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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 10, 2001
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
DEPOMED, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
CALIFORNIA 94-3229046
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1360 O'BRIEN DRIVE, MENLO PARK, CALIFORNIA 94025 (650) 462-5900
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
JOHN W. FARA, PH.D.
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
1360 O'BRIEN DRIVE, MENLO PARK, CALIFORNIA 94025 (650) 462-5900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPY TO:
STEPHEN C. FERRUOLO, ESQ.
Heller Ehrman White & McAuliffe LLP
4250 Executive Square, 7th Floor
La Jolla, California 92037
Telephone: (858) 450-8400
Facsimile: (858) 450-8499
--------------------------
Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT
BECOME EFFECTIVE.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNTS TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, no par value.................. 1,828,506 $3.7815 $6,914,495 $1,729
</TABLE>
(1) In accordance with Rule 416 under the Securities Act of 1933, Common Stock
offered hereby shall also be deemed to cover additional securities to be
offered or issued to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended,
based on the average of the high and low prices of Registrant's Common Stock
on the American Stock Exchange on January 8, 2001.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
DEPOMED, INC.
1,428,550 SHARES OF COMMON STOCK
399,956 SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF WARRANTS
This prospectus may be used only in connection with the resale, from time to
time, of up to 1,828,506 shares of our common stock, no par value, by the
selling shareholders. 399,956 of the shares are issuable upon exercise of
warrants to purchase common stock. Information on the selling shareholders, and
the times and manner in which they may offer and sell shares of our common stock
under this prospectus, is provided under "Selling Shareholders" and "Plan of
Distribution" in this prospectus. We will not receive any proceeds from the sale
of these shares by the selling shareholders under this prospectus, with the
exception of proceeds received upon exercise of the warrants to purchase common
stock.
Our address is 1360 O'Brien Drive, Menlo Park, California 94025, and our
telephone number is (650) 467-5900.
Our common stock trades on the American Stock Exchange under the symbol
"DMI" and our common stock purchase warrants trade on the American Stock
Exchange under the symbol "DMI/WS". On January 9, 2001, the closing price for
our common stock, as reported on the American Stock Exchange, was $3.875 per
share and the closing price for our common stock purchase warrants was $1.125.
------------------------
BEGINNING ON PAGE 3, WE HAVE LISTED A NUMBER OF "RISK FACTORS" WHICH YOU
SHOULD CONSIDER. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE
YOUR INVESTMENT DECISION.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
In this prospectus, "DepoMed," the "company," the "Registrant," "we," "us"
and "our" refer to DepoMed, Inc.
------------------------
The date of this prospectus is January 10, 2001
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including the "Risk Factors"
section and our financial statements and the related notes contained herein.
OUR COMPANY
We are a development stage company engaged in the development of new and
proprietary oral drug delivery technologies. We have developed two types of oral
drug delivery systems, the Gastric Retention System (the "GR System") and the
Reduced Irritation System (the "RI System" and together, the "DepoMed Systems").
The GR System is designed to be retained in the stomach for an extended period
of time while it delivers the incorporated drug or drugs, and the RI System is
designed to reduce the gastrointestinal irritation that is a side effect of many
orally administered drugs. In addition, the DepoMed Systems are designed to
provide continuous, controlled delivery of an incorporated drug.
OUR PRODUCTS
We intend to develop products utilizing the DepoMed Systems in collaboration
with pharmaceutical and biotechnology companies from which we expect to receive
license fees, research and development funding, milestone payments and
royalties. We also intend to develop, either independently or jointly,
proprietary products utilizing certain off-patent and over-the-counter ("OTC")
drugs in the DepoMed Systems.
In November 1999, we entered into an agreement to form a joint venture with
Elan Corporation, plc ("Elan"). The joint venture will develop a series of
undisclosed proprietary products using oral drug delivery technologies and the
expertise of both companies. The first product developed by the joint venture
entered Phase I clinical trials in December 2000.
We also have in development Metformin GR-TM-, a potential once-daily
metformin product for the treatment of Type II diabetes. In July 2000, we
completed a second Phase I clinical trial of Metformin GR. Both trials showed
positive results, and in the third quarter of 2000 we initiated a Phase II
clinical trial. In June 2000, we announced the initiation of a collaboration
with AVI Biopharma, Inc. ("AVI") to investigate the feasibility of controlled
oral delivery of AVI's proprietary NEUGENE antisense agents. We are also
developing certain other product candidates expected to benefit from
incorporation into the DepoMed Systems. We have in development a GR System
formulation of an undisclosed antibiotic and an undisclosed cardiovascular drug.
The antibiotic product entered Phase I clinical trials in December 2000. We will
ultimately seek marketing partners to commercialize both of these products.
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<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND UNCERTAINTIES BEFORE
YOU INVEST IN OUR COMMON STOCK. INVESTING IN OUR COMMON STOCK INVOLVES RISK. IF
ANY OF THE FOLLOWING RISKS OR UNCERTAINTIES ACTUALLY OCCURS, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY
AFFECTED. THE FOLLOWING RISKS AND UNCERTAINTIES ARE NOT THE ONLY ONES FACING US.
ADDITIONAL RISKS AND UNCERTAINTIES OF WHICH WE ARE UNAWARE OR WHICH WE CURRENTLY
BELIEVE ARE IMMATERIAL COULD ALSO MATERIALLY ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS. IN ANY CASE, THE TRADING PRICE OF
OUR COMMON STOCK COULD DECLINE, AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT. SEE ALSO, "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS."
WE ARE AT AN EARLY STAGE OF DEVELOPMENT AND WE EXPECT OPERATING LOSSES IN THE
FUTURE
We are at an early stage of development. Accordingly, our business is
subject to all of the business risks associated with a new enterprise,
including:
- uncertainties regarding product development;
- risks related to collaborative partnering relationships;
- lack of revenue and uncertainty regarding future revenues;
- limited financial and personnel resources; and
- lack of established credit facilities.
As we expand our research and development efforts, we anticipate that we
will continue to incur substantial operating losses for at least the next
several years. Therefore, we expect our cumulative losses to increase. To date,
we have had no revenues from product sales and only limited revenues from our
collaborative research and development arrangements and feasibility studies. Our
success will depend on commercial sales of products that generate significant
revenues for us. We cannot predict whether we will be able to achieve commercial
sales of any revenue-generating products.
WE MAY NOT BE ABLE TO DEVELOP A SUCCESSFUL PRODUCT
Our research and development programs are at an early stage. In order for us
to incorporate a pharmaceutical product into a DepoMed System, we will need to
complete substantial additional research and development on an off-patent drug
or a drug provided by a collaborative partner. Even if we are successful, the
drug incorporated in the DepoMed System:
- may not be offered for commercial sale; or
- may prove to have undesirable or unintended side effects that prevent or
limit its commercial use.
Before we or others make commercial sales of products using the DepoMed
Systems, we or our collaborative partners will need to:
- conduct clinical tests showing that these products are safe and effective;
and
- obtain regulatory approval.
This process involves substantial financial investment. Successful
commercial sales of any of these products require:
- market acceptance;
- cost-effective commercial scale production; and
- reimbursement under private or governmental health plans.
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We will have to curtail, redirect or eliminate our product development
programs if we or our collaborative partners find that:
- the DepoMed Systems prove to have unintended or undesirable side effects;
or
- products which appear promising in preclinical studies do not demonstrate
efficacy in larger scale clinical trials.
These events could have a material adverse effect on the company.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE
The following factors will affect our quarterly operating results and may
result in a material adverse effect on the company:
- variations in revenues obtained from collaborative agreements, including
milestone payments, royalties, license fees and other contract revenues;
- success or failure of the company in entering into further collaborative
relationships;
- decisions by collaborative partners to proceed or not to proceed with
subsequent phases of the relationship or program;
- the timing of any future product introductions by us or our collaborative
partners;
- market acceptance of the DepoMed Systems;
- regulatory actions;
- adoption of new technologies;
- the introduction of new products by our competitors;
- manufacturing costs and capabilities;
- changes in government funding; and
- third-party reimbursement policies.
MOST OF OUR REVENUES ARE DERIVED FROM OUR RELATIONSHIP WITH ELAN
We have generated most of our revenues to date through collaborative
arrangements with pharmaceutical and biotechnology companies. Currently, our
revenues are derived primarily from our joint venture with Elan. If our joint
venture with Elan is terminated or fails to produce desired results, our
revenues and results of operations will suffer.
OUR STRATEGY IS DEPENDENT UPON ENTERING INTO ADDITIONAL COLLABORATIVE
RELATIONSHIPS
Our strategy to continue the research, development, clinical testing,
manufacturing and commercial sale of products using the DepoMed Systems requires
that we enter into additional collaborative arrangements.
The company may not be able to enter into future collaborative arrangements
on acceptable terms. The success of the Elan joint venture and any additional
collaborative arrangements requires that the company's collaborative partners:
- perform their obligations as expected; and
- devote sufficient resources to the development, clinical testing and
marketing of products developed under collaborations.
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<PAGE>
It is possible that Elan or our future collaborative partners may not:
- continue to fund their particular projects;
- perform their agreed-to obligations.
For example, in the first quarter of 1999, we completed the first phase of
research and development under the March 1998 feasibility agreement with R.W.
Johnson Pharmaceutical Research Institute ("PRI"). We have not had any
significant communication with PRI regarding their plans for the product since
the first quarter of 1999. In light of this, we no longer expect to continue
research and development work on the project even though the project has not
been canceled. There can be no assurance that a collaborative partner's product
development decisions will favor the DepoMed Systems or that their timelines
will be aligned with our own business strategies.
Any of the following events could have a material adverse effect on the
company:
- any parallel development by a collaborative partner of competitive
technologies or products;
- arrangements with collaborative partners that limit or preclude the
company from developing products or technologies;
- premature termination of an agreement; or
- failure by a collaborative partner to devote sufficient resources to the
development; and commercial sales of products using the DepoMed Systems.
Collaborative agreements are generally complex and may contain provisions
which give rise to disputes regarding the relative rights and obligations of the
parties. Any such dispute could delay collaborative research, development or
commercialization of potential products, or could lead to lengthy, expensive
litigation or arbitration.
WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN THE PHARMACEUTICAL PRODUCT AND
DRUG DELIVERY SYSTEM INDUSTRIES
Competition in pharmaceutical product and drug delivery system industries is
intense. We expect competition to increase. Competing technologies or products
developed in the future may prove superior either generally or in particular
market segments to the DepoMed Systems or products using the DepoMed Systems.
These developments would make the DepoMed Systems or products using them
noncompetitive or obsolete.
All of our principal competitors have substantially greater financial,
marketing, personnel and research and development resources than us. In
addition, many of our potential collaborative partners have devoted, and
continue to devote, significant resources to the development of their own drug
delivery systems and technologies.
FAILURE TO OBTAIN REGULATORY APPROVAL COULD HARM OUR BUSINESS
Numerous governmental authorities in the United States and other countries
regulate our research and development activities and those of our collaborative
partners. Governmental approval is required of all potential pharmaceutical
products using the DepoMed Systems and the manufacture and marketing of products
using the DepoMed Systems prior to the commercial use of those products. The
regulatory process will take several years and require substantial funds. If
products using the DepoMed Systems do not receive the required regulatory
approvals or if such approvals are delayed, the company's business would be
materially adversely affected. There can be no assurance that the requisite
regulatory approvals will be obtained without lengthy delays, if at all.
5
<PAGE>
In the United States, the United States Food and Drug Administration (the
"FDA") rigorously regulates pharmaceutical products, including any drugs using
the DepoMed Systems. If a company fails to comply with applicable requirements,
the FDA or the courts may impose sanctions. These sanctions may include civil
penalties, criminal prosecution of the company or its officers and employees,
injunctions, product seizure or detention, product recalls, total or partial
suspension of production. The FDA may withdraw approved applications or refuse
to approve pending new drug applications, premarket approval applications, or
supplements to approved applications.
The company generally must conduct preclinical testing on laboratory animals
of new pharmaceutical products prior to commencement of clinical studies
involving human beings. These studies evaluate the potential efficacy and safety
of the product. The company then submits the results of these studies to the FDA
as part of an Investigational New Drug application ("IND"), which must become
effective before beginning clinical testing in humans.
Typically, human clinical evaluation involves a time-consuming and costly
three-phase process:
- In Phase I, the company conducts clinical trials with a small number of
subjects to determine a drug's early safety profile and its
pharmacokinetic pattern.
- In Phase II, the company conducts clinical trials with groups of patients
afflicted with a specific disease in order to determine preliminary
efficacy, optimal dosages and further evidence of safety.
- In Phase III, the company conducts large-scale, multi-center, comparative
trials with patients afflicted with a target disease in order to provide
enough data to demonstrate the efficacy and safety required by the FDA
prior to commercialization.
The FDA closely monitors the progress of each phase of clinical testing. The
FDA may, at its discretion, re-evaluate, alter, suspend or terminate testing
based upon the data accumulated to that point and the FDA's assessment of the
risk/benefit ratio to patients.
The results of the preclinical and clinical testing are submitted to the FDA
in the form of a new drug application (an "NDA") for approval prior to
commercialization. In responding to an NDA, the FDA may grant marketing
approval, request additional information or deny the application. Failure to
receive approval for any products using the DepoMed Systems would have a
material adverse effect on the company.
Various FDA regulations apply to over-the-counter products that comply with
monographs issued by the FDA. These regulations include:
- cGMP requirements;
- general and specific over-the-counter labeling requirements (including
warning statements);
- advertising restrictions; and
- requirements regarding the safety and suitability of inactive ingredients.
In addition, the FDA may inspect over-the-counter products and manufacturing
facilities. A failure to comply with applicable regulatory requirements may lead
to administrative or judicially imposed penalties. If an over-the-counter
product differs from the terms of a monograph, it will, in most cases, require
FDA approval of an NDA for the product to be marketed.
Foreign regulatory approval of a product must also be obtained prior to
marketing the product internationally. Foreign approval procedures vary from
country to country. The time required for approval may delay or prevent
marketing in certain countries. In certain instances the company or its
collaborative partners may seek approval to market and sell certain products
outside of the United States before submitting an application for United States
approval to the FDA. The clinical testing
6
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requirements and the time required to obtain foreign regulatory approvals may
differ from that required for FDA approval. Although there is now a centralized
European Union ("EU") approval mechanism in place, each EU country may
nonetheless impose its own procedures and requirements. Many of these procedures
and requirements are time-consuming and expensive. Some EU countries require
price approval as part of the regulatory process. These constraints can cause
substantial delays in obtaining required approval from both the FDA and foreign
regulatory authorities after the relevant applications are filed, and approval
in any single country may not meaningfully indicate that another country will
approve the product.
WE WILL DEPEND ON THIRD PARTIES FOR MANUFACTURING, MARKETING AND SALES OF
PRODUCTS USING THE DEPOMED SYSTEMS
We do not have and do not intend to establish in the foreseeable future
internal manufacturing, marketing or sales capabilities. Rather, we intend to
use the facilities of our collaborative partners or those of contract
manufacturers to manufacture products using the DepoMed Systems. Our dependence
on third parties for the manufacture of products using the DepoMed Systems may
adversely affect our ability to develop and deliver such products on a timely
and competitive basis. There may not be sufficient manufacturing capacity
available to us when, if ever, we are ready to seek commercial sales of products
using the DepoMed Systems. In addition, we expect to rely on our collaborative
partners or to develop distributor arrangements to market and sell products
using the DepoMed Systems. We may not be able to enter into manufacturing,
marketing or sales agreements on reasonable commercial terms, or at all, with
third parties. Failure to do so would have a material adverse effect on the
company.
Applicable cGMP requirements and other rules and regulations prescribed by
foreign regulatory authorities will apply to the manufacture of products using
the DepoMed Systems. The company will depend on the manufacturers of products
using the DepoMed Systems to comply with cGMP and applicable foreign standards.
Any failure by a manufacturer of products using the DepoMed Systems to maintain
cGMP or comply with applicable foreign standards could delay or prevent their
commercial sale. This could have a material adverse effect on the company.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND WE MAY BE LIABLE FOR
INFRINGING THE INTELLECTUAL PROPERTY OF OTHERS
Our success will depend in part on our ability to obtain and maintain patent
protection for our technologies and to preserve our trade secrets. Our policy is
to file patent applications in the United States and foreign jurisdictions. We
currently hold three issued United States patents and five United States patent
applications are pending. We have also applied for patents in numerous foreign
countries. Some of those countries have granted our applications and other
applications are still pending. Additionally, we are currently preparing a
series of patent applications representing our expanding technology for filing
in the United States. No assurance can be given that our patent applications
will be approved, or that any issued patents will provide competitive advantages
for the DepoMed Systems or our technologies.
With respect to already issued patents and any patents which may issue from
our applications, there can be no assurance that claims allowed will be
sufficient to protect our technologies. The United States maintains patent
applications in secrecy until a patent issues. As a result, the company cannot
be certain that others have not filed patent applications for technology covered
by our pending applications or that the company was the first to file patent
applications for such technology. Competitors may have filed applications for,
or may have received patents and may obtain additional patents and proprietary
rights relating to, compounds or processes that may block our patent rights or
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permit the competitors to compete without infringing the patent rights of the
company. In addition, there can be no assurance that:
- any patents issued to the company will not be challenged, invalidated or
circumvented; or
- the rights granted under the patents issued to the company will provide
proprietary protection or commercial advantage to the company.
Our ability to develop our technologies and to make commercial sales of
products using our technologies also depends on not infringing the patents of
others. We are not aware of any claim of patent infringement against us.
However, if claims concerning patents and proprietary technologies arise and are
determined adversely to the company, the claims could have a material adverse
effect on the company.
Extensive litigation regarding patent and other intellectual property rights
is common in the pharmaceutical industry. We may need to engage in litigation to
enforce any patents issued or licensed to the company or to determine the scope
and validity of third-party proprietary rights. There can be no assurance that
our issued or licensed patents would be held valid by a court of competent
jurisdiction. Whether or not the outcome of litigation is favorable to the
company, the diversion of our financial and managerial resources to such
litigation could have a material adverse effect on the company. We may also be
required to participate in interference proceedings declared by the United
States Patent and Trademark Office for the purpose of determining the priority
of inventions in connection with the patent applications of the company or other
parties. Adverse determinations in litigation or interference proceedings could
require the company to seek licenses (which may not be available on commercially
reasonable terms) or subject the company to significant liabilities to third
parties. These events could have a material adverse effect on the company.
We also rely on trade secrets and proprietary know-how. We seek to protect
that information, in part, through entering into confidentiality agreements with
employees, consultants, collaborative partners and others before such persons or
entities have access to our proprietary trade secrets and know-how. These
confidentiality agreements may not be effective in certain cases, due to, among
other things, the lack of an adequate remedy for breach of trade secrets that
may otherwise become known or be independently developed by competitors.
OUR ADVISORS HAVE RELATIONSHIPS WITH OTHER ENTITIES
Two groups (the Policy Advisory Board and Development Advisory Board) advise
the company on business and scientific issues and future opportunities. Certain
members of our Policy Advisory Board and Development Advisory Board work
full-time for academic or research institutions. Others act as consultants to
other companies. In addition, except for work performed specifically for and at
the direction of the company, any inventions or processes discovered by such
persons will be their own intellectual property or that of their institutions or
other companies. Further, invention assignment agreements signed by such persons
in connection with their relationships with the company may be subject to the
rights of their primary employers or other third parties with whom they have
consulting relationships. If the company desires access to inventions which are
not its property, the company will have to obtain licenses to such inventions
from these institutions or companies. The company may not be able to obtain
these licenses on commercially reasonable terms.
REFORM OF THE HEALTHCARE INDUSTRY MAY AFFECT OUR BUSINESS AND THE AVAILABILITY
OF HEALTHCARE REIMBURSEMENT
The healthcare industry is changing rapidly as the public, government,
medical professionals, third-party payors and the pharmaceutical industry
examine ways to contain or reduce the cost of health
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care. Changes in the healthcare industry could impact our business, particularly
to the extent that the company develops the DepoMed Systems for use in
prescription drug applications.
Certain foreign governments regulate pricing or profitability of
prescription pharmaceuticals sold in their countries. There have been a number
of federal and state proposals to implement similar government control in the
United States, particularly with respect to Medicare payments. The company
expects that these proposals will continue to be advanced. In addition, downward
pressure on pharmaceutical pricing in the United States has increased due to an
enhanced emphasis on managed care. The company expects this pressure to continue
to increase. The company cannot predict whether any such legislative or
regulatory proposals will be adopted or the effect such proposals or managed
care efforts may have on its business. However, the announcement of such
proposals or efforts could have a material adverse effect on the company's
ability to raise capital. Further, the adoption of such proposals or efforts
would have a material adverse effect on the company and any prospective
collaborative partners.
Sales of products using the DepoMed Systems in domestic and foreign markets
will depend in part on the availability of reimbursement from third-party
payors, such as government health administration authorities and private health
insurers. Third-party payors are increasingly challenging the price and
cost-effectiveness of prescription pharmaceutical products. Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
products. Accordingly, products using the DepoMed Systems may not be eligible
for third-party reimbursement at price levels sufficient for us or our
collaborative partners to realize appropriate returns on our investments in the
DepoMed Systems.
WE COULD BECOME SUBJECT TO PRODUCT LIABILITY LITIGATION
Our business involves exposure to potential product liability risks that are
inherent in the production and manufacture of pharmaceutical products. Any such
claims could have a material adverse effect on the company. We have obtained
product liability insurance for clinical trials currently underway. Although,
there can be no assurance that:
- the company will be able to obtain product liability insurance for future
trials;
- the company will be able to maintain product liability insurance on
acceptable terms;
- the company will be able to secure increased coverage as the
commercialization of the DepoMed Systems proceeds; or
- any insurance will provide adequate protection against potential
liabilities.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements that involve risks and uncertainties. The statements contained or
incorporated by reference in this prospectus that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "1933 Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), including without limitation
statements regarding DepoMed's expectations, beliefs, intentions or strategies
regarding the future. All forward-looking statements included in this document
are based on information available to DepoMed on the date hereof, and all
forward-looking statements in documents incorporated by reference are based on
information available to Depomed as of the date of such documents. DepoMed
assumes no obligation to update any such forward-looking statements. DepoMed's
actual results may differ materially from those discussed in the forward-looking
statements as a result of certain factors, including those set forth in the risk
factors and elsewhere in this prospectus and incorporated by reference herein.
In evaluating DepoMed's business, prospective investors should carefully
consider the following factors in addition to the other information set forth in
this prospectus and incorporated by reference herein.
USE OF PROCEEDS
DepoMed will not receive any of the proceeds from the sale of the shares
offered by this prospectus, with the exception of proceeds received upon
exercise of the warrants to purchase common stock. The selling shareholders will
receive all of the proceeds.
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SELLING SHAREHOLDERS
The following table sets forth the names of the selling shareholders, the
number of shares of common stock owned beneficially by each selling shareholder
as of January 2, 2001 and the number of shares that may be offered pursuant to
this prospectus. This information is based upon information provided to us by
the selling shareholders.
For purposes of this table, beneficial ownership is determined in accordance
with rules of the SEC, and includes voting power and investment power with
respect to shares. Shares issuable upon the exercise of currently exercisable
warrants and options are considered outstanding for purposes of calculating the
percentage owned by a person, but not for purposes of calculating the percentage
owned by any other person.
As explained below under "Plan of Distribution," we have agreed to bear
certain expenses (other than broker discounts and commissions, if any) in
connection with the registration statement of which this prospectus is a part.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING THE OFFERING
---------------------- SHARES ---------------------
SELLING SHAREHOLDERS: NUMBER PERCENT(1) OFFERED NUMBER PERCENT(1)
--------------------- --------- ---------- --------- -------- ----------
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OrbiMed Associates LLC(2) .................. 35,713 * 35,713 -- --
767 3rd Avenue
New York, NY 10017
Caduceus Private Investments LP(3) ......... 1,749,937 20.3% 1,749,937 -- --
767 3rd Avenue
New York, NY 10017
Trout Group LLC(4) ......................... 67,856 * 42,856 25,000 *
740 Broadway, #903
New York, NY 10003
</TABLE>
------------------------
* Less than one percent
(1) Based upon shares of common stock outstanding on January 2, 2001. This
registration statement shall also cover any additional shares of common
stock which become issuable in connection with the shares registered for
sale hereby by reason of any stock dividend, stock split, recapitalization
or other similar transaction effected without the receipt of consideration
which results in an increase in the number of DepoMed's outstanding shares
of common stock.
(2) Includes 7,142 shares issuable upon exercise of warrants, all of which are
being offered pursuant to this prospectus.
(3) Includes 349,958 shares issuable upon exercise of warrants, all of which are
being offered pursuant to this prospectus.
(4) Includes 42,856 shares issuable upon exercise of warrants, all of which are
being offered pursuant to this prospectus, and 25,000 shares issuable upon
exercise of vested options.
11
<PAGE>
PLAN OF DISTRIBUTION
We will receive no proceeds from this offering, with the exception of
proceeds received upon exercise of the warrants to purchase common stock. The
shares offered hereby may be sold by the selling shareholders from time to time
in transactions in the over-the-counter market, on the American Stock Exchange,
in privately negotiated transactions, or by a combination of such methods of
sale, at fixed prices which may be changed, at market prices prevailing at the
time of sale, at prices related to prevailing market prices or at negotiated
prices. The selling shareholders may effect such transactions by selling the
shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholder and/or the purchasers of the shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The selling shareholders and any broker-dealers or agents that participate
with the selling shareholders in the distribution of the shares may under
certain circumstances be deemed to be "underwriters" within the meaning of the
1933 Act, and any commissions received by them and any profit realized on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the 1933 Act. The selling shareholders may agree
to indemnify such broker-dealers against certain liabilities, including
liabilities under 1933 Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the selling shareholders (and, if it acts as agent for the
purchase of such shares, from such purchaser). Broker-dealers may agree with the
selling shareholders to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the selling stockholder, to purchase as principal any unsold shares.
Brokers-dealers who acquire shares as principal may thereafter resell such
shares from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market, on the American Stock Exchange, in privately negotiated transactions, or
by a combination of such methods of sale, at fixed prices that may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices, and in connection with such
resales may pay to or receive from the purchasers of such shares commissions
computed as described above.
Under applicable rules and regulations under the 1934 Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, the selling shareholders will be subject to
applicable provisions of the 1934 Act and the rules and regulations thereunder,
including, without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of shares of our common stock by the selling
shareholders.
The selling shareholders will pay all commissions and other expenses
associated with the sale of shares by it. The shares offered hereby are being
registered pursuant to contractual obligations of DepoMed, and DepoMed has
agreed to bear certain expenses in connection with the registration and sale of
the shares being offered by the selling shareholders. DepoMed has not made any
underwriting arrangements with respect to the sale of shares offered hereby.
12
<PAGE>
LEGAL MATTERS
The legality of the issuance of the securities being offered hereby is being
passed upon us by Heller Ehrman White & McAuliffe LLP, La Jolla, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our Annual report on Form 10-K for the year ended
December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents previously filed by DepoMed with the Commission
pursuant to the 1934 Act are hereby incorporated by reference in this prospectus
and made a part hereof:
1. Our Annual Report on Form 10-KSB for the year ended December 31, 1999;
2. Our Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2000;
3. Our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2000;
4. Our Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2000;
5. Our Current Report on Form 8-K filed on February 18, 2000; and
6. The description of our common stock contained in our registration
statement on Form 8-A filed on October 27, 1997 under the 1934 Act, including
any amendment or report filed for the purpose of updating such description.
All documents filed with the Commission pursuant to Section 13(a), 13(c),14
or 15(d) of the 1934 Act after the date of this prospectus and prior to the
termination of the offering shall be deemed to be incorporated by reference into
this prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this prospectus.
Upon written or oral request, DepoMed will provide without charge to each
person to whom a copy of the prospectus is delivered a copy of the documents
incorporated by reference herein (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference herein). You may
request a copy of these filings, at no cost, by writing or telephoning us at the
following address: DepoMed, Inc., 1360 O'Brien Drive, Menlo Park, California
94025, Attention: John Hamilton, Chief Financial Officer, telephone:
(650) 462-5900.
DepoMed is subject to the informational requirements of the 1934 Act and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed by
DepoMed may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and at the Commission's following Regional
Offices: Chicago Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
at prescribed rates from the Public Reference Section of the Commission at 450
Fifth
13
<PAGE>
Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004. Reports, proxy and
information statements and other information filed electronically by DepoMed
with the Commission are available at the Commission's world wide web site at
http://www.sec.gov.
DepoMed has authorized no one to provide you with any information that
differs from that contained in this prospectus. Accordingly, you should not
relay on any information that is not contained in this prospectus. You should
not assume that the information in this prospectus is accurate as of any date
other than the date of the front cover of this prospectus.
14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered. All of the amounts shown
are estimates except for the Securities and Exchange Commission Registration
Fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 1,729.00
Accounting Fees............................................. 9,000.00
Legal Fees and Disbursements................................ 15,000.00
Printing and Engraving...................................... 2,000.00
Miscellaneous............................................... 271.00
----------
Total:.................................................. $28,000.00
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to Section 204(a) and 317 of the California Corporations Code, as
amended, the Registrant has included in its articles of incorporation and bylaws
provisions regarding the indemnification of officers and directors of the
registrant. Article IV of Registrant's Amended and Restated Articles of
Incorporation provides as follows:
"The liability of the directors of this corporation for monetary damages shall
be eliminated to the fullest extent permissible under California law. This
corporation is also authorized, to the fullest extent permissible under
California law, to indemnify its agents (as defined in Section 317 of the
California Corporations Code), whether by bylaw, agreement or otherwise, for
breach of duty to this corporation and its shareholder in excess of the
indemnification expressly permitted by Section 317 and to advance defense
expenses to its agents in connection with such matters as they are incurred,
subject to the limits on such excess indemnification set forth in Section 204 of
the California Corporations Code. If, after the effective date of this Article,
California law is amended in a manner which permits a corporation to limit the
monetary or other liability of its directors or to authorize indemnification of,
or advancement of such defense expense to, its directors or other persons, in
any such case to a greater extent than is permitted on such effective date, the
references in this Article to "California law" shall to that extent be deemed to
refer to California law as so amended."
Section 29 of the registrant's Bylaws, as amended, provides as follows:
"29. Indemnification of Directors and Officers.
(a) Indemnification. To the fullest extent permissible under California
law, the corporation shall indemnify its directors and officers against all
expenses, judgment, fines, settlement and other amounts actually and reasonably
incurred by them in connection with any proceeding, including an action by or in
the right of the corporation, by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director, officer, trustee, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise
(including service with respect to employee benefit plans). To the fullest
extent permissible under California law, expenses incurred by a director or
officer seeking indemnification under this bylaw in defending any proceeding
shall be advanced by the corporation as they are incurred upon receipt by the
corporation of an undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that the director or
officer is not entitled to be indemnified by the corporation for those expenses.
If, after the effective date of this bylaw, California law is amended in a
manner which permits the corporation to authorize indemnification of or
advancement of expenses to
II-1
<PAGE>
its directors or officers, in any such case to a greater extent than is
permitted on such effective date, the references in this bylaw to "California
law" shall to that extent be deemed to refer to California law as so amended.
The rights granted by this bylaw are contractual in nature and, as such, may not
be altered with respect to any present or former director or officer without the
written consent of that person.
(b) Procedure. Upon written request to the Board of Directors by a person
seeking indemnification under this bylaw, the Board shall promptly determine in
accordance with Section 317(e) of the California Corporations Code whether the
applicable standard of conduct has been met and, if so, the Board shall
authorize indemnification. If the Board cannot authorize indemnification because
the number of directors who are parties to the proceeding with respect to which
indemnification is sought prevents the formation of a quorum of directors who
are not parties to the proceeding, then, upon written request by the person
seeking indemnification, independent legal counsel (by means of a written
opinion obtained at the corporation's expense) or the corporation's shareholders
shall determine whether the applicable standard of conduct has been met and, if
so, shall authorize indemnification.
(c) Definitions. The term "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative. The term "expenses" includes, without limitation, attorney's fees
and any expenses of establishing a right to indemnification." The registrant has
entered into indemnification agreements with each of its current directors and
officers pursuant to the foregoing provisions.
ITEM 16. EXHIBITS.
The following documents are filed herewith (unless otherwise indicated) and
made a part of this registration statement.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ------------------------------------------------------------
<C> <S>
5.1 Opinion of Heller Ehrman White & McAuliffe LLP
10.1 Form of Subscription Agreement
10.2 Form of Class A Warrant
10.3 Form of Class B Warrant
23.1 Consent of Heller Ehrman White & McAuliffe LLP (filed as
part of Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (included on page II-4)
</TABLE>
ITEM 17. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of the
1933 Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
II-2
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (i) and (ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
1934 Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. That, for purposes of determining any liability under the 1933 Act, each
filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the 1934 Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the 1934 Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 above, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
D. To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
1934 Act; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the 1933 Act, as amended, Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Menlo Park, California, on January 10, 2001.
<TABLE>
<S> <C> <C>
DEPOMED, INC.
By /s/ JOHN W. FARA
------------------------------------------
John W. Fara, Ph.D.
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John W. Fara, Ph.D. and John F. Hamilton, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Registration
Statement on Form S-3 and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the 1933 Act, this Registration Statement on
Form S-3 has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN W. FARA Chairman, President and Chief January 10, 2001
------------------------------------ Executive Officer (Principal
John W. Fara, Ph.D. Executive Officer)
/s/ JOHN N. SHELL Vice President, Operations and January 10, 2001
------------------------------------ Director
John N. Shell
/s/ JOHN F. HAMILTON Vice President, Finance and Chief January 10, 2001
------------------------------------ Financial Officer (Principal
John F. Hamilton Accounting and Financial Officer)
/s/ JOHN W. SHELL Director January 10, 2001
------------------------------------
John W. Shell, Ph.D.
/s/ G. STEVEN BURRILL Director January 10, 2001
------------------------------------
G. Steven Burrill
/s/ W. LEIGH THOMPSON Director January 10, 2001
------------------------------------
W. Leigh Thompson, M.D., Ph.D.
</TABLE>
II-4
<PAGE>
DEPOMED, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
--------------------- ------------------------------------------------------------
<C> <S>
5.1 Opinion of Heller Ehrman White & McAuliffe LLP
10.1 Form of Subscription Agreement
10.2 Form of Class A Warrant
10.3 Form of Class B Warrant
23.1 Consent of Heller Ehrman White & McAuliffe LLP (filed as
part of Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (included on page II-4)
</TABLE>
