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Rule 424(b)(3)
Registration Statement No. 333-65862
800,000 SHARES
NEORX CORPORATION
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COMMON STOCK
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This prospectus relates to the public offering of up to 800,000 shares
of our common stock by the selling shareholders.
Our common stock is traded on the Nasdaq National Market under the
symbol "NERX." On August 6, 2001, the last sales price of the common stock, as
reported on the Nasdaq National Market, was $3.40 per share.
SEE "RISK FACTORS" BEGINNING AT PAGE 2 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is August 8, 2001
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TABLE OF CONTENTS
NEORX CORPORATION.............................................................1
RISK FACTORS..................................................................2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS............................10
USE OF PROCEEDS..............................................................11
SELLING SHAREHOLDERS.........................................................11
PLAN OF DISTRIBUTION.........................................................12
VALIDITY OF COMMON STOCK.....................................................13
EXPERTS......................................................................13
WHERE YOU CAN FIND MORE INFORMATION..........................................13
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NEORX CORPORATION
NeoRx is developing innovative products designed to provide improved,
cost-effective treatments for patients with cancer.
We are in the process of completing initial safety and efficacy testing,
commonly referred to as Phase I and Phase II clinical trials, of our Skeletal
Targeted Radiation product, which we call STR, combined with chemotherapy in
patients with multiple myeloma. Multiple myeloma is a cancer of plasma cells
that are found in the bone marrow. STR selectively delivers a form of radiation
called holmium-166 to the bone, where it is designed to destroy both tumor cells
and normal cells in the marrow. The patient then receives an infusion of cells
harvested from the patient prior to exposure to treatment. These cells are
designed to repopulate the bone marrow so that the patient can make normal red
cells, white cells and platelets. We believe that STR represents an important
opportunity in cancer therapy to deliver high doses of radiation to the bone and
marrow cavity without simultaneously causing significant damage to organs
outside the bone
In October 2000, we initiated the next stage of testing, commonly
referred to as Phase III clinical trials, of our STR product for multiple
myeloma. In November 2000, the U.S. Food and Drug Administration placed our
Phase III trials and other STR studies on clinical hold after a number of Phase
I/II patients who received STR developed a serious delayed side effect. We are
in continuing communications with the FDA to remove our proposed STR product
from clinical hold. You should refer to our filings with the Securities and
Exchange Commission for further information about the status of our STR studies.
We currently cannot predict if, when or under what conditions the FDA will
permit us to restart our STR studies.
We also are developing a proprietary PRETARGET(R) program to deliver
radiation therapy, and potentially other anti-cancer agents, directly to tumor
sites. This program employs antibody fragments linked to a receptor. A receptor
is a molecule that can bind another molecule. The antibody/receptor is designed
to target cancer cells. Antibodies are proteins produced by certain white blood
cells in the body's immune system in response to foreign substances (antigens),
such as viruses, bacteria, toxins and specific types of cancer cells. An
antibody will recognize and bond specifically only to a single type of antigen.
Using PRETARGET(R) technology, we administer an antibody to the patient
prior to injecting a radioactive molecule. We then administer a radioactive drug
to the patient that is formulated to attach to the antibody. Any portion of the
radioactive drug that does not attach to the antibody is rapidly eliminated from
the patient's body in the patient's urine.
We began phase I clinical trials of our PRETARGET(R) technology in
patients with lymphomas, which are cancers of the lymph cells in December 2000.
We also are developing PRETARGET(R) therapeutics that may be useful for the
treatment of cancers of the lung, breast, ovary, colon, rectum and pancreas.
Phase I PRETARGET(R) clinical trials in patients with pancreatic and other
cancers of the gastrointestinal tract are expected to begin in 2001.
On April 19, 2001, we purchased from International Isotopes Inc., a
radiopharmaceutical manufacturing facility and certain other assets, located in
Denton, Texas. We have hired certain former employees of International Isotopes
to serve on our radiopharmaceutical manufacturing team at the facility. We
intend to use the facility primarily to produce our STR and other products in
development. Additionally, we intend to explore certain select opportunities to
provide manufacturing contract services to third parties.
Effective July 30, 2001, Paul G. Abrams, MD, JD, resigned as President
and Chief Executive Officer and as a Director of the Company, and Douglass B.
Given, MD, PhD, was appointed to those positions.
Our principal executive offices are located at 401 West Harrison Street,
Seattle, Washington 98119-4007. Our telephone number is (206) 281-7001. We
maintain a World Wide Web site at www.neorx.com. Information contained on our
Web site does not constitute part of, nor is it incorporated by reference into,
this prospectus.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, YOU
SHOULD CAREFULLY READ AND CONSIDER THE FOLLOWING RISK FACTORS BEFORE PURCHASING
OUR COMMON STOCK. EACH OF THESE RISKS COULD HARM OUR BUSINESS, OPERATING RESULTS
AND FINANCIAL CONDITION, AS WELL AS DECREASE THE VALUE OF AN INVESTMENT IN OUR
STOCK. THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
WE HAVE A HISTORY OF OPERATING LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES,
AND WE MAY NEVER BECOME PROFITABLE.
We have not been profitable for any year since our formation in 1984. As
of June 30, 2001, we had an accumulated deficit of $168 million. These losses
have resulted principally from costs incurred in our research and development
programs and from our general and administrative costs. To date, we have been
engaged only in research and development activities and have not generated any
significant revenues from product sales. We do not anticipate that any of our
proposed products will be commercially available for several years. We expect to
incur additional operating losses in the future. We expect that our the recent
purchase of a radiopharmaceutical manufacturing facility and certain other
assets located in Denton, Texas will increase our operating losses. These losses
may increase significantly as we expand development and clinical trial efforts.
Our ability to achieve long-term profitability is dependent upon obtaining
regulatory approvals for our proposed products and successfully commercializing
our products alone or with third parties. However, our operations may not be
profitable even if we succeed in commercializing any of our products under
development.
WE WILL NEED TO RAISE ADDITIONAL CAPITAL, AND OUR FUTURE ACCESS TO CAPITAL IS
UNCERTAIN.
It is expensive to develop cancer therapy products and conduct clinical
trials for these products. We plan to continue to simultaneously conduct
clinical trials and preclinical research for a number of different cancer
therapy products, which is costly. Our future revenues may not be sufficient to
support the expense of our operations and the conduct of our clinical trials and
preclinical research. We will need to raise additional capital:
- - to fund operations;
- - to continue the research and development of our therapeutic products;
- - to maintain and develop our radiopharmaceutical manufacturing facility;
and
- - to commercialize our proposed products.
We believe that our existing funds will be sufficient to satisfy our
financing requirements through at least the third quarter of 2002. However, we
may need additional financing within this time frame depending on a number of
factors, including the following:
- - The rate of progress and costs of our research and development and
clinical trial activities;
- - The costs of developing manufacturing operations;
- - The costs of developing and expanding marketing operations, if we
undertake those activities;
- - The amount of milestone payments we might receive from potential
collaborators;
- - Our degree of success in commercializing our cancer therapy products;
- - The emergence of competing technologies and other adverse market
developments;
- - Changes in or terminations of our existing collaborations and licensing
arrangements; and
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- - The costs of preparing, filing, prosecuting, maintaining and enforcing
patent claims and other intellectual property rights.
We may not be able to obtain additional financing on favorable terms or
at all. If we are unable to raise additional funds when we need them, we may be
required to delay, reduce or eliminate some or all of our development programs
and some or all of our clinical trials. We also may be forced to partner with
third parties to develop or commercialize products or technologies that we
otherwise would have sought to develop independently. If we raise additional
funds by issuing equity securities, further dilution to shareholders may result,
and new investors could have rights superior to current security holders.
OUR POTENTIAL PRODUCTS MUST UNDERGO RIGOROUS CLINICAL TESTING AND REGULATORY
APPROVALS, WHICH COULD BE COSTLY, TIME CONSUMING, SUBJECT US TO UNANTICIPATED
DELAYS OR PREVENT US FROM MARKETING ANY PRODUCTS.
The manufacture and marketing of our proposed products and our research
and development activities are subject to regulation for safety, efficacy and
quality by the U.S. Food and Drug Administration in the United States and
comparable authorities in other countries.
The process of obtaining FDA and other required regulatory approvals,
including foreign approvals, is expensive and often takes many years and can
vary substantially based upon the type, complexity and novelty of the products
involved. Our Skeletal Targeted Radiation, which we call STR, and PRETARGET(R)
products are novel; therefore, regulatory agencies lack experience with them.
This may lengthen the regulatory review process, increase our development costs
and delay or prevent commercialization of our STR and PRETARGET(R) products. Our
current STR studies were placed on clinical hold after some phase I/II patients
in our STR multiple myeloma trials developed a serious late toxicity. The FDA
has requested that we collect additional dosimetry data from patients to
demonstrate the accuracy of the method we propose to use to calculate dose in
our proposed phase III trial. We expect our phase III STR trials to be delayed
until the dosimetry trial is completed. The FDA has also suggested that we
analyze our patient data to determine the relevant factors for selecting a
radiation dose likely to produce an appropriate safety profile. Our current STR
phase III protocol could be modified based on this analysis. Our phase III
trials cannot begin until we receive authorization from the FDA, and there is no
guarantee when, if, or under what conditions that will occur.
No cancer products using our STR or PRETARGET(R) technologies have been
approved for marketing. Consequently, there is no precedent for the successful
commercialization of products based on our technologies. In addition, we have
had only limited experience in filing and pursuing applications necessary to
gain regulatory approvals. This may impede our ability to obtain timely FDA
approvals, if at all. We will not be able to commercialize any of our potential
products until we obtain FDA approval, and consequently any delay in obtaining,
or inability to obtain, FDA approval could harm our business.
If we violate regulatory requirements at any stage, whether before or
after marketing approval is obtained, we may be fined, forced to remove a
product from the market and experience other adverse consequences, including
delay, which could materially harm our financial results. Additionally, we may
not be able to obtain the labeling claims necessary or desirable for the
promotion of our proposed products. We may also be required to undertake
post-marketing trials. In addition, if others or we identify side effects after
any of our products are on the market, or if manufacturing problems occur,
regulatory approval may be withdrawn and reformulation of our products,
additional clinical trials, changes in labeling of our products, and additional
marketing applications may be required.
The requirements governing the conduct of clinical trials, manufacturing
and marketing of our proposed products outside the United States vary widely
from country to country. Foreign approvals may take longer to obtain than FDA
approvals and can involve additional testing. Foreign regulatory approval
processes include all of the risks associated with the FDA approval processes.
Also, approval of a product by the FDA does not ensure approval of the same
product by the health authorities of other countries.
WE MAY TAKE LONGER TO COMPLETE OUR CLINICAL TRIALS THAN WE PROJECT, OR WE MAY BE
UNABLE TO COMPLETE THEM AT ALL.
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Although for planning purposes we project the commencement, continuation
and completion of our clinical trials, a number of factors may cause significant
delays, including scheduling conflicts with participating clinicians and
clinical institutions and difficulties in identifying and enrolling patients who
meet trial eligibility criteria. We may not commence or complete clinical trials
involving any of our products as projected or may not conduct them successfully.
We rely on academic institutions or clinical research organizations to
conduct, supervise or monitor some or all aspects of clinical trials involving
our proposed products. We will have less control over the timing and other
aspects of those clinical trials than if we conducted them entirely on our own.
If we fail to commence or complete, or experience delays in, any of our planned
clinical trials, our stock price and our ability to conduct our business as
currently planned could be harmed.
IF TESTING OF A PARTICULAR PRODUCT DOES NOT YIELD SUCCESSFUL RESULTS, WE WILL BE
UNABLE TO COMMERCIALIZE THAT PRODUCT.
Our research and development programs are designed to test the safety
and efficacy of our proposed products in humans through extensive preclinical
and clinical testing. We may experience numerous unforeseen events during, or as
a result of, the testing process that could delay or prevent commercialization
of our proposed products, including the following:
- - safety and efficacy results attained in early human clinical trials may
not be indicative of results that are obtained in later clinical trials;
- - the results of preclinical studies may be inconclusive, or they may not
be indicative of results that will be obtained in human clinical trials;
- - after reviewing test results, we or any potential collaborators may
abandon projects that we previously believed were promising;
- - our potential collaborators or regulators may suspend or terminate
clinical trials if the participating subjects or patients are being
exposed to unacceptable health risks; and
- - the effects our potential products have may not be the desired effects
or may include undesirable side effects or other characteristics that
preclude regulatory approval or limit their commercial use if approved.
Clinical testing is very expensive, can take many years, and the outcome
is uncertain. We cannot at this time predict if, when or under what conditions
we will be permitted to restart our STR phase III trial or our other STR
clinical trials. The data collected from our clinical trials may not be
sufficient to support approval by the FDA of our proposed STR multiple myeloma
product, or any of our other proposed products. The clinical trials of our
proposed STR multiple myeloma product and our other products under development
may not be completed on schedule, and the FDA may not ultimately approve any of
our product candidates for commercial sale. Our failure to adequately
demonstrate the safety and efficacy of a cancer therapy product under
development would delay or prevent regulatory approval of the product, which
could prevent us from achieving profitability.
WE ARE DEPENDENT ON SUPPLIERS FOR THE TIMELY DELIVERY OF MATERIALS AND SERVICES
AND MAY EXPERIENCE INTERRUPTIONS IN SUPPLY IN THE FUTURE.
To be successful, we need to develop and maintain reliable and
affordable third party suppliers of:
- - commercial quantities of holmium-166, the form of radiation used in our
STR product, and yttrium-90, the form of radiation used in our
PRETARGET(R) program;
- - the chemical agent used in our STR product to deliver holmium-166 to the
bone; and
- - the antibodies and proteins used in our PRETARGET(R) program.
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Sources of some of these materials are limited, and we may be unable to
obtain these materials in amounts and at prices necessary to successfully
commercialize our proposed products. Timely delivery of materials is critical to
our success. For example, holmium-166, the form of radiation used in our STR
product, loses its effectiveness for treating patients within a short period of
time. As a result, our suppliers must ship the STR product to the patient within
24 hours after it is manufactured. Failures or delays in the manufacturing and
shipping processes could compromise the quality and effectiveness of our
products. We currently depend on a single source vendor for the holmium-166
component of our STR product. We plan to establish an additional supplier for
this material, but this may take several years. There are, in general,
relatively few alternative sources of holmium-166. While the current vendor
generally has provided us these materials with acceptable quality, quantity and
cost in the past, it may be unable or unwilling to meet out future demands. If
we have to switch to a replacement vendor, the manufacture and delivery of our
products could be interrupted for an extended period.
We have entered into an arrangement with the University of Missouri
research reactor facility group, also known as MURR, to produce holmium-166.
MURR currently is responsible for the manufacture of holmium-166, including
process qualification, quality control, packaging and shipping, from its
Columbia, Missouri reactor facility. Our business and operations could be
materially adversely affected if MURR does not perform satisfactorily under this
arrangement. We plan to negotiate a long-term supply contract with MURR. If we
are unable to negotiate a long-term contract in a timely fashion upon favorable
terms, or if MURR is unable or unwilling to provide supplies of holmium-166
under such contract in a satisfactory manner, we may suffer delays in, or be
prevented from, initiating or completing clinical trials of our STR product.
IF WE FAIL TO NEGOTIATE AND MAINTAIN COLLABORATIVE ARRANGEMENTS WITH THIRD
PARTIES, OUR MANUFACTURING, CLINICAL TESTING, SALES AND MARKETING ACTIVITIES MAY
BE DELAYED OR REDUCED.
We rely in part on collaborators and other third parties to perform for
us or assist us with a variety of important functions, including research and
development, manufacturing and clinical trials management. We also license
technology from others to enhance or supplement our technologies. We may not be
able to locate suppliers to manufacture our products at a cost or in quantities
necessary to make them commercially viable. We intend to rely on third party
contract manufacturers to produce large quantities of materials needed for
clinical trials and product commercialization. Third party manufacturers may not
be able to meet our needs with respect to timing, quantity or quality. If we are
unable to contract for a sufficient supply of needed materials on acceptable
terms, or if we should encounter delays or difficulties in our relationships
with manufacturers, our clinical testing may be delayed, thereby delaying the
submission of products for regulatory approval or the market introduction and
subsequent sales of our products. Any such delay may lower our revenues and
potential profitability.
Moreover, we and any of our third-party manufacturers must continually
adhere to cGMP regulations enforced by the FDA through its facilities inspection
program. If our facilities, or the facilities of these manufacturers, cannot
pass a pre-approval plant inspection, the FDA will not grant pre-market approval
of our cancer therapy products. In complying with cGMP and foreign regulatory
requirements, we and any of our third-party manufacturers will be obligated to
expend time, money and effort in production, record-keeping and quality control
to assure that our products meet applicable specifications and other
requirements. If we or any of our third-party manufacturers fail to comply with
these requirements, we may be subject to regulatory action.
ABC Laboratories, Inc., which we call ABC Labs, currently is our sole
collaborator manufacturing STR for our pending multiple myeloma clinical trials.
As such, ABC Labs would be responsible for all aspects of the manufacture of
STR, including process qualification, quality control, packaging and shipping.
We believe that ABC's manufacturing facilities will be sufficient to meet our
initial needs for the planned STR multiple myeloma and other STR clinical
trials. In the past, we have experienced interruptions in ABC Labs' STR
manufacturing processes, which if they occur in the future, could result in
material delays in, or prevent us from completing, our clinical trials and
otherwise commercializing our STR product.
To help protect against future interruptions or delays in supply, on
April 19, 2001, we purchased, from International Isotopes Inc., a
radiopharmaceutical manufacturing facility and certain other assets, located in
Denton, Texas. We have hired certain former employees of International Isotopes
to serve on our radiopharmaceutical manufacturing team at the facility. We
intend to use the facility primarily to produce our STR and other products in
development. Additionally, we
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intend to explore certain select opportunities to provide manufacturing contract
services to third parties. We currently expect this manufacturing facility to be
operational in the fourth quarter of 2001. In this case, ABC Labs and NeoRx
would share the manufacture of STR for clinical trials.
If we lose or are unable to secure collaborators, or if we are not
successful in initiating manufacturing operations at the Denton, Texas facility,
or if our current collaborators, including ABC Labs, do not apply adequate
resources to their collaboration with us, our product development and potential
for profitability may suffer. We intend to enter into collaborations for one or
more of the research, development, manufacturing, marketing and other
commercialization activities relating to some of our products under development.
If any collaborator breaches or terminates its agreement with us, or fails to
conduct its collaborative activities in a timely manner, the commercialization
of our products under development could be slowed down or blocked completely.
Disputes may arise between us and ABC Labs or other collaborators on a variety
of matters, including financial or other obligations under our agreements. These
disputes may be both expensive and time consuming and may result in delays in
the development and commercialization of our proposed products.
WE FACE SUBSTANTIAL COMPETITION IN THE DEVELOPMENT OF CANCER THERAPIES AND MAY
NOT BE ABLE TO SUCCESSFULLY COMPETE, AND OUR POTENTIAL PRODUCTS MAY BE RENDERED
OBSOLETE BY RAPID TECHNOLOGICAL CHANGE.
The competition for development of cancer therapies is intense. There are
numerous competitors developing products to treat the diseases for which we are
seeking to develop products. We are initially focusing our STR product on the
treatment of multiple myeloma. Celgene Corporation's thalidomide product is
being sold for multiple myeloma, and Cell Therapeutics, Inc.'s arsenic trioxide
also is being tested in that disease. Some competitors have adopted product
development strategies targeting cancer cells with antibodies. Many emerging
companies, including IDEC Pharmaceuticals, Cytogen Corp. and Corixa Corporation,
have corporate partnership arrangements with large, established companies to
support the research, development and commercialization of products that may be
competitive with ours. In addition, a number of established pharmaceutical
companies, including SmithKline Beecham, Nycomed Amersham, Mallinkrodt, Inc. and
Bristol-Myers Squibb, are developing proprietary technologies or have enhanced
their capabilities by entering into arrangements with, or acquiring, companies
with proprietary antibody-based technology or other technologies applicable to
the treatment of cancer. Many of our existing or potential competitors have, or
have access to, substantially greater financial, research and development,
marketing and production resources than we do and may be better equipped than us
to develop, manufacture and market competing products. Our competitors may have,
or may develop and introduce, new products that would render our technology and
products under development less competitive, uneconomical or obsolete.
We also expect to face increasing competition from universities and
other non-profit research organizations. These institutions carry out a
significant amount of cancer research and development. These institutions are
becoming increasingly aware of the commercial value of their findings and more
active in seeking patent and other proprietary rights, as well as licensing
revenues.
IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY, OR OPERATE PROFITABLY.
Our success is dependent in part on obtaining, maintaining and enforcing
our patents and other proprietary rights and our ability to avoid infringing the
proprietary rights of others. Patent law relating to the scope of claims in the
biotechnology field in which we operate is still evolving and, consequently,
patent positions in our industry may not be as strong as in other
better-established fields. Accordingly, the United States Patent and Trademark
Office may not issue patents from the patent applications owned by or licensed
to us. If issued, the patents may not give us an advantage over competitors with
similar technology.
We own more than 100 issued United States patents and have licenses to
additional patents. However, the issuance of a patent is not conclusive as to
its validity or enforceability and it is uncertain how much protection, if any,
will be given to our patents if we attempt to enforce them and they are
challenged in court or in other proceedings, such as oppositions, which may be
brought in foreign jurisdictions to challenge the validity of a patent. A third
party may challenge the validity or enforceability of a patent after its
issuance by the Patent and Technology Office. It is possible that a competitor
may successfully challenge our patents or that a challenge will result in
limiting their coverage. Moreover, the cost of litigation to
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uphold the validity of patents and to prevent infringement can be substantial.
If the outcome of litigation is adverse to us, third parties may be able to use
our patented invention without payment to us. It also is possible that
competitors may infringe our patents or successfully avoid them through design
innovation. To stop these activities we may need to file a lawsuit. These
lawsuits are expensive and would consume time and other resources, even if we
were successful in stopping the violation of our patent rights. In addition,
there is a risk that a court would decide that our patents are not valid and
that we do not have the right to stop the other party from using the inventions.
There is also the risk that, even if the validity of our patents was upheld, a
court would refuse to stop the other party on the ground that its activities do
not infringe our patents.
In addition to the intellectual property rights described above, we rely
on unpatented technology, trade secrets and confidential information. Therefore,
others may independently develop substantially equivalent information and
techniques or otherwise gain access to or disclose our technology. We may not be
able to effectively protect our rights in unpatented technology, trade secrets
and confidential information. We require each of our employees, consultants and
advisors to execute a confidentiality agreement at the commencement of an
employment or consulting relationship with us. However, these agreements may not
provide effective protection of our information or, in the event of unauthorized
use or disclosure, they may not provide adequate remedies.
THE USE OF OUR TECHNOLOGIES COULD POTENTIALLY CONFLICT WITH THE RIGHTS OF
OTHERS.
Our competitors or others may have or acquire patent rights that they
could enforce against us. If they do so, we may be required to alter our
products, pay licensing fees or cease activities. If our products conflict with
patent rights of others, third parties could bring legal actions against us
claiming damages and seeking to enjoin manufacturing and marketing of the
affected products. If these legal actions are successful, in addition to any
potential liability for damages, we could be required to obtain a license in
order to continue to manufacture or market the affected products. We may not
prevail in any legal action and a required license under the patent may not be
available on acceptable terms or at all.
WE MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS
RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS.
The cost to us of any litigation or other proceedings relating to
intellectual property rights, even if resolved in our favor, could be
substantial. Some of our competitors may be better able to sustain the costs of
complex patent litigation because they have substantially greater resources. If
there is litigation against us, we may not be able to continue our operations.
If third parties file patent applications, or are issued patents claiming
technology also claimed by us in pending applications, we may be required to
participate in interference proceedings in the Patent and Trademark Office to
determine priority of invention. We may be required to participate in
interference proceedings involving our issued patents and pending applications.
We may be required to cease using the technology or to license rights from
prevailing third parties as a result of an unfavorable outcome in an
interference proceeding. A prevailing party in that case may not offer us a
license on commercially acceptable terms.
PRODUCT LIABILITY CLAIMS IN EXCESS OF THE AMOUNT OF OUR INSURANCE WOULD
ADVERSELY AFFECT OUR FINANCIAL CONDITION.
The testing, manufacturing, marketing and sale of the cancer therapy
products that we have under development may subject us to product liability
claims. We are insured against such risks up to a $10 million annual aggregate
limit in connection with clinical trials of our products under development and
intend to obtain product liability coverage in the future. However, insurance
coverage may not be available to us at an acceptable cost, if at all. We may not
be able to obtain insurance coverage that will be adequate to satisfy any
liability that may arise. Regardless of merit or eventual outcome, product
liability claims may result in decreased demand for a product, injury to our
reputation, withdrawal of clinical trial volunteers and loss of revenues. As a
result, regardless of whether we are insured, a product liability claim or
product recall may result in losses that could be material.
OUR USE OF RADIOACTIVE AND OTHER HAZARDOUS MATERIALS EXPOSES US TO THE RISK OF
MATERIAL ENVIRONMENTAL LIABILITIES, AND WE MAY INCUR SIGNIFICANT ADDITIONAL
COSTS TO COMPLY WITH ENVIRONMENTAL LAWS IN THE FUTURE.
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Our research and development and clinical manufacturing processes, as
well as the manufacturing processes used by our collaborators, involve the
controlled use of hazardous and radioactive materials. As a result, we are
subject to foreign, federal, state and local laws, rules, regulations and
policies governing the use, generation, manufacture, storage, air emission,
effluent discharge, handling and disposal of certain materials and wastes in
connection with our use of these materials. Although we believe that our safety
procedures and the safety procedures utilized by our collaborative partners for
handling and disposing of such materials comply with the standards prescribed by
such laws and regulations, we may be required to incur significant costs to
comply with environmental and health and safety regulations in the future. In
addition, the risk of accidental contamination or injury from hazardous and
radioactive materials cannot be completely eliminated. In the event of such an
accident, we could be held liable for any resulting damages, and any such
liability could exceed our resources.
EVEN IF WE BRING PRODUCTS TO MARKET, CHANGES IN HEALTHCARE REIMBURSEMENT COULD
ADVERSELY AFFECT OUR ABILITY TO EFFECTIVELY PRICE OUR PRODUCTS OR OBTAIN
ADEQUATE REIMBURSEMENT FOR SALES OF OUR PRODUCTS.
The levels of revenues and profitability of biotechnology companies may
be affected by the continuing efforts of government and third-party payors to
contain or reduce the costs of healthcare through various means. For example, in
certain foreign markets pricing or profitability of prescription pharmaceuticals
is subject to governmental control. In the United States, there have been, and
we expect that there will continue to be, a number of federal and state
proposals to implement similar governmental controls. It is uncertain what
legislative proposals will be adopted or what actions federal, state or private
payors for healthcare goods and services may take in response to any healthcare
reform proposals or legislation. Even in the absence of statutory change, market
forces are changing the healthcare sector. We cannot predict the effect
healthcare reforms may have on the development, testing, commercialization and
marketability of our cancer therapy products. Further, our ability to
commercialize our products under development may be adversely affected to the
extent that such proposals or reforms have a material adverse effect on the
business, financial condition and profitability of other companies that are
prospective collaborators for certain of our potential products. In addition,
both in the United States and elsewhere, sales of prescription pharmaceuticals
depend in part on the availability of reimbursement to the consumer from
third-party payors, such as governmental and private insurance plans.
Third-party payors are increasingly challenging the prices charged for medical
products and services. If we succeed in bringing one or more products to market,
we cannot be certain that these products will be considered cost-effective and
that reimbursement to the consumer will be available or will be sufficient to
allow us to sell our products on a competitive or profitable basis.
THE LOSS OF KEY EMPLOYEES COULD ADVERSELY AFFECT OUR OPERATIONS.
We are a small company with approximately 115 employees as of June 30,
2001. Our success depends, to a significant extent, on the continued
contributions of our principal management and scientific personnel. The loss of
the services of one or more of our executive officers, including Douglass B.
Given, President and Chief Executive Officer, and Wolfgang Oster, Chief
Operating Officer, or other principal members of our scientific and management
staff, could delay our product development programs and our research and
development efforts. We do not maintain key person life insurance on any of our
officers, employees or consultants.
Competition for qualified employees among companies in the biotechnology
and biopharmaceutical industry is intense. Our future success depends upon our
ability to attract, retain and motivate highly skilled employees. In order to
commercialize our proposed products successfully, we may be required to expand
substantially our workforce, particularly in the areas of manufacturing,
clinical trials management, regulatory affairs, business development and sales
and marketing. These activities will require the addition of new personnel,
including management, and the development of additional expertise by existing
management personnel.
OUR STOCK PRICE IS VOLATILE AND, AS A RESULT, YOU COULD LOSE SOME OR ALL OF YOUR
INVESTMENT.
There has been a history of significant volatility in the market prices
of securities of biotechnology companies, including our common stock, and it is
likely that the market price of our common stock will continue to be highly
volatile. Our business and the relative prices of our common stock may be
influenced by a large variety of industry factors, including:
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- - announcements by us or our competitors concerning acquisitions,
strategic alliances, technological innovations and new commercial
products;
- - the availability of critical materials used in developing our products;
- - the results of clinical trials;
- - developments concerning patents, proprietary rights and potential
infringement; and
- - the expense and time associated with and the extent of our ultimate
success in securing government approvals.
In addition, public concern about the safety of the products we develop,
comments by securities analysts, and general market conditions may have a
significant effect on the market price of our common stock. The realization of
any of the risks described in this report, as well as other factors, could have
a material adverse impact on the market price of our common stock and may result
in a loss of some or all of your investment.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in their stock prices. We may
in the future be the targets of similar litigation. Securities litigation could
result in substantial costs and divert our management's time and resources,
which could cause our business to suffer.
CERTAIN PROVISIONS IN OUR ARTICLES OF INCORPORATION AND WASHINGTON STATE LAW
COULD DISCOURAGE A CHANGE OF CONTROL OF NEORX.
Our articles of incorporation authorize our board of directors to issue
up to 3,000,000 shares of preferred stock and to determine the price, rights,
preference, privileges and restrictions, including voting rights, of those
shares without any further vote or action by our shareholders. The issuance of
preferred stock could have the effect or delaying, deferring or preventing a
change of control of NeoRx, even if this change would benefit our shareholders.
In addition, the issuance of preferred stock may adversely affect the market
price of our common stock and the voting and other rights of the holders of our
common stock.
We have adopted a shareholders' rights plan, which is intended to
protect the rights of shareholders by deterring coercive or unfair takeover
tactics. The board of directors declared a dividend to holders of our common
stock of one preferred share purchase right for each outstanding share of the
common stock. The right is exercisable ten days following the offer to purchase
or acquisition of beneficial ownership of 20% of the outstanding common stock by
a person or group of affiliated persons. Each right entitles the registered
holder, other than the acquiring person or group, to purchase from NeoRx
one-hundredth of one share of Series A Junior Participating Preferred Stock at
the price of $40, subject to adjustment. The rights expire April 10, 2006. In
lieu of exercising the right by purchasing one one-hundredth of one share of
Series A Preferred Stock, the holder of the right, other than the acquiring
person or group, may purchase for $40 that number of shares of our common stock
having a market value of twice that price.
Washington law imposes restrictions on some transactions between a
corporation and significant shareholders. Chapter 23B.19 of the Washington
Business Corporation Act prohibits a target corporation, with some exceptions,
from engaging in particular significant business transactions with an acquiring
person, which is defined as a person or group of persons that beneficially owns
10% or more of the voting securities of the target corporation, for a period of
five years after the acquisition, unless the transaction or acquisition of
shares is approved by a majority of the members of the target corporation's
board of directors prior to the acquisition. Prohibited transactions include:
- - a merger or consolidation with, disposition of assets to, or issuance or
redemption of stock to or from the acquiring person;
- - termination of 5% or more of the employees of the target corporation;
and
- - receipt by the acquiring person of any disproportionate benefit as a
shareholder.
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A corporation may not opt out of this statute. This provision may have
the effect of delaying, deterring or preventing a change in control of NeoRx.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "intend," "anticipate," "believe," "estimate,"
"predict," "potential," "propose" or "continue," the negative of these terms or
other terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined in the Risk
Factors section above. These factors may cause our actual results to differ
materially from any forward-looking statement.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. You should not place undue
reliance on our forward-looking statements, which apply only as of the date of
this prospectus.
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USE OF PROCEEDS
The proceeds from the sale of the common stock offered in this
prospectus are solely for the account of the selling shareholders. We will not
receive any of the proceeds from such sale.
SELLING SHAREHOLDERS
The following table sets out the number of shares of common stock held
by the selling shareholders and the number of shares of common stock offered by
the selling shareholders.
SHARES BENEFICIALLY NUMBER OF SHARES SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING BEING OFFERED OWNED AFTER OFFERING(1)
----------------------- ---------------- -----------------------
NAME NUMBER PERCENT(2) NUMBER PERCENT
---- ------ ---------- ------ -------
AIG SoundShore Holdings Ltd. 43,783 * 43,783 - -
AIG SoundShore Opportunity 16,907 * 16,907 - -
AIG SoundShore Strategic Holding Fund, 14,712 * 14,712 - -
Ltd.
Belfer Investments, L.P. 26,349 * 26,349 - -
Christopher Grosso 3,294 * 3,294 - -
Diane Grosso 3,294 * 3,294 - -
Ralph Richart 17,566 * 17,566 - -
Ralph Richart, Jr. Benefit Trust 2,196 * 2,196 - -
Marian Richart Benefit Trust 2,196 * 2,196 - -
Thomas Kershner 4,391 * 4,391 - -
J.M. Hull Associates, L.P. 10,979 * 10,979 - -
J.D. Woodward 6,587 * 6,587 - -
Thomas J. Clark 4,391 * 4,391 - -
John McCormack 8,783 * 8,783 - -
Daurice White Custodian Daniel Patrick 4,391 * 4,391 - -
McCormack UGMA TX
Daurice White Custodian Meagan Anne 4,391 * 4,391 - -
McCormack UGMA TX
Daurice White Custodian John William 4,391 * 4,391 - -
McCormack UGMA TX
Patrick J. Mackin 6,391 * 4,391 2,000 *
Auric Partners Ltd. Partnership 87,830 * 87,830 - -
PW Family Associates LLC 4,392 * 4,392 - -
LKCM Investment Partnership 7,685 * 7,685 - -
J. Luther King 7,685 * 7,685 - -
Bryan King 1,098 * 1,098 - -
Bryan King and Mason King Livestock
Partnership 1,098 * 1,098 - -
Leroy Landhuis 13,175 * 13,175 - -
Michael R. Hamblett 6,098 * 1,098 5,000 *
Keane Securities Co., Inc. 7,685 * 7,685 - -
Thierry DeVergnes 4,392 * 4,392 - -
Brown Simpson Partners I, Ltd. 439,150 1.66% 439,150 - -
International Isotopes, Inc. 41,720 * 41,720 - -
------- ------- ------- ------ -------
Total 807,000 1.66% 800,000 7,000 *
- ---------------
* Less than 1%
(1) Assumes the sale of all shares offered in this prospectus and no other
purchases or sales of our common stock.
(2) Applicable percentage of ownership is based on 26,419,311 shares of our
common stock outstanding on July 24, 2001.
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PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time by the selling shareholders or by their pledgees, donees, transferees or
other successors in interest. The selling shareholders will act independently of
us in making decisions with respect to the timing, manner and size of each sale.
The selling shareholders may sell their shares on the Nasdaq National Market or
otherwise, at market prices or at negotiated prices. They may sell shares by one
or more of the following means of distribution:
- block trades 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 or dealer as principal and resale by the
broker or dealer for its account pursuant to this prospectus;
- over-the-counter distributions in accordance with the rules of
the Nasdaq National Market;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
- privately negotiated transactions.
To the extent required, this prospectus may be amended and supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of such shares or otherwise, the selling shareholders may
enter into hedging transactions with broker-dealers. In these transactions,
broker-dealers may engage in short sales of the shares in the course of hedging
the positions they assume with the selling shareholders. The selling
shareholders also may sell our common stock short and redeliver the shares to
close out such short positions. The selling shareholders may enter into option
or other transactions with broker-dealers that require the delivery to the
broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer the shares under this prospectus, as supplemented or amended to reflect
such transaction. The selling shareholders also may loan or pledge the shares to
a broker-dealer, and, upon default, such broker-dealer may sell the pledged
shares pursuant to this prospectus.
In effecting sales, brokers, dealers or agents engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
selling shareholders in amounts to be negotiated prior to the sale. Such brokers
and dealers and any other participating brokers and dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales, and any commissions, discounts or concessions received by them,
and any profits on the resale of shares sold by broker-dealers, may be deemed to
be underwriting discounts and commissions under the Securities Act of 1933. We
will pay all reasonable expenses incident to the registration of the common
stock being offered by this prospectus, other than any legal fees of the selling
shareholders and any selling expenses of the selling shareholders, including any
commissions and discounts of underwriters, dealers or agents.
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The selling shareholders may agree to indemnify any agent, broker or
dealer that participates in transactions involving shares of the common stock
against certain liabilities, including liabilities arising under the Securities
Act of 1933.
At the time a particular offer of shares is made a prospectus
supplement, if required, will be distributed. Such prospectus supplement will
set forth the number of shares being offered and the terms of the offering,
including the name of any underwriter, dealer or agent, the purchase price paid
by any underwriter, any discount, commission and other items constituting
compensation, any discount, commission or concession allowed or reallowed or
paid to any dealer, and the proposed sales price to the public.
We have the right, upon written notice to the selling shareholders, to
require the selling shareholders to suspend open market offers and sales of the
shares if our board of directors reasonably determines that there is a
significant business purpose for such suspension. We have agreed to use our best
efforts to limit such suspensions to two 60-day periods in any 365-day period.
The selling shareholders and other persons participating in the sale or
distribution of the shares will be subject to the provisions of the Securities
Exchange Act of 1934 and its associated rules and regulations, which provisions
may limit the timing of purchases and sales of shares of our common stock by the
selling shareholders and other such persons.
We have agreed with the selling shareholders to keep the registration
statement of which this prospectus is a part effective until the earlier of:
- two years after the effective date of the registration statement
to which this prospectus relates;
- the date on which the shares offered by this prospectus may be
resold by the selling shareholders without registration or
without regard to any volume limitations under Rule 144 under
the Securities Act of 1933; or
- all of the shares offered by this prospectus have been sold
pursuant to the registration statement to which this prospectus
relates or Rule 144 of the Securities Act of 1933, as amended,
or any other rule of similar effect.
VALIDITY OF COMMON STOCK
Certain legal matters in connection with the common stock offered by
this prospectus have been passed upon for us by Perkins Coie LLP, Seattle,
Washington.
EXPERTS
Our financial statements as of December 31, 2000 and 1999, and for each
of the years in the three-year period ended December 31, 2000 have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
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, NW, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference room. The SEC maintains an Internet site at http://www.sec.gov that
contains reports, proxy and information statements, and other information
regarding issuers, including us, that file documents with the SEC
electronically. You can also inspect our SEC filings at the offices of The
Nasdaq Stock Market, 1735 K Street, NW, Washington D.C. 20006.
This prospectus is a part of a registration statement on Form S-3 that
we filed with the SEC with respect to the shares offered by this prospectus.
This prospectus does not contain all of the information that is in the
registration statement. We omitted certain parts of the registration statement
as allowed by the SEC. We refer you to the registration statement and its
exhibits for further information about us and the shares offered by the selling
shareholders.
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The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus, and the information that we file later 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 Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until this offering is completed:
- our Annual Report on Form 10-K for the year ended December 31,
2000;
- our Quarterly Reports on Form 10-Q for the quarters ended March
31, 2001 and June 30, 2001;
- our Current Reports on Form 8-K dated July 31, 2001, June 7,
2001, May 8, 2001, April 25, 2001, March 21, 2001 and January
11, 2001; and
- our Proxy Statement for the 2001 Annual Meeting of Shareholders.
You may request a copy of these filings, at no cost, by writing to or
telephoning us at the address below. However, we will not provide copies of the
exhibits to these filings unless we specifically incorporated by reference the
exhibits in this prospectus.
Melinda G. Kile
Chief Accounting Officer
NeoRx Corporation
410 West Harrison Street
Seattle, Washington 98119-4007
(206) 286-2501
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