PROSPECTUS SUPPLEMENT NO. 1
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Registration No. 333-138299
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(To Prospectus Dated November 22, 2006)
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Rule 424(b)(5) Prospectus
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10,696,616 Units
(each unit consisting of 1 share of common stock and 0.5 common stock warrants)
AVI
BioPharma, Inc.
$
1.90
per unit
5,348,308
shares of common stock issuable upon exercise of the warrants
We are selling units consisting of one share of our common
stock and a warrant to purchase 0.5 shares of our common stock for $1.90 per
unit, and 5,348,308 shares of common stock issuable upon exercise of the
warrants. We sometimes refer to the warrants as the unit warrants. The units
are immediately separable.
Our common stock is listed on the Nasdaq Global
Market under the symbol AVII. The last reported sale price of the common
stock on the Nasdaq Global Market on December 12, 2007 was $2.23 per share.
Investing in the units involves risks. See Risk
Factors beginning on p. S-2 of this prospectus supplement
.
Neither the Securities and
Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
prospectus supplement or the accompanying prospectus. Any representation to the
contrary is a criminal offense.
Citigroup Global Markets Inc. is acting as lead
placement agent and Oppenheimer & Co. Inc. and Maxim Group, LLC are acting
as co-placement agents in connection with this offering. We have agreed to pay
the placement agents the placement agency fees set forth in the table below,
which assumes that we sell all of the 10,696,616 units we are offering. We have
also agreed to reimburse the placement agents for certain of their expenses as
described under Plan of Distribution in this prospectus supplement. The
placement agents are not required to arrange for the sale of any specific
number or dollar amount of units, but will use reasonable efforts to arrange
for the sale of all of the units offered hereby.
|
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Per unit
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Per share underlying unit warrant
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|
Total
|
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Public offering price
for units
|
|
$
|
1.900
|
|
$
|
|
|
$
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20,323,570
|
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Placement Agents Fees
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$
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0.133
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$
|
|
|
$
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1,422,650
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|
Proceeds, before expenses, to us, from
units
|
|
$
|
1.767
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|
$
|
|
|
$
|
18,900,920
|
|
Public offering price for shares underlying
unit warrants
|
|
$
|
|
|
$
|
2.45
|
|
$
|
13,103,355
|
|
Total proceeds, before expenses, to us from
units and shares underlying unit warrants
|
|
$
|
|
|
$
|
|
|
$
|
32,004,275
|
|
We expect the total offering expenses, excluding
placement agency fees, to be approximately $332,000 for all sales pursuant to
this prospectus supplement. Because there is no minimum offering amount
required as a condition to the closing of this offering, the actual total
offering amount, placement agency fees, and proceeds before expenses, to us are
not presently determinable and may be substantially less than the maximum
amounts set forth above.
Delivery of the units will be made on or about December
18, 2007.
Citi
Oppenheimer
& Co.
|
|
Maxim
Group, LLC
|
|
December
12
, 2007
|
|
|
You should only rely on the information contained
in, or incorporated by reference in, this prospectus supplement and the
accompanying prospectus. We have not, and the placement agents have not,
authorized anyone to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information contained in this prospectus supplement,
the accompanying prospectus and the documents incorporated by reference herein
and therein is accurate as of any date other than the dates of the specific
information.
ABOUT THIS
PROSPECTUS SUPPLEMENT
We are providing this information to you about this
offering of common stock in two parts. The first part is this prospectus
supplement, which provides the specific details regarding the offering. The
second part is the base prospectus dated November 22, 2006, included in the
registration statement on Form S-3, as amended (No. 333-138299) which we are
supplementing with the information contained in this supplement. Generally,
when we refer to this prospectus, we are referring to both documents combined.
Some of the information in the base prospectus may not apply to this offering.
You should also read and consider the information in
the documents that we have referred you to in Where You Can Find More
Information on page S-10 of this prospectus supplement. The information
incorporated by reference is considered to be part of this prospectus
supplement, and information that we file later with the SEC will automatically
update and supersede this information.
If
information in this prospectus supplement is inconsistent with the base
prospectus, you should rely on this prospectus supplement. We have not
authorized anyone to provide information different from that contained or
incorporated in this prospectus supplement and the accompanying prospectus. We
are offering to sell units only in jurisdictions where offers and sales are
permitted. The information contained or incorporated in this prospectus
supplement and the accompanying prospectus is accurate only as of the date of
such information, regardless of the time of delivery of this prospectus
supplement and the accompanying prospectus or of any sale of our units.
In this prospectus
supplement, we, us, our company and Company refer to AVI BioPharma,
Inc., together with its subsidiaries, unless the context otherwise requires.
TABLE OF CONTENTS
S-1
THE
OFFERING
Securities
offered
|
|
10,696,616
units. Each unit consists of one share
of common stock and a warrant to purchase 0.5 common shares. Plus 5,348,308
shares of common stock upon exercise of unit warrants.
|
|
|
|
Issue
Price
|
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$1.90
per unit.
|
|
|
|
Warrants
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Each
whole unit warrant will be exercisable at a price of $2.45 per common share
at any time on or after June 19, 2008 and through and including December 18,
2012. Please refer to Description of
the Unit Warrants.
|
|
|
|
Common
stock to be outstanding after the offering
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64,426,992
common shares, or 69,775,300 common shares if all the unit warrants are
exercised for cash.
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|
|
|
Use
of proceeds
|
|
We
intend to use the net proceeds from this offering to fund clinical trials for
our lead product candidates, to fund the advancement of our pre-clinical
programs and for other research and development and general corporate
purposes.
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|
|
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Risk
factors
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|
See
Risk Factors beginning on page S-2 of this prospectus supplement and other
information included or incorporated by reference in this prospectus
supplement and the accompanying prospectus for a discussion of factors you
should carefully consider before deciding to invest in shares of our common
stock.
|
|
|
|
Nasdaq
Global Market Symbol
|
|
AVII
|
The number of shares of common stock to be
outstanding after the offering is based on the number of shares outstanding as
of
September 30, 2007. As of that date, and
prior to taking into account this offering, we had 53,730,376 shares of common
stock outstanding, which does not include:
5,348,308
shares underlying the unit warrants offered by this prospectus;
6,299,526 shares of common stock underlying
options outstanding at a weighted average exercise price of $4.62 per share;
8,508,103 shares of common stock underlying
warrants outstanding at a weighted average exercise price of $11.68 per share;
and
1,860,822 shares available for future grant under
our stock option plan and 230,687 shares available for future issuance under
our employee stock purchase plan.
FORWARD-LOOKING
STATEMENTS
This prospectus supplement and the information
incorporated by reference herein contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities and Exchange Act of 1934, as amended. Forward
looking statements are identified by such words as believe, expect, anticipate
and words and phrases of similar import. All statements other than historical
or current facts, including, without limitation, statements about our business
strategy, plans and objectives of management and our future prospects, are
forward-looking statements. Such forward-looking statements involve risks and
uncertainties, including, but not limited to, the results of research and
development efforts, the success of raising funds in the current offering or future
offerings under our current shelf registration, the results of pre-clinical and
clinical testing, the effect of regulation by FDA and other agencies, the
impact of competitive products, product development, commercialization and
technological difficulties, and other risks detailed in the Companys
Securities and Exchange Commission filings, that could cause actual results to
differ materially from the expected results reflected in such forward looking
statements. You should review carefully the section entitled Risk Factors for
a discussion of these and other risks that relate to our business and investing
in our common stock.
RISK FACTORS
Risks Affecting Future Operating Results
The following factors should be considered in
evaluating our business and prospects for the future. If risks described below
actually occur, our operating results and financial condition would likely
suffer and the trading price of our common stock may fall, causing a loss of
some or all of an investment in our units.
Our products are in an early stage of research and
development and may not be determined to be safe or effective.
We are only in the early stages of research and
clinical development with respect to our NEUGENE antisense pharmaceutical
products. We have devoted almost all of our time to research and development of
our technology and products,
S-2
protecting
our proprietary rights and establishing strategic alliances. Our potential
products are in the pre-clinical or clinical stages of research and development
and will require significant further research, development, clinical testing
and regulatory clearances. We have no products available for sale and we do not
expect to have any products available for sale for several years. Our proposed
products are subject to development risks. These risks include the
possibilities that any of the products could be found to be ineffective or
toxic, or could fail to receive necessary regulatory clearances. We have not received
any significant revenues from the sale of products and we may not successfully
develop marketable products that will increase sales and, given adequate
margins, make us profitable. Third parties may develop superior or equivalent,
but less expensive, products.
We have incurred net losses since our inception and
we may not achieve or sustain profitability.
We incurred a net loss of $28.7 million in 2006 and
$23 million in the first nine months of 2007. As of September 30, 2007, our
accumulated deficit was $222.2 million. Our losses have resulted principally
from expenses incurred in research and development of our technology and
products and from selling, general and administrative expenses that we have
incurred while building our business infrastructure. We expect to continue to
incur significant operating losses in the future as we continue our research
and development efforts and seek to obtain regulatory approval of our products.
Our ability to achieve profitability depends on our ability to raise additional
capital, complete development of our products, obtain regulatory approvals and
market our products. It is uncertain when, if ever, we will become profitable.
If we fail to attract significant additional capital,
we may be unable to continue to successfully develop our products.
Since we began operations, we have obtained
operating funds primarily by selling shares of our common stock. Based on our
current plans, we believe that current cash balances will be sufficient to meet
our operating needs for the current fiscal year. Furthermore, the actual amount
of funds that we will need will be determined by many factors, some of which
are beyond our control. These factors include the success of our research and
development efforts, the status of our pre-clinical and clinical testing, costs
relating to securing regulatory approvals and the costs and timing of obtaining
new patent rights, regulatory changes, competition and technological
developments in the market. We may need funds sooner than currently
anticipated.
If necessary, potential sources of additional
funding could include strategic relationships, public or private sales of
shares of our stock or debt or other arrangements. We may not be
able to obtain additional funding when we
need it on terms that will be acceptable to us or at all. If we raise funds by
selling additional shares of our common stock or securities convertible into
our common stock, the ownership interest of our existing shareholders will be
diluted. If we are unable to obtain financing when needed, our business and
future prospects would be materially adversely affected.
If we fail to receive necessary regulatory approvals,
we will be unable to commercialize our products.
All of our products are subject to extensive
regulation by the United States Food and Drug Administration, or FDA, and by
comparable agencies in other countries. The FDA and these agencies require new
pharmaceutical products to undergo lengthy and detailed clinical testing
procedures and other costly and time-consuming compliance procedures. We do not
know when or if we will be able to submit our products for regulatory review.
Even if we submit a new drug application, there may be delays in obtaining
regulatory approvals, if we obtain them at all. Sales of our products outside
the United States will also be subject to regulatory requirements governing
clinical trials and product approval. These requirements vary from country to
country and could delay introduction of our products in those countries. We
cannot assure you that any of our products will receive marketing approval from
the FDA or comparable foreign agencies.
We may fail to compete effectively, particularly
against larger, more established pharmaceutical companies, causing our business
to suffer.
The biotechnology industry is highly competitive. We
compete with companies in the United States and abroad that are engaged in the
development of pharmaceutical technologies and products. They include
biotechnology, pharmaceutical, chemical and other companies; academic and
scientific institutions; governmental agencies; and public and private research
organizations.
The financial and technical resources and production
and marketing capabilities of many of these entities, some of which are our
competitors, exceed our resources and capabilities. Our industry is
characterized by extensive research and development and rapid technological
progress. Competitors may successfully develop and market superior or less
expensive products which render our products less valuable or unmarketable.
S-3
We have limited operating experience.
We have engaged solely in the research and
development of pharmaceutical technology. Although some members of our
management team have experience in biotechnology company operations, we have
limited experience in manufacturing or selling pharmaceutical products. We also
have only limited experience in negotiating and maintaining strategic
relationships and in conducting clinical trials and other later-stage phases of
the regulatory approval process. We may not successfully engage in some or all
of these activities.
We have limited manufacturing
capability.
While we believe that we can produce materials for
clinical trials and produce products for human use at our existing and
potentially expanded manufacturing facility, we may need to expand our
commercial manufacturing capabilities for products in the future if we elect
not to or cannot contract with others to manufacture our products. This
expansion may occur in stages, each of which would require regulatory approval,
and product demand could at times exceed supply capacity. We have reviewed the
possibility of expanding our facilities and do not know what the ultimate
construction cost would be for such facilities and whether we will have the
financing
needed for such
construction. We do not know if or when the FDA will determine that such
facilities comply with Good Manufacturing Practices. The projected locations
and construction of any facilities will depend on regulatory approvals, product
development, pharmaceutical partners and capital resources, among other
factors. We have not obtained regulatory approvals for any production
facilities for our products, nor can we assure investors that we will be able
to do so.
If we lose key personnel or are unable to attract and
retain additional, highly skilled personnel required for our activities, our
business will suffer.
Our success will depend to a large extent on the
abilities and continued service of several key employees, including Drs.
Patrick Iversen and Dwight Weller. We maintain key man life insurance in the
amount of $500,000 for each of Drs. Iversen and Weller. The loss of any of
these key employees could significantly delay the achievement of our goals.
Competition for qualified personnel in our industry is intense, and our success
will depend on our ability to attract and retain highly skilled personnel. To
date, we have been successful in attracting and retaining key personnel. We are
not aware of any key personnel who plan to retire or otherwise leave the
Company in the near future.
The resignation and replacement of the Companys Chief Executive
Officer could have adverse impacts on the Company
.
In March 2007, the Companys Chief Executive officer
resigned and an interim CEO was appointed. The Company has commenced a search
for a permanent replacement. There can be no assurance that the Company will be
able to find and employ a new permanent CEO that will be able to lead the Company
successfully in the near term. The failure to secure a permanent replacement
may adversely affect the Companys research and development efforts.
Asserting, defending and maintaining our intellectual
property rights could be difficult and costly, and our failure to do so will
harm our ability to compete and the results of our operations.
Our success will depend on
our existing patents and licenses and our ability to obtain additional patents
in the future. We own or license on an exclusive basis 186 patents (U.S. and
foreign), and 192 pending patent applications (U.S. and foreign), including an
exclusive third-party license in the field of antisense compounds directed
against DMD splice sites. Many of our patents and pending applications cover
morpholino antisense compounds and improvements thereto, independent of
antisense sequences (Patents on Core Technologies).
Some of our Patents on Core
Technologies expire as early as 2008, including for NEUGENES. Currently, we
posses non-exclusive patent protection on the targeting sequence of AVI 6001,
and our exclusivity position with respect to this product may depend on our
Patents on Core Technologies. Patent
claims covering the targeting sequence of AVI 4658 may be unpatentable, and our
exclusivity position with respect to this product may depend on our Patents on
Core Technologies, on our exclusive third-party license in the field of DMD
splice sites, and on exclusivity available from an Orphan Drug Designation
granted by the FDA for AVI 4658.
We cannot assure you that
our pending patent applications will result in patents being issued in the
United States or foreign countries. In addition, the patents that have been or
will be issued may not afford meaningful protection for our technology and
products. Competitors may develop products similar to ours that do not conflict
with our patents. Others may challenge our patents and, as a result, our
patents could be narrowed or invalidated. The patent position of biotechnology
firms generally is highly uncertain, involves complex legal and factual
questions, and has recently been the subject of much litigation. No consistent
policy has emerged from the United States Patent and Trademark Office (USPTO),
or the courts regarding the breadth of claims allowed or the degree of
protection afforded under biotechnology patents. In addition, there is a
substantial backlog of biotechnology patent applications at the USPTO and the
approval or rejection of patents may take several years.
Our success will also depend
partly on our ability to operate without infringing upon the proprietary rights
of others, as well as our ability to prevent others from infringing on our
proprietary rights. We may be required at times to take legal action to protect
our proprietary rights and, despite our best efforts, we may be sued for
infringing on the patent rights of others. We have not received any
communications or other indications from owners of related patents or others
that such persons believe our products or technology may infringe their
patents. Patent litigation is costly and, even if we prevail, the cost of such
litigation could adversely affect our financial condition. If we do not
prevail, in addition to any damages we might have to pay, we could be required
to stop the infringing activity or obtain a license. Any required license may
not be available to us on acceptable terms, or at all. If we fail to obtain a
license, our business might be materially adversely affected.
To help protect our
proprietary rights in unpatented trade secrets, we require our employees,
consultants and advisors to execute confidentiality agreements. However, such
agreements may not provide us with adequate protection if confidential
information is used or disclosed improperly. In addition, in some situations,
these agreements may conflict with, or be subject to, the rights of third
parties with whom our employees, consultants or advisors have prior employment
or consulting relationships. Further, others may independently develop
substantially equivalent proprietary information and techniques, or otherwise
gain access to our trade secrets.
S-4
If our strategic relationships are unsuccessful, our
business could be harmed.
Our strategic relationships are important to our
success. The development, improvement and marketing of many of our key
therapeutic products are or will be dependent in large part on the efforts of
our strategic partners. The transactions contemplated by our agreements with
strategic partners, including the equity purchases and cash payments, are
subject to numerous risks and conditions. The occurrence of any of these events
could severely harm our business.
Our near-term strategy is to co-develop products
with strategic partners or to license the marketing rights for our products to
pharmaceutical partners after we complete one or more Phase II clinical trials.
In this manner, the extensive costs associated with late-stage clinical
development and marketing will be shared with, or become the responsibility of,
our strategic partners.
To fully realize the potential of our products,
including development, production and marketing, we may need to establish other
strategic relationships.
We may be subject to product liability lawsuits and
our insurance may not be adequate to cover damages.
We believe we carry adequate insurance for our
current product development research. In the future, when we have products
available for commercial sale and use, the use of our products will expose us
to the risk of product liability claims. Although we intend to obtain product
liability insurance coverage, product liability insurance may not continue to
be available to us on acceptable terms and our coverage may not be sufficient
to cover all claims against us. A product liability claim, even one without
merit or for which we have substantial coverage, could result in significant
legal defense costs, thereby increasing our expenses, lowering our earnings
and, depending on revenues, potentially resulting in additional losses.
Continuing efforts of government and third party
payers to contain or reduce the costs of health care may adversely affect our
revenues and future profitability.
In addition to obtaining regulatory approval, the
successful commercialization of our products will depend on the ability to
obtain reimbursement for the cost of the product and treatment from the
consumers of or third-party payors for such products. Government authorities,
private health insurers and other organizations, such as health maintenance
organizations are increasingly challenging the prices charged for medical
products and services. Also, the trend toward managed health care in the United
States, the growth of healthcare
organizations such as HMOs, and legislative proposals to reform
healthcare and government insurance programs could significantly influence the
purchase of healthcare services and products, resulting in lower prices and
reducing demand for our products. The cost containment measures that healthcare
providers are instituting and any healthcare reform could affect our or our
marketing partners ability to sell our products and may have a material
adverse effect on our financial results from operations. Reimbursement in the
United States or foreign countries may not be available for any of our
products, any reimbursement granted may be reduced or discontinued, and limits
on reimbursement available from third-party payors may reduce the demand for,
or the price of, our products. The lack or inadequacy of third-party
reimbursements for our products would have a material adverse effect on our
operations. Additional legislation or regulation relating to the healthcare
industry or third-party coverage and reimbursement may be enacted in the future
that adversely affects our products and our business.
If we fail to establish strategic relationships with
larger pharmaceutical partners, our business may suffer.
We do not intend to conduct late-stage (Phase III)
human clinical trials ourselves. We anticipate entering into relationships with
larger pharmaceutical companies to conduct these and later pharmaceutical
trials and to market our products. We also plan
S-5
to
continue to use contract manufacturing for late stage clinical and commercial
quantities of our products. We may be unable to enter into partnerships or
other relationships, which could impede our ability to bring our products to
market
.
Any such partnerships, if
entered into at all, may be on less than favorable terms and may not result in
the successful development or marketing of our products. If we are unsuccessful
in establishing advantageous clinical testing, manufacturing and marketing
relationships, we are not likely to generate significant revenues and become
profitable.
We use hazardous substances in our research
activities.
We use organic and inorganic solvents and reagents
in our clinical development that are customarily used in pharmaceutical
development and synthesis. Some of these chemicals, such as methylene chloride,
isopropyl alcohol, ethyl acetate and acetane, may be classified as hazardous
substances, are flammable and, if exposed to human skin can cause anything from
irritation to severe burns. We receive, store, use and dispose of such chemicals
in compliance with all applicable laws with containment storage facilities and
contained handling and disposal safeguards and procedures. We are routinely
inspected by federal, state and local governmental and public safety agencies
regarding our storage, use and disposal of such chemicals, including the
federal Occupational, Safety and Health Agency (OSHA), the Oregon Department
of Environmental Quality (DEQ) and local fire departments, without any
material noncompliance issues in such inspections to date. Further, our usage
of such chemicals is limited and falls
below
the reporting thresholds under federal law. Based on our limited use of such
chemicals, the nature of such chemicals and the safeguards undertaken by the
Company for storage, use and disposal, we believe we do not have any material
exposure for toxic tort liability. Further, the cost of such compliance is not
a material cost in our operating budget. While we do not have toxic tort
liability insurance at this time, we believe our current insurance coverage is
adequate to cover most liabilities that may arise from our use of such
substances. If we are wrong in any of our beliefs, we could incur a liability
in certain circumstances that would be material to our finances and the value of
an investment in our securities.
The Company will need additional funds to continue operations at
current levels
.
The
Companys net cash use through the end of 2007 is expected to be approximately
$5 to $6 million assuming no material change in the Companys operations,
including clinical trials and research and development activities. As of
September 30, 2007, the Company has cash, cash equivalents and short-term
securities of $14 million. Unless the Company is able to secure additional
capital, it will need to curtail expenditures on its clinical programs, its
research and development efforts and/or its plans to expand its manufacturing
capacity. While such curtailments may extend the Companys cash resources, such
efforts may adversely affect the Companys prospects to commercialize its
existing products and develop its next-generation products, which could
adversely affect shareholder value.
Risks Related to Share Ownership
Our right to issue preferred stock, our classified
Board of Directors and Oregon Anti-Takeover
laws may delay a takeover
attempt and prevent or frustrate any attempt to replace or remove the
then current management of the Company by shareholders.
Our authorized capital consists of 200,000,000
shares of common stock and 20,000,000 shares of preferred stock. Our Board of
Directors, without any further vote by the shareholders, has the authority to
issue preferred shares and to determine the price, preferences, rights and
restrictions, including voting and dividend rights, of these shares. The rights
of the holders of shares of common stock may be affected by the rights of
holders of any preferred shares that our board of directors may issue in the
future. For example, our Board of Directors may allow the issuance of preferred
shares with more voting rights, preferential dividend payments or more
favorable rights upon dissolution than the shares of common stock or special
rights to elect directors.
In addition, we have a classified Board of
Directors, which means that only one-half of our directors are eligible for
election each year. Therefore, if shareholders wish to change the composition
of our Board of Directors, it could take at least two years to remove a
majority of the existing directors or to change all directors. Having a
classified Board of Directors may, in some cases, delay mergers, tender offers
or other possible transactions that may be favored by some or a majority of our
shareholders and may delay or frustrate action by shareholders to change the
then current Board of Directors and management. The Oregon Control Share Act
and Business Combination Act may limit parties that acquire a significant
amount of voting shares from exercising control over us for specific periods of
time. These acts may lengthen the period for a proxy contest or for a person to
vote their shares to elect the majority of our Board and change management.
S-6
Our stock price is volatile and may fluctuate due to factors
beyond our control.
Historically, the market price of our stock has been
highly volatile. The following types of announcements could have a significant
impact on the price of our common stock: positive or negative results of
testing and clinical trials by ourselves, strategic partners, or competitors;
delays in entering into corporate partnerships; technological innovations or
commercial product introductions by ourselves or competitors; changes in
government regulations; developments concerning proprietary rights, including
patents and litigation matters; public concern relating to the commercial value
or safety of any of our products; financing or other corporate transactions; or
general stock market conditions.
The significant number of our shares of Common Stock
eligible for future sale may cause the price of our common stock to fall.
We have outstanding 53,730,376 shares of common
stock as of September 30, 2007 and all are eligible for sale under
Rule 144 or are otherwise freely tradeable. In addition:
Our employees and others hold options to buy
a total of 6,299,526 shares of common stock of which 4,452,205 shares were
exercisable at September 30, 2007. The options outstanding have exercise prices
between $1.76 and $8.13 per share. The shares of common stock to be issued upon
exercise of these options, have been registered, and, therefore, may be freely
sold when issued;
Shares underlying the unit warrants may be
exercised after June 19, 2008 at an exercise price of $2.45 per share. The
shares have been registered, and therefore may be freely sold when issued;
There are outstanding warrants to buy 8,508,103
shares of common stock at September 30, 2007 with exercise prices ranging from
$0.0003 to $35.63 per share. All of these shares of common stock are registered
for resale and may be freely sold when issued;
We may issue options to purchase up to an
additional 1,860,822 shares of common stock at September 30, 2007 under our
stock option plans, which also will be fully saleable when issued except to the
extent limited under Rule 144 for resales by our officers and directors;
We are authorized to sell up to 230,687 shares
of common stock under our Employee Stock Purchase Plan to our full-time
employees, nearly all of whom are eligible to participate; and
We have also granted certain contractual
rights to purchase (i) an additional 352,113 shares of our common stock at
a price of $7.10 per share and (ii) the right to purchase up to $7,500,000
of our common stock based on the average closing sales price for the five days
preceding the commitment to purchase. If we meet certain technological
milestones, the holder of these rights is obligated to purchase shares of
common stock from us. The holder of these rights may require us to register the
shares issued upon the exercise of such purchase rights.
Sales
of substantial amounts of shares into the public market could lower the market
price of our common stock.
We do not expect to pay dividends in the foreseeable
future.
We have never paid dividends on our shares of common
stock and do not intend to pay dividends in the foreseeable future. Therefore,
you should only invest in our common stock with the expectation of realizing a
return through capital appreciation on your investment. You should not invest
in our common stock if you are seeking dividend income.
No market will exist for the sale
of unit warrants.
There is no established trading market for the unit
warrants to be issued in this offering and no market is expected to exist for
the unit warrants in the future. The unit warrants will not be listed for
trading on any stock exchange. The holders of unit warrants are not likely to
be able to trade the unit warrants and may be forced to convert the unit
warrants in order to sell or transfer their interest in the unit warrant.
USE OF
PROCEEDS
We expect to receive approximately $18.6 million in
net proceeds from the sale of 10,696,616 units in this offering, after
deducting placement agent fees and offering expenses payable by us. Pending the
use of the net proceeds, we may invest the net proceeds in investment grade,
interest-bearing securities.
We intend to use the net proceeds from this offering
to fund clinical trials for our lead product candidates, to fund the
advancement of our pre-clinical programs and for other research and development
and general corporate purposes. We may also use a portion of the net proceeds
to acquire or invest in businesses, products and technologies that are
complementary to our own, although we are not currently planning or negotiating
any such transactions. We have not identified the amounts we plan to spend on
each of these areas or the timing of such expenditures, and we will have
significant discretion in the use of any net proceeds. The amounts and timing
of our actual expenditures for each purpose may vary significantly depending
upon numerous factors, including the status of our research and product
development efforts, regulatory approvals, competition, and economic or other
conditions.
S-7
CAPITALIZATION
The following table sets forth our capitalization as
of September 30, 2007:
on an actual basis without any adjustments to
reflect subsequent or anticipated events; and
on an as adjusted basis reflecting the sale
of units and the receipt by us of the net proceeds from the sale of 10,696,616 units
in this offering at the public offering price of $1.90 per unit, and after
deducting the underwriting discounts and commissions and estimated offering
expenses payable by us.
You should read this table in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of Operations and
our consolidated financial statements and related notes incorporated by
reference into this prospectus.
|
|
As of September 30, 2007
|
|
|
|
Actual
|
|
As Adjusted
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Preferred stock, $.0001 par value,
20,000,000 shares authorized; none issued and outstanding
|
|
$
|
|
|
$
|
|
|
Common stock, $.0001 par value, 200,000,000
shares authorized; 53,730,376 issued and outstanding, actual; 64,426,992
issued and outstanding, pro forma
|
|
5,373
|
|
6,443
|
|
Additional paid-in capital
|
|
237,450,696
|
|
256,018,546
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
Deficit accumulated during the development
stage
|
|
(222,230,361
|
)
|
(222,230,361
|
)
|
Total Shareholders Equity
|
|
$
|
15,225,708
|
|
$
|
33,794,628
|
|
|
|
|
|
|
|
|
|
|
The preceding table excludes, as of
September 30, 2007:
5,348,308 shares
underlying the unit warrants offered by this prospectus;
6,299,526 shares of common stock underlying
options outstanding at a weighted average exercise price of $4.62 per share;
8,508,103 shares of common stock underlying
warrants outstanding at a weighted average exercise price of $11.68 per share;
and
1,860,822 shares available for future grant
under our stock option plan and 230,687 shares available for future issuance
under our employee stock purchase plan.
DILUTION
The net tangible book value of our common stock on September
30, 2007 was approximately $12.2 million, or approximately $0.23 per share. Net
tangible book value per share is equal to the amount of our total tangible
assets, less total liabilities, divided by the aggregate number of shares of
common stock outstanding. Dilution in net tangible book value per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the net tangible book value per
share of our common stock immediately after this offering. After giving effect
to the sale of the units in this offering at a sales price of $1.90 per unit,
our net tangible book value at September 30, 2007 would have been approximately
$30.8 million, or approximately $0.48 per common share. This represents an
immediate dilution of $1.42 per common share to new investors purchasing units
in this offering. The following table illustrates this dilution:
Public offering price per unit
|
|
|
|
$
|
1.90
|
|
Net tangible book value per share
|
|
$
|
0.23
|
|
|
|
Increase in net tangible book value per
share attributable to new investors
|
|
$
|
0.25
|
|
|
|
Net tangible book value per share after
giving effect to this offering
|
|
|
|
$
|
0.48
|
|
Dilution per share to new investors
|
|
|
|
$
|
1.42
|
|
|
|
|
|
|
|
|
|
|
The number of shares of common stock to be
outstanding after the offering is based on the number of shares outstanding as
of September 30, 2007. As of that date, and prior to taking into account this
offering, we had 53,730,376
shares
of common stock outstanding, which does not include:
5,348,308
shares underlying the unit warrants offered by this prospectus;
6,299,526 shares of common stock underlying options outstanding at a
weighted average exercise price of $4.62 per share;
S-8
8,508,103 shares of common stock underlying warrants outstanding at a
weighted average exercise price of $11.68 per share; and
1,860,822 shares available for future grant under our stock option plan
and 230,687 shares available for future issuance under our employee stock
purchase plan.
The above table does not reflect the expected loss
to date for our fiscal quarter ending December 31, 2007, which would
increase the dilution per share.
PLAN OF
DISTRIBUTION
Citigroup Global Markets Inc. is acting as the lead
placement agent of the offering and Oppenheimer & Co. and Maxim Group, LLC
are acting as co-placement agents of the offering. Subject to the terms and
conditions stated in the Placement Agency Agreement dated the date of this
prospectus, the placement agents are using their reasonable efforts to
introduce us to investors who will purchase the units we are offering pursuant
to this prospectus supplement. The placement agents do not have any obligation
to buy any of the units from us or to arrange the purchase or sale of any
specific number or dollar amount of the units.
We may enter into subscription agreements with
investors for the purchase of units in this offering. The terms of this
offering will be subject to market conditions and negotiations between us, the
placement agents and prospective investors.
Certain investor funds may be deposited into an
escrow account set up at Mellon Investor Services LLC. Mellon Investor Services
LLC will not accept any investor funds until the date of this prospectus
supplement. Before the closing date, Mellon Investor Services LLC will notify
the placement agents when funds to pay for the units have been received. We
will deposit the units with the Depository Trust Company upon receiving notice
from the placement agents that funds to pay for the shares have been received.
At the closing, Depository Trust Company will credit the shares to the
respective accounts of the investors and the Company will issue the unit
warrants. If the conditions to this offering are not satisfied or waived, then
all investor funds that were deposited into escrow will be returned promptly to
investors and this offering will terminate. We will pay Mellon Investor
Services LLC a fee in connection with the escrow services.
Confirmations and definitive prospectuses will be
distributed to all investors who agree to purchase units, informing investors
of the closing date as to such units. We currently anticipate that closing of
the sale of the units will take place on or about December 18, 2007. Investors
will also be informed of the date on which they must transmit the purchase
price into the designated accounts.
We, our officers and
directors have agreed to that for a period of 90 days after the execution of
the Placement Agency Agreement, subject to limited extension in certain
circumstances, we and they will not, without the prior written consent of
Citigroup Global Markets Inc., dispose of or hedge any shares of our common
stock or any securities convertible into or exchangeable for our common stock. Citigroup
Global Markets Inc. in its sole discretion may release any of the securities
subject to these lock-up agreements at any time without notice. If research
reports specific to us are not permitted to be published or distributed under
rules of the Securities and Exchange Commission, the 90-day lock-up period will
be extended to the extent:
|
|
|
during the last 17 days of
the 90-day lock-up period we issue an earnings release or material news or a
material event relating to us occurs; or
|
|
|
|
|
|
|
|
prior to the expiration of
the 90-day lock-up period we announce that we will release earnings results
during the 16-day period beginning on the last day of the 90-day period;
|
in which case the lock-up
restrictions will continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the announcement of the
material news or material event, the announcement of the material news or the
occurrence of a material event, unless such extension is waived in writing by
Citigroup Global Markets Inc.
We have agreed to pay the placement agents an
aggregate placement agents fee equal to seven percent of the gross proceeds
from the sale of the units in this offering. We will also reimburse the
placement agents for certain reasonable expenses incurred by them in connection
with this offering. The following table shows the per share and total placement
agents fee and expenses we will pay to the placement agents in connection with
the sale of the units offered pursuant to this prospectus supplement, the
accompanying prospectus and any free writing prospectus, assuming the purchase
of all of the units offered hereby:
S-9
|
|
Paid by us
|
|
Per unit
|
|
$
|
0.142
|
|
Total
|
|
$
|
1,522,650
|
|
In compliance with the guidelines of FINRA the
maximum consideration or discount to be received by any NASD member may not
exceed eight percent of the aggregate amount of the securities offered pursuant
to this prospectus supplement. The placement agents have informed us that they
will not engage in over-allotment or syndicate covering transactions in
connection with this offering.
In connection with the offering, Citigroup Global
Markets Inc. may purchase and sell shares of our common stock in the open
market. These transactions may include short sales and stabilizing
transactions. These activities may have the effect of preventing or retarding a
decline in the market price of the shares. They may also cause the price of the
shares to be higher than the price that would otherwise exist in the open
market in the absence of these transactions. The placement agents may conduct
these transactions on the Nasdaq Global Market or in the over-the-counter
market, or otherwise. If the placement agents commence any of these
transactions, they may discontinue them at any time.
This is a brief summary of the material provisions
of the Placement Agency Agreement and the subscription agreements and does not
purport to be a complete statement of their terms and conditions. The Placement
Agency Agreement and form of subscription agreement is included as an exhibit
to our Current Report on Form 8-K that will be filed with the Securities and
Exchange Commission prior to the consummation of this offering. See Where You
Can Find More Information in this prospectus.
A
prospectus supplement and the accompanying prospectus in electronic format may
be made available on the websites maintained by one or more of the placement
agents or their affiliates.
Other
than the electronic formats of this prospectus supplement and the accompanying
prospectus made available by the placement agents or their affiliates, the
information contained on, or accessible through, the placement agents websites
or any other website maintained by the placement agents are not part of the
prospectus supplement, the accompanying prospectus, any free writing prospectus
or the registration statement of which this prospectus supplement and the
accompanying prospectus form a part, and has not been approved and/or endorsed
by us and should not be relied upon by investors.
We have agreed to indemnify
the placement agents and certain of their affiliates against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or the Securities Act, and the Securities Exchange Act of 1934, as
amended, or the Exchange Act, or to contribute to payments the placement agents
may be required to make because of any of those liabilities.
The placement agents may,
from time to time, engage in transactions with and perform services for us in
the ordinary course of their business for which they may receive customary
fees.
The transfer agent for our common stock is Mellon
Investor Services LLC.
Our common stock is traded on the Nasdaq Global
Market under the symbol AVII.
DESCRIPTION
OF THE UNIT WARRANTS
Each
unit will include 0.5 common share purchase warrants. The warrants will be
exercisable by the holders at any time on or after June 19, 2008 and through
and including December 18, 2012.
The
warrants will be issued in the form of warrant certificates. The exercise price
per share of common stock purchasable upon exercise of the unit warrant is $2.45
per share of common stock being purchased The warrants will, among other
things, include provisions for the appropriate adjustment in exercise price of
the warrants and the class and number of the common shares to be issued upon
exercise of the warrants upon the occurrence of certain events, including any
subdivision, consolidation or reclassification of our common shares, the
payment of stock dividends, our amalgamation, and certain distributions.
The
common shares underlying the unit warrants, when issued upon exercise of a unit
warrant, will be fully paid and non-assessable, and we will pay any transfer
tax, transfer agent fee, or other incidental tax or expense incurred as a
result of the issuance of common shares to the holder upon its exercise.
We
are not required to issue fractional shares upon the exercise of a warrant. In
lieu of any fractional share that would otherwise be issuable, we will pay the
warrant holder cash equal to the product of such fraction multiplied by the
closing price of one common share as reported on the applicable trading market.
The holder of a warrant will not possess any rights as our shareholder until such
holder exercises the warrant.
At
any time in which the registration statement of which this prospectus is a part
is effective after June 19, 2008, a warrant may be exercised upon delivery to
us, prior to the expiry date of the unit warrant, of the exercise form found on
the back of the warrant certificate completed and executed as indicated,
accompanied by payment of the exercise price in immediately available funds for
the number of common shares with respect to which the unit warrant is being
exercised. At any time in which the registration statement of which this
prospectus is a part is not effective after June 19, 2008 and prior to the
warrant expiry date, by proper election on the exercise form a warrant may be
exercised through a cashless exercise, in which event we will issue to the
holder of the unit warrant a number of shares determined by a formula set forth
in the warrant certificate, which will result in fewer common shares being
issued to the unit warrant holder.
Absent
a waiver by us, the number of shares of our common stock that may be acquired
by a holder upon exercise of a warrant unit is limited to the extent that,
following the exercise, the total number of common shares beneficially owned by
the holder and its affiliates whose beneficial ownership is aggregated with the
holder does not exceed 4.99% of the total number of issued and outstanding
shares of our common stock. In the event a holder waives the foregoing
restriction, a holder can not waive the requirement that the number of shares
of our common stock that may be acquired by a holder upon exercise of a unit warrant
be limited to the extent that, following the exercise, the total number of
common shares beneficially owned by the holder and its affiliates whose
beneficial ownership is aggregated with the holder does not exceed 9.99% of the
total number of issued and outstanding shares of our common stock.
The
foregoing discussion of material terms and provisions of the unit warrants is
qualified in its entirety by reference to the detailed provisions of the
warrant certificate, which will be provided to each purchaser in this offering
and will be filed on a Current Report on Form 8-K in connection with this
offering.
LEGAL
MATTERS
Certain legal matters with respect to the validity
of the securities offered under this prospectus supplement will be passed upon
for us by Davis Wright Tremaine LLP, Portland, Oregon.
EXPERTS
The financial statements of AVI BioPharma, Inc. for
each of the years in the three-year period ended December 31, 2006, and
managements assessment of the effectiveness of internal control over financial
reporting as of December 31, 2006 have been incorporated by reference herein
and in the registration statement in reliance upon the reports of KPMG LLP,
independent registered public accounting firm, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
WHERE YOU
CAN FIND MORE INFORMATION
We are a reporting company and file annual,
quarterly and current reports, proxy statements and other information with the
SEC. We have filed with the SEC a registration statement on Form S-3 under
the Securities Act with respect to the units we are offering under this
prospectus. This prospectus does not contain all of the information set forth
in the registration statement, as amended, and the exhibits to the registration
statement. For further information with respect to us and
S-10
the
securities we are offering under this prospectus, we refer you to the
registration statement, as amended, and the exhibits and schedules filed as a
part of the registration statement. You may read and copy the registration
statement, as amended, as well as our reports, proxy statements and other
information, at the SECs Public Reference Room at Room 100 F Street N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the Public Reference Room. The SEC maintains
an Internet site at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC.
Most of our
SEC filings are also accessed through our website at www.avibio.com.
The SEC allows us to incorporate by reference
information that we file with it, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus. Information
in this prospectus supersedes information incorporated by reference that we filed
with the SEC prior to the date of this prospectus, while information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference into this registration statement and
prospectus the documents listed below and any future filings we will make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this prospectus but prior to the termination of the offering of the
securities covered by this prospectus.
The following documents filed with the SEC are
incorporated by reference in this prospectus:
Our Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2006, including information incorporated by reference in the
Form 10-K from our definitive proxy statement for the 2007 annual meeting
of stockholders, which was filed on April 17, 2007, filed on
November 5, 2007;
Our Current Reports on Form 8-K filed on February 8, 2007, March
14, 2007, March 30, 2007, April 25, 2007, May 8, 2007, August 29, 2007, October
24, 2007, October 30, 2007, and December 5, 2007;
Our Quarterly Reports on Form 10-Q/A for the quarters ended March 31,
2007 and June 30, 2007, as filed on November 5, 2007;
Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2007, which was filed on November 9, 2007; and
The description of our common stock set forth
in our registration statement on Form 8-A filed May 29, 1997.
We will furnish without charge to you, on written or
oral request, a copy of any or all of the documents incorporated by reference,
including exhibits to these documents. You should direct any requests for documents
to:
AVI BioPharma, Inc.
Investor Relations
One S.W. Columbia
Suite 1105
Portland, OR 97258
Attn: Michael C. Hubbard
(503) 227-0554
S-11
10,696,616 Units (each unit consisting
of 1 share of common stock and 0.5 common stock warrants)
5,348,308 shares of common stock issuable
upon exercise of the warrants
P R O S P E C T U S
S U P P L E M E N T
December
12, 2007
Citi
Oppenheimer
& Co.
Maxim
Group, LLC
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