S-4/A 1 d204759ds4a.htm AMENDMENT NO. 3 TO FORM S-4 Amendment No. 3 to Form S-4
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As filed with the Securities and Exchange Commission on October 6, 2011

Registration No. 333-175778

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 3

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

PONIARD PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Washington   2837   91-1261311

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

750 Battery Street, Suite 330

San Francisco, CA 94111

(650) 583-3774

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Ronald A. Martell

750 Battery Street, Suite 330

San Francisco, CA 94111

(650) 583-3774

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

 

James R. Lisbakken, Esq.

Perkins Coie LLP

1201 Third Avenue, Suite 4800

Seattle, Washington 98101-3099

(206) 359-3237

 

Ronald A. Martell

750 Battery Street, Suite 330

San Francisco, CA 94111

(650) 583-3774

 

Stephen M. Graham, Esq.

Fenwick & West LLP

1191 Second Avenue, 10th Floor

Seattle, Washington 98101

(206) 389-4520

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement is declared effective and the satisfaction or waiver of all other conditions under the merger agreement described herein.

 

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

 

¨ Large accelerated filer

  ¨  Accelerated filer     ¨  Non-accelerated filer     x  Smaller reporting company
    (Do not check if a smaller reporting company)  

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

  ¨ Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)
  ¨ Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus/consent solicitation is not complete and may be changed. Poniard may not issue the securities being offered by use of this proxy statement/prospectus/consent solicitation until the registration statement filed with the Securities and Exchange Commission, of which this proxy statement/prospectus/consent solicitation is a part, is effective. This proxy statement/prospectus/consent solicitation is not an offer to sell these securities, nor is it soliciting offers to buy these securities, in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY AND SUBJECT TO COMPLETION, DATED OCTOBER 6, 2011

 

LOGO

  

LOGO

We are furnishing this proxy statement/prospectus/consent solicitation to the holders of Poniard Pharmaceuticals, Inc.’s common stock and to holders of Allozyne, Inc.’s common stock, Series A Preferred Stock, Series B-1 Preferred Stock and Series B-2 Preferred Stock.

The boards of directors of Poniard Pharmaceuticals, Inc., or Poniard, and Allozyne, Inc., or Allozyne, have each unanimously approved the Agreement and Plan of Merger and Reorganization, or the merger agreement, by and among Poniard, Allozyne and FV Acquisition Corp., or the Merger Sub, a direct wholly owned subsidiary of Poniard, pursuant to which the Merger Sub will merge with and into Allozyne and Allozyne will survive the merger as a wholly owned subsidiary of Poniard.

Poniard is soliciting proxies for use at a special meeting of shareholders to consider and vote upon (i) a proposal to approve the issuance of Poniard common stock and the resulting change of control of Poniard pursuant to a merger transaction with Allozyne, (ii) a proposal to approve amendment of Poniard’s amended and restated articles of incorporation to effect a 1-for-40 reverse stock split, and (iii) a proposal to adjourn the special meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of the issuance of the shares or the reverse stock split.

Allozyne is soliciting written consents from its stockholders to consider and vote on a proposal to adopt the merger agreement with Poniard and approve the merger and the other transactions contemplated thereby.

If the merger is consummated, at the effective time of the merger, the outstanding shares of Allozyne common and preferred stock will be converted into the right to receive the number of shares of Poniard common stock representing approximately 65% of the shares of outstanding common stock of the combined company, after giving effect to the issuance of shares pursuant to Allozyne’s and Poniard’s outstanding options, warrants and other securities convertible into capital stock. Each share of Allozyne common stock and Allozyne preferred stock is expected to convert into the right to receive that number of shares of Poniard common stock equal to approximately 0.0628, which is also known as the exchange ratio, after giving effect to the 1-for-40 reverse stock split of Poniard common stock to be implemented upon approval by Poniard’s shareholders and prior to the consummation of the merger. The actual number of shares of Poniard common stock to be issued in respect of each share of Allozyne common stock or preferred stock, or the actual exchange ratio, will be adjusted to reflect Poniard’s and Allozyne’s net cash or net debt and certain permitted financings completed prior to the closing of the merger, divided by the number of shares of Allozyne common stock and Allozyne preferred stock outstanding and deemed outstanding pursuant to the formula set forth in the merger agreement and described in this proxy statement/prospectus/consent solicitation under the heading “The Merger Agreement—Merger Consideration and Adjustment”.

Poniard’s common stock is listed on The NASDAQ Capital Market under the symbol “PARD”. On [], 2011, the last trading day before the date of this proxy statement/prospectus/consent solicitation, the closing sales price of the Poniard common stock was $[] per share. Allozyne is a privately-held company, and there is currently no public market for its securities. Following the merger, the combined company is expected to be renamed Allozyne, Inc. and to change its symbol for trading on The NASDAQ Capital Market to “ALLO”.

This proxy statement/prospectus/consent solicitation provides you with detailed information about Poniard, Allozyne, the merger and the merger agreement. Please give all of the information in this proxy statement/prospectus/consent solicitation your careful attention. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION ENTITLED “RISK FACTORS” BEGINNING ON PAGE 24.

This proxy statement/prospectus/consent solicitation incorporates or refers to important business and financial information about Poniard and Allozyne that is not included in or delivered with this proxy statement/prospectus/consent solicitation. Such information is available without charge to stockholders of Poniard and Allozyne upon oral or written request at the following addresses: Poniard Pharmaceuticals, Inc., Attn: Investor Relations, 750 Battery Street, Suite 330, San Francisco CA 94111, or by telephone (650) 583-3774, and for information concerning Allozyne, Inc., Attn: Chief Financial Officer, 1600 Fairview Ave E., Suite 300, Seattle, WA 98102, or by telephone at (206) 518-5700. To obtain timely delivery, Poniard shareholders must request the information no later than five business days before the date of the special meeting of Poniard shareholders, or no later than November 14, 2011, and Allozyne stockholders must request the information before delivering their signed written consent, which must be delivered to Allozyne no later than November 21, 2011.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares to be issued under this proxy statement/prospectus/consent solicitation or passed upon the adequacy or accuracy of this proxy statement/prospectus/consent solicitation. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus/consent solicitation is dated [], 2011 and was first mailed to shareholders of Poniard and stockholders of Allozyne on or about [], 2011.

 

 


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Poniard Pharmaceuticals, Inc.

750 Battery Street, Suite 330

San Francisco, CA 94111

(650) 583-3774

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON NOVEMBER 21, 2011

TO THE SHAREHOLDERS OF PONIARD PHARMACEUTICALS, INC.:

NOTICE IS HEREBY GIVEN that Poniard Pharmaceuticals, Inc., a Washington corporation, will hold a special meeting of its shareholders on November 21, 2011 at 9:00 a.m., Pacific Time, at the offices of Bay City Capital, located at 750 Battery Street, Suite 400, San Francisco, California 94111, for the following purposes:

1. To consider and vote upon a proposal to approve the issuance of Poniard common stock and the resulting change of control of Poniard pursuant to the Agreement and Plan of Merger and Reorganization dated as of June 22, 2011, by and among Poniard, the Merger Sub and Allozyne, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus/consent solicitation.

2. To consider and vote upon a proposal to approve the amendment of Poniard’s amended and restated articles of incorporation to effect a reverse stock split of Poniard’s outstanding common stock, at a ratio of 1-for-40.

3. To consider and vote upon an adjournment of the Poniard special meeting of shareholders, if necessary, to solicit additional votes if there are not sufficient votes in favor of Proposal Nos. 1 and 2.

4. To consider and act upon such other business and matters or proposals as may properly come before the special meeting or any adjournments or postponements thereof.

The board of directors of Poniard has fixed October 4, 2011 as the record date for determining which shareholders have the right to receive notice of and to vote at the Poniard special meeting of shareholders or any adjournments or postponements thereof. Only holders of record of shares of Poniard common stock at the close of business on the record date have the right to receive notice of and to vote at the Poniard special meeting of shareholders. At the close of business on the record date, Poniard had [] shares of common stock outstanding and entitled to vote.

Your vote is important. The affirmative vote of the holders of a majority of the voting power of the shares of Poniard common stock casting votes in person or by proxy at the Poniard special meeting of shareholders is required for approval of Poniard Proposal No. 1. The affirmative vote of the holders of a majority of the common shares having voting power outstanding on the record date of the Poniard special meeting is required for approval of Poniard Proposal No. 2. Approval of Proposal No. 3 requires that the votes cast “FOR” Proposal No. 3 by the shares of Poniard common stock present in person or by proxy at the Poniard special meeting exceed the votes cast “AGAINST” Proposal No. 3 at the Poniard special meeting.

Whether or not you plan to attend the Poniard special meeting of shareholders, please complete, sign and date the enclosed proxy and return it promptly in the enclosed postage-paid return envelope. You may revoke the proxy at any time before its exercise in the manner described in the accompanying proxy statement/prospectus/consent solicitation. Any shareholder present at the Poniard special meeting of shareholders, including any adjournments or postponements of the meeting, may revoke such shareholder’s proxy and vote personally on the matters to be considered at the Poniard special meeting. Executed proxies with no instructions indicated thereon will be voted “FOR” each of the proposals outlined above.

This proxy statement/prospectus/consent solicitation describes the merger agreement and the actions to be taken in connection with the merger and provides additional information about the parties involved. Please give this information your careful attention.

THE PONIARD BOARD OF DIRECTORS HAS DETERMINED THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO AND IN THE BEST INTERESTS OF PONIARD AND ITS SHAREHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE PONIARD BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PONIARD SHAREHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

 

BY ORDER OF THE BOARD OF DIRECTORS

[]

Corporate Secretary

San Francisco, California

[], 2011


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Allozyne, Inc.

1600 Fairview Ave E., Suite 300

Seattle, WA 98102

(206) 518-5700

NOTICE OF SOLICITATION OF WRITTEN CONSENT

TO THE STOCKHOLDERS OF ALLOZYNE, INC.:

Allozyne, Inc., a Delaware of corporation, has entered into Agreement and Plan of Merger and Reorganization dated as of June 22, 2011, by and among Poniard, the Merger Sub and Allozyne, a copy of which is attached as Annex A to the accompanying proxy statement/prospectus/consent solicitation, pursuant to which the Merger Sub would merge with and into Allozyne, with Allozyne surviving the merger as a wholly owned subsidiary of Poniard, and pursuant to which Poniard would issue shares of common stock to the stockholders of Allozyne, resulting in a change of control of Poniard.

This proxy statement/prospectus/consent solicitation is being delivered to you on behalf of the Allozyne board of directors to request that holders of Allozyne common stock and preferred stock as of October 7, 2011, or the record date, execute and return written consents to approve the merger and adopt and approve the merger agreement and the transactions contemplated thereby.

As a record holder of outstanding Allozyne common stock or preferred stock on the record date, you are urged to complete, date and sign the enclosed written consent and promptly return it to Allozyne. The Allozyne board of directors has set November 21, 2011 as the target final date for receipt of written consents. Allozyne reserves the right to extend the final date for receipt of written consents without any prior notice to stockholders.

This proxy statement/prospectus/consent solicitation describes the merger agreement and the actions to be taken in connection with the merger and provides additional information about the parties involved. Please give this information your careful attention. A summary of the appraisal rights that may be available to you is provided in the section entitled “The Merger—Appraisal Rights” on page 101 of this proxy statement/prospectus/consent solicitation.

Written consents from the holders of (i) a majority of the shares of Allozyne common stock, (ii) a majority of the shares of Allozyne common stock and preferred stock and (iii) at least three-fourths of the outstanding shares of Allozyne preferred stock, voting together as a single class on an as-converted-to-common stock basis, each outstanding on the applicable record date, are required to approve the merger and adopt and approve the merger agreement and the transactions contemplated thereby.

Regardless of the number of shares you own, your written consent is important. Please complete, date and sign the written consent furnished with this proxy statement/prospectus/consent solicitation and return it promptly to Allozyne by one of the means described in “Solicitation of Allozyne Written Consent—Submission of Consents” on page 61 of this proxy statement/prospectus/consent solicitation. You may change or revoke your consent to a proposal at any time before the consents of holders of a sufficient number of shares to approve and adopt such proposal have been filed with the corporate secretary of Allozyne.

THE ALLOZYNE BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE MERGER AND THE TERMS OF THE MERGER AGREEMENT AND HAS DETERMINED THAT THE MERGER IS FAIR, ADVISABLE AND IN THE BEST INTERESTS OF ALLOZYNE AND ITS STOCKHOLDERS. ACCORDINGLY, THE ALLOZYNE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ALLOZYNE STOCKHOLDERS APPROVE THE MERGER AND ADOPT AND APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY BY EXECUTING AND DELIVERING THE WRITTEN CONSENT FURNISHED WITH THIS PROXY STATEMENT/PROSPECTUS/CONSENT SOLICITATION.

 

BY ORDER OF THE BOARD OF DIRECTORS

[]

 

Corporate Secretary

Seattle, Washington

[], 2011


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER

     vi   

Questions and Answers Regarding the Merger

     vi   

Questions and Answers for Poniard Shareholders

     ix   

Questions and Answers for Allozyne Stockholders

     xi   

SUMMARY

     1   

The Companies

     1   

The Merger (see page 63)

     2   

Reasons for the Merger (see page 70)

     3   

Risks Related to the Proposed Merger (see page 24)

     6   

Opinion of the Poniard Financial Advisor (see page 76)

     6   

Overview of the Merger Agreement (see page 105)

     7   

Shareholder Agreements/Stockholder Agreements (see page 120)

     10   

Directors and Officers of Poniard Following the Merger (see page 110)

     11   

Interests of Certain Persons in the Merger (see page 85 and page 93)

     11   

Assumption of Allozyne Stock Options and Warrants (see page 110)

     13   

Material United States Federal Income Tax Consequences of the Merger (see page 99)

     13   

Regulatory Approvals (see page 98)

     14   

NASDAQ Capital Market Listing (see page 96)

     14   

Anticipated Accounting Treatment (see page 101)

     14   

Appraisal Rights in Connection with the Merger (see page 101 and Annex B)

     14   

Comparison of Rights of Holders of Poniard Capital Stock and Allozyne Capital Stock (see page 197)

     15   

SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     16   

Selected Historical Financial Data of Poniard

     16   

Selected Historical Financial Data of Allozyne

     17   

Selected Unaudited Pro Forma Condensed Combined Financial Data of Poniard and Allozyne

     18   

Comparative Historical and Unaudited Pro Forma Per Share

     19   

MARKET PRICE AND DIVIDEND INFORMATION

     21   

Poniard

     21   

Allozyne

     23   

Dividends

     23   

RISK FACTORS

     24   

Risks Related to the Proposed Merger

     24   

Risks Related to Poniard

     27   

Risks Related to Poniard Common Stock

     33   

Risks Related to Allozyne’s Business

     39   

Risks Related to the Combined Company’s Common Stock

     54   

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     57   

MARKET AND INDUSTRY DATA

     57   

THE SPECIAL MEETING OF PONIARD SHAREHOLDERS

     58   

Date, Time and Place

     58   

Purposes of the Poniard Special Meeting of Shareholders

     58   

Recommendation of Poniard’s Board of Directors

     58   

Record Date and Voting Power

     58   

Voting and Revocation of Proxies

     58   

 

i


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(continued)

 

     Page  

Required Vote

     59   

Solicitation of Proxies

     60   

Other Matters

     60   

SOLICITATION OF ALLOZYNE WRITTEN CONSENT

     61   

Allozyne Stockholder Action by Written Consent

     61   

Shares Entitled to Consent and Consent Required

     61   

Submission of Consents

     61   

Executing Consents; Revocation of Consents

     62   

Solicitation of Consents; Expense

     62   

Recommendation of the Allozyne Board

     62   

Stockholder Agreements

     62   

THE MERGER

     63   

General Description of the Merger

     63   

Background of the Merger

     63   

Reasons for the Merger

     70   

Opinion of the Poniard Financial Advisor

     76   

Board of Directors and Officers of the Combined Company

     84   

Interests of Poniard’s Executive Officers and Directors in the Merger

     85   

Interests of Allozyne’s Directors and Executive Officers in the Merger

     93   

Stock Options and Warrants

     95   

Form of the Merger; NASDAQ Capital Market Listing

     96   

Merger Consideration and Adjustment

     96   

Effective Time of the Merger

     98   

Regulatory Approvals

     98   

Material United States Federal Income Tax Consequences of the Merger

     99   

Anticipated Accounting Treatment

     101   

Appraisal Rights

     101   

THE MERGER AGREEMENT

     105   

General

     105   

Effective Time of the Merger

     105   

Merger Consideration and Adjustment

     105   

Assumption of Allozyne Stock Options and Warrants

     110   

Directors and Officers of Poniard Following the Merger

     110   

Conditions to Completion of the Merger

     111   

No Solicitation

     113   

Meetings of Stockholders

     114   

Covenants; Conduct of Business Pending the Merger

     115   

Other Agreements

     116   

Termination

     117   

Termination Fee

     119   

Representations and Warranties

     119   

Amendment

     120   

Other Agreements Related to the Merger Agreement

     120   

ALLOZYNE’S BUSINESS

     124   

Overview

     124   

Biociphering™ Platforms

     125   

 

ii


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(continued)

 

     Page  

Product Candidates and Recent Developments

     128   

AZ01

     128   

AZ17

     132   

AZ05

     133   

Allozyne’s Business Strategy

     133   

Competition

     134   

Intellectual Property

     134   

Manufacturing

     138   

Government Regulation

     139   

Reimbursement

     142   

Employees

     142   

Properties

     142   

Legal Proceedings

     143   

Securities Authorized for Issuance Under Allozyne’s Equity Compensation Plan

     143   

Corporate Background

     143   

ALLOZYNE’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     144   

Overview

     144   

Critical Accounting Policies and Significant Judgments and Estimates

     146   

Financial Operations Overview

     152   

Results of Operations

     153   

Liquidity and Capital Resources

     156   

Related-Party Transactions

     159   

Off-Balance Sheet Arrangements

     159   

Recently Issued Accounting Pronouncements

     159   

Impact of Inflation

     159   

MANAGEMENT OF THE COMBINED COMPANY

     161   

Executive Officers and Directors of the Combined Company Following the Merger

     161   

Director Independence

     163   

Committees of the Board of Directors

     164   

Audit Committee

     164   

Compensation Committee

     164   

Nominating and Corporate Governance Committee

     165   

Executive Compensation

     165   

Compensation of Directors

     170   

PRINCIPAL SHAREHOLDERS OF PONIARD

     173   

PRINCIPAL STOCKHOLDERS OF ALLOZYNE

     175   

PRINCIPAL SHAREHOLDERS OF THE COMBINED COMPANY

     179   

RELATED PARTY TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER

     184   

Allozyne Transactions

     184   

Poniard Transactions

     184   

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     185   

 

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(continued)

 

     Page  

DESCRIPTION OF PONIARD CAPITAL STOCK

     194   

Common Stock

     194   

Preferred Stock

     194   

Antitakeover Effects of Certain Provisions of Articles of Incorporation, Bylaws and Washington Law

     194   

Transfer Agent and Registrar

     196   

NASDAQ Capital Market

     196   

COMPARISON OF RIGHTS OF HOLDERS OF PONIARD CAPITAL STOCK AND ALLOZYNE CAPITAL STOCK

     197   

Authorized Capital Stock

     197   

Redemption

     198   

Dividends

     198   

Rights on Liquidation

     198   

Conversion Rights

     199   

Stockholder Approval Rights

     200   

Number of Directors and Election

     202   

Removal of Directors

     203   

Stockholder Action by Written Consent

     204   

Amendment of Charter

     204   

Amendment of Bylaws

     204   

Voting Rights

     205   

Cumulative Voting

     205   

Limitation of Personal Liability of Directors

     206   

Indemnification of Officers and Directors

     206   

Special Meeting of Stockholders

     206   

Notice of Stockholder Meeting

     207   

Quorum of Stockholder Meetings

     207   

Inspection of Stockholder Lists

     207   

Stockholder Preemptive Rights

     208   

Rights of Dissenting Stockholders

     208   

Applicable State Takeover Laws

     209   

MATTERS TO BE PRESENTED TO THE PONIARD SHAREHOLDERS

     212   

PONIARD’S BUSINESS

     219   

Overview

     219   

Picoplatin and Platinum-Based Chemotherapeutics

     219   

Patents and Proprietary Rights

     226   

Competition

     228   

Government Regulation and Product Testing

     229   

Employees

     231   

Properties

     231   

Legal Proceedings

     231   

Changes in and Disagreements with Accountants

     232   

Corporate Background

     233   

Available Information

     233   

 

iv


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TABLE OF CONTENTS

(continued)

 

     Page  

PONIARD’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     234   

Important Information Regarding Forward-Looking Statements

     234   

General

     234   

Results of Operations

     236   

Results of Operations

     245   

Contractual Obligations and Off-Balance Sheet Arrangements

     253   

Critical Accounting Policies and Estimates

     253   

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT THE MARKET RISK OF PONIARD

     254   

LEGAL MATTERS

     255   

EXPERTS

     255   

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     255   

Information on Websites

     256   

OTHER MATTERS

     256   

Shareholder Proposals

     256   

HOUSEHOLDING OF PROXY MATERIALS

     257   

INDEX TO PONIARD FINANCIAL STATEMENTS

     F-1   

INDEX TO ALLOZYNE FINANCIAL STATEMENTS

     F-50   

ANNEXES

     A-1   

ANNEX A AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, DATED JUNE  22, 2011, BY AND AMONG PONIARD PHARMACEUTICALS, INC., ALLOZYNE, INC, AND FV ACQUISITION CORP.

     A-A-1   

ANNEX B SECTION 262 OF DELAWARE GENERAL CORPORATION LAW APPRAISAL RIGHTS

     A-B-1   

ANNEX C ALLOZYNE FORM OF STOCKHOLDER AGREEMENT AND IRREVOCABLE PROXY

     A-C-1   

ANNEX D PONIARD FORM OF SHAREHOLDER AGREEMENT AND IRREVOCABLE PROXY

     A-D-1   

ANNEX E OPINION OF LEERINK SWANN LLC

     A-E-1   

ANNEX F FORM OF ARTICLES OF AMENDMENT TO PONIARD’S AMENDED AND RESTATED ARTICLES OF INCORPORATION TO EFFECT 1-for-40 REVERSE STOCK SPLIT

     A-F-1   

ANNEX G CHAPTER 23B.13 OF THE WASHINGTON BUSINESS CORPORATION ACT. DISSENTERS’ RIGHTS

     A-G-1   

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus/consent solicitation does not give effect to the reverse stock split described in Poniard Proposal No. 2, beginning on page 212 in this proxy statement/prospectus/consent solicitation.

The following section provides answers to frequently asked questions about the merger and the effect of the merger on holders of Poniard common stock and Allozyne common and preferred stock, the Poniard special meeting of shareholders and the Allozyne stockholder action by written consent. This section, however, only provides summary information. Poniard and Allozyne urge you to read carefully the remainder of this proxy statement/prospectus/consent solicitation, including the annexes to this proxy statement/prospectus/consent solicitation, because the information in this section does not provide all the information that might be important to you regarding the merger and the other matters being considered at the Poniard special meeting of shareholders and by the Allozyne stockholder action by written consent.

As used in this proxy statement/prospectus/consent solicitation, references to “Poniard” refer collectively to Poniard Pharmaceuticals, Inc. and its subsidiaries unless the context requires otherwise, references to “Allozyne” refer to Allozyne, Inc., and references to the “combined company” refer to Poniard following the proposed transaction described in this proxy statement/prospectus/consent solicitation and the anticipated change of Poniard’s name to “Allozyne, Inc.”

Questions and Answers Regarding the Merger

Q: What is the transaction?

A: Poniard, Allozyne and the Merger Sub, a wholly owned subsidiary of Poniard, have entered into an Agreement and Plan of Merger and Reorganization dated as of June 22, 2011, which is referred to in this proxy statement/prospectus/consent solicitation as the merger agreement, that contains the terms and conditions of the proposed business combination of Poniard and Allozyne. Pursuant to the terms and conditions of the merger agreement, the Merger Sub will be merged with and into Allozyne, with Allozyne surviving the merger as a wholly owned subsidiary of Poniard.

At the effective time of the merger, the outstanding shares of Allozyne capital stock will be converted into shares of Poniard common stock. As a result of the merger, holders of Allozyne common stock and preferred stock, options and warrants are expected to own or have the right to acquire in the aggregate approximately 65% of the combined company and the holders of Poniard common stock, preferred stock, options, warrants and restricted stock units, or RSUs, are expected to own or have the right to acquire in the aggregate approximately 35% of the combined company, both after giving effect to the issuance of shares pursuant to Allozyne’s and Poniard’s outstanding options, warrants and other securities convertible into capital stock. At the effective time of the merger, Poniard will change its corporate name to “Allozyne, Inc.”

Q: Why am I receiving this proxy statement/prospectus/consent solicitation?

A: You are receiving this proxy statement/prospectus/consent solicitation because you have been identified as a stockholder of Poniard or Allozyne. If you are a shareholder of Poniard, you are entitled to vote at Poniard’s special meeting of shareholders. If you are a stockholder of Allozyne, you are entitled to vote by signing the Allozyne stockholder action by written consent, or the written consent. This document serves as a proxy statement of Poniard, used to solicit proxies for Poniard’s special meeting of shareholders, as a consent solicitation of Allozyne, and as a prospectus of Poniard, used to offer shares of Poniard common stock to Allozyne stockholders in exchange for shares of Allozyne capital stock pursuant to the terms of the merger agreement. This document contains important information about the merger, the shares of Poniard common stock to be issued in the merger and the special meeting of Poniard shareholders, and you should read it carefully.

 

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Q: Why are the two companies proposing to merge?

A: The combined company that results from the merger will be a biotechnology company focused on developing and commercializing therapeutics in the areas of autoimmune and inflammatory disease and cancer. The combined company will have several potential advantages, including a new technology platform with product candidates in the pipeline, expected access to sufficient capital to fund its projected operating requirements for the foreseeable future and a proven and experienced management team.

Q: Who is paying for this proxy solicitation and consent solicitation?

A: Poniard and Allozyne are conducting this proxy/consent solicitation and will each bear their own costs of the proxy/consent solicitation, including the preparation, assembly, printing and mailing of this proxy statement/prospectus/consent solicitation, the proxy card and any additional information furnished to Poniard shareholders. Poniard and Allozyne will each bear its own legal expenses. Poniard has engaged and will pay D.F. King & Co. and BNY Mellon Shareowner Services, both proxy solicitation firms, to solicit proxies from Poniard shareholders. Poniard may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their costs of forwarding proxy and solicitation materials to beneficial owners.

Q: What is required to consummate the merger?

A: To consummate the merger, Poniard shareholders must approve the issuance of shares of Poniard common stock in the merger and the resulting change of control of Poniard and the amendment of the amended and restated articles of incorporation of Poniard effecting the reverse stock split, and Allozyne stockholders must approve and adopt the merger agreement and the merger contemplated in the merger agreement.

The approval by the shareholders of Poniard requires the affirmative vote of the holders of a majority of the voting power of the shares of Poniard common stock casting votes in person or by proxy at the Poniard special meeting for the issuance of shares of Poniard common stock in the merger and the resulting change of control of Poniard, and the affirmative vote of the holders of a majority of the common stock having voting power outstanding on the record date of the Poniard special meeting for the reverse stock split. The approval of the proposal to adjourn the meeting, if necessary, to solicit additional proxies will be approved if the number of votes cast “FOR” the adjournment proposal exceeds the number of votes cast “AGAINST” the adjournment proposal at the Poniard special meeting of shareholders. The approval by the stockholders of Allozyne requires the affirmative vote of the holders of at least (i) a majority of the shares of Allozyne common stock, (ii) a majority of the shares of Allozyne common stock and preferred stock, voting together as a single class, and (iii) at least three-fourths of the shares of Allozyne preferred stock, voting together as a single class on an as-converted-to-common stock basis, each outstanding on the applicable record date, for the merger, the merger agreement and the transactions contemplated thereby.

Concurrent with and as a condition to execution of the merger agreement, certain Allozyne stockholders have entered into stockholder agreements with and granted irrevocable proxies in favor of Poniard to vote shares representing approximately 65% of the outstanding capital stock of Allozyne for approval of the merger and the merger agreement and against any competing acquisition proposals, subject to the terms of the stockholder agreement. In addition, certain Poniard shareholders have entered into shareholder agreements with and granted irrevocable proxies in favor of Allozyne to vote shares representing approximately 21% of the outstanding common stock of Poniard for approval of the merger and the merger agreement and against any competing acquisition proposals, subject to the terms of the shareholder agreement.

In addition to the requirement of obtaining such stockholder approvals and appropriate regulatory approvals, each of the other closing conditions set forth in the merger agreement must be satisfied or waived. For a more complete description of the closing conditions under the merger agreement, we urge you to read the section entitled “The Merger Agreement—Conditions to Completion of the Merger” on page 111 of this proxy statement/prospectus/consent solicitation.

 

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Q: When do Poniard and Allozyne expect to complete the merger?

A: Poniard and Allozyne are working to complete the merger during the fourth quarter of 2011, or as soon thereafter as reasonably possible. Poniard and Allozyne must first obtain the necessary approvals, including, but not limited to, the approval of each company’s stockholders, and satisfy the closing conditions described in the merger agreement. Neither Poniard nor Allozyne can assure you as to if all the conditions to the merger will be met nor can Poniard or Allozyne predict the exact timing of the closing of the merger. It is possible Poniard and Allozyne will not complete the merger.

Q: What are the material U.S. federal income tax consequences of the merger to me?

A: The merger has been structured to qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. As a result of the merger’s qualification as a reorganization, it is anticipated that Allozyne stockholders will not recognize gain or loss for U.S. federal income tax purposes upon the exchange of shares of Allozyne common and preferred stock for shares of Poniard common stock, except with respect to cash received in lieu of fractional shares of Poniard common stock and except for Allozyne stockholders who exercise their appraisal rights with respect to the merger.

Tax matters are very complicated, and the tax consequences of the merger to a particular stockholder will depend in part on such stockholder’s circumstances. Accordingly, you should consult your tax advisor for a full understanding of the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax consequences. For more information, please see the section entitled “The Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 99 of this proxy statement/prospectus/consent solicitation.

Q: Who will be the directors of the combined company following the merger?

A: Following the merger, the board of directors of the combined company is expected to initially be comprised of seven directors, four of whom are currently directors of Allozyne and two of whom are currently directors of Poniard. The current directors of Allozyne that are expected to become directors of the combined company are Meenu Chhabra, Steven Gillis, Ph.D., Michael Steinmetz, Ph.D., and Carl Weissman. The current directors of Poniard that are expected to become directors of the combined company are Ronald Martell and Fred B. Craves, Ph.D. Further, one additional independent director will be recruited to serve on the board of directors of the combined company.

Q: Who will be the executive officers of the combined company following the merger?

A: Following the merger, the executive management team of the combined company is expected to be comprised of Allozyne’s executive management team prior to the merger and is contemplated to include each of the following individuals serving in the position set forth opposite his or her name. Each of the following individuals currently serves in the same position with Allozyne:

 

Name:    Position in the Combined Company:

Meenu Chhabra

   President and Chief Executive Officer

John Bencich

   Chief Financial Officer, Treasurer and Secretary

Kenneth H. Grabstein, Ph.D.

   Chief Scientific Officer

Q: What risks should I consider in deciding whether to vote in favor of the proposals?

A: You should carefully review the section of this proxy statement/prospectus/consent solicitation entitled “Risk Factors” beginning on page 24, which sets forth certain risks and uncertainties related to the merger, risks and uncertainties to which the combined company’s business will be subject, and risks and uncertainties to which each of Poniard and Allozyne, as an independent company, is subject.

 

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Q: Who can help answer my questions?

A: If you are a Poniard shareholder and would like additional copies, without charge, of this proxy statement/prospectus/consent solicitation or if you have questions about the merger, including the procedures for voting your shares, you should contact:

Solicitation Agent:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Tel: (800) 967-7635

If you are an Allozyne stockholder and would like additional copies, without charge, of this proxy statement/prospectus/consent solicitation or if you have questions about the merger, including the procedures for signing the stockholder action by written consent, you should contact:

Allozyne, Inc.

1600 Fairview Ave E., Suite 300

Seattle, WA 98102

Tel: (206) 518-5700

Attn: Chief Financial Officer

You may also obtain additional information about Poniard from documents filed with the Securities and Exchange Commission by following the instructions in the section entitled “Where You Can Find Additional Information” on page 255.

Questions and Answers for Poniard Shareholders

Q: What do Poniard shareholders need to do now?

A: You should read this proxy statement/prospectus/consent solicitation carefully, including its annexes, and consider how the merger affects you and then vote your shares either in person at the Poniard special meeting or by proxy.

If you are a Poniard shareholder, you may provide your proxy instructions in one of three different ways. First, you can mail your signed proxy card in the enclosed return envelope. Alternatively, you can provide your proxy instructions via the toll-free call center set up for this purpose by calling the toll-free number on your proxy card and follow the instructions. Please have your proxy card available when you call. You will be prompted to enter the control number from your proxy card that will identify you as a shareholder of record. If you vote by telephone, you do not need to return your proxy card. Finally, you can provide your proxy instructions via the Internet at the web address shown on your proxy card by following the on-screen instructions. Please have your proxy card available when you access the web page. You will be prompted to enter the control number from your proxy card that will identify you as a shareholder of record. If you vote over the Internet, you do not need to return your proxy card. Please provide your proxy instructions only once and as soon as possible so that your shares can be voted at the special meeting of Poniard shareholders. Poniard shareholders may also attend the Poniard special meeting of shareholders in person. Poniard urges you to vote by proxy to ensure your vote is counted. You may still attend the Poniard special meeting of shareholders and vote in person even if you have already voted by proxy.

Q: As a Poniard shareholder, how does Poniard’s board of directors recommend that I vote?

A: After careful consideration, Poniard’s board of directors recommends that Poniard shareholders vote:

 

   

“FOR” Proposal No. 1 to approve the issuance of shares of Poniard common stock and the resulting change of control of Poniard in the merger;

 

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“FOR” Proposal No. 2 to approve articles of amendment to the articles of incorporation of Poniard to effect a 1-for-40 reverse stock split of the Poniard common stock; and

 

   

“FOR” Proposal No. 3 to adjourn the Poniard special meeting, if necessary, if a quorum is present, to solicit additional proxies to vote in favor or Proposal Nos. 1 and 2.

Q: What happens if I do not return a Poniard proxy card or otherwise provide proxy instructions?

A: If you are a Poniard shareholder, the failure to return your proxy card or otherwise provide proxy instructions will have the same effect as voting against the reverse stock split set out in Poniard Proposal No. 2. The reverse stock split is required in order to satisfy certain conditions to closing of the merger.

Q: May I vote in person?

A: If your shares of Poniard common stock are registered directly in your name with Poniard’s transfer agent, you are considered, with respect to those shares, the shareholder of record, and the proxy materials and proxy card are being sent directly to you. If you are a Poniard shareholder of record as of October 4, 2011, you may attend the special meeting of Poniard shareholders to be held on November 21, 2011 and vote your shares in person, rather than signing and returning your proxy card or otherwise providing proxy instructions. However, we urge you to return your proxy voting instructions in any event, just in case your plans should change.

If your shares of Poniard common stock are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in “street name,” and the proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you are also invited to attend the special meeting of Poniard shareholders. Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the special meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.

Q: If my shares are held in “street name” by my broker, will my broker vote my Poniard shares for me?

A: Unless your broker has discretionary authority to vote on certain matters, your broker will not be able to vote your shares of Poniard common stock without instruction forms from you. Brokers are not expected to have discretionary authority to vote for Poniard Proposal Nos. 1 and 2. To make sure your vote is counted, you should instruct your broker as to how to vote your shares, following the instructions contained in the voting instructions card that your broker provides to you.

Q: May I change my vote after I have provided proxy instructions?

A: Yes. If you have not voted through your broker, there are three ways for you to revoke your proxy and change your vote. First, you may send a written notice to Poniard’s corporate secretary stating that you would like to revoke your proxy. Second, you may complete and submit a new proxy card, but it must bear a later date than the original proxy. Third, you may attend and vote in person at the special meeting of Poniard shareholders. Your attendance alone will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow the directions you receive from your broker to change your vote. Your last vote will be the vote that is counted.

Q: What happens to Poniard if the merger is not ultimately completed?

A: Poniard will have very limited cash resources, and if no alternate transaction can be negotiated and completed within a short period of time it will, unless it can raise additional capital, likely be forced to file for federal bankruptcy protection. In that event, the creditors of Poniard would have first claim on the value of the assets of Poniard which, other than limited remaining cash, would most likely be liquidated in a bankruptcy sale. Poniard can give no assurance as to the magnitude of the net proceeds of such a sale and whether such proceeds would be sufficient to satisfy Poniard’s obligations to its creditors, let alone to permit any distribution to its equity holders.

 

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Q: Are Poniard shareholders entitled to dissenters’ rights?

A: Under Washington law, holders of Poniard common stock are entitled to dissenters’ rights for any amendment to Poniard’s articles of incorporation that materially reduces the number of shares owned by a Poniard shareholder to a fraction of a share, if the fractional share created by the amendment is to be acquired by Poniard for cash. As a result, any shareholder who is entitled to receive only a fractional share in the reverse stock split may be entitled to judicial appraisal of the “fair value” of his or her fractional share. In order to be entitled to dissenters’ rights under Washington law, a Poniard shareholder must not vote in favor of the reverse stock split and must meet other conditions set out in the applicable statute. Poniard refers you to the information under the heading “Matters to be Presented to the Poniard Shareholders—Dissenters’ Rights” on page 216 this proxy statement/prospectus/consent solicitation and to the applicable Washington statute attached as Annex G to this proxy statement/prospectus/consent solicitation for information on how to exercise your dissenters’ rights. Failure to follow all of the steps required under the Washington law will result in the loss of your dissenters’ rights.

Poniard shareholders do not have any dissenters’ rights in connection with the issuance of shares of Poniard common stock in connection with the merger.

Questions and Answers for Allozyne Stockholders

Q: Who is soliciting my written consent?

A: The Allozyne board of directors is providing these consent solicitation materials to you. These materials constitute a prospectus with respect to the Poniard common stock issuable to Allozyne stockholders in the merger.

Q: What am I being asked to approve?

A: You are being asked to approve the merger and adopt the merger agreement and the transactions contemplated thereby.

Q: What happens to Allozyne if the merger is not ultimately completed?

A: If the merger is not completed, Allozyne is likely to continue as an independent privately held company for the foreseeable future. That said, Allozyne will have very limited cash resources. While Allozyne has in the past successfully raised capital from venture capital funds and private investors, Allozyne can give no assurance that it will be able to do so in the future. If no acceptable financing transaction can be negotiated and completed within a short period of time, Allozyne may be required to sell its securities or assets, or agree to be acquired, on terms that may not be favorable to Allozyne or to its stockholders.

Q: Who is entitled to give a written consent?

A: The Allozyne board of directors has set October 7, 2011 as the record date for determining holders of Allozyne common stock and preferred stock entitled to execute and deliver written consent with respect to this solicitation. Holders of Allozyne common stock and preferred stock on the record date will be entitled to give a consent using the written consent furnished with this proxy statement/prospectus/consent solicitation. If you are an Allozyne stockholder on the record date, you will be able to give or withhold a consent, or abstain, on each proposal on which you are entitled to vote, using the written consent furnished with this proxy statement/prospectus/consent solicitation.

Q: What do Allozyne stockholders need to do now?

A: Allozyne urges you to read this proxy statement/prospectus/consent solicitation carefully, including its annexes, and consider how the merger affects you. Allozyne stockholders are being asked to sign and return the written consent. Allozyne is not asking Allozyne stockholders for a proxy and Allozyne stockholders are not requested to send Allozyne a proxy.

 

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Q: What options do I have with respect to the Allozyne proposal?

A: With respect to the shares of Allozyne common stock and preferred stock that you hold, you may execute a written consent to approve the proposed merger and the terms of the merger agreement proposal (which is equivalent to a vote for the proposal) or to disapprove such proposal (which is equivalent to a vote against the proposal). If you fail to execute and return your written consent, it has the same effect as voting against the proposal.

Q: How can I return my Allozyne written consent?

A: If you hold shares of Allozyne common stock or preferred stock as of the record date and you wish to submit your consent, you must fill out the enclosed written consent, date and sign it, and promptly return it to Allozyne. Once you have completed, dated and signed your written consent, deliver it to Allozyne by faxing it to Allozyne’s legal counsel, Fenwick & West LLP, Attention: Ellen Welichko, at (206) 389-4511, by emailing a pdf copy of your written consent to ewelichko@fenwick.com, or by mailing your written consent to Fenwick & West LLP at 1191 Second Avenue, 10th Floor, Seattle, Washington 98101, Attention: Ellen Welichko.

Allozyne will not be holding a stockholders’ meeting to consider these proposals, and therefore you will be unable to vote by attending a stockholders’ meeting.

Q: What happens if I do not return my Allozyne written consent?

A: If you are a record holder of shares of Allozyne common stock or preferred stock and you do not return your written consent, that will have the same effect as a vote against the proposals.

Q: Will my rights as a Poniard shareholder be different from my rights as an Allozyne stockholder?

A: Yes. Upon completion of the merger, each stockholder of Allozyne, a Delaware corporation, will become a shareholder of Poniard, a Washington corporation. There are important differences between the rights of shareholders of Poniard and stockholders of Allozyne. Please carefully review the description of these differences in the section of this proxy statement/prospectus/consent solicitation entitled “Comparison of Rights of Holders of Poniard Capital Stock and Allozyne Capital Stock” beginning on page 197.

Q: Should I send in my stock certificates now?

A: No. If you are an Allozyne stockholder, after the merger is consummated, you will receive written instructions from the exchange agent for exchanging your certificates representing shares of Allozyne capital stock for certificates representing shares of Poniard common stock.

Q: As an Allozyne stockholder, how does Allozyne’s board of directors recommend that I vote?

A: After careful consideration, Allozyne’s board of directors has approved the merger and the terms of the merger agreement, and has determined that they are advisable, fair to and in the best interests of Allozyne stockholders. Accordingly, Allozyne’s board of directors recommends that Allozyne’s stockholders approve such proposal by written consent.

Q: Are Allozyne stockholders entitled to appraisal rights?

A: Under Delaware law, holders of Allozyne common stock and preferred stock are entitled to appraisal rights in connection with the merger. If you do not wish to accept shares of Poniard common stock in the merger and you do not approve the merger in the Allozyne stockholder action by written consent, you have the right under Delaware law to seek from Allozyne the “fair value” of your shares in lieu of the Poniard common stock you would receive if the merger is completed. Allozyne refers you to the information under the heading “The

 

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Merger—Appraisal Rights” on page 101 of this proxy statement/prospectus/consent solicitation and to the applicable Delaware statute attached as Annex B to this proxy statement/prospectus/consent solicitation for information on how to exercise your appraisal rights. Failure to follow all of the steps required under the Delaware law will result in the loss of your appraisal rights.

Q: What will Allozyne stockholders receive in the merger?

A: Poniard has agreed to issue, and holders of Allozyne capital stock will receive, shares of Poniard common stock such that following the consummation of the transactions contemplated by the merger agreement, current shareholders of Poniard, together with holders of Poniard options, warrants and RSUs, are expected to own or have the right to acquire in the aggregate approximately 35% of the common stock of the combined company, and current Allozyne stockholders, together with holders of Allozyne options and warrants, are expected to own or have the right to acquire in the aggregate approximately 65% of the combined company. If the merger is consummated, each share of Allozyne common stock and Allozyne preferred stock is expected to convert into the right to receive that number of shares of Poniard common stock equal to approximately 0.0628, which is also known as the exchange ratio, after giving effect to the 1-for-40 reverse stock split of Poniard common stock to be implemented upon approval of Poniard shareholders and prior to the consummation of the merger. The actual number of shares of Poniard common stock to be issued in respect of each share of Allozyne common stock or preferred stock, or the actual exchange ratio, will be adjusted to reflect Poniard’s and Allozyne’s net cash or net debt and certain permitted financings completed prior to the closing of the merger, divided by the number of shares of Allozyne common stock and Allozyne preferred stock outstanding and deemed outstanding pursuant to the formula set forth in the merger agreement and described in this proxy statement/prospectus/consent solicitation under the heading “The Merger Agreement—Merger Consideration and Adjustment”. Poniard shareholders, optionholders, warrantholders and RSU holders will continue to own and hold, respectively, their existing shares, options, warrants and RSUs for Poniard common stock.

Q: How will the merger affect stock options and warrants for Allozyne common stock?

A: Poniard will assume options and warrants to purchase shares of Allozyne common stock and Allozyne preferred stock, which will become exercisable for shares of Poniard common stock with the same terms, exercisability, vesting schedule and other provisions, but with the number of shares and exercise price being appropriately adjusted to reflect the conversion factor between Poniard common stock and Allozyne common stock and preferred stock determined in accordance with the merger agreement and described above and further subject to adjustment to give effect to the reverse stock split described in further detail in this proxy statement/prospectus/consent solicitation.

Q: What if I am a record holder and I don’t indicate a decision with respect to the proposals?

A: If you are a record holder on the record date of shares of Allozyne common stock or Allozyne preferred stock and you return a signed written consent without indicating your decision on a proposal, you will have given your consent to approve the merger and adopt and approve the merger agreement and the transactions contemplated thereby.

Q: What is the deadline for returning my written consent?

A: The Allozyne board of directors has set November 21, 2011 as the targeted final date for receipt of written consents. Allozyne reserves the right to extend the final date for receipt of written consents beyond November 21, 2011 in the event that consents approving the merger and adopting and approving the merger agreement and the transactions contemplated thereby have not been obtained by that date from holders of a sufficient number of shares of Allozyne common stock and Allozyne preferred stock to satisfy the conditions to the merger. Any such extension may be made without notice to stockholders. Once all conditions to the merger have been satisfied or waived, the consent solicitation will conclude.

 

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Q: Can I change or revoke my written consent?

A: Yes, if you are a record holder on the record date of shares of Allozyne common stock or preferred stock, you may change or revoke your consent to a proposal at any time before the consents of a sufficient number of shares to approve and adopt such proposal have been filed with the corporate secretary of Allozyne. If you wish to change or revoke your consent before that time, you may do so by sending in a new written consent with a later date by one of the means described in the section entitled “Solicitation of Allozyne Written Consent—Submission of Consents” on page 61, or delivering a notice of revocation to the corporate secretary of Allozyne.

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus/consent solicitation and may not contain all of the information that is important to you. To better understand the merger and the other proposals being considered at the Poniard special meeting of shareholders and through the Allozyne written consent of stockholders, you should carefully read this entire proxy statement/prospectus/consent solicitation, including the merger agreement, attached as Annex A, or the merger agreement, the opinion of Leerink Swann LLC, attached as Annex E and the other annexes and documents to which you are referred in this proxy statement/prospectus/consent solicitation. For more information, see the section entitled “Where You Can Find Additional Information” in this proxy statement/prospectus/consent solicitation. Page references to this proxy statement/prospectus/consent solicitation have been included in parentheses to direct you to a more detailed description of the topics presented in this summary.

The Companies

Poniard Pharmaceuticals, Inc.

750 Battery Street, Suite 330

San Francisco, CA 94111

(650) 583-3774

Poniard Pharmaceuticals, Inc. is a biopharmaceutical company focused on the development and commercialization of cancer therapeutics. Poniard’s lead product candidate is picoplatin, a new generation platinum-based cancer therapy that has the potential to become a platform product for use in different formulations, as a single agent or in combination with other anti-cancer agents, to treat multiple cancer indications. Picoplatin is a chemotherapeutic designed to treat solid tumors that are resistant to existing platinum-based cancer therapies. Clinical studies to date suggest that picoplatin has an improved safety profile relative to existing platinum-based cancer therapies. Poniard has completed a pivotal Phase 3 SPEAR (Study of Picoplatin Efficacy After Relapse) trial of picoplatin in the second-line treatment of patients with small cell lung cancer. This trial did not meet its primary endpoint of overall survival. Poniard also has completed Phase 2 trials evaluating picoplatin as a first-line treatment of metastatic colorectal cancer and castration-resistant (hormone-refractory) prostate cancer and a Phase 1 study evaluating an oral formulation of picoplatin in solid tumors.

FV Acquisition Corp.

750 Battery Street, Suite 330

San Francisco, CA 94111

(650) 583-3774

FV Acquisition Corp. is a wholly owned subsidiary of Poniard that was incorporated in Delaware on June 6, 2011. FV Acquisition Corp. does not engage in operations and exists solely to facilitate the merger.

Allozyne, Inc.

1600 Fairview Ave E., Suite 300

Seattle, WA 98102

(206) 518-5700

Allozyne is a biopharmaceutical company creating a pipeline of novel protein therapeutic product candidates to treat autoimmune and inflammatory diseases and cancer. Allozyne’s current product development efforts are based on its proprietary biociphering™ platforms which allow for the union of biological protein engineering and medicinal chemistry in order to create novel and enhanced protein therapeutics. Allozyne’s

 

 

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CAESAR biocipher™ platform allows for site-specific substitution of a non-natural amino acid in exchange for a naturally occurring amino acid anywhere along the protein sequence. In contrast, Allozyne’s VIGENÈRE biocipher™ allows for a site-specific addition of a non-natural amino acid anywhere along the protein sequence. The non-natural amino acids serve as chemical hinges to subsequently attach a multitude of bioconjugates designed to optimize the therapeutic performance of the protein. Bioconjugation is accomplished through a specific set of medicinal chemistry tools that enable the attachment of various bioconjugates such as polyethylene glycol, or PEG, antibody Fc domains and other therapeutic drugs such as cancer chemotherapeutics. Allozyne’s lead product candidate, AZ01, is a next-generation long-acting interferon beta for the treatment of relapsing-remitting multiple sclerosis, or RRMS. Allozyne has completed a Phase 1a single ascending dose trial for AZ01 in normal healthy volunteers and a Phase 1b multiple ascending dose trial in normal healthy volunteers is currently underway. Additional programs include AZ17, a bispecific antibody for the treatment of various autoimmune and inflammatory diseases, including Crohn’s disease and RRMS, and AZ05, an antibody-drug conjugate for the treatment of various solid tumors.

The Merger (see page 63)

If the merger is completed, the Merger Sub would merge with and into Allozyne, with Allozyne surviving the merger as a wholly owned subsidiary of Poniard, and pursuant to which Poniard would issue shares of common stock to the stockholders of Allozyne, resulting in a change of control of Poniard.

At the effective time of the merger, the outstanding shares of Allozyne capital stock will be converted into shares of Poniard common stock. If the merger is consummated, holders of Allozyne common stock and preferred stock, options and warrants are expected to own or have the right to acquire in the aggregate approximately 65% of the combined company and the holders of Poniard common stock, preferred stock, options, warrants and RSUs are expected to own or have the right to acquire in the aggregate approximately 35% of the combined company, both after giving effect to the issuance of shares pursuant to Allozyne’s and Poniard’s outstanding options, warrants and other securities convertible into capital stock. Each share of Allozyne common stock and Allozyne preferred stock outstanding immediately prior to the effective time of the merger is expected to convert into the right to receive approximately 0.0628 shares of Poniard common stock, which is also known as the exchange ratio, after giving effect to the 1-for-40 reverse stock split of Poniard common stock to be implemented upon approval of Poniard shareholders and prior to the consummation of the merger. The actual number of shares of Poniard common stock to be issued in respect of each share of Allozyne common stock or preferred stock, or the actual exchange ratio, will be adjusted to reflect Poniard’s and Allozyne’s net cash or net debt and certain permitted financings completed prior to the closing of the merger, divided by the number of shares of Allozyne common stock and Allozyne preferred stock outstanding, after giving effect to the issuance of shares pursuant to Allozyne’s outstanding options, warrants and other securities convertible into capital stock, pursuant to the formula set forth in the merger agreement. At the effective time of the merger, Poniard will change its corporate name to “Allozyne, Inc.” and expects to trade on The NASDAQ Capital Market under the symbol “ALLO”.

The merger agreement requires the parties to consummate the merger after all of the conditions to the consummation of the merger contained in the merger agreement are satisfied or waived, including the approval of the merger by the shareholders of Poniard and the stockholders of Allozyne. The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware, or at such later time as is agreed by Poniard and Allozyne and specified in the certificate of merger. Neither Poniard nor Allozyne can predict the exact timing of the consummation of the merger.

The approval by the shareholders of Poniard requires the affirmative vote of the holders of a majority of the voting power of the shares of Poniard common stock casting votes in person or by proxy at the Poniard special meeting of shareholders for the issuance of shares of Poniard common stock in the merger and the resulting

 

 

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change of control, and the affirmative vote of the holders of a majority of shares of Poniard common stock having voting power outstanding on the record date of the Poniard special meeting for approval of the reverse stock split.

The approval by the stockholders of Allozyne of the merger and adoption and approval of the merger agreement requires: the approval of (i) a majority of the shares of Allozyne common stock, (ii) a majority of the shares of Allozyne common stock and preferred stock, voting together as a single class, and (iii) at least three-fourths of the shares of Allozyne preferred stock, voting together as a single class on an as-converted-to-common stock basis, each outstanding on the applicable record date.

A copy of the merger agreement is attached as Annex A to this proxy statement/prospectus/consent solicitation and is incorporated by reference in its entirety into this proxy statement/prospectus/consent solicitation. Poniard and Allozyne encourage you to read the entire merger agreement carefully because it is the principal document governing the merger.

Reasons for the Merger (see page 70)

The combined company that results from the merger will be a biotechnology company focused on developing and commercializing therapeutics in the areas of autoimmune and inflammatory disease and cancer. The lead Allozyne product candidate, AZ01, is a clinical-stage, next generation long-acting interferon beta for the treatment of relapse remitting multiple sclerosis, or RRMS. Poniard and Allozyne believe the combined company will have the following potential advantages:

 

   

Clinical-Stage Product Candidate. Allozyne has completed a Phase 1a single ascending dose clinical trial in normal healthy volunteers for its lead product candidate, AZ01 and a Phase 1b multiple administration dose trial in normal healthy volunteers is currently ongoing. At the time of the Poniard due diligence review of Allozyne in connection with the proposed merger, Allozyne was preparing to initiate the Phase 1b clinical trial. AZ01 is a next generation long acting interferon beta for the treatment of relapse remitting multiple sclerosis, or RRMS. Through the application of Allozyne’s CAESAR technology platform, a PEG moiety is attached to the modified interferon beta in order to create a controlled release and long acting version of this molecule which may offer potential advantages over the existing interferon beta therapies, including less frequent dosing, superior tolerability and possibly greater efficacy.

 

   

Known Active Agent and Reduced Regulatory Risk. The active pharmaceutical ingredient in AZ01 is interferon beta. Currently marketed interferons include Avonex®, Betaseron® and Rebif®. Despite their established safety profile, currently marketed interferon betas are administered between once daily and once weekly and often produce flu like symptoms and injection site reactions following each administration. These side effects, combined with a daily or weekly dosing regimen, lead to reduced patient compliance. Allozyne believes the clinical application of a long acting interferon beta, such as AZ01, has the potential to be a first line therapy supplanting existing interferon beta therapies. In addition, AZ01 has the potential to be used to maintain patients in remission in between short term treatment with immunomodulators such as Tysabri® and Gilenya® and as an add-on therapy with the somewhat safer but less efficacious oral counterparts to the immunomodulators.

 

   

Markets. Poniard believes that AZ01 represents a sizeable market opportunity, and may provide new medical benefits for patients with RRMS and returns for investors. According to MedTRACK, currently marketed interferons for the treatment of RRMS, including Avonex®, Betaseron® and Rebif®, totaled more than $6 billion in revenue worldwide in 2010.

 

   

Management Team. It is expected that the combined company will be led by the experienced management from Allozyne and a board of directors with representation from each of Poniard and Allozyne.

 

 

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Each of the boards of directors of Poniard and Allozyne also considered other reasons for the merger, as described herein. For example, the board of directors of Poniard considered, among other things:

 

   

the strategic alternatives of Poniard to the merger, including the discussions that Poniard management and the Poniard board of directors had during 2010 and 2011 with other potential merger candidates;

 

   

the failure of the Poniard’s lead product candidate, picoplatin, in its SPEAR Phase 3 clinical trial for the treatment of small cell lung cancer, the resultant loss of current shareholder value and the diminished prospect for the creation of future shareholder value;

 

   

the risks of continuing to operate Poniard on a stand-alone basis, including the need to rebuild infrastructure and management to continue its operations;

 

   

the risks associated with, and uncertain value to shareholders of, liquidating Poniard; and

 

   

the opportunity for the Poniard shareholders to participate in the potential long-term value of the Allozyne product pipeline and platforms as a result of the merger.

In addition, the board of directors of Allozyne approved the merger based on a number of factors, including the following:

 

   

the expectation that the merger with Poniard would be a more time- and cost-effective means to access sufficient capital than other options considered, including an initial public offering or an additional round of private equity financing, given the stage of development of Allozyne and the state of the markets for initial public offerings and biotechnology venture financings;

 

   

the view that the range of options available to the combined company to access private and public equity markets will likely be greater as a public company than continuing as a privately held company; and

 

   

the belief that the combined company will have an increased ability to attract and retain technical talent compared to a privately held company.

In addition to considering the factors outlined above, the Allozyne board of directors considered the following factors in reaching its conclusion to approve the merger and to recommend that the Allozyne stockholders approve the merger and related transactions, all of which it viewed as supporting its decision to approve the business combination with Poniard:

 

   

the strategic alternatives of Allozyne to the merger, including raising capital from private equity investors and engaging with biotechnology and pharmaceutical companies to enter into partnerships to develop AZ01 and AZ17 and the biociphering technology;

 

   

the terms and conditions of the merger agreement, including the following related factors:

 

   

the determination that the relative percentage ownership of Allozyne stockholders and Poniard shareholders is based on the valuations of each company at the time of Allozyne’s board of directors’ approval of the merger agreement, subject to adjustments as outlined in the merger agreement;

 

   

the expectation that the merger will be treated as a reorganization for U.S. federal income tax purposes, with the result that in the merger, the Allozyne shareholders will generally not recognize taxable gain or loss for U.S. federal income tax purposes;

 

   

the potential termination fee of $1.0 million to be paid upon certain terminations;

 

   

belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable under the circumstances;

 

 

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the agreement of Poniard to solicit proxies to seek shareholder approval of the issuance of Poniard common stock in the merger;

 

   

the likelihood that the merger will be consummated on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals;

 

   

the opportunity for Allozyne stockholders to hold shares of a publicly traded company; and

 

   

the possibility that the combined entity would be able to take advantage of the potential benefits resulting from the combination of the Poniard public company infrastructure and Allozyne management team.

In the course of its deliberations, the Allozyne board of directors also considered a variety of risks and other countervailing factors related to entering into the merger agreement, including:

 

   

the substantial expenses to be incurred in connection with the merger;

 

   

the risk that the merger might not be consummated in a timely manner or at all and the potential adverse effect on the reputation of Allozyne of the public announcement of the merger or on the delay or failure to complete the merger with Poniard;

 

   

the risk to the business of Allozyne, operations and financial results in the event that the merger is not consummated; and

 

   

various other risks associated with the combined company and the merger, including those described in the section entitled “Risk Factors” in this proxy statement/prospectus/consent solicitation.

The foregoing information and factors considered by the Allozyne board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Allozyne board of directors. The Allozyne board of directors conducted an overall analysis of the factors described above, including thorough discussions with Allozyne’s legal advisors, and considered the factors overall to be favorable to, and to support, its determination.

In the course of its deliberations, the Poniard board of directors also considered a variety of risks and other countervailing factors related to entering into the merger agreement, including:

 

   

the substantial expenses to be incurred in connection with the merger;

 

   

the possible volatility, at least in the short-term, of the trading price of Poniard common stock resulting from the merger announcement;

 

   

the risk that the merger might not be consummated in a timely manner or at all and the potential adverse effect on the reputation of Poniard of the public announcement of the merger or on the delay or failure to complete the merger with Allozyne;

 

   

the risk to the business of Poniard, operations and financial results in the event that the merger is not consummated; and

 

   

various other risks associated with the combined company and the merger, including those described in the section entitled “Risk Factors” in this proxy statement/prospectus/consent solicitation.

For a more complete description of the factors on which the Poniard board of directors based its decision to approve the issuance of Poniard common stock to Allozyne stockholders in connection with the merger, see the section entitled “The Merger—Reasons for the Merger—Poniard’s Reasons for the Merger” in this proxy statement/prospectus/consent solicitation. For a more complete description of the factors on which the Allozyne board of directors based its decision to approve the merger, see the section entitled “The Merger—Reasons for the Merger—Allozyne’s Reasons for the Merger” in this proxy statement/prospectus/consent solicitation.

 

 

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Risks Related to the Proposed Merger (see page 24)

Both Poniard and Allozyne are subject to various risks associated with their businesses and industries. In addition, the merger poses a number of risks to each company and its respective stockholders, including, but not limited to, the following:

 

   

There is no assurance when or even if the merger will be completed. Failure to obtain required approvals necessary to satisfy closing conditions may delay or prevent completion of the merger.

 

   

Because the lack of a public market for Allozyne’s outstanding shares makes it difficult to evaluate the fairness of the merger, Allozyne stockholders may receive consideration in the merger that is greater than or less than the fair market value of the Allozyne shares.

 

   

Because the merger will be completed after the date of the Poniard special meeting of shareholders and the Allozyne written consent of stockholders, at the time of your special meeting or written consent, you will not know the exact number of shares of Poniard common stock that the Allozyne stockholders will receive upon completion of the merger.

 

   

Poniard and Allozyne executive officers and directors may have interests in the merger that are different from, or in addition to, those of Poniard shareholders and Allozyne stockholders generally.

 

   

During the pendency of the merger, Poniard and Allozyne may be unable to enter into a business combination with another party because of restrictions in the merger agreement.

 

   

The merger may be completed even though material adverse changes may result from the announcement of the merger, industry-wide changes and other causes.

 

   

The rights of Allozyne stockholders who become Poniard shareholders in the merger will be governed by Washington law and by Poniard’s amended and restated articles of incorporation and amended and restated bylaws.

 

   

If the merger does not qualify as a reorganization under Section 368(a) of the Code or is otherwise taxable to U.S. holders of Allozyne common stock, then such holders may be required to pay substantial U.S. Federal income taxes.

 

   

The combined company will incur significant transaction and merger-related costs in connection with the merger.

 

   

The combined company may be unable to utilize Poniard’s net operating loss carryforwards.

 

   

The anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

These and other risks are discussed in greater detail under the section entitled “Risk Factors” in this proxy statement/prospectus/consent solicitation. Poniard and Allozyne both encourage you to read and consider all of these risks carefully.

Opinion of the Poniard Financial Advisor (see page 76)

Leerink Swann LLC, or Leerink, the financial advisor of Poniard, delivered to the board of directors of Poniard a written opinion dated June 22, 2011, addressed to the board of directors of Poniard, to the effect that, as of the date of the opinion and based on and subject to various assumptions, qualifications and limitations described in the opinion, the consideration to be paid by Poniard in the proposed merger was fair, from a financial point of view, to Poniard. The full text of this written opinion to the Poniard board of directors, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex E to this proxy statement/prospectus/consent solicitation and is incorporated by reference in its entirety into this proxy statement/prospectus/consent solicitation. Holders of

 

 

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Poniard common stock are encouraged to read the opinion carefully in its entirety. Poniard has agreed to pay Leerink a transaction fee which is customary for transactions of this nature and is contingent upon the consummation of the merger. Additionally, Poniard has agreed to reimburse Leerink for its out-of-pocket expenses, including attorney’s fees, and has agreed to indemnify Leerink against certain liabilities, including liabilities under the federal securities laws. The opinion was provided to the board of directors of Poniard in connection with its evaluation of the consideration provided for in the merger. It does not address any other aspect of the proposed merger or any alternative to the merger and does not constitute a recommendation as to how any shareholders of Poniard should vote or act in connection with the merger or otherwise.

Overview of the Merger Agreement (see page 105)

The merger agreement requires the parties to consummate the merger after all of the conditions to the consummation of the merger contained in the merger agreement are satisfied or waived, including the approval and adoption of the merger agreement by the stockholders of Allozyne and the approval by the Poniard shareholders of the issuance of Poniard common stock and the resulting change of control of Poniard. The merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware, or at such later time as is agreed by Poniard and Allozyne and specified in the certificate of merger. Neither Poniard nor Allozyne can predict the exact timing of the consummation of the merger.

Pursuant to the merger agreement, each Allozyne option and warrant that is outstanding and unexercised immediately prior to the effective time of the merger, whether or not vested, will be assumed by Poniard and automatically converted into an option or warrant to purchase Poniard common stock. Any restrictions on the exercise of the assumed Allozyne options or warrants will continue in full force and effect, and the term, exercisability, vesting schedule and other provisions of assumed Allozyne stock options will remain unchanged.

Each party’s obligation to complete the merger is subject to the satisfaction or waiver by each of the parties, at or before the merger, of various conditions, as outlined in “The Merger Agreement—Conditions to Completion of the Merger”. Except in certain limited circumstances the merger agreement prohibits Poniard and Allozyne from soliciting, initiating, encouraging or engaging in discussions and negotiations with respect to any acquisition proposal or acquisition inquiry, as outlined in “The Merger Agreement—No Solicitation”.

The merger agreement may be terminated at any time before the completion of the merger, whether before or after the required stockholder approvals to complete the merger have been obtained on the occurrence of certain defined events, as outlined in “The Merger Agreement—Termination”. In certain outlined circumstances if there is a termination there is a termination fee of $1.0 million payable by either Poniard or Allozyne, as outlined in “The Merger Agreement—Termination Fee”.

Consideration to Be Received in the Merger by Allozyne Stockholders (see page 105)

At the effective time of the merger, all outstanding shares of Allozyne common stock and preferred stock, and all outstanding options and warrants to purchase Allozyne capital stock, will convert into the right to receive Poniard common stock that collectively represents approximately 67.9% of the capital stock outstanding or issuable upon exercise of outstanding options and warrants of the combined company, so long as, on a date that is five calendar days prior to the anticipated date for closing, or the Determination Date, Poniard’s net debt amount is not greater than zero dollars, Allozyne’s net cash amount is not less than zero dollars and Allozyne does not raise more than the $4.0 million already raised in May and July 2011 in aggregate gross cash receipts from the sale by Allozyne of Allozyne capital stock, warrants to purchase Allozyne common stock, or securities that by their terms convert into Allozyne capital stock upon, or prior to, the effective time of the merger, in a single capital-raising transaction or in a series of related capital-raising transactions occurring before the closing of the merger having a conversion price and warrant exercise price per share not less than $1.00 and warrant coverage no greater than 25%.

 

 

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Assuming Poniard does not have any net debt, Allozyne has net cash and Allozyne does not raise more than the $4.0 million already raised in May and July 2011 in aggregate gross cash proceeds from the sale of its capital stock in such specified transactions:

 

   

each share of Allozyne common stock and preferred stock outstanding immediately prior to the effective time of the merger will automatically be converted into the right to receive approximately 0.0628 shares of Poniard common stock, after giving effect to the 1-for-40 reverse stock split of Poniard common stock to be implemented upon approval of Poniard shareholders and prior to the consummation of the merger;

 

   

each option to purchase shares of Allozyne common stock outstanding and unexercised immediately prior to the effective time of the merger will be assumed by Poniard and will become an option to purchase that number of shares of the common stock of the combined company equal to the product of the number of shares of Allozyne common stock subject to the option multiplied by 0.0628, after giving effect to the 1-for-40 reverse stock split of Poniard common stock to be implemented upon approval of Poniard shareholders and prior to the consummation of the merger, rounded down to the nearest whole number of shares of Poniard common stock; and

 

   

each warrant to purchase shares of Allozyne preferred stock or common stock outstanding and not terminated or exercised immediately prior to the effective time of the merger will be assumed by Poniard and will become a warrant to purchase that number of shares of Poniard common stock equal to the product of the number of shares of Allozyne common stock (for Allozyne common stock warrants), or the number of shares of Allozyne common stock issuable upon conversion of Allozyne preferred stock (for Allozyne preferred stock warrants), issuable upon exercise of the Allozyne warrant multiplied by 0.0628, after giving effect to the 1-for-40 reverse stock split of Poniard common stock to be implemented upon approval of Poniard shareholders and prior to the consummation of the merger, rounded down to the nearest whole number of shares of Poniard common stock.

No fractional shares of Poniard common stock will be issuable pursuant to the merger to Allozyne’s stockholders. Instead, each Allozyne stockholder who would otherwise be entitled to receive a fraction of a share of Poniard common stock, after aggregating all fractional shares of Poniard common stock issuable to such stockholder, will be entitled to receive in cash the dollar amount, rounded to the nearest whole cent, without interest, determined by multiplying such fraction by the closing price of a share of Poniard common stock as quoted on The NASDAQ Capital Market on the date the merger becomes effective.

For a more complete description of the merger consideration to be issued by Poniard, see the section entitled “The Merger Agreement” in this proxy statement/prospectus/consent solicitation.

Conditions to Completion of the Merger (see page 111)

To consummate the merger, Poniard shareholders must approve the issuance of shares of Poniard common stock in the merger and the resulting change of control of Poniard, which requires the affirmative vote of the holders of a majority of the voting power of the shares of Poniard common stock casting votes in person or by proxy at the Poniard special meeting, and the amendment of Poniard’s articles of incorporation effecting the reverse stock split, which requires the affirmative vote of holders of a majority of the shares of Poniard common stock having voting power outstanding on the record date of the Poniard special meeting; and Allozyne stockholders must approve the merger agreement and the merger, which requires written consents from the holders of (i) a majority of the shares of Allozyne common stock, (ii) a majority of the shares of Allozyne common stock and preferred stock and (iii) at least three-fourths of the outstanding shares of Allozyne preferred stock, voting together as a single class on an as-converted-to-common stock basis, each outstanding on the applicable record date.

 

 

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No Solicitation (see page 113)

Each of Poniard and Allozyne agreed that, except as described below, it will not, and will not authorize or permit any of its subsidiaries or officers, directors, investment bankers, attorneys or accountants to, and it will use its commercially reasonable efforts to cause its and its subsidiaries’ non-officer employees and other agents not to, and will not authorize any of them to, directly or indirectly:

 

   

solicit, initiate, encourage, induce or knowingly facilitate the communication, making, submission or announcement of any “acquisition proposal” or “acquisition inquiry,” each as is defined in the merger agreement, or take any action that could reasonably be expected to lead to an acquisition proposal or acquisition inquiry;

 

   

furnish to any person any information with respect to it or in connection with or in response to an acquisition proposal or acquisition inquiry;

 

   

engage in discussions or negotiations with respect to any acquisition proposal or acquisition inquiry;

 

   

approve, endorse or recommend any acquisition proposal; or

 

   

execute or enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any acquisition proposal.

However, before obtaining the applicable Poniard shareholder or Allozyne stockholder approvals required to consummate the merger, each party may furnish nonpublic information regarding such party to, and may enter into discussions or negotiations with, any third party in response to a bona fide written acquisition proposal made or received after the date of the merger agreement, which such party’s board of directors determines in good faith, after consultation with a nationally recognized independent financial advisor and such party’s outside legal counsel, constitutes or is reasonably likely to result in a “superior offer,” as defined in the merger agreement and if certain conditions are satisfied.

Termination of the Merger Agreement (see page 117)

Either Poniard or Allozyne can terminate the merger agreement under certain circumstances, which would prevent the merger from being consummated.

The merger agreement may be terminated at any time before the completion of the merger, whether before or after the required stockholder approvals to complete the merger have been obtained, as set forth below:

 

   

by mutual written consent duly authorized by the board of directors of each of Poniard and Allozyne;

 

   

by either Poniard or Allozyne if the merger has not been completed by October 31, 2011, with certain exceptions;

 

   

by Poniard or Allozyne if a court of competent jurisdiction or a governmental entity permanently restrains, enjoins or otherwise prohibits the merger;

 

   

by either Poniard or Allozyne if Allozyne does not obtain the written consent of the requisite number of its stockholders necessary to approve the merger and related matters subject to certain exceptions;

 

   

by either Poniard or Allozyne if the shareholders of Poniard have not approved the issuance of the shares pursuant to the merger agreement subject to certain exceptions;

 

   

by Allozyne, at any time prior to the approval of the issuance of the shares of Poniard common stock pursuant to the merger, if the board of directors of Poniard does not recommend that the Poniard shareholders vote to approve the merger or Poniard fails to hold the Poniard special meeting within the required time period or the board recommends any alternative acquisition proposal or enters into any letter of intent or breaches the no solicitation provisions set forth in the merger agreement(each of the above is referred to as an Poniard triggering event);

 

 

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by Poniard, at any time prior to the approval of the merger by the written consent of the requisite number of Allozyne’s stockholders, if the board of directors of Allozyne does not recommend that the Allozyne stockholders vote to approve the merger or Allozyne does not obtain the sufficient stockholder written consent within the required time period or the board recommends any alternative acquisition proposal or enters into any letter of intent or breaches the no solicitation provisions set forth in the merger agreement (each of the above is referred to as an Allozyne triggering event); or

 

   

by Poniard or Allozyne if the other party has breached any of its representations, warranties, covenants or agreements subject to certain materiality limitations contained in the merger agreement or if any representation or warranty of the other party has become inaccurate, in either case such that the conditions to the closing of the merger would not be satisfied as of the time of such breach or innaccuracy.

Termination Fee (see page 119)

If the merger agreement is terminated under certain circumstances, Poniard or Allozyne will be required to pay the other party a termination fee of $1.0 million.

Poniard must pay Allozyne a termination fee of $1.0 million if:

 

   

the merger agreement is terminated by Allozyne because the shareholders of Poniard do not approve the issuance of Poniard common stock and an alternative acquisition proposal is publicly announced prior to the Poniard special meeting and Poniard subsequently consummates the alternative acquisition proposal within 12 months of the termination; or

 

   

the merger agreement is terminated by Allozyne because of a Poniard triggering event; or

 

   

the merger agreement is terminated by Allozyne as a result of a material, and intentional or willful, breach by Poniard of any of its covenants contained in the merger agreement.

Allozyne must pay Poniard a termination fee of $1.0 million if:

 

   

the merger agreement is terminated by Poniard because the stockholders of Allozyne do not approve the merger and an acquisition proposal with respect to Allozyne was publicly announced before Allozyne obtains the written consent of a requisite number of its stockholders necessary to approve the merger and Allozyne subsequently consummates the alternative acquisition proposal within 12 months of the termination;

 

   

the merger agreement is terminated by Poniard because of an Allozyne triggering event; or

 

   

the merger agreement is terminated by Poniard as a result of a material, and intentional or willful, breach by Allozyne of any of its covenants contained in the merger agreement.

Shareholder Agreements/Stockholder Agreements (see page 120)

In connection with the execution of the merger agreement, all Poniard officers, directors and greater than 10% securityholders entered into shareholder agreements and irrevocable proxies with Allozyne pursuant to which these shareholders agreed to vote all of their shares of Poniard common stock in favor of the merger and the other actions contemplated by the merger agreement and against any competing acquisition proposal, subject to the terms of the shareholder agreement. These Poniard shareholders also granted Allozyne an irrevocable proxy to their respective shares of Poniard common stock in accordance with the shareholder agreement. Under the shareholder agreements, subject to certain limited exceptions, such shareholders also have agreed not to sell or transfer shares of Poniard common stock, or engage in hedging or similar transactions with regard to such shares, until the earlier of the termination of the merger agreement or six months after the effective time of the merger.

 

 

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The following Poniard securityholders have executed shareholder agreements: MPM BioVentures III, L.P., MPM BioVentures III-QP, L.P., MPM BioVentures III GmbH & Co. Beteiligungs KG, MPM BioVentures III Parallel Fund, L.P. and MPM Asset Management Investors 2005 BVIII LLC Bay City Capital Fund IV, L.P. and Bay City Capital Fund IV Co-Investment Fund, L.P., Bay City Capital Management IV LLC, Ronald A. Martell, Robert S. Basso, Fred B. Craves, E. Rolland Dickson, Carl S. Goldfischer, Robert M. Littauer, Gary A. Lyons, Gerald McMahon, Nicholas J. Simon, David R. Stevens, Michael S. Perry, Michael K. Jackson, Cheni Kwok and Anna L. Wight. As of August 15, 2011, these securityholders held in the aggregate approximately 25% of the outstanding Poniard common stock.

In connection with the execution of the merger agreement, a number of Allozyne stockholders entered into stockholder agreements and irrevocable proxies with Poniard pursuant to which these stockholders agreed to vote all of their shares of Allozyne common stock and preferred stock in favor of the approval of the merger and the merger agreement and against any competing acquisition proposal. The Allozyne stockholders also granted Poniard an irrevocable proxy to their respective shares in accordance with the stockholder agreement. Under the stockholder agreements, subject to certain limited exceptions, such stockholders also have agreed not to sell or transfer Poniard common stock, or engage in hedging or similar transactions with regard to such shares, including shares of Poniard common stock received in the merger or issuable upon exercise of Poniard options or warrants, until the earlier of the termination of the merger agreement or six months after the effective time of the merger.

The following Allozyne securityholders have executed stockholder agreements with voting and lock-up provisions: Alexandria Equities, LLC, ARCH V Entrepreneurs Fund V, L.P., ARCH Venture Fund V, L.P., ARCH Venture Fund VI, L.P., Meenu Chhabra, MPM Asset Management Investors 2003 BVIII LLC, MPM BioVentures III L.P., MPM BioVentures III GmbH & Co. Beteiligungs KG, MPM BioVentures III Parallel Fund, L.P., MPM BioVentures III—QP, L.P., OVP Venture Partners VI, L.P., OVP Venture Partners VII, L.P., OVP VI Entrepreneurs Fund, L.P., and David Tirrell. As of August 15, 2011, these securityholders held in the aggregate approximately 77% of the outstanding Allozyne common stock.

The forms of the Poniard shareholder agreement and the Allozyne stockholder agreement are attached to this proxy statement/prospectus/consent as Annex D and Annex C, respectively.

Directors and Officers of Poniard Following the Merger (see page 110)

Following the merger, the combined company’s board of directors will initially be comprised of seven directors, four of whom are currently directors of Allozyne (Meenu Chhabra, Steven Gillis, Ph.D., Michael Steinmetz, Ph.D., and Carl Weissman), two of whom are currently directors of Poniard (Ronald Martell and Fred B. Craves, Ph.D.), and one independent director not previously sitting on the board of either Allozyne or Poniard.

Effective as of the closing of the merger, the combined company’s officers will be Meenu Chhabra (President and Chief Executive Officer), John Bencich (Chief Financial Officer, Treasurer and Secretary), and Kenneth H. Grabstein, Ph.D. (Chief Scientific Officer), each of whom currently holds the same position at Allozyne.

Interests of Certain Persons in the Merger

Interests of Poniard’s Executive Officers and Directors in the Merger (see page 85)

In considering the Poniard board of directors’ recommendation that you vote to approve Proposal Nos. 1, 2 and 3, you should be aware that some Poniard officers, directors, principal shareholders and affiliates may have interests in the merger that are different from, or in addition to, your interests and that may present actual or potential conflicts of interest. For example, Poniard has entered into certain severance and change of control agreements with each of its executive officers that may result in the receipt by such executive officers of cash

 

 

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severance payments and other benefits with a total value of approximately $1.5 million (collectively, not individually, and excluding the value of any accelerated vesting of stock options and restricted stock units). The estimated value of the cash severance payments and other benefits for each Poniard executive officer in connection with the merger is as follows: Ronald A. Martell, $942,735; Michael S. Perry, $429,603; and Michael K. Jackson, $124,570. The agreements also may result in the accelerated vesting of stock options and restricted stock units held by those officers, assuming a covered termination of employment of each executive officer’s employment as of August 15, 2011. Individually, the value of accelerated vesting of RSUs currently held by each of Poniard’s executive officers, based on a per share value of $0.17, the closing price of Poniard common stock on August 15, 2011, is as follows: Ronald A. Martell, $251,553; Michael S. Perry, $100,771 and Michael K. Jackson, $42,461. For Mr. Martell, this value also includes the estimated value of an RSU that will be payable in lieu of a cash bonus severance amount and accrued vacation amount, which RSU has an estimated value as of August 15, 2011 of $97,164. No value is attributed to stock options held by the executive officers because all Poniard stock options have per share exercise prices substantially in excess of $0.17 per share. In addition, based on data available as of August 15, 2011, the merger will result in the acceleration of vesting of options to purchase approximately 3.7 million shares of Poniard common stock and the vesting of approximately 2.1 million RSUs of Poniard, held by all Poniard executive officers and directors, whether or not, with respect to executive officers, there is a covered termination of such officer’s employment. Additional information about the amounts payable to Poniard’s executive officers in connection with the merger is provided under “The Merger—Interests of Poniard’s Executive Officers and Directors in the Merger—Severance and Change of Control Agreements” beginning on page 86 of this proxy statement/prospectus/consent solicitation.

Bay City Capital LLC, or BCC, a principal Poniard shareholder and an affiliate of Poniard directors Fred B. Craves, Ph.D., and Carl S. Goldfischer, M.D., has executed a binding commitment to make a $2.4 million secured nonrecourse loan to Poniard immediately prior to the closing of the merger to pay severance, change of control and certain other obligations arising in connection with the merger. Additionally, Poniard directors Ronald A. Martell and Fred B. Craves, Ph.D., will serve on the board of directors of the combined company following consummation of the merger, and Poniard director Nicholas J. Simon is affiliated with certain venture funds which currently hold significant security interests in both Allozyne and Poniard and will be significant shareholders of the combined company.

As of August 15, 2011, all directors and executive officers of Poniard, together with their affiliates, beneficially owned approximately 27.4% of the shares of Poniard common stock. The affirmative vote of the holders of a majority of the voting power of the shares of Poniard common stock casting votes in person or by proxy at the Poniard special meeting is required for approval of Proposal No. 1, and the affirmative vote of the holders of a majority of shares of Poniard common stock having voting power outstanding on the record date of the Poniard special meeting is required for approval of Proposal No. 2. Proposal No. 3 will be approved if the number of votes cast “FOR” Proposal No. 3 exceeds the number of votes cast against Proposal No. 3. All Poniard officers and directors, and their affiliates, have entered into shareholder agreements in connection with the merger. The shareholder agreements are discussed in greater detail under the section entitled “The Merger Agreement—Other Agreements Related to the Merger Agreement—Shareholder Agreements/Stockholder Agreements—Poniard Shareholder Agreements” beginning on page 120 of this joint proxy statement/prospectus/consent solicitation.

Interests of Allozyne’s Directors and Executive Officers in the Merger (see page 93)

You also should be aware that a number of Allozyne’s executive officers and directors have interests in the merger that are different from those of other Allozyne stockholders. These interests include among other things the assumption of all stock options held by the Allozyne executive officers and board members upon the consummation of the merger, the agreement that Meenu Chhabra, Steven Gillis, Ph.D., Michael Steinmetz, Ph.D., and Carl Weissman, each an Allozyne director, will continue to serve on the board of directors of the

 

 

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combined company following the consummation of the merger, and the agreement that Meenu Chhabra, John Bencich and Kenneth H. Grabstein, Ph.D., each an Allozyne executive officer, will continue to serve as executive officers of the combined company following the consummation of the merger.

As of August 15, 2011, all directors and executive officers of Allozyne, together with their affiliates, owned approximately 73% of the shares of Allozyne capital stock. The affirmative vote of the holders of at least (i) a majority of the shares of Allozyne common stock, (ii) a majority of the shares of Allozyne common stock and preferred stock, voting together as a single class, and (iii) at least three-fourths of the shares of Allozyne preferred stock, voting together as a single class on an as-converted-to-common stock basis, each outstanding on the applicable record date, for the merger, the merger agreement and the transactions contemplated thereby. Certain officers and directors of Allozyne, and their affiliates, have also entered into stockholder agreements in connection with the merger. The stockholder agreements are discussed in greater detail under the section entitled “The Merger Agreement—Other Agreements Related to the Merger—Shareholder Agreements/Stockholder Agreements—Allozyne Stockholder Agreements” beginning on page 121 of this proxy statement/prospectus/consent solicitation.

Assumption of Allozyne Stock Options and Warrants (see page 110)

At the effective time of the merger, each option to purchase Allozyne common stock that is outstanding and unexercised immediately prior to the effective time of the merger, whether or not vested, will be assumed by Poniard and automatically converted into an option to purchase Poniard common stock. All assumed Allozyne stock options will remain subject to the terms and conditions of the agreements, including Allozyne’s 2005 Stock Option Plan, pursuant to which such options were granted. From and after the effective time of the merger, each Allozyne option may be exercised solely for the number of shares of Poniard common stock determined by multiplying (i) the number of shares of Allozyne common stock that were subject to such option by (ii) the exchange ratio and rounding the resulting number down to the nearest whole number of shares of Poniard common stock. The per share exercise price for the Poniard common stock issuable upon exercise of each Allozyne stock option will be determined by dividing (i) the per share exercise price for the Allozyne common stock subject to the option by (ii) the exchange ratio and rounding the resulting exercise price up to the nearest whole cent. Any restrictions on the exercise of the assumed Allozyne options or warrants will continue in full force and effect, and the term, exercisability, vesting schedule and other provisions of assumed Allozyne stock options will remain unchanged.

Each outstanding warrant to purchase shares of Allozyne preferred or common stock will be converted into rights with respect to Poniard common stock at the effective time of the merger. After the effective time, each Allozyne warrant may be exercised solely for the number of shares of Poniard common stock determined by multiplying (i) the number of shares of Allozyne common stock (for Allozyne common stock warrants), or the number of shares of Allozyne common stock issuable upon conversion of the shares of Allozyne preferred stock issuable upon exercise of the warrant (for Allozyne preferred stock warrants), by (ii) the exchange ratio and rounding the resulting number down to the nearest whole number of shares of Poniard common stock. The per share exercise price for the Poniard common stock issuable upon exercise of each assumed Allozyne warrant will be determined by dividing (i) the then effective per share exercise price of the Allozyne common stock or preferred stock subject to such warrant by (ii) the exchange ratio and rounding the resulting exercise price up to the nearest whole cent.

Material United States Federal Income Tax Consequences (see page 99)

Each of Poniard and Allozyne expects, and it is a condition to the closing of the merger that Perkins Coie LLP and Fenwick & West LLP will opine, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, as amended. Allozyne stockholders generally will not recognize gain or loss for United States federal income tax purposes upon the exchange of shares of Allozyne capital stock for shares of

 

 

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Poniard common stock, except with respect to cash received in lieu of fractional shares of Poniard common stock and except for Allozyne stockholders who exercise their appraisal rights with respect to the merger. The tax opinions discussed in this section will each be conditioned upon certain assumptions and certain customary representations being delivered by Allozyne, the Merger Sub and Poniard.

Tax matters are very complicated, and the tax consequences of the merger to a particular stockholder will depend in part on such stockholder’s circumstances. Accordingly, you are urged to consult your own tax advisor for a full understanding of the tax consequences of the merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For more information on the federal income tax effect of the merger, see the section entitled “The Merger—Material United States Federal Income Tax Consequences of the Merger” on page 99 of this proxy statement/prospectus/consent solicitation.

Regulatory Approvals (see page 98)

In the United States, Poniard must comply with applicable federal and state securities laws and the rules and regulations of The NASDAQ Capital Market in connection with the issuance of shares of Poniard common stock in the merger and the filing of a registration statement, of which this proxy statement/prospectus/consent solicitation is a part, with the Securities and Exchange Commission, or the SEC. As of the date of this proxy statement/prospectus/consent solicitation, neither Poniard nor Allozyne is required to make filings or to obtain approvals or clearances from any other federal or state regulatory authorities, including any antitrust regulatory authorities in the United States, or antitrust regulatory authorities in other countries to consummate the merger.

See the section entitled “The Merger—Regulatory Approvals” on page 98 of this proxy statement/prospectus/consent solicitation.

NASDAQ Capital Market Listing (see page 96)

Prior to consummation of the merger, Poniard intends to file an initial listing application with The NASDAQ Capital Market pursuant to NASDAQ “reverse merger” rules. If such application is accepted, Poniard anticipates that the combined company’s common stock will be listed on The NASDAQ Capital Market following the closing of the merger under the trading symbol “ALLO”.

Anticipated Accounting Treatment (see page 101)

Allozyne security holders will own, after the merger, approximately 65% of the outstanding shares of the combined company. Further, Allozyne directors will constitute at least one-half of the combined company’s board of directors and all members of the executive management of the combined company will be from Allozyne. Therefore, Allozyne will be deemed to be the acquiring company for accounting purposes, and the merger will be accounted for as a reverse merger.

The unaudited pro forma combined condensed consolidated financial information included in this proxy statement/prospectus/consent solicitation has been prepared to give effect to the proposed merger of Allozyne and Poniard as a reverse acquisition of assets in accordance with accounting principles generally accepted in the United States. For accounting purposes, Allozyne is considered to be acquiring Poniard in the merger.

Appraisal Rights in Connection with the Merger (see page 101 and Annex B)

Under Delaware law, record holders of Allozyne capital stock who do not vote for approval of the proposal to adopt the merger agreement and who properly assert their appraisal rights will be entitled to seek appraisal for, and obtain payment in cash for the judicially determined fair value of their Allozyne stock if the merger is

 

 

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completed, in lieu of receiving the merger consideration. This value could be more than, the same as, or less than the value of the merger consideration. The relevant provisions of Section 262 of the Delaware General Corporation Law, or Section 262, are attached as Annex B to this proxy statement/prospectus/consent solicitation. You are encouraged to read these provisions carefully and in their entirety. Moreover, due the complexity of the procedures for exercising the right to seek appraisals, Allozyne stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with these provisions will result in the loss of the right of appraisal.

See the section entitled “The Merger—Appraisal Rights” on page 101 of this proxy statement/prospectus/consent solicitation for more information.

Holders of Poniard common stock are not entitled to appraisal rights in connection with the merger except with respect to the reverse stock split as described in the section entitled “Matters to be Presented to the Poniard Shareholders—Dissenters’ Rights” in this proxy statement/prospectus/consent solicitation.

Comparison of Rights of Holders of Poniard Capital Stock and Allozyne Capital Stock (see page 197)

If Poniard and Allozyne successfully complete the merger, holders of Allozyne capital stock will become Poniard shareholders, and their rights as shareholders will be governed by Poniard’s amended and restated articles of incorporation and bylaws, as amended. There are differences between the articles of incorporation and bylaws of Poniard and the certificates of incorporation and bylaws of Allozyne. Since Allozyne is a Delaware corporation and Poniard is a Washington corporation, the rights of Allozyne stockholders will begin to be governed by the Washington Business Corporation Act, or WBCA, after the completion of the merger. There are differences between the laws of Delaware and Washington. Due to the fact that Delaware has a more developed body of corporate law, the rights of stockholders are more clearly defined under the Delaware General Corporation Law, or DGCL, than the WBCA creating greater certainty with regard to the legal effects of corporate action. There are significant differences in antitakeover laws and it is easier for a change in control to occur in Delaware than Washington. Also, dissenters’ rights are more limited under Delaware law. At the effective time of the merger, the outstanding shares of Allozyne common and preferred stock will be converted into the right to receive shares of Poniard common stock. Allozyne preferred stock will in effect be exchanged for Poniard common stock so certain dividend, liquidation, redemption, voting, and protective rights held by holders of Allozyne’s preferred stock pursuant to Allozyne’s amended and restated certificate of incorporation will no longer be applicable. In addition, 1,120,000 shares of Poniard’s preferred stock are designated as $2.4375 Convertible Exchangeable Preferred Stock, Series 1, or Exchangeable Preferred Stock, and holders of the Exchangeable Preferred Stock have certain redemption, conversion and protective rights pursuant to Poniard’s Amended and Restated Articles of Incorporation. Furthermore, Allozyne’s amended and restated certificate of incorporation does not provide for cumulative voting, while Poniard’s amended and restated articles of incorporation provide that for the election of each director, every shareholder entitled to vote at such election shall have the right to cumulate his or her votes. See “Comparison of Rights of Holders of Poniard Capital Stock and Allozyne Capital Stock” on page 197 of this proxy statement/prospectus/consent solicitation for more information.

 

 

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SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following tables present summary historical and unaudited pro forma condensed combined financial data for Poniard and Allozyne. The selected financial data does not give effect to the 1-for-40 reverse stock split of Poniard common stock to be implemented upon approval of Poniard shareholders and prior to consummation of the merger.

Selected Historical Financial Data of Poniard

The following selected financial data should be read together with Poniard’s financial statements and accompanying notes and “Poniard’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this proxy statement/prospectus/consent solicitation. The selected financial data in this section is not intended to replace Poniard’s financial statements and the accompanying notes. Historical results are not necessarily indicative of operating results to be expected in the future.

The statement of operations data for the years ended December 31, 2010 and 2009 and the balance sheet data as of December 31, 2010 and 2009 was derived from Poniard’s audited financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2010, which is included in this proxy statement/prospectus/consent solicitation. The statement of operations data for the years ended December 31, 2008, 2007 and 2006 and balance sheet data as of December 31, 2008, 2007 and 2006 was derived from audited financial statements not included or incorporated by reference in this proxy statement/prospectus/consent solicitation. The statement of operations data for the six months ended June 30, 2011 and 2010 and the balance sheet data as of June 30, 2011 was derived from unaudited financial statements contained in Poniard’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 included in this proxy statement/prospectus/consent solicitation. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Poniard considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected in future periods.

 

    Years Ended December 31,     Six Months Ended
June 30,
 
    2010     2009     2008     2007     2006         2011             2010      
    (In thousands, except per share data)        

Statement of Operations Data

             

Revenues

  $ —        $ —        $ —        $ —        $ —        $ —        $ —     

Operating Expenses

             

Research and development

    7,975        25,739        34,714        23,373        13,356        775        6,979   

General and administrative

    17,140        14,698        14,443        12,085        7,548        6,295        8,687   

Restructuring

    1,626        468        —          —          —          —          1,626   

Loss on extinguishment of debt

    1,217        —          —          —          —          —          —     

Asset impairment loss

    —          2,073        —          —          403        —          —     

Gain on sale of real estate and equipment

    —          —          —          (105     (73     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    27,958        42,978        49,157        35,353        21,234        7,070        17,292   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (27,958     (42,978     (49,157     (35,353     (21,234     (7,070     (17,292

Other income (expense), net

    (2,093     (2,737     592        2,571        (2,060     (34     (1,143
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (30,051     (45,715     (48,565     (32,782     (23,294     (7,104     (18,435

Preferred stock dividends

    (736     (500     (500     (500     (500     (96     (640
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss applicable to common shareholders

  $ (30,787   $ (46,215   $ (49,065   $ (33,282   $ (23,794   $ (7,200   $ (19,075
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share applicable to common shareholders—basic and diluted

  $ (0.66   $ (1.31   $ (1.41   $ (1.08   $ (1.37   $ (0.13   $ (0.42
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
             

Weighted average common shares outstanding—basic and diluted

    46,860        35,272        34,686        30,762        17,376        54,304        45,401   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     As of December 31,     As of
June 30,
 
     2010     2009     2008     2007     2006     2011  
     (In thousands, except per share data)        

Selected Balance Sheet Data

            

Cash, cash equivalents, marketable securities and restricted cash

   $ 4,488      $ 43,670      $ 73,036      $ 92,902      $ 53,846      $ 3,850   

Total assets

     11,643        52,442        84,232        105,140        69,067        9,989   

Long-term obligations

     1,574        11,671        17,445        6,561        9,975        1,618   

Accumulated deficit

     (438,943     (408,156     (361,941     (312,876     (279,594     (446,143

Total shareholders’ equity

     8,453        23,644        47,647        89,105        46,891        6,284   

Selected Historical Financial Data of Allozyne

The following selected financial data should be read together with Allozyne’s financial statements and accompanying notes and “Allozyne’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this proxy statement/prospectus/consent solicitation. The selected financial data in this section is not intended to replace Allozyne’s financial statements and the accompanying notes. Historical results are not necessarily indicative of operating results to be expected in the future.

The statement of operations data for the years ended December 31, 2010 and 2009 and the balance sheet data as of December 31, 2010 and 2009 was derived from Allozyne’s audited financial statements that are included in this proxy statement/prospectus/consent solicitation. The statement of operations data for the years ended December 31, 2008, 2007 and 2006 and balance sheet data as of December 31, 2008, 2007 and 2006 was derived from financial statements not included or incorporated by reference in this proxy statement/prospectus/consent solicitation. The statement of operations data for the six months ended June 30, 2010 and 2011 and the balance sheet data as of June 30, 2011 was derived from unaudited condensed financial statements also included in this proxy statement/prospectus/consent solicitation. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Allozyne considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected in future periods.

 

    Years Ended December 31,     Six Months
Ended

June 30,
 
    2010     2009     2008     2007     2006     2011     2010  
    (In thousands, except per share data)        

Statement of Operations Data

             

Revenues

  $ 43      $ —        $ —        $ —        $ —        $ —        $ 43   

Operating expenses

             

Research and development

    6,904        6,736        11,397        2,388        1,336        3,912        3,833   

General and administrative

    1,990        1,809        3,083        1,284        523        1,781        862   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    8,894        8,545        14,480        3,672        1,859        5,693        4,695   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (8,851     (8,545     (14,480     (3,671     (1,859     (5,693     (4,652

Other income (expense), net

    399        (357     286        (46     80        (142     (10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

    (8,452     (8,902     (14,194     (3,717     (1,779     (5,835     (4,662

Accretion of preferred stock

    (2,264     (1,828     (1,505     (468     (223     (1,132     (1,132
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
             

Net loss applicable to common stockholders

  $ (10,716   $ (10,730   $ (15,699   $ (4,185   $ (2,002   $ (6,967   $ (5,794
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
             

Net loss per share applicable to common stockholders—basic
and diluted

  $ (3.62   $ (3.73   $ (5.49   $ (1.52   $ (0.80   $ (2.31   $ (1.98
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
             

Weighted average common shares outstanding—basic and diluted

    2,957        2,876        2,862        2,759        2,512        3,013        2,921   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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     As of December 31,     As of
June 30,
 
     2010     2009     2008     2007     2006     2011  
     (In thousands)        

Selected Balance Sheet Data

            

Cash, cash equivalents, marketable securities and restricted cash

   $ 856      $ 8,176      $ 6,241      $ 18,660      $ 1,170      $ 1,317   

Total assets

     4,367        12,106        15,337        19,425        1,340        4,421   

Long-term obligations

     1,052        1,427        3,925        250        —          996   

Deficit accumulated during the development stage

     (42,985     (32,450     (21,933     (6,467     (2,297     (49,557

Total stockholders’ deficit

     (42,982     (32,447     (21,931     (6,465     (2,295     (49,554

Selected Unaudited Pro Forma Condensed Combined Financial Data of Poniard and Allozyne

The following unaudited pro forma condensed combined financial data should be read in conjunction with the historical financial statements and the accompanying notes of Poniard and Allozyne, and “Poniard’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Allozyne’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are included elsewhere in this proxy statement/prospectus/consent solicitation, and the other information contained in this proxy statement/prospectus/consent solicitation. See “Where You Can Find Additional Information” beginning on page 255 and the financial statements of Poniard and Allozyne beginning on pages F-1 and F-50, respectively.

The following selected unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting. For accounting purposes, Allozyne is considered to be acquiring Poniard in this merger. The Poniard and Allozyne unaudited pro forma condensed combined balance sheet data assume that the merger of Poniard and Allozyne took place on June 30, 2011, and combines Poniard’s historical balance sheet at June 30, 2011 with Allozyne’s historical balance sheet at June 30, 2011. The Poniard and Allozyne unaudited pro forma condensed combined statement of operations data assume that the merger of Poniard and Allozyne took place as of the beginning of the periods presented. The unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2010 combines Poniard’s historical statement of operations for the year then ended with Allozyne’s statement of operations for the year ended December 31, 2010 and reflects only ongoing operations. The unaudited pro forma condensed combined statement of operations data for the six months ended June 30, 2011 combines Poniard’s historical statement of operations for the six months then ended with Allozyne’s historical statement of operations for the six months ended June 30, 2011 and reflects only ongoing operations.

The selected unaudited pro forma condensed combined financial data are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations of future periods or the results that actually would have been realized had the entities been a single entity during these periods. The selected unaudited pro forma condensed combined financial data as of and for the six months ended June 30, 2011 and for the year ended December 31, 2010 are derived from the unaudited pro forma condensed combined financial information starting at page 185 of this proxy statement/prospectus/consent solicitation and should be read in conjunction with those statements and the related notes. See “Unaudited Pro Forma Condensed Combined Financial Information.”

 

     Year Ended
December 31,
2010
    Six Months
Ended
June 30, 2011
 
     (in thousands, except per share data)  

Unaudited Pro Forma Condensed Combined Statement of Operations Data:

    

Revenue

   $ 43      $ —     

Net loss applicable to common shareholders

     (38,297     (12,853

Net loss per share applicable to common shareholders – basic and diluted

   $ (0.23   $ (0.07

Weighted average common shares outstanding – basic and diluted

     168,555        176,055   

 

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     As of
June 30, 2011
 
     (in thousands)  

Unaudited Pro Forma Condensed Combined Balance Sheet Data:

  

Cash and cash equivalents

   $ 6,352   

Working capital

     (2,077

Total assets

     22,573   

Total liabilities

     12,767   

Shareholders’ equity

     9,806   

Comparative Historical and Unaudited Pro Forma Per Share

The following information does not give effect to the proposed reverse stock split that Poniard presented to its shareholders for approval at its 2011 annual meeting of shareholders originally held on June 9, 2011 and reconvened on July 8 and July 22, 2011.

The information below reflects:

 

   

the historical net loss and book value per share of Allozyne and the historical net loss and book value per share of Poniard common stock in comparison with the unaudited pro forma net loss and book value per share after giving effect to the proposed merger of Poniard with Allozyne on a purchase basis; and

 

   

the equivalent historical net loss per share attributable to shares of Poniard common stock which will be issued in the merger.

You should read the tables below in conjunction with the respective audited and unaudited financial statements of Poniard and Allozyne included elsewhere in this document and the related notes and the unaudited pro forma condensed financial information and notes related to such financial information included elsewhere in this proxy statement/prospectus/consent solicitation.

ALLOZYNE

 

     Year Ended
December 31,
2010
    Six Months
Ended
June 30, 2011
 

Historical Per Common Share Data:

    

Basic and diluted net loss per common share

   $ (3.62   $ (2.31

Book value per common share

     (14.26     (16.45

PONIARD

 

     Year Ended
December 31,
2010
    Six Months
Ended
June 30, 2011
 

Historical Per Common Share Data:

    

Basic and diluted net loss per common share

   $ (0.66   $ (0.13

Book value per common share

     0.17        0.10   

 

     Year Ended
December 31,
2010
    Six Months
Ended
June 30, 2011
 

Pro Forma Equivalent Data (1):

    

Basic and diluted net loss per common share

   $ (0.58   $ (0.18

Book value per common share

     N/A        0.13   

 

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ALLOZYNE AND PONIARD

 

     Year Ended
December 31,
2010
    Six Months
Ended
June 30, 2011
 

Combined Pro Forma Per Common Share Data:

    

Basic and diluted net loss per combined pro forma common share

   $ (0.23   $ (0.07

Book value per combined pro forma common share

     N/A        0.05   

 

(1) Poniard pro forma equivalent amounts are calculated by multiplying pro forma combined per share amounts by the exchange ratio of 2.5119.

 

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MARKET PRICE AND DIVIDEND INFORMATION

Poniard

On December 17, 2010, Poniard transferred its common stock listing to The NASDAQ Capital Market from The NASDAQ Global Market, where it had been listed since October 1, 2007. The table below sets forth, for the periods indicated, the high and low sales prices for Poniard common stock, as reported on The NASDAQ Capital Market or The NASDAQ Global Market, as applicable. Because the market price of Poniard common stock is subject to fluctuation, the market value of the shares of Poniard common stock that Allozyne stockholders will be entitled to receive in the merger may increase or decrease.

 

     High      Low  

2011

     

First Quarter

   $ 0.70       $ 0.34   

Second Quarter

     0.43         0.19   

2010

     

First Quarter

     2.70         1.04   

Second Quarter

     1.45         0.60   

Third Quarter

     0.68         0.38   

Fourth Quarter

     0.65         0.35   

2009

     

First Quarter

   $ 3.73       $ 1.50   

Second Quarter

     6.19         1.97   

Third Quarter

     9.14         6.50   

Fourth Quarter

     8.55         1.60   

On June 22, 2011, the last full trading day immediately preceding the public announcement of the signing of the merger agreement, the closing sales price per share of Poniard common stock as reported on The NASDAQ Capital Market was $0.1915 per share, for an aggregate market value of Poniard of approximately $11.0 million.

On [], 2011, the last practicable date before the printing of the this proxy statement/prospectus/consent solicitation, the closing sales price per share of Poniard common stock as reported on The NASDAQ Capital Market was $[] per share, for an aggregate market value of Poniard of approximately $[].

As of October 4, 2011, the record date for the Poniard special meeting of shareholders, there were approximately [] shares of Poniard common stock outstanding and approximately [] holders of record of Poniard common stock. The number of shareholders of record does not include the shareholders whose shares are held on record by a broker or clearing agency, but includes such a brokerage house or clearing agency as one holder of record.

At the effective time of the merger, Poniard will change its corporate name to “Allozyne, Inc.” and expects to trade on The NASDAQ Capital Market under the symbol “ALLO.”

On July 20, 2010, Poniard received a letter from The NASDAQ Stock Market, or NASDAQ, stating that the minimum bid price of its common stock had been below $1.00 per share for 30 consecutive business days and that Poniard is not in compliance with the minimum bid price requirement for listing on The NASDAQ Global Market. Poniard was provided an initial period of 180 calendar days, or until January 18, 2011, to regain compliance. Poniard transferred the listing of its common stock to The NASDAQ Capital Market on December 17, 2010, at which time Poniard was afforded the remainder of the initial compliance period. On January 19, 2011, Poniard received a letter from NASDAQ notifying Poniard that it had been granted an additional 180 calendar day period, or until July 18, 2011, to regain compliance with the minimum bid price requirement. The additional time period was granted based on Poniard meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The NASDAQ Capital Market, with the exception of the bid price requirement, and Poniard’s written notice to NASDAQ of its

 

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intention to cure the deficiency during the additional compliance period by effecting a reverse stock split, if necessary. To regain compliance, the closing bid price of Poniard’s common stock must meet or exceed $1.00 per share for at least ten consecutive business days during the additional time period. NASDAQ may, in its discretion, require Poniard common stock to maintain a closing bid price of at least $1.00 for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining that Poniard has demonstrated an ability to maintain long-term compliance.

On June 9, 2011, after election of directors and ratification of auditors, Poniard adjourned its 2011 annual meeting of shareholders to July 8, 2011 and further adjourned to July 22, 2011, to solicit additional proxies to vote in favor of a proposal to authorize the board of directors to, on or before August 1, 2011, implement a reverse stock split of its outstanding common stock at a ratio between 1-for-15 and 1-for-25, with the exact ratio to be set by the Poniard board in its discretion. The purpose of the reverse stock split proposal was to facilitate Poniard’s efforts to regain compliance with The NASDAQ Capital Market minimum bid price requirement. Poniard adjourned its reconvened annual meeting of shareholders on July 22, 2011, with an insufficient number of votes to approve the reverse stock split proposal. Although 91.6% of the shareholders who voted at the annual meeting voted in favor of the reverse stock split proposal, only 49.2% of Poniard’s outstanding common stock entitled to vote at the annual meeting actually voted. A majority (50% of the shares outstanding, plus one share) of the Poniard common stock outstanding and entitled to vote at the Poniard annual meeting of shareholders was required to approve the reverse stock split proposal.

On July 19, 2011, the NASDAQ Listing Qualifications Staff advised Poniard that it had not regained compliance within the extended compliance period and its common stock therefore will be delisted. On August 25, 2011, representatives of Poniard attended a hearing to appeal the decision and to present a plan for compliance to the NASDAQ listing qualifications panel. On September 2, 2011, the NASDAQ Hearings Panel determined to allow the continued listing of Poniard’s common stock on The NASDAQ Stock Market subject to the conditions that on or before December 31, 2011, Poniard must have (i) held a shareholders’ meeting; (ii) obtained shareholder approval for the merger with Allozyne and a reverse stock split in a ratio sufficient to allow the stock to trade above $4.00 per share; and (iii) obtained approval of the NASDAQ staff for listing of the combined company on The NASDAQ Stock Market. There can be no assurance that the plan of compliance and the combined company will be able to satisfy the requirements for maintaining The NASDAQ Capital Market listing.

The merger constitutes a “reverse merger” under applicable marketplace rules established by NASDAQ, which requires the combined company to comply with the initial listing standards of the applicable NASDAQ market to continue to be listed on such market following the merger. The NASDAQ Capital Market’s initial listing standards require a company to have, among other things, (i) a minimum bid price of at least $4.00 per share; (ii) at least 1,000,000 publicly held shares with an aggregate value of at least $15.0 million; and (iii) stockholders’ equity of at least $5.0 million. In addition, the combined entity must comply with NASDAQ’s corporate governance requirements.

If the 1-for-40 reverse stock split described in Proposal No. 2 is approved and the merger is consummated, Poniard expects that the 1-for-40 reverse stock split will increase the market price of its common stock and Poniard will be able to satisfy the minimum bid price requirement of at least $4.00 per share. Notwithstanding the foregoing, there can be no assurance that the market price per share following the merger and the reverse stock split will remain in excess of the minimum bid price for a sustained period of time.

Following the consummation of the merger, Poniard expects that its publicly held shares will be in excess of 1,000,000 shares with an aggregate value of at least $15.0 million. “Publicly held shares” is defined as total shares outstanding, less any shares held directly or indirectly by officers, directors or any person who is the beneficial owner of more than 10% of the total shares outstanding of the company. Notwithstanding the foregoing, there can be no assurance that the combined entity’s publicly held shares will remain in excess of 1,000,000 shares with an aggregate value of at least $15.0 million for a sustained period of time.

 

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Poniard anticipates that the combined company’s shareholders’ equity on a pro-forma combined basis as of August 15, 2011 will be approximately $9.8 million. Thus, Poniard anticipates that the combined company’s stockholders’ equity will exceed the $5.0 million stockholders’ equity requirement. Notwithstanding the foregoing, there can be no assurance that the combined company’s stockholders’ equity will remain in excess of the $5.0 million stockholders’ equity requirement. NASDAQ also reserves the right to make adjustments to estimate stockholders’ equity. For example, NASDAQ has stated that a burn rate may be calculated with the aid of historically published income statements and applied to estimate a company’s stockholders’ equity at the time of listing, if the company has previously reported net losses. Poniard has incurred net losses in each year since its inception in 1984. Since its inception, Allozyne also has incurred net losses. Given this history, there is no assurance that NASDAQ will not make adjustments to estimate and determine that the combined company does not meet the stockholders’ equity requirement.

The corporate governance requirements which the combined company must meet to successfully apply for initial listing on The NASDAQ Capital Market include: (i) possessing a majority independent board and (ii) having an audit committee which complies with NASDAQ’s listing standards. There is no assurance that the combined company will be successful in seeking independent directors to serve on the board of directors of the combined company after the resignations of Poniard’s current board members following the closing of the merger or that the combined company will be able to have an audit committee which satisfies NASDAQ’s listing standards for audit committee independence.

As a result of the uncertainties described above, there is no assurance that Poniard will be able to maintain its listing on The NASDAQ Capital Market even if the merger is consummated.

Allozyne

Allozyne is a privately-held company, and there is no established trading market for its securities. As of August 15, 2011, there were approximately 3,012,860 shares of Allozyne common stock outstanding, 6,492,999 shares of Allozyne Series A Preferred Stock outstanding, 18,000,000 shares of Allozyne Series B-1 Preferred Stock outstanding and 12,016,168 shares of Allozyne Series B-2 Preferred outstanding, and there were approximately 25 holders of record of Allozyne capital stock.

Dividends

Poniard has never declared or paid any cash dividends on its common stock nor does it intend to do so in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of the Poniard board of directors and will depend upon its financial condition, operating results, capital requirements, any applicable contractual restrictions and such other factors as the Poniard board of directors deems relevant. Poniard has declared and paid all dividends due on its $2.4375 convertible exchangeable preferred stock.

Allozyne has never declared or paid any cash dividends on its capital stock nor does it intend to do so in the foreseeable future.

 

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RISK FACTORS

You should consider the following factors in evaluating whether to approve the proposals described in this proxy statement/prospectus/consent solicitation. These factors should be considered in conjunction with the other information included by Poniard and Allozyne in this proxy statement/prospectus/consent solicitation. The risk factors relating to Allozyne will also apply to the combined company going forward because the business of the combined company primarily will be Allozyne’s business.

Risks Related to the Proposed Merger

There is no assurance when or even if the merger will be completed. Failure to obtain required approvals necessary to satisfy closing conditions may delay or prevent completion of the merger.

Completion of the merger is subject to the satisfaction or waiver of a number of conditions, including the requisite approvals by the shareholders of Poniard and the stockholders of Allozyne. There can be no assurance that Poniard or Allozyne will be able to satisfy the closing conditions or that closing conditions beyond their control will be satisfied or waived.

Because the lack of a public market for Allozyne’s outstanding shares makes it difficult to evaluate the fairness of the merger, Allozyne stockholders may receive consideration in the merger that is greater than or less than the fair market value of the Allozyne shares.

The outstanding capital stock of Allozyne is privately held and is not traded in any public market. The lack of a public market makes it extremely difficult to determine the fair market value of Allozyne. Since the percentage of Poniard’s equity to be issued to Allozyne stockholders was determined based on negotiations between the parties, it is possible that the value of the Poniard common stock to be issued in connection with the merger will be greater than the fair market value of Allozyne. Alternatively, it is possible that the value of the shares of Poniard common stock to be issued in connection with the merger will be less than the fair market value of Allozyne.

Because the merger will be completed after the date of the Poniard special meeting of shareholders and the Allozyne written consent of stockholders, at the time of your special meeting or written consent, you will not know the exact number of shares of Poniard common stock that the Allozyne stockholders will receive upon completion of the merger.

Subject to the terms of the merger agreement, at the effective time of the merger, each share of Allozyne common stock and preferred stock issued and outstanding immediately prior to the merger will be canceled, extinguished and automatically converted into the right to receive that number of shares of Poniard common stock as determined pursuant to the exchange ratio described in the merger agreement. The exchange ratio depends on the net debt of Poniard, the net cash of Allozyne and any amounts of aggregate gross cash receipts raised by Allozyne. Under the merger agreement, Poniard’s net debt is defined as Poniard’s liabilities and other outstanding and future obligations as of the effective time of the merger minus all of its cash and cash equivalents, marketable securities, accounts and interest receivable and deposits (to the extend refundable to Poniard), subject to certain adjustments, and Allozyne’s net cash is defined as Allozyne’s cash and cash equivalents, marketable securities, accounts and interest receivable and deposits (to the extent refundable to Allozyne), minus (i) certain liabilities of Allozyne and (ii) the aggregate amount of cash to be received by Allozyne in certain financing activities, including $4.0 million already raised in May and July 2011. Accordingly, the exact number of shares of Poniard common stock that Allozyne stockholders will receive upon completion of the merger will not be available at the time of the Poniard special meeting of shareholders and the Allozyne written consent of stockholders.

 

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Poniard and Allozyne executive officers and directors may have interests in the merger that are different from, or in addition to, those of Poniard shareholders and Allozyne stockholders generally.

The executive officers and directors of Poniard and Allozyne may have interests in the merger that are different from, or are in addition to, those of Poniard shareholders and Allozyne stockholders generally. The directors of the combined company will consist of two directors from Poniard’s board, four directors from Allozyne’s board, and one new director. Allozyne’s executive officers will continue to serve as executive officers of the combined company. Further, certain Poniard executive officers will receive change in control payments in connection with the merger. See the sections entitled “The Merger—Interests of Poniard’s Executive Officers and Directors in the Merger” starting on page 85 and “The Merger—Interests of Allozyne’s Directors and Executive Officers in the Merger” starting on page 93.

During the pendency of the merger, Poniard and Allozyne may be unable to enter into a business combination with another party because of restrictions in the merger agreement.

The merger agreement restricts the ability of Poniard and Allozyne to make acquisitions or complete other transactions during the pendency of the merger. While the merger agreement is in effect, subject to limited exceptions, each party is prohibited from soliciting, initiating, encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to such party entering into certain extraordinary transactions with any third party, such as a sale of assets, an acquisition of equity interest, a tender offer for capital stock or a merger or other business combination outside the ordinary course of business. Any such transactions could be favorable to Poniard shareholders or Allozyne stockholders.

The merger may be completed even though material adverse changes may result from the announcement of the merger, industry-wide changes and other causes.

In general, either party can refuse to complete the merger if there is a material adverse change affecting the other party between June 22, 2011, the date of the merger agreement, and the closing of the merger. However, some types of changes do not permit either party to refuse to complete the merger, even if such changes would have a material adverse effect on Poniard or Allozyne. If adverse changes occur but Poniard and Allozyne must still complete the merger, the combined company’s stock price may suffer.

The rights of Allozyne stockholders who become Poniard shareholders in the merger will be governed by Washington law and by Poniard’s amended and restated articles of incorporation and amended and restated bylaws.

Allozyne stockholders who receive shares of Poniard common stock in the merger will become Poniard shareholders. Poniard is currently a corporation formed under the laws of Washington. As a result, Allozyne stockholders who become shareholders in Poniard will be governed by the WBCA, and Poniard’s Amended and Restated Articles of Incorporation and Poniard’s Amended and Restated Bylaws, rather than being governed by the DGCL and Allozyne’s Amended and Restated Certificate of Incorporation and Allozyne’s Amended and Restated Bylaws. There are differences between the laws of Delaware and Washington. Due to the fact that Delaware has a more developed body of corporate law, the rights of stockholders are more clearly defined under the DGCL than the WBCA creating greater certainty with regard to the legal effects of corporate action. There are significant differences in antitakeover laws and it is easier for a change in control to occur in Delaware than Washington. Also, dissenters’ rights are more limited under Delaware law. At the effective time of the merger, the outstanding shares of Allozyne common and preferred stock will be converted into the right to receive shares of Poniard common stock. Allozyne preferred stock will in effect be exchanged for Poniard common stock so certain dividend, liquidation, redemption, voting, and protective rights held by holders of Allozyne’s preferred stock pursuant to Allozyne’s amended and restated certificate of incorporation will no longer be applicable. In addition, 1,120,000 shares of Poniard’s preferred stock are designated as $2.4375 convertible exchangeable preferred stock, or Series 1 Preferred Shares, and holders of the Series 1 Preferred Shares have certain redemption, conversion and protective rights pursuant to Poniard’s amended and restated articles of

 

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incorporation. Furthermore, Allozyne’s amended and restated certificate of incorporation does not provide for cumulative voting, while Poniard’s amended and restated articles of incorporation provide that for the election of each director, every shareholder entitled to vote at such election shall have the right to cumulate his or her votes. For more information, see “Comparison of Rights of Holders of Poniard Capital Stock and Allozyne Capital Stock” beginning on page 197.

If the merger does not qualify as a reorganization under Section 368(a) of the Code or is otherwise taxable to U.S. holders of Allozyne common stock, then such holders may be required to pay substantial U.S. Federal income taxes.

As a condition to the completion of the merger, each of Fenwick & West LLP, tax counsel to Allozyne, and Perkins Coie LLP, tax counsel to Poniard, will have delivered an opinion, dated as of the closing date of the merger, that the merger will be treated for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. These opinions will be based on certain assumptions and representations as to factual matters from Allozyne, Poniard and the Merger Sub, as well as certain covenants and undertakings by Allozyne, Poniard and the Merger Sub. If any of the assumptions, representations, covenants or undertakings is incorrect, incomplete, inaccurate or is violated in any material respect, the validity of the conclusions reached by counsel in their opinions would be jeopardized. Additionally, an opinion of counsel represents counsel’s best legal judgment but is not binding on the United States Internal Revenue Service, or IRS, or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinions or that a court will not sustain such a challenge. If the IRS or a court determines that the merger should not be treated as a reorganization, a holder of Allozyne common stock would recognize taxable gain or loss upon the exchange of Allozyne common stock for Poniard common stock pursuant to the merger. See “The Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 99.

The combined company will incur significant transaction and merger-related costs in connection with the merger.

Poniard and Allozyne estimate that they will incur aggregate direct transaction costs of approximately $3.7 million associated with the merger, including costs incurred through June 30, 2011, and additional costs associated with the commencement of Allozyne’s operation as a public company, which cannot be estimated accurately at this time. The costs associated with the merger may increase if any Allozyne stockholders elect to dissent from the merger and seek payment of the fair value of their shares as permitted by Delaware law. If the total costs of the merger exceed Poniard’s and Allozyne’s estimates, the ability of the combined company to achieve its business plan will be adversely affected.

The combined company may be unable to utilize Poniard’s net operating loss carryforwards.

Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Further, if the “continuity of business requirement” defined in Section 382 of the Code is not met in a change of control transaction, the pre-transaction net operating loss carryfoward deductions become substantially reduced or unavailable for use by the surviving corporation in the transaction. An ownership change will occur as a result of the merger and there will not be a continuation of Poniard’s business following completion of the merger, which will substantially reduce or eliminate the ability of the combined company to utilize Poniard’s net operating loss carryforwards.

The anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

The merger involves the integration of two companies that have previously operated independently with principal offices in two distinct locations. Due to legal restrictions, Poniard and Allozyne are able to conduct

 

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only limited planning regarding the integration of the two companies prior to completion of the merger. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition, and stock price following the merger. Even if the combined company were able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.

Risks Related to Poniard

Poniard may not be able to complete the merger with Allozyne, in which case, it will need to explore other alternatives and may file for bankruptcy.

Poniard cannot assure you that it will be able to complete the proposed merger with Allozyne in a timely manner or at all or that the proposed merger will return value to Poniard shareholders. The merger agreement is subject to many closing conditions and termination rights, as set forth in more detail in “The Merger Agreement—Conditions to Completion of the Merger” and “The Merger Agreement—Termination” on pages 111 and 117 of this proxy statement/prospectus/consent solicitation. In addition to its picoplatin product candidate, Poniard’s assets currently consist primarily of its limited cash and cash equivalents.

Poniard estimates that its current cash resources, which totaled $3.7 million as of June 30, 2011, will be sufficient to continue operations at substantially their current level through the third quarter of 2011. Poniard’s current operational costs consist primarily of personnel expenses, facilities expenses, including insurance costs, expenses for investor relations and corporate regulatory filings, and professional fees, including progress payments for legal and accounting fees in connection with the proposed merger. Poniard’s operating budget, however, does not include additional costs associated with the proposed merger with Allozyne or, if Poniard is unable to complete the proposed merger, the costs of a liquidation and winding up the company. These costs may be substantial and would include costs incurred in connection with the proposed merger, estimated to total approximately $1.6 million, in addition to severance and accrued vacation expense, accelerated payments due under existing contracts, and legal, accounting and/or financial advisory fees.

If the merger with Allozyne is not completed, Poniard’s board of directors will be required to explore alternatives for Poniard’s business and assets. These alternatives might include raising capital, seeking to merge or combine with another company, seeking the dissolution and liquidation of Poniard, or initiating bankruptcy proceedings. There can be no assurance that any third party will be interested in merging with Poniard or would agree to a price and other terms that Poniard would deem adequate or that Poniard shareholders would approve any such transaction. Although Poniard may try to pursue an alternative transaction and would seek to continue its current efforts to enter into a partnership or other strategic collaboration to support the continued development of picoplatin, Poniard likely will have very limited cash resources and likely will be forced to file for federal bankruptcy protection, unless it raises additional capital. If Poniard files for bankruptcy protection, its picoplatin license agreement and commercial supply contracts would be subject to termination by the other parties to those agreements and the obligation for dedicated manufacturing equipment under the commercial supply agreement with W. C. Heraeus GmbH, or Heraeus, in the amount of $1.6 million, would accelerate. In the event Poniard seeks bankruptcy protection, the creditors of Poniard would have first claim on the value of the assets of Poniard which, other than any remaining cash, would most likely be liquidated in a bankruptcy sale. Poniard can give no assurance of the magnitude of the net proceeds of any such sale and whether such proceeds would be sufficient to satisfy Poniard’s obligations to its creditors, let alone permit any distribution to its equity holders.

Poniard has a history of operating losses, will require substantial additional capital to fund its operation, and substantial doubt exists about Poniard’s ability to continue as a going concern.

The report of Poniard’s independent registered public accountants issued as part of its Annual Report on Form 10-K for the year ended December 31, 2010 contains a statement expressing substantial doubt regarding

 

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Poniard’s ability to continue as a going concern. Poniard has not been profitable since its formation in 1984. As of June 30, 2011, Poniard had an accumulated deficit of $446.1 million. Poniard had net losses of $30.1 million, $45.7 million and $48.6 million for the years ended December 31, 2010, 2009 and 2008, respectively. These losses resulted principally from costs incurred in its research and development programs and from its general and administrative activities. To date, Poniard has dedicated substantially all of its resources to research and development activities and has not generated any significant revenue from any product sales. Poniard has devoted substantially all of its resources in recent years to the development of its picoplatin product candidate. Poniard does not anticipate that picoplatin will be commercially available before 2014, if ever. In March 2010, Poniard initiated a comprehensive review of strategic alternatives aimed at supporting and optimizing the value of its picoplatin program for Poniard shareholders. Poniard has completed internal preparation of potential registration strategies for advancing picoplatin into pivotal clinical trials in colorectal, prostate, ovarian and small cell lung cancers, but has not otherwise conducted significant development activities since undertaking the strategic review process. This may further delay the timeline for potential commercialization of picoplatin. Poniard expects to incur additional operating losses and negative cash flows from operations for the foreseeable future. Without additional substantial capital from a financing, sale of assets, technology or intellectual property, or from a business combination or a similar transaction, Poniard will exhaust its resources and be unable to continue operations. These factors raise substantial doubt about Poniard’s ability to continue as a going concern.

Poniard’s Phase 3 trial of picoplatin in small cell lung cancer failed to meet the primary endpoint of overall survival, and this has negatively impacted, and will likely continue to negatively impact, Poniard’s ability to obtain funding and enter into strategic transactions.

In November 2009, based on 321 patient deaths, Poniard announced that its pivotal Phase 3 SPEAR trial did not meet its primary endpoint of overall survival in the intent-to-treat population. While this result is not necessarily predictive of the results that Poniard may experience in other indications, in different patient populations and/or with modifications to trial design, it had an immediate negative impact on Poniard’s ability to obtain funding for future picoplatin clinical trials and/or enter into strategic transactions and could negatively impact Poniard’s ability to obtain funding for future picoplatin clinical trials and/or enter into strategic transactions should the merger not close. Prior to the announcement of the Phase 3 SPEAR trial, Poniard had approached potential strategic partners who had expressed an interest in holding discussions with Poniard once results of the Phase 3 SPEAR trial were known. Also at this time, Poniard was planning a possible financing. Following the announcement of the unfavorable Phase 3 SPEAR trial results, these potential strategic partners declined to engage in discussions with Poniard and investors with whom Poniard had discussed a potential financing were unwilling to commit funds on a timely basis or on terms that would support the continued development of picoplatin.

If the merger with Allozyne is not completed and Poniard cannot successfully maintain and protect its current license for the development and commercial sale of picoplatin, Poniard’s prospects may be materially negatively affected.

Poniard has entered into an exclusive worldwide license, as amended, with Genzyme Corporation (successor to AnorMED, Inc. and a wholly owned subsidiary of Sanofi S.A. since April 2011) or Genzyme, for the development and commercialization of picoplatin. Under the license, Poniard is solely responsible for the development and commercialization of picoplatin. Genzyme retains the right, at Poniard’s cost, to prosecute its patent applications and maintain all licensed patents. The parties executed the license agreement in April 2004, at which time Poniard paid a one-time upfront payment of $1.0 million in common stock and $1.0 million in cash. The original agreement excluded Japan from the licensed territory and provided for $13.0 million in development and commercialization milestones, payable in cash or a combination of cash and common stock, and a royalty rate of up to 15% on product net sales after regulatory approval. The parties amended the license agreement on September 18, 2006, modifying several key financial terms and expanding the licensed territory to include Japan, thereby providing Poniard worldwide rights. In consideration of the amendment, Poniard paid Genzyme $5.0 million in cash on October 12, 2006 and an additional $5.0 million in cash on March 30, 2007. The amendment

 

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eliminated all development milestone payments to Genzyme. Genzyme remains entitled to receive up to $5.0 million in commercialization milestones upon the attainment of certain levels of annual net sales of picoplatin after regulatory approval. The amendment also reduced the royalty payable to Genzyme to a maximum of 9% of annual net product sales and eliminated sharing of sublicense revenues with Genzyme. Poniard cannot predict the actual timing for initiation or completion of any future clinical trials, the length of time to regulatory approval, if any, or the extent of annual sales, if any, of picoplatin and, therefore, cannot predict when or if the milestone and royalty payments under its license agreement with Genzyme may be triggered.

The license agreement may be terminated by either Poniard or Genzyme for breach, or if the other party files a petition in bankruptcy or insolvency or for reorganization or is dissolved, liquidated or makes assignment for the benefit of creditors. Poniard can terminate the license at any time upon prior written notice to Genzyme. If not earlier terminated, the license agreement will continue in effect, in each country in the territory in which the licensed product is sold or manufactured, until the earlier of (i) expiration of the last valid claim of a pending or issued patent covering the licensed product in that country or (ii) a specified number of years after first commercial sale of the licensed product in that country. If Genzyme were to breach its obligations under the license, or if the license expires or is terminated and Poniard cannot renew, replace, extend or preserve its rights under the license agreement, Poniard’s business will be harmed.

If the merger is not completed and Poniard is unable to protect its proprietary rights, the commercial success of its product candidates may be limited and Poniard may be unable to realize value from its intellectual property; Poniard’s patents are of limited duration and Poniard may not be able to rely on the continuation of its patents beyond their stated duration.

Poniard’s success is dependent in part on obtaining, maintaining and enforcing its patents and other proprietary rights and its ability to avoid infringing the proprietary rights of others. The United States Patent & Trademark Office, or USPTO, may not issue patents from the patent applications owned by or licensed to Poniard. If issued, the patents may not give Poniard an advantage over competitors with similar technologies. The issuance of a patent is not conclusive as to its validity or enforceability and it is uncertain how much protection, if any, will be given to Poniard’s patents if it attempts to enforce them and they are challenged in court or in other proceedings, such as oppositions, which may be brought in foreign jurisdictions to challenge the validity of a patent. A third party may challenge the validity or enforceability of a patent after its issuance by the USPTO. It is possible that a competitor may successfully challenge Poniard’s patents or that a challenge will result in limiting their coverage. Moreover, the cost of litigation to uphold the validity of patents and to prevent infringement can be substantial. If the outcome of litigation is adverse to Poniard, third parties may be able to use Poniard’s patented invention without payment to Poniard. Moreover, it is possible that competitors may infringe Poniard’s patents or successfully avoid them through design innovation. Poniard may need to file lawsuits to stop these activities. These lawsuits can be expensive and would consume time and other resources, even if Poniard is successful in stopping the violation of Poniard’s patent rights. In addition, there is a risk that a court would decide that Poniard’s patents are not valid and that Poniard does not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of Poniard’s patents was upheld, a court would refuse to stop the other party on the ground that its activities do not infringe Poniard’s patents. The protection afforded by issued patents is limited in duration. Poniard has no knowledge of any infringement of its patents relevant to its current business.

With respect to picoplatin, in the United States, Poniard expects to rely primarily on RE41209 (the reissue of U.S. Patent No. 5,665,771, or ‘771), expiring February 7, 2016, which is licensed to Poniard by Genzyme, and additional licensed patents expiring in 2016 covering picoplatin in Europe and other countries. The U.S. Food and Drug Administration, or FDA, has designated picoplatin as an orphan drug for the treatment of small cell lung cancer under the provisions of the Orphan Drug Act, which entitles Poniard to exclusive marketing rights for picoplatin in the U.S. for seven years following market approval. If approved, Poniard may also be able to extend the term of a U.S. patent covering picoplatin under The Drug Price and Competition and Patent Restoration Act of 1984, commonly referred to as the Hatch-Waxman Act, which permits the extension of the

 

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term of a U.S. patent on a new drug for up to a maximum of five years. In addition, the European Commission has designated picoplatin as an orphan medicinal product for the treatment of small cell lung cancer in the European Union, which entitles Poniard to exclusive marketing rights for picoplatin in the European Union for ten years following market approval in the European Union. Additional potential avenues exist which may supplement patent protection and exclusivity for picoplatin in Europe.

On May 8, 2009, patent owners, Genzyme and The Institute of Cancer Research, together with Poniard, filed with the USPTO, an application to reissue the ‘771 patent to the picoplatin compound. On April 6, 2010, the USPTO reissued the composition of matter patent for picoplatin as RE41209, replacing the ‘771 patent. The reissue patent includes claims specific to the picoplatin compound, its use in the treatment of any cancer, as well as claims to its pharmaceutical composition and oral dosage form. The reissue patent has the same force and effect as the original ‘771 patent and the same February 2016 expiration date, with the potential for up to a five year patent extension until 2021 under the Hatch-Waxman Act. Picoplatin is currently covered by additional issued process patents and other pending applications in the United States and abroad.

Under Poniard’s license agreement with Genzyme, Genzyme retains the right to prosecute its patent applications and maintain all licensed patents, with Poniard reimbursing such expenses. Poniard has the right to sue any third party infringers of the picoplatin patents. If Poniard does not file suit, Genzyme, in its sole discretion, has the right to sue the infringer at its expense. RE41209 is co-owned by Genzyme and The Institute of Cancer Research, which has exclusively licensed its rights to the patent to Genzyme.

In addition to the intellectual property rights described above, Poniard relies on unpatented technology, trade secrets and confidential information. Therefore, others may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose Poniard technology. Poniard may not be able to effectively protect its rights in unpatented technology, trade secrets and confidential information. Poniard requires each of its employees, consultants and advisors to execute a confidentiality agreement at the commencement of an employment or consulting relationship with Poniard. However, these agreements may not provide effective protection of its information or, in the event of unauthorized use or disclosure, may not provide adequate remedies.

The use of Poniard’s technologies could potentially conflict with the rights of others.

Poniard’s competitors or others may have or may acquire patent rights that they could enforce against Poniard. In such case, Poniard may be required to alter its products, pay licensing fees or cease activities. If Poniard’s products conflict with patent rights of others, third parties could bring legal actions against Poniard claiming damages and seeking to enjoin manufacturing and marketing of the affected products. If these legal actions are successful, in addition to any potential liability for damages, Poniard could be required to obtain a license in order to continue to manufacture or market the affected products. Poniard may not prevail in any legal action and a required license under the patent may not be available on acceptable terms. Poniard is not aware of any entities that have legally blocking proprietary rights to the use of its technologies relevant to its current business.

Poniard may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

The cost to Poniard of any litigation or other proceedings relating to intellectual property rights, even if resolved in Poniard’s favor, could be substantial. Some of Poniard’s competitors may be better able to sustain the costs of complex patent litigation because they have substantially greater resources. If there is litigation against Poniard, it may not be able to continue its operations. If third parties file patent applications, or are issued patents claiming technology also claimed by Poniard in pending applications, Poniard may be required to participate in interference proceedings in the USPTO to determine priority of invention. Poniard may be required to participate in interference proceedings involving its issued patents and pending applications. Poniard may be required to

 

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cease using the technology or license rights from prevailing third parties as a result of an unfavorable outcome in an interference proceeding. A prevailing party in that case may not offer Poniard a license on commercially acceptable terms.

Poniard may in the future be required to repay dedicated equipment costs under a commercial supply agreement, which may result in a material adverse effect on its financial resources.

Poniard is a party to a picoplatin active pharmaceuticals ingredient, or API, commercial supply agreement with Heraeus, under which Heraeus has agreed to produce picoplatin API for commercial use. Manufacturing services are provided on a purchase order, fixed-fee basis, subject to certain purchase price adjustments and minimum quantity requirements. The Heraeus API commercial supply agreement continues for an initial term ending December 31, 2013 and may be terminated:

 

   

by mutual agreement of the parties;

 

   

by either party, if there is a material breach by the other party that remains uncured;

 

   

by either party, in the event of insolvency or bankruptcy of the other party;

 

   

by either party, if the other party or any its personnel performing services is debarred;

 

   

by Poniard, if there is a change of control of Heraeus; or

 

   

by either party on 24 months’ notice following the initial term.

The Heraeus API commercial supply agreement provides that Poniard must repay Heraeus for the purchase and set-up of dedicated manufacturing equipment costing approximately $1.6 million in the form of a surcharge on an agreed upon amount of the picoplatin API ordered and delivered on or before December 31, 2013. If Poniard orders and takes delivery of less than the agreed upon amount of picoplatin API through December 31, 2013, Poniard will be obligated to pay the balance of the equipment cost as of that date. To date, Poniard has not ordered any picoplatin API under the Heraeus agreement. Poniard is exploring potential partnering or out licensing opportunities to continue clinical development and commercialization of picoplatin and believes that any such partnering arrangement may include assignment of the Heraeus API commercial supply agreements to the licensee or other partner. However, Poniard has no assurance that it will be able to successfully out license or otherwise partner picoplatin or that any such arrangement would include the assignment of any or all of Poniard’s obligations under the Heraeus agreement, including the obligation to pay up to $1.6 million in committed equipment costs.

Changes in health care reimbursement could adversely affect the commercial potential of Poniard’s picoplatin candidate and any potential partnering arrangement for picoplatin.

The levels of revenues and profitability of biotechnology companies may be affected by the continuing efforts of government and third party payers to contain or reduce the costs of health care through various means. For example, in certain foreign markets, pricing or profitability of prescription pharmaceuticals is subject to governmental control. In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental controls. It is uncertain what legislative proposals will be adopted or what actions federal, state or private payers for health care goods and services may take in response to any health care reform proposals or legislation. Even in the absence of statutory change, market forces are changing the health care sector. Poniard cannot predict the effect health care reforms may have on the development, testing, commercialization and marketability of its picoplatin product. To the extent that such proposals or reforms have a material adverse effect on the business and potential revenues of other companies that are potential strategic partners or collaborators, Poniard’s ability to enter into an out license or transaction to partner picoplatin may be adversely affected and the amount a third party may be willing to pay to license or acquire picoplatin in the future may be reduced.

 

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Product liability claims in excess of the amount of Poniard’s insurance would adversely affect Poniard’s financial condition.

The testing, manufacture, marketing and sale of picoplatin and any other proposed cancer therapy products, including past clinical and manufacturing activities in connection with Poniard’s terminated skeletal targeted radiotherapy, or STR, development program, may subject Poniard to product liability claims. Poniard is insured against such risks up to a $10.0 million annual aggregate limit in connection with clinical trials of its products candidates. However, insurance coverage may not be available to Poniard in the future at an acceptable cost. Poniard may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise. Regardless of merit or eventual outcome, product liability claims may result in decreased demand for a product, injury to Poniard’s reputation, withdrawal of clinical trial volunteers and loss of revenues. As a result, regardless of whether Poniard is insured, a product liability claim or product recall may result in losses that could be material. Poniard has no knowledge of any material product liability claims that have been filed against it relevant to its current business.

Poniard’s past use of radioactive and other hazardous materials exposes Poniard to the risk of material environmental liabilities, and Poniard may incur significant additional costs to comply with environmental laws in the future.

Poniard’s past research and development and manufacturing processes, as well as the manufacturing processes that may have been used by its collaborators, involved the controlled use of hazardous and radioactive materials. As a result, Poniard is subject to foreign, federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials and wastes in connection with its use of these materials. Although Poniard believes that its safety procedures for handling and disposing of such materials complied with the standards prescribed by such laws and regulations, Poniard may be required to incur significant costs to comply with environmental and health and safety regulations in the future. Poniard terminated its STR manufacturing operations in Denton, Texas in May 2005 and completed the sale of the Denton facility in October 2007. Poniard’s current insurance does not cover liability for the clean-up of hazardous waste materials or other environmental risks.

Any future impairment and write down of Poniard’s picoplatin intangible asset would increase Poniard’s net loss, which could materially and adversely affect Poniard’s financial position, stockholders’ equity and the value of its common stock.

As of December 31, 2010, Poniard had a net intangible asset of approximately $6.4 million, which represents capitalized payments for Poniard’s picoplatin license. In accounting for the picoplatin intangible asset, Poniard estimates its expected useful life, the expected residual value, and the potential for impairment based on the occurrence of certain events or circumstances, including changes in Poniard’s business strategy and plans, a significant decrease in market value of Poniard, a significant change in asset condition, or a significant adverse change in regulatory and/or economic climate. Specifically, the value of the picoplatin intangible asset could be impaired as a result of negative results of clinical trials or adverse decisions or rulings of regulatory bodies, such as the FDA.

In November 2009, Poniard announced that its pivotal Phase 3 SPEAR trial of picoplatin in the second-line treatment of small cell lung cancer did not meet the primary endpoint of overall survival. Poniard considered this event to be a trigger for testing its picoplatin intangible asset for possible impairment; however, upon review of the expected future undiscounted net cash flows identifiable to its picoplatin license, Poniard determined that the picoplatin intangible was recoverable and that no impairment had occurred. Poniard continues to believe that the picoplatin intangible is recoverable as of June 30, 2011.

Poniard has no assurance that events or circumstances will not arise in the future requiring it to perform impairment testing of its picoplatin intangible asset. If an impairment is indicated as a result of future evaluations, Poniard will be required to record an impairment charge, which would increase Poniard’s reported

 

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net loss for the period in which the charge is taken and reduce its net asset value. Such events could materially adversely affect Poniard’s results of operations and stockholders’ equity and, in turn, its stock price. Moreover, a material decrease in stockholders’ equity could negatively impact Poniard’s compliance with the $2.5 million minimum stockholders’ equity requirement for continued listing of Poniard’s common stock on The NASDAQ Capital Market.

Poniard has very limited staffing and will continue to be dependent upon key personnel.

As of August 15, 2011, Poniard had seven full-time employees and one part-time employee. Poniard’s success depends, to a significant extent, on the efforts of a small management team and staff. Poniard has change of control agreements and/or severance agreements with all of its officers. Poniard’s agreements with its officers provide for “at will” employment, which means that each officer may terminate his or her service with Poniard at any time. Poniard does not maintain key-person life insurance on any of its officers or employees. If key individuals leave Poniard, Poniard could be adversely affected if suitable replacement personnel are not quickly recruited. There is competition for qualified personnel in all functional areas, which makes it difficult to attract and retain qualified personnel. Poniard’s uncertain financial situation and the prospect of the proposed merger will compound this difficulty.

Poniard’s operations may be interrupted by the occurrence of a natural disaster or other catastrophic event.

Poniard’s principal executive offices are in San Francisco, California, and Poniard maintains accounting and legal activities in Seattle, Washington. Natural disasters or other catastrophic events, including earthquakes, fires, floods, war, terrorist attacks, civil unrest and similar events, could disrupt Poniard’s operations. Although Poniard believes that it carries commercially reasonable business interruption and liability insurance, it might suffer losses as a result of business interruptions that exceed the coverage available under its insurance. Any natural disaster or catastrophic event could have a significant negative impact on Poniard’s operations and financial prospects. Moreover, any such event could delay or adversely affect Poniard’s ability to complete the merger with Allozyne, Poniard’s continuing efforts to out license or otherwise partner picoplatin development or, if the merger is not completed, identify and execute any alternative transactions.

Risks Related to Poniard Common Stock

Poniard’s common stock may be delisted from The NASDAQ Stock Market LLC if Poniard is unable to maintain compliance with The NASDAQ Capital Market continued listing requirements.

Poniard transferred the listing of its common stock from The NASDAQ Global Market to The NASDAQ Capital Market on December 17, 2010. In order to continue to be included in The NASDAQ Capital Market, Poniard must meet The NASDAQ Capital Market continued listing standards, including maintaining a closing bid price of $1.00 per share.

On July 20, 2010, Poniard received a letter from NASDAQ stating that the minimum bid price of its common stock had been below $1.00 per share for 30 consecutive business days and that Poniard was not in compliance with the minimum bid price requirement for listing on The NASDAQ Global Market. Poniard was provided an initial period of 180 calendar days, or until January 18, 2011, to regain compliance. Poniard transferred the listing of its common stock to The NASDAQ Capital Market on December 17, 2010, at which time Poniard was afforded the remainder of the initial compliance period. On January 19, 2011, Poniard received a letter from NASDAQ notifying Poniard that it had been granted an additional 180 calendar day period, or until July 18, 2011, to regain compliance with the minimum bid price requirement. The additional time period was granted based on Poniard meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The NASDAQ Capital Market, with the exception of the bid price requirement, and Poniard’s written notice to NASDAQ of its intention to cure the deficiency during the additional compliance period by effecting a reverse stock split, if necessary. To regain compliance, the closing bid price of Poniard’s common stock must meet or exceed $1.00 per share for at least ten consecutive business

 

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days during the additional time period. NASDAQ may, in its discretion, require Poniard common stock to maintain a closing bid price of at least $1.00 for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining that Poniard has demonstrated an ability to maintain long-term compliance.

On June 9, 2011, after election of directors and ratification of auditors, Poniard adjourned its 2011 annual meeting of shareholders to July 8, 2011 and further adjourned to July 22, 2011, to solicit additional proxies to vote in favor of a proposal to authorize the board of directors to, on or before August 1, 2011, implement a reverse stock split of Poniard’s outstanding common stock at an exchange ratio between 1-for-15 and 1-for-25, with the exact ratio to be set by the Poniard board in its discretion. The purpose of the reverse stock split proposal was to facilitate Poniard’s efforts to regain compliance with The NASDAQ Capital Market minimum bid price requirement. Poniard adjourned its reconvened annual meeting of shareholders on July 22, 2011, with an insufficient number of votes to approve the reverse stock split proposal. Although 91.6% of the shareholders who voted at the annual meeting voted in favor of the reverse stock split proposal, only 49.2% of Poniard’s outstanding common stock entitled to vote at the annual meeting actually voted. A majority (50% of the shares outstanding, plus one share) of the Poniard common stock outstanding and entitled to vote at the Poniard annual meeting of shareholders was required to approve the reverse stock split proposal.

On July 19, 2011, the NASDAQ Listing Qualifications Staff advised Poniard that it had not regained compliance within the extended compliance period and its common stock therefore will be delisted. On August 25, 2011, representatives of Poniard attended a hearing to appeal the decision and to present a plan for compliance to the NASDAQ listing qualifications panel. On September 2, 2011, the NASDAQ Hearings Panel determined to allow the continued listing of Poniard’s common stock on The NASDAQ Stock Market subject to the conditions that on or before December 31, 2011, Poniard must have (i) held a shareholders’ meeting; (ii) obtained shareholder approval for the merger with Allozyne and a reverse stock split in a ratio sufficient to allow the stock to trade above $4.00 per share; and (iii) obtained approval of the NASDAQ staff for listing of the combined company on The NASDAQ Stock Market. There can be no assurance that the plan of compliance and the combined company will be able to satisfy the requirements for maintaining The NASDAQ Capital Market listing.

The level of trading activity of Poniard common stock may decline if it is no longer listed on The NASDAQ Capital Market. As such, if Poniard’s common stock ceases to be listed for trading on The NASDAQ Capital Market for any reason, it may harm Poniard’s stock price, increase the volatility of Poniard’s stock price, lead to decreased analyst coverage, investor demand and information available concerning trading prices and volume, or make it more difficult for investors to buy or sell shares of Poniard common stock. Further, Poniard may no longer qualify for exemptions from state securities registration requirements. Without an exemption from registration, Poniard may need to file time-consuming and costly registration statements for future securities transactions and issuances and to amend Poniard’s stock option and stock purchase plans. Furthermore, if Poniard’s common stock is delisted, Poniard would be required to utilize the long-form registration statement on SEC Form S-1 in order to register any future securities under the Securities Act of 1933, as amended, or the Securities Act, either for sale by Poniard or for resale by investors who previously acquired securities from Poniard in a private placement. The SEC Form S-1 requires more information than SEC Form S-3 and will take longer and be more costly to prepare and keep current than SEC Form S-3.

If Poniard’s common stock were to be delisted from The NASDAQ Capital Market, trading of Poniard common stock could be conducted in the over-the-counter market on an electronic bulletin board or interdealer quotation system, such as the OTC Bulletin Board or the OTC Market Group’s OTC Link. Any such change in listing could reduce the market liquidity of its common stock. As a result, an investor would find it more difficult to dispose of, or obtain accurate quotations for the price of, Poniard common stock.

If Poniard common stock were to be delisted from The NASDAQ Capital Market, and Poniard’s trading price remains below $5.00 per share, trading in Poniard’s common stock might also become subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a

 

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stock defined as a “penny stock” (generally, any equity security not listed on a national securities exchange that has a market price of less than $5.00 per share, subject to certain exceptions). Many brokerage firms are reluctant to recommend low-priced stocks to their clients. Moreover, various regulations and policies restrict the ability of shareholders to borrow against or “margin” low-priced stocks, and declines in the stock price below certain levels may trigger unexpected margin calls. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current price of the common stock can result in an individual shareholder paying transaction costs that represent a higher percentage of total share value than would be the case if Poniard’s share price were higher. This factor may also limit the willingness of institutions to purchase Poniard common stock. Finally, the additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from facilitating trades in Poniard common stock, which could severely limit the market liquidity of the stock and the ability of investors to trade Poniard common stock.

Poniard’s stock price is volatile and, as a result, you could lose some or all of your investment.

There has been a history of significant volatility in the market prices of securities of biotechnology companies, including Poniard’s common stock. In 2010, the reported high and low closing sale prices of Poniard’s common stock were $2.70 and $0.35. During 2009, the reported high and low closing sale prices of Poniard’s common stock were $9.14 and $1.50. Poniard’s stock price has been, and may continue to be, affected by this type of market volatility, as well as Poniard’s own performance. Poniard’s business and the relative price of its common stock may be influenced by a large variety of factors, including:

 

   

announcements regarding the sufficiency of its cash resources;

 

   

available sources of funding;

 

   

developments concerning the proposed merger with Allozyne or other strategic opportunities and the terms and timing of any such transactions;

 

   

the progress and results of clinical trials;

 

   

Poniard’s ability to identify viable and efficient registration strategies for picoplatin in various indications;

 

   

Poniard’s ability to protect its patent and other intellectual property rights;

 

   

future sales of significant amounts of Poniard common stock by Poniard or its shareholders;

 

   

the expense and time associated with, and the extent of Poniard’s ultimate success in, securing regulatory approvals;

 

   

announcements by Poniard or its competitors concerning acquisitions, strategic alliances, technological innovations, new commercial products or changes in product development strategies;

 

   

the availability and cost of picoplatin API and finished drug product;

 

   

developments in and the outcome of litigation against Poniard; and

 

   

other events or factors, many of which are beyond Poniard’s control.

In addition, public concern about the potential safety and efficacy of picoplatin, comments by securities analysts, Poniard’s ability to maintain the listing of its common stock on The NASDAQ Capital Market, and conditions in the capital markets in general and in the life science capital market specifically, may have a significant effect on the market price of Poniard’s common stock. The realization of any of the risks described in this proxy statement/prospectus/consent solicitation or in Poniard’s other reports filed with the SEC, as well as other factors, could have a material adverse impact on the market price of Poniard’s common stock and may result in a loss of some or all of your investment in Poniard’s securities.

 

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Poniard may become involved in securities class action litigation that could divert management’s attention and harm the business of Poniard.

The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices for the common stock of pharmaceutical and biotechnology companies. These broad market fluctuations may cause the market price of Poniard common stock to decline. In the past, securities class action litigation often has been brought against companies following periods of volatility in their stock prices. Poniard may in the future be the target of similar litigation. Securities litigation, even if it is without merit or unsuccessful, could result in substantial costs and divert Poniard’s management’s time and resources, which could cause Poniard’s business to suffer.

On June 27, 2011, a putative class action lawsuit was filed in the Superior Court of California, San Francisco County, against Poniard, its board of directors, a wholly-owned subsidiary of Poniard and Allozyne. The action, titled Aronheim v. Poniard Pharmaceuticals, Inc., et al. (Case Number: CGC-11-512033), alleges in summary that, in connection with the proposed merger with Allozyne, the members of the Poniard board of directors breached their fiduciary duties by purportedly conducting an unfair sale process and agreeing to an unfair sale price, and by purportedly engineering the proposed merger to provide them with improper personal benefits. The action also alleges that Poniard and Allozyne aided and abetted the Poniard board members’ purported breaches of fiduciary duty. The plaintiff seeks, among other things, a declaration that the suit can be maintained as a class action, a declaration that the merger agreement was entered into in breach of the Poniard board members’ fiduciary duties, rescission of the merger agreement, an injunction against the proposed merger, a directive that the Poniard board members exercise their fiduciary duties to obtain a transaction that is in the best interests of Poniard’s shareholders, the imposition of a constructive trust in favor of the plaintiff and the class upon any benefits improperly received by the Poniard board members as a result of their purportedly wrongful conduct and fees and costs. Poniard, its board of directors and Allozyne believe that the claims are without merit and intend to vigorously defend against them. However, there can be no assurances as to the outcome of the litigation.

On August 24, 2011, a putative class action lawsuit was filed in the Superior Court of California, San Francisco County, against Poniard and its board of directors, as well as against Poniard’s Chief Executive Officer, its President and Chief Medical Officer, its Interim Chief Financial Officer, its Senior Vice President of Corporate Development, and its Vice President, Legal and Corporate Secretary. The action, titled Wing Sze Wu v. Robert S. Basso, et al. (Case Number: CGC-11-513652), alleges in summary that the members of the Poniard board of directors breached their fiduciary duties by agreeing to pay purportedly excessive compensation and benefits to Poniard’s senior management, that such members of Poniard’s senior management were allegedly unjustly enriched when they received such executive compensation and benefits, that Poniard’s board of directors breached their fiduciary duties by conducting a purportedly unfair sale process in connection with the proposed transaction with Allozyne and agreeing to an allegedly unfair and dilutive sale price and a transaction that included improper “deal protection measures,” and by providing allegedly materially inadequate disclosures and material disclosure omissions to Poniard’s shareholders. The plaintiff seeks, among other things, a declaration that the suit can be maintained as a class action, an injunction against the proposed merger, rescission of the proposed merger to the extent it occurs before final judgment in the lawsuit or recissory damages, a directive that the defendants account for all damages allegedly caused by them and account for all profits and special benefits obtained as a result of their alleged breaches of their fiduciary duties, and for costs, attorneys fees, expenses and such other relief as the court deems just and proper. Poniard, its board of directors and Poniard’s management believe that the claims are without merit and intend to vigorously defend against them. However, there can be no assurances as to the outcome of the litigation.

Additional lawsuits could be filed, and the allegations in the above lawsuit may be amended.

Certain investors beneficially own significant blocks of Poniard common stock; these large shareholders may take actions that are contrary to your interests, including selling their stock.

A small number of Poniard shareholders hold a significant amount of Poniard’s outstanding stock. As of August 15, 2011, entities affiliated with Bay City Management beneficially owned an aggregate of

 

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approximately 7.6% of Poniard’s outstanding common stock. Two of Poniard’s directors, Fred B. Craves and Carl S. Goldfischer, are managing directors of Bay City Capital LLC, an affiliate of Bay City Management, and possess capital and carried interests in the Bay City Management entities holding Poniard’s shares. Entities affiliated with MPM Capital beneficially owned an aggregate of approximately 10.7% of Poniard’s outstanding common stock as of August 15, 2011. Nicholas J. Simon, a director of Poniard, is a general partner of certain of the MPM entities that hold those shares. As a result, these shareholders may collectively be able to significantly influence matters requiring approval of Poniard shareholders, including the election of directors and approval of significant corporate transactions. These shareholders may support competing transactions and have interests that are different from yours.

Sales of a large number of shares of Poniard stock by one or more of these large shareholders or other shareholders within a short period of time, or the expectation that such sales may occur, could significantly reduce the market price of Poniard common stock. For example, certain of Poniard’s officers and directors and their affiliates have established, or may in the future establish, selling plans under Rule 10b5-1 of the Exchange Act for the purpose of effecting specified sales of Poniard common stock over a specified period of time. If any of these events cause a large number of Poniard shares to be sold in the public market, the sales could reduce the trading price of Poniard’s common stock and impede Poniard’s ability to raise future capital.

Any future securities issuances by Poniard may have dilutive or adverse effects on Poniard’s existing shareholders.

Poniard historically has financed its operations primarily by issuing and selling Poniard common stock or securities convertible into or exercisable for shares of its common stock. In light of Poniard’s need for additional capital, Poniard may issue additional shares of common stock or convertible securities that could dilute ownership of existing Poniard shareholders and may include terms that give new investors rights that are superior to those of existing shareholders. Moreover, any issuances by Poniard of equity securities may be at or below the prevailing market price of Poniard’s common stock and in any event may have a dilutive impact on the ownership interest of existing shareholders, which could cause the market price of Poniard’s common stock to decline. Poniard may also raise additional funds through the incurrence of debt, and the holders of any debt Poniard may issue would have rights superior to rights of current Poniard shareholders in the event Poniard is forced to seek the protection of bankruptcy laws.

Poniard has never paid cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future; however, holders of Poniard’s outstanding Series 1 preferred stock do receive payments of dividends and have certain other rights and preferences superior to those of Poniard’s common shareholders.

Poniard has not paid cash dividends on its common stock to date, and Poniard currently intends to retain its future earnings, if any, to fund its business operations. Poniard does not anticipate paying any cash dividends on its common stock in the foreseeable future. As a result, capital appreciation, if any, of Poniard’s common stock would be the sole source of gain for the foreseeable future.

Poniard had 78,768 shares of $2.4375 convertible exchangeable preferred stock, or Series 1 preferred shares, outstanding as of August 15, 2011. These shares were originally issued in 1989. Pursuant to the terms of the designation of the Series 1 preferred shares, holders of Series 1 preferred shares are entitled to receive annual dividends of $2.4375 per Series 1 preferred share outstanding. Since the issuance of the Series 1 preferred shares, Poniard has timely declared and paid all annual dividends owned to the holders of its Series 1 preferred shares. Dividends on the Series 1 preferred shares are cumulative, which means that if they are not paid, the amount of the dividends accrue and, unless full cumulative dividends on the Series 1 preferred shares have been paid, no dividends may be paid on any stock ranking junior to the Series 1 preferred shares, including the common stock. In addition, holders of Poniard’s Series 1 preferred shares have certain redemption rights and liquidation preferences that are greater than or superior to the rights of Poniard common shareholders. These rights may decrease the amount of earnings and assets available for distribution to Poniard common shareholders.

 

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Poniard’s failure to pay cumulative dividends on its Series 1 preferred stock when such dividends become due may give rise to Series 1 voting rights and would result in Poniard’s loss of eligibility to register its securities on SEC Form S-3, which would adversely affect Poniard’s ability to conduct its business in an efficient and cost-effective manner and adversely impact the market of its common stock.

If the merger is not completed and Poniard is unable to raise additional capital or enter into an alternative transaction on a timely basis, Poniard likely will not have sufficient funds to timely pay cumulative dividends on its Series 1 preferred stock. Although holders of Poniard’s Series 1 preferred stock generally do not have voting rights, if dividends payable on the Series 1 preferred stock have been in arrears and unpaid for three semi-annual periods, holders of the Series 1 preferred stock will have the exclusive right, voting as a single class, to elect two directors, which directors will be in addition to the number of directors constituting the then current Poniard board of directors. Such voting rights will continue until such time as all cumulative dividends accumulated on the Series 1 preferred stock have been paid in full, subject to revesting upon any subsequent default. Furthermore, if Poniard fails to pay any cumulative dividend on its Series 1 preferred stock, Poniard would, for the remainder of the fiscal year in which such default has occurred, be required to utilize the long-form registration statement on SEC Form S-1 in order to register any future securities under the Securities Act, either for sale by Poniard or for resale by investors who previously acquired securities from Poniard in a private placement. The SEC Form S-1 requires more information than SEC Form S-3 and would take longer and be more costly to prepare and keep current than SEC Form S-3.

Certain provisions in Poniard’s articles of incorporation and Washington state law could discourage a change of control and may adversely affect the rights and interests of Poniard common shareholders.

Poniard’s articles of incorporation authorize Poniard’s board of directors to issue up to 200,000,000 shares of common stock and up to 2,998,425 shares of preferred stock. Up to 1,120,000 preferred shares have been designated Series 1 preferred shares, 78,768 of which currently are outstanding. The remaining authorized but unissued preferred shares are presently undesignated. Poniard currently has no plans to issue any additional shares of preferred stock.

Under its articles of incorporation, Poniard’s board of directors is authorized generally, without shareholder approval, to issue shares of preferred stock in one or more series and, in connection with the creation of each such series, to fix the number of shares of such series and designate the powers, preferences and rights of such series, including dividend rights, redemption rights, liquidation preferences, sinking fund provisions, conversion rights and voting rights, any or all of which may be greater than or superior to the rights of the common stock.

Washington law imposes restrictions on certain transactions between a corporation and significant shareholders. Chapter 23B.19 of the Washington Business Corporation Act prohibits a target corporation, with some exceptions, from engaging in particular significant business transactions with an acquiring person, which is defined as a person or group of persons that beneficially owns 10% or more of the voting securities of the target corporation, for a period of five years after the date the acquiring person first became a 10% beneficial owner of voting securities of the target corporation, unless (i) the business transaction or the acquisition of shares is approved by a majority of the members of the target corporation’s board of directors prior to the time the acquiring person first became a 10% beneficial owner of the target corporation’s voting securities or (ii) at or after the acquiring first person became a 10% beneficial owner of the target corporation, the business transaction is approved by a majority of the members of the target corporation’s board of directors and at least 2/3 of the outstanding voting shares of the target corporation (excluding shares held by the acquiring person). Prohibited business transactions include, among other things:

 

   

a merger or consolidation with, disposition of assets to, or issuance or redemption of stock to or from the acquiring person;

 

   

termination of 5% or more of the employees of the target corporation; or

 

   

receipt by the acquiring person of any disproportionate benefit as a shareholder.

 

 

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After the five-year period, a significant business transaction may occur if it complies with “fair price” provisions specified in the statute. A corporation may not opt out of this statute. This provision may have an anti-takeover effect with respect to transactions that the Poniard board of directors does not approve in advance.

The foregoing provisions of Washington law, together with the provisions of Poniard’s articles of incorporation authorizing the Poniard board of directors, without further vote or action by the shareholders, to issue shares of preferred stock with powers, preferences and privileges fixed by the board, may have the effect of delaying, deterring or preventing a change of control of Poniard, even if this change would be beneficial to its shareholders. These provisions also may discourage bids for Poniard common stock at a premium over market price and may adversely affect the market price of, and the voting and other rights of the holders of, Poniard common stock. In addition, these provisions could make it more difficult to replace or remove Poniard’s current directors and management in the event Poniard’s shareholders believe this would be in the best interests of Poniard and its shareholders.

Risks Related to Allozyne’s Business

If Allozyne fails to obtain the capital necessary to fund its operations, Allozyne may be unable to develop its product candidates and Allozyne could be forced to share its rights to these product candidates on terms that may be unfavorable to Allozyne.

Allozyne needs large amounts of capital to support the development of its product candidates and its research and development efforts. Allozyne intends to raise funds through strategic partnerships, by selling additional equity or debt securities, or both, or by incurring other indebtedness. If Allozyne is unable to raise additional capital in sufficient amounts or on terms acceptable to Allozyne, it will be prevented from advancing development of its product candidates and furthering its research and development efforts or Allozyne may instead elect to enter into collaborations that could require it to share rights to its product candidates to a greater extent than it currently intends.

Taking into account its projected operating results, Allozyne believes that its current cash and cash equivalents balances of $1.3 million as of June 30, 2011 plus proceeds from an additional $1.5 million in a financing that closed in July 2011 will provide adequate resources to fund operations into the fourth quarter of 2011. However, there is no assurance Allozyne can achieve its projected operating results. Its forecast, however, reflects use of available cash only to fund its current operations and transactional costs associated with the proposed merger with Poniard. The costs included in the above projected operating results include the continued clinical development costs of the Company’s lead product candidate, AZ01, facilities and employee related expenses, and preclinical activities around the Company’s other product candidates. Its forecast does not include costs associated with a liquidation and winding up of the company if it is unable to raise additional funds. These costs may be substantial and Allozyne can provide no assurance that it will have sufficient cash to cover these additional costs.

The amount of capital Allozyne will require in the future will depend on many factors, including:

 

   

the ability to raise capital in the debt/equity markets or through strategic partnerships;

 

   

the costs and timing associated with the closing of the merger;

 

   

the scope, rate of progress, results and costs of its preclinical testing, clinical trials, and other research and development activities;

 

   

the hiring of a number of new employees at salary levels consistent with its estimates to support operating as a publicly-held company following the merger;

 

   

the number of programs Allozyne pursues;

 

   

the cost of preparing, filing, prosecuting, defending, and enforcing any patent claims and other intellectual property rights;

 

   

the cost of establishing clinical and commercial supplies of its product candidates;

 

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the extent to which Allozyne acquires or invests in businesses, products, or technologies; and

 

   

the cost, timing, and outcomes of regulatory approvals.

Allozyne’s current financial condition may make securing additional capital extremely difficult. While Allozyne has in the past successfully raised capital from venture capital funds and private investors, Allozyne can give no assurance that it will be able to do so in the future. If no acceptable financing transaction can be negotiated and completed within a short period of time, Allozyne may be required to sell its securities or assets, or agree to be acquired, on terms that may not be favorable to Allozyne or to its stockholders.

The sale of additional shares of Allozyne’s capital stock could result in dilution to its stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire or license intellectual property rights, and other operating restrictions that could adversely impact Allozyne’s ability to conduct its business.

Allozyne has incurred operating losses in each year since its inception, expects to continue to incur substantial and increasing losses for the foreseeable future, will require substantial additional capital to fund its operation and substantial doubt exists about its ability to continue as a going concern.

The report of Allozyne’s independent registered public accountants issued as part of its financial statement audit for the year ended December 31, 2010 contains a statement expressing substantial doubt regarding Allozyne’s ability to continue as a going concern. Allozyne’s financial statements do not include any adjustments that might result from the outcome of this uncertainty. Allozyne has been engaged in designing and developing compounds and product candidates since 2005 and it has not generated any product revenue to date. Its aggregate net losses are $8.5 million, $8.9 million and $14.2 million for the years ended December 31, 2010, 2009 and 2008, respectively. Allozyne expects its research and development expenses to increase in the future due to increased manufacturing and clinical development costs primarily related to the costs of its clinical trials, the advancement of its preclinical studies, and to product candidate manufacturing costs. As a result, Allozyne expects to continue to incur substantial and increasing losses for the foreseeable future. Allozyne is uncertain when or if it will be able to achieve or sustain profitability. Failure to become and remain profitable would adversely affect Allozyne’s ability to continue its operations. Without additional substantial capital from a financing or strategic partnership, Allozyne will exhaust its resources and be unable to continue operations.

Allozyne’s success depends on the success of its clinical product candidate, AZ01, and Allozyne cannot be certain that it will be safe or effective, complete clinical trials, receive regulatory approval or be successfully commercialized.

Although Allozyne’s lead product candidate, AZ01, has completed a Phase 1a clinical trial for the treatment of RRMS, many additional clinical trials would be required before Allozyne is able to submit a Biologic License Application, or BLA, to the FDA for approval. The regulatory approval process can take many years to complete and require the expenditure of substantial resources. Moreover, despite Allozyne’s expenditure of substantial resources and its continued efforts to developing AZ01, the clinical trials required for FDA approval of AZ01 may never be successfully completed. If the required clinical trials are not completed or the results do not meet safety and efficacy thresholds required by the FDA, AZ01 will not receive regulatory approval. Even if AZ01 receives regulatory approval, AZ01 may never be successfully commercialized. If AZ01 does not receive regulatory approval or is not successfully commercialized, Allozyne may be unable to generate revenue, or become profitable, which would adversely affect its ability to continue operations.

 

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Allozyne is focused on a limited number of product candidates, and adverse developments with respect to one or more of those candidates could harm its business.

Allozyne is currently focused on continuing the development of its product candidates, AZ01, AZ05 and AZ17. Allozyne’s focus on a limited number of internal product candidates means that adverse developments with respect to one or more of these candidates could have a more significant adverse impact on its business than if Allozyne maintained a broader portfolio of product candidates.

Any failure or delay in commencing or completing clinical trials for product candidates could harm Allozyne’s business.

To date, only AZ01 has entered clinical trials. The commencement and completion of clinical trials for Allozyne’s product candidates may be delayed or prevented by many factors, including:

 

   

having the capital resources available to fund preclinical studies and clinical trials;

 

   

Allozyne’s ability to obtain regulatory approval to commence a clinical trial;

 

   

Allozyne’s ability to manufacture or obtain from third parties materials sufficient for use in preclinical studies and clinical trials;

 

   

delays in patient enrollment and variability in the number and types of patients available for clinical trials;

 

   

poor effectiveness of product candidates during clinical trials;

 

   

unforeseen safety issues or side effects;

 

   

governmental or regulatory delays related to clinical trials, including trial design, results, and materials supply;

 

   

changes in regulatory requirements, policy, and guidelines; and

 

   

varying interpretation of data by Allozyne, the FDA, and similar foreign regulatory agencies.

It is possible that none of Allozyne’s product candidates will complete the required clinical trials. Accordingly, Allozyne may not seek or receive the regulatory approvals necessary to market its product candidates. Any failure or delay in commencing or completing clinical trials or obtaining regulatory approvals for product candidates would prevent or delay their commercialization.

Any success of Allozyne’s preclinical studies and clinical trials may not be indicative of results in a large number of subjects of either safety or efficacy.

The successful results of Allozyne’s preclinical studies using animal models may not be predictive of the results that Allozyne will see in its clinical trials with human subjects. In addition, results in early-stage clinical trials generally test for drug safety rather than efficacy and are based on limited numbers of subjects. For instance, Allozyne’s AZ01 Phase 1a trial only had 40 subjects and the objectives were to assess AZ01’s safety and tolerability profile and define its pharmacological profile.

Allozyne’s reported progress and results from its early phases of clinical testing of its product candidates may not be indicative of progress or results that will be achieved with larger populations, which could be less favorable. Moreover, Allozyne does not know if any favorable results it achieves in clinical trials will have a lasting or repeatable effect. If a larger group of subjects does not experience positive results or if any favorable results do not demonstrate a beneficial effect, Allozyne’s product candidates that it advances to clinical trials may not receive approval from the FDA for further clinical trials or commercialization.

 

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Allozyne may be unable to successfully identify additional clinical product candidates.

As a significant part of its growth strategy, Allozyne intends to develop and commercialize additional product candidates through its research program using its proprietary biociphering™ platforms, CAESAR and VIGÈNERE. The success of this strategy depends upon Allozyne’s ability to identify and select product candidates that fit into its development plans. Allozyne’s efforts in drug discovery and development using its biociphering™ platforms, CAESAR and VIGÈNERE, have yielded only a small number of product candidates. Additionally, Allozyne does not have significant clinical data with respect to any of these potential product candidates. Allozyne cannot be certain that it will be able to successfully identify new product candidates and, even if Allozyne’s research program initially shows promise in identifying potential product candidates, it may fail to yield product candidates suitable for clinical development.

Allozyne is subject to extensive and rigorous governmental regulation, including the requirement of approval before its products may be lawfully marketed.

Before obtaining regulatory approvals for the commercial sale of any product candidate, Allozyne must demonstrate through preclinical testing and clinical trials that the product candidate is safe and effective for use in each target indication. This process can take many years and require the expenditure of substantial resources, and may include post-marketing studies and surveillance. To date, Allozyne has not successfully demonstrated in clinical trials safety or efficacy sufficient for regulatory approval for any product candidate. Allozyne cannot assure you that its product candidates will demonstrate sufficient safety and efficacy for regulatory approval. Allozyne may also encounter delays or rejections due to additional government regulation from future legislation, administrative action, or changes in FDA policy. If Allozyne’s current product candidates are not shown to be safe and effective in clinical trials, then Allozyne’s business will be harmed. If Allozyne is unable to discover or successfully develop drugs that are effective and safe in humans and receive regulatory approval, Allozyne will not have a viable business. Allozyne does not expect any of its current product candidates to be commercially available in major markets before 2017, if at all.

Failure to obtain regulatory approval in foreign jurisdictions would prevent Allozyne from marketing its products internationally.

Allozyne intends to have its product candidates marketed outside the United States. In order to market its products in the European Union and many other non-U.S. jurisdictions, Allozyne must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. To date, Allozyne has not filed for marketing approval of any of its product candidates and may not receive the approvals necessary to commercialize its product candidates in any market. The approval procedure varies among countries and can involve additional testing and data review. The time required to obtain foreign regulatory approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval, or may include different or additional risks. Allozyne may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory agencies in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory agencies in other foreign countries or by the FDA. A failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in other jurisdictions, including approval by the FDA. The failure to obtain regulatory approval in foreign jurisdictions would harm Allozyne’s business.

Even if Allozyne’s product candidates receive regulatory approval, they could be subject to restrictions or withdrawal from the market and Allozyne may be subject to penalties if Allozyne fails to comply with regulatory requirements or if Allozyne experiences unanticipated problems with its products.

Any product candidate for which Allozyne receives regulatory approval, together with the manufacturing processes, post-approval clinical data, and advertising and promotional activities for such product, will be subject to continued review and regulation by the FDA and other regulatory agencies. Even if regulatory approval of a

 

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product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or on the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product candidate. Later discovery of previously unknown problems with Allozyne’s products or their manufacture, or failure to comply with regulatory requirements, may result in, among other things:

 

   

restrictions on the products or manufacturing processes;

 

   

withdrawal of the products from the market;

 

   

voluntary or mandatory recalls;

 

   

fines;

 

   

suspension of regulatory approvals;

 

   

product seizures; or

 

   

injunctions or the imposition of civil or criminal penalties.

If Allozyne is slow or otherwise unable to adapt to changes in existing regulatory requirements, Allozyne may lose marketing approval for any products that may be approved in the future.

Allozyne’s product candidates may never achieve market acceptance even if Allozyne obtains regulatory approvals.

Even if Allozyne obtains regulatory approvals for the commercial sale of its product candidates, the commercial success of these product candidates will depend on, among other things, their acceptance by physicians, patients, third-party payors, and other members of the medical community as a therapeutic and cost-effective alternative to competing products and treatments. If Allozyne’s product candidates fail to gain market acceptance, Allozyne may be unable to earn sufficient revenue to continue its business. Market acceptance of, and demand for, any product that Allozyne may develop and commercialize will depend on many factors, including:

 

   

Allozyne’s ability to provide acceptable evidence of safety and efficacy;

 

   

the prevalence and severity of adverse side effects;

 

   

availability, relative cost, and relative efficacy of alternative and competing treatments;

 

   

the effectiveness of Allozyne’s marketing and distribution strategy;

 

   

publicity concerning Allozyne’s products or competing products and treatments; and

 

   

Allozyne’s ability to obtain sufficient third-party insurance coverage or reimbursement.

If Allozyne’s product candidates do not become widely accepted by physicians, patients, third-party payors, and other members of the medical community, Allozyne’s business will be harmed.

Allozyne will rely on third-party manufacturers to supply its product candidates for clinical trials and will rely on third-party manufacturers to manufacture its product candidates in commercial quantities, which could delay, prevent or increase the costs associated with the clinical development and future commercialization of its product candidates.

Allozyne does not manufacture its product candidates and Allozyne does not currently have any manufacturing supply agreements with third-party manufacturers. Allozyne must enter into supply agreements with third-party manufacturers and, if Allozyne is unable to enter into supply agreements with third-party manufacturers on commercially acceptable terms, Allozyne may be unable to complete its product development efforts in a timely manner, if at all.

 

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Additionally, any manufacturer of Allozyne’s product candidates and approved products, if any, must comply with current Good Manufacturing Process, or cGMP, requirements enforced by the FDA through its facilities inspection program. These requirements include quality control, quality assurance, and the maintenance of records and documentation. Manufacturers of Allozyne’s product candidates and approved products, if any, may be unable to comply with these cGMP requirements and with other FDA, state, and foreign regulatory requirements, as applicable. Allozyne has little control over its manufacturers’ compliance with these regulations and standards. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any quantities supplied is compromised due to Allozyne’s manufacturers’ failure to adhere to applicable laws or for other reasons, Allozyne may be unable to obtain regulatory approval for or successfully commercialize its products, which would harm its business.

None of Allozyne’s product candidates have been manufactured for commercial use. If any of its product candidates becomes a product approved for commercial sale, Allozyne’s third-party manufacturer may need to increase its manufacturing capacity to satisfy the commercial requirements for such an approved product, which may require the manufacturer to fund capital improvements to support the scale-up of manufacturing and related activities. Such third-party manufacturer may be unable to successfully increase its manufacturing capacity for such an approved product in a timely or economic manner, if at all. If any manufacturer is unable to provide commercial quantities of such an approved product, Allozyne will have to successfully transfer manufacturing technology to a new manufacturer. Engaging a new manufacturer for such an approved product could require Allozyne to conduct comparative studies or utilize other means to determine bioequivalence of the new and prior manufacturers’ products, which could delay or prevent its ability to commercialize such an approved product. If any of these manufacturers is unable or unwilling to increase its manufacturing capacity or if Allozyne is unable to establish alternative arrangements on a timely basis or on acceptable terms, the development and commercialization of such an approved product may be delayed or there may be a shortage in supply. Any inability to manufacture Allozyne’s products in sufficient quantities when needed would harm its business.

Allozyne relies on single-source third-party suppliers for some of its raw materials; if these third parties fail to supply these items, development of affected product candidates may be delayed or discontinued.

Certain raw materials necessary for the manufacturing and formulation of Allozyne’s product candidates are provided, or have been provided, by single-source unaffiliated third-party suppliers. Allozyne would be unable to obtain these raw materials for an indeterminate period of time if these third-party single-source suppliers were to cease or interrupt production or otherwise fail to supply these materials to Allozyne for any reason, including:

 

   

regulatory requirements or action by the FDA or others;

 

   

adverse financial developments at or affecting the supplier;

 

   

unexpected demand for or shortage of raw materials;

 

   

labor disputes or shortages; and

 

   

failure to comply with Allozyne’s quality standards, which results in quality failures, product contamination and/or recall.

For example, under an agreement that expired in July of 2011, NOF Corporation was Allozyne’s single-source supplier of branched polyethylene glycol, which is required for the production of AZ01 but not AZ17. Allozyne’s current inventory of this branched polyethylene glycol is anticipated to be sufficient for it to complete its MAD study, but Allozyne will require a new supply of branched polyethylene glycol to begin its next phase of clinical trials. At or before that time, Allozyne will be required to negotiate a new agreement with NOF Corporation or make arrangements to use an alternative supplier. At such time, NOF Corporation may be unable to supply the branched polyethylene glycol, unwilling to negotiate a mutually acceptable supply agreement or willing to agree only to terms that are unfavorable to Allozyne. Moreover, an alternate supplier may be unable to supply the branched polyethylene glycol to Allozyne. If an alternate supplier is able to supply the branched

 

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polyethylene glycol, changing suppliers may be costly and delay Allozyne’s efforts to develop AZ01. With respect to product candidates other than AZ01, Allozyne relies on other key third-party suppliers without supply agreements in place. In each case, the future pricing of Allozyne’s required supplies are uncertain and Allozyne may experience unexpected cost increases that are beyond its control. These events could adversely affect Allozyne’s ability to continue development on affected product candidates.

Allozyne relies on third parties to conduct its clinical trials. If these third parties do not perform as contractually required or otherwise expected, Allozyne may be unable to obtain regulatory approval for or commercialize its product candidates.

Allozyne does not currently conduct its own clinical trials and Allozyne depends on third parties, such as contract research organizations, medical institutions, clinical investigators, and contract laboratories, to conduct its clinical trials. Allozyne has, in the ordinary course of business, entered into agreements with these third parties. Nonetheless, Allozyne is responsible for confirming that each of its clinical trials is conducted in accordance with its general investigational plan and protocol. Moreover, the FDA requires Allozyne to comply with regulations and standards, commonly referred to as good clinical practices, for conducting, recording, and reporting the results of clinical trials to ensure that data and reported results are credible and accurate and that the trial participants are adequately protected. Allozyne’s reliance on third parties does not relieve it of these responsibilities and requirements. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to Allozyne’s clinical protocols or regulatory requirements or for other reasons, Allozyne’s clinical trials may be extended, delayed, suspended, or terminated, and Allozyne may be unable to obtain regulatory approval for its product candidates.

If Allozyne’s technology or its product candidates conflict with the rights of others, Allozyne may be unable to manufacture or market its product candidates, which could harm Allozyne’s business.

Allozyne’s commercial success will depend in part on not infringing the patents or violating the proprietary rights of third parties. Issued patents held by others may limit Allozyne’s ability to develop commercial products. All issued U.S. patents are entitled to a presumption of validity under U.S. law. If Allozyne needs licenses to such patents to permit it to manufacture, develop, or market its product candidates Allozyne may be required to pay significant fees or royalties, and Allozyne cannot be certain that it would be able to obtain such licenses. Competitors or third parties may have or may obtain patents that may cover subject matter Allozyne uses in developing the technology required to bring its products to market, producing its products, or treating patients with its products. If use of technology incorporated into or used to produce Allozyne’s product candidates is challenged, or if Allozyne’s processes or product candidates conflict with patent rights of others, third parties could bring legal actions against it claiming damages and seeking to enjoin manufacturing and marketing of the affected products. Additionally, it is not possible to predict with certainty what patent claims may issue from pending applications. With respect to patent applications filed solely in the United States, for example, patent prosecution could proceed in secret prior to issuance of a patent. As a result, third parties with such patent applications could obtain patents with claims relating to Allozyne’s product candidates, which they could attempt to assert against Allozyne without Allozyne’s prior knowledge. Further, as Allozyne develops its products, such third parties may assert that Allozyne infringes the patents currently held or licensed by them and Allozyne cannot predict the outcome of any such action.

Allozyne is aware that Biogen Idec, Inc., or Biogen Idec, a potential competitor, is currently asserting in litigation that several of the largest pharmaceutical companies, including Bayer, Novartis and Pfizer Inc., or Pfizer, are infringing a patent owned by Biogen Idec (U.S. Patent No. 7,588,755) relating to interferon beta used in multiple sclerosis treatments. One or more of the parties in the litigation have asserted that Biogen Idec’s patent is invalid, but Allozyne cannot predict the outcome of this litigation. If the Biogen Idec patent is not invalidated, Biogen Idec may assert this patent against Allozyne in connection with commercialization of its AZ01 and related products in an infringement action, and Allozyne may become involved in costly litigation.

 

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While Allozyne may have other defenses to this action, Allozyne cannot be certain that it would prevail over Biogen Idec in such defenses, and a negative outcome could have a material adverse effect on Allozyne’s ability to commercialize AZ01 and related products. If Allozyne were not to prevail, it would be required to obtain a license under one or more Biogen Idec patents. Allozyne cannot be certain that it would be able to obtain such a license, or that it could do so on commercially acceptable terms.

Allozyne is also aware of a number of patents owned by Nektar Therapeutics, Inc. (U.S. Patent Nos. 7,026,440, 7,786,221 and 7,872,072) that relate to certain forms of PEG conjugates with bioactive ingredients. Nektar may assert one or more of these patents against Allozyne in connection with commercialization of its AZ01 and related products in an infringement action, and Allozyne may become involved in costly litigation. While Allozyne may have defenses to this action, Allozyne cannot be certain that it would prevail over Nektar in such defenses, and a negative outcome could have a material adverse effect on Allozyne’s ability to commercialize AZ01 and related products. If Allozyne were not to prevail, it would be required to obtain a license under one or more Nektar patents. Allozyne cannot be certain that it would be able to obtain such a license, or that it could do so on commercially acceptable terms.

Allozyne may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.

There has been significant litigation in the biotechnology industry over patents and other proprietary rights, and if Allozyne becomes involved in any litigation it could consume a substantial portion of its resources, regardless of the outcome of the litigation. Many of Allozyne’s competitors may be better able to sustain the costs of complex patent litigation because they have substantially greater resources. If any legal action against Allozyne is successful, in addition to any potential liability for damages, Allozyne could be required to obtain a license, grant cross-licenses, or pay substantial royalties in order to continue to manufacture or market the affected products. Allozyne cannot assure you Allozyne would prevail in any legal action or that any license required under a third-party patent would be made available on acceptable terms, if at all. In addition, uncertainties resulting from the initiation and continuation of any litigation could harm Allozyne’s business. Ultimately, Allozyne could be prevented from commercializing a product or be forced to cease some aspect of its business operations as a result of claims of patent infringement or violation of other intellectual property rights, which could harm Allozyne’s business. Should third parties file patent applications, or be issued patents claiming technology also claimed by Allozyne in pending applications, Allozyne may be required to participate in interference proceedings in the USPTO to determine priority of invention, which could result in substantial costs to Allozyne and an adverse decision as to the priority of its inventions. An unfavorable outcome in an interference proceeding could require Allozyne to cease using the technology or to license rights from prevailing third parties. Allozyne cannot assure you that any prevailing party would offer it a license or do so on commercially acceptable terms.

Allozyne’s core intellectual property is licensed from non-affiliated third parties whose interests may not always be aligned with that of Allozyne’s.

Allozyne has licenses to develop its product candidates from three main sources: California Institute of Technology, Sigma-Aldrich Co., or Sigma-Aldrich, and The Scripps Research Institute, or TSRI. If Allozyne violates the terms of these licenses then Allozyne’s ability to move its product candidates forward may adversely affected. Allozyne’s license agreements include royalties and milestone payments that may reduce its market opportunity for its product candidates even if they receive regulatory approval.

If Allozyne is unable to obtain, maintain, and enforce its proprietary rights, Allozyne may be unable to compete effectively or operate profitably.

Allozyne’s success depends in part on obtaining, maintaining, and enforcing its patents and other proprietary rights, and will depend in large part on its ability to:

 

   

obtain and maintain patent and other proprietary protection for Allozyne’s technology, processes, and product candidates;

 

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enforce patents once issued and defend those patents if their enforceability is challenged;

 

   

preserve trade secrets; and

 

   

operate without infringing the patents and proprietary rights of third parties.

The degree of future protection for Allozyne’s proprietary rights is uncertain. For example:

 

   

Allozyne might not have been the first to make the inventions claimed in its patents, if issued, or disclosed in its pending patent applications;

 

   

Allozyne might not have been the first to file patent applications for these inventions;

 

   

others may independently develop similar or alternative technologies or duplicate any of Allozyne technologies;

 

   

it is possible that none of Allozyne’s pending patent applications will result in issued patents or, if issued, these patents may not be sufficient to protect its technology or provide Allozyne with a basis for commercially viable products, and may not provide Allozyne with any competitive advantages;

 

   

if Allozyne’s pending applications issue as patents, they may be challenged by third parties as infringing, invalid, or unenforceable under U.S. or foreign laws; and

 

   

Allozyne may develop additional proprietary technologies that are not patentable and that may not be adequately protected through trade secrets, if, for example, a competitor were to independently develop duplicative, similar, or alternative technologies.

The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves many complex legal and technical issues. There is no clear policy involving the breadth of claims allowed in patents or the degree of protection afforded under patents. Allozyne cannot assure you that patent applications owned by or licensed to it will result in patents being issued or that, if issued, the patents will give Allozyne an advantage over competitors with similar technology, nor can Allozyne assure you that Allozyne can obtain, maintain, and enforce all ownership and other proprietary rights necessary to develop and commercialize its product candidates.

Even if any or all of Allozyne’s patent applications issue as patents, others may challenge the validity, inventorship, ownership, enforceability, or scope of Allozyne’s patents or other technology used in or otherwise necessary for the development and commercialization of Allozyne’s product candidates. Further, Allozyne cannot assure you that any such challenge would not be successful. Moreover, the cost of litigation to uphold the validity of patents to prevent infringement or to otherwise protect Allozyne’s proprietary rights can be substantial. If the outcome of litigation is adverse to Allozyne, third parties may be able to use the challenged technologies without payment to Allozyne. Allozyne cannot assure you that Allozyne’s patents, if issued, will not be infringed or successfully avoided through design innovation. Intellectual property lawsuits are expensive and would consume time and other resources, even if the outcome were successful. In addition, there is a risk that a court would decide that Allozyne’s patents, if issued, are not valid and that Allozyne does not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of a patent were upheld, a court would refuse to stop the other party from using the inventions, including on the ground that its activities do not infringe that patent.

In addition to the intellectual property and other rights described above, Allozyne also relies on unpatented technology, trade secrets, and confidential information, particularly when Allozyne does not believe that patent or trademark protection is appropriate or available. Trade secrets are difficult to protect and Allozyne cannot assure you that others will not independently develop substantially equivalent information and techniques or otherwise gain access to or disclose Allozyne’s unpatented technology, trade secrets, and confidential information. In addition, Allozyne cannot assure you that the steps Allozyne takes with employees, consultants, and advisors will provide effective protection of Allozyne’s confidential information or, in the event of unauthorized use of Allozyne’s intellectual property or the intellectual property of third parties, provide adequate or effective remedies.

 

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Allozyne depends on its senior management and scientific personnel, and Allozyne’s business could be harmed if Allozyne is unable to attract and retain key personnel necessary for its success.

Allozyne is highly dependent on its senior management, especially Meenu Chhabra, Allozyne’s President and Chief Executive Officer, Kenneth H. Grabstein, Ph.D., Allozyne’s Chief Scientific Officer and John Bencich, Allozyne’s Chief Financial Officer, Treasurer and Secretary. Allozyne’s success will depend on its ability to retain senior management and to attract, retain, and motivate qualified personnel in the future, including scientists, clinicians, and other highly skilled personnel and to integrate current and additional personnel in all departments. While Allozyne has had success to date in attracting and retaining senior management personnel and none of its senior management personnel or scientists has expressed any plans to retire or leave Allozyne in the near future, competition for senior management personnel, as well as scientists, is intense and Allozyne may be unable to retain its personnel. The loss of any members of Allozyne’s senior management or any scientists, could hinder Allozyne’s ability to develop and commercialize Allozyne’s product candidates. The loss of a member of Allozyne’s senior management or professional staff would require the remaining senior executive officers to divert immediate and substantial attention to seeking a replacement.

Allozyne may be unable to obtain and maintain additional third-party relationships that are necessary to develop, commercialize and manufacture some or all of Allozyne’s product candidates or to expand its pipeline by adding new candidates.

Allozyne expects to depend on collaborators, partners, licensees, contract research organizations, manufacturers and other third parties and strategic partners to support Allozyne’s discovery and development efforts, to formulate product candidates, to conduct clinical trials for some or all of its product candidates, to manufacture clinical and commercial scale quantities of its product candidates and products and to market, sell, and distribute any products Allozyne successfully develops, if any. Allozyne cannot guarantee that it will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, manufacturers and other third parties on favorable terms, if at all. If Allozyne is unable to obtain or maintain these agreements, Allozyne may be unable to clinically develop, formulate, manufacture, obtain regulatory approvals for or commercialize its product candidates.

Allozyne expects to expend substantial management time and effort to enter into relationships with third parties and, if Allozyne successfully enters into such relationships, to manage these relationships. In addition, substantial amounts of Allozyne’s expenditures may be paid to third parties in these relationships. However, Allozyne cannot control the amount or timing of resources its contract partners will devote to Allozyne’s research and development programs, product candidates or potential product candidates, and Allozyne cannot guarantee that these parties will fulfill their obligations to Allozyne under these arrangements in a timely fashion, if at all.

If Allozyne enters into strategic partnerships Allozyne may be required to relinquish important rights to and control over the development of its product candidates or otherwise be subject to terms unfavorable to Allozyne.

If Allozyne enters into any strategic partnerships, Allozyne will be subject to a number of risks, including:

 

   

Allozyne may be unable to control the amount and timing of resources that its strategic partners devote to the development or commercialization of product candidates;

 

   

strategic partners may delay clinical trials, design clinical trials in a manner with which Allozyne does not agree, provide insufficient funding, terminate a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new version of a product candidate for clinical testing;

 

   

strategic partners may not pursue further development and commercialization of products resulting from the strategic partnering arrangement or may elect to discontinue research and development programs;

 

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strategic partners may not commit adequate resources to the marketing and distribution of any future products, limiting Allozyne’s potential revenues from these products;

 

   

disputes may arise between Allozyne and its strategic partners that result in the delay or termination of the research, development, or commercialization of Allozyne’s product candidates or that result in costly litigation or arbitration that diverts management’s attention and consumes resources;

 

   

strategic partners may experience financial difficulties;

 

   

strategic partners may not properly maintain or defend Allozyne’s intellectual property rights or may use Allozyne’s proprietary information in a manner that could jeopardize or invalidate Allozyne’s proprietary information or expose Allozyne to potential litigation;

 

   

business combinations or significant changes in a strategic partner’s business strategy may also adversely affect a strategic partner’s willingness or ability to complete its obligations under any arrangement;

 

   

strategic partners could independently move forward with a competing product candidate developed either independently or in collaboration with others, including Allozyne’s competitors; and

 

   

strategic partners could terminate the arrangement or allow it to expire, which would delay the development and may increase the cost of developing Allozyne’s product candidates.

The occurrence of any of these risks could negatively impact the development of Allozyne’s product candidates.

Allozyne faces substantial competition, which may result in others discovering, developing, or commercializing products before or more successfully than Allozyne.

Product Candidates for RRMS. If approved for the treatment of RRMS, Allozyne anticipates that its product candidates, AZ01 and AZ17, would compete with other therapies for RRMS, including, among others: Avonex® (Biogen Idec), Copaxone® (Teva Pharmaceutical Industries Ltd., or Teva/Sanofi S.A., or Sanofi), Rebif® (Merck KGaA/Pfizer), Novantrone® (Teva), and Tysabri® (Biogen Idec and Elan Corporation plc, or Elan).

Product Candidate for Crohn’s Disease. If approved for the treatment of Crohn’s disease, Allozyne anticipates that its product candidate, AZ17, would compete with other therapies for Crohn’s disease, including Azulfidine® (Pfizer Incorporated), Remicade® (Johnson & Johnson/Merck & Co., Inc.), Humira® (Abbot Laboratories), Cimzia® (UCB S.A.), and generic drugs such as mesalamine, corticosteroids and their derivatives.

Many of Allozyne’s potential competitors have substantially greater financial, technical, manufacturing, marketing and personnel resources than Allozyne. Allozyne’s ability to successfully compete will depend largely on its ability to:

 

   

design and develop products that are superior to other products in the market;

 

   

attract and retain qualified scientific, medical, product development, commercial, and sales and marketing personnel;

 

   

obtain patent or other proprietary protection for Allozyne’s processes, product candidates, and technologies;

 

   

operate without infringing the patents and proprietary rights of third parties;

 

   

obtain required regulatory approvals; and

 

   

successfully collaborate with others in the design, development, and commercialization of new products.

 

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Established competitors may invest heavily to quickly discover and develop novel compounds that could make Allozyne’s product candidates obsolete. In addition, any new product that competes with a generic market-leading product must demonstrate compelling advantages in efficacy, convenience, tolerability, and safety in order to overcome severe price competition and to be commercially successful. If Allozyne is unable to compete effectively against its current and future competitors, Allozyne’s business will be harmed.

Several companies, which have substantial experience and resources, have products or are developing product candidates in the areas Allozyne has targeted for its product candidates.

For Allozyne’s product candidates in development, Allozyne faces competition from other entities involved in the research and development of therapeutic proteins, antibody products and pharmaceuticals, including Abbott Laboratories, Ambrx, Inc., Bayer, Biogen Idec, Elan, Merck KGaA, Mitsubishi Tanabe Pharma Corporation, or Mitsubishi, Novartis, Prolor Biotech Inc., Sanofi, and Teva, among others. A number of Allozyne’s largest competitors are pursuing the development or marketing of pharmaceuticals that address the same diseases that Allozyne is pursuing, and the number of companies seeking to develop products and therapies for these diseases may increase. Allozyne also faces competition from entities developing other types of products related to particular diseases, including other biotechnology and pharmaceutical companies, universities, public and private research institutions, government entities and other organizations.

Furthermore, Allozyne’s potential products, if approved and commercialized, may compete against well-established therapeutic protein-based products or well-established antibody products, many of which may be currently reimbursed by government health administration authorities, private health insurers and health maintenance organizations.

Many of Allozyne’s existing and potential competitors have substantially greater research, product development and commercial capabilities, and financial, scientific, marketing and human resources than Allozyne does. As a result, these competitors may:

 

   

succeed in developing therapeutic protein-based products or alternative therapies, earlier than Allozyne does;

 

   

obtain approvals for products from the FDA or other regulatory agencies more rapidly than Allozyne does;

 

   

obtain patents that block or otherwise inhibit Allozyne’s ability to develop and commercialize its product candidates;

 

   

develop treatments or cures that are safer, more effective, convenient or economical than those Allozyne proposes to develop;

 

   

devote greater resources to marketing or selling their products;

 

   

introduce products that make the continued development of Allozyne’s potential products uneconomical;

 

   

withstand price competition more successfully than Allozyne can;

 

   

negotiate more favorable terms with third-party collaborators, licensees, group purchasing organizations and other large customers; and

 

   

take advantage of acquisitions or other opportunities more readily than Allozyne can.

Because of these and other potential disadvantages, Allozyne may be unable to compete effectively with these competitors. All of Allozyne’s product candidates face competition and Allozyne expects that competition in its industry will continue to be intense.

 

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If any products Allozyne develops become subject to unfavorable pricing regulations, third-party reimbursement practices, or healthcare reform initiatives, Allozyne’s business could be harmed.

Allozyne’s ability to commercialize any product candidate profitably will depend in part on the extent to which reimbursement for such product candidate and related treatments will be available from government health administration authorities, private health insurers or private payors, and other organizations in the United States and internationally. Even if Allozyne succeeds in bringing one or more product candidates to market, these products may not be considered cost-effective, and the amount reimbursed for any product may be insufficient to allow Allozyne to sell it profitably. Because Allozyne’s product candidates are in the early stages of development, Allozyne is unable at this time to determine their cost-effectiveness and the level or method of reimbursement. There may be significant delays in obtaining coverage for newly approved products, and coverage may be more limited than the purposes for which the product candidate is approved by the FDA or foreign regulatory agencies. Moreover, eligibility for coverage does not mean that any product will be reimbursed in all cases or at a rate that covers Allozyne’s costs, including research, development, manufacture, sale and distribution. Increasingly, the third-party payors who reimburse patients, such as government and private payors, are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. If the reimbursement Allozyne is able to obtain for any product is inadequate in light of Allozyne’s development and other costs, its business could be harmed.

Allozyne faces potential product liability exposure, and if successful claims are brought against Allozyne, it may incur substantial liability for a product candidate and may have to limit such product candidate’s commercialization.

The use of Allozyne’s product candidates in clinical trials and the sale of any products for which Allozyne obtains marketing approval expose Allozyne to the risk of product liability claims. Product liability claims might be brought against Allozyne by consumers, health care providers, pharmaceutical companies or others selling Allozyne’s products. If Allozyne cannot successfully defend itself against these claims, Allozyne will incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in:

 

   

decreased demand for Allozyne’s product candidates;

 

   

impairment of Allozyne’s business reputation;

 

   

withdrawal of clinical trial participants;

 

   

costs of related litigation;

 

   

substantial monetary awards to patients or other claimants;

 

   

loss of revenues; and

 

   

inability to commercialize Allozyne’s product candidates.

Allozyne currently has product liability insurance coverage for its global clinical trials for bodily injury and property damage expenses or losses that arise from the testing of its product candidates. Allozyne is insured against such risk up to a $5.0 million aggregate limit in connection with clinical trials currently under development. Allozyne periodically reviews its insurance limits for adequacy in relation to the number and stage of ongoing patient trials. However, Allozyne’s insurers may not reimburse Allozyne, or Allozyne’s insurance coverage may not be sufficient to reimburse Allozyne, for any or all expenses or losses Allozyne may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, Allozyne may be unable to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect Allozyne against losses due to liability. Allozyne intends to expand its insurance coverage to include the sale of commercial products if Allozyne obtains marketing approval for its product candidates in development, but Allozyne may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, large judgments have been awarded in class action lawsuits based on products that had unanticipated side effects. A successful product liability claim or series of claims brought against Allozyne that exceeds its insurance limits could harm its business.

 

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Allozyne’s management and auditors have identified a material weakness in its internal controls that, if not properly remediated, could result in material misstatements in its financial statements and the inability of Allozyne’s management to provide its report on the effectiveness of Allozyne’s internal controls as required by the Sarbanes-Oxley Act of 2002 for the year ending December 31, 2011, either of which could cause investors to lose confidence in its reported financial information and have a negative effect on the trading price of its stock.

Allozyne is not currently required to comply with Section 404 of the Sarbanes-Oxley Act of 2002, and is therefore not required to make an assessment of the effectiveness of Allozyne’s internal control over financial reporting. Further, Allozyne’s independent auditors have not been engaged to express, nor have they expressed, an opinion on the effectiveness of Allozyne’s internal control over financial reporting as of any balance sheet date or for any period reported in their financial statements. Had Allozyne performed such an evaluation or had its independent auditors performed an audit of Allozyne’s internal control over financial reporting, control deficiencies, including material weaknesses and significant deficiencies, in addition to those described below may have been identified.

In connection with Allozyne’s 2010 financial statement audit, Allozyne and its independent auditors identified a material weakness in Allozyne’s internal controls. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness consisted of a lack of financial accounting and reporting personnel and a lack of sufficient levels of review and approval of Allozyne’s financial statement closing procedures. This weakness in the design and operation of Allozyne’s internal controls resulted in the recording of numerous audit adjustments, and significantly delayed Allozyne’s financial statement close process for the year ended December 31, 2010.

Allozyne plans to continue to assess its internal controls and procedures and intends to take action as necessary or appropriate to address these matters, including to effect compliance with Section 404 of the Sarbanes-Oxley Act of 2002 when Allozyne is required to make an assessment of its internal controls. Remedying the deficiencies and maintaining proper and effective internal controls will require substantial management time and attention and may result in Allozyne incurring substantial incremental expenses, including costs associated with increasing the breadth and depth of its finance organization to ensure that it has personnel with the appropriate qualifications and training in certain key accounting roles and adherence to certain control disciplines within the accounting and reporting function. In June 2011, Allozyne hired its Chief Financial Officer, who has experience managing a company’s internal controls and procedures to effect compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Allozyne plans on expending significant resources to improve the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act and expand the financial accounting and reporting personnel to address the identified material weakness. However, the existence of a material weakness is an indication that there is a more than remote likelihood that a material misstatement of Allozyne’s financial statements will not be prevented or detected in a future period on a timely basis. The process of designing and implementing effective internal controls and procedures is a continuous effort that requires Allozyne to anticipate and react to changes in its business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy its reporting obligations as a public company. In addition, Allozyne cannot assure you that additional material weaknesses or significant deficiencies in its internal controls will not be discovered in the future.

Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC rules and regulations implementing such act will require Allozyne to conduct an annual evaluation of its internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act of 2002 also requires that Allozyne’s audit committee be advised and regularly updated on management’s review of internal controls. If Allozyne is unable to timely remedy the material weakness identified in connection with its fiscal 2010 audit, or if Allozyne is unable to implement the requirements of Section 404 in a timely manner or with adequate compliance, management may be unable to

 

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assess whether its internal controls over financial reporting are effective, which may subject Allozyne to adverse regulatory consequences and could result in a negative reaction in the financial markets due to a loss of confidence in the reliability of Allozyne’s financial statements. In addition, if Allozyne fails to develop and maintain effective controls and procedures, Allozyne may be unable to provide the required financial information in a timely and reliable manner or otherwise comply with the standards applicable to Allozyne as a public company. Any failure by Allozyne to timely provide the required financial information could harm its business.

The requirements of being a public company may strain Allozyne’s resources and distract its management, which could make it difficult to manage its business.

Following the completion of this merger, Allozyne will be required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to Allozyne and could harm its business.

As a public company, Allozyne will be subject to the reporting requirements of the Exchange Act. These requirements could strain its systems and resources. The Exchange Act requires that Allozyne file annual, quarterly and current reports with respect to its business and financial condition. The Exchange Act requires that Allozyne maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, Allozyne will need to commit significant resources, hire additional staff and provide additional management oversight. Allozyne will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s attention from other business concerns and could make it difficult to manage Allozyne’s business, which could harm its business, results of operations, financial condition and cash flows. In addition, if Allozyne is unable to remediate its material weaknesses that have been identified, Allozyne could lose investor confidence in the accuracy and completeness of its financial reports, which would cause the market price of the combined company’s stock to decline.

If Allozyne uses biological and hazardous materials in a manner that causes contamination or injury or violates laws, Allozyne may be liable for damages.

Allozyne’s research and development activities and clinical trials involve the use of potentially harmful biological materials, as well as hazardous materials and chemicals. Allozyne cannot completely eliminate the risk of accidental contamination or injury from the distribution, use, storage, handling, or disposal of these materials. In the event of contamination or injury, Allozyne could be held liable for damages that result, and any liability could exceed its available financial resources. Allozyne, its collaborative partners, the third parties that conduct clinical trials on its behalf, and its third-party manufacturers are subject to federal, state, local or foreign laws and regulations governing the use, storage, handling, and disposal of these materials and waste products. The cost of compliance with these laws and regulations could be significant. The failure to comply with any of these laws and regulations could result in significant fines and work stoppages.

Allozyne may become involved in securities class action litigation in connection with the merger that could divert management’s attention and harm the business of Allozyne.

Allozyne may become the target of securities class action litigation in connection with the merger. Securities litigation, even if it is without merit or unsuccessful, could result in substantial costs and divert Allozyne’s management’s time and resources, which could cause Allozyne’s business to suffer.

On June 27, 2011, a putative class action lawsuit was filed in the Superior Court of California, San Francisco County, against Poniard, its board of directors, a wholly-owned subsidiary of Poniard and Allozyne. The action, titled Aronheim v. Poniard Pharmaceuticals, Inc., et al. (Case Number: CGC-11-512033), alleges in summary that, in connection with the proposed merger with Allozyne, the members of the Poniard board of

 

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directors breached their fiduciary duties by purportedly conducting an unfair sale process and agreeing to an unfair sale price, and by purportedly engineering the proposed merger to provide them with improper personal benefits. The action also alleges that Poniard and Allozyne aided and abetted the Poniard board members’ purported breaches of fiduciary duty. The plaintiff seeks, among other things, a declaration that the suit can be maintained as a class action, a declaration that the merger agreement was entered into in breach of the Poniard board members’ fiduciary duties, rescission of the merger agreement, an injunction against the proposed merger, a directive that the Poniard board members exercise their fiduciary duties to obtain a transaction that is in the best interests of Poniard’s shareholders, the imposition of a constructive trust in favor of the plaintiff and the class upon any benefits improperly received by the Poniard board members as a result of their purportedly wrongful conduct and fees and costs. Poniard, its board of directors and Allozyne believe that the claims are without merit and intend to vigorously defend against them. However, there can be no assurances as to the outcome of the litigation.

Additional lawsuits could be filed, and the allegations in the above lawsuit may be amended.

Risks Related to the Combined Company’s Common Stock

The trading price of the combined company’s common stock may be subject to significant fluctuations and volatility, and the shareholders of the combined company may be unable to resell their shares at a profit.

There has not been a public market for the combined company’s common stock. The market price of the combined company’s common stock could be subject to significant fluctuation following the merger. Market prices for securities of early-stage pharmaceutical, medical device, biotechnology and other life science companies have historically been particularly volatile. Some of the factors that may cause the market price of the combined company’s common stock to fluctuate include:

 

   

its ability to develop, obtain regulatory clearances or approvals for and market new and enhanced products on a timely basis;

 

   

changes in governmental regulations or in the status of its regulatory approvals, clearances or future applications;

 

   

its announcements or its competitors’ announcements regarding new products, product enhancements, significant contracts, acquisitions or strategic investments;

 

   

quarterly variation in the combined company’s or its competitors’ results of operations;

 

   

changes in earnings estimates or recommendations by securities analysts, if any, who cover the combined company’s stock;

 

   

failure to meet estimates or recommendation by securities analysts, if any, who cover the combined company’s stock;

 

   

changes in healthcare policy;

 

   

product liability claims or other litigation involving the combined company;

 

   

accusations that the combined company has violated a law or regulation;

 

   

sales of large blocks of the combined company’s common stock, including sales by the company’s executive officers, directors and significant shareholders;

 

   

disputes or other developments with respect to intellectual property rights;

 

   

changes in accounting principles; and

 

   

general market conditions and other factors, including factors unrelated to the combined company’s operating performance or the operating performance of its competitors.

 

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In addition, if securities class action litigation is initiated against the combined company, it would incur substantial costs and its management’s attention would be diverted from operations. All of these factors could cause the price of the combined company’s stock to decline, and you may lose some or all of your investment.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined company’s common stock.

The combined company plans to issue additional equity securities in the future, which may result in dilution to existing investors.

To the extent the combined company raises additional capital by issuing equity securities, including in a debt financing where the combined company issues convertible notes or notes with warrants, the combined company’s shareholders may experience substantial dilution. The combined company may, from time to time, sell common stock in one or more transactions at prices and in a manner it determines. If the combined company sells common stock, existing shareholders may be materially diluted. In addition, new investors could gain rights superior to existing shareholders, such as liquidation and other preferences. In addition, the number of shares available for future grant under the Poniard Amended and Restated 2004 Incentive Compensation Plan that the combined company will be assuming in connection with the merger will be increased. In addition, the combined company will also have warrants outstanding to purchase shares of capital stock. The combined company’s shareholders will incur dilution upon exercise of any outstanding stock options or warrants.

All of Poniard’s outstanding shares of common stock are, and any shares that are issued in the merger will be, freely tradable without restrictions or further registration under the Securities Act, except for any shares subject to shareholder agreements with lock-up provisions executed in connection with the merger and any shares held by affiliates, as defined in Rule 144 under the Securities Act. Rule 144 defines an affiliate as a person who directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the combined company and would include persons such as the combined company’s directors and executive officers.

The concentration of the capital stock ownership with insiders of the combined company will likely limit the ability of the shareholders of the combined company to influence corporate matters.

Following the merger, the executive officers, directors, five percent or greater shareholders, and their respective affiliated entities of the combined company will beneficially own approximately 60.0% of the combined company’s outstanding common stock. As a result, these shareholders, acting together, have control over most matters that require approval by the combined company’s shareholders, including the election of directors and approval of significant corporate transactions. Corporate actions might be taken even if other shareholders oppose them. This concentration of ownership might also have the effect of delaying or preventing a corporate transaction that other shareholders may view as beneficial.

If securities analysts do not publish research or reports about the business of the combined company, or if they publish negative evaluations, the price of the combined company’s common stock could decline.

The trading market for the combined company’s common stock will rely in part on the availability of research and reports that third-party industry or financial analysts publish about the combined company. There are many large, publicly traded companies active in the biopharmaceutical industry, which may mean it will be less likely that the combined company receives widespread analyst coverage. Furthermore, if one or more of the analysts who do cover the combined company downgrade its stock, its stock price would likely decline. If one or more of these analysts cease coverage of the combined company, the combined company could lose visibility in the market, which in turn could cause its stock price to decline.

 

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Anti-takeover provisions under Washington law could make an acquisition of the combined company, which may be beneficial to the shareholders of the combined company, more difficult and may prevent attempts by the shareholders of the combined company to replace or remove management.

The combined company will be subject to the Washington laws regulating corporate takeovers, which, with limited exceptions, prohibit a “target corporation” from engaging in certain “significant business transactions” for a period of five years after the share acquisition by an acquiring person, unless (i) the prohibited transaction or the acquiring person’s purchase of shares was approved by a majority of the members of the target corporation’s board of directors prior to the acquiring person’s share acquisition or (ii) the prohibited transaction was both approved by the majority of the members of the target corporation’s board and authorized at a shareholder meeting by at least two-thirds of the outstanding voting shares (excluding the acquiring person’s shares) at or subsequent to the acquiring person’s share acquisition. An “acquiring person” is defined as a person or group of persons that beneficially owns 10% or more of the voting securities of the target corporation. Such prohibited transactions include, among other things:

 

   

certain mergers or consolidations with, dispositions of assets to, or issuances of stock to or redemptions of stock from, the acquiring person;

 

   

termination of 5% or more of the employees of the target corporation as a result of the acquiring person’s acquisition of 10% or more of the shares;

 

   

allowing the acquiring person to receive any disproportionate benefit as a shareholder; and

 

   

liquidating or dissolving the target corporation.

After the five-year period, certain “significant business transactions” are permitted, as long as they comply with certain “fair price” provisions of the Washington statute or are approved by a majority of the outstanding shares other than those of which the acquiring person has beneficial ownership. A corporation may not “opt out” of this statute.

As such, these laws could prohibit or delay mergers or a change in control and may discourage attempts by other companies to acquire the combined company.

In addition, following the merger, the combined company’s amended and restated articles of incorporation and amended and restated bylaws contain provisions, such as undesignated preferred stock, that could make it more difficult for a third party to acquire the combined company without the consent of its board of directors. Further, the combined company’s bylaws require advance notice of shareholder proposals and nominations and impose restrictions on the persons who may call special shareholder meetings. These provisions may have the effect of preventing or hindering any attempts by the shareholders of the combined company to replace its board of directors or management.

In the event that the combined company fails to satisfy any of the listing requirements of The NASDAQ Capital Market, its common stock may be put under review or removed from listing, which could affect its market price and liquidity.

Following the merger, the combined company is expected to be renamed “Allozyne, Inc.” and its common stock listed on The NASDAQ Capital Market. For continued listing on The NASDAQ Capital Market, the combined company will be required to comply with the listing requirements, including the minimum market capitalization standard set forth in the NASDAQ Marketplace Rule 5550(b)(2). In the event that the combined company fails to satisfy any of the listing requirements of The NASDAQ Capital Market, its common stock may be put under review or removed from listing. If the combined company is unable to list on The NASDAQ Capital Market, it would likely be more difficult to trade in or obtain accurate quotations as to the market price of the combined company’s common stock. Delisting of the combined company’s common stock would materially and adversely affect the market price and market liquidity of its common stock and its ability to raise necessary capital.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus/consent solicitation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “forecast,” “potential,” “contemplates,” “expects,” “intends,” “plans,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can” and similar expressions identify forward-looking statements. Forward-looking statements in this prospectus/proxy statement/consent solicitation include, without limitation, statements regarding corporate strategy, forecasts of product development, potential benefits and timing of the closing of the proposed merger and future expectations concerning available cash and cash equivalents, the expected timing of the conclusion of preclinical and clinical trials, the timing of regulatory filings and approvals or clearances, and other matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed in or implied by this prospectus/proxy statement/consent solicitation. Such risk factors include, among others: the ability to consummate the proposed merger; the ability of the combined company to develop and commercialize product candidates; the ability to obtain the substantial additional funding required to conduct clinical trials and development and commercialization activities; the ability to obtain regulatory approvals; the ability to comply with NASDAQ listing standards; the ability to conduct clinical trials; the results of preclinical studies and clinical trials with respect to products under development and whether such results will be indicative of results obtained in later clinical trials; the competitive environment in the biopharmaceutical industry; and the ability to obtain, maintain and enforce patent and other intellectual property protection for product candidates. These and other risks are described in greater detail in the section entitled “Risk Factors” in this proxy statement/prospectus/consent solicitation.

Many of the important factors that will determine these results and values are beyond Poniard’s and Allozyne’s ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements. Except as otherwise required by law, Poniard and Allozyne do not assume any obligation to update any forward-looking statements. In evaluating the merger, you should carefully consider the discussion of risks and uncertainties in the section entitled “Risk Factors” in this proxy statement/prospectus/consent solicitation.

MARKET AND INDUSTRY DATA

Information and management estimates contained in this proxy statement/prospectus/consent solicitation concerning the biotechnology industry, including general expectations and market position, market opportunity and market share, are based on publicly available information, such as clinical studies, academic research reports and other research reports, as well as information from industry reports provided by third-party sources, such as Datamonitor. The management estimates are also derived from Allozyne’s internal research, using assumptions made by Allozyne that it believes to be reasonable and Allozyne’s knowledge of the industry and markets in which Allozyne operates and expects to compete. None of the sources cited in this proxy statement/prospectus/consent solicitation has consented to the inclusion of any data from its reports, nor have Poniard or Allozyne sought their consent. Allozyne’s internal research has not been verified by any independent source, and Allozyne has not independently verified any third-party information. In addition, while Allozyne believes the market position, market opportunity and market share information included in this proxy statement/prospectus/consent solicitation is generally reliable, such information is inherently imprecise. Such data involves risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors.”

 

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THE SPECIAL MEETING OF PONIARD SHAREHOLDERS

Date, Time and Place

The special meeting of Poniard shareholders will be held on November 21, 2011, at the offices of Bay City Capital, located at 750 Battery Street, Suite 400, San Francisco, California 94111, commencing at 9:00 a.m., Pacific Time. Poniard is sending this proxy statement/prospectus/consent solicitation to its shareholders in connection with the solicitation of proxies by the Poniard board of directors for use at the Poniard special meeting of shareholders and any adjournments or postponements of the special meeting. This proxy statement/prospectus/consent solicitation is first being furnished to shareholders of Poniard on or about [], 2011.

Purposes of the Poniard Special Meeting of Shareholders

The purposes of the Poniard special meeting of shareholders are:

1. To consider and vote upon a proposal to approve the issuance of Poniard common stock and the resulting change of control of Poniard pursuant to the Agreement and Plan of Merger and Reorganization dated as of June 22, 2011, by and among Poniard, the Merger Sub and Allozyne, Inc., a copy of which is attached as Annex A to this proxy statement/prospectus/consent solicitation.

2. To consider and vote upon a proposal to approve an amendment of Poniard’s Amended and Restated Articles of Incorporation to effect a reverse stock split of Poniard’s outstanding common stock, at ratio of 1-for-40.

3. To consider and vote upon an adjournment of the Poniard special meeting of shareholders, if necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposals Nos. 1 and 2.

4. To consider and act upon such other business and matters or proposals as may properly come before the Poniard special meeting or any adjournments or postponements thereof.

Recommendation of Poniard’s Board of Directors

THE PONIARD BOARD OF DIRECTORS HAS DETERMINED THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO AND IN THE BEST INTERESTS OF PONIARD AND ITS SHAREHOLDERS AND HAS APPROVED SUCH PROPOSAL. THE PONIARD BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PONIARD SHAREHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.

Record Date and Voting Power

Only holders of record of Poniard common stock at the close of business on the record date, October 4, 2011, are entitled to notice of, and to vote at, the Poniard special meeting of shareholders or any adjournments or postponements thereof. At the close of business on the record date, [] shares of Poniard common stock were issued and outstanding and entitled to vote. Each share of Poniard common stock entitles the holder thereof to one vote on each matter submitted for stockholder approval.

Certain Poniard shareholders have entered into shareholder agreements whereby they have agreed to vote shares representing approximately 21% of the outstanding common stock of Poniard in favor of the merger, including the issuance of Poniard common stock in the merger, and refrain from selling any shares of their Poniard common stock for six months following the effective time of the merger. Additional information on shareholder agreements is provided below and in the section entitled “The Merger Agreement—Other Agreements Related to the Merger—Shareholder Agreements/Stockholder Agreements—Poniard Shareholder Agreements” in this joint proxy statement/prospectus/consent solicitation.

Voting and Revocation of Proxies

The Poniard proxy accompanying this proxy statement/prospectus/consent solicitation is solicited on behalf of the board of directors of Poniard for use at the Poniard special meeting of shareholders.

 

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If you are a shareholder of record of Poniard as of the applicable record date referred to above, you may vote in person at the Poniard special meeting of shareholders or vote by proxy. You may provide your proxy instructions in three different ways:

 

   

You can mail your signed proxy card in the enclosed return envelope.

 

   

You can provide your proxy instructions via the toll-free call center set up for this purpose by calling the toll-free number on your proxy card and follow the instructions. Please have your proxy card available when you call. You will be prompted to enter the control number from you proxy card that will identify you as a shareholder of record. If you vote by telephone, you do not need to return you proxy card.

 

   

You can provide your proxy instructions via the Internet at the web address shown on your proxy card by following the on-screen instructions. Please have your proxy card available when you access the web page. You will be prompted to enter the control number from you proxy card that will identify you as a shareholder of record. If you vote over the Internet, you do not need to return your proxy card.

Whether or not you plan to attend the Poniard special meeting of shareholders, Poniard urges you to vote by proxy to ensure your vote is counted. You may still attend the Poniard special meeting of shareholders and vote in person if you have already voted by proxy.

All properly executed Poniard proxies that are not revoked will be voted at the Poniard special meeting of shareholders and at any adjournments or postponements thereof in accordance with the instructions contained in the proxy. If a holder of Poniard common stock executes and returns a proxy and does not specify otherwise, the shares represented by that proxy will be voted “FOR” Poniard Proposal No. 1 to approve the issuance of shares of Poniard common stock to Allozyne stockholders pursuant to the merger, “FOR” Poniard Proposal No. 2 to approve the amendment of the articles of incorporation of Poniard to effect the reverse stock split, and “FOR” Poniard Proposal No. 3 to adjourn the Poniard special meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of either or both Poniard Proposals Nos. 1 and 2.

A Poniard shareholder of record as of the record date described above who has submitted a proxy may revoke it at any time before it is voted at the Poniard special meeting of shareholders by executing and returning a proxy bearing a later date, filing written notice of revocation with the secretary of Poniard stating that the proxy is revoked or attending the Poniard special meeting of shareholders and voting in person.

Required Vote

The presence, in person or represented by proxy, at the Poniard special meeting of shareholders of the holders of a majority of the shares of Poniard common stock outstanding and entitled to vote at the Poniard special meeting of shareholders is necessary to constitute a quorum at the meeting. Abstentions and broker non-votes will be counted toward a quorum. Approval of Poniard Proposal No. 1 requires the affirmative vote of holders of a majority of the voting power of the shares of Poniard common stock casting votes in person or by proxy at the Poniard special meeting of shareholders for the issuance of shares of Poniard common stock in the merger. Poniard Proposal No. 2 requires the affirmative vote of the holders of a majority of the common shares having voting power outstanding on the record date of the Poniard special meeting. Poniard Proposal No. 3 will be approved if the number of votes cast “FOR” the Proposal No. 3 exceeds the number of votes cast “AGAINST” Proposal No. 3 at the Poniard special meeting.

Votes will be counted by the inspector of election appointed for the meeting, who will separately count “FOR,” “WITHHOLD,” and “AGAINST” votes, and abstentions and broker non-votes. For Poniard Proposal Nos. 1 and 3, abstentions and broker non-votes will not be counted toward the vote total. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” Poniard Proposal No. 2.

 

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At the record date for the Poniard special meeting, the directors and executive officers of Poniard held []% of the outstanding shares of Poniard common stock entitled to vote at the Poniard special meeting. Concurrently with and as a condition to Poniard’s and Allozyne’s entering into the merger agreement on June 22, 2011, the principal shareholders of Poniard, who collectively beneficially own approximately 16,079,536 shares, or 21% of the outstanding shares of Poniard common stock entered into shareholder agreements pursuant to which each such shareholder has agreed to vote all shares of Poniard common stock that he or she beneficially owned as of the date of the shareholder agreement, and that the shareholder subsequently acquires, in favor of the merger and the other actions contemplated by merger agreement and against any competing acquisition proposal, and to refrain from selling any Poniard common stock for six months following the effective time of the merger, subject to the terms of the shareholder agreement. Each such shareholder also granted Allozyne an irrevocable proxy to vote his or her shares of Poniard common stock. For a more detailed discussion of the shareholder agreements see the section entitled “The Merger Agreement—Other Agreements Related to the Merger—Shareholder Agreements/Stockholder Agreements—Poniard Shareholder Agreements” beginning on page 120 of this joint proxy statement/prospectus/consent solicitation.

Solicitation of Proxies

The Poniard board of directors is soliciting proxies of Poniard shareholders to vote at the special meeting, and the cost of such solicitation will be borne by Poniard. Poniard has engaged D.F. King & Co. Inc. and BNY Mellon Shareowner Services to assist in the solicitation of proxies for the special meeting and will pay an aggregate fee of approximately $100,000, plus reimbursement of out-of-pocket expenses. Further solicitation of some Poniard shareholders may be made by Poniard directors, officers and regular employees personally, by e-mail, telephone, or facsimile. These persons will not receive any additional compensation for assisting in the solicitation. Poniard also will reimburse brokerage firms, nominees, custodians and fiduciaries for their reasonable expenses in forwarding solicitation materials to beneficial owners.

Other Matters

As of the date of this proxy statement/prospectus/consent solicitation, the Poniard board of directors does not know of any business to be presented at the Poniard special meeting of shareholders other than as set forth in the notice accompanying this proxy statement/prospectus/consent solicitation. If any other matters should properly come before the Poniard special meeting of shareholders, it is intended that the shares represented by proxies will be voted with respect to such matters in accordance with the judgment of the persons voting the proxies.

 

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SOLICITATION OF ALLOZYNE WRITTEN CONSENT

Allozyne Stockholder Action by Written Consent

The Allozyne board of directors is providing this consent solicitation and consent solicitation materials to its stockholders. Allozyne stockholders are being asked to execute and deliver the written consent furnished with this proxy statement/prospectus/consent solicitation to approve the merger and adopt and approve the merger agreement and the transactions contemplated thereby, including the Certificate of Merger to be filed with the Secretary of State of the State of Delaware referenced in the merger agreement.

Shares Entitled to Consent and Consent Required

Only Allozyne stockholders of record at the close of business on October 7, 2011 will be notified of and be entitled to execute and deliver a written consent. On the record date, the outstanding securities of Allozyne eligible to consent with respect to the proposals consist of [] shares of Allozyne common stock and an aggregate of [] shares of all series of Allozyne Series A, Series B-1 and Series B-2 Preferred Stock combined.

Under Allozyne’s Amended and Restated Certificate of Incorporation, each holder of Allozyne common stock is entitled to one vote for each share of common stock held of record and each holder of Allozyne preferred stock is entitled to one vote for each share of common stock into which such share of preferred stock held of record is convertible.

Approval of the merger and adoption and approval of the merger agreement and the transactions contemplated thereby requires: the approval of the holders of (i) a majority of the shares of Allozyne common stock, (ii) a majority of the shares of Allozyne common stock and preferred stock, voting together as a single class, and (iii) at least three-fourths of the shares of Allozyne preferred stock, voting together as a single class on an as-converted-to-common stock basis, each outstanding on the applicable record date.

On the record date, the directors and executive officers of Allozyne were beneficial owners of []% of the outstanding shares of Allozyne common stock entitled to execute and deliver the written consent. As of June 30, 2011, certain of the major stockholders of Allozyne who hold approximately 30,509,176 shares, or approximately 77% of the outstanding shares of Allozyne common stock on as-converted-to-common stock basis, solely in their capacity as Allozyne stockholders, have entered into stockholder agreements with voting and lock-up provisions and irrevocable proxies with Poniard in connection with the merger.

Submission of Consents

You may consent to the proposals with respect to your shares by completing and signing the written consent furnished with this proxy statement/prospectus/consent solicitation and returning it to Allozyne on or before November 21, 2011, the date the Allozyne board of directors has set as the targeted final date for receipt of written consents. Allozyne reserves the right to extend the final date for receipt of written consents beyond November 21, 2011 in the event that consents approving the merger and adopting and approving the merger agreement and the transactions contemplated thereby have not been obtained by that date from holders of a sufficient number of shares of Allozyne common stock and Allozyne preferred stock to satisfy the conditions to the merger. Any such extension may be made without notice to stockholders. Once all conditions to the merger have been satisfied or waived, the consent solicitation will conclude.

If you hold shares of Allozyne common stock or preferred stock as of the record date and you wish to give your written consent, you must complete the enclosed written consent, date and sign it, and promptly return it to Allozyne. Once you have completed, dated and signed the written consent, you may deliver it to Allozyne by faxing it to Allozyne’s legal counsel, Fenwick & West LLP, Attention: Ellen Welichko, at (206) 389-4511, by emailing a pdf copy of your written consent to ewelichko@fenwick.com, or by mailing your written consent to Fenwick & West LLP at 1191 Second Avenue, 10th Floor, Seattle, Washington 98101, Attention: Ellen Welichko.

 

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Executing Consents; Revocation of Consents

With respect to each proposal for which the shares of Allozyne common stock and preferred stock that you hold allow you to give consent, you may execute a written consent to approve each proposal (which is equivalent to a vote for the proposal) or disapprove each proposal (which is equivalent to a vote against the proposal). If you do not return your written consent, it will have the same effect as a vote against the proposals. If you are a record holder and you return a signed written consent without indicating your decision on a proposal, you will have given your consent to approve the merger and adopt and approve the merger agreement and the transactions contemplated thereby.

Your consent to a proposal may be changed or revoked at any time before the consents of a sufficient number of shares to approve and adopt such proposal have been filed with Allozyne’s corporate secretary. If you wish to change or revoke a previously delivered consent before that time, you may do so by delivering a notice of revocation to Allozyne’s corporate secretary or by delivering a new written consent with a later date.

Solicitation of Consents; Expense

The expense of preparing, printing and mailing these consent solicitation materials is being borne by Allozyne. Officers and employees of Allozyne may solicit consents by telephone and personally, in addition to solicitation by mail. These persons will receive their regular salaries but no special compensation for soliciting consents.

Recommendation of the Allozyne Board

THE ALLOZYNE BOARD OF DIRECTORS RECOMMENDS THAT ALLOZYNE STOCKHOLDERS APPROVE THE MERGER AND ADOPT AND APPROVE THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY BY EXECUTING AND DELIVERING THE WRITTEN CONSENT FURNISHED WITH THIS PROXY STATEMENT/PROSPECTUS/CONSENT SOLICITATION. The Allozyne board of directors believes the merger consideration to Allozyne stockholders is fair, advisable and in the best interests of Allozyne and its stockholders. The management of Allozyne and the Allozyne board of directors, after careful study and evaluation of the economic, financial, legal and other factors, also believe the merger could provide the combined company with increased opportunity for profitable expansion of its business, which in turn should benefit Allozyne stockholders who become shareholders of Poniard. See “The Merger—Reasons for the Merger—Allozyne’s Reasons for the Merger” on page 75 of this joint proxy statement/prospectus/consent solicitation.

Stockholder Agreements

Concurrently with and as a condition to Poniard’s and Allozyne’s entering into the merger agreement, on June 22, 2011, certain stockholders, directors and officers of Allozyne, holding approximately 65% of the Allozyne outstanding shares, entered into stockholder agreements whereby they have agreed to vote their Allozyne shares in favor of the merger and the merger agreement and against any competing acquisition proposal, and to refrain from selling any of the Poniard common stock they receive in the merger for six months following the effective time of the merger, subject to the terms of the stockholder agreements. For a more detailed discussion of the stockholder agreements see “The Merger Agreement—Other Agreements Related to the Merger Agreement—Shareholder Agreements/Stockholder Agreements—Allozyne Stockholder Agreements” beginning on page 121 of this proxy statement/prospectus/consent solicitation.

 

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THE MERGER

This section and the section entitled “The Merger Agreement” in this proxy statement/prospectus/consent solicitation describe the material aspects of the merger, including the merger agreement. While Poniard and Allozyne believe that this description covers the material terms of the merger and the merger agreement, it may not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus/consent solicitation for a more complete understanding of the merger and the merger agreement, including the merger agreement attached as Annex A to this proxy statement/prospectus/consent solicitation.

General Description of the Merger

Poniard, Allozyne and the Merger Sub, have entered into an Agreement and Plan of Merger and Reorganization dated as of June 22, 2011, which is referred to in this proxy statement/prospectus/consent solicitation as the merger agreement, that contains the terms and conditions of the proposed business combination of Poniard and Allozyne. Pursuant to the terms and conditions of the merger agreement, the Merger Sub will be merged with and into Allozyne, with Allozyne surviving the merger as a wholly owned subsidiary of Poniard.

Background of the Merger

Historical Background for Poniard Pharmaceuticals

On November 16, 2009, Poniard announced, based on 320 patient deaths, that its pivotal Phase 3 SPEAR (Study of Picoplatin Efficacy After Relapse) trial of picoplatin in the treatment of patients with small cell lung cancer, or the SPEAR trial, did not meet its primary endpoint of overall survival. Picoplatin is Poniard’s lead product candidate, and the SPEAR trial was Poniard’s most advanced picoplatin clinical study. The Phase 3 SPEAR trial was an international, multi-center, open-label, controlled study to compare the efficacy and safety of picoplatin plus best supportive care with best supportive care alone as a second-line therapy for small cell lung cancer. Poniard was blinded to any analysis of the aggregate data until the database was locked after the occurrence of 320 evaluable events (patient deaths). The study enrolled 401 patients with small cell lung cancer whose disease was non-responsive to first-line platinum-containing (cisplatin or carboplatin) chemotherapy or whose disease responded initially to first-line platinum-containing therapy but then progressed within six months after treatment was completed. Patients were randomized in a 2:1 ratio to receive picoplatin plus best supportive care or best supportive care alone. Best supportive care includes all medical, radiation and surgical interventions that small cell lung cancer patients should receive to relieve symptoms and treat the complications of their disease, but excludes treatment with other chemotherapy.

On December 8, 2009, due primarily to the outcome of the SPEAR trial in November 2009, and at the direction of the Poniard board of directors, Poniard management presented to the Poniard board of directors a revised strategic plan. Poniard management’s presentation included an analysis of strategic alternatives potentially available to Poniard, including regulatory strategies with regard to picoplatin, continuing as a standalone company, pursing a sale, merger, global partnership, or liquidation of the company. Poniard management’s presentation included a preliminary assessment of whether the SPEAR trial data supported the submission of a new drug application, or NDA. Management reviewed these potential strategic alternatives with the board and also discussed Poniard’s current cash needs and the potential implementation of cost-saving measures, including one or more reductions in force, the cancellation of manufacturing lots and sublease of Poniard’s executive office space in South San Francisco.

Following the presentations, the Poniard board of directors directed management to continue to evaluate the SPEAR trial data to determine any statistically significant survival trends evidenced in the preliminary SPEAR data and to work with the FDA to identify a regulatory strategy that would support submission of an NDA based on any such trends. The Poniard board of directors also directed management to continue to identify strategic partnering opportunities, recognizing that potential partners would be unlikely to pursue a transaction with Poniard until the outcome of Poniard’s discussions with the FDA is known.

 

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On January 29, 2010, Poniard management presented to the Poniard board of directors an updated analysis of the SPEAR trial data. Poniard management reported that the SPEAR data demonstrated statistically significant efficacy benefit in multiple subsets of patients. Those statistically significant efficacy benefits were:

 

   

A statistically significant difference in favor of patients in the picoplatin arm for progression free survival in the intent-to-treat population. Patients in the picoplatin arm of the SPEAR trial had progression free survival of 9.0 weeks, compared to 6.6 weeks for those patients who received best supportive care alone.

 

   

A statistically significant difference in favor of patients in the picoplatin arm for time to progression, or TTP, in the intent-to-treat population, with a median TTP of 11.3 weeks in the picoplatin arm, compared to a median TTP of 6.7 weeks for patients who received best supportive care alone.

 

   

Overall survival in the intent-to-treat population, the primary endpoint of the study, which was based on 320 evaluable events, or deaths, showed a median overall survival of 20.6 weeks in the picoplatin arm of the SPEAR trial, compared to overall survival of 19.7 weeks who received best supportive care alone. The primary endpoint of the trial was not met, potentially due to an imbalance in the use of post-trial chemotherapy between the picoplatin arm of the trial and the best supportive care alone arm: 27.6 percent of patients in the picoplatin arm of the trial received post-trial chemotherapy, compared to 40.6 percent of the patients who received best supportive care alone.

 

   

Among the 273 patients who did not receive post-SPEAR trial chemotherapy, the 194 patients in the picoplatin arm demonstrated a statistically significant improvement in overall survival compared to the 79 patients who received best supportive care alone. In these 273 patients, the patients in the picoplatin arm demonstrated a median survival of 18.3 weeks, compared to a median survival of 14.4 weeks for patients who received best supportive care alone.

 

   

The 294 patients who were refractory or relapsed within 45 days of first-line platinum-based therapy, the 202 patients in the picoplatin arm demonstrated a statistically significant improvement in overall survival compared to the 92 patients in the best supportive care alone arm of the trial. In these 294 patients, the patients in the picoplatin arm demonstrated a median survival of 21.3 weeks, compared to a median survival of 18.4 weeks for the patients who received best supportive care alone.

After a discussion of the challenges of filing an NDA based on subset data, including the lack of supporting precedent within the FDA, the Poniard board instructed Poniard management to discuss this approach with the FDA and, in parallel, to develop contingency plans outlining Poniard’s strategic options in the event of a negative FDA response. To this end, Poniard’s board of directors established an executive committee to work with Poniard management to review and assess Poniard’s strategic options, including with respect to financing, corporate partnering and clinical and regulatory matters. Poniard’s board appointed Fred B. Craves, Ph.D., Nicholas J. Simon and Robert S. Basso, each an independent director, to serve on the executive committee.

On February 5, 2010, Poniard implemented a restructuring plan to conserve Poniard’s capital resources. As part of Poniard’s restructuring plan, Poniard reduced its workforce from 50 to 22 employees and completed a management reorganization, in which Gerald McMahon, Ph.D. stepped down as Poniard’s Chief Executive Officer, Robert J. DeJager, M.D. stepped down as Poniard’s Chief Medical Officer, Ronald A. Martell, Poniard’s then President and Chief Operating Officer, was named Chief Executive Officer, and Michael S. Perry, D.V.M., Ph.D., who at the time served as a consultant, was named President and Chief Medical Officer. As a further cost cutting measure, on February 12, 2010, Poniard entered into an agreement to sublease its executive office space.

In early March 2010, the FDA advised Poniard that a new Phase 3 clinical trial of picoplatin would be required to support submission of an NDA with respect to the use of picoplatin to treat the subset of patients in which the SPEAR trial data had demonstrated statistically significant efficacy. In light of this FDA response, following discussion at its March 22, 2010 meeting, the Poniard board of directors approved management’s recommendation to discontinue all filing activities related to the SPEAR trial. In conjunction with this action, the board approved a corporate restructuring to further reduce the number of employees to 12, effective April 30, 2010.

 

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On March 24, 2010, Poniard formally engaged Leerink as Poniard’s exclusive financial advisor to assist Poniard in identifying, evaluating and pursuing alternative strategies to optimize shareholder value. Leerink was engaged to explore a broad range of transaction possibilities, including the sale of Poniard or its assets, merger, out-licensing picoplatin rights, conducting a new Phase 3 trial for picoplatin, refocusing clinical activities on the development of an oral formulation of picoplatin, or in-licensing new products.

At the meeting of the Poniard board of directors held on April 9, 2010, Leerink recommended, based on its assessment of Poniard’s picoplatin program and capital resources, timing considerations and the SPEAR trial results, that Poniard explore potential sale, merger and partnership opportunities with strategic buyers and partners in parallel with possible structured or public financing alternatives.

Leerink and Poniard management screened potential candidates worldwide for a broad range of opportunities involving product in-licensing or business combination transactions and prioritized potential buyers and partners based on strategic fit and product pipeline synergy with Poniard. Potential counterparties were identified across three broad categories:

 

   

big pharma and large cap biopharma;

 

   

mid-cap and small-cap biopharma with oncology focus; and

 

   

merger candidates.

Allozyne was not among this initial group of counterparties. Poniard and Leerink also identified potential financial partners with which to explore alternative financing mechanisms.

Between April and July 2010, Leerink and Poniard contacted a total of 78 companies (41 potential acquirers, 30 potential merger candidates and 7 potential financial partners). Five potential acquirers/merger candidates executed confidentiality disclosure agreements, or CDAs, to evaluate picoplatin and Poniard during this period. After completing preliminary due diligence, three of those companies declined to move forward, indicating a lack of a strategic fit.

On June 9, 2010, the Poniard board of directors met for a regularly scheduled meeting. At the meeting, Leerink reported that, based on feedback received from potential counterparties, there was little or no interest in partnering or licensing picoplatin due to the cost of a new Phase 3 clinical trial, the ongoing risk associated with the negative SPEAR trial outcome and the competitive landscape for platinum-based therapeutics. As a result, Leerink advised that the most likely strategic option would be a merger or stock acquisition of Poniard by a public company or a merger of Poniard with a private entity. Leerink and Poniard management then identified four preferred potential merger candidates.

During the week of June 13, 2010 and in the weeks that followed, Poniard management and Leerink made follow-up contacts with a number of parties who had expressed varying degrees of interest in a transaction with Poniard, including the four merger candidates identified at the June 9 board meeting. During this follow-up, all parties, except Company A, declined further discussions or ultimately withdrew from discussions.

Company A initially was introduced to Poniard in January 2010, when Mr. Martell met with Company A’s Chief Executive Officer to discuss strategic opportunities between the two companies. Company A is a non-U.S. domiciled, non-U.S. listed public company with a variety of oncology and non-oncology assets. On February 1, 2010, Company A entered into a CDA with Poniard, and on February 16, 2010, Poniard sent a confidential data package to Company A for its review. On March 23, 2010, Company A held a telephone conference with members of Poniard management to conduct additional preliminary due diligence and to discuss the broad construct of a possible transaction.

From April 2010 through November 2010, Poniard conducted extensive negotiations, including the exchange of draft agreements and due diligence materials with Company A. From mid-July until the end of

 

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October 2010, Poniard and Company A and their respective legal and financial advisors and other representatives conducted detailed due diligence, negotiated the structure and terms of a proposed transaction and prepared initial drafts of the transaction documents. The proposed transaction called for a stock-for-stock transaction in which Poniard shareholders would own less than one-third of the combined company and in addition Company A shareholders would receive shares of a newly created class of preferred stock through which Company A would pay out a portion of any value realized on a certain Company A product.

At meetings of the Poniard board of directors held on July 6, August 5, September 1, and September 28, 2010, Poniard management reviewed and discussed with the board the results of Poniard’s due diligence and the status of negotiations with Company A, including key terms, timeline, operational issues, financing requirements, regulatory approval processes, exchange ratio and related matters. At its meeting on July 6, 2010, the Poniard board established an ad hoc transaction committee to provide advice and guidance to Poniard management in evaluating and negotiating the proposed transaction with Company A. The board appointed Robert M. Littauer, Gary S. Lyons, Nicholas B. Simon and Fred B. Craves, Ph.D. to serve on the committee.

In mid-October 2010, Company A met with the securities regulators in its domicile country to address listing issues fundamental to Company A’s willingness to move forward with the negotiated transaction. Company A received an unfavorable determination from its regulators on October 18, 2010. Consequently, Company A officially terminated discussions with Poniard on or about November 19, 2010.

On November 3, 2010, Mr. Martell met with Steven Gillis, Ph.D. to identify potential merger candidates from ARCH Venture Partners’ portfolio companies. Allozyne and four additional companies were suggested as possible candidates.

The Poniard board of directors met on November 19, 2010, to discuss the strategic alternatives available to Poniard given that negotiations with Company A had been terminated by Company A. At that meeting, management recommended the strategy of exploring a merger with a private company seeking access to the U.S. capital markets and as a means to diversify Poniard’s pipeline. Working with Leerink, management advised that it had screened 55 companies and identified 33 potential counterparties. In identifying potential counterparties, management focused on U.S.-based private companies having a market cap similar to that of Poniard and a clinical stage pipeline. The strategic objective was to create a combined company with a product pipeline that could attract sufficient financing to advance the development of its product candidates. The Poniard board authorized management to proceed with high-level discussions with the identified counterparties and to conduct preliminary due diligence as appropriate. The board also authorized management to continue to explore opportunities to partner picoplatin. Potential partners for picoplatin spanned a broad range of candidates with varying attributes, including privately held and publicly traded companies, specialty pharmaceuticals in Europe and Asia, and large, mid-size and small biopharmaceuticals worldwide.

During a three-month period beginning November 2010, Leerink and Poniard contacted 26 companies (23 potential merger candidates and three new potential picoplatin partners). The three potential picoplatin partners all have clinical-stage oncology product pipelines. Two of the three potential picoplatin partners are based in the United States, one of which is a publicly traded company, and the third potential partner is based in China. Eight of the potential merger candidates, including Allozyne, executed CDAs. Poniard’s management team conducted initial financial, business and scientific due diligence on each of these companies. Such due diligence included assessment of the market size, competitive landscape, clinical progress and risks associated with each company’s lead compounds and platforms, as well as the extent to which such compounds and platforms address an unmet medical need. Financial due diligence included a review of the candidate’s financing history, valuation and cash position.

On November 30, 2010, Mr. Martell met with two directors of Allozyne, Dr. Gillis and Michael Steinmetz, Ph.D., and Allozyne’s Chief Executive Officer, Meenu Chhabra, to obtain an overview of Allozyne.

On December 15, 2010, Ms. Chhabra provided Mr. Martell a presentation on the combined entity strategic vision to facilitate further discussion between the parties.

 

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Subsequent multiple discussions regarding a potential merger were held between Mr. Martell and Ms. Chhabra, Dr. Gillis, Dr. Steinmetz and Carl Weissman, another director of Allozyne, in January 2011.

On January 26, 2011, Poniard management and Leerink updated the Poniard board on their progress in evaluating the potential merger candidates and identified Allozyne, Company B and Company C, all privately-held clinical stage product companies, as the preferred potential candidates. Poniard management advised the board that it had sent nonbinding term sheets to Company B and Company C on January 21, 2011 and December 21, 2010, respectively, and was in active discussions with Company B’s senior management about the possible structure and financial terms of a merger. The board determined that no opportunity represented enough certainty to focus on a single company and instructed management and Leerink to pursue further due diligence and continue discussions with all three companies. At that same meeting, Mr. Simon disclosed to the board that he is affiliated with certain venture funds that are significant stockholders of Allozyne and which have a representative on the Allozyne board of directors, as described in the section of this joint proxy statement/prospectus/consent solicitation entitled “The Merger — Interests of Poniard’s Executive Officers and Directors in the Merger,” and advised that he would recuse himself from discussions of the board or the executive committee of the board; however, the board felt it was in Poniard’s best interest to have Mr. Simon involved in discussions evaluating financial aspects of Poniard’s operations and strategic alternatives until it appeared that a transaction would be negotiated exclusively with Allozyne. As a result, except for the February 24, 2011 meeting of independent directors of the board and the April 15, 2011 meeting of the executive committee, from which Mr. Simon was absent, and the February 25, 2011 board meeting, at which Poniard management reported on its diligence assessment of Allozyne, Mr. Simon attended all board and executive committee meetings until May 19, 2011, on which date he resigned from the executive committee. After that date, Mr. Simon recused himself from all further discussions at meetings of the board related to the negotiation of a transaction with Allozyne.

Due diligence of Allozyne by the Poniard management team was initiated on February 4, 2011, and additional technical, business and intellectual property rights due diligence continued between February and March 2011. In parallel, multiple discussions between Mr. Martell and Ms. Chhabra were held during the same time period regarding potential deal structures and financial and business terms of a proposed merger.

On February 12, 2011, Poniard received a nonbinding written indication of interest from Company D, a clinical stage oncology company with which Poniard had earlier discussions.

On February 18, 2011, Poniard management and Leerink updated the Poniard board of directors on their preliminary due diligence reviews of Allozyne, Company B, Company C and Company D, including the initial due diligence findings with respect to the lead assets of each company. At the meeting, Mr. Simon reminded the board of his affiliation with certain venture funds that are significant stockholders of Allozyne and which have a representative on the Allozyne board of directors and advised that he would recuse himself if discussions with Allozyne advanced. After discussion, the board instructed management to finalize term sheets with Allozyne and Company B. The Poniard board determined not to pursue a possible merger with Company C or Company D, primarily because of uncertainties regarding probabilities of technical success of their product candidates and their ability to consummate a transaction. At the same meeting, the board expressed interest in following up on Company E, an anti-infective and anti-inflammatory biopharmaceutical company, which recently had contacted Poniard with a preliminary indication of interest.

On February 24, 2011, the independent directors of the board met to discuss the process regarding the evaluation of strategic alternatives.

At a meeting of the Poniard directors held on February 25, 2011, Perkins Coie LLP, Poniard’s outside counsel, reviewed and discussed with the board members their fiduciary duties in considering and evaluating potential transactions. Mr. Martell advised the board that Poniard had been in active discussions with Allozyne and Company B and reported on Poniard’s diligence assessment of Company B and Allozyne. At the meeting, Mr. Simon recused himself from the report on Poniard’s diligence assessment of Allozyne. The board authorized Mr. Martell to continue discussions with Allozyne and Company B and to provide further information to the

 

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board at a subsequent meeting. In addition, the board appointed Mr. Littauer to the executive committee, such that the executive committee would be comprised of Dr. Craves, Mr. Basso, Mr. Simon and Mr. Littauer.

Poniard continued its due diligence reviews and assessments of Allozyne, Company B and Company E throughout the remainder of February and into April 2011. On March 14, 2011, following Poniard management’s report on its due diligence findings to the Poniard board, including pro forma information about Allozyne and Company B, the board authorized Poniard management to pursue discussions with all three companies.

Poniard delivered, for discussion purposes only, nonbinding term sheets to Allozyne and Company E on April 1, 2011. On April 15, 2011, Company E advised Poniard that the proposed nonbinding terms were not acceptable and that the executive committee of Company E had determined that it was in the best interest of Company E shareholders to remain a private company at the present time, and declined to negotiate further.

On April 2, 2011, Company B delivered, for discussion purposes only, a nonbinding counterproposal to Poniard’s January 21 term sheet.

At the April 12, 2011 board meeting, Dr. Kwok updated the board on the status of discussions with Allozyne and Company B and, after discussion, the board indicated its interest in pursuing a transaction with Company B and discussed the terms of a proposed counterproposal. On April 15, 2011, telephonic meetings of the board and executive committee were held and, following an update by Mr. Martell on his discussions with Company B and Allozyne, the decision was made to move forward with Company B and to suspend discussions with Allozyne. On April 15, 2011, Mr. Martell phoned Dr. Gillis to inform him that Poniard would not be moving forward with Allozyne at the present time.

Poniard delivered a counterproposal to Company B on April 14, 2011, for discussion purposes only. At a meeting of Poniard’s executive committee on April 18, 2011, Mr. Martell updated the committee on the status of negotiations with Company B. The committee discussed in detail the business and financial terms of a potential transaction with Company B.

On April 19, 2011, Dr. Craves, Mr. Lyons, Mr. Martell and Bryan Giraudo of Leerink met with six members of the board of directors of Company B and other key investors of Company B. On May 6, 2011, Company B management advised Poniard that, after considerable discussion, the board and key investors of Company B were unable to agree to Poniard’s counterproposal. On May 17, 2011, Company B communicated that it would not be moving forward with Poniard.

On April 29, 2011, the Poniard board met to discuss reengaging with Allozyne and, on May 3, 2011, Mr. Martell informed Dr. Gillis that Poniard would like to pursue potential merger discussions with Allozyne.

Historical Background for Allozyne

Since Allozyne’s inception, its board of directors and management team have been regularly evaluating its business and operations, long-term strategic goals and alternatives, and prospects as an independent company. Allozyne’s board of directors and management team have regularly reviewed and assessed trends and conditions impacting Allozyne and its industry, changes in the marketplace and applicable law, the competitive environment and Allozyne’s future prospects. As part of the ongoing review of Allozyne and its position in its industry, Allozyne’s board of directors also regularly reviews the strategic alternatives available to Allozyne, including, among other things, possible strategic combinations, acquisitions and divestitures.

Background of Development of Transaction Between Poniard and Allozyne

During November and December of 2010, Mr. Martell had various meetings and strategic discussions with members of the Allozyne board of directors, including Dr. Gillis, Dr. Steinmetz and Mr. Weissman, and with Ms. Chhabra, Allozyne’s Chief Executive Officer.

 

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On January 11, 2011, at the JPM Healthcare Conference in San Francisco, members of Allozyne’s board of directors met with members of Poniard’s board of directors and management to discuss how to facilitate additional information sharing.

On January 24, 2011, the Allozyne and Poniard management teams met to review Allozyne’s platform technology and programs, as well as Poniard’s technology. On January 27, 2011, Poniard submitted an initial due diligence request to Allozyne.

During February and March 2011, the Poniard management team conducted additional technical, business and intellectual property rights due diligence. In parallel, there were multiple discussions between the chief executive officers and members of the boards of directors of both companies regarding possible deal structures.

On March 3, 2011, Mr. Martell delivered to Allozyne its initial nonbinding summary of terms , providing for a merger whereby the shareholders of both companies would own 50% of the combined company, with an increase for Allozyne shareholders to 60% of the combined company if the results of Allozyne’s multiple-ascending dose (MAD) study were positive. Throughout the month of March 2011, Poniard’s board of directors and management, in consultation with Leerink, continued their assessments of Allozyne, including preparation of pro forma analyses and evaluation of potential deal structures, and due diligence.

On March 24, 2011, based on negotiations between Mr. Martell and Ms. Chhabra, Mr. Martell delivered to Allozyne a revised nonbinding summary of terms, providing for a merger whereby the shareholders of both companies would own 50% of the combined company, with an increase for Allozyne shareholders to 65% of the combined company if the results of Allozyne’s MAD study were positive. In addition, the shareholders of Allozyne would receive the right to additional shares of the combined company equal to 25% of any cash received for third party licenses during the first two years following the closing date. Poniard management continued their due diligence and evaluations of potential deal structures through the end of March 2011.

On April 1, 2011, Dr. Kwok provided Ms. Chhabra a revised nonbinding term sheet making the right to additional shares subject to positive results from Allozyne’s MAD study and capping the cash value of such shares at $12.5 million. The parties negotiated extensively during the first two weeks of April 2011 until April 15, 2011, when Poniard communicated to Allozyne that it wished to place negotiations on hold while Poniard explored an alternative strategic opportunity. Poniard continued its negotiations with Company B until the conclusion of those negotiations on May 17, 2011, as described above.

On May 9, 2011, Messrs. Martell and Littauer and Dr. Craves, each a Poniard director, met with Allozyne board members Mr. Weissman and Dr. Gillis and with Ms. Chhabra in the corporate offices of Allozyne to discuss the proposed terms of a merger.

On May 12, 2011, based on the negotiations between Poniard and Allozyne to date, Poniard delivered a nonbinding term sheet, providing for a merger whereby the shareholders of Allozyne would own 65% of the combined company, without any right to additional shares post-closing or contingency based on the results of Allozyne’s MAD study.

Poniard and Allozyne, together with their respective outside legal counsel, and with Poniard’s financial advisor, Leerink, continued their mutual due diligence and engaged in negotiations regarding the terms of the merger agreement and the shareholder and stockholder agreements, including potential adjustments to the exchange ratio in the merger, each party’s net cash requirements, including a potential additional financing by Allozyne, certain liabilities, non-solicitation provisions, management of the combined company, treatment of stock options and warrants in the merger, employee benefits following the merger, conditions to each party’s obligation to complete the merger, post-closing financing strategies, termination rights and termination fees, and representations, warranties and covenants of the parties. Final agreement on these and other issues was reached over the course of numerous discussions involving members of Poniard and Allozyne management and their legal teams.

 

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During May 2011, the Poniard executive committee convened telephonically, joined by Mr. Martell, to discuss the status of the proposed transaction with Allozyne and negotiations related to the merger. The discussions included: updates on proposed business and financial terms, review of drafts of the merger agreement and related documents, and evaluation of Poniard employee severance issues. On May 19, 2011, with a potential transaction with Company B no longer a prospect, Mr. Simon resigned from the executive committee. David Stevens, Ph.D. subsequently began attending executive committee meetings and was appointed to replace Mr. Simon on the committee.

On June 6, 2011, the executive committee convened telephonically to discuss the current state of negotiations and due diligence, including key terms relating to Poniard severance and change of control obligations.

On June 9, 2011, at the annual board meeting, the Poniard board of directors reviewed the status of negotiations with Allozyne and the due diligence review of Allozyne.

On June 22, 2011, the Poniard board of directors, excluding Mr. Simon and Drs. Goldfischer and Craves, held a special telephonic meeting to consider the proposed merger between Poniard and Allozyne and to vote on the merger agreement and related matters. Representatives of Perkins Coie LLP reviewed with the directors their fiduciary duties in evaluating the merger and summarized the terms of the proposed merger agreement and related agreements. Representatives of Perkins Coie LLP and Leerink also responded to questions from members of the board of directors. The board also considered the interests of Mr. Simon, Dr. Goldfischer, Dr. Craves and Mr. Martell in the transactions contemplated by the merger agreement, as described in the section of this joint proxy statement/prospectus/consent solicitation entitled “The Merger—Interests of Poniard’s Executive Officers and Directors in the Merger.” At the meeting, a representative from Leerink delivered certain of its written analyses and its written opinion to the board to the effect that, and subject to various assumptions, qualifications and limitations, as of June 22, 2011, the consideration to be paid by Poniard in the merger pursuant to the merger agreement was fair, from a financial point of view, to Poniard and its shareholders. The written opinion of Leerink attached to this joint proxy statement/prospectus/consent solicitation as Annex E. Following these discussions, and after review and discussion among the members of the board of directors, the board unanimously determined, among other things, that the merger agreement and the proposed merger contemplated thereby were advisable and in the best interests of Poniard and its shareholders and resolved to recommend that Poniard shareholders approve the issuance of shares of Poniard common stock in connection with the proposed merger and all other actions required or contemplated to be taken by the merger agreement.

On June 22, 2011, certain Allozyne stockholders executed stockholder agreements and irrevocable proxies with Poniard, and certain Poniard shareholders executed shareholder agreements and irrevocable proxies with Allozyne. After the close of trading markets on June 22, 2011, Poniard and Allozyne executed and delivered to each other the merger agreement. Thereafter, Poniard and Allozyne issued a joint press release announcing the execution of the merger agreement and held a joint conference call discussing the merger.

In connection with the merger agreement, on June 22, 2011, BCC, a principal shareholder of Poniard and an affiliate of Poniard directors Drs. Craves and Goldfischer, delivered to Poniard a binding commitment to loan Poniard $2.4 million, on a nonrecourse basis immediately prior to closing of the merger, to enable Poniard to pay employee severance, change of control and certain other obligations under the merger agreement. See the sections entitled “The Merger—Interests of Poniard’s Executive Officers and Directors in the Merger—Binding Loan Commitment” and “The Merger Agreement—Other Agreements Related to the Merger Agreement—Loan and Security Agreement”, for a more detailed description of the BCC loan commitment and the terms of the BCC loan.

Reasons for the Merger

The combined company that results from the merger will be a biotechnology company focused on developing and commercializing therapeutics in the areas of autoimmune and inflammatory disease and cancer.

 

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The lead Allozyne product candidate, AZ01, is a clinical-stage, next generation long-acting interferon beta for the treatment of relapse remitting multiple sclerosis, or RRMS. Poniard and Allozyne believe the combined company will have the following potential advantages:

 

   

Clinical-Stage Product Candidate. Allozyne has completed a Phase 1a single ascending dose clinical trial in normal healthy volunteers for its lead product candidate, AZ01 and a Phase 1b multiple administration dose trial in normal healthy volunteers is currently ongoing. At the time of the Poniard due diligence review of Allozyne in connection with the proposed merger, Allozyne was preparing to initiate the Phase 1b clinical trial. Through the application of Allozyne’s CAESAR technology platform, a PEG moiety, or molecular substructures responsible for the chemical reaction of these molecules, is attached to the modified interferon beta in order to create a controlled release and long acting version of this molecule which may offer potential advantages over the existing interferon beta therapies, including less frequent dosing, superior tolerability and possibly greater efficacy.

 

   

Known Active Agent and Reduced Regulatory Risk. The active pharmaceutical ingredient in AZ01 is interferon beta. Currently marketed interferons include Avonex®, Betaseron® and Rebif®. Despite their established safety profile, currently marketed interferon betas are administered between once daily and once weekly and often produce flu like symptoms and injection site reactions following each administration. These side effects, combined with a daily or weekly dosing regimen, lead to reduced patient compliance. Allozyne believes the clinical application of a long acting interferon beta, such as AZ01, has the potential to be a first line therapy supplanting existing interferon beta therapies. In addition, AZ01 has the potential to be used to maintain patients in remission in between short term treatment with immunomodulators such as Tysabri® and Gilenya® and as an add-on therapy with the somewhat safer but less efficacious oral counterparts to the immunomodulators.

 

   

Markets. Poniard and Allozyne believe that AZ01 represents a significant market opportunity. According to MedTRACK, currently marketed interferons for the treatment of RRMS, including Avonex®, Betaseron® and Rebif®, totaled more than $6 billion in revenue worldwide in 2010.

 

   

Management Team. It is expected that the combined company will be led by the experienced management from Allozyne and a board of directors with representation from each of Poniard and Allozyne.

As a result of these potential advantages, Poniard and Allozyne believe the combined company will be more attractive to potential investors and will have greater opportunities to obtain the financing necessary to advance the combined company’s product candidates. Poniard and Allozyne each expect to incur additional operating losses and negative cash flows from operations for the foreseeable future. Without additional substantial capital from a financing, sale of assets or license of technology, Poniard and Allozyne will each likely exhaust their resources, be unable to continue operations, and, in the case of Poniard, likely be forced to file for federal bankruptcy protection.

Poniard’s Reasons for the Merger

The Poniard board of directors approved the merger with Allozyne based on a number of factors, including the following:

 

   

Alternative Option

The Poniard board of directors believed, in light of, among other factors, the discontinuation of its clinical research operations, the regulatory restrictions relating to pursuit of an NDA based on subset data, and the reductions in workforce, that the only alternative option for Poniard was to undertake an orderly liquidation of Poniard’s assets and to cease company operations. Therefore, the Poniard board of directors viewed the merger with Allozyne as the more favorable outcome for realizing potential future long-term value for Poniard’s shareholders.

 

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Clinical-Stage Product Candidate

Allozyne has completed a Phase 1a single ascending dose clinical trial in normal healthy volunteers for its lead product candidate, AZ01, and a Phase 1b multiple administration dose trial in normal healthy volunteers is ongoing. At the time of the Poniard due diligence review of Allozyne in connection with the proposed merger, Allozyne was preparing to initiate the Phase 1b clinical trial. AZ01 is a next generation long acting interferon beta for the treatment of relapse remitting multiple sclerosis, or RRMS. Through the application of Allozyne’s CAESAR technology platform, a PEG moiety is attached to the modified interferon beta in order to create a controlled release and long acting version of this molecule which may offer potential advantages over the existing interferon beta therapies, including less frequent dosing, superior tolerability and possibly greater efficacy.

 

   

Known Active Agent and Reduced Regulatory Risk

The active pharmaceutical ingredient in AZ01 is interferon beta. Currently marketed interferons include Avonex®, Betaseron® and Rebif®. Despite their established safety profile, currently marketed interferon betas are administered between once daily and once weekly and often produce flu like symptoms and injection site reactions following each administration. These side effects, combined with a daily or weekly dosing regimen, lead to reduced patient compliance. Allozyne believes the clinical application of a long acting interferon beta, such as AZ01, has the potential to be a first line therapy supplanting existing interferon beta therapies. In addition, AZ01 has the potential to be used to maintain patients in remission in between short-term treatment with immunomodulators such as Tysabri® and Gilenya® and as an add-on therapy with the somewhat safer but less efficacious oral counterparts to the immunomodulators.

 

   

Markets

Poniard believes that AZ01 represents a sizeable market opportunity, and may provide new medical benefits for patients with RRMS and returns for investors. Currently marketed interferons, including Avonex®, Betaseron® and Rebif®, totaled more than $6 billion in revenue worldwide in 2010.

 

   

Fairness Opinion

The Poniard board of directors considered the financial analyses of Leerink, including its opinion to the board of directors as to the fairness to Poniard, from a financial point of view and as of the date of the opinion, of the consideration provided for in the merger, as more fully described below under the caption “The Merger—Opinion of the Poniard Financial Advisor.”

In the course of its deliberations, the Poniard board of directors discussed potential alternatives to the transaction, including attempting to secure a strategic partner, pursuing a voluntary bankruptcy filing, pursuing a voluntary dissolution proceeding, and continuing to pursue an alternative business combination transaction with a third party other than Allozyne. The board noted that no third party entity had expressed an interest in a strategic partnership relationship. The board reviewed the issues likely to be involved with pursuing a voluntary dissolution or bankruptcy and concluded those alternatives would not be in the best interests of the shareholders and were not likely to provide superior value. The board concluded that a voluntary bankruptcy filing would likely result in less value to Poniard’s shareholders, and potentially to creditors, than the proposed transaction with Allozyne in light of, among other factors, the significant legal and other costs involved in preparing and pursuing a bankruptcy filing, the uncertainty concerning the ability to fund Poniard’s operations during a bankruptcy proceeding and ongoing operating and legal expenses during the pendency of a bankruptcy proceeding, the adverse effect that a bankruptcy filing would have on Poniard’s stock price, the possible assertion of contingent claims in the proceeding and the possible delay in resolving those claims, the uncertain outcome of resolution of issues with creditors and shareholders in those proceedings, and other factors. The board concluded that it was unlikely to attract an offer superior to the proposed transaction with Allozyne, and that attempting to continue looking for other transactions would involve additional time and expense with no reasonable prospect of a superior result for the shareholders. The board noted that Poniard had engaged in discussions with a number of potential acquirers and strategic partners, that a business combination with Allozyne presented an attractive

 

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opportunity for the Poniard shareholders to benefit from the potential appreciation in value of the combined company’s business, that third parties with whom Poniard previously had discussions had elected not to pursue further discussions concerning a merger transaction or strategic partnership, and that Poniard’s declining cash balances made further pursuit of a different business combination transaction an unattractive alternative compared to the opportunity with Allozyne.

In addition to considering the factors outlined above, the Poniard board of directors considered the following factors in reaching its conclusion to approve the merger and to recommend that the Poniard shareholders approve the issuance of shares of Poniard common stock in the merger and the resulting change of control of Poniard, all of which it viewed as supporting its decision to approve the business combination with Allozyne:

 

   

the strategic alternatives of Poniard to the merger, including the discussions that Poniard management and the Poniard board of directors had during 2010 and 2011 with other potential merger candidates;

 

   

the failure of Poniard’s lead product candidate, picoplatin, in its SPEAR Phase 3 clinical trial for the treatment of small cell lung cancer, the resultant loss of current shareholder value and the diminished prospect for the creation of future, shareholder value;

 

   

the risks of continuing to operate Poniard on a standalone basis, including the need to rebuild infrastructure and management to continue its operations;

 

   

the risks associated with and the value to shareholders of liquidating Poniard;

 

   

the loss of a substantial portion of Poniard’s operational capabilities;

 

   

the opportunity for the Poniard shareholders to participate in the potential long-term value of the Allozyne product pipeline and platforms as a result of the merger;

 

   

the terms and conditions of the merger agreement, including the following related factors:

 

   

the determination that the relative percentage ownership of Poniard shareholders and Allozyne stockholders is based on the valuations of each company at the time of the Poniard board of directors’ approval of the merger agreement, subject to adjustments as outlined in the merger agreement;

 

   

the expectation that the merger will be treated as a reorganization for U.S. federal income tax purposes, with the result that in the merger, the Poniard shareholders will generally not recognize taxable gain or loss for U.S. federal income tax purposes;

 

   

Poniard’s rights under the merger agreement to consider certain unsolicited acquisition proposals under certain circumstances should Poniard receive a superior proposal;

 

   

the conclusion of the Poniard board of directors that the potential termination fee of $1.0 million, which is payable upon certain terminations, was reasonable;

 

   

the no solicitation provisions governing the ability of the parties to engage in negotiations with, provide any confidential information or data to, and otherwise have discussions with, any person relating to an alternative acquisition proposal;

 

   

belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable under the circumstances;

 

   

the agreement of Allozyne to provide written consent of its stockholders necessary to approve the merger and related transactions;

 

   

the likelihood of retaining key Allozyne employees to manage the combined company;

 

   

the likelihood that the merger will be consummated on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals;

 

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the possibility that the combined entity would be able to take advantage of the potential benefits resulting from the combination of the Poniard public company infrastructure and Allozyne management team; and

 

   

its understanding of the business of Poniard, including its product candidates, the expenses and fixed costs associated with the Poniard operations and the Poniard cash position, and of the Allozyne business, including its product candidates, the Allozyne management team, Allozyne’s need for financing to continue development of its product candidates, and the prospects for value creation for Poniard shareholders in connection with the merger.

In the course of its deliberations, the Poniard board of directors also considered a variety of risks and other countervailing factors related to entering into the merger agreement, including:

 

   

the substantial expenses to be incurred in connection with the merger;

 

   

the possible volatility, at least in the short-term, of the trading price of Poniard common stock resulting from the merger announcement;

 

   

the risk that the merger might not be consummated in a timely manner or at all and the potential adverse effect on the reputation of Poniard of the public announcement of the merger or on the delay or failure to complete the merger with Allozyne;

 

   

the risk to Poniard’s business, operations and financial results in the event that the merger is not consummated;

 

   

the concentration of capital stock ownership with insiders of the combined company will likely limit the ability of shareholders of the combined company to influence corporate matters;

 

   

the trading price of the combined company’s common stock may be subject to significant fluctuations and volatility;

 

   

the combined company plans to issue additional equity securities in the future, which may result in dilution to existing investors;

 

   

the price of the combined company’s common stock could decline if securities analysts do not publish research or reports about the business of the combined company, or if they publish negative evaluations;

 

   

certain provisions of the merger agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the merger agreement; and

 

   

if the combined company’s common stock fails to satisfy any of the listing requirements of The NASDAQ Capital Market, its common stock may be put under review or removed from listing, which could affect its market price and liquidity.

After evaluating the proposed transaction with Allozyne and taking into account the factors previously discussed and considered by the Poniard board of directors, the board unanimously approved the merger transaction with Allozyne and authorized management to negotiate and enter into definitive agreements on terms consistent in material respects with the terms presented to the Poniard board of directors.

The foregoing information and factors considered by the Poniard board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Poniard board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Poniard board of directors did not find it useful, and did not attempt, to quantify, rank or otherwise assign relative weights to these factors. In considering the factors described above, individual members of the Poniard board of directors may have given different weight to different factors. The Poniard board of directors conducted an overall analysis of the factors described above, including thorough discussions with Poniard legal and financial advisors, and considered the factors overall to be favorable to, and to support, its determination.

 

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Allozyne’s Reasons for the Merger

The Allozyne board of directors approved the merger with Poniard based on a number of factors, including the following:

 

   

the expectation that the merger with Poniard would be a more time- and cost-effective means to access sufficient capital than other options considered, including an initial public offering or an additional round of private equity financing, given the stage of development of Allozyne and the challenging state of the markets for initial public offerings and venture financings of private biotechnology companies;

 

   

the view that the range of options available to the combined company to access private and public equity markets should additional capital be needed in the future will likely be greater as a public company than continuing as a privately held company taking into account the strategic alternatives of Allozyne to the merger, including primarily raising capital from private equity investors and engaging with biotechnology and pharmaceutical companies to enter into partnerships to develop AZ01 and AZ17 and the biociphering technology;

 

   

the belief that the combined company will have an increased ability to attract and retain technical talent compared to a privately held company; and

 

   

the conclusion, based on the foregoing, that the combined company could more effectively maximize the commercial potential of the Allozyne pipeline than the continuation of Allozyne as a separate, stand-alone entity.

In addition to considering the factors outlined above, the Allozyne board of directors considered the following factors in reaching its conclusion to approve the merger and to recommend that the Allozyne stockholders approve the merger and related transactions, all of which it viewed as supporting its decision to approve the business combination with Poniard:

 

   

the terms and conditions of the merger agreement, including the following related factors:

 

   

the determination that the relative percentage ownership of Allozyne stockholders and Poniard shareholders is based on the valuations of each company at the time of Allozyne’s board of directors’ approval of the merger agreement, subject to adjustments as outlined in the merger agreement;

 

   

the expectation that the merger will be treated as a reorganization for U.S. federal income tax purposes, with the result that in the merger, the Allozyne shareholders will generally not recognize taxable gain or loss for U.S. federal income tax purposes;

 

   

the potential termination fee of $1.0 million to occur upon certain terminations;

 

   

belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable under the circumstances;

 

   

the agreement of Poniard to provide written consent of its shareholders necessary to approve the merger and related transactions;

 

   

the likelihood that the merger will be consummated on a timely basis, including the likelihood that the merger will receive all necessary regulatory approvals;

 

   

the opportunity for Allozyne stockholders to hold shares of a publicly traded company; and

 

   

the possibility that the combined entity would be able to take advantage of the potential benefits resulting from the combination of the Poniard public company infrastructure and Allozyne management team.

 

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In the course of its deliberations, the Allozyne board of directors also considered a variety of risks and other countervailing factors related to entering into the merger agreement, including:

 

   

the substantial expenses to be incurred in connection with the merger;

 

   

the risk that the merger might not be consummated in a timely manner or at all and the potential adverse effect on the reputation of Allozyne of the public announcement of the merger or on the delay or failure to complete the merger with Poniard;

 

   

the risk to the business of Allozyne, operations and financial results in the event that the merger is not consummated;

 

   

the concentration of capital stock ownership with insiders of the combined company will likely limit the ability of shareholders of the combined company to influence corporate matters;

 

   

the trading price of the combined company’s common stock may be subject to significant fluctuations and volatility;

 

   

the combined company plans to issue additional equity securities in the future, which may result in dilution to existing investors;

 

   

the price of the combined company’s common stock could decline if securities analysts do not publish research or reports about the business of the combined company, or if they publish negative evaluations;

 

   

certain provisions of the merger agreement may discourage third parties from submitting alternative takeover or financing proposals, including proposals that may be superior to the arrangements contemplated by the merger agreement; and

 

   

if the combined company’s common stock fails to satisfy any of the listing requirements of The NASDAQ Capital Market, its common stock may be put under review or removed from listing, which could affect its market price and liquidity.

The foregoing information and factors considered by the Allozyne board of directors are not intended to be exhaustive but are believed to include all of the material factors considered by the Allozyne board of directors. The Allozyne board of directors conducted an overall analysis of the factors described above, including thorough discussions with Allozyne’s legal advisors, and considered the factors overall to be favorable to, and to support, its determination.

Opinion of the Poniard Financial Advisor

Pursuant to an engagement letter dated June 6, 2011, Poniard retained Leerink to render an opinion to the board of directors of Poniard as to the fairness, from a financial point of view, to Poniard of the merger consideration to be paid by Poniard pursuant to the merger.

On June 22, 2011, Leerink rendered certain of its written analyses and its oral opinion to the board of directors of Poniard, subsequently confirmed in writing of the same date, to the effect that, and subject to the various assumptions, qualifications and limitations set forth therein, as of June 22, 2011, the merger consideration to be paid by Poniard pursuant to the merger agreement was fair, from a financial point of view, to Poniard.

The full text of the written opinion of Leerink, dated June 22, 2011, is attached hereto as Annex E. Holders of Poniard common stock are encouraged to read the opinion carefully in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by Leerink. The analyses and opinion of Leerink were prepared for and addressed to the board of directors of Poniard and are directed only to the fairness, from a financial point of view to Poniard, of the merger consideration to be paid by Poniard pursuant to the merger agreement, and do not constitute an opinion as to the merits of the merger and is not a recommendation to any stockholder as to how to vote or take any other action in connection with the merger or otherwise. The

 

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merger consideration to be paid in the merger was determined through arms’ length negotiations between Poniard and its representatives, on the one hand, and Allozyne and its representatives, on the other hand. Leerink provided advice to Poniard during these negotiations. Leerink did not, however, recommend any specific amount of consideration to Poniard or the board of directors of Poniard or suggest that any specific amount of consideration constituted the only appropriate consideration for the merger.

The summary of the opinion below is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion, Leerink reviewed and considered such financial and other information as it deemed relevant, including, among other things:

 

   

certain financial terms of a draft of the merger agreement, dated June 21, 2011;

 

   

certain financial and other business information of Poniard furnished to Leerink and prepared by the management of Poniard and certain financial and other business information of Allozyne furnished to Leerink and prepared by the management of Allozyne;

 

   

certain periodic reports and other publicly available information regarding Poniard;

 

   

comparisons of certain publicly available financial data of companies whose securities are traded in the public markets and that Leerink deemed relevant to similar data for the Poniard;

 

   

comparisons of the financial terms of the proposed transaction with the financial terms, to the extent publicly available, of certain other transactions that Leerink deemed relevant;

 

   

certain pro forma financial effects of the transaction; and

 

   

such other information, financial studies, analyses and investigations and such other factors that Leerink deemed relevant for the purposes of its letter and opinion.

Leerink also held discussions with members of senior management and representatives of Poniard concerning the financial and other business information of Poniard and Allozyne furnished by management of Poniard and Allozyne, as well as the businesses and prospects of Poniard and Allozyne.

In conducting its review and analysis and in arriving at the opinion described above, Leerink, with the consent of Poniard, assumed and relied, without independent investigation, upon the accuracy and completeness of all financial and other information provided to it by Poniard or Allozyne, respectively, or which was publicly available. Leerink did not undertake any responsibility for independently verifying, and did not independently verify the accuracy, completeness or reasonableness of any such information. In addition, Leerink did not conduct, nor did Leerink assume any obligation to conduct, any physical inspection of the properties or facilities of Poniard or Allozyne. Leerink further relied upon the representation of Poniard that all information provided to it by Poniard or Allozyne is accurate and complete in all material respects. With respect to financial forecasts for Poniard and Allozyne that were provided to Leerink, Leerink has been advised by Poniard, and has assumed, with Poniard’s consent, that such forecasts have been reasonably prepared in good faith on the basis of reasonable assumptions and reflect the best currently available estimates and judgments of the management of each of Poniard and Allozyne as to the future financial condition and performance of Poniard and Allozyne. Leerink expressed no opinion with respect to such forecasts or estimates or the assumptions on which they are based.

Leerink did not make or obtain any independent evaluations, valuations or appraisals of the assets or liabilities (contingent or otherwise) of Poniard or Allozyne, nor was Leerink furnished with any such materials. In addition, Leerink did not evaluate the solvency or fair value of Poniard or Allozyne under state or federal laws relating to bankruptcy, insolvency or similar matters. Leerink did not advise or opine with respect to any legal, regulatory, accounting or tax matters. Leerink did not make any independent investigation of any legal, accounting or tax matters relating to Poniard or Allozyne, and assumed the correctness of all legal, accounting and tax advice given to Poniard.

 

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In rendering its opinion, Leerink assumed, in all respects material to its analysis, that the consideration to be received in the transaction was determined through arm’s length negotiations between the appropriate parties, that the representations and warranties of each party contained in the merger agreement were true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement without material alteration or waiver thereof. Leerink assumed that all governmental, regulatory or other consents and approvals contemplated by the merger agreement will be obtained and that, in the course of obtaining those consents, no restrictions will be imposed or waivers made that would have an adverse effect on the contemplated benefits of the merger and that all conditions to the consummation of the merger will be satisfied without waiver thereof or material alteration to the terms of the merger. Leerink also assumed that the final form of the merger agreement would be substantially the same as the last draft reviewed by Leerink prior to rendering its opinion. In addition, Leerink assumed, with Poniard’s consent, that the historical financial statements of Poniard and Allozyne reviewed by Leerink had been prepared and fairly presented in accordance with U.S. generally accepted accounting principles, or GAAP, consistently applied. Leerink further assumed, with Poniard’s consent, that as of the date of the opinion, there had been no material adverse change in Poniard’s or Allozyne’s assets, financial condition, results of operations, business or prospects since the date of the last unaudited financial statements made available to Leerink.

Leerink was not requested to opine as to, and its opinion does not express any opinion as to (i) the value of any employee agreement or other arrangement entered into in connection with the merger or other transactions contemplated by the merger agreement, or (ii) any tax or other consequences that might result from the merger or other transactions contemplated by the merger agreement. Furthermore, Leerink was not requested and did not express any opinion with respect to the amount or nature of compensation to any officer, director or employee of any party to the merger, or any class of such persons, relative to the consideration to be paid by Poniard in the merger or with respect to the fairness of any such compensation.

Leerink’s opinion relates solely to the fairness, from a financial point of view, to Poniard of the consideration to be paid by Poniard pursuant to the merger agreement, and Leerink was not requested to opine as to, and its opinion does not in any manner address Poniard’s underlying business decision to proceed with or effect the merger or any other transactions contemplated by the merger agreement, aspect or implication of the merger or any other agreement, arrangement or understanding entered into in connection with the merger or otherwise. Leerink was not requested to opine as to, and its opinion did not in any manner address, the fairness of the merger or the other transactions contemplated by the merger agreement or the consideration to holders of Allozyne common and preferred stock. Leerink did not express any opinion as to the impact of the merger on the solvency or viability of Poniard or Allozyne or the ability of Poniard or Allozyne to pay its obligations when they become due. In addition, Leerink did not advise or opine with respect to any legal, regulatory, accounting or tax matters.

Leerink’s opinion was necessarily based upon economic and market conditions and other circumstances as they existed and could be evaluated by Leerink as of the date of its opinion. It should be understood that although subsequent developments may affect Leerink’s opinion, Leerink has no obligation to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of its opinion and Leerink expressly disclaimed any responsibility to do so.

Leerink’s opinion was for the use and benefit of the board of directors of Poniard in its consideration of the merger and other transactions contemplated by the merger agreement. Leerink’s opinion was authorized by the Leerink Fairness Opinion Review Committee.

Leerink’s opinion does not constitute a recommendation to stockholders as to how the stockholder should vote with respect to the merger or to take any other action in connection with the merger or otherwise. Leerink does not express any opinion as to what the value of Poniard common stock actually will be when issued to Allozyne stockholders pursuant to the merger. Further, Leerink expressed no view as to price or trading range for shares of Poniard common stock following the consummation of the merger or otherwise.

 

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The following is a summary of the principal financial analyses performed by Leerink to arrive at its opinion. The following summary, however, does not purport to be a complete description of the financial analyses performed by Leerink, nor does the order of analyses described represent relative importance or weight given to those analyses by Leerink. Some of the summaries of the financial analyses include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analysis. Considering the data set forth in the tables without considering the full narrative description of financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before June 20, 2010 and is not necessarily indicative of current market conditions. Leerink performed certain procedures, including each of the financial analyses described below, and reviewed with the management of Poniard the assumptions on which such analyses were based and other factors, including the historical and projected financial results of Poniard and Allozyne. Poniard did not impose any limitations on the scope of the investigation by Leerink.

Analysis of Selected Publicly Traded Companies

To provide contextual data and comparative market information, Leerink reviewed certain financial information for selected publicly traded corporations in the biopharmaceutical industry, or the Selected Companies, and compared that information to the value ascribed to Allozyne under the terms of the merger agreement, or Implied Value, calculated at two points in time: (i) at the estimated date the merger agreement would be signed, or the Signing and (ii) at the estimated date the transaction would close, or the Closing. The Selected Companies that Leerink reviewed were the following:

 

   

Infinity Pharmaceuticals, Inc.

 

   

AVI BioPharma Inc.

 

   

StemCells Inc.

 

   

Threshold Pharmaceuticals Inc.

 

   

Neuralstem, Inc.

 

   

Aeolus Pharmaceuticals, Inc.

Although none of the Selected Companies is directly comparable to Allozyne, the Selected Companies were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to certain operations of Allozyne.

Leerink calculated and compared financial metrics for each of the Selected Companies based on closing stock prices as of June 20, 2011, and publicly available financial data from SEC filings. The metrics included:

 

   

equity value (fully diluted using the treasury stock method based on outstanding options, warrants and restricted stock units); and

 

   

enterprise value, which is the fully diluted equity value plus the value of such company’s indebtedness and minority interests and preferred stock, minus such company’s cash, cash equivalents and marketable securities.

Leerink then calculated the Implied Equity Value and Implied Enterprise Value of Allozyne at Signing and at Closing. To calculate these Implied Values, Leerink used:

 

   

the terms of the merger agreement, as provided to Leerink in a draft merger agreement dated June 21, 2011;

 

   

market data as it existed on and before June 20, 2011; and

 

   

historical and projected financial information provided to it by the management of Poniard and Allozyne.

 

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Leerink calculated the Implied Equity and Implied Enterprise Values of Allozyne as follows:

 

   

Implied Equity Value at Signing: the five-day average closing price of Poniard’s common stock prior to and including June 20, 2011, multiplied by the number of fully diluted shares of Poniard’s common stock outstanding at Signing, divided by the current Poniard shareholders’ estimated pro forma ownership in the combined company (37.4%, based on the estimated exchange ratio at Signing, calculated using Poniard and Allozyne’s balance sheet information as of May 31, 2011, as provide to Leerink by management of Poniard and Allozyne, and assuming an aggregate post-signing financing amount of $4,000,000), multiplied by the sum of one minus the current Poniard shareholders’ estimated pro forma ownership in the combined company (100% - 37.4% = 62.6%).

 

   

Implied Equity Value at Closing: the five-day average closing price of Poniard’s common stock prior to and including June 20, 2011, multiplied by the number of fully diluted shares of Poniard’s common stock outstanding at Announcement (based on capitalization information provided to Leerink by Poniard management), divided by the current Poniard shareholders’ estimated pro forma ownership in the combined company (34.6%, based on the estimated exchange ratio at Announcement, calculated using projected balance sheet information for Poniard and Allozyne, as provide to Leerink by Poniard management, and assuming an aggregate post-signing financing amount of $4,000,000), multiplied by the sum of one minus the current Poniard shareholders’ estimated pro forma ownership in the combined company (100% - 34.6% = 65.4%).

 

   

Implied Enterprise Value at Signing: Implied Allozyne Equity Value at Signing plus the estimated value at Signing of: Allozyne’s indebtedness and minority interests and preferred stock, minus Allozyne’s cash, cash equivalents and marketable securities or, Allozyne’s Net Debt, based on balance sheet information as of May 31, 2011, as provided to Leerink by Allozyne management.

 

   

Implied Enterprise Value at Closing: Implied Allozyne Equity Value at closing plus Allozyne’s projected Net Debt at Closing, based on projected balance sheet information provided to Leerink by Poniard and Allozyne management.

For comparison purposes, Leerink then subtracted an estimation of Allozyne’s Net Debt positions at Signing and Closing from the mean and median enterprise values of the Selected Companies to calculate a range of comparable equity values or, Comparable Equity Value Ranges.

The results of these analyses are summarized as follows:

Selected Companies:

 

     Equity Value    Enterprise Value

Mean

   $108.9 million    $72.9 million

Median

   $78.7 million    $59.8 million

Range

   $44.6 million – $191.1 million    $40.0 million – $134.7 million

Allozyne Implied Value:

 

     Implied Equity Value      Implied Enterprise Value  

At Signing

   $ 23.2 million       $ 22.7 million   

At Closing

   $ 26.3 million       $ 26.1 million   

Comparable Equity Value Ranges (Mean and Median of Selected Companies’ Enterprise Values minus estimated Allozyne Net Debt at Signing and Closing):

 

     Comparable Equity Value Range  

At Signing

   $ 59.2 million – $72.4 million   

At Closing

   $ 59.6 million – $72.8 million   

 

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In addition, Leerink performed an analysis to compare the Comparable Equity Value Ranges listed above to the current Poniard equity value; the values were made comparable by looking at each on a per share basis. Leerink divided the values in the Comparable Equity Value Ranges by the pro forma, fully diluted number of shares to be outstanding after the Transaction, based on the estimated Exchange Ratio at Signing and at Closing. Leerink compared these per share values to the closing trading price of Poniard’s shares on June 20, 2011.

The results of this analysis are summarized as follows:

 

Comparable Equity Value Range At Signing (per share)

   $0.32 – $0.40

Comparable Equity Value Range At Closing (per share)

   $0.30 – $0.37

Poniard Closing Share Price (June 20, 2011)

   $0.22

Analysis of Selected Acquisition Transactions

Leerink analyzed certain publicly available information relating to 16 selected transactions in the biopharmaceutical industry since the beginning of 2009 (collectively, the “Selected Acquisition Transactions”). The Selected Acquisition Transactions were the following:

 

Target

  

Acquiror

   Date Announced  

Astex Therapeutics Ltd.

   SuperGen, Inc.      4/6/2011   

Gemin X Pharmaceuticals, Inc.

   Cephalon, Inc.      3/21/2011   

Calistoga Pharmaceuticals, Inc.

   Gilead Sciences, Inc.      2/22/2011   

Taligen Therapeutics, Inc.

   Alexion Pharmaceuticals, Inc.      1/31/2011   

Arresto Biosciences, Inc.

   Gilead Sciences, Inc.      12/20/2010   

SmartCells, Inc.

   Merck & Co., Inc.      12/2/2010   

ZyStor Therapeutics, Inc.

   BioMarin Pharmaceutical Inc.      8/17/2010   

Trubion Pharmaceuticals, Inc.

   Emergent BioSolutions, Inc.      8/12/2010   

CGI Pharmaceuticals, Inc.

   Gilead Sciences, Inc.      6/25/2010   

Cequent Pharmaceuticals, Inc.

   MDRNA, Inc.      4/1/2010   

Lead Therapeutics, Inc.

   BioMarin Pharmaceutical Inc.      2/4/2010   

Humalys SAS

   Vivalis      1/11/2010   

Intradigm Corporation

   Silence Therapeutics plc      12/16/2009   

Calixa Therapeutics Inc.

   Cubist Pharmaceuticals, Inc.      12/14/2009   

Huxley Pharmaceuticals, Inc.

   BioMarin Pharmaceutical Inc.      10/26/2009   

BioAssets Development Corp.

   Cephalon, Inc.      10/26/2009   

While none of the companies that participated in the Selected Acquisition Transactions is directly comparable to Allozyne, the companies that participated in the Selected Acquisition Transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Allozyne’s results and product profile.

For each of the Selected Acquisition Transactions, using publicly available information, Leerink calculated and compared the total offer value, the total transaction value, and the upfront consideration paid to the target company, to the extent available. Leerink also calculated and compared the “Tech Value” ascribed to the target companies in each of the Selected Acquisition Transactions, to the extent available. Leerink defined Tech Value as: for public target companies, the value of the upfront payment plus the target company’s Net Debt; and for private target companies, the value of the upfront payment.

For comparison purposes, Leerink then subtracted Allozyne’s estimated Net Debt positions at Signing and Closing from the mean and median Tech Values of the Selected Companies to calculate a range of comparable offer values or, Comparable Offer Value Ranges.

 

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The results of these analyses are summarized below:

 

(Dollars in millions)

   Upfront
Payment
   Total Offer
Value
   Total
Transaction
Value
   Tech Value

Selected Acquisition Transactions

           

Mean

   $100    $223    $221    $97

Median

   $68    $124    $118    $51

Range

   $15 – $375    $31 – $600    $31 – $600    $15 – $375

Allozyne Implied Value

           

At Signing

   $23    $23    $23    $23

At Closing

   $26    $26    $26    $26

Comparable Offer Value Ranges

           

At Signing

      $50 – $97      

At Closing

      $51 – $97      

In addition, Leerink performed an analysis to compare the Comparable Offer Value Ranges listed above to the current Poniard equity value; the values were made comparable by looking at each on a per share basis. Leerink divided the values in the Comparable Offer Value Ranges by the pro forma, fully diluted number of shares to be outstanding after the Transaction, based on the estimated Exchange Ratio at Signing and at Closing, calculated as described in the Selected Publicly Traded Companies Analysis section above. Leerink compared these per share values to the closing trading price of Poniard’s shares on June 20, 2011.

The results of these analyses are summarized as follows:

 

Comparable Equity Value Range At Signing (per share)

   $0.27 – $0.53

Comparable Equity Value Range At Closing (per share)

   $0.26 – $0.49

Poniard Closing Share Price (June 20, 2011)

   $0.22

Analysis of Selected Merger Transactions

Leerink analyzed certain publicly available information relating to eight selected merger transactions in the biopharmaceutical industry since the beginning of 2007 (collectively, the “Selected Merger Transactions”). The Selected Merger Transactions were the following:

 

Private Company Target

  

Public Company Acquiror

   Date Announced  

diaDexus, Inc.

   VaxGen, Inc.      4/14/2010   

Cardiovascular Systems Inc.

   Replidyne, Inc.      11/4/2008   

ARCA biopharma, Inc.

   Nuvelo, Inc.      9/25/2008   

Transcept Pharmaceuticals

   Novacea      9/2/2008   

OncoGenex Technologies

   Sonus Pharmaceuticals, Inc.      5/28/2008   

CellDex Therapeutics, Inc.

   AVANT Immunotherapeutics, Inc.      10/22/2007   

Dara BioSciences, Inc.

   Point Therapeutics, Inc.      10/10/2007   

VIA Pharmaceuticals, Inc.

   Corautus Genetics Inc.      2/8/2007   

While none of the companies that participated in the Selected Merger Transactions is directly comparable to Allozyne, the companies that participated in the Selected Merger Transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain of Poniard and Allozyne’s respective results and product profiles.

For each of the Selected Merger Transactions, using publicly available information, Leerink calculated and compared the pro forma ownership percentages in the combined company of the target company’s shareholders and the acquiring company’s shareholders. Leerink also calculated the estimated pro forma ownership of Poniard

 

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and Allozyne’s shareholders in the combined company, based on both the estimated Exchange Ratio at Signing and at Closing (calculated as described above in the Selected Publicly Traded Companies Analysis section).

The results of these analyses are as follows:

 

     Pro Forma Ownership %  

Selected Merger Transactions:

   Private Company Target     Public Company Acquiror  

Mean

     70.6     29.4

Median

     63.6     36.4

Current Transaction

   Allozyne Shareholders     Poniard Shareholders  

At Signing

     62.6     37.4

At Closing

     65.4     34.6

Analysis of Liquidation Scenario

Based on projections provided to it by Poniard management, Leerink calculated the value per share that could potentially be recovered if Poniard were to liquidate its assets and enter a dissolution procedure. The results of this analysis were as follows:

 

   

$0.10 per share, if the full balance sheet carrying value of picoplatin were to be realized through an asset sale, partnership or collaboration agreement, or out-licensing or other transaction; and

 

   

$0.01 per share, if zero value could be realized for picoplatin.

Leerink compared this Liquidation Value Range ($0.01—$0.10 per share) to the closing trading price of Poniard’s shares on June 20, 2011, of $0.22 per share.

The foregoing summary of certain principal financial analyses does not purport to be a complete description of all the analyses performed by Leerink. The preparation of a fairness opinion is a complex process involving various determinations and subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and therefore, such an opinion and the analyses used in arriving at such an opinion are not readily susceptible to partial analysis or summary description. Leerink did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, notwithstanding the separate factors summarized above, Leerink believes, and has advised the board of directors of Poniard, that its analysis must be considered as a whole and that selecting portions of the analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the processes underlying Leerink’s opinion. In performing its analyses, Leerink made numerous assumptions with respect to industry performance, business and economic conditions and other matters, many of which are beyond the control of Poniard and Allozyne. The analyses performed by Leerink based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. In addition, analyses relating to the value of businesses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Accordingly, as such analyses and estimates are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, neither Poniard nor Leerink nor any other person assumes responsibility if future results are materially different from those forecast. No company or transaction used in the above analyses as a comparison is directly comparable to Poniard or Allozyne or the contemplated transaction. None of Poniard, Allozyne, Leerink or other person assumes responsibility if future results are materially different from those projected. The analyses supplied by Leerink and its opinion were among several factors taken in consideration by the board of directors of Poniard in making its decision to enter into the merger agreement and should not be considered determinative of such decision.

 

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The decision by the board of directors of Poniard to approve the transaction and enter into the merger agreement was solely that of the board of directors of Poniard. As described above, Leerink’s opinion to the board of directors of Poniard was one of many factors taken into consideration by the board of directors of Poniard in making its determination to approve the merger agreement and the merger and other transactions contemplated by the merger agreement.

Leerink was selected by the board of directors of Poniard to render an opinion to Poniard because Leerink is a nationally recognized investment banking firm with substantial experience in the healthcare industry and with transactions similar to this merger. Leerink, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. Leerink is a full-service securities firm engaged in securities trading and brokerage activities as well as investment banking and financial advisory services. In addition, in the ordinary course of its trading and brokerage activities, Leerink and its affiliates have in the past and may in the future hold positions, for its own account or the accounts of its customers, in the equity, debt and other securities of Poniard or its affiliates.

Leerink acted as financial advisor to Poniard in connection with, and participated in certain of the negotiations leading to, the merger and other transactions contemplated by the merger agreement. Leerink has not provided any services to, or received fees from, Poniard during the past two years; however, in the ordinary course of business, Leerink and its affiliates may, in the future, provide commercial and investment banking services to Poniard, Allozyne or their respective affiliates. In connection with such services, Leerink and its affiliates may, in the future, receive customary compensation.

Pursuant to the Leerink engagement letter, in connection with the merger, Leerink will be entitled to receive a transaction fee equal to $500,000 and is contingent upon consummation of the merger. Additionally, Poniard has agreed to reimburse Leerink for its out-of-pocket expenses, not to exceed $20,000 without the consent of Poniard, including attorney’s fees, and has agreed to indemnify Leerink against certain liabilities, including liabilities under the federal securities laws. The terms of the fee arrangement with Leerink, which are customary in transactions of this nature, were negotiated at arm’s length between Leerink and Poniard, and the board of directors of Poniard was aware of the arrangement, including the fact that the transaction fee payable to Leerink is contingent upon the completion of the merger pursuant to the merger agreement. Poniard engaged Leerink as a book runner for a proposed financing in 2009 but such financing subsequently did not occur and no fees were paid in connection by Poniard to Leerink. Leerink has not otherwise had a material relationship with, nor otherwise received fees from, Poniard during the past two years preceding the date of this proxy statement/prospectus/consent solicitation.

The full text of the Leerink written opinion to the board of directors of Poniard, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex E to this proxy statement/prospectus/consent solicitation and is incorporated by reference in its entirety into this proxy statement/prospectus/consent solicitation. Holders of Poniard common stock are encouraged to read the opinion carefully in its entirety. Leerink’s consent to the inclusion of its opinion and the references thereto in this proxy statement/prospectus/consent solicitation is filed as Exhibit 99.3 to the registration statement of which this proxy statement/prospectus/consent solicitation is a part.

Leerink delivered its opinion to the board of directors of Poniard for the benefit and use of the board of directors in connection with and for purposes of its evaluation of the consideration provided for in the merger. It does not constitute a recommendation to you on how to vote or act in connection with the merger or otherwise.

Board of Directors and Officers of the Combined Company

Following the merger, the combined company’s board of directors will be comprised of seven directors, four of whom are currently directors of Allozyne, and two of whom are currently directors of Poniard, and one new director not previously sitting on the board of either Allozyne or Poniard.

 

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Pursuant to the merger agreement, the employment of all of Poniard’s current executive officers will be terminated prior to the consummation of the merger. Following the merger, the management team of the combined company is expected to be composed of the management team of Allozyne prior to the merger and is contemplated to include each of the following individuals serving in the position set forth opposite his or her name. Each of the following individuals currently serves in the same position with Allozyne:

 

Name:    Position in the Combined Company:

Meenu Chhabra

   President and Chief Executive Officer

John Bencich

   Chief Financial Officer, Treasurer and Secretary

Kenneth H. Grabstein, Ph.D.

   Chief Scientific Officer

Interests of Poniard’s Executive Officers and Directors in the Merger

In considering the recommendation of the Poniard board of directors with respect to approving the issuance of shares of Poniard common stock to Allozyne’s stockholders in the merger and the other matters to be acted on by Poniard’s shareholders at the Poniard special meeting, Poniard’s shareholders should be aware that certain executive officers of Poniard and members of Poniard’s board of directors have interests in the merger that may be different from, or in addition to, the interests of Poniard’s shareholders. These interests relate to, among other things:

 

   

that Nicholas J. Simon is affiliated with certain venture funds that currently hold significant security interests in both Poniard and Allozyne;

 

   

severance benefits to which each of the executive officers would become entitled in the event of a change of control of Poniard and such executive officer’s covered termination of employment within specified periods of time relative to the consummation of the merger. The estimated value of the cash severance payments and other benefits for each Poniard executive officer is as follows: Ronald A. Martell, $942,735; Michael S. Perry, $429,603 and Michael K. Jackson, $124,570;

 

   

the accelerated vesting of all stock options and RSUs held by Poniard’s executive officers and board members in connection with the consummation of the merger. The value of accelerated vesting of RSUs currently held by each of Poniard’s executive officers, based on a per share value of $0.17, the closing price of Poniard common stock on August 15, 2011, is as follows: Ronald A. Martell, $251,553; Michael S. Perry, $100,771 and Michael K. Jackson, $42,461. For Mr. Martell, this value also includes the estimated value of the RSU that will be payable in lieu of a cash bonus severance amount and accrued vacation amount, which RSU has an estimated value as of August 15, 2011 of $97,164. No value is attributed to stock options held by the executive officers, because all Poniard stock options have per share exercise prices substantially in excess of $0.17 per share;

 

   

the binding commitment by BCC, a principal shareholder of Poniard and an affiliate of Poniard directors Fred B. Craves, Ph.D., and Carl S. Goldfischer, M.D., to make a $2.4 million secured nonrecourse loan to Poniard immediately prior to closing of the merger to enable Poniard to pay severance, change of control and certain other obligations arising in connection with the merger; and

 

   

the agreement that Ronald A. Martell and Fred B. Craves, Ph.D., each a Poniard director, will continue to serve on the board of directors of the combined company following the consummation of the merger.

Poniard’s board of directors was aware of these potential conflicts of interest and considered them in reaching its decision to approve the transactions contemplated by the merger agreement and to recommend that Poniard’s shareholders approve the Poniard proposals contemplated by this proxy statement/prospectus/consent solicitation.

 

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Ownership Interests

As of August 15, 2011, all executive officers and directors of Poniard, together with their affiliates, beneficially owned approximately 24.7% of the outstanding shares of Poniard common stock. The affirmative vote of the holders of a majority of the voting power of the shares of Poniard common stock casting votes in person or by proxy at the Poniard special meeting of shareholders is required to approve the issuance of shares of Poniard common stock in the merger. The affirmative vote of the holders of a majority of the common stock having voting power outstanding on the record date of the Poniard special meeting is required for approval of the reverse stock split. Approval of the proposal to adjourn the Poniard special meeting, if necessary, to solicit additional proxies requires that the votes cast “FOR” the adjournment proposal exceed the votes cast “AGAINST” the adjournment proposal. All Poniard officers and directors, and their affiliates, have entered into voting agreements in connection with the merger. For a more detailed discussion of the voting agreements see the section entitled “The Merger Agreement—Other Agreements Related to the Merger Agreement—Shareholder Agreements/Stockholder Agreements—Poniard Shareholder Agreements” in this proxy statement/prospectus/consent solicitation.

Following the closing of the merger, the executive officers and directors of Poniard, together with their affiliates, will own approximately 8.6% of the common stock of the combined company, including shares subject to outstanding options, warrants and RSUs after consummation of the merger based on shares outstanding as of August 15, 2011. Nicholas J. Simon, a director of Poniard, is an affiliate of the MPM BioVentures III, L.P., MPM BioVentures III-QP, L.P., MPM BioVentures III GmbH & Co. Beteiligungs KG, MPM BioVentures III Parallel Fund, L.P. and MPM Asset Management Investors 2005 BVIII LLC, collectively, the MPM Funds, which are stockholders of both Poniard and Allozyne. The MPM Funds owned approximately 10.7% of the outstanding common stock of Poniard and 37.5% of the outstanding capital stock of Allozyne (on an as-converted-to-common stock basis) as of August 15, 2011. Following closing of the merger, based on shares outstanding as of August 15, 2011, the MPM Funds will own approximately 33.7% of the common stock of the combined company, including shares subject to outstanding options, warrants and RSUs after consummation of the merger based upon shares outstanding as of August 15, 2011 assuming Poniard does not have any net debt, Allozyne does not have any net cash, and Allozyne does not raise more than the $4.0 million already raised in May and July 2011 in aggregate gross cash proceeds from the sale of its capital stock in such specified transactions. Michael Steinmetz, Ph.D., an affiliate of entities of the MPM Funds, is currently a director of Allozyne and will become a director of the combined company upon closing of the merger.

As of June 22, 2011, certain of the major shareholders of Poniard, sometimes referred to as the principal shareholders of Poniard, holding approximately 16,079,536 shares, or approximately 25% of the outstanding shares of Poniard common stock, solely in their capacity as Poniard shareholders, have entered into shareholder agreements with voting and lock-up provisions and irrevocable proxies with Allozyne in connection with the merger. For a more detailed discussion of the shareholder agreements see the section entitled “The Merger Agreement—Other Agreements Related to the Merger Agreement—Shareholder Agreements/Stockholder Agreements—Poniard Shareholder Agreements” beginning on page 120 of this proxy statement/prospectus/consent solicitation.

Severance and Change of Control Agreements

The executive officers of Poniard are Ronald A. Martell (CEO), Michael S. Perry, D.V.M., Ph.D. (President and Chief Medical Officer) and Michael K. Jackson (Interim CFO). Each executive officer is a party to both a severance and a change of control agreement with Poniard, except that Mr. Jackson is a party only to a severance agreement. On June 22, 2011, each of Poniard’s executive officers entered into a letter agreement with Poniard that explained the treatment of severance benefits in the event of a qualifying termination of employment prior to or in connection with the merger and amended, in limited respects, certain provisions of the severance and change of control agreements between Poniard and the executive officers, as described below in this section under the heading “Letter Agreements Regarding Severance and Change of Control Payments and Benefits” on page 88 of this proxy statement/prospectus/consent solicitation.

 

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Severance Agreements

Under the severance agreements with each of Mr. Martell, Dr. Perry and Mr. Jackson, if an executive officer’s employment is terminated by Poniard without cause, or if the executive officer resigns for good reason prior to the consummation of the merger, he will be eligible for the following benefits:

 

   

Accrued obligations: earned but unpaid base salary and accrued but unpaid vacation pay otherwise payable under Poniard’s standard policy;

 

   

Salary severance: severance pay equal to a percentage of current annual base salary, payable in the form of salary continuation following the date of termination (100% of base salary for Mr. Martell, for which the salary continuation is 12 months; 75% for Dr. Perry, for which the salary continuation is nine months; and 50% for Mr. Jackson, for which the salary continuation is six months);

 

   

COBRA payments: payment of premiums as provided for under the Consolidated Omnibus Budget Reconciliation Act, or COBRA, for the executive officer and his family members for the time period set forth in the executive officer’s severance agreement, or until such earlier time as the executive officer qualifies for comparable insurance benefits from another employer (12 months for Mr. Martell, nine months for Dr. Perry and six months for Mr. Jackson); and

 

   

280G gross-ups: if applicable, reimbursement of any excise taxes imposed on the executive officer under Section 4999 of the Code.

As a condition to receiving any severance amounts under the severance agreement, an executive officer must execute a general release of claims against Poniard. The executive officer is also subject to nondisclosure covenants set forth in the agreement. To the extent severance payments under the change of control agreements described below also are payable to the executive officers, payments will be coordinated so that executive officers do not receive duplicative payments under both agreements.

Timing of payments under the severance agreements may be adjusted in certain circumstances to the extent necessary for compliance with or exemption from Section 409A of the Code.

Change of Control Agreements

The change of control agreements with each of Mr. Martell and Dr. Perry provide for certain payments and benefits if, within two years following a change of control of Poniard, the executive officer’s employment is terminated without cause or the executive officer terminates employment for good reason. In such event, each of Mr. Martell and Dr. Perry is entitled to receive:

 

   

Accrued obligations: earned but unpaid base salary and accrued but unpaid vacation pay otherwise payable under Poniard’s standard policy;

 

   

Bonus severance (pro-rated): a severance bonus equal to the average annualized bonus paid or payable to the executive officer during the three fiscal years (or such shorter period of employment) immediately preceding the fiscal year in which the date of termination occurs, prorated for the number of days served during the year of termination;

 

   

Salary severance: severance pay equal to a percentage of annual base salary (200% for Mr. Martell and 100% for Dr. Perry);

 

   

Bonus severance: severance pay equal to the average annualized bonus paid or payable to the executive officer during the three fiscal years (or such shorter period of employment) immediately preceding the fiscal year in which the date of termination occurs;

 

   

COBRA payments: payment of COBRA premiums for the executive officer and family members for the time period set forth in the executive officer’s change of control agreement, or until such earlier time as the executive officer qualifies for comparable insurance benefits from another employer (18 months for Mr. Martell and 12 months for Dr. Perry);

 

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Accelerated option vesting: full acceleration of stock option vesting; and

 

   

280G gross-ups: if applicable, reimbursement of any applicable excise taxes imposed on the executive officer under Section 4999 of the Code.

Cash severance amounts are generally payable in a lump sum amount within ten business days of the date of termination.

A change of control under the agreements is generally deemed to occur upon the following events:

 

   

the incumbent board members (or persons nominated or appointed by incumbent board members) fail to hold a majority of the seats on Poniard’s board of directors;

 

   

an acquisition by a person or group of related persons of beneficial ownership of 20% or more of the outstanding common s