Filing Pursuant to Rule 424(b)(2)
Registration Statement No. 333-51440
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED DECEMBER 18, 2000
749,063 SHARES
NEXELL THERAPEUTICS INC.
COMMON STOCK
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You should read this prospectus supplement and the accompanying
prospectus carefully before you invest. Both documents contain information you
should consider carefully before making your investment decision.
Investing in our common stock involves certain risks. See "Risk Factors"
beginning on page 3 of the prospectus.
Plan of Distribution
We are offering 749,063 shares of our common stock to Acqua Wellington
North American Equities Fund, Ltd. pursuant to this prospectus supplement. The
common stock will be purchased at a negotiated purchase price of $2.67 per
share. We will not pay any other compensation in conjunction with the sale of
our common stock.
Acqua Wellington may be deemed to be an underwriter within the meaning
of Section 2(a)(11) of the Securities Act of 1933, as amended. The purchase
price discount to our then-current market price would accordingly be deemed to
be underwriting discounts and commissions.
Our common stock may be sold from time to time by Acqua Wellington, by a
broker-dealer or by pledges, donees, transferees or other successors in
interest. Such sales may be made on the Nasdaq National Market at prices and at
terms then prevailing or at prices related to the then current market price, or
in negotiated private transactions, or in a combination of these methods. In
effecting sales, any broker-dealer engaged by Acqua Wellington may arrange for
other broker-dealers to participate. The common stock may be sold in one or more
of the following manners:
. a block trade in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
. purchases by a broker-dealer for its account under this prospectus
supplement;
. short sales;
S-1
. through the writing of options on the shares;
. ordinary brokerage transactions and transactions in which the
broker solicits purchasers; or
. a combination of any such methods of sale.
Such broker-dealers and any other participating broker-dealers may be deemed to
be underwriters in connection with such sales.
Acqua Wellington and any other persons participating in the sale or
distribution of the shares covered by this prospectus supplement will be subject
to liability under the federal securities laws and must comply with the
requirements of the Securities Act and the Securities Exchange Act, including
without limitation, Rule 10b-5 and Regulation M. These rules and regulations may
limit the timing of purchases and sales of any of the shares by the purchaser or
any other person. Under these rules and regulations, Acqua Wellington and any
other persons participating in the sale of distribution.
. may not engage in any stabilization activity in connection with
our securities;
. must furnish each broker which offers shares of our common stock
covered by this prospectus supplement with the number of copies of the
prospectus and this prospectus supplement which are required by each broker; and
. may not bid or purchase any of our securities or attempt to induce
any person to purchase any of our securities other than as permitted under the
Securities Exchange Act.
These restrictions may affect the marketability of the shares.
In connection with Acqua Wellington's purchase and potential resale of
the shares covered by this prospectus supplement, we have agreed to indemnify
and hold harmless Acqua Wellington and, possibly, any broker-dealers and agents
who Acqua Wellington sells through and who may be deemed to be underwriters with
respect to securities covered by this registration statement, against certain
liabilites, including liabilities under the Securities Act, which may be based
upon, among other things, any untrue statement or alleged untrue statement of a
material fact or any omission or alleged omission of a material fact, unless
made or omitted in reliance upon written information provided to us by Acqua
Wellington.
We have agreed to bear the expenses incident to the registration of the
shares, other than selling discounts and commissions. These expenses are
estimated to be $100,600.
Use of Proceeds
We will use the proceeds of this offering as described in the
prospectus. See "Use of Proceeds" beginning on page 14 of the prospectus.
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Market For Our Common Stock
On January 5, 2001, the last reported sale price of our common stock on
the Nasdaq National Market was $3.00 per share. Our common stock is listed on
the Nasdaq National Market under the symbol "NEXL." The common stock sold under
this prospectus supplement will be listed on the Nasdaq National Market after
we notify the Nasdaq National Market that the shares have been issued.
As of January 5, 2001, we had 19,084,894 shares of common stock
outstanding.
General
You should rely only on the information provided or incorporated by
reference in this prospectus supplement and the prospectus. We have not
authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus supplement in accurate as of
any date other than the date on the front of these documents.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus supplement is January 8, 2001.
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PROSPECTUS
NEXELL THERAPEUTICS INC.
9 Parker
Irvine, California 92618
(949) 470-9011
$25,000,000 Aggregate Amount of Common Stock
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This prospectus will allow us to issue common stock over time. This means:
. we will provide a prospectus supplement each time we issue common stock;
. the prospectus supplement will inform you about the specific terms of
that offering and may also add, update or change information contained
in this document; and
. you should read this document and any prospectus supplement carefully
before you invest.
Nexell Therapeutics Inc. common stock is traded on the Nasdaq National
Market under the symbol "NEXL." On December 6, 2000, the closing sale price of
Nexell common stock on the Nasdaq National Market was $3.59 per share.
This investment involves a high degree of risk. You should purchase
shares only if you can afford a complete loss. See "Risk Factors" beginning on
page 3.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
The date of this prospectus is December 18, 2000
TABLE OF CONTENTS
Page
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Prospectus Summary..................................................... 1
The Company............................................................ 1
The Offering........................................................... 2
Risk Factors........................................................... 3
Forward-Looking Statements............................................. 12
Use of Proceeds........................................................ 14
Plan of Distribution................................................... 15
Where You Can Find More Information.................................... 16
Legal Matters.......................................................... 17
Experts................................................................ 17
i
Prospectus Summary
The following summary is qualified in its entirety by reference to the more
detailed information and consolidated financial statements appearing elsewhere
or incorporated by reference in this prospectus.
The Company
Nexell Therapeutics Inc. (formerly VIMRX Pharmaceuticals Inc.) is a
biotechnology company that focuses on innovative technologies to improve human
health. Nexell's principal subsidiary, Nexell of California, Inc. is developing
products utilizing cell separation technology in cell therapy for cancer and
other life-threatening diseases. We currently sell cell therapy products in
Europe, the United States and Canada.
1
The Offering
Common stock offered in this
prospectus................................... ________ shares
Common stock outstanding after
the offering................................. ________ shares (l)
Use of proceeds.............................. See "Use of Proceeds."
Nasdaq National Market symbol................ NEXL
__________________
(1) Based on shares outstanding as of September 30, 2000.
Does not include:
. 2,305,247 shares of common stock issuable upon exercise of outstanding
options as of September 30, 2000;
. 3,911,130 shares of common stock issuable upon exercise of outstanding
warrants as of September 30, 2000; and
. 12,499,817 shares of common stock issuable upon conversion of
outstanding convertible preferred stock as of September 30, 2000.
2
Risk Factors
An investment in the securities offered by this prospectus is very risky.
You should carefully consider the following risk factors in addition to the
information in the remainder of this prospectus before deciding to purchase the
stock.
These risks and uncertainties are not the only ones we face. Others that
we do not know about now, or that we do not now think are important, may impair
our business or the trading price of our securities.
Investors should consider the following factors:
We have a history of operating losses and may not be profitable.
Since commencing our operations in January 1987, through September 30,
2000, we have incurred an accumulated deficit of approximately $192,287,000.
These losses have resulted principally from costs incurred in research and
development of the Isolex(R) system and our cell culture technologies, general
and administrative expenses, and the prosecution of patent applications. We had
no significant operating revenues until 1998. Revenues since 1998 have been
principally derived from sales of Isolex(R) devices and related disposables. We
expect to incur substantial additional losses over the next several years,
whether or not we continue to generate revenues, as we continue to develop our
products. We expect that these additional losses will result primarily from our
research and development programs, including preclinical and clinical trials,
and the establishment of marketing and distribution capabilities necessary to
support commercialization efforts for our products. We cannot predict with any
certainty the amount of future losses. Our ability to continue to generate
revenue and operating income in the future will depend on many factors,
including:
. establishing manufacturing, sales and marketing capabilities for our
products internally and through collaborative arrangements;
. cost and timing of regulatory approvals and commercial sales of our
products;
. level of competing technologies and market developments;
. protection of our patent and other intellectual rights;
. continued scientific progress in our research and development programs;
and
. Timing and investment in new technologies.
We expect to continue to incur net operating losses for the foreseeable future
and we can give no assurance that we will ever be profitable.
Failure to obtain and maintain required regulatory approvals would restrict our
ability to sell our products and earn revenues.
Our development activities of our technologies are intended to lead to new
drugs and medical devices that must obtain the approval of the United States
Food and Drug Administration before sales
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may be made in the United States, and the approval of foreign regulators before
sales may be made in foreign jurisdictions. The process of obtaining and
maintaining regulatory approvals for new drugs and medical devices is lengthy,
expensive and uncertain. The manufacturing, distribution, advertising and
marketing of these products are also subject to extensive regulation. If we
cannot demonstrate the safety, reliability and efficacy of our product
candidates, we will not obtain required regulatory approvals and our revenues
will suffer. Noncompliance with applicable requirements can result in, among
other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the FDA to grant
premarket clearance or premarket approval for devices, withdrawal of marketing
clearances or approvals, and criminal prosecution. The FDA also has the
authority to request recall, repair, replacement or refund of the cost of any
device manufactured or distributed by us.
Even after regulatory approval of a product is granted, that approval may
be subject to limitations on the indicated uses for which it may be marketed.
In addition, the FDA, other regulatory agencies and governments in other
countries continue to review and inspect marketed products, manufacturers and
manufacturing facilities after regulatory approval is granted. Later discovery
of previously unknown problems with a product, manufacturer or facility may
result in restrictions on the product or manufacturer, including withdrawal of
the product from the market. Further, governmental agencies may establish
additional regulations which could prevent or delay regulatory approval of our
products.
If we do not successfully complete clinical trials, we will not be able to
obtain FDA approval and sell our products.
To be able to market products in the United States, we must demonstrate,
through extensive preclinical studies and clinical trials, the safety and
efficacy of our processes and product candidates, together with the cells
produced by such processes in such products, for application in the treatment of
humans. We have completed pivotal clinical trials to demonstrate the safety and
biological activity of patient cells isolated and collected in the Isolex(R)
300i system. We plan to conduct additional trials to demonstrate safety and
efficacy for enhancements to the Isolex(R) 300i. If our clinical trials for
product enhancements to the Isolex(R) 300i, or if our other products are not
successful, our products may not be marketable.
Our ongoing studies may be delayed or halted for various reasons,
including:
. lack of effectiveness of our device is not effective, or the perception
by physicians that the device is not effective;
. failure of patients to enroll in the trials at the rate we expect;
. doubts among physicians and patients regarding the utility of stem cell
therapy; and
. side effects as a result of the treatment.
In addition, the FDA and foreign regulatory authorities have substantial
discretion in the approval process. The FDA and foreign regulatory authorities
may not agree that we have demonstrated that our products are safe and
effective.
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If the licenses we depend on are breached or terminated, we would lose our right
to develop and sell the products covered by the licenses.
We have obtained licenses to third-party technology to conduct parts of our
business, including technology supporting critical components of our Isolex(R)
system. We are the exclusive licensee in the field of therapeutic research to
patented technology from Becton Dickinson Company and Johns Hopkins University,
which technology relates to stem cell separation and particularly relates to the
separation of CD34 blood stem cells. If the licensors breach or terminate this
or other licenses, we may lose our rights to develop and market the products for
the purposes covered by the licenses, including the rights to develop and market
our Isolex(R) system. We may not be able to obtain additional licenses as may
be required for the development of our products on reasonable terms or at all.
If our patent and other intellectual property protection is inadequate, our
sales and profits could suffer or competitors could force our products out of
the market.
We own or license patents on which our products rely in four general patent
families:
. selection systems;
. bioreactor and culture systems;
. reagents for use in selection; and
. cell culture and cell compositions.
Four of our licensed patents relating to CD34 stem cell separation, a
critical application of the Isolex(R) system, currently are set to expire in
2004, 2007, 2110 and 2111, respectively. We may not be able to extend these or
any other patents. Competitors may develop products based upon the same
principles as our products, including the Isolex(R) system, and market those
products after our patents expire, or may design around our existing patents.
If this happens, our sales would suffer and profits could be severely impacted.
In addition, patents may be issued to others which prevent the manufacture or
sale of our products. We may have to license those patents and pay significant
fees or royalties to the owners of the patents in order to keep marketing our
products. This would cause profits on sales to suffer.
We have filed patent applications with respect to our potential products.
These patent applications and others which may be filed by us may not issue.
The scope of any patent that issues may not be sufficient to protect our
technology. The laws of foreign jurisdictions in which we sell and intend to
sell our products may not protect our rights to the same extent as the laws of
the United States.
In addition to patent protection, we also rely on trade secrets,
proprietary know-how and technology advances. We enter into confidentiality
agreements with our employees and others, but these agreements may not be
effective in protecting our proprietary information. Others may independently
develop substantially equivalent proprietary information or obtain access to our
know-how.
If we do not keep pace with technological and market changes, our products may
become obsolete and our business may suffer.
The market for our products is very competitive and is subject to rapid
technological changes. Our competitors may have developed, or could in the
future develop, new technologies
5
that compete with our products or even render our products obsolete. Numerous
investigators are working in the fields for which our products are intended
for use. Given the unpredictable nature of medical research and clinical
development, studies have been and will continue to be published that are not
supportive of the uses of our products for which we intended. Even if we are
able to demonstrate improved or equivalent results of our products compared to
existing products, practitioners may not switch to our new products. Given the
experience and expertise associated with traditional cancer treatment methods,
if we cannot develop our cell selection procedure to lead to a less expensive
and quicker recovery time than seen with alternative treatment methods, we will
suffer a competitive disadvantage. Researchers are continually learning more
about cancer that may lead to new technologies to treat the disease. To the
extent that others develop new technologies that address cancer treatment, our
business will suffer.
The market for our products will depend on acceptance by physicians and
patients.
Market acceptance and demand for our products will depend largely on
acceptance by physicians and patients of the products as safe and effective
treatments and on the pricing of alternative products. Our technologies or
product candidates may not be accepted by the marketplace as readily as
competing or alternative processes or methodologies. Sales of our products have
generated growing but modest revenues to date. The Isolex(R) 300i cell selection
system has been approved for marketing in the United States. This is the only
one of our stem cell selection products that has received such approval. We
cannot assure that any of our products will gain any significant degree of
market acceptance in the United States or internationally among physicians,
hospital personnel, other health care providers and third-party payers, even if
reimbursement and necessary regulatory approvals are obtained. We believe that
the commercial success of our products will depend on such acceptance.
Acceptance will also depend upon our ability to train physicians, hospital
personnel and other health care providers to use the Isolex(R) system and our
other products, and the willingness of such individuals to learn to use these
products. Failure of our products to achieve significant market acceptance would
have a material adverse effect on our business, financial condition and results
of operations.
The success of sales of our products may depend upon reimbursements by third-
party payers.
In the United States, physicians, hospitals and other health care providers
that perform medical services generally rely on third-party payers, such as
government and private health insurance plans and health maintenance
organizations, to reimburse all or part of the cost associated with the
treatment of patients. Our ability to successfully commercialize our product
candidates will also depend on the extent to which these third party payers will
pay for the products and related treatments. Reimbursement by third party
payers depends on factors such as the payers' determination that use of the
products is safe and effective, medically necessary and not experimental or
investigational, appropriate for the patient and cost-effective. At present,
most third-party payers will reimburse for stem cell transplantation based on
fixed case rates. Many payers, however, still consider stem cell selection to
be experimental and investigational and have not included reimbursement for the
selection process in those case rates. A number of transplant centers in the
United States have in fact succeeded in negotiating higher case rates to include
reimbursement for the stem cell selection process, but there can be no assurance
that most or all of our customers will have such success in the United States or
foreign jurisdictions. Accordingly, reimbursement in the United States or
foreign jurisdictions may not be available or maintained for the Isolex(R)
system or any of our product candidates.
6
If third party payers do not approve our products for reimbursement, sales
will suffer as transplant centers and patients opt for competing products or
alternative treatments. If we do not obtain approvals for adequate third-party
reimbursements, we may not be able to establish or maintain price levels
sufficient to realize an appropriate return on our investment in product
development. Any limits on reimbursement available from third-party payers may
reduce the demand for, or negatively affect the price of, our products.
We have limited experience with manufacturing and we depend on third parties,
who may not perform, manufacture, or distribute our products outside the United
States, Canada and Western Europe.
We have no in-house manufacturing capability and rely exclusively on Baxter
Healthcare Corporation for the manufacture of our Isolex(R) and MaxSep(R)
products, as well as the supplies associated with these products. We also
contract with Dynal Biotech, a Norwegian reagent company, for the supply of
paramagnetic beads for use in cell selection. We contract with other companies
for supply of monoclonal antibodies, reagents and/or plastics. We rely on
Baxter affiliates and other companies for the distribution and servicing of our
products outside of the United States, Canada and Western Europe. If third
parties do not successfully carry out their contractual duties or meet expected
deadlines, or if our supply of certain components or other materials is limited
or interrupted, we would not be able to conduct clinical trials or market our
product candidates on a timely and cost-competitive basis, if at all. Our
revenues may suffer as a consequence. We may not be able to maintain favorable
agreements with these parties and may not be able to locate acceptable
contractors, or enter into favorable agreements with them, to replace existing
contractors or to manufacture and distribute new products. If third party
agreements terminate at a critical time, we may not have manufacturing or
distribution capabilities to meet demand for our products.
To be successful, our products must be manufactured in compliance with
regulatory requirements and at acceptable costs. Manufacturing facilities of
the company's products are subject to GMP regulations, international quality
standards and other regulatory requirements. Failure by our contractors to
maintain their facilities in accordance with GMP regulations, international
quality standards or other regulatory requirements may entail a delay or
termination of production, which could have a material adverse effect on our
business, financial condition and results of operations.
Given our limited sales and marketing experience, we may not be able to develop
effective methods to sell and market our products.
Until late 1999, we relied on Baxter Healthcare Corporation for sales and
marketing of our products. We have established internal sales and marketing
capabilities and will be primarily responsible for sales and marketing of our
products. Our internal capabilities are inexperienced and may not be effective.
If we are not able to develop an effective sales and marketing organization, we
will have to arrange for such activities to be performed by contracted third
parties. We may not be able to enter into favorable agreements with such third
parties, if at all. Such failures could have a material adverse effect on our
business, financial condition and results of operations.
7
Intellectual property litigation could harm our business.
Our success will depend in part on our ability to develop commercially
viable products without infringing the proprietary rights of others.
Litigation, which is very expensive, may be necessary to enforce or defend our
patents or proprietary rights and may not end favorably for us. Although we
have not been subject to any filed infringement claims based on third party
patents, other patents could exist or could be filed, which would prohibit or
limit our ability to market our products or maintain our competitive position.
On March 2, 2000, we filed suit against Miltenyi Biotec GmbH and their related
companies, Miltenyi Biotec, Inc. and AmCell Corporation. The suit charges
Miltenyi with patent infringement, breach of contract and deceptive trade
practices. Intellectual property litigation such as this could divert
management's attention from developing our products and could force us to incur
substantial costs regardless of whether we are successful. An adverse outcome
could subject us to increased competition in the United States. Any of our
patents, licenses or other intellectual property may be challenged, invalidated,
canceled, infringed or circumvented and may not provide any competitive
advantage to us.
Public attitudes towards cell therapy may negatively affect regulatory approval
or public perception of our products.
The commercial success of our product candidates will depend in part on
public acceptance of the use of cell therapy for the prevention or treatment of
human diseases. Public attitudes may be influenced by claims that cell therapy
is unsafe, and cell therapy may not gain the acceptance of the public or the
medical community. Adverse effects in the field of cell therapy that have
occurred or may occur in the future also may result in greater governmental
regulation of our product candidates and potential regulatory delays relating to
the testing or approval of our product candidates.
The ethical, legal and social implications of our research using stem cells
could prevent us from developing or gaining acceptance for commercially viable
products in this area.
Our research programs may involve the use of human stem cells that would be
derived from human tissue. The use of certain human stem cells gives rise to
ethical, legal and social issues regarding the appropriate use of these cells.
In the event that our research related to human stem cells becomes the subject
of adverse commentary or publicity, the market price for our common stock could
be significantly harmed.
We face certain risks associated with international sales of our products.
A number of risks are inherent in international operations and
transactions. International sales and operations may be limited or disrupted by
the imposition of government controls, export license requirements, political
instability, trade restrictions, changes in tariffs and difficulties in
staffing, coordinating and managing international operations. Additionally, our
business, financial condition and results of operations may be adversely
affected by fluctuations in international currency exchange rates as well as
constraints on our ability to maintain or increase prices. The international
nature of our business subjects us and our representatives, agents and
distributors to laws and regulations of the foreign jurisdictions in which they
operate or in which our products are sold. The regulation of medical devices in
a number of such jurisdictions, particularly in the European Union, continues to
develop. We cannot assure that new laws or
8
regulations, or new interpretations of existing laws and regulations, will not
have a material adverse effect on our business, financial condition and results
of operations. In addition, the laws of certain foreign countries do not protect
our intellectual property rights to the same extent as do the laws of the United
States. We may not be able to successfully further commercialize our current
products or successfully commercialize any future products in any international
market.
We may not successfully compete in the biotechnology industry.
We compete with biotechnology companies, pharmaceutical companies, academic
institutions, government agencies and public and private research organizations.
Many of these entities have extensive resources and experience in research and
development, clinical testing, manufacturing, regulatory affairs, distribution
and marketing. Some of these entities have significant research and development
activities in areas upon which our programs focus. Many of our competitors
possess substantially greater research and development, financial, technical,
marketing and human resources than us and may be in a better position to
develop, manufacture and market products. We are aware of existing products
that compete with our products and other products in development that may
compete with our products. If we cannot successfully compete with existing or
new products, our marketing and sales will suffer and it may not ever be
profitable.
If we need additional financing and cannot obtain it, product development and
sales may be limited.
We may need to change our plans for development of our proposed products to
address difficulties with clinical studies or for sales of our existing products
to accommodate market demands. If that occurs, we may need to spend more funds
than currently anticipated. We may not be able to obtain additional funds on
commercially reasonable terms or at all. If adequate funds are not available,
we may be required to delay or terminate research and development programs,
curtail capital expenditures, reduce business development and other operating
activities or to obtain financing on terms not favorable to us.
If we do not attract and retain key management, consultants and scientific
personnel, our business may suffer.
We are highly dependent on our current management, consultants and
scientific personnel. Our success will largely depend upon our ability to
retain our current key personnel and consultants and to attract and retain new
highly qualified personnel. Expertise in the field of ex vivo cell research and
therapy is not generally available in the market, and competition for qualified
consultants, management and scientific personnel is intense. We may not be
successful in retaining existing or hiring new key consultants and personnel,
which may have an adverse effect on us.
9
We may not have adequate insurance and may have substantial exposure to payment
of product liability claims.
We face an inherent business risk of exposure to product liability claims
in the event that the use of the Isolex(R) system during research and
development efforts, including clinical trials, or after commercialization
results in adverse effects. As a result, we may incur significant product
liability exposure, which could exceed existing product liability insurance
coverage. We may not be able to maintain our product liability insurance at an
acceptable cost, if at all. If claims or losses exceed our liability insurance
coverage, our financial condition would be adversely affected.
Our stock price and warrant price could be volatile and could decline.
The market prices for securities of biotechnology companies are highly
volatile, and there are significant price and volume fluctuations in the market
that may be unrelated to particular companies' operating performances. Our stock
price could decline suddenly due to factors such as the following:
. results of clinical trials;
. the amount of our cash resources and ability to obtain additional
funding;
. timing of regulatory approvals and changes in government regulation;
. fluctuations in operating results;
. announcements by us or others of technological innovations or new
products;
. failure to meet estimates or expectations of securities analysts;
. rate of product acceptance;
. developments in or disputes over patent or other proprietary rights;
. public concern as to the safety of products developed by us or by
others;
. changes in recommendations by securities analysts, if any; and
. general market conditions.
Any of these events may cause the price of our shares to fall, which may
adversely affect our business and financing opportunities. In addition, the
stock market in general and the market prices for biotechnology companies in
particular have experienced significant volatility that often has been unrelated
to the operating performance or financial conditions of such companies. These
broad market and industry fluctuations may adversely affect the trading price of
our shares, regardless of our operating performance or prospects. For example,
since December 31, 1999, the price of our common stock has fluctuated from a low
of $3.25 to a high of $25.75, and the price of our publicly traded warrants has
fluctuated from a low of $.6875 to a high of $5.50.
10
Outstanding shares of convertible preferred stock and warrants could cause
substantial dilution.
As of September 30, 2000, our outstanding equity securities included:
. 74,498 shares of Series A Cumulative Convertible Preferred Stock,
convertible into 6,772,545 shares of common stock at a conversion price
of $11.00 per share;
. 63,000 shares of Series B Cumulative Convertible Preferred Stock,
convertible into 5,727272 shares of common stock at a conversion price
of $11.00 per share;
. Class B Warrants to purchase 750,000 shares of common stock for a price
of $12.00 per share; and
. warrants to purchase 1,300,000 shares of common stock for a price of
$4.60 per share.
. warrants to purchase 361,130 shares of common stock for a price of $5.40
per share.
If holders of the preferred stock and warrants listed above converted or
exercised all of their shares as of September 30, 2000, the holders would
receive approximately 14,911,000 shares of common stock (representing
approximately 39% of our outstanding shares on a fully diluted basis, including
approximately 2,212,000 shares of common stock upon the exercise of stock
options outstanding as of September 30, 2000). Investors in our common stock or
warrants could experience substantial dilution of their investment upon
conversion of the preferred stock or exercise of the warrants. Our outstanding
equity securities also include Class A Warrants to purchase up to 1,500,000
shares of common stock for a price of $.04 per share, which are not exercisable,
if at all, until November 24, 2004.
Future sales of shares may depress the price of our common stock.
If shareholders sell a substantial number of shares of our common stock in
the public market, or investors perceive that these sales might occur, the
market price of our common stock could decrease. Such a decrease could make it
difficult for us to raise capital by selling stock or to pay for acquisitions
using stock. To the extent outstanding options or warrants are exercised or
additional shares of capital stock are issued, investors purchasing our common
stock or securities convertible into common stock may incur additional dilution.
Our employees hold a significant number of options to purchase shares, many of
which are presently exercisable. Employees may exercise their options and sell
shares shortly after such options become exercisable, particularly if they need
to raise funds to pay for the exercise of such options or to satisfy tax
liabilities that they may incur in connection with exercising their options.
If shareholders do not receive dividends, shareholders must rely on stock
appreciation for any return on their investment.
We have never declared or paid cash dividends on any of our capital stock.
We currently intend to retain any earnings for future growth and, therefore, do
not anticipate paying cash dividends in the future. As a result, only
appreciation of the price of the warrants and/or common stock will provide a
return to investors who purchase or acquire securities pursuant to this
prospectus.
11
Forward-Looking Statements
This prospectus contains forward-looking statements, including statements
regarding:
. plans and objectives of management for future operations, including
those relating to the development, sales and marketing of the Isolex(R)
products;
. statements preceded by, followed by, or including the words "believes,"
"expects," "intends," "estimates," "should," "may," or similar
expressions; and
. other statements contained or incorporated by reference in this
prospectus regarding matters that are not historical facts.
Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by such forward-
looking statements. Factors that could cause actual results to differ
materially include, but are not limited to:
. results of clinical trials;
. ability to enter into strategic collaborations with others;
. timing of product development;
. marketability of products;
. ability to obtain and protect patent and proprietary rights;
. competition and technological change;
. extent of developing sales and marketing capabilities;
. ability to obtain third-party reimbursement;
. existence of hazardous materials;
. potential product liability and availability of insurance;
. future capital needs and ability to obtain additional funding; and
. timing and receipt of regulatory approval.
Although we believe that the expectations reflected in the forward-looking
statements as of this date are reasonable, we cannot assure that the
expectations will prove to have been correct. All phases of our operations are
subject to uncertainties, risks and other influences, many of which are outside
our control. Any one, or a combination, of those uncertainties, risks or other
influences could materially adversely affect our results of operations, whether
or not the forward-looking statements ultimately prove to be accurate.
12
We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or otherwise.
You are advised, however, to consult any additional disclosures we make in our
Form 10-Q, 8-K and 10-K reports to the SEC.
13
Use Of Proceeds
We cannot guarantee that we will receive any proceeds in connection with
this offering.
We intend to use the net proceeds of this offering, if any, to fund
research, development and product manufacturing, to provide working capital and
for general corporate purposes. We may also use a portion of the net proceeds
to acquire or invest in businesses, products and technologies that are
complementary to our own. Pending these uses, the net proceeds will be invested
in investment-grade, interest-bearing securities.
The principal proposes of this offering are to increase our capitalization
and our operating and financial flexibility. As of the date of this prospectus,
we cannot specify with certainty all of the particular uses for the net proceeds
we will have upon completion of this offering. Accordingly, our management will
have broad discretion in the application of net proceeds, if any.
Based upon our current operating plan, we believe that our available cash
and existing sources of revenue, together with the proceeds of this offering, if
any, and interest earned thereon, will be adequate to satisfy our capital needs
until at least the end of the year 2001.
14
Plan Of Distribution
We may offer the common stock:
. Directly to purchasers;
. to or through underwriters;
. through dealers, agents or institutional investors; or
. through a combination of such methods.
Regardless of the method used to sell the common stock, we will provide a
prospectus supplement that will disclose:
. the identity of any underwriters, dealers or agents who purchase the
common stock;
. the material terms of the distribution, including the number of shares
sold and the consideration paid;
. the amount of any compensation, discounts or commissions to be received
by the underwriters, dealers or agents;
. the terms of any indemnification provisions, including indemnification
from liabilities under the federal securities laws; and
. the nature of any transaction by an underwriter, dealer or agent during
the offering that is intended to stabilize or maintain the market price
of the common stock.
We will bear the expenses incident to the registration of the shares, other
than selling discounts and commissions. These expenses are estimated to be
$100,600.
15
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 room at 450 Fifth Street, N.W., Washington, D.C., 20549.
You can request copies of these documents by contacting the SEC and paying a fee
for the copying cost. 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 from the SEC's website at www.sec.gov.
This prospectus is part of a registration statement on Form S-3, including
amendments, relating to the common stock offered by this prospectus with the
SEC. This prospectus does not contain all of the information set forth in the
registration statement, the exhibits and schedules, some portions of which the
SEC allows us to omit. Statements contained in this prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and in each instance reference is made to the copy of that contract or
other document filed as an exhibit to the registration statement. For further
information about us and the common stock offered by this prospectus we refer
you to the registration statement and its exhibits and schedules which may be
obtained as described above.
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
that we filed with the SEC before the date of this prospectus, while information
that we file later with the SEC will automatically update and supersede prior
information. We incorporate by reference the documents listed below and any
future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, prior to the
termination of the offering:
1. our Annual Report on Form 10-K for the fiscal year ended December 31,
1999;
2. our Quarterly Reports on Form 10-Q for the quarters ended March 31,
2000, June 30, 2000 and September 30, 2000;
3. our Current Reports on Form 8-K, filed July 19, 2000 and June 22, 2000;
and
4. the description of our common stock contained in our registration
statement on Form S-3 filed May 10, 1999.
You may request copies of these filings, at no cost, by writing or
telephoning us at:
Nexell Therapeutics Inc.
9 Parker
Irvine, California 92618
Attention: Corporate Communications
Telephone (949) 470-9011
16
Legal Matters
The validity of the issuance of the common stock offered in this prospectus
will be passed upon for Nexell Therapeutics Inc. by Latham & Watkins, Menlo
Park, California. Latham & Watkins does not beneficially own any shares of
common stock as of the date of this prospectus.
Experts
The consolidated financial statements of Nexell Therapeutics Inc. as of
December 31, 1999 and 1998, and for each of the years in the three-year period
ended December 31, 1999, have been incorporated herein by reference and in the
registration statement in reliance upon the report of KPMG LLP, independent
auditors, incorporated by reference herein, and upon the authority of said firm
as experts in accounting and auditing.
17
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Plan of Distribution................................................... S-1
Use of Proceeds........................................................ S-2
Market for Our Common Stock............................................ S-3
General................................................................ S-3
Prospectus
Prospectus Summary..................................................... 1
The Company............................................................ 1
The Offering........................................................... 2
Risk Factors........................................................... 3
Forward-Looking Statements............................................. 12
Use of Proceeds........................................................ 14
Plan of Distribution................................................... 15
Where You Can Find More Information.................................... 16
Legal Matters.......................................................... 17
Experts................................................................ 17