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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1999
REGISTRATION NO. -333-________________
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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.
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(Exact name of registrant as specified in its charter)
DELAWARE 93-0979187
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
157 TECHNOLOGY DRIVE, IRVINE, CALIFORNIA 92618
(949) 788-6700
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(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
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(Name, address, including zip code, and telephone number,
including area code of agent for service)
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COPIES TO:
C. CRAIG CARLSON, ESQ.
ROBERT E. RICH, ESQ.
STRADLING YOCCA CARLSON & RAUTH,
A PROFESSIONAL CORPORATION
660 NEWPORT CENTER DRIVE
NEWPORT BEACH, CALIFORNIA 92660
(949) 725-4000
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 or interest 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
effective 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 effective 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
=====================================================================================================================
Proposed maximum Proposed maximum
Title of securities Amount to be offering price aggregate offering Amount of
to be registered registered(1) per share price registration fee
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Common Stock, $.001 par value 845,594 shares $11.03(3) $ 9,326,901.82 $2,462.30
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Common Stock issuable
upon exercise of
Closing Warrants 126,839 $14.235(4) $ 1,805,553.17 $ 476.67
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Common Stock issuable
upon exercise of
Adjustable Warrants 813,666(2) $.001(4) $ 813.67 $ 0.22
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Total 1,786,099 $11,133,268.66 $2,939.19
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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) The number of shares registered hereby is based on a formula included in
the Adjustable Warrants and represents an estimate of the number of shares
of common stock that would be issuable upon exercise of the Adjustable
Warrants assuming the adjustment price pursuant to the formula was $6.75,
or 50% of the closing bid price of the Company's common stock on November
18, 1999, the trading date immediately preceding the closing date of a
securities purchase agreement between the Registrant and the holders of
the Adjustable Warrants.
(3) The offering price is estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) using the average of the
high and low price reported by the Nasdaq National Market for the Common
Stock on December 10, 1999, which was approximately $11.03 per share.
(4) The exercise price of the Warrants, used for the purpose of calculating
the amount of the registration fee in accordance with Rule 457(g) under
the Securities Act.
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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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
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UP TO 1,786,099 SHARES OF
NEOTHERAPEUTICS, INC.
COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the
symbol "NEOT." On ____________, 2000, the closing price of our common stock was
$__________.
These shares of common stock are being sold by the holders of certain
of our securities listed under the heading "Selling Stockholders." The selling
stockholders previously received the shares from us or will receive the shares
from us by exercising previously issued common stock purchase warrants. We will
not receive any of the proceeds from the sales of the shares by the selling
stockholders.
The number of shares being offered for sale includes 845,594 shares
owned by the selling stockholders and 126,839 shares that are issuable upon
exercise of Closing Warrants held by the selling stockholders. This prospectus
also covers 813,666 shares that would be issuable upon exercise of Adjustable
Warrants held by the selling stockholders, assuming that the adjustment price
specified in a formula included in the Adjustable Warrants was $6.75, or 50% of
the closing bid price of our common stock on November 18, 1999, the trading day
immediately preceding the closing date of a securities purchase agreement
between us and the selling stockholders. The actual number of shares of common
stock issuable upon exercise of the Adjustable Warrants will be determined at
two vesting dates, March 18, 2000 and May 17, 2000, and will be determined
according to a formula based on the average of the ten lowest closing bid prices
per share of our common stock during the thirty (30) consecutive trading days
immediately preceding each vesting date. The actual number of shares of common
stock which the selling stockholders will receive upon exercise of the
Adjustable Warrants could be materially more than 813,666, depending upon the
market price of our common stock as of each vesting date.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 4.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of the prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is __________ ___, 2000.
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TABLE OF CONTENTS
Page
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Where You Can Find More Information................................ 2
About NeoTherapeutics, Inc......................................... 3
Risk Factors....................................................... 4
Forward-Looking Statements......................................... 15
Issuance of Common Stock to Selling Stockholders................... 16
Use of Proceeds.................................................... 16
Selling Stockholders............................................... 17
Plan of Distribution............................................... 18
Legal Matters...................................................... 19
Experts............................................................ 19
Limitation of Liability and Disclosure of Commission Position on
Indemnification For Securities Act Liabilities.................. 19
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, and Chicago.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them which means that we can disclose important information to you by
referring you to those documents instead of having to repeat the information in
this prospectus. The information incorporated by reference is considered to be
part of this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
the selling stockholders sell all the shares.
Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
Our definitive Proxy Statement filed pursuant to Section 14 of the
Exchange Act in connection with our 1999 Annual Meeting of Stockholders;
Our Current Reports on Form 8-K filed January 28, 1999, February 9,
1999 and December 7, 1999;
Our Quarterly Report on Form 10-Q for the fiscal quarters ended March
31, 1999, June 30, 1999 and September 30, 1999; and
The description of our 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.
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You can request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
NeoTherapeutics, Inc.
Attn: Investor Relations
157 Technology Drive
Irvine, California 92618
(949) 788-6700
You should rely only on the information contained in this prospectus or
any supplement and in the documents incorporated by reference. We have not
authorized anyone else to provide you with different information. The selling
stockholders will not make an offer of these shares in any state where the offer
is not permitted. You should not assume that the information in this prospectus
or any supplement or in the documents incorporated by reference is accurate on
any date other than the date on the front of those documents.
This prospectus is part of a registration statement we filed with the
SEC (Registration No. 333-___________). More information about the shares sold
by the selling stockholders is contained in that registration statement and the
exhibits filed along with the registration statement. Because information about
contracts referred to in this prospectus is not always complete, you should read
the full contracts which are filed as exhibits to the registration statement.
You may read and copy the full registration statement and its exhibits at the
SEC's public reference rooms or their web site.
ABOUT NEOTHERAPEUTICS
NeoTherapeutics, Inc. is a development-stage biopharmaceutical company
engaged in the discovery and development of novel therapeutic drugs intended to
treat neurological diseases and conditions, such as memory deficits associated
with Alzheimer's disease and dementia, spinal cord injury, stroke, Parkinson's
disease, migraine, depression and obesity. Our initial product candidate,
Neotrofin(TM) (AIT-082, leteprinim potassium), and other compounds under
development, are based on our 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 act rapidly upon specific target cells in specific locations in the
central nervous system, including the brain. Animal and laboratory tests have
shown that our Neotrofin(TM) compound appears to increase selectively the
production in animals of certain neurotrophic factors, a type of large protein,
in selected areas of the brain and in the spinal cord. These neurotrophic
factors regulate nerve cell growth and function. Our 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
maturation of the central nervous system. We believe that Neotrofin(TM) could
have therapeutic and regenerative effects.
NeoTherapeutics, Inc. was incorporated in Colorado in December 1987 and
reincorporated in Delaware in June 1997. All references to "we," "our" or
"NeoTherapeutics" refer to NeoTherapeutics, Inc. and its subsidiaries. Our
executive offices are located at 157 Technology Drive, Irvine, California 92618.
Our telephone number is (949) 788-6700. Our web site address is
www.neotherapeutics.com. Information contained in our web site does not
constitute part of this prospectus.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider the risks described below and the other information contained in
this prospectus carefully before deciding to invest in our common stock. If any
of the following risks actually occur, our business, financial condition and
operating results would be harmed. As a result, the trading price of our common
stock could decline, and you could lose a part or all of your investment.
WE HAVE INCURRED LOSSES IN EVERY YEAR SINCE OUR INCEPTION AND EXPECT TO CONTINUE
INCURRING LOSSES FOR THE NEXT SEVERAL YEARS AS WE SEEK TO BRING OUR INITIAL DRUG
PRODUCT TO MARKET.
We are considered a development stage company because we have not yet
generated revenues from sales. From our inception in 1987 through September 30,
1999, we have incurred cumulative losses of approximately $37.6 million, almost
all of which consisted of research and development and general and
administrative expenses. Our losses have been increasing. We lost approximately
$6.2 million in 1997, $11.6 million in 1998, and $13.8 million in the nine
months ending September 30, 1999. We expect our losses to increase in the future
as we expand our clinical trials and increase our research and development
activities. It is possible that we may never achieve significant revenues or
become profitable. Even if we eventually generate revenues from sales, we
nevertheless expect to incur significant operating losses over the next several
years. Our ability to become profitable and to achieve long-term success will
depend on:
o the time and expense necessary to develop our proposed products;
o whether and how quickly we can obtain regulatory approvals for such
products; and
o our success in bringing these products to market.
THE SCIENTIFIC AND MEDICAL CHALLENGES ASSOCIATED WITH DEVELOPING OUR DRUG
PRODUCTS MAY MAKE IT IMPOSSIBLE FOR US TO DEVELOP PRODUCTS THAT CAN PASS
REGULATORY SCRUTINY AND BE SOLD FOR A PROFIT. IF WE FAIL TO DEVELOP SUCCESSFUL
PRODUCTS WE WILL NEVER GENERATE REVENUES.
Our proposed products are in an early stage of development. They will
require additional research and development, clinical testing and regulatory
clearances. We currently do not sell any products and do not expect to have any
products commercially available for at least two years. Our proposed products
are subject to the risks of failure inherent in the development of
pharmaceutical products based on innovative technologies. Some of these risks
are that a proposed product:
o could be ineffective or toxic;
o may fail to receive necessary regulatory clearances;
o will be uneconomical to manufacture or market;
o may not be sold because of patent or other rights of third parties;
or
o becomes unmarketable because a third party introduces an equivalent
or superior product.
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As a result, we are unable to predict whether our research and development
activities will result in any commercially viable products or applications.
Disorders of the central nervous system, our primary area of therapeutic focus,
are not thoroughly understood by the scientific and medical community and are
the subject of continuing research. We cannot be certain that our proposed
products will prove to be safe or effective in treating such disorders or any
other diseases. In our industry, the majority of compounds fail to enter
clinical studies, and the majority of products entering clinical studies after
achieving promising preclinical results are not commercialized successfully.
WE WILL NEED MORE THAN $80 MILLION OF ADDITIONAL FUNDS TO DEVELOP OUR LEAD DRUG
CANDIDATE SUCCESSFULLY AND IT MAY BE IMPOSSIBLE TO OBTAIN SUCH FUNDING ON TERMS
ACCEPTABLE TO US. WITHOUT SUCH FUNDING WE WILL NOT DEVELOP SUCCESSFUL DRUG
CANDIDATES AND WILL NEVER GENERATE REVENUES.
We will require substantial additional capital to further develop our
proposed products and to commercialize any products that are developed. Our
capital requirements will depend on many factors, including:
o the progress of our research and development program;
o the progress of preclinical and clinical testing;
o the time and cost involved in obtaining regulatory approvals;
o the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights;
o competing technological and market developments; and
o our ability to establish collaborative and other arrangements with
third parties, such as licensing and manufacturing agreements.
We currently are spending cash at a rate in excess of $2.0 million per
month, and we expect this rate of spending to continue for approximately the
next 12 months.
We expect that we will need a minimum of $80 million to complete
development and clinical trials of Neotrofin(TM), our lead drug candidate,
before we will be able to submit it to the Food and Drug Administration for
approval for commercial sale. We believe that our existing cash and capital
resources will allow us to satisfy our current funding requirements for
approximately the next 8 months. Thereafter, we will require substantial
additional funds in order to complete the research and development activities
currently contemplated and to commercialize our proposed products.
We expect that we will seek such additional funding through public or
private financings or collaborative or other arrangements with third parties. We
cannot be certain that additional funds will be available on acceptable terms,
if at all. Any future equity financing will decrease the percentage ownership of
existing stockholders and may, depending on the price at which we are able to
sell the equity securities, result in substantial economic dilution to our
existing stockholders. Alternatively, we may obtain funds by entering into
arrangements with third parties. These arrangements may require us to relinquish
rights to certain of our products or technologies that we would not otherwise
relinquish.
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If adequate funds are not available, we may have to delay, scale back
or eliminate one or more of our development programs. Any failure to obtain
adequate funding, or any unfavorable arrangement regarding our products or
technology, would limit our ability to develop or commercialize our products and
could harm our business.
WE DEPEND ON THIRD PARTIES FOR CLINICAL TESTING, MANUFACTURING AND MARKETING OF
OUR PROPOSED DRUG PRODUCTS. IF WE ARE UNABLE TO OBTAIN SUCH SERVICES ON TERMS
ACCEPTABLE TO US, WE MAY FAIL TO DEVELOP SUCCESSFUL DRUG PRODUCTS AND TO
GENERATE REVENUES.
Except with respect to our Neotrofin(TM) compound, we currently do not
intend to conduct later-stage human clinical trials ourselves or to manufacture
any of our proposed products for commercial sale nor do we have the resources
necessary to do so. We currently are seeking larger pharmaceutical companies as
partners to conduct such activities as well as to market and distribute our
products. However, we will seek to retain certain co-marketing rights to certain
of our proposed products, so that we may promote such products to selected
medical specialists while our corporate partner promotes these products to the
medical market generally.
We cannot guarantee that we will be able to enter into any such
partnering arrangements on this or any other basis. In addition, we cannot
guarantee that we or our potential corporate partners can successfully introduce
our proposed products or that such proposed products will achieve acceptance by
patients, health care providers and insurance companies. Further, it is possible
that we may not be able to manufacture and market our proposed products at
prices that would permit us to make a profit.
EXTENSIVE AND COSTLY CLINICAL TRIALS WILL BE NECESSARY TO ASSESS THE SAFETY AND
EFFICACY OF OUR POTENTIAL DRUG PRODUCTS. IF WE ARE UNABLE TO IMPLEMENT CLINICAL
TRIALS SUCCESSFULLY, OR IF THE TRIALS SHOW THAT OUR DRUG CANDIDATES ARE
INSUFFICIENTLY SAFE OR EFFECTIVE, WE WILL BE UNABLE TO SELL OUR DRUG PRODUCTS
AND WILL NOT GENERATE REVENUES.
The rate of completion of clinical trials depends on, among other
factors, the type, novelty and complexity of the product and the rate of patient
enrollment. Patient enrollment is a function of many factors, including:
o the nature of the clinical trial protocols;
o existence of competing protocols;
o size of the patient population;
o proximity of patients to clinical sites; and
o eligibility criteria for the study.
Delays in patient enrollment will increase costs and delay the
introduction of our potential products, thereby harming our business and
financial condition.
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Many pharmaceutical companies are conducting clinical trials in
patients with Alzheimer's disease. As a result, we must compete with them for
clinical sites, physicians and the limited number of patients with Alzheimer's
disease who fulfill the stringent requirements for participation in clinical
trials. This competition could delay completion of clinical trials and/or result
in increased costs.
Even if we successfully enroll patients in our clinical trials, we
cannot guarantee they will respond to our potential products. We think it is
prudent to expect setbacks. If we do not comply with the U.S. Food and Drug
Administration regulations applicable to such testing, our clinical trials could
be delayed, suspended or cancelled, or the FDA might not accept the results of
such testing. The FDA may suspend clinical trials at any time if it concludes
that the subjects participating in such trials are being exposed to unacceptable
health risks. Further, we cannot assure you that human clinical testing will
show any current or future product candidate to be safe and effective or that
data derived therefrom will be suitable for submission to the FDA.
OUR MANAGEMENT HAS LIMITED MANUFACTURING AND MARKETING EXPERIENCE AND MAY HAVE
DIFFICULTY MANAGING OUR GROWTH. IF WE ARE UNABLE TO MANAGE GROWTH AND MAKE THE
TRANSITION FROM A COMPANY FOCUSED EXCLUSIVELY ON RESEARCH AND DEVELOPMENT TO A
COMMERCIAL ENTERPRISE WE MAY HAVE TO LICENSE OUR PRODUCTS TO THIRD PARTIES OR
SELL OUR ASSETS OR ENTIRE BUSINESS FOR PRICES THAT ARE LESS THAN WE BELIEVE TO
BE THEIR LONG-TERM VALUE.
We cannot guarantee that we will be able to develop manufacturing or
marketing capabilities successfully, either on our own or through third parties,
or that we will be able to manage the expansion of our operations successfully.
To date, we have engaged exclusively in the development of pharmaceutical
technology and products. Our management has substantial experience in
pharmaceutical company operations, but has limited experience in manufacturing
or procuring products in commercial quantities or in marketing pharmaceutical
products. Our management has only limited experience in negotiating,
establishing and maintaining strategic relationships, conducting clinical trials
and other later-stage phases of the regulatory approval process.
We cannot be certain that we will be able to engage successfully in any
of these activities with respect to any products which we attempt to
commercialize. If we decide to establish a commercial-scale manufacturing
facility for our lead product candidate Neotrofin(TM), we will require
substantial additional funds and personnel and will be required to comply with
extensive regulations applicable to such a facility. This growth may strain our
management and operations. Our ability to manage such growth depends upon the
ability of our officers and key employees to:
o broaden our management team and to attract, hire and retain skilled
employees;
o implement and improve our operational, management information and
financial control systems;
o expand, train and manage our employee base; and
o develop additional expertise among existing management personnel.
WE NEED TO COMPLY WITH EXTENSIVE GOVERNMENTAL REGULATION TO OBTAIN PRODUCT
APPROVALS AND TO MARKET PRODUCTS AFTER APPROVALS. IF WE FAIL TO COMPLY WITH SUCH
REGULATIONS, WE MIGHT NOT BE PERMITTED TO SELL OUR PRODUCTS OR COULD BE SUBJECT
TO CRIMINAL OR CIVIL PENALTIES.
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Various agencies in the United States and abroad regulate the testing,
manufacturing, labeling, distribution, marketing and advertising of proposed
products and ongoing research and development activities. The U.S. Food and Drug
Administration and comparable agencies in foreign countries impose many
requirements on the introduction of new pharmaceutical products through lengthy
and detailed clinical testing procedures, and other costly and time consuming
compliance procedures. These requirements make it difficult to estimate when
Neotrofin(TM) or any other potential product will be available commercially, if
at all.
Our proprietary compounds will require substantial clinical trials and
FDA review as new drugs. We cannot predict with certainty when we might submit
any of our proposed products currently under development for regulatory review.
Once we submit a proposed product for review, we cannot guarantee that FDA or
other regulatory approvals will be granted on a timely basis, if at all.
If we are delayed or fail to obtain such approvals, our business may be
damaged. If we fail to comply with regulatory requirements, either prior to
approval or in marketing our products after approval, we could be subject to
regulatory or judicial enforcement actions. These actions could result in:
o product recalls or seizures;
o injunctions;
o civil penalties;
o criminal prosecution;
o refusals to approve new products and withdrawal of existing
approvals; and
o enhanced exposure to product liabilities.
If we sell our products outside the United States, we will be subject
to regulatory requirements governing such sales. These requirements vary widely
from country to country and could delay introduction of our products in those
countries.
IF THIRD-PARTY PAYORS SET REIMBURSEMENT LEVELS FOR OUR DRUG PRODUCTS THAT DO NOT
ADEQUATELY COMPENSATE THOSE USING OUR DRUG PRODUCTS, DEMAND FOR OUR PRODUCTS MAY
FAIL TO GROW OR COULD DECLINE.
Our commercial success will depend heavily on the extent to which
third-party payors, including government authorities (such as Medicare), managed
care providers and private health insurers will reimburse users for the costs of
our products and any related treatments. If those who buy or use our products
are not adequately reimbursed, they may forego or reduce such use.
Governmental authorities and private third-party payors are engaged in
ongoing efforts to contain or reduce the costs of pharmaceutical products. In
the United States, an increasing emphasis on managed care and consolidation of
hospital purchasing has and will continue to place pressure on pharmaceutical
prices, and may reduce the prices we can charge for our potential products. In
many major foreign markets, pricing approval is required before sales can
commence and prices are often
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set by governmental authorities. These private and public price controls are
subject to change at unpredictable times. Market acceptance of our potential
products will be curtailed severely if adequate coverage and reimbursement
levels are not provided by governmental authorities and private third-party
payors. This includes developments in countries where any of our potential
collaborative partners operate.
THE LOSS OF KEY RESEARCHERS OR MANAGERS OR THE INABILITY TO HIRE NECESSARY
PERSONNEL COULD HINDER OUR DRUG DEVELOPMENT PROCESS SIGNIFICANTLY AND MIGHT
CAUSE OUR BUSINESS TO FAIL.
Our success depends upon the contributions of our key management and
scientific personnel. If we lose the services of any such personnel we could be
delayed in or precluded from achieving our business objectives. Although we
currently have key-man life insurance on Dr. Alvin Glasky, our Chief Executive
Officer and Chief Scientific Officer, in the face amount of $2 million, the loss
of Dr. Glasky's services could substantially damage our business.
We also will need substantial additional expertise in such areas as
finance and marketing, among others, in order to achieve our business
objectives. Competition for qualified personnel among pharmaceutical companies
is intense, and the loss of key personnel, or the inability to attract and
retain the additional skilled personnel required for the expansion of our
business, could damage our business.
IF WE ARE UNABLE TO PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS
ADEQUATELY, THE VALUE OF OUR RESEARCH COULD DECLINE AS OUR COMPETITORS
APPROPRIATE PORTIONS OF OUR RESEARCH.
We actively pursue patent protection for our proprietary products and
technologies. We hold three U.S. patents and currently have five U.S. patent
applications pending. In addition, we have numerous foreign patents issued and
patent applications pending corresponding to our U.S. patents. However, our
patents may not protect us against our competitors. We may be required to file
suit to protect our patents, and we cannot be certain that we will have the
resources necessary to pursue such litigation or otherwise to protect our patent
rights.
We also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. Others could
develop substantially equivalent proprietary information or gain access to our
trade secrets.
We have a policy requiring that our employees and consultants execute
proprietary information agreements upon commencement of employment or consulting
relationships. These 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. However, these
agreements may not successfully protect our trade secrets or other proprietary
information.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS BROUGHT AGAINST US COULD BE TIME
CONSUMING AND EXPENSIVE TO DEFEND AND MAY HARM OUR BUSINESS.
Other could assert claims against us based on their patents. Such
claims could seek damages as well as an injunction prohibiting clinical testing,
manufacturing and marketing of the product at issue. If any such actions are
successful, in addition to any potential liability for damages, we could be
required to obtain a license in order to continue to manufacture or market the
product at issue. It
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is possible that any license required under any such patent would not be made
available on acceptable terms, if at all. There has been, and we believe that
there will continue to be, significant litigation in the pharmaceutical industry
regarding patent and other intellectual property rights. If we become involved
in any litigation, a substantial portion of our financial and personnel
resources could be consumed, regardless of the outcome of such litigation.
WE ARE A SMALL COMPANY RELATIVE TO OUR PRINCIPAL COMPETITORS AND OUR LIMITED
FINANCIAL AND RESEARCH RESOURCES MAY LIMIT OUR ABILITY TO DEVELOP AND MARKET NEW
PRODUCTS.
Competition in the pharmaceuticals market is intense. Many companies,
both public and private, including well-known pharmaceutical companies, are
developing products to treat Alzheimer's disease and certain of the other
applications we are pursuing. Most of these companies have substantially greater
financial, research and development, manufacturing and marketing experience and
resources than we do. These competitors may develop pharmaceutical products that
are more effective or less costly than any products which we may develop. To
date, only one product, donepezil (Aricept(R), Pfizer, Inc.), is being marketed
actively in the U.S. for the treatment of Alzheimer's disease.
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 we are able to establish and
maintain a significant proprietary position with respect to our proposed
products, competition likely will depend primarily on the effectiveness of the
particular product and the number, gravity and severity of its unwanted side
effects as compared to alternative products or treatments.
We compete in an industry which is characterized by extensive research
and development efforts and rapid technological progress. Although we believe
that our proprietary technology may give us a competitive advantage with respect
to our proposed products, new developments are expected to continue and it is
possible that discoveries by others will render our potential products
noncompetitive. Our competitive position also depends on our ability to:
o attract and retain qualified scientific and other personnel;
o develop effective proprietary products;
o implement development and marketing plans;
o obtain patent protection; and
o secure adequate capital resources.
We may fail to achieve one or more of these goals.
HOLDERS OF OUR ADJUSTABLE WARRANTS COULD ENGAGE IN SHORT SELLING TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE ADJUSTABLE
WARRANTS. IF THIS OCCURS, THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE.
The number of shares of common stock issuable upon exercise of the
Adjustable Warrants, if any, will be determined at two vesting dates, March 18,
2000 and May 17, 2000, according to a
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formula based on the average of the ten lowest closing bid prices of our common
stock during the 30 consecutive trading days immediately preceding each vesting
date. The exercise price of the shares of common stock issuable upon exercise of
the Adjustable Warrants is $0.001 per share, regardless of the number of shares
which may vest. A greater number of shares of common stock are issuable the
lower the price of our common stock. Increased sales volume of our common stock
could put downward pressure on the market price of the shares. This fact could
encourage holders of the Adjustable Warrants to sell short our common stock
prior to each vesting date under the Adjustable Warrants, thereby potentially
causing the market price to decline and a greater number of shares to vest. The
holders of the Adjustable Warrants could then exercise their Adjustable Warrants
and use the shares of common stock received upon exercise to cover their short
positions. The holders of the Adjustable Warrants could thereby profit by the
decline in the market price of the common stock caused by their short selling.
OUR COMMON STOCK COULD BE DELISTED FROM NASDAQ'S NATIONAL MARKET
Our common stock is listed on the Nasdaq National Market. To remain
listed on this market, we must meet Nasdaq's listing maintenance standards and
abide by Nasdaq's rules governing listed companies. If the price of our common
stock falls below $1.00 per share for an extended period, or if we fail to meet
other Nasdaq standards or violate Nasdaq rules, our common stock could be
delisted from the Nasdaq National Market.
Nasdaq has established certain rules regarding the issuance of "future
priced securities." These rules may apply to our Adjustable Warrants because
additional shares of our common stock are issuable upon exercise based on a
future price of our common stock. Nasdaq's concerns regarding our Adjustable
Warrants include the following:
SHAREHOLDERS MUST APPROVE SIGNIFICANT ISSUANCES OF LISTED SECURITIES AT
A DISCOUNT TO MARKET OR BOOK VALUE. Nasdaq rules prohibit an issuer of listed
securities from issuing 20% or more of its outstanding capital stock at less
than the greater of book value or then current market value without obtaining
prior stockholder consent. We did not obtain stockholder consent prior to
issuing the Adjustable Warrant.
PUBLIC INTEREST CONCERNS. Nasdaq may terminate the listing of a
security if necessary to prevent fraudulent and manipulative acts and practices
or to protect investors and the public interest. With respect to future priced
securities, Nasdaq has indicated that it may delist a security if the returns
with respect to the future priced security become excessive compared to the
returns being earned by public investors in the issuer's securities.
Furthermore, certain requirements for continued listing, such as the
$1.00 minimum bid price requirement, are outside of our control. Accordingly,
there is a risk that our common stock might be delisted from the Nasdaq National
Market.
If our common stock is delisted, we likely would seek to list our
common stock on the Nasdaq SmallCap Market or for quotation on the American
Stock Exchange or a regional stock exchange. However, listing or quotation on
such market or exchange could reduce the market liquidity for our common stock.
If our common stock were not listed or quoted on another market or
exchange, trading of our common stock would be conducted in the over-the-counter
market on an electronic bulletin board
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established for unlisted securities or in what are commonly referred to as the
"pink sheets." As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations for the price of, our common stock.
In addition, delisting from the Nasdaq National Market and failure to
obtain listing or quotation on such other market or exchange would subject our
securities to so-called "penny stock" rules. These rules impose additional sales
practice and market-making requirements on broker-dealers who sell and/or make a
market in such securities. Consequently, if our common stock is delisted from
the Nasdaq National Market and we fail to obtain listing or quotation on another
market or exchange, broker-dealers may be less willing or able to sell and/or
make a market in our common stock and purchasers of our common stock may have
more difficulty selling their securities in the secondary market. In either
case, the market liquidity of our common stock would decline.
FUTURE SALES OF OUR COMMON STOCK COULD CAUSE THE MARKET PRICE OF OUR COMMON
STOCK TO FALL.
A substantial number of shares of our common stock are eligible for
future sale in the public market. These include 9,124,576 shares that are
outstanding as of December 13, 1999, as well as shares that may be issued upon
exercise of outstanding stock options and warrants. As of December 13, 1999,
security holders held options and warrants which, if exercised, would obligate
us to issue up to an additional 4,643,496 shares of common stock. A substantial
number of those shares, when issued upon exercise, will be available for
immediate resale in the public market. In addition, we are permitted to issue up
to an additional $9.5 million of our common stock under the Equity Line
Agreement during the remainder of its term. The shares of common stock we sell
under the Equity Line Agreement will be available for resale in the public
market. The market price of our common stock could fall as a result of such
resales.
THE ISSUANCE OF STOCK PURSUANT TO THE EQUITY LINE AGREEMENT MAY CAUSE DILUTION
TO OUR CURRENT STOCKHOLDERS.
The sale of shares of common stock pursuant to the Equity Line
Agreement may have a dilutive impact on our current stockholders because it will
be issued at a discount to the then-prevailing market price of our common stock.
These discounted sales could cause the market price of our common stock to drop.
PATIENTS MAY ASSERT PRODUCT LIABILITY CLAIMS AGAINST US AND MAY SUE US FOR
FAILURES OF OUR POTENTIAL DRUG PRODUCTS.
Although we currently carry product liability insurance with coverage
limits of $5.0 million, it is possible that the amounts of such coverage will be
insufficient to protect us from future claims. Further, we cannot be certain
that we will be able to obtain or maintain additional insurance on acceptable
terms, or at all, for our clinical and commercial activities or that such
additional insurance would be sufficient to cover any potential product
liability claim or recall. Any imposition of liability that is not covered by
insurance or is in excess of our insurance coverage could damage our business.
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THE USE OF HAZARDOUS MATERIALS IN OUR RESEARCH AND DEVELOPMENT EFFORTS IMPOSES
CERTAIN COMPLIANCE COSTS ON US AND MAY SUBJECT US TO LIABILITY FOR CLAIMS
ARISING FROM THE USE OR MISUSE OF THESE MATERIALS.
Our research and development efforts involve the use of hazardous
materials. We are subject to federal, state and local laws and regulations
governing the storage, use and disposal of such materials and certain waste
products. We believe that our safety procedures for handling and disposing of
such materials comply with the standards prescribed by federal, state and local
regulations. However, we cannot completely eliminate the risk of accidental
contamination or injury from these materials. If there were an accident, we
could be held liable for any damages that result. Such liability could exceed
our resources. We may incur substantially increased costs to comply with
environmental regulations if we develop our own commercial manufacturing
facility.
OUR SHARES HAVE EXPERIENCED SIGNIFICANT PRICE AND VOLUME FLUCTUATIONS WHICH
COULD RESULT IN SUBSTANTIAL LOSSES FOR INDIVIDUAL INVESTORS.
Our common stock has experienced significant fluctuations in market
price and trading volume and is likely to continue to fluctuate in the future.
Factors that may cause the market price and trading volume of our common stock
to fluctuate include:
o timing and announcements of the results of our clinical trials, our
technological innovations or new products, or those of our
competitors;
o fluctuations in our results of operations;
o FDA and foreign regulatory actions;
o developments with respect to patents and proprietary rights;
o public concern as to the safety of products developed by us or
others;
o changes in health care policy in the United States and in foreign
countries;
o changes in stock market analyst recommendations regarding our common
stock;
o failure of our results of operations to meet the expectations of
stock market analysts and investors;
o increases in the number of outstanding shares of our common stock
resulting from sales of new shares, the conversion of shares of our
Series A preferred stock, or the exercise of warrants or stock
options;
o changes in investors' perception of the pharmaceutical industry
generally; and
o general stock market conditions.
In addition, 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 cause the market price
of our common stock to drop.
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OUR DIRECTORS AND EXECUTIVE OFFICERS OWN A SUBSTANTIAL PERCENTAGE OF OUR COMMON
STOCK. THEIR OWNERSHIP COULD ALLOW THEM TO EXERCISE SIGNIFICANT CONTROL OVER
CORPORATE DECISIONS AND TO IMPLEMENT CORPORATE ACTS THAT ARE NOT IN THE BEST
INTERESTS OF OUR STOCKHOLDERS AS A GROUP.
Our directors and executive officers beneficially own approximately
19.9% of our outstanding common stock as of December 13, 1999. In addition,
Montrose Investments Ltd. and Strong River Investments, Inc. have agreed that
they will vote any and all shares of our common stock that they own as
recommended by our board of directors in any meeting of our stockholders.
Therefore, our directors and executive officers, if they acted together, could
exert substantial control over matters requiring approval by our stockholders.
These matters would include the election of directors and the approval of
mergers or other business combination transactions. This concentration of
ownership and voting control may discourage or prevent someone from acquiring
our business.
PROVISIONS IN OUR CHARTER AND BYLAWS MAY DISCOURAGE MERGERS AND OTHER
TRANSACTIONS.
Certain provisions of our Certificate of Incorporation and Bylaws may
make it more difficult for someone to acquire control of us. These provisions
may make it more difficult for stockholders to take certain corporate actions
and could delay or prevent someone from acquiring our business. These provisions
could limit the price that certain investors might be willing to pay for shares
of our common stock.
OUR BUSINESS AND THE BUSINESS OF OUR SUPPLIERS COULD BE HARMED BY COMPUTER
ERRORS OR FAILURES ASSOCIATED WITH THE YEAR 2000 PROBLEM.
The Year 2000 issue in computers arises from the common industry
practice of using two digits to represent a date in computer software code and
databases to enhance processing time and to save storage space. Therefore, when
dates in the year 2000 and beyond are indicated and computer programs read the
date "00," the computer may default to the year "1900" rather than the correct
"2000." This could result in incorrect calculations, faulty data and computer
shutdowns, which would cause disruptions of operations. In addition, the year
2000 is a leap year and systems need to recognize it as such.
We have completed an inventory and risk assessment of our:
o internal information technology system applications (including voice
and data systems);
o internal non-information technology facilities systems (including
embedded software in environmental controls, security systems, fire
protection systems, elevators and public utility connections for
gas, electric and telephone systems); and
o embedded and external software contained in laboratory and other
equipment that we believe could be adversely affected by the Year
2000 issue.
We believe that our internal systems are, at the present time,
substantially compliant based upon internal systems tests, currently available
information and reasonable assurance by our equipment and software vendors. The
cost to remediate Year 2000 issues with regard to these systems is not material.
In June of 1998, we began sending questionnaires to and/or contacting
our outside vendors regarding their state of readiness with respect to
identifying and remediating their Year 2000 issues. We have completed our risk
assessment of our outside vendors and are currently reviewing their compliance.
We cannot be certain that our vendors will adequately address their Year 2000
issues.
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Furthermore, we cannot determine that third parties upon which our vendors
depend will accomplish adequate remediation of their Year 2000 issues. We
believe that, with respect to the computer systems of our major outside vendors,
should a Year 2000 issue exist whereby a vendor was unable to address our needs,
alternative vendors have been identified and are readily available that could
furnish us with the same or similar supplies or services that we presently
receive from these vendors without undue cost or expense.
Based on currently available information, we believe that the impact of
the Year 2000 issue, as it relates to our internal operations, information
systems and software applications, will not be material. In the event we fail to
resolve successfully our Year 2000 issues with respect to our internal systems
in a timely manner, we believe that, while such events would be disruptive to
our operations in the short term, such circumstances would not harm our business
significantly over the long term. However, failure of the major third parties,
in particular the financial institutions with which we have significant banking
and investment management relationships and our third party manufacturers, to be
Year 2000 compliant could inflict significant damage on our business or business
prospects.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain forward-looking statements that are based on current
expectations, estimates and projections about our industry, management's
beliefs, and assumptions made by management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," and variations
of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict; therefore, actual results may differ materially from
those expressed or forecasted in any forward-looking statements. The risks and
uncertainties include those noted in "Risk Factors" above and in the documents
incorporated by reference. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
On November 19, 1999 we entered into a Securities Purchase Agreement
with Montrose Investments Ltd., a Cayman Islands corporation, and Strong River
Investments, Inc., a British Virgin Islands corporation. Under that agreement,
we issued and sold the following securities for total cash consideration of
$10.0 million:
o a total of 845,594 shares of our common stock;
o Closing Warrants to purchase 126,839 shares of common stock at an
exercise price of $14.24 per share; and
o Adjustable Warrants to purchase a number of shares of common stock
to be determined at two vesting dates, March 18, 2000 and May 17,
2000, at an exercise price of $0.001 per share.
The number of shares of common stock issuable at each vesting date
under the Adjustable Warrants, if any, will be determined by a formula in the
Adjustable Warrant and is based on the 10 lowest closing bid prices of our
common stock during the 30 consecutive trading days preceding each vesting date.
A greater number of shares of common stock are issuable the lower the price of
our common stock. However, if the average of the 10 lowest closing bid prices of
our common stock during the 30 consecutive trading days preceding a vesting date
exceeds approximately $13.25 per share, then no shares are issuable pursuant to
the Adjustable Warrants for that vesting date. In addition, if at any time each
of (a) the average of the closing bid prices of our common stock for 30
consecutive trading days exceeds $17.74 and (b) the closing bid price of our
common stock exceeded $17.74 for at least 10 of those 30 days, then no shares
will vest pursuant to the Adjustable Warrants for any subsequent vesting date.
We also have the option at the time of the first vesting date to redeem up to
one half of the shares of common stock sold to the selling stockholders on
November 19, 1999, and thereby cancel the second vesting. The Adjustable
Warrants expire if not exercised by August 15, 2000.
The terms of the warrants prohibit any holder thereof from exercising
the warrants to the extent that such exercise would result in such holder,
together with any affiliate thereof, beneficially owning in excess of 9.999% of
the outstanding shares of common stock following such exercise. Such restriction
may be waived by the holder of the warrants as to itself upon not less than 61
days' notice to us.
Pursuant to a Registration Rights Agreement which we entered into with
Montrose Investments Ltd. and Strong River Investments, Inc., we have filed a
registration statement, of which this prospectus forms a part, in order to
permit the selling stockholders to resell to the public the shares of common
stock that they purchased pursuant to the Securities Purchase Agreement and that
they acquire upon any exercise of the warrants. The number of shares that we
have registered is based upon the actual number of shares sold to the selling
stockholders pursuant to the Securities Purchase Agreement, the number of shares
issuable upon any exercise of the Closing Warrants, and an estimate of the
number of shares issuable upon exercise of the Adjustable Warrants. The estimate
of the number of shares issuable upon exercise of the Adjustable Warrants is
based on a formula included in the Adjustable Warrant and assumes that the
adjustment price specified in the formula was $6.75, or 50% of the closing bid
price of our common stock on November 18, 1999, the trading day immediately
preceding the closing date of the Securities Purchase Agreement, in order to
cover potential downward movements in the market price of our common stock.
Montrose Investments Ltd. and Strong River Investments, Inc. have
agreed that they will vote any and all shares of our common stock that they own
as recommended by our board of directors in any meeting of our stockholders.
USE OF PROCEEDS
The proceeds from the sale of the common stock will belong to the
selling stockholders. We will not receive any proceeds from such sales.
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SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock by the selling stockholders as of December 7,
1999. The number of shares of common stock listed as beneficially owned by each
selling stockholder and potentially offered by this prospectus represents the
number of shares of common stock owned as of December 7, 1999, the number of
shares issuable upon exercise of the Closing Warrants, and a number of shares
issuable upon exercise of the Adjustable Warrants, based on certain assumptions
as to the price of our common stock. The actual number of shares issuable upon
exercise of the Adjustable Warrants will be determined at each of two vesting
dates, March 18, 2000 and May 17, 2000. The terms of the warrants prohibit any
holder from exercising the warrants to the extent that such exercise would
result in such holder, together with any affiliate thereof, beneficially owning
in excess of 9.999% of the outstanding shares of our common stock following such
exercise. Such restriction may be waived by the holder of the warrant as to
itself upon not less than 61 days' notice to us. The cover page of this
prospectus indicates that the selling stockholders may sell up to 1,786,099
shares of common stock. That number of shares includes an estimate of the number
of shares issuable upon exercise of the Adjustable Warrants based on a formula
included in the Adjustable Warrant, and assumes that the adjustment price
specified in the formula was $6.75, or 50% of the closing bid price of our
common stock on November 18, 1999, the trading day immediately preceding the
closing date of the Securities Purchase Agreement, in order to cover potential
downward movements in the market price of our common stock. The number of shares
stated on the cover page of this prospectus is not intended to constitute a
prediction as to the future market price of our common stock or as to the number
of shares which may vest pursuant to the Adjustable Warrants. HBK Management
L.L.C., of which Mr. Harlan B. Korenvaes is Managing Director, has voting and
investment power over the securities beneficially owned by Montrose Investments
Ltd. Enright Holding Corp., of which Mr. Avi Vigder is managing director, has
voting and investment power over the securities beneficially owned by Strong
River Investments, Inc.
Shares of Common Stock
Number of Shares Beneficially Owned
Name of Common Stock Number of Shares Following the Offering(5)
Beneficially Owned of Common Stock -------------------------
Before Offering Offered Hereby Number % of Class
------------------ -------------- ------ ----------
Montrose Investments Ltd. 681,348(1) 893,050(2) 195,131 2.14
Strong River Investments, Inc. 496,916(3) 893,049(4) 10,700 *
- -------------
* Less than 1%.
(1) Includes 569,178 shares held by Montrose Investments Ltd. as of December 7,
1999 and 112,170 shares subject to currently exercisable warrants.
(2) Includes 422,797 shares held by Montrose Investments Ltd. as of December 7,
1999, 63,420 shares subject to a currently exercisable warrant, and 406,833
shares potentially issuable upon exercise of the Adjustable Warrants.
(3) Includes 433,497 shares held by Strong River Investments, Inc. as of
December 7, 1999 and 63,419 shares subject to a currently exercisable
warrant.
(4) Includes 422,797 shares held by Strong River Investments, Inc. as of
December 7, 1999, 63,419 shares subject to a currently exercisable warrant,
and 406,833 shares potentially issuable upon exercise of the Adjustable
Warrants.
(5) Assumes the sale by the selling stockholders of all of the shares of common
stock available for resale under this Prospectus.
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PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of the shares of
common stock offered hereby on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The selling stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a selling
stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares. The selling stockholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares other
than ordinary course brokerage arrangements, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
selling stockholders.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
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The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholders. The Company has agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
Upon the Company being notified by a selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In addition, upon the Company being notified by a
selling stockholder that a donee or pledgee intends to sell more than 500
shares, a supplement to this prospectus will be filed.
The Company has advised the selling stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Securities
Exchange Act of 1934 may apply to their sales of the shares offered hereby.
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 consolidated financial statements of the Company incorporated by
reference in this registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report. 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
Our by-laws provide for indemnification of our 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
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.
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================================================================================
1,786,099 SHARES OF COMMON STOCK
NEOTHERAPEUTICS, INC.
PROSPECTUS
_______________, 2000
================================================================================
23
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............................................$ 2,939.19
Accounting Fees and Expenses................................$ 5,000.00*
Legal Fees and Expenses.....................................$25,000.00*
Miscellaneous...............................................$ 2,060.81*
----------
Total..............................................$35,000.00*
==========
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* 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.
Exhibits. Description
--------- -----------
4.1 Securities Purchase Agreement dated as of November 19, 1999,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments L.P.(1)
4.2 Registration Rights Agreement dated as of November 19, 1999,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments L.P.(1)
II-1
24
Exhibits. Description
--------- -----------
4.3 Closing Warrant issued by Registrant to Montrose Investments
L.P., dated as of November 19, 1999.(1)
4.4 Closing Warrant issued by Registrant to Strong River
Investments, Inc., dated as of November 19, 1999.(1)
4.5 Adjustable Warrant issued by Registrant to Montrose
Investments L.P., dated as of November 19, 1999.(1)
4.6 Adjustable Warrant issued by Registrant to Strong River
Investments, Inc., dated as of November 19, 1999.(1)
5.1 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.
24.1 Power of Attorney (included on the signature page to this
Registration Statement).
- -----------------
(1) Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference from, the Registrant's Current Report on Form 8-K
filed with the Commission on December 7, 1999.
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 information on
the plan of distribution.
(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.
II-2
25
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 December 14, 1999.
NEOTHERAPEUTICS, INC.
By: /s/ Samuel Gulko
--------------------------------
Samuel Gulko
Chief Financial Officer
POWER OF ATTORNEY
We, the undersigned directors and officers 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
to sign for us or any of us in our names and in any and all capacities, any and
all amendments (including post-effective amendments) to this Registration
Statement, or any related registration statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto and other documents required in
connection therewith, and each of them with full power to do any and all acts
and things in our names and in any and all capacities, which such
attorneys-in-fact and agents, or either of them, may deem necessary or advisable
to enable NeoTheraputics, Inc. to comply with the Securities Act of 1933, as
amended, and any rules, regulations, and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement; and we
hereby do ratify and confirm all that the such attorneys-in-fact and agents, or
either of them, shall do or cause to be done by virtue thereof.
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 Chief Executive Officer, President December 14, 1999
- ----------------------------------- and Director (principal executive
Alvin J. Glasky, Ph.D. officer)
/s/ Samuel Gulko Chief Financial Officer, Secretary, December 14, 1999
- ----------------------------------- Treasurer and Director (principal
Samuel Gulko financial and accounting officer)
/s/ Mark J. Glasky Director December 14, 1999
- -----------------------------------
Mark J. Glasky
/s/ Frank M. Meeks Director December 14, 1999
- -----------------------------------
Frank M. Meeks
II-3
26
Signature Title Date
--------- ----- ----
/s/ Paul H. Silverman, Ph.D., D.Sc. Director December 14, 1999
- -----------------------------------
Paul H. Silverman, Ph.D., D.Sc.
/s/ Carol O'Cleireacain, Ph.D. Director December 14, 1999
- -----------------------------------
Carol O'Cleireacain, Ph.D.
/s/ Eric L. Nelson, Ph.D. Director December 14, 1999
- -----------------------------------
Eric L. Nelson, Ph.D.
/s/ Stephen Runnels Director December 14, 1999
- -----------------------------------
Stephen Runnels
/s/ Joseph Rubinfeld, Ph.D. Director December 14, 1999
- -----------------------------------
Joseph Rubinfeld, Ph.D.
/s/ Armin Kessler Director December 14, 1999
- -----------------------------------
Armin Kessler
/s/ Ann Kessler Director December 14, 1999
- -----------------------------------
Ann Kessler
II-4
27
EXHIBIT INDEX
Exhibits Description
-------- -----------
4.1 Securities Purchase Agreement dated as of November 19, 1999,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments L.P.(1)
4.2 Registration Rights Agreement dated as of November 19, 1999,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments L.P.(1)
4.3 Closing Warrant issued by Registrant to Montrose Investments
L.P., dated as of November 19, 1999.(1)
4.4 Closing Warrant issued by Registrant to Strong River
Investments, Inc., dated as of November 19, 1999.(1)
4.5 Adjustable Warrant issued by Registrant to Montrose
Investments L.P., dated as of November 19, 1999.(1)
4.6 Adjustable Warrant issued by Registrant to Strong River
Investments, Inc., dated as of November 19, 1999.(1)
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation.
23.1 Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on the signature page to this
Registration Statement).
- -------------------
(1) Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference from, the Registrant's Current Report on Form 8-K
dated December 7, 1999.