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As Filed With the Securities and Exchange Commission on May 11, 1998
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-0979187
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
157 Technology Drive, Irvine, California 92618
(949) 788-6700
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
Alvin J. Glasky, Ph.D., President and Chief Executive Officer
157 Technology Drive
Irvine, California 92618
(949) 788-6700
(Name, address, including zip code, and telephone number,
including area code of agent for service)
Copies to:
C. Craig Carlson, Esq.
Robert E. Rich, Esq.
Stradling Yocca Carlson & Rauth, a Professional Corporation
660 Newport Center Drive, Suite 1600, Newport Beach, California 92660
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum Amount of
Title of securities Amount to be offering price aggregate registration
to be registered registered(1) per share offering price fee
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Common Stock, par value 705,000 $9.03125(2) $6,367,031.25 $1,878.27
$.001 per share
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Common Stock, par value 25,000 $11.61875(3) $ 290,468.75 $ 85.69
$.001 per share, issuable
upon exercise of a Warrant
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TOTALS: 730,000 $ 6,657,500 $1,963.96
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(1) In the event of a stock split, stock dividend, or similar transaction
involving the Company's Common Stock, in order to prevent dilution, the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act, on the basis of the average of the
high and low reported sale prices of the Registrant's Common Stock on May
6, 1998, as reported on the Nasdaq National Market.
(3) The exercise price of the Warrant, used for the purpose of calculating the
amount of the registration fee in accordance with Rule 457(g) under the
Securities Act.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
NEOTHERAPEUTICS, INC.
730,000 SHARES OF COMMON STOCK
This Prospectus may be used only in connection with the resale, from
time to time, of up to 730,000 shares (the "Shares") of Common Stock, par value
$.001 per share (the "Common Stock") of NeoTherapeutics, Inc., a Delaware
corporation (the "Company"), as follows: (i) 700,000 shares of Common Stock (the
"Equity Line Shares"), which may be issued pursuant to a Private Equity Line of
Credit Agreement dated March 27, 1998 (the "Equity Line Agreement") between the
Company and one of the selling stockholders named herein (the "Equity Line
Stockholder"), (ii) 5,000 shares of Common Stock, which have been issued to one
of the selling stockholders named herein (the "Placement Stockholder," and
together with the Equity Line Stockholder, the "Selling Stockholders") for
advisory services rendered in connection with the negotiation of the Equity Line
Agreement and (iii) 25,000 shares of Common Stock, which are issuable upon
exercise of a currently outstanding warrant (the "Warrant") issued to the Equity
Line Stockholder. The Shares may be sold from time to time for the account of
the Selling Stockholders. The Company will not receive any proceeds from the
sale of the Shares by the Selling Stockholders. The expenses incurred in
registering the Shares, including legal and accounting fees, will be paid by the
Company, except for commissions, transfer taxes and certain other expenses
associated with the sale of the Shares, which will be paid by the Selling
Stockholders.
The Equity Line Shares are to be issued by the Company to the Equity
Line Stockholder pursuant to the terms of the Equity Line Agreement. The price
at which the Equity Line Shares will be issued by the Company to the Equity Line
Stockholder shall be 88% of the Market Price (as defined in the Equity Line
Agreement) on the date the Company issues shares under the Equity Line
Agreement. The Company has agreed to indemnify the Equity Line Stockholder
against certain liabilities, including liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act").
The Selling Stockholders may offer, pursuant to this Prospectus, the
Shares to purchasers from time to time in transactions in the Nasdaq National
Market, in negotiated transactions, or otherwise, or by a combination of these
methods, at fixed prices that may be changed, at market prices prevailing at the
time of the sale, at prices related to such market prices or at negotiated
prices. The Selling Stockholders may effect these transactions by selling the
Shares to or through broker-dealers, who may receive compensation in the form of
discounts or commissions from the Selling Stockholders or from the purchasers of
the Shares for whom the broker-dealers may act as an agent or to whom they may
sell as a principal, or both. The Selling Stockholders and such brokers-dealers
may be deemed to be "underwriters" within the meaning of the Securities Act, in
connection with such sales. See "Plan of Distribution."
The Common Stock is listed for quotation on the Nasdaq National Market
under the symbol "NEOT." On May __, 1998, the closing sales price of the Common
Stock was $__.__.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS COMMENCING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This date of this Prospectus is _____________, 1998.
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TABLE OF CONTENTS
PAGE
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Available Information.......................................................................2
Incorporation of Certain Documents by Reference.............................................2
Prospectus Supplements......................................................................3
The Company.................................................................................3
Risk Factors................................................................................4
Use of Proceeds.............................................................................8
Selling Stockholders....................................................................... 8
Plan of Distribution........................................................................9
Description of Securities...................................................................9
Legal Matters..............................................................................10
Experts....................................................................................10
Limitation on Liability and Disclosure of Commission Position on
Indemnification For Securities Act Liabilities........................................11
No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in this
Prospectus, in connection with the offering described herein, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or the Selling Stockholders or any underwriters,
brokers or agents. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, nor shall there be any sale of these securities
by any person in any jurisdiction in which it is unlawful for such person to
make such offer, solicitation or sale. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create an implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") as a "small
business issuer" as defined under Regulation S-B promulgated under the
Securities Act. In accordance with the Exchange Act, the Company files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information may be inspected and copied at, and copies of
such materials can be obtained at prescribed rates from, the Public Reference
Branch of the Commission located at 450 Fifth Street, N.W., Washington, D.C. and
at the Commission's Pacific Regional Office located at 5670 Wilshire Boulevard,
11th Floor, Los Angeles, California, the Commission's Northeast Regional Office
located at 7 World Trade Center Suite 1300, New York, New York and at the
Commission's Midwest Regional Office located at Citicorp Center, 500 W. Madison
Street Suite 1400, Chicago, Illinois. In addition, the Company has filed the
registration statement and other filings pursuant to the Exchange Act with the
Commission through its Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system, and such filings are publicly available through the
Commission's site on the World Wide Web on the Internet, located at
http://www.sec.gov.
This Prospectus does not contain all of the information set forth in
the registration statement of which this Prospectus is a part and which the
Company has filed with the Commission. For further information with respect to
the Company and the securities offered hereby, reference is made to the
registration statement, including the exhibits filed as a part thereof, copies
of which can be inspected at, or obtained at prescribed rates from, the Public
Reference Section of the Commission at the address set forth above. Additional
updating information with respect to the Company may be provided in the future
by means of appendices or supplements to this Prospectus.
The Company's Common Stock is quoted on the Nasdaq National Market
(symbol: NEOT). Reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Exchange Act and are incorporated by reference herein:
a. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1997.
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b. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998.
c. The Company's Current Report on Form 8-K filed April 2, 1998.
d. The Company's Current Report on Form 8-K filed April 23, 1998.
e. The definitive Proxy Statement of the Company filed pursuant to
Section 14 of the Exchange Act in connection with the 1998 Annual
Meeting of Stockholders of the Company.
f. The description of the Company's Common Stock contained in the
Registration of Securities of Certain Successor Issuers filed
pursuant to Section 12(g) of the Exchange Act on Form 8-B on June
27, 1997, including any amendment or reports filed for the
purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy
of this Prospectus is delivered, upon written or oral request of such person, a
copy of any and all of the information that has been or may be incorporated by
reference herein (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents). Such requests
should be directed to NeoTherapeutics, Inc., Attention: Chief Financial Officer,
157 Technology Drive, Irvine, California 92618, telephone number (949) 788-6700.
PROSPECTUS SUPPLEMENTS
The Equity Line Stockholder may purchase from the Company up to $15
million of Common Stock in tranches pursuant to the Equity Line Agreement. The
timing of purchases and the amount of Common Stock sold to the Equity Line
Stockholder will be determined by the Company, subject to certain restrictions
set forth in the Equity Line Agreement. Upon each purchase of shares, the
Company will supplement this Prospectus to reflect the amount of shares to be
resold by the Equity Line Stockholder.
THE COMPANY
The Company is a development stage biopharmaceutical company engaged in
the discovery and development of novel therapeutic drugs intended to treat
neurodegenerative diseases and conditions, such as memory deficits associated
with Alzheimer's disease and aging, stroke, spinal cord injuries and Parkinson's
disease. The Company's initial product candidate, AIT-082, and its other
compounds under development are based on the Company's patented technology. This
technology uses small synthetic molecules to create non-toxic compounds,
intended to be administered orally or by injection, that are capable of passing
through the blood-brain barrier to rapidly act upon specific target cells in
selected locations in the central nervous system, including the brain. Animal
and laboratory tests have shown that the Company's AIT-082 compound appears to
selectively increase the production of certain neurotrophins, a type of large
protein, in the brain and spinal cord. These neurotrophins regulate nerve cell
growth and function. The Company's technology has been developed to capitalize
on the beneficial effects of these proteins, which have been widely acknowledged
to be closely involved in the early formation and differentiation of the central
nervous system. The Company believes that AIT-082 could have prophylactic,
therapeutic and regenerative effects.
The Company was incorporated in Colorado in December 1987 and
reincorporated in Delaware in June 1997. The Company's wholly-owned subsidiary,
Advanced Immunotherapeutics, Inc. ("AIT"), was incorporated as a California
corporation in June 1987. In April 1997, the Company established NeoTherapeutics
GmbH ("NEOT GmbH"), a wholly owned subsidiary in Switzerland. Unless the context
otherwise requires, all references to the "Company" and "NeoTherapeutics" refer
to NeoTherapeutics, Inc., a Delaware corporation, AIT and NEOT GmbH, as
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a consolidated entity. The Company's executive offices are located at 157
Technology Drive, Irvine, CA 92618, and its telephone number is (949) 788-6700.
RISK FACTORS
The purchase of the shares of Common Stock offered hereby involves a
high degree of risk. In addition to the other information set forth elsewhere in
this Prospectus, the factors listed below relating to the Company and this
offering should be considered when evaluating an investment in the Common Stock
offered hereby.
This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1993 and Section 21E of the Securities
Exchange Act of 1934. In light of the important factors that can materially
affect results, including those set forth below, the inclusion of
forward-looking information herein should not be regarded as a representation by
the Company or any other person that the objectives or plans for the Company
will be achieved. Assumptions relating to budgeting, research, and other
management decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its research,
capital expenditure or other budgets, which may in turn affect the Company's
business, financial position, results of operations and cash flows. The reader
is therefore cautioned not to place undue reliance on forward-looking statements
contained herein, which speak as of the date of this Prospectus. Factors that
might cause such a difference include, but are not limited to, the following:
HISTORY OF OPERATING LOSSES: FUTURE PROFITABILITY UNCERTAIN
The Company is a development stage biopharmaceutical company. From its
inception in 1987 through March 31, 1998, the Company incurred cumulative losses
of approximately $14.7 million, substantially all of which consisted of research
and development and general and administrative expenses. The Company has not
generated any revenues from product sales to date, and there can by no assurance
that revenues from product sales will ever be achieved. Moreover, even if the
Company eventually generates revenues from product sales, the Company
nevertheless expects to incur significant operating losses over the next several
years. The Company's ability to achieve profitable operations in the future will
depend in large part on completing development of its products, obtaining
regulatory approvals for such products and bringing these products to market.
The likelihood of the long-term success of the Company must be considered in
light of the expenses, difficulties and delays frequently encountered in the
development and commercialization of new pharmaceutical products, competitive
factors in the marketplace as well as the burdensome regulatory environment in
which the Company operates. There can be no assurance that the Company will ever
achieve significant revenues or profitable operations.
TECHNOLOGICAL UNCERTAINTY; EARLY STAGE OF PRODUCT DEVELOPMENT; NO ASSURANCE OF
REGULATORY APPROVALS
The Company's proposed products are in the early stage of development
and will require significant further research, development, clinical testing and
regulatory clearances. The Company has no products available for sale and does
not expect to have any products resulting from its research efforts commercially
available for at least several years. The Company's proposed products are
subject to the risks of failure inherent in the development of products based on
innovative technologies. These risks include the possibilities that some or all
of the proposed products could be found to be ineffective or toxic, or otherwise
fail to receive necessary regulatory clearances, that the proposed products,
although effective, will be uneconomical to manufacture or market, that third
parties may now or in the future hold proprietary rights that preclude the
Company from marketing them, or that third parties will market a superior or
equivalent product. Accordingly, the Company is unable to predict whether its
research and development activities will result in any commercially viable
products or applications. Furthermore, due to the extended testing and
regulatory review process required before marketing clearance can be obtained,
the Company does not expect to be able to commercialize any therapeutic drug for
at least several years, either directly or through any potential corporate
partners or licensees. There can be no assurance that the Company's proposed
products will prove to be safe or effective in humans or will receive regulatory
approval that are required for commercial sale. The Company's primary area of
therapeutic focus, disorders of the central nervous system (CNS), is not
thoroughly understood and there can be no assurance that the products the
Company is seeking to develop will prove to be safe and effective in treating
CNS disorders or any other diseases.
NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
The Company will require substantial funds for further development of
its potential products and to commercialize any products that may be developed.
The Company's capital requirements depend on numerous factors, including the
progress of its research and development programs, the progress of pre-clinical
and clinical testing, the
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time and cost involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments and the ability
of the Company to establish collaborative arrangements. The Company believes
that its existing capital resources, including capital which may be raised
through sales of Common Stock under the Equity Line Agreement, will be
sufficient to satisfy its current and projected funding requirements for the
next 12 months. The Company anticipates that after the next 12 months, it may
require substantial additional capital. Moreover, if the Company experiences
unanticipated cash requirements during the next 12 months, the Company could
require additional capital to fund its operations, continue research and
development programs as well as to continue the pre-clinical and clinical
testing of its potential products and to commercialize any products that may be
developed. The Company may seek such additional funding through public or
private financing or collaborative or other arrangements with third parties.
There can be no assurance that additional funds will be available on acceptable
terms, if at all. The Company may receive additional funds upon the exercise
from time to time of its Common Stock Purchase Warrants and other outstanding
warrants and stock options, but there can be no assurance that any such warrants
or stock options will be exercised or that the amounts received will be
sufficient for the Company's purposes. If additional funds are raised by issuing
equity securities, further substantial dilution to existing shareholders may
result. If adequate funds are not available, the Company may be required to
delay, scale back or eliminate one or more of its development programs, or to
obtain funds by entering into arrangements with collaborative partners or others
that may require the Company to relinquish rights to certain of its products or
technologies that the Company would not otherwise relinquish.
DEPENDENCE ON THIRD PARTIES FOR CLINICAL TESTING, MANUFACTURING AND MARKETING
The Company does not have the resources and, except with respect to its
AIT-082 compound, does not presently intend to conduct later-stage human
clinical trials itself or to manufacture any of its proposed products for
commercial sale. The Company therefore presently intends to seek larger
pharmaceutical company partners to conduct such activities for most or all of
its proposed products. In connection with its efforts to secure corporate
partners, the Company will seek to retain certain co-marketing rights to certain
of its proposed products, so that it may promote such products to selected
medical specialists while its corporate partner promotes these products to the
general medical market. There can be no assurance that the Company will be able
to enter into any such partnering arrangements on this or any other basis. In
addition, there can be no assurance that either the Company or its prospective
corporate partners can successfully introduce its proposed products, that they
will achieve acceptance by patients, health care providers and insurance
companies, or that they can be manufactured and marketed at prices that would
permit the Company to operate profitably.
LACK OF OPERATING EXPERIENCE
To date, the Company has engaged exclusively in the development of
pharmaceutical technology and products. Although members of the Company's
management have substantial experience in pharmaceutical company operations, the
Company has no experience in manufacturing or procuring products in commercial
quantities or marketing pharmaceutical products and has only limited experience
in negotiating, setting up and maintaining strategic relationships, conducting
clinical trials and other later-stage phases of the regulatory approval process.
There can be no assurance that the Company will successfully engage in any of
these activities with respect to AIT-082 or any other products which it may
choose to distribute. In the event the Company decides to establish a
commercial-scale manufacturing facility for AIT-082, the Company will require
substantial additional funds and personnel and will be required to comply with
extensive regulations applicable to such a facility. There can be no assurance
that the Company will be able to develop adequate manufacturing or marketing
capabilities either on its own or through third parties.
NEED TO COMPLY WITH GOVERNMENTAL REGULATION AND TO OBTAIN PRODUCT APPROVALS
The testing, manufacturing, labeling, distribution, marketing and
advertising of products such as the Company's proposed products and its ongoing
research and development activities are subject to extensive regulation by
governmental regulatory authorities in the United States and other countries.
The U.S. FDA and comparable agencies in foreign countries impose substantial
requirements on the introduction of new pharmaceutical products through lengthy
and detailed clinical testing procedures, sampling activities and other costly
and time consuming compliance procedures. The Company's proprietary compounds
require substantial clinical trials and FDA review as new drugs. The Company
cannot predict with certainty when it might submit many of its proprietary
products currently under development for regulatory review. Once the Company
submits its potential products for review, there can be no assurance that FDA or
other regulatory approvals for any pharmaceutical products developed by the
Company will be granted on a timely basis or at all. A delay in obtaining or
failure to obtain such approvals would have a material adverse effect on the
Company's business and results of operations. Failure to comply with regulatory
requirements could subject the Company to regulatory or judicial enforcement
actions, including, but not limited to, product recalls or seizures,
injunctions, civil penalties, criminal prosecution, refusals to approve new
products and withdrawal of
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existing approvals, as well as potentially enhanced product liability exposure.
Sales of the Company's products outside the United States will be subject to
regulatory requirements governing clinical trials and marketing approval. These
requirements vary widely from country to country and could delay introduction of
the Company's products in those countries.
DEPENDENCE ON KEY PERSONNEL
The Company's success is dependent on its key management and scientific
personnel, the loss of whose services could significantly delay the achievement
of the Company's planned development objectives. Although the Company has
obtained key man life insurance on Dr. Alvin Glasky in the face amount of $2
million, there can be no assurance that the proceeds of such policy will be
sufficient to compensate the Company for any disruptions resulting from the loss
of Dr. Glasky's services. Achievement of the Company's business objectives will
require substantial additional expertise in such areas as finance, manufacturing
and marketing, among others. Competition for qualified personnel among
pharmaceutical companies is intense, and the loss of key personnel, or the
inability to attract and retain the additional, highly skilled personnel
required for the expansion of the Company's activities, could have a material
adverse effect on the Company's business and results of operations.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
The Company actively pursues a policy of seeking patent protection for
its proprietary products and technologies. The Company owns two United States
patents and currently has two United States patent applications on file. In
addition, numerous foreign patents corresponding to the Company's first patent
have been granted and corresponding patent applications with respect to the
Company's second United States patent and pending United States patent
applications have been filed in a number of foreign jurisdictions. However,
there can be no assurance that the Company's patents will provide it with
significant protection against competitors. Litigation could be necessary to
protect the Company's patents, and there can be no assurance that the Company
will have the financial or personnel resources necessary to pursue such
litigation or otherwise to protect its patent rights. In addition to pursuing
patent protection in appropriate cases, the Company also relies on trade secret
protection for its unpatented proprietary technology. However, trade secrets are
difficult to protect. There can be no assurance that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets, that such
trade secrets will not be disclosed or that the Company can effectively protect
its rights to unpatented trade secrets. The Company pursues a policy of having
its employees and consultants execute proprietary information agreements upon
commencement of employment or consulting relationships with the Company, which
agreements provide that all confidential information developed or made known to
the individual during the course of the relationship shall be kept confidential
except in specified circumstances. There can be no assurance, however, that
these agreements will provide meaningful protection for the Company's trade
secrets or other proprietary information.
Furthermore, there can be no assurance that claims against the Company
will not be raised in the future based on patents held by others or that, if
raised, such claims will not be successful. Such claims, if brought, could seek
damages as well as an injunction prohibiting clinical testing, manufacturing and
marketing of the affected product. If any such actions are successful, in
addition to any potential liability for damages, the Company could be required
to obtain a license in order to continue to manufacture or market the affected
product. There can be no assurance that the Company would prevail in any such
action or that any license required under any such patent would be made
available under acceptable terms, if at all. There has been, and the Company
believes that there will continue to be, significant litigation in the
pharmaceutical industry regarding patent and other intellectual property rights.
If the Company becomes involved in any litigation, it could consume a
substantial portion of the Company's financial and personnel resources
regardless of the outcome of such litigation.
COMPETITION
Competition in the area of pharmaceutical products is intense. There
are many companies, both public and private, including well-known pharmaceutical
companies, that are engaged in the development of products for certain of the
applications being pursued by the Company. Most of these companies have
substantially greater financial, research and development, manufacturing and
marketing experience and resources than the Company and represent substantial
long-term competition for the Company. In addition, there are numerous other
companies that are also in the process of developing products for the treatment
of diseases and disorders for which the Company is developing products. Such
companies may succeed in developing pharmaceutical products that are more
effective or less costly than any products that may be developed by the Company.
Factors affecting competition in the pharmaceutical industry vary
depending on the extent to which the competitor is able to achieve a competitive
advantage based on proprietary technology. If the Company is able to establish
and
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maintain a significant proprietary position with respect to its products,
competition will likely depend primarily on the effectiveness of the product and
the number, gravity and severity of its unwanted side effects as compared to
alternative products.
The industry in which the Company competes is characterized by
extensive research and development efforts and rapid technological progress.
Although the Company believes that its proprietary position may give it a
competitive advantage with respect to its proposed drugs, new developments are
expected to continue and there can be no assurance that discoveries by others
will not render the Company's potential products noncompetitive. The Company's
competitive position also depends on its ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products,
implement development and marketing plans, obtain patent protection and secure
adequate capital resources. There can be no assurance that the Company will be
able to successfully attract or retain such personnel.
SHARES ELIGIBLE FOR FUTURE SALE
As of May 4, 1998, the Company had 5,474,307 shares of Common Stock
outstanding. An additional 3,997,973 shares of Common Stock are issuable upon
the exercise of outstanding options and warrants (including 25,000 shares
issuable upon exercise of the Warrant). Substantially all of such shares subject
to outstanding options and warrants will, when issued upon exercise thereof, be
available for immediate resale in the public market pursuant to currently
effective registration statements under the Securities Act or pursuant to Rule
701 promulgated thereunder. In addition, the Equity Line Agreement provides that
the Company will issue at least $1 million (up to a maximum of $15 million) of
Common Stock during its term, which commences on the date of this Prospectus and
continues until either (i) the Company sells $15 million of Common Stock to the
Equity Line Investor, (ii) the Company fails to meet certain obligations under
the Equity Line Agreement, or (iii) 30 months from the date of this Prospectus.
The shares of stock which the Company may sell to the Equity Line Investor under
the Equity Line Agreement will be available for immediate resale in the public
market pursuant to this Prospectus. Such resales, or the prospect of such
resales, may have an adverse effect on the market price of the Common Stock.
RISK OF PRODUCT LIABILITY
Although the Company currently carries product liability insurance,
there can be no assurance that the amounts of such coverage will be sufficient
to protect the Company, nor that there can be any assurance that the Company
will be able to obtain or maintain additional insurance on acceptable terms for
its clinical and commercial activities or that such additional insurance would
be sufficient to cover any potential product liability claim or recall. Failure
to maintain sufficient coverage could have a material adverse effect on the
Company's business and results of operations.
USE OF HAZARDOUS MATERIALS
The Company's research and development efforts involve the use of
hazardous materials. The Company is subject to federal, state and local laws and
regulations governing the storage, use and disposal of such materials and
certain waste products. Although the Company believes that its safety procedures
for handling and disposing of such materials comply with the standards
prescribed by federal, state and local regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of an accident, the Company could be held liable for any damages that
result and any such liability could exceed the resources of the Company. The
Company may incur substantial costs to comply with environmental regulations if
the Company develops its own commercial manufacturing facility.
POSSIBLE VOLATILITY OF STOCK PRICE
The stock market from time to time experiences significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
market price of the Common Stock. In addition, the market price of the Common
Stock is likely to be highly volatile. Factors such as fluctuations in the
Company's results of operations, timing and announcements of technological
innovations or new products by the Company or its competitors, FDA and foreign
regulatory actions, developments with respect to patents and proprietary rights,
public concern as to the safety of products developed by the Company or others,
changes in health care policy in the United States and in foreign countries,
changes in stock market analyst recommendations regarding the Company, the
pharmaceutical industry generally and general market conditions each may have a
significant adverse effect on the market price of the Common Stock. In addition,
it is likely that during at least some future quarterly periods, the Company's
results of operations will fail to meet the expectations of stock market
analysts and investors and, in such event, the market price of the Common Stock
could be materially and adversely affected.
7
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CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers beneficially own in the
aggregate approximately 26.9% of the Company's outstanding common stock. These
stockholders, if acting together, would be able to control substantially all
matters requiring approval by the stockholders of the Company, including the
election of directors and the approval of mergers or other business combination
transactions. Such concentration of ownership could discourage or prevent a
change of control of the Company.
EFFECT OF CERTAIN CHARTER AND BYLAWS PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and
Bylaws may have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control of
the Company. Such provisions could limit the price that certain investors might
be willing to pay in the future for shares of common stock. These provisions may
make it more difficult for shareholders to take certain corporate actions and
could have the effect of delaying or preventing a change in control of the
Company.
USE OF PROCEEDS
The proceeds from the sale of the Shares will belong to the Selling
Stockholders. The Company will not receive any proceeds from such sales.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock by the Selling Stockholders as of May
__, 1998. Upon the completion of the offering and assuming the sale by the
Selling Stockholders of all of the shares of Common Stock available for resale
under this Prospectus, the Selling Stockholders will not own more than 1% of the
outstanding Common Stock of the Company.
Shares Owned Shares Being Shares Owned
Before Offering Offered After Offering
------------------- ------------ ----------------
Name Number Percent Number Percent
---- ------ ------- ------ -------
Kingsbridge Capital Limited (1) * (1) 0 *
Trinity Capital Advisors, Inc. 5,000 * 5,000 0 *
----- ------- ----- ------ -------
TOTAL: (1) (1) 0 *
- ----------------
* Represents less than 1%
(1) This information will be modified with a Prospectus Supplement to reflect
the number of shares of Common Stock acquired by Kingsbridge Capital Limited
pursuant to the Equity Line Agreement.
Neither of the Selling Stockholders has had any material relationship
with the Company or any of its affiliates within the past three years other than
as a result of the ownership of Common Stock or as a result of the negotiation
and the execution of the Equity Line Agreement.
The shares offered hereby by Kingsbridge Capital Limited are to be
acquired pursuant to the Equity Line Agreement between the Company and
Kingsbridge Capital Limited or upon exercise of the Warrant. Under the Equity
Line Agreement, the Company agreed to register the Shares for resale by the
Selling Stockholders to permit the resale from time to time in the market or in
privately-negotiated transactions. The Company will prepare and file such
amendments and supplements to the registration statement as may be necessary in
accordance with the rules and regulations of the Securities Act to keep it
effective for a period of approximately 30 months.
The Company has agreed to bear certain expenses (other than broker
discounts and commissions, if any) in connection with the registration
statement.
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PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that the
Selling Stockholders may sell the Shares from time to time in transactions on
the Nasdaq National Market, in negotiated transactions, or otherwise, or by a
combination of these methods, at fixed prices which may be changed, at market
prices at the time of sale, at prices related to market prices or at negotiated
prices. The Selling Stockholders may effect these transactions by selling the
Shares to or through broker-dealers, who may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of the Shares for whom the broker-dealer may act as an agent or to
whom they may sell the Shares as a principal, or both. The compensation to a
particular broker-dealer may be in excess of customary commissions.
The Selling Stockholders and broker-dealers who act in connection with
the sale of the Shares may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commissions received by such broker-dealers and
profits on any resale of the Shares as a principal may be deemed to be
underwriting discounts and commissions under the Securities Act.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Stockholders (and, if they act as agent for
the purchaser of such Shares, from such purchaser). Broker-dealers may agree
with the Selling Stockholders to sell a specified number of Shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to
do so acting as agent for the Selling Stockholders, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer commitment to
the Selling Stockholders. Broker-dealers who acquire Shares as principal may
thereafter resell such Shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
Shares commissions computed as described above. To the extent required under the
Securities Act, a supplemental prospectus will be filed, disclosing (a) the name
of any such broker-dealers; (b) the number of Shares involved; (c) the price at
which such Shares are to be sold; (d) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable; (e) that such
broker-dealers did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus, as supplemented; and (f)
other facts material to the transaction.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage in
market making activities with respect to such securities for a period beginning
when such person becomes a distribution participant and ending upon such
person's completion of participation in a distribution, including stabilization
activities in the Common Stock to effect syndicate covering transactions, to
impose penalty bids or to effect passive market making bids. In addition and
without limiting the foregoing, in connection with transactions in the Shares,
the Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Rule 10b-5 and, insofar as the Selling Stockholders are distribution
participants, Regulation M and Rules 100, 101, 102, 103, 104 and 105 thereof.
All of the foregoing may affect the marketability of the Shares.
The Selling Stockholders will pay all commissions and certain other
expenses associated with the sale of the Shares. The Shares offered hereby are
being registered pursuant to contractual obligations of the Company, and the
Company has paid the expenses of the preparation of this Prospectus. The Company
has also agreed to indemnify the Equity Line Stockholder with respect to the
Equity Line Shares offered hereby against certain liabilities, including,
without limitation, certain liabilities under the Securities Act, or, if such
indemnity is unavailable, to contribute toward amounts required to be paid in
respect of such liabilities.
Trinity Capital Advisors, Inc. acted as a finder with respect to the
negotiation and execution of the Equity Line Agreement. Trinity Capital
Advisors, Inc. and the Company have not had any material relationship prior to
the engagement of Trinity Capital Advisors, Inc. by the Company in connection
with the Equity Line Agreement.
DESCRIPTION OF SECURITIES
As of the date of this Prospectus, the authorized capital stock of the
Company consists of 25 million shares of Common Stock, par value $.001 per
share, and 5 million shares of Preferred Stock, par value $.001 per share.
9
12
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Stockholders do not have rights to
cumulate their votes in the election of directors under the Company's
Certificate of Incorporation, or the provisions of the Delaware General
Corporation Law and the Company's management does not presently intend to extend
cumulative voting rights to stockholders. However, under Section 2115 of the
California Corporations Code, specific provisions of the California General
Corporation Law, including mandatory cumulative voting rights of stockholders,
are made applicable to "pseudo-California" corporations incorporated under laws
of other states which meet certain tests. The tests are (i) that the average of
specified property, payroll and sales factors (generally relating to the extent
of activities in California) exceed 50% on a consolidated basis during the
corporation's latest full income year, and (ii) that more than one-half of the
corporation's outstanding voting securities are held of record by persons having
addresses in California. The Company will likely meet such tests as of the end
of its current fiscal year.
Subject to preferences that may be applicable to the holders of
outstanding shares of Preferred Stock, if any, the holders of Common Stock are
entitled to receive such lawful dividends as may be declared by the Board of
Directors. In the event of liquidation, dissolution or winding up of the
Company, and subject to the rights of the holders of outstanding shares of
Preferred Stock, if any, the holders of shares of Common Stock shall be entitled
to receive pro rata all of the remaining assets of the Company available for
distribution to its stockholders. There are no redemption or sinking fund
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are fully paid and nonassessable, and shares of Common Stock to be issued
pursuant to this offering shall be fully paid and nonassessable.
WARRANT
The Warrant will entitle the holder to purchase 25,000 shares of Common
Stock at a price of $11.61875 per share. The Warrant is exercisable at any time
beginning on September 24, 1998 and ending on September 24, 2001. The shares of
Common Stock underlying the Warrant, when issued upon exercise of the Warrant in
whole or in part, will be fully paid and nonassessable, and the Company will pay
any transfer tax incurred as a result of the issuance of Common Stock to the
holder upon its exercise.
The Warrant contains provisions that protect the holder against
dilution by adjustment of the exercise price. Such adjustments will occur in the
event, among others, of a merger, stock split or reverse stock split, stock
dividend or recapitalization. The Company is not required to issue fractional
shares upon the exercise of the Warrant. The holder of the Warrant will not
possess any rights as a stockholder of the Company until such holder exercises
the Warrant.
The Warrant may be exercised upon surrender on or before the expiration
date of the Warrant at the offices of the Company, with an exercise form
completed and executed as indicated, accompanied by payment of the exercise
price for the number of shares with respect to which the Warrant is being
exercised. The exercise price is payable either (i) by check or bank draft
payable to the order of the Company or by wire transfer to an account designated
by the Company or (ii) by a "cashless exercise," in which that number of shares
of Common Stock underlying the Warrant having a fair market value equal to the
aggregate exercise price are cancelled as payment of the exercise price.
For the life of the Warrant, the holder thereof has the opportunity to
profit from a rise in the market price of the Common Stock without assuming the
risk of ownership of the shares of Common Stock issuable upon the exercise of
the Warrant. The Warrant holder may be expected to exercise the Warrant at a
time when the Company would, in all likelihood, be able to obtain any needed
capital by an offering of Common Stock on terms more favorable than those
provided for by the Warrant. Furthermore, the terms on which the Company could
obtain additional capital during the life of the Warrant may be adversely
affected.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California.
EXPERTS
The audited consolidated financial statements of the Company
incorporated by reference in this registration statement have been audited by
Arthur Andersen LLP, independent public accounts, as indicated in their report
with
10
13
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports. Reference is made to said report which
states that the Company is in the development stage, as described in Note 1 to
the consolidated financial statements.
LIMITATION ON LIABILITY AND DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The by-laws of the Company provide for indemnification of the Company's
directors and officers to the fullest extent permitted by law. Insofar as
indemnification for liabilities under the Securities Act may be permitted to
directors, officers or controlling persons of the Company pursuant to the
Company's Certificate of Incorporation, as amended, by-laws and the Delaware
General Corporation Law (the "DGCL"), the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in such Act and is therefore unenforceable.
11
14
================================================================================
730,000 SHARES OF COMMON STOCK
NEOTHERAPEUTICS, INC.
----------
PROSPECTUS
----------
___________, 1998
================================================================================
15
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the costs and expenses, all of which shall be
borne by the Registrant, in connection with the offering of the securities
pursuant to this registration statement:
Registration Fee................................................. $ 1,964
Accounting Fees and Expenses..................................... $ 5,000*
Legal Fees and Expenses.......................................... $ 20,000*
Miscellaneous.................................................... $ 2,036*
Total..................................................... $ 29,000*
- --------------
* Estimated
Item 15. Indemnification of Directors and Officers.
The by-laws of the Registrant provide for indemnification of the
Registrant's directors and officers to the fullest extent permitted by law.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the Registrant's Certificate of Incorporation, by-laws and the
Delaware General Corporation Law (the "DGCL"), the Registrant has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in such Act and is therefore unenforceable.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may include a provision which eliminates or limits the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
relating to prohibited dividends or distributions or the repurchase or
redemption of stock or (iv) for any transaction from which the director derives
an improper personal benefit. The Registrant's Certificate of Incorporation
includes such a provision. As a result of this provision, the Registrant and its
stockholders may be unable to obtain monetary damages from a director for breach
of his or her duty of care.
Item 16. Exhibits.
4.1 Private Equity Line of Credit Agreement between Registrant and
Kingsbridge Capital Limited dated as of March 27, 1998.
4.2 Registration Rights Agreement between Registrant and Kingsbridge
Capital Limited dated as of March 27, 1998.
4.3 Warrant to Purchase up to 25,000 shares of Common Stock of
Registrant, issued to Kingsbridge Capital Limited as of March 27,
1998.
5 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation.
23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
24 Power of Attorney (included on the signature page to the
registration statement - see page II-3).
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(iii) Include any additional or changed material
information on the plan of distribution.
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16
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be deemed the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
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17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on the 11th day of May,
1998.
NEOTHERAPEUTICS, INC.
By: /s/ Alvin J. Glasky, Ph.D.
-------------------------------------
Alvin J. Glasky, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of NeoTherapeutics, Inc., do
hereby constitute and appoint Alvin J. Glasky, Ph.D. and Samuel Gulko or either
of them, our true and lawful attorneys-in-fact and agents, each with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this registration
statement, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite are necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorney-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Alvin J. Glasky, Ph.D. Chief Executive Officer, May 11, 1998
- --------------------------------- President and Director
Alvin J. Glasky, Ph.D. (Principal executive officer)
/s/ Samuel Gulko Chief Financial Officer May 11, 1998
- --------------------------------- (principal financial and
Samuel Gulko accounting officer)
/s/ Mark J. Glasky Director May 11, 1998
- ---------------------------------
Mark J. Glasky
/s/ Frank M. Meeks Director May 11, 1998
- ---------------------------------
Frank M. Meeks
/s/ Paul H. Silverman, Ph.D., D.Sc. Director May 11, 1998
- ----------------------------------
Paul H. Silverman, Ph.D., D.Sc.
/s/Carol O'Cleireacain, Ph.D. Director May 11, 1998
- ----------------------------------
Carol O'Cleireacain, Ph.D.
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EXHIBIT INDEX
Exhibit
Number Description
------- -----------
4.1 Private Equity Line of Credit Agreement between Registrant and
Kingsbridge Capital Limited dated as of March 27, 1998.
4.2 Registration Rights Agreement between Registrant and Kingsbridge
Capital Limited dated as of March 27, 1998.
4.3 Warrant to Purchase up to 25,000 shares of Common Stock of
Registrant, issued to Kingsbridge Capital Limited as of March 27,
1998.
5 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation
23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional
Corporation (Included in Exhibit 5).
23.2 Consent of Arthur Andersen, LLP.
24 Power of Attorney (included on the signature page to the
registration statement - see page II-3).
II-4