Rostislav Raykov
	Chief Executive Officer
501 Eastowne Drive, Suite 140	Adherex Technologies, Inc.
Chapel Hill, NC 27514	501 Eastowne Drive, Suite 140
(919) 636-4530	Chapel Hill, NC 27514
	(919) 636-4530
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)	(Name, address, including zip code, and telephone number, including area code, of agent for service)

Jonathan E. Silverblatt, Esq	Randy Taylor, Esq.
Phillips Nizer LLP	LaBarge Weinstein P.C.
666 Fifth Avenue	515 Legget Drive, Suite 800
New York, New York 10103	Ottawa, ON K2K 3G4
Phone (212) 977-9700	Phone (613) 599-9600
Fax (212) 262-5152	Fax (613) 599-0018

 

 

  

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Securities Offered

Except as provided in this prospectus, we are distributing at no charge to each of the holders (each, a “Holder”) of our common stock, rights to purchase up to an aggregate of up to 425,000,000 units (the “Units”) consisting of an aggregate of up to 425,000,000 shares of common stock and warrants (the “Warrants”) representing the right to purchase up to an aggregate of up to 425,000,000 shares of common stock. Each Unit will consist of one share of common stock and one Warrant representing the right to purchase one share of common stock for CAD$0.08.  We will distribute one right to each Holder for each share of common stock held by such Holders as of 5:00 p.m., New York City time, on February 24, 2011, the record date for the rights offering (the “Record Date”).  Fractional subscription rights resulting from such pro rata distribution will be eliminated by rounding down to the nearest whole right.  Assuming all of the rights offered hereby are exercised, the total purchase price for the securities offered in this rights offering would be approximately CAD$12.75 million; if the full 425,000,000 warrants were subsequently exercised, we would receive an additional CAD$34.0 million in proceeds. However, it is possible the warrants may expire before any or all of them are exercised, in which case we may receive no proceeds from the exercise of the Warrants.

 

Basic Subscription Right and Subscription Price

The basic subscription right (the “Basic Subscription Right”) entitles the Holder to purchase one (1) Unit for each subscription right distributed to such Holder at the subscription price of CAD$0.03 per Unit, and each Unit will consist of one share of common stock and one Warrant representing the right to purchase one share of common stock. You may exercise some or all of your Basic Subscription Rights, or you may choose not to exercise any of your Basic Subscription Rights. There is no minimum number of Units you must purchase, but you may not purchase fractional Units. See “No Minimum Subscription Requirement; No Fractional Units” on page 8.

 

A participant who holds common stock of the Corporation as of the Record Date on behalf of more than one beneficial owner may, upon providing evidence satisfactory to the subscription agent, exercise the Rights evidenced by its Rights certificate or exchange its rights certificate on the same basis as though each of the beneficial owners were a shareholder of record as of the Record Date.

 

Over-Subscription Right

Holders who fully exercise their Basic Subscription Right will be entitled to subscribe for additional Units at a price of CAD $0.03 per Unit (the “Over-Subscription Right”). There is no standby commitment or additional subscription right.  If there is a sufficient number of Units available to fully satisfy the Over-Subscription Right requests of all Holders following the exercise of their Basic Subscription Rights, all Over-Subscription Right requests will be honored in full.  If insufficient Units are available to fully satisfy the Over-Subscription Right requests of Holders, the available unsubscribed Units will be distributed proportionately among those Holders who exercised their Over-Subscription Right based on the number of Units each Holder subscribed for pursuant to their Over-Subscription Right. As no Units will be issued to Private Placement Holders in respect to any Rights issuable to such Private Placement Holders, such Units will be available for issue to Holders (other than Private Placement Holders), who exercise their Over-Subscription Right.

Rights Certificates, Registered Holders of Common Shares

To each Holder who holds shares of common stock in definitive certificate form, certificates representing the Rights (“Rights Certificate”) will be mailed with a copy of this prospectus to each registered Holder as of the Record Date.

Rights Certificates, Shares of Common Stock And Warrants Held Through CDS or DTC

For all shareholders who hold their common stock through a securities broker or dealer, bank or trust company or other Participant in the book-based systems administered by CDS or DTC, we anticipate that a global certificate representing the total number of Rights to which all such shareholders as at the Record Date are entitled will be issued in registered form to, and deposited with, CDS or DTC, as the case may be.   In addition, we anticipate that the common stock and warrants underlying the Units will also be issued in registered form to, and deposited with, CDS or DTC, as the case may be.  The Corporation expects that each beneficial shareholder will receive a confirmation of the number of Rights issued to it from its Participant in accordance with the practices and procedures of that Participant. Once eligible with CDS or DTC, as the case may be, CDS and DTC will be responsible for establishing and maintaining book-entry accounts for Participants holding rights.

Neither we nor the subscription agent will have liability for: (i) the records maintained by CDS, DTC or Participants relating to the Rights, including the shares of common stock and warrants underlying such Rights, or the book-entry accounts maintained by them; (ii) maintaining, supervising or reviewing any records relating to the Rights, including the shares of common stock and warrants underlying such Rights; (iii) any advice or representations made or given by CDS, DTC or Participants with respect to the rules and regulations of CDS or DTC or any action to be taken by CDS, DTC of their Participants.

 

Record Date

5:00 p.m., New York City time, on February 24, 2011.

 

Commencement Date of Subscription Period

February 28, 2011.

 

Expiration Date of Subscription Period

5:00 p.m., New York City time, on March 29, 2011. Any Rights not exercised at or before that time will have no value and expire without any payment to the Holders of those Rights not exercised.

 

Transferability of Rights

The Rights will be transferable during the subscription period and will expire on the scheduled expiration date of this rights offering.  Assignment of your rights must be accomplished as described under “Form 3 – Transfer of Rights in “Instructions of Exercising Rights” on page 28.  The shares of our common stock which you receive upon exercise of your rights and, separately, upon exercise of the warrants underlying the Units will be transferable following their issuance.  The warrants to be issued pursuant to this offering will be separately transferable following their issuance and through their expiration date of five years from the issue date.  We have applied to list the Rights, the shares of common stock and warrants issuable upon exercise of the Rights, and the shares of common stock issuable upon exercise of the warrants, on the TSX.  Such listing is subject to us fulfilling all of the listing requirements of the TSX.  However, we do not intend to list the Rights, such shares of common stock or the warrants on any other exchange.  We do not anticipate that the Rights will be quoted for trading on the Pink Sheets.  See “Transferability of Rights/Common Stock/Warrants” below.

 

Limitation on Purchase of Units

We will not issue Units to any Holder that is required to obtain prior clearance or approval from, or submit a notice to, any state or federal regulatory authority to acquire, own, or control such Units if we determine that, as of the expiration date of the rights offering, such clearance or approval has not been satisfactorily obtained and any applicable waiting period has not expired.

 

Description of Warrants

Exercise Price: The Warrants will have an exercise price of CAD$0.08 per share of common stock and the exercise price may be adjusted in certain instances. The exercise price will be payable by certified or bank check, or by wire transfer, to an account designated by us of an amount equal to the then applicable warrant price multiplied by the number of warrant shares being issued.

Term: The Warrants will not be exercisable for the first six months from their date of issuance and will terminate five years from the date of issuance

Anti-Dilution Protection: The number of shares of common stock for which the Warrants may be exercised and the exercise price applicable to the Warrants will be proportionately adjusted in the event that we make distributions of our common stock, or subdivide, combine or reclassify outstanding shares of our common stock, or if we pay a dividend in securities or property other than common stock. In the case of a merger or consolidation of us into another company where we are not the surviving company, the Holder will have the right to receive a new warrant in the surviving corporation.

Procedure for Exercising Rights

If you are a Holder on the record date, to exercise your Rights to buy Units, you must properly complete and execute the subscription certificate together with any required signature guarantees and forward it, together with the payment in full of the subscription price for each Unit you subscribe for, to the subscription agent, Olympia Transfer Services, Inc., at the address set forth on the subscription certificate.  The subscription rights certificate must be received by the subscription agent on or prior to 5:00 p.m., New York City time, on March 29, 2011, the expiration date of the rights offering. Once you exercise your Rights, you cannot revoke your exercise.  Persons holding equity securities through a broker, dealer, trustee, depository for securities, custodian bank or other nominee that desire to exercise their Rights with respect thereto should contact the appropriate institution or nominee and request it to effect the transaction for them.  See “Payment for Units” on page 29.

No Minimum Subscription Requirement; No Fractional Units

There is no minimum subscription requirement, but you may not purchase fractional Units. We will consummate the rights offering regardless of the amount raised from the exercise of subscription rights by the expiration date. For the avoidance of doubt, upon exercise of a right the Company will distribute the components of a Unit rather than the Unit itself.

Maximum Offering Size

We will raise no more than CAD $46,750,000 in this offering.

Common Stock Outstanding / Dilution

As of February 8, 2011, we had 368,293,451 shares of common stock outstanding (which excludes outstanding options, warrants and preferred stock convertible into or exercisable for shares of common stock). If you do not exercise any of your Rights, the number of shares of our common stock you own (or have the right to own upon exercise or conversion of other securities) will not change. However, to the extent that Units are purchased by other stockholders in the rights offering your relative actual and fully-diluted ownership interest will be reduced, and the percentage that your original shares represent of our equity after exercise of the Rights will be diluted. Assuming that the rights offering is fully subscribed, 425,000,000 shares of common stock and Warrants to purchase 425,000,000 shares of common stock will be issued.

Use of Proceeds

We intend to use the net proceeds, after payment of fees and expenses of this rights offering, for working capital and general corporate purposes, including primarily for the development of eniluracil.

Stock Exchange Listing

The outstanding common stock of the Corporation is currently listed and posted for trading on the TSX and the Pink Sheets under the symbols “AHX” and “ADHXF”, respectively. We have applied to list the rights, the shares of common stock and warrants issuable upon exercise of the Rights, and the shares of common stock issuable upon exercise of the warrants on the TSX.  Such listing is subject to us fulfilling all of the listing requirements of the TSX.

No Board Recommendation

Our board of directors makes no recommendation to you about whether you should exercise any Rights. You are urged to make an independent investment decision about whether to exercise your Rights based on your own assessment of our business and the rights offering.

Officers and Directors

Certain of our officers and directors are Holders and, as such, are eligible to participate in this rights offering. However, we cannot guarantee to you that any of them will exercise their Rights to purchase any Units.

Subscription Agents/Warrant Registrar

We have appointed Olympia Transfer Services, Inc. as our subscription agent for this rights offering and the warrant registrar with respect to the warrants underlying the Rights.

Fees and Expenses

We will bear the fees and expenses relating to the rights offering.

State Securities Law Considerations

We are not making this rights offering in any state or other jurisdiction in which it is unlawful to do so, nor are we selling or accepting any offers to purchase any Units from rights holders who are residents of those states or other jurisdictions. We may delay the commencement of this rights offering in those states or other jurisdictions, or change the terms of this rights offering, in order to comply with the securities law requirements of those states or other jurisdictions. We may decline to make modifications to the terms of this rights offering requested by those states or other jurisdictions, in which case, if you are a resident in those states or jurisdictions, you will not be eligible to participate in this rights offering.  For more information, see “State Securities Law Considerations” below.

Material United States and Canadian Federal Income Tax Consequences

A Holder will not recognize income or loss for United States or Canadian Federal income tax purposes in connection with the receipt or exercise of Rights in the rights offering. For a detailed discussion, see “Material United States and Canadian Federal Income Tax Consequences” beginning on page 30.  You should consult your tax advisor as to the particular consequences to you of the rights offering.

Risk Factors

An investment in the Units involves risks. See “Risk Factors” beginning on page 11, and the other information in this prospectus for a discussion of the factors you should consider before investing in the Units offered herein.

·	lack of funding;

 

·	the drug is not effective;

 

·	patients experience severe side effects during treatment;

 

·	appropriate patients do not enroll in the studies at the rate expected;

 

·	drug supplies are not sufficient to treat the patients in the studies; or

 

·	we decide to modify the drug during testing.

·	delays, warning letters and fines;

 

·	product recalls or seizures and injunctions on sales;

 

·	refusal of the FDA to review pending applications;

 

·	total or partial suspension of production;

 

·	withdrawals of previously approved marketing applications; and

 

·	civil penalties and criminal prosecutions.

·	some of all of our pending patent applications, or those we have licensed, may not be allowed;

·	proprietary products or processes that we develop in the future may not be patentable;

·	any issued patents that we own or license may not provide us with any competitive advantages or may be successfully challenged by third parties; or

·	the patents of others may have an adverse effect on our ability to do business.

 

 

 

 

·	our immediate need to raise additional capital and the terms of any transaction we are able to enter into;

 

·	the economic crisis or other external factors generally or stock market trends in the pharmaceutical or biotechnology industries specifically;

 

·	announcements of licensing agreements, joint ventures, collaborations or other strategic alliances that involve our products or those of our competitors;

 

·	innovations related to our or our competitors’ products;

 

·	actual or potential clinical trial results related to our or our competitors’ products;

 

·	our financial results or those of our competitors;

 

·	reports of securities analysts regarding us or our competitors;

 

·	developments or disputes concerning our licensed or owned patents or those of our competitors;

 

·	developments with respect to the efficacy or safety of our products or those of our competitors; and

 

·	health care reforms and reimbursement policy changes nationally and internationally.

 

  

 

  

  

 

•	the historical and current market price of our common stock;

 

•	the fact that holders of rights will have an over-subscription right;

 

•	the terms and expenses of this offering relative to other alternatives for raising capital,

 

•	the size of this offering; and

 

•	the general condition of the securities market.

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Material U.S. Federal Income Tax Considerations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

 

 

 

 

 

 

 

 

 

 

 

 

   

 

—

the item is effectively connected with the conduct by the non-U.S. holder of a trade or business in the United States and:

(i)

in the case of a resident of a country which has a treaty with the United States, the item is attributable to a permanent establishment; or

(ii)

in the case of an individual, the item is attributable to a fixed place of business in the United States;

—

the non-U.S. holder is an individual who holds the common stock as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition and does not qualify for an exemption; or

—

the non-U.S. holder is subject to tax under the provisions of U.S. tax law applicable to U.S. expatriates.

 

 

  

·	is broken down (catabolized) to f orm α-fluoro-β-alanine, or F-BAL . This compound appears to cause neurotoxicity and “hand-foot syndrome” which are debilitating and dose-limiting side effects of 5-FU therapy. Importantly, F-BAL also decreases the antitumor activity of 5-FU in lab animals.

·	extends the elimination half-life of 5-FU from about 10 minutes to about 5 hours; and

 

 

·	prevents the formation of F-BAL, which is the apparent causative agent for hand-foot syndrome and for 5-FU-induced neurotoxicity. F-BAL also decreases the antitumor efficacy of 5-FU in lab animals.

·

Phase II Clinical Trials : Phase II clinical trials typically take one to two years to complete and are generally carried out on a relatively small number of patients, generally between 15 and 50, in a specific setting of targeted disease or medical condition, in order to provide an estimate of the drug’s effectiveness in that specific setting. This phase also provides additional safety data and serves to identify possible common short-term side effects and risks in a somewhat larger group of patients. Phase II testing frequently relates to a specific disease, such as breast or lung cancer. Some contemporary methods of developing drugs, particularly molecularly targeted therapies, do not require broad testing in specific diseases, and instead permit testing in subsets of patients expressing the particular marker. In some cases, such as cancer indications, the company sponsoring the new drug may submit a marketing application to seek accelerated approval of the drug based on evidence of the drug’s effect on a “surrogate endpoint” from Phase II clinical trials.  A surrogate endpoint is a laboratory finding or physical sign that may not be a direct measurement of how a patient feels, functions or survives, but is still considered likely to predict therapeutic benefit for the patient.  If accelerated approval is received, the company sponsoring the new drug must continue testing to demonstrate that the drug indeed provides therapeutic benefit to the patient.

 

 

·

Marketing Application : Upon completion of Phase III clinical trials, the pharmaceutical company sponsoring the new drug assembles all the chemistry, preclinical and clinical data and submits it to the TPD or the FDA as part of a New Drug Submission in Canada or a New Drug Application, in the United States.  The marketing application is then reviewed by the regulatory body for approval to market the product.  The review process generally takes twelve to eighteen months.