospectus
generally covers the resale of that number of shares of common stock equal to the number of shares of common stock previously issued
to the selling stockholders, the shares of common stock issuable upon exercise of the March 2017 warrants and certain other warrants
and the shares of common stock issuable upon conversion of the 5% convertible preferred stock, determined as if such warrants were
exercised and such 5% convertible preferred stock were converted, as applicable, in full, in each case as of the trading day immediately
preceding the date this registration statement was initially filed with the SEC. The fourth column assumes the sale of all of the
shares included in this prospectus.
Under the terms of the March 2017 warrants,
generally a selling stockholder may not exercise the March 2017 warrants to the extent such exercise would cause such selling stockholder,
together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed
4.99% of our then outstanding common stock following such exercise, excluding for purposes of such determination shares of common
stock issuable upon exercise of the March 2017 warrants which have not been exercised. The number of shares in the second column
does not reflect this limitation. The selling stockholders may sell all, some or none of their shares included in this prospectus.
See “Plan of Distribution.”
|
Name of Selling Stockholder
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|
Number of Shares Owned Prior to Offering
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Maximum Number of Shares to be Sold Pursuant to this Prospectus
|
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Number of Shares Owned After Offering
|
|
Third Point Loan LLC
(1)
|
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10,002,983
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8,000,273
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|
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2,002,710
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|
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Perceptive Life Sciences Master Fund LTD
(2)
|
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4,862,179
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4,567,939
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294,240
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Titan Perc, Ltd.
(3)
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239,319
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190,421
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48,898
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Sabby Healthcare Master Fund, Ltd.
(4)
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363,061
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363,061
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—
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Sabby Volatility Warrant Master Fund, Ltd.
(4)
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119,047
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119,047
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—
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Alexandria Equities, LLC
(5)
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1,050,205
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416,666
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633,539
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NexPoint Capital, Inc.
(6)
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346,347
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346,347
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|
|
|
—
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Highland Long/Short Healthcare Fund
(7)
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521,271
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|
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|
521,271
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—
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Empery Asset Master, LTD
(8)
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150,473
|
|
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|
150,473
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|
—
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Empery Tax Efficient, LP
(9)
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77,385
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|
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|
77,385
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|
—
|
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Empery Tax Efficient II, LP(
10)
|
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122,142
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|
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|
122,142
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|
|
|
—
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Intracoastal Capital, LLC
(11)
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|
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166,665
|
|
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|
166,665
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|
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|
—
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Perceptive Credit Holdings LP
(12)
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529,413
|
|
|
|
529,413
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|
|
|
—
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San Bernardino County Employees Retirement Association
(13)
|
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363,176
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|
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345,923
|
|
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|
17,253
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GT NM, L.P.
(14)
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174,132
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|
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|
164,002
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|
10,130
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|
GN3 SIP Limited
(15)
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864,279
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|
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|
663,349
|
|
|
|
200,930
|
|
|
GoldenTree 2004 Trust
(16)
|
|
|
4,057,914
|
|
|
|
3,950,622
|
|
|
|
107,292
|
|
|
Stellar Performer Global Series: Series G—Global Credit
(17)
|
|
|
204,632
|
|
|
|
201,413
|
|
|
|
3,219
|
|
|
GoldenTree Insurance Fund Series Interests of the SALI Multi-Series Fund, L.P.
(18)
|
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|
7,700
|
|
|
|
7,378
|
|
|
|
322
|
|
|
GoldenTree Credit Opportunities, L.P.
(19)
|
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|
81,441
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|
|
|
81,441
|
|
|
|
—
|
|
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(1)
|
The address for Third Point Loan LLC is 390 Park Avenue, 14th Floor, New York NY 10022.
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|
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(2)
|
The address for Perceptive Life Sciences Master Fund LTD is 51 Astor Place, 10th floor, New York, NY 10003. Perceptive Advisors
LLC serves as the investment manager for the Perceptive Life Sciences Master Fund LTD.
|
|
|
(3)
|
The address for Titan Perc, Ltd. is 750 Washington Boulevard, 10th Floor, Stamford CT 06901. Perceptive Advisors LLC serves
as the investment manager for Titan Perc, Ltd.
|
|
|
(4)
|
Sabby Management, LLC is the investment manager of Sabby Healthcare Master Fund, Ltd. and Sabby Volatility Warrant Master Fund,
Ltd. and shares voting and investment power with respect to these shares in this capacity. As manager of Sabby Management, LLC,
Hal Mintz also shares voting and investment power on behalf of each Selling Stockholder. Each of Sabby Management, LLC and Hal
Mintz disclaims beneficial ownership over the securities listed except to the extent of their pecuniary interest. The address for
Sabby Management, LLC is 10 Mountainview Road, Suite 205, Upper Saddle River, NJ 07458.
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|
|
(5)
|
The address for Alexandria Equities, LLC is 385 E. Colorado Blvd., Suite 299, Pasadena, CA 91101.
|
|
|
(6)
|
NexPoint Advisors, L.P., the investment adviser to NexPoint Capital, Inc., has discretionary authority to vote and dispose
of the shares held by NexPoint Capital, Inc. and may be deemed to be the beneficial owner of these shares. Mr. James Dondero, in
his capacity as the President and sole member of the general partner of NexPoint Advisors, L.P., may be deemed to be an indirect
beneficial owner of shares held by accounts advised by NexPoint Advisors, L.P. Mr. Dondero disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein. The address for NexPoint Capital, Inc. is 300 Crescent Court, Suite
700, Dallas, Texas 75201.
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|
|
(7)
|
Highland Capital Management Fund Advisors, L.P., the investment adviser to Highland Long/Short Healthcare Fund, has discretionary
authority to vote and dispose of the shares held by Highland Long/Short Healthcare Fund and may be deemed to be the beneficial
owner of these shares. Mr. James Dondero, in his capacity as the sole shareholder of the general partner of Highland Capital Management
Fund Advisors, L.P., may be deemed to be an indirect beneficial owner of shares held by accounts advised by Highland Capital Management
Fund Advisors, L.P. Mr. Dondero disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
Mr. Brad Ross, as the President of the general partner of Highland Capital Management Fund Advisors, L.P., may be deemed to be
an indirect beneficial owner of shares held by accounts advised by Highland Capital Management Fund Advisors, L.P. Mr. Ross disclaims
beneficial ownership of such shares. The address for Highland Long/Short Healthcare Fund is 300 Crescent Court, Suite 700, Dallas,
Texas, 75201.
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|
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(8)
|
Empery Asset Management LP, the authorized agent of Empery Asset Master Ltd (“EAM”), has discretionary authority
to vote and dispose of the shares held by EAM and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan
Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion
and voting power over the shares held by EAM. EAM, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares.
The address for Empery Asset Master, LTD is c/o Empery Asset Management, LP, One Rockefeller Plaza, Suite 1205, New York, NY 10020.
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|
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(9)
|
Empery Asset Management LP, the authorized agent of Empery Tax Efficient, LP (“ETE”), has discretionary authority
to vote and dispose of the shares held by ETE and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan
Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment discretion
and voting power over the shares held by ETE. ETE, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares.
The address for Empery Tax Efficient, LP is c/o Empery Asset Management, LP, One Rockefeller Plaza, Suite 1205, New York, NY 10020.
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(10)
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Empery Asset Management LP, the authorized agent of Empery Tax Efficient II, LP (“ETE II”), has discretionary authority
to vote and dispose of the shares held by ETE II and may be deemed to be the beneficial owner of these shares.
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Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery Asset Management LP, may also be deemed to have investment
discretion and voting power over the shares held by ETE II. ETE II, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership
of these shares. The address for Empery Tax Efficient II, LP is c/o Empery Asset Management, LP, One Rockefeller Plaza, Suite 1205,
New York, NY 10020.
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(11)
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Michael P. Kopin and Daniel B. Asher, each of whom are managers of Intracoastal Capital LLC (“Intracoastal”), have
shared voting control and investment discretion over the securities reported herein that are held by Intracoastal. As a result,
each of Mr. Kopin and Mr. Asher may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities
Exchange Act, as amended) of the securities reported herein that are held by Intracoastal. Mr. Asher, who is a manager of Intracoastal,
is also a control person of a broker-dealer. As a result of such common control, Intracoastal may be deemed to be an affiliate
of a broker-dealer. Intracoastal acquired the ordinary shares being registered hereunder in the ordinary course of business, and
at the time of the acquisition of the ordinary shares and warrants described herein, Intracoastal did not have any arrangements
or understandings with any person to distribute the securities. The address for Intracoastal Capital, LLC is 2211A Lakeside Drive,
Bannockburn, IL 60015.
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(12)
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The address for Perceptive Credit Holdings LP is 51 Astor Place, 10th floor, New York, NY 10003.
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(13)
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Consists of, (a) shares of common stock held by the San Bernardino County Employees Retirement Association, (b) shares of common
stock into which the 5% convertible preferred stock holdings of San Bernardino County Employees Retirement Association can immediately
convert and (c) warrants held by San Bernardino County Employees Retirement Association. GoldenTree Asset Management LP
acts as investment manager for the GoldenTree Entities, San Bernardino County Employees Retirement Association, GT NM, L.P.,
GN3 SIP Limited, GoldenTree 2004 Trust, GoldenTree Insurance Fund Series Interests of the Sali Multi-Series Fund, LP., Stellar
Performer Global Series: Series G—Global Credit, GoldenTree Entrust Master Fund SPC, GoldenTree Master Fund, Ltd., GoldenTree
Master Fund II, Ltd. and GoldenTree Credit Opportunities, L.P. GoldenTree Asset Management LLC serves as the general partner
for GoldenTree Asset Management LP. Steven A. Tananbaum is the managing member of GoldenTree Asset Management LLC and
holds sole voting and dispositive power over the securities indirectly held by such entity. By virtue of the relationships described
in this footnote, each entity and person described herein may be deemed to share beneficial ownership of all shares held by each
of the other entities described herein. Each entity and individual named herein expressly disclaims any such beneficial ownership,
except to the extent of its individual pecuniary interests therein. The address for San Bernardino Country Employees Retirement
Association is 300 Park Avenue, 21st Floor, New York, NY 10022.
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(14)
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Consists of, (a) shares of common stock held by GT NM, L.P., (b) shares of common stock into which the 5% convertible preferred
stock holdings of GT NM, L.P. can immediately convert and (c) warrants held by GT NM, L.P. GoldenTree Asset Management LP
acts as investment manager for the GoldenTree Entities, San Bernardino County Employees Retirement Association, GT NM, L.P.,
GN3 SIP Limited, GoldenTree 2004 Trust, GoldenTree Insurance Fund Series Interests of the Sali Multi-Series Fund, LP., Stellar
Performer Global Series GoldenTree Entrust Master Fund SPC, GoldenTree Master Fund, Ltd., GoldenTree Master Fund II, Ltd. and GoldenTree
Credit Opportunities, L.P. Series G—Global Credit, GoldenTree Asset Management LLC serves as the general partner
for GoldenTree Asset Management LP. Steven A. Tananbaum is the managing member of GoldenTree Asset Management LLC and
holds sole voting and dispositive power over the securities indirectly held by such entity. By virtue of the relationships described
in this footnote, each entity and person described herein may be deemed to share beneficial ownership of all shares held by each
of the other entities described herein. Each entity and individual named herein expressly disclaims any such beneficial ownership,
except to the extent of its individual pecuniary interests therein. The address for GT NM, L.P. is 300 Park Avenue, 21st Floor,
New York, NY 10022.
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(15)
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Consists of, (a) shares of common stock held by GN3 SIP Limited, (b) shares of common stock into which the 5% convertible
preferred stock holdings of GN3 SIP Limited can immediately convert and (c) warrants held by GN3 SIP Limited. GoldenTree
Asset Management LP acts as investment manager for the GoldenTree Entities, San Bernardino County Employees Retirement Association,
GT NM, L.P., GN3 SIP Limited, GoldenTree 2004 Trust, GoldenTree Insurance Fund Series Interests of the Sali Multi-Series Fund, LP.,
Stellar Performer Global Series: Series G—Global Credit, GoldenTree Entrust Master Fund SPC, GoldenTree Master Fund,
Ltd., GoldenTree Master Fund II, Ltd. and GoldenTree Credit Opportunities, L.P. GoldenTree Asset Management LLC serves as
the general partner for GoldenTree Asset Management LP. Steven A. Tananbaum is the managing member of GoldenTree Asset Management LLC
and holds sole voting and
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dispositive power over the securities
indirectly held by such entity. By virtue of the relationships described in this footnote, each entity and person described herein
may be deemed to share beneficial ownership of all shares held by each of the other entities described herein. Each entity and
individual named herein expressly disclaims any such beneficial ownership, except to the extent of its individual pecuniary interests
therein. The address for GN3 SIP Limited is 300 Park Avenue, 21st Floor, New York, NY 10022.
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(16)
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Consists of, (a) shares of common stock held by GoldenTree 2004 Trust, (b) shares of common stock into which the 5% convertible
preferred stock holdings of GoldenTree 2004 Trust can immediately convert, and (c) warrants held by GoldenTree 2004 Trust. GoldenTree
Asset Management LP acts as investment manager for the GoldenTree Entities, San Bernardino County Employees Retirement Association,
GT NM, L.P., GN3 SIP Limited, GoldenTree 2004 Trust, GoldenTree Insurance Fund Series Interests of the Sali Multi-Series Fund, LP.,
Stellar Performer Global Series: Series G—Global Credit, GoldenTree Entrust Master Fund SPC, GoldenTree Master Fund,
Ltd., GoldenTree Master Fund II, Ltd. and GoldenTree Credit Opportunities, L.P. GoldenTree Asset Management LLC serves as
the general partner for GoldenTree Asset Management LP. Steven A. Tananbaum is the managing member of GoldenTree Asset Management LLC
and holds sole voting and dispositive power over the securities indirectly held by such entity. By virtue of the relationships
described in this footnote, each entity and person described herein may be deemed to share beneficial ownership of all shares held
by each of the other entities described herein. Each entity and individual named herein expressly disclaims any such beneficial
ownership, except to the extent of its individual pecuniary interests therein. The address for GoldenTree 2004 Trust is 300 Park
Avenue, 21st Floor, New York, NY 10022.
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(17)
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Consists of, (a) shares of common stock held by Stellar Performer Global Series: G—Global Credit and (b) shares
of common stock into which the 5% convertible preferred stock holdings of Stellar Performer Global Series: Series G—Global
Credit can immediately convert. GoldenTree Asset Management LP acts as investment manager for the GoldenTree Entities, San
Bernardino County Employees Retirement Association, GT NM, L.P., GN3 SIP Limited, GoldenTree 2004 Trust, GoldenTree Insurance
Fund Series Interests of the Sali Multi-Series Fund, LP., Stellar Performer Global Series: Series G—Global Credit,
GoldenTree Entrust Master Fund SPC, GoldenTree Master Fund, Ltd., GoldenTree Master Fund II, Ltd. and GoldenTree Credit Opportunities,
L.P. GoldenTree Asset Management LLC serves as the general partner for GoldenTree Asset Management LP. Steven A. Tananbaum
is the managing member of GoldenTree Asset Management LLC and holds sole voting and dispositive power over the securities
indirectly held by such entity. By virtue of the relationships described in this footnote, each entity and person described herein
may be deemed to share beneficial ownership of all shares held by each of the other entities described herein. Each entity and
individual named herein expressly disclaims any such beneficial ownership, except to the extent of its individual pecuniary interests
therein. The address for Stellar Performer Global Series: Series G—Global Credit is 300 Park Avenue, 21st Floor,
New York, NY 10022.
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(18)
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Consists of (a) shares of common stock held by GoldenTree Insurance Fund Series Interests of the SALI Multi-Series Fund, L.P.
and (b) warrants held by GoldenTree Insurance Fund Series Interests of the SALI Multi-Series Fund, L.P. GoldenTree Asset Management
LP acts as investment manager for the GoldenTree Entities, San Bernardino County Employees Retirement Association, GT NM, L.P.,
GN3 SIP Limited, GoldenTree 2004 Trust, GoldenTree Insurance Fund Series Interests of the SALI Multi-Series Fund, L.P., Stellar
Performer Global Series G—Global Credit, GoldenTree Entrust Master Fund SPC, GoldenTree Master Fund, Ltd., GoldenTree Master
Fund II, Ltd. and GoldenTree Credit Opportunities, L.P. Golden Tree Asset Management LLC serves as the general partner for GoldenTree
Asset Management LP. Steven A. Tananbaum is the managing member of GoldenTree Asset Management LLC and holds sole voting and dispositive
power over the securities indirectly held by such entity. By virtue of the relationships described in this footnote, each entity
and person described herein may be deemed to share beneficial ownership of all shares.
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(19)
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Consists of warrants held by GoldenTree Credit Opportunities, L.P. GoldenTree Asset Management LP acts as investment manager
for the GoldenTree Entities, San Bernardino County Employees Retirement Association, GT NM, L.P., GN3 SIP Limited, GoldenTree 2004
Trust, GoldenTree Insurance Fund Series Interests of the SALI Multi-Series Fund, L.P., Stellar Performer Global Series G—Global
Credit, GoldenTree Entrust Master Fund SPC, GoldenTree Master Fund, Ltd., GoldenTree Master Fund II, Ltd. and GoldenTree Credit
Opportunities, L.P. Golden Tree Asset Management LLC serves as the general partner for GoldenTree Asset Management LP. Steven A.
Tananbaum is the managing member of GoldenTree Asset Management LLC and holds sole voting and dispositive power over the securities
indirectly held by such entity. By virtue of the relationships described in
this footnote, each entity and person described herein may be deemed to share beneficial ownership of all shares.
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DESCRIPTION
OF CAPITAL STOCK
The following summary describes our
capital stock and certain provisions of our certificate of incorporation and our bylaws, the registration rights agreements to
which we and certain of our stockholders are parties and the General Corporation Law of the State of Delaware. Because the following
is only a summary, it does not contain all of the information that may be important to you. For a complete description, you should
refer to our certificate of incorporation, bylaws, and registration rights agreements, copies of which are incorporated by reference
into the registration statement of which this prospectus is a part.
We are a Delaware
corporation. We completed transactions on July 26, 2016 pursuant to which we converted into a Delaware corporation and changed
our name from Kadmon Holdings, LLC to Kadmon Holdings, Inc. Our authorized share capital consists of 200,000,000 shares of common
stock, par value $0.001 per share, and 10,000,000 preferred shares, par value $0.001 per share.
The following descriptions are summaries
of important terms contained in our Certificate of Incorporation and Bylaws (our “Certificate of Incorporation” and
“Bylaws”, respectively). Reference is made to the more detailed provisions of, and the descriptions are qualified in
their entirety by reference to, the Certificate of Incorporation and Bylaws, copies of which are filed with the SEC as exhibits
to the registration statement of which this prospectus is a part, and relevant portions of the Delaware General Corporation Law
(“DGCL”).
Common
Stock
General
. As
of June 30, 2017, there were 51,846,521 shares of common stock issued and outstanding. All outstanding shares of common stock are
validly issued, fully paid and non-assessable. As of June 30, 2017, there were approximately 2,850 stockholders of record.
Voting rights
. The
holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders,
including the election of directors, and do not have cumulative voting rights. Unless otherwise required by law, matters submitted
to a vote of our stockholders require the approval of a majority of votes cast by stockholders represented in person or by proxy
and entitled to vote on such matter, except that directors will be elected by a plurality of votes cast. Accordingly, the holders
of a majority of the shares of common stock entitled to vote in any election of directors are able to elect all of the directors
standing for election, if they so choose.
Dividend rights
. Holders
of shares of common stock are entitled to receive ratably dividends if, as and when dividends are declared from time to time by
our board of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any then
outstanding preferred stock.
Liquidation
. Upon
our liquidation, dissolution or winding up, the holders of shares of common stock are entitled to share ratably in the net assets
legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to any
liquidation preference granted to holders of any outstanding preferred stock.
Rights and
Preferences.
Holders of shares of common stock have no preemptive or conversion rights or other subscription rights, and no
redemption or sinking fund provisions are applicable to our common stock. The rights, preferences and privileges of the holders
of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred
stock that we may designate in the future.
Fully Paid
and Nonassessable.
All outstanding shares of common stock are, and the shares of common stock to be issued in this offering
will be, fully paid and nonassessable.
Preferred
Stock
No shares of preferred
stock are outstanding other than shares of our 5% convertible preferred stock, as described below under “5% Convertible Preferred
Stock.” Our certificate of incorporation authorizes our board of directors, without further action by our stockholders, to
issue up to 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions
thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, redemption rights,
terms of sinking funds, liquidation preferences, the number of shares constituting any class or series and the designation of the
class or series. Terms selected by our board of directors in the future could decrease the amount of earnings and assets available
for distribution to holders of shares of common stock or adversely affect the rights and powers, including voting rights, of the
holders of shares of common stock without any further vote or action by the stockholders. As a result, the rights of holders of
our common stock will be subject to, and may be adversely affected by, the rights of the holders of the 5% convertible preferred
stock and any other preferred stock that may be issued by us in the future, which could have the effect of decreasing the market
price of our common stock.
5%
Convertible Preferred Stock
As
of June 30, 2017, we have issued 30,000 shares of convertible preferred stock, designated as the 5% convertible preferred stock
pursuant to the certificate of designations filed by us with the Secretary of State of the State of Delaware, with an aggregate
original purchase price and initial liquidation preference of $30.0 million. Each share of convertible preferred stock was
issued for an amount equal to $1,000 per share, which we refer to as the original purchase price.
The
following description is a summary of the material provisions of the 5% convertible preferred stock and the certificate of designations
and does not purport to be complete. This summary is subject to and is qualified by reference to all the provisions of the convertible
preferred stock and certificate of designations, including the definitions of certain terms used in the certificate of designations.
We urge you to read this document because it, and not this description, defines the rights of a holder of the 5% convertible preferred
stock. A copy of the form of certificate of designations that we filed with the Secretary of State of the State of Delaware on
July 26, 2016 has been incorporated by reference as an exhibit to the registration statement of which this prospectus forms a part.
No Mandatory
Redemption Date or Sinking Fund
The
shares of 5% convertible preferred stock do not have a mandatory redemption date and are not subject to any sinking fund. The shares
of convertible preferred stock will remain outstanding indefinitely unless we are required to redeem them under the circumstances
described below in “Redemption” or we otherwise repurchase them or they are converted into shares of our common stock
as described below under “Conversion Rights.”
Dividends
The
shares of 5% convertible preferred stock are entitled to receive dividends, when and as declared by our board of directors and
to the extent of funds legally available for the payment of dividends, at an annual rate of 5% of the sum of the original purchase
price per share of 5% convertible preferred stock plus any dividend arrearages. Dividends on the convertible preferred stock shall,
at our option, either be paid in cash or added to the stated liquidation preference amount for purposes of calculating dividends
at the 5% annual rate (until such time as we declare and pay the missed dividend in full and in cash, at which time that dividend
will no longer be part of the stated liquidation preference amount). Dividends shall be payable annually on June 30 of each
year and shall be cumulative from the most recent dividend payment date on which dividend has been paid or, if no dividend has
ever been paid, from the original date of issuance of the 5% convertible preferred stock and shall accumulate from day to day whether
or not declared until paid.
The
shares of 5% convertible preferred stock are also entitled to participate in all dividends declared and paid on shares of company
common stock on an “as if” converted basis.
Liquidation Preference
In the event of:
(A) a liquidation, dissolution or winding
up of our company, whether voluntary or involuntary;
(B) certain changes of control;
(C) a sale or transfer of all,
or substantially all, of our consolidated assets other than to a wholly-owned subsidiary of ours;
(D) any other event of discharge,
retirement or cancellation of the 5% convertible preferred stock, in each case in this clause (D), that is not described in the
foregoing clauses (A), (B), or (C) or a redemption pursuant to the certificate of designations;
(E) our company or one of our significant
subsidiaries becoming the subject of certain bankruptcy events;
(F) a material breach of our obligations
under the exchange agreement that is not cured within 15 days after we receive notice from a holder of the 5% convertible preferred
stock; or
(G) upon our failure to
make any payment of principal, interest, or other amount due and payable of any of our or our subsidiaries’ indebtedness
after giving effect to any applicable cure period,
the holders of the 5% convertible preferred
stock shall be entitled to receive for each share of 5% convertible preferred stock an amount equal to the greater of (i) (A)
(I) the original purchase price per share of 5% convertible preferred stock plus dividend arrearages thereon in cash
plus
(II) any
dividends accrued and unpaid thereon from the last dividend payment date to the date of the final distribution to such holder
plus
(B) solely
in connection with an event specified in clauses (A), (D), (E), (F) or (G) above, a premium equal to 20.2%
of the amount described in clause (i)(A) of this sentence at such time or (ii) an amount per share of 5% convertible
preferred stock equal to the amount which would have been payable or distributable had each share of 5% convertible preferred stock
been converted into shares of our common stock immediately before the event occurred under clause (A), (B), (C) or (D) above.
Subject
to the rights of the holders of any parity shares, upon any of the events specified in clauses (A) through (D) above,
after payment shall have been made in full to the holders of the convertible preferred stock and any parity securities, any other
series or class or classes of junior securities shall be entitled to receive any and all assets remaining to be paid or distributed,
and the holders of the convertible preferred stock and any parity securities as such shall not be entitled to share in that payment
or distribution.
In
the event that the event giving rise to the determination of the amount that holders of 5% convertible preferred stock shall be
entitled to receive as their liquidation preference is a failure by us to make any payment of principal, interest, or other amount
due and payable of any of our or our subsidiaries' indebtedness after giving effect to any applicable cure period, that event shall
be deemed never to have occurred if, subsequent to the expiration of the cure period, (i) that failure to make payment is
cured in full, (ii) all other obligations to pay principal, interest or other amounts due and payable of any of our or our
subsidiaries' indebtedness have been paid at that time, and (iii) no bankruptcy event has occurred.
Ranking
The
5% convertible preferred stock ranks, with respect to rights to the payment of dividends and the distribution of assets in the
event of any of the events specified in clauses (A) through (D) under “—Liquidation Preference” above,
(1) senior to all common
stock and to all other equity securities of our company other than equity securities referred to in clauses (2) and (3) of
this sentence (“junior securities”);
(2) to the extent authorized
under the certificate of designations, on a parity with all equity securities of our company the terms of which specifically provide
that such equity securities rank on a parity with the 5% convertible preferred stock (“parity securities”); and
(3) to the extent authorized
under the certificate of designations, junior to all equity securities of our company the terms of which specifically provide that
such equity securities rank senior to the 5% convertible preferred stock (“senior securities”).
See
“Voting Rights—Matters Requiring Approval of Holders of 5% Convertible Preferred Stock” for a description of
the types of issuances of equity securities and other securities of our company requiring approval of holders of a majority of
shares of 5% convertible preferred stock then outstanding, voting together as a class.
Redemption
If:
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(A)
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we or one of our significant subsidiaries becomes the subject of certain bankruptcy events;
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(B)
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a material breach of our obligations under the exchange agreement occurs that is not cured within 15 days after we receive
notice from a holder of the 5% convertible preferred stock; or
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(C)
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we fail to make any payment of principal, interest, or other amount due and payable of any of our or our subsidiaries’
indebtedness after giving effect to any applicable cure period,
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each holder of 5% convertible preferred
stock shall have the right to cause us to redeem all or part of the shares of 5% convertible preferred stock held by such holder
for a redemption price per share equal to (i) the original purchase price
plus
any dividend arrearages
plus
any
dividends accrued and unpaid thereon from the last dividend payment date to, but excluding, the redemption date
plus
(ii) a
premium equal to 20.2% of the amount described in clause (i) of this sentence at such time.
We
are required to mail notice of any redemption event to the holders of 5% convertible preferred stock not later than one business
day after we acquire knowledge of that event. That notice must state, among other things, (1) the redemption price and the
date of redemption, which shall be no sooner than 30 days and no later than 90 days from the date the notice is mailed
and (2) any holder of 5% convertible preferred stock electing to have its shares redeemed shall be required to surrender its
shares, with a properly completed redemption request, to us before the close of business on the fifth business day before the redemption
date. If we fail to give notice of the redemption event within the time period specified above, then any holder of 5% convertible
preferred stock may deliver that notice to us and the other holders, in which case the redemption date shall occur on the 45th day
after the date of the notice and any holder electing to have any of its shares of 5% convertible preferred stock redeemed shall
be required to surrender its shares, with a properly completed redemption request, to us before the close of business on the fifth
business day preceding that redemption date.
Until
the holders of the 5% convertible preferred stock who have delivered a notice to us requesting redemption have been paid the redemption
price specified in the previous paragraph in full, no payment will be made to any holder of parity securities or junior securities.
Notwithstanding
anything to the contrary, in the event that the event giving rise to the above redemption right is a failure by us to make any
payment of principal, interest or other amount due and payable of any of our indebtedness after giving effect to any applicable
cure period, that event shall be deemed never to have occurred and any request for redemption delivered by a holder of 5% convertible
preferred stock in respect of that event shall be deemed automatically rescinded if, subsequent to the expiration of the cure period,
(i) our failure to make payment is cured in full, (ii) all other obligations to pay principal, interest or other amounts
due and payable of any of our or our subsidiaries’ indebtedness have been paid at such time and (iii) no bankruptcy
event has occurred.
Conversion
Rights
Conversion
at the option of the holder.
The holders of shares of 5% convertible preferred stock will, at any time, be entitled
to convert some or all of their 5% convertible preferred stock into the number of shares of our common stock obtained by dividing
the aggregate original purchase price of the shares to be converted
plus
any dividend arrearages
plus
any
dividends accrued and unpaid from the last dividend payment date to but excluding the conversion date by an amount equal
to 80% of the initial public offering price per share in the IPO, which amount we refer to as the conversion price.
The conversion
price will be adjustable upon the occurrence of certain events and transactions to prevent dilution as described under “Adjustments
to Conversion Price to Prevent Dilution.” Any shares of our common stock issued upon conversion of the shares of 5% convertible
preferred stock shall be validly issued, fully paid and non-assessable. Cash shall be paid in lieu of fractional shares.
Conversion
at our option.
At any time following the first anniversary of the issuance of the 5% convertible preferred stock,
provided that (A) the volume-weighted average price of our common stock for the 30 consecutive trading days immediately preceding
the date we elect for conversion is in excess of 150% of the initial public offering price per share in this offering (as adjusted
for the events described below under “Adjustments to Conversion Price to Prevent Dilution” and dividends paid in shares
of our common stock) and (B) we have in place an effective resale shelf registration statement permitting the resale of all
of the shares of common stock issuable upon conversion of the 5% convertible preferred stock, we have the right to require the
conversion of any number of shares of 5% convertible preferred stock then outstanding into the number of shares of our common stock
obtained by dividing the aggregate original purchase price of the shares to be converted
plus
any dividend arrearages
plus
any dividends accrued and unpaid from the last dividend payment date to but excluding the conversion date by the then applicable
conversion price.
Adjustments
to Conversion Price to Prevent Dilution
The 5% convertible
preferred stock is subject to provisions that protect the holders against dilution by adjustment of the conversion price and/or
number of shares of common stock issuable upon conversion in certain events such as a subdivision, combination or reclassification
of our outstanding common stock.
Voting
Rights—Matters Requiring Approval of Holders of Convertible Preferred Stock
Holders
of the 5% convertible preferred stock shall be entitled to vote on any and all matters on which holders of the company common stock
are entitled to vote on an “as if” converted basis. Additionally, so long as any 5% convertible preferred stock remains
outstanding, without the affirmative approval of the holders of at least a majority of the shares of 5% convertible preferred stock
then outstanding, we shall not, directly or indirectly (including through merger or consolidation with any other corporation),
and shall not permit any of our subsidiaries to:
(1) authorize or approve
the issuance of any senior securities, 5% convertible preferred stock, or parity securities (or, in each case, any security convertible
into, or convertible or exchangeable therefor or linked thereto) or authorize or create or increase the authorized amount of any
senior securities, 5% convertible preferred stock or parity securities (or, in each case, any security convertible into, or convertible
or exchangeable therefor or linked thereto);
(2) authorize or approve
the purchase or redemption of any parity securities or junior securities;
(3) amend, alter or repeal
any of the provisions of the certificate of designations, our certificate of incorporation or our by-laws in a manner that would
adversely affect the powers, designations, preferences and rights of the 5% convertible preferred stock;
(4) contract, create, incur,
assume or suffer to exist any indebtedness or guarantee any such indebtedness with an aggregate value of more than $5,000,000 (subject
to certain exceptions); or
(5) agree to take any of
the foregoing actions.
The
certificate of designations governing the 5% convertible preferred stock also provides that no amendment or waiver of any
provision of the certificate of designations or our charter or Bylaws shall, without the prior written consent of all holders
of the 5% convertible preferred stock who are known to us to hold, together with their affiliates, more than 5% of the 5%
convertible preferred stock then outstanding, (i) reduce any amounts payable or that may become payable to holders of the 5%
convertible preferred stock, (ii) postpone the payment date of any amount payable to holders of the 5% convertible preferred
stock or waive or excuse any payment, (iii) modify or waive the conversion rights of the 5% convertible preferred stock in a
manner that would adversely affect any holder of the 5% convertible preferred stock,
or (iv) change any of the voting-related provisions or any other provision of the certificate of designations specifying the number
or percentage of holders of the 5% convertible preferred stock which are required to waive, amend or modify any rights under the
certificate of designations or make any determination or grant any consent under that document.
Registration Rights
The holders of the 5% convertible preferred
stock were granted registration rights, subject to customary cutbacks, blackout periods and other exceptions, for all shares of
our common stock issued or issuable upon conversion of the 5% convertible preferred stock, including (a) two demand registrations
at any time after the expiration of 180 days from the closing of the IPO, (b) unlimited piggyback rights and (c) the right to require
filing of a resale S-3 registration statement (once we become eligible to file on such form) and maintenance of its effectiveness
on an “evergreen” basis until such time as there are no longer any registrable securities.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be our direct
general obligations. The debt securities will be either senior debt securities or subordinated debt securities and may be secured
or unsecured and may be convertible into other securities, including our common stock. The debt securities will be issued under
one or more separate indentures between our company and a financial institution that will act as trustee. Senior debt securities
will be issued under a senior indenture. Subordinated debt securities will be issued under a subordinated indenture. Each of the
senior indenture and the subordinated indenture is referred to individually as an indenture and collectively as the indentures.
Each of the senior debt trustee and the subordinated debt trustee is referred to individually as a trustee and collectively as
the trustees. The material terms of any indenture will be set forth in the applicable prospectus supplement.
We have summarized certain terms and provisions
of the indentures. The summary is not complete. The indentures are subject to and governed by the Trust Indenture Act of 1939,
as amended. The senior indenture and subordinated indenture are substantially identical, except for the provisions relating to
subordination.
Neither indenture will limit the amount
of debt securities that we may issue. We may issue debt securities up to an aggregate principal amount as we may authorize from
time to time. The applicable prospectus supplement will describe the terms of any debt securities being offered. These terms will
include some or all of the following:
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classification as senior or subordinated debt securities;
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ranking of the specific series of debt securities relative to other outstanding indebtedness, including subsidiaries’
debt;
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if the debt securities are subordinated, the aggregate amount of outstanding indebtedness, as of a recent date, that is senior
to the subordinated securities, and any limitation on the issuance of additional senior indebtedness;
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the designation, aggregate principal amount and authorized denominations;
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the date or dates on which the principal of the debt securities may be payable;
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the rate or rates (which may be fixed or variable) per annum at which the debt securities shall bear interest, if any;
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the date or dates from which such interest shall accrue, on which such interest shall be payable, and on which a record shall
be taken for the determination of holders of the debt securities to whom interest is payable;
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the place or places where the principal and interest shall be payable;
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our right, if any, to redeem the debt securities, in whole or in part, at our option and the period or periods within which,
the price or prices at which and any terms and conditions upon which such debt securities may be so redeemed, pursuant to any sinking
fund or otherwise;
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our obligation, if any, of the Company to redeem, purchase or repay any debt securities pursuant to any mandatory redemption,
sinking fund or other provisions or at the option of a holder of the debt securities;
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if other than denominations of $2,000 and any higher integral multiple of $1,000, the denominations in which the debt securities
will be issuable;
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if other than the currency of the United States, the currency or currencies, in which payment of the principal and interest
shall be payable;
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whether the debt securities will be issued in the form of global securities;
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provisions, if any, for the defeasance of the debt securities;
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any U.S. federal income tax consequences; and
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other specific terms, including any deletions from, modifications of or additions to the events of default or covenants described
below or in the applicable indenture.
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Senior Debt
We may issue under the senior indenture
the debt securities that will constitute part of our senior debt. These senior debt securities will rank equally and pari passu
with all our other unsecured and unsubordinated debt.
Subordinated Debt
We may issue under the subordinated indenture
the debt securities that will constitute part of our subordinated debt. These subordinated debt securities will be subordinate
and junior in right of payment, to the extent and in the manner set forth in the subordinated indenture, to all our “senior
indebtedness.” “Senior indebtedness” is defined in the subordinated indenture and generally includes obligations
of, or guaranteed by, us for borrowed money, or as evidenced by bonds, debentures, notes or other similar instruments, or in respect
of letters of credit or other similar instruments, or to pay the deferred purchase price of property or services, or as a lessee
under capital leases, or as secured by a lien on any asset of ours. “Senior indebtedness” does not include the subordinated
debt securities or any other obligations specifically designated as being subordinate in right of payment to, or pari passu with,
the subordinated debt securities. In general, the holders of all senior indebtedness are first entitled to receive payment in full
of such senior indebtedness before the holders of any of the subordinated debt securities are entitled to receive a payment on
account of the principal or interest on the indebtedness evidenced by the subordinated debt securities in certain events. These
events include:
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any insolvency or bankruptcy proceedings, or any receivership, dissolution, winding up, total or partial liquidation, reorganization
or other similar proceedings in respect of us or a substantial part of our property, whether voluntary or involuntary;
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(i) a default having occurred with respect to the payment of principal or interest on or other monetary amounts due and payable
with respect to any senior indebtedness or (ii) an event of default (other than a default described in clause (i)) having occurred
with respect to any senior indebtedness that permits the holder or holders of such senior indebtedness to accelerate the maturity
of such senior indebtedness. Such a default or event of default must have continued beyond the period of grace, if any, provided
in respect of such default or event of default, and such a default or event of default shall not have been cured or waived or shall
not have ceased to exist; and
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the principal of, and accrued interest on, any series of the subordinated debt securities having been declared due and payable
upon an event of default pursuant to the subordinated indenture. This declaration must not have been rescinded and annulled as
provided in the subordinated indenture.
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Authentication and Delivery
We will deliver the debt securities to
the trustee for authentication, and the trustee will authenticate and deliver the debt securities upon our written order.
Events of Default
When we use the term “Event of Default”
in the indentures with respect to the debt securities, of any series, set forth below are some examples of what we mean:
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default in the payment of the principal on the debt securities when it becomes due and payable at maturity or otherwise;
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(2)
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default in the payment of interest on the debt securities when it becomes due and payable, and such default continues for a
period of 30 days;
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(3)
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default in the performance, or breach, of any covenant in the indentures (other than defaults specified in clauses (1) or (2)
above) and the default or breach continues for a period of 90 consecutive days or more after written notice to us by the trustee
or to us and the trustee by the holders of 25% or more in aggregate principal amount of the outstanding debt securities of all
series affected thereby;
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(4)
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the occurrence of certain events of bankruptcy, insolvency, or similar proceedings with respect to us or any substantial part
of our property; and/or
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(5)
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any other Events of Default that may be set forth in the applicable prospectus supplement.
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If an Event of Default (other than an
Event of Default specified in clause (4) above) with respect to the debt securities of any series then outstanding occurs and is
continuing, then either the trustee or the holders of not less than 25% in principal amount of the securities of all such series
then outstanding in respect of which an Event of Default has occurred may, by notice in writing to us, declare the entire principal
amount of all debt securities of the affected series, and accrued interest, if any, to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable.
If an Event of Default described in clause
(4) above occurs and is continuing, then the principal amount of all the debt securities then outstanding and accrued interest
shall be and become due immediately and payable without any declaration, notice or other action by any holder of the debt securities
or the trustee.
The trustee will, within 90 days after
the occurrence of any default actually known to it, give notice of the default to the holders of the debt securities of that series,
unless the default was already cured or waived. Unless there is a default in paying principal or interest when due, the trustee
can withhold giving notice to the holders if it determines in good faith that the withholding of notice is in the interest of the
holders.
Satisfaction, Discharge and Defeasance
We may discharge our obligations under
each indenture, except as to:
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the rights of registration of transfer and exchange of debt securities, and our right of optional redemption, if any;
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substitution of mutilated, defaced, destroyed, lost or stolen debt securities;
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the rights of holders of the debt securities to receive payments of principal and interest;
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the rights, obligations and immunities of the trustee; and
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the rights of the holders of the debt securities as beneficiaries with respect to the property deposited with the trustee payable
to them (as described below);
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when:
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all debt securities of any series issued that have been authenticated and delivered have been delivered by us to the trustee
for cancellation; or
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all debt securities of any series issued that have not been delivered by us to the trustee for cancellation have become due
and payable or will become due and payable within one year or are to be called for redemption within one year under arrangements
satisfactory to the trustee for the giving of notice of redemption by such trustee in our name and at our expense, and we have
irrevocably deposited or caused to be deposited with the trustee as trust funds the entire amount sufficient to pay at maturity
or upon redemption all debt securities of such series not delivered to the trustee for cancellation, including principal and interest
due or to become due on or prior to such date of maturity or redemption;
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we have paid or caused to be paid all other sums then due and payable under such indenture; and
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we have delivered to the trustee an officer’s certificate and an opinion of counsel, each stating that all conditions
precedent under such indenture relating to the satisfaction and discharge of such indenture have been complied with.
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In addition, unless the applicable
prospectus supplement and supplemental indenture otherwise provide, we may elect either (i) to have our obligations under
each indenture discharged with respect to the outstanding debt securities of any series (“legal defeasance”) or
(ii) to be released from our obligations under each indenture with respect to certain covenants applicable to the outstanding
debt securities of any series (“covenant defeasance”). Legal defeasance means that we will be deemed to have paid
and discharged the entire indebtedness represented by the outstanding debt securities of such series under such indenture and
covenant defeasance means that we will no longer be required to comply with the obligations with respect
to such covenants (and an omission to comply with such obligations will not constitute a default or event of default).
In order to exercise legal defeasance or
covenant defeasance with respect to outstanding debt securities of any series:
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we must irrevocably have deposited or caused to be deposited with the trustee as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated solely to the benefits of the holders of the debt securities
of a series:
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U.S. government obligations; or
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a combination of money and U.S. government obligations,
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in each case sufficient without reinvestment, in the written
opinion of a nationally recognized firm of independent public accountants, to pay and discharge, and which shall be applied by
the trustee to pay and discharge, all of the principal and interest at due date or maturity or if we have made irrevocable arrangements
satisfactory to the trustee for the giving of notice of redemption by the trustee, the redemption date;
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in the case of a legal defeasance, we have delivered to the trustee an opinion of counsel stating that, (A) we have received
from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this prospectus, there has
been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel
shall confirm that, the beneficial owners of the debt securities of that series will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of the defeasance and will be subject to the same federal income tax as would be the case
if the defeasance did not occur;
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in the case of a covenant defeasance, we have delivered to the trustee an opinion of counsel stating that, under then applicable
U.S. federal income tax law, the beneficial owners of the debt securities of that series will not recognize income, gain or loss
for U.S. federal income tax purposes as a result of the defeasance and will be subject to the same federal income tax as would
be the case if the defeasance did not occur;
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no default relating to bankruptcy or insolvency and, in the case of a covenant defeasance, no other default has occurred and
is continuing at any time;
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if at such time the debt securities of such series are listed on a national securities exchange, we have delivered to the trustee
an opinion of counsel to the effect that the debt securities of such series will not be delisted as a result of such defeasance;
and
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we have delivered to the trustee an officer’s certificate and an opinion of counsel stating that all conditions precedent
with respect to the defeasance have been complied with.
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We are required to furnish to each trustee
an annual statement as to compliance with all conditions and covenants under the indenture
Governing Law
The indenture and the debt securities,
including any claim or controversy arising out of or relating to the indenture or the securities, will be governed by the laws
of the State of New York.
DESCRIPTION
OF WARRANTS
We may issue warrants
for the purchase of shares of our common stock or preferred stock or of debt securities. We may issue warrants independently or
together with other securities, and the warrants may be attached to or separate from any offered securities. Each series of warrants
will be issued under a separate warrant agreement to be entered into between us and the investors or a warrant agent. The following
summary of material provisions of the warrants and warrant agreements are subject to, and qualified in their entirety by reference
to, all the provisions of the warrant agreement and warrant certificate applicable to a particular series of warrants. The terms
of any warrants offered under a prospectus supplement may differ from the terms described below. We urge you to read the applicable
prospectus supplement and any related free writing prospectus, as well as the complete warrant agreements and warrant certificates
that contain the terms of the warrants.
The particular terms of any issue of warrants
will be described in the prospectus supplement relating to the issue. Those terms may include:
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the number of shares of common stock or preferred stock purchasable upon the exercise of warrants to purchase such shares and
the price at which such number of shares may be purchased upon such exercise;
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the designation, stated value and terms (including, without limitation, liquidation, dividend, conversion and voting rights)
of the series of preferred stock purchasable upon exercise of warrants to purchase preferred stock;
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the principal amount of debt securities that may be purchased upon exercise of a debt warrant and the exercise price for the
warrants, which may be payable in cash, securities or other property;
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the date, if any, on and after which the warrants and the related debt securities, preferred stock or common stock will be
separately transferable;
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the terms of any rights to redeem or call the warrants;
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the date on which the right to exercise the warrants will commence and the date on which the right will expire;
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United States federal income tax consequences applicable to the warrants; and
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any additional terms of the warrants, including terms, procedures, and limitations relating to the exchange, exercise and settlement
of the warrants.
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Holders of equity
warrants will not be entitled:
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to vote, consent or receive dividends;
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receive notice as stockholders with respect to any meeting of stockholders for the election of our directors or any other matter;
and/or
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exercise any rights as stockholders of Kadmon Holdings, Inc.
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Each
warrant will entitle its holder to purchase the principal amount of debt securities or the number of shares of preferred stock
or common stock at the exercise price set forth in, or calculable as set forth in, the applicable prospectus supplement. Unless
we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants at any time up
to the specified time on the expiration date that we set forth in the applicable prospectus supplement. After the close of business
on the expiration date, unexercised warrants will become void.
A holder of warrant certificates may exchange
them for new warrant certificates of different denominations, present them for registration of transfer and exercise them at the
corporate trust office of the warrant agent or any other office indicated in the applicable prospectus supplement. Until any warrants
to purchase debt securities are exercised, the holder of the warrants will not have any rights of holders of the debt securities
that can be purchased upon exercise, including any rights to receive payments of principal, premium, if any, or interest on the
underlying debt securities or to enforce covenants in the applicable indenture. Until any warrants to purchase common stock or
preferred stock are exercised, the holders of the warrants will not have any rights of holders of the underlying common stock or
preferred stock, including any rights to receive dividends or payments upon any liquidation, dissolution or winding up on the common
stock or preferred stock, if any.
DESCRIPTION OF PURCHASE CONTRACTS
We may issue purchase contracts for the
purchase or sale of:
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debt or equity securities issued by us or securities of third parties, a basket of such securities, an index or indices or
such securities or any combination of the above as specified in the applicable prospectus supplement;
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Each purchase contract will entitle the
holder thereof to purchase or sell, and obligate us to sell or purchase, on specified dates, such securities, currencies or commodities
at a specified purchase price, which may be based on a formula, all as set forth in the applicable prospectus supplement. We may,
however, satisfy our obligations, if any, with respect to any purchase contract by delivering the cash value of such purchase contract
or the cash value of the property otherwise deliverable or, in the case of purchase contracts
on underlying currencies, by delivering the underlying currencies, as set forth in the applicable prospectus supplement.
The applicable
prospectus supplement will also specify the methods by which the holders may purchase or sell such securities, currencies or commodities
and any acceleration, cancellation or termination provisions or other provisions relating to the settlement of a purchase contract.
The purchase contracts may require us to
make periodic payments to the holders thereof or vice versa, which payments may be deferred to the extent set forth in the applicable
prospectus supplement, and those payments may be unsecured or prefunded on some basis. The purchase contracts may require the holders
thereof to secure their obligations in a specified manner to be described in the applicable prospectus supplement. Alternatively,
purchase contracts may require holders to satisfy their obligations thereunder when the purchase contracts are issued. Our obligation
to settle such pre-paid purchase contracts on the relevant settlement date may constitute indebtedness. Accordingly, pre-paid purchase
contracts will be issued under the applicable indenture.
DESCRIPTION OF UNITS
We may issue units consisting of any combination
of the other types of securities offered under this prospectus in one or more series. We may evidence each series of units by unit
certificates that we will issue under a separate agreement. We may enter into unit agreements with a unit agent. Each unit agent
will be a bank or trust company that we select. We will indicate the name and address of the unit agent in the applicable prospectus
supplement relating to a particular series of units.
The following description, together with
the additional information included in any applicable prospectus supplement, summarizes the general features of the units that
we may offer under this prospectus. You should read any prospectus supplement and any free writing prospectus that we may authorize
to be provided to you related to the series of units being offered, as well as the complete unit agreements that contain the terms
of the units. Specific unit agreements will contain additional important terms and provisions and we will file as an exhibit to
the registration statement of which this prospectus is a part, or will incorporate by reference from another report that we file
with the SEC, the form of each unit agreement relating to units offered under this prospectus.
If we offer any units, certain terms of
that series of units will be described in the applicable prospectus supplement, including, without limitation, the following, as
applicable:
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the title of the series of units;
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identification and description of the separate constituent securities comprising the units;
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the price or prices at which the units will be issued;
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the date, if any, on and after which the constituent securities comprising the units will be separately transferable;
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a discussion of certain United States federal income tax considerations applicable to the units; and
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any other terms of the units and their constituent securities.
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FORM OF SECURITIES
Each debt security, warrant, and unit will
be represented either by a certificate issued in definitive form to a particular investor or by one or more global securities representing
the entire issuance of securities. Certificated securities in definitive form and global securities will be issued in registered
form. Definitive securities name you or your nominee as the owner of the security, and in order to transfer or exchange these securities
or to receive payments other than interest or other interim payments, you or your nominee must physically deliver the securities
to the trustee, registrar, paying agent or other agent, as applicable. Global securities name a depositary or its nominee as the
owner of the debt securities, warrants, or units represented by these global securities. The depositary maintains a computerized
system that will reflect each investor’s beneficial ownership of the securities through an account maintained by the investor
with its broker/dealer, bank, trust company or other representative, as we explain more fully below.
Global Securities
Registered Global Securities
. We
may issue the registered debt securities, warrants, and units in the form of one or more fully registered global securities that
will be deposited with a depositary or its nominee identified in the applicable prospectus supplement and registered in the name
of that depositary or nominee. In those cases, one or more registered global securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal or face amount of the securities to be represented by registered
global securities. Unless and until it is exchanged in whole for securities in definitive registered form, a registered global
security may not be transferred except as a whole by and among the depositary for the registered global security, the nominees
of the depositary or any successors of the depositary or those nominees.
If not described below, any specific terms
of the depositary arrangement with respect to any securities to be represented by a registered global security will be described
in the prospectus supplement relating to those securities. We anticipate that the following provisions will apply to all depositary
arrangements.
Ownership of beneficial interests in a
registered global security will be limited to persons, called participants, that have accounts with the depositary or persons that
may hold interests through participants. Upon the issuance of a registered global security, the depositary will credit, on its
book-entry registration and transfer system, the participants’ accounts with the respective principal or face amounts of
the securities beneficially owned by the participants. Any dealers, underwriters or agents participating in the distribution of
the securities will designate the accounts to be credited. Ownership of beneficial interests in a registered global security will
be shown on, and the transfer of ownership interests will be effected only through, records maintained by the depositary, with
respect to interests of participants, and on the records of participants, with respect to interests of persons holding through
participants. The laws of some states may require that some purchasers of securities take physical delivery of these securities
in definitive form. These laws may impair your ability to own, transfer or pledge beneficial interests in registered global securities.
So long as the depositary, or its nominee,
is the registered owner of a registered global security, that depositary or its nominee, as the case may be, will be considered
the sole owner or holder of the securities represented by the registered global security for all purposes under the applicable
indenture, warrant agreement, guaranteed trust preferred security or unit agreement. Except as described below, owners of beneficial
interests in a registered global security will not be entitled to have the securities represented by the registered global security
registered in their names, will not receive or be entitled to receive physical delivery of the securities in definitive form and
will not be considered the owners or holders of the securities under the applicable indenture, warrant agreement, guaranteed trust
preferred security or unit agreement. Accordingly, each person owning a beneficial interest in a registered global security must
rely on the procedures of the depositary for that registered global security and, if that person is not a participant, on the procedures
of the participant through which the person owns its interest, to exercise any rights of a holder under the applicable indenture,
warrant agreement, guaranteed trust preferred security or unit agreement. We understand that under existing industry practices,
if we request any action of holders or if an owner of a beneficial interest in a registered global security desires to give or
take any action that a holder is entitled to give or take under the applicable indenture, warrant agreement, guaranteed trust preferred
security or unit agreement, the depositary for the registered global security would authorize the participants holding the relevant
beneficial interests to give or take that action, and the participants would authorize beneficial owners owning through them to
give or take that action or would otherwise act upon the instructions of beneficial owners holding through them.
Principal, premium, if any, and interest
payments on debt securities, and any payments to holders with respect to warrants, guaranteed trust preferred securities or units,
represented by a registered global security registered in the name of a depositary or its nominee will be made to the depositary
or its nominee, as the case may be, as the registered owner of the registered global security. None of Kadmon, the trustees, the
warrant agents, the unit agents or any other agent of Kadmon, agent of the trustees or agent of the warrant agents or unit agents
will have any responsibility or liability for any aspect of the records relating to payments made on account of beneficial ownership
interests in the registered global security or for maintaining, supervising or reviewing any records relating to those beneficial
ownership interests.
We expect that the depositary for any of
the securities represented by a registered global security, upon receipt of any payment of principal, premium, interest or other
distribution of underlying securities or other property to holders on that registered global security, will immediately credit
participants’ accounts in amounts proportionate to their respective beneficial interests in that registered global security
as shown on the records of the depositary.
We also expect that payments by participants to owners of
beneficial interests in a registered global security held through participants will be governed by standing customer
instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer
form or registered in “street name,” and will be the responsibility of those participants.
If the depositary for any of these securities
represented by a registered global security is at any time unwilling or unable to continue as depositary or ceases to be a clearing
agency registered under the Securities Exchange Act of 1934, and a successor depositary registered as a clearing agency under the
Securities Exchange Act of 1934 is not appointed by us within 90 days, we will issue securities in definitive form in exchange
for the registered global security that had been held by the depositary. Any securities issued in definitive form in exchange for
a registered global security will be registered in the name or names that the depositary gives to the relevant trustee, warrant
agent, unit agent or other relevant agent of ours or theirs. It is expected that the depositary’s instructions will be based
upon directions received by the depositary from participants with respect to ownership of beneficial interests in the registered
global security that had been held by the depositary.
Anti-takeover Effects of Provisions of Our Certificate
of Incorporation and Bylaws and Delaware Law
The provisions of the DGCL and our Certificate
of Incorporation and Bylaws could have the effect of discouraging others from attempting an unsolicited offer to acquire our company.
Such provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make
it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Election and removal of directors.
Our directors are elected until the expiration of the term for which they are elected and until their respective successors are
elected. Our directors may be removed only by the affirmative vote of at least a majority of the holders of our then outstanding
common stock. For more information on the terms of our directors, see the section entitled “Management—Board of Managers
and Committees” in our Registration Statement on Form S-1/A dated as of July 26, 2016. This system of electing and removing
directors generally makes it more difficult for stockholders to replace a majority of our directors.
Authorized but unissued shares.
The authorized but unissued shares of our common stock and our preferred stock are available for future issuance without any further
vote or action by our stockholders. These additional shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but
unissued shares of our common stock and our preferred stock could render more difficult or discourage an attempt to obtain control
over us by means of a proxy contest, changes in our management, tender offer, merger or otherwise.
Stockholder action; advance notification
of stockholder nominations and proposals.
Our Certificate of Incorporation and Bylaws require that any action required or permitted
to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected
by a consent in writing. Our Certificate of Incorporation and Bylaws also require that special meetings of stockholders be called
only by our board of directors, the Chairman of our Board or our Chief Executive Officer. In addition, our Bylaws provide that
candidates for director may be nominated and other business brought before an annual meeting only by the board of directors or
by a stockholder who gives written notice to us no later than 90 days prior to nor earlier than 120 days prior to the first anniversary
of the last annual meeting of stockholders. These provisions may have the effect of deterring unsolicited offers to acquire our
company or delaying changes in our management, which could depress the market price of our common stock.
Delaware anti-takeover law.
Our
Certificate of Incorporation provides that Section 203 of the DGCL, an anti-takeover law, applies to us. In general, Section 203
prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested
stockholder” for a period of three years following the date the person became an interested stockholder, unless the “business
combination” or the transaction in which the person became an interested stockholder is approved in a prescribed manner.
Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial
benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates
and associates, owns or, within three years prior to the determination of interested stockholder status, did own, 15.0% or more
of a corporation’s voting stock.
Limitation of Liability and Indemnification
Our Certificate of Incorporation provides
that no director will be personally liable for monetary damages for breach of any fiduciary duty as a director, except with respect
to liability:
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for any breach of the director’s duty of loyalty to us or our stockholders;
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for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
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under Section 174 of the DGCL (governing distributions to stockholders); or
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for any transaction from which the director derived any improper personal benefit.
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If the DGCL is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then the liability of our directors will be eliminated
or limited to the fullest extent permitted by the DGCL, as so amended. The modification or repeal of this provision of our certificate
of incorporation will not adversely affect any right or protection of a director existing at the time of such modification or repeal.
Our Bylaws also provide that we will, to
the fullest extent permitted by law, indemnify our directors and officers against all liabilities and expenses in any suit or proceeding
or arising out of their status as an officer or director or their activities in these capacities. We also indemnify any person
who, at our request, is or was serving as a director, officer, employee, agent or trustee of another corporation or of a partnership,
limited liability company, joint venture, trust or other enterprise. We may, by action of our board of directors, provide indemnification
to our employees and agents within the same scope and effect as the foregoing indemnification of directors and officers.
Exclusive Forum
Our Certificate of Incorporation provides
that the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum
for any (1) derivative action or proceeding brought on behalf of our company, (2) action asserting a claim of breach of a fiduciary
duty owed by any director or officer of our company to our company or our company’s stockholders, (3) action asserting a
claim against our company arising pursuant to any provision of the DGCL or our Certificate of Incorporation or our Bylaws or (4)
action asserting a claim against our company governed by the internal affairs doctrine. Any person or entity purchasing or otherwise
acquiring any interest in shares of capital stock of our company shall be deemed to have notice of and consented to the forum provisions
in our amended and restated Certificate of Incorporation. However, the enforceability of similar forum provisions in other companies’
certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types
of provisions to be unenforceable.
Listing
Our common stock is listed under the symbol
“KDMN” on the New York Stock Exchange.
Transfer Agent and Registrar
The transfer agent and registrar for our
common stock is American Stock Transfer & Trust Company, LLC.
Plan of
Distribution
We or the selling stockholders may sell
the securities from time to time pursuant to underwritten public offerings, negotiated transactions, block trades or a combination
of these methods. We or the selling stockholders may sell the securities to or through underwriters or dealers, through agents,
or directly to one or more purchasers. We or the selling stockholders may distribute securities from time to time in one or more
transactions:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to such prevailing market prices; or
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We or the selling stockholders may also
sell equity securities covered by this registration statement in an “at the market offering” as defined in Rule 415(a)(4)
under the Securities Act. Such offering may be made into an existing trading market for such securities in transactions at other
than a fixed price on or through the facilities of the New York Stock Exchange or any other securities exchange or quotation or
trading service on which such securities may be listed, quoted or traded at the time of sale.
Such at-the-market offerings, if any, may
be conducted by underwriters acting as principal or agent.
A prospectus supplement or supplements
(and any related free writing prospectus that we may authorize to be provided to you) will describe the terms of the offering of
the securities, including, to the extent applicable:
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the name or names of any underwriters, if any;
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the purchase price of the securities and the proceeds we will receive from the sale;
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any over-allotment options under which underwriters may purchase additional securities from us;
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any agency fees or underwriting discounts and other items constituting agents’ or underwriters’ compensation;
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any public offering price;
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any discounts or concessions allowed or reallowed or paid to dealers; and
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any securities exchange or market on which the securities may be listed.
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Only underwriters named in the prospectus
supplement are underwriters of the securities offered by the prospectus supplement.
If underwriters are used in the sale, they
will acquire the securities for their own account and may resell the securities from time to time in one or more transactions at
a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase
the securities will be subject to the conditions set forth in the applicable underwriting agreement. We or the selling stockholders
may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Subject to certain conditions, the underwriters will be obligated to purchase all of the securities offered
by the prospectus supplement. Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers
may change from time to time. We or the selling stockholders may use underwriters with whom we or the selling stockholders, as
applicable, have a material relationship. We or the selling stockholders will describe in the prospectus supplement, naming the
underwriter, the nature of any such relationship.
We or the selling stockholders may sell
securities directly or through agents we designate from time to time. We or the selling stockholders will name any agent involved
in the offering and sale of securities, and we or the selling stockholders will describe any commissions we or the selling stockholders
will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our or the selling stockholders’
agent will act on a best-efforts basis for the period of its appointment.
We or the selling stockholders may authorize
agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us or the selling
stockholders at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing
for payment and delivery on a specified date in the future.
We or the selling stockholders
will describe the conditions to these contracts and the commissions we or the selling stockholders must pay for solicitation of
these contracts in the prospectus supplement.
We or the selling stockholders may provide
agents and underwriters with indemnification against civil liabilities related to offerings pursuant to this prospectus, including
liabilities under the Securities Act, or contribution with respect to payments that the agents or underwriters may make with respect
to these liabilities. Agents and underwriters may engage in transactions with, or perform services for, us in the ordinary course
of business.
All securities we offer, other than common
shares, will be new issues of securities with no established trading market. Any underwriters may make a market in these securities,
but will not be obligated to do so and may discontinue any market making at any time without notice. We cannot guarantee the liquidity
of the trading markets for any securities.
Any underwriter may engage in overallotment,
stabilizing transactions, short covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.
Overallotment involves sales in excess of the offering size, which create a short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Short covering transactions
involve purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids
permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased
in a stabilizing or covering transaction to cover short positions. Those activities may cause the price of the securities to be
higher than it would otherwise be. If commenced, the underwriters may discontinue any of the activities at any time.
Any underwriters who are qualified market
makers on the New York Stock Exchange may engage in passive market making transactions in the securities on the New York Stock
Exchange in accordance with Rule 103 of Regulation M, during the business day prior to the pricing of the offering, before the
commencement of offers or sales of the securities. Passive market makers must comply with applicable volume and price limitations
and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess
of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid,
however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded. Passive market making
may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if
commenced, may be discontinued at any time.
Legal matters
Unless otherwise indicated in the applicable
prospectus supplement, the validity of the issuance of the shares of common stock offered hereby will be passed upon for us by
Davis Polk & Wardwell LLP, New York, New York. Additional legal matters may be passed upon for us or any underwriters, dealers
or agents, by counsel that we will name in the applicable prospectus supplement.
Experts
The consolidated financial statements of
Kadmon Holdings, Inc. as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 incorporated
by reference in this prospectus and in the registration statement have been so incorporated in reliance on the report of BDO USA,
LLP, an independent registered public accounting firm, (the report on the financial statements contains an explanatory paragraph
regarding the Company’s ability to continue as a going concern) incorporated herein by reference, given on the authority
of said firm as experts in accounting and auditing.
Where You
Can Find More Information
This prospectus is part of a registration
statement we filed with the Securities and Exchange Commission, or SEC. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed
therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and
the exhibits and schedules filed thereto. Statements contained in this prospectus regarding the contents of any contract or any
other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement
is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration
statement. You may read and copy this information at the Public Reference Room of the U.S. Securities and Exchange Commission,
100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference rooms
by calling the U.S. Securities and Exchange Commission at 1-800-SEC-0330. The U.S. Securities and Exchange Commission also maintains
an Internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically
with the U.S. Securities and Exchange Commission. The address of that site is www.sec.gov.
We are subject to the full informational
requirements of the Securities Exchange Act of 1934, as amended. We will fulfill our obligations with respect to such requirements
by filing periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing
consolidated financial statements certified by an independent public accounting firm. We also maintain an Internet site at www.kadmon.com.
Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus
or the registration statements of which it forms a part.
Information
Incorporated by Reference
The rules of the SEC allow us to incorporate
by reference information into this prospectus. The information incorporated by reference is considered to be a part of this prospectus.
This prospectus incorporates by reference the documents listed below:
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our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 22, 2017;
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our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed with the SEC on May 15, 2017;
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our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 3, 2017;
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the information specifically incorporated by reference into our annual report on Form 10-K for the year ended December 31,
2016 from our definitive proxy statement on Schedule 14A, filed with the SEC on May 10, 2017;
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our Current Reports on Form 8-K filed with the SEC on January 6, 2017, January 18, 2017, January 20, 2017, February 17, 2017,
March 8, 2017 (except Item 7.01), as amended, April 3, 2017, April 4, 2017, June 14, 2017, June 23, 2017, June 29, 2017, July 11,
2017, July 25, 2017 and August 14, 2017; and
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the description of our common stock contained in our registration statement on Form 8-A filed with the SEC on July 21, 2016,
including any amendments or reports filed for the purpose of updating such description.
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All reports and other documents we subsequently
file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this offering, including all
such documents we may file with the SEC after the date of the initial registration statement and prior to the effectiveness of
the registration statement, but excluding any information furnished to, rather than filed with, the SEC, will also be incorporated
by reference into this prospectus and deemed to be part of this prospectus from the date of the filing of such reports and documents.
Any statement made in this prospectus or
in a document incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus
to the extent that a statement contained in this prospectus modifies or supersedes that statement. Any statement so modified or
superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
You can obtain any of the filings incorporated
by reference in this prospectus through us or from the SEC through the SEC’s Internet site at www.sec.gov. We will provide
without charge to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, upon written or
oral request of such person, a copy of any or all of the documents referred to above which have been or may be incorporated by
reference in this prospectus. You should direct requests for those documents to the Corporate Secretary, Kadmon Holdings, Inc.,
450 East 29th Street, New York, NY 10016 (telephone: (212) 308-6000). Our Annual Report on Form 10-K and our Quarterly Reports
on Form 10-Q may also be found on the Investor Relations portion of our website at investors.kadmon.com. Our website and the information
contained in it or connected to it shall not be deemed to be incorporated into this prospectus or the registration statements of
which it forms a part.
5,500,000 Shares of Common Stock
Warrants to Purchase 2,200,000 Shares
of Common Stock
PROSPECTUS SUPPLEMENT
September
26, 2017
Kadmon (NYSE:KDMN)
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