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Filed Pursuant to Rule 424 (b) (1) File No. 333-09681
P R O S P E C T U S
[LOGO]
800,000 SHARES OF COMMON STOCK MINIMUM
1,200,000 SHARES OF COMMON STOCK MAXIMUM
----------------
All of the shares of Common Stock offered hereby (the "Shares") are being
sold by MGI PHARMA, INC. (the "Company").
The Common Stock of the Company is traded on the Nasdaq National Market
under the symbol "MOGN." On September 4, 1996, the last sale price for the
Common Stock as reported by Nasdaq was $5 3/8 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================
Price to Commissions Proceeds to
Public and Fees(1) Company (2)(3)
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<S> <C> <C> <C>
Per Share ............ $ 5.00 $ .30 $ 4.70
- -------------------------------------------------------------------------------
Total Minimum
(800,000 Shares).... $4,000,000 $240,000 $3,760,000
- -------------------------------------------------------------------------------
Total Maximum
(1,200,000 Shares)... $6,000,000 $360,000 $5,640,000
- -------------------------------------------------------------------------------
===============================================================================
</TABLE>
(1) The Shares are being offered by the Company principally to selected
institutional and accredited investors. T. R. Winston Capital, Inc. (the
"Placement Agent") has been retained to act, on a best efforts basis, as
placement agent for the Company in connection with this transaction. The
Company has agreed (i) to pay the Placement Agent a commission equal to 6%
of the Price to Public of the Shares sold (or $.30 per Share), (ii) to
reimburse the Placement Agent for certain expenses and (iii) to indemnify
the Placement Agent against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(2) The offering of Shares will terminate on September 10, 1996 (the
"Termination Date"). Prior to the Termination Date, all investor funds
will promptly be placed in escrow with First Trust National Association,
as escrow agent (the "Escrow Agent"), in an escrow account established for
the benefit of the investors. In the event that investor funds are not
received in the full amount necessary to satisfy the minimum requirements
of this offering on or before the Termination Date, all funds deposited in
the Escrow Agent account will promptly be returned to the investors. See
"Plan of Distribution."
(3) Before deducting estimated expenses of $123,000 payable by the Company.
T.R. WINSTON CAPITAL, INC.
The date of this Prospectus is September 4, 1996
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "Commission") are hereby incorporated by reference
in this Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996; and
(c) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on October 25, 1982, as amended by
Form 8 filed on on July 20, 1987, including any amendment or report for the
purpose of updating such description filed subsequent to the date of this
Prospectus and prior to the termination of the offering described herein.
In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), subsequent to the date of this Prospectus and prior to the
termination of the offering of the Shares being made hereby shall be deemed to
be incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained
herein or in a document incorporated by reference 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
subsequently filed document which is incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Such requests
should be directed to James V. Adam, Vice President, Chief Financial Officer,
MGI PHARMA, INC., Suite 300 E, Opus Center, 9900 Bren Road East, Minnetonka,
Minnesota 55343-9667, telephone: (612) 935-7335.
___________________
IN CONNECTION WITH THIS OFFERING, THE PLACEMENT AGENT MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S COMMON STOCK AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR FLORIDA RESIDENTS THE SECURITIES REFERRED TO HEREIN WILL BE SOLD TO, AND
ACQUIRED BY, THE PURCHASER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE
FLORIDA SECURITIES AND INVESTOR PROTECTION ACT. THE SECURITIES HAVE NOT BEEN
REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL PURCHASERS
WHO ARE FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE
WITHIN THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH
PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT.
___________________
Salagen(R) is a registered trademark of MGI PHARMA, INC. DIDRONEL(R) is
a registered trademark of Proctor & Gamble Pharmaceuticals, Inc.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus and the financial
statements (including the notes thereto) incorporated herein by reference.
Prospective investors should consider carefully the information discussed
under "Risk Factors."
THE COMPANY
MGI PHARMA, INC. (the "Company") is a pharmaceutical company that
acquires, develops and markets innovative and differentiated therapeutic
specialty products for niche markets of unmet medical need. The Company is
primarily focused on products that treat cancer or improve the quality of
life for cancer patients. It is currently marketing its oncology products to
physicians throughout the United States, with sales made to pharmaceutical
wholesalers for distribution to the ultimate consumers of the Company's
products. See "The Company" and "Recent Developments."
THE OFFERING
Common Stock Being Offered......... 800,000 shares minimum up to 1,200,000
shares maximum of Common Stock (the
"Shares"). All funds paid by investors
for the Shares will be held in an escrow
account at First Trust National
Association until the closing of the
offering, at which time the funds held in
escrow will be released to the Company.
If less than 800,000 Shares are
subscribed for by the Termination Date,
all funds held in the escrow account will
be returned to investors. See "Plan of
Distribution."
Common Stock Outstanding:
Before the Offering........... 12,822,971 shares of Common Stock(1)
After the Offering:
Assuming Sale of Minimum.... 13,622,971 shares of Common Stock
Assuming Sale of Maximum.... 14,022,971 shares of Common Stock
Offering Price per Share........... $5.00
Use of Proceeds.................... To finance the development and marketing
of the Company's products and the
acquisition or license of additional
products, and for working capital and
other general corporate purposes. See
"Use of Proceeds."
Nasdaq National Market Symbol...... MOGN
____________
(1) Based on the number of shares outstanding as of September 4, 1996.
Excludes up to 956,561 shares of Common Stock issuable upon the exercise
of options outstanding as of September 4, 1996.
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3
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RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree
of risk. In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors
relating to the business of the Company before making an investment. This
Prospectus, including the information incorporated by reference herein,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Exchange Act. Actual results
could differ significantly from those projected in the forward-looking
statements as a result, in part, of the risk factors set forth below.
LACK OF PROFITABLE OPERATIONS
The Company's revenues have not been sufficient to offset all the
expenses involved in operating a pharmaceutical company including research,
development and production. The Company had net losses of $2,614,000 for
1995 and $2,058,000 for the six months ended June 30, 1996. At June 30, 1996
the Company had an accumulated deficit of $67,895,000. To the extent the
Company is unable to achieve profitability, its ability to continue its
operations will depend upon its ability to secure additional funds from other
sources. Revenue may display significant variations due to the impact of new
contract and licensing arrangements, the completion or termination of those
contracts and arrangements and the timing and amounts of milestone payments.
The Company's profitability will be dependent on its success in developing,
obtaining regulatory approvals for and effectively marketing its products.
There can be no assurance as to whether the Company will be able to achieve
and sustain profitability.
DEPENDENCE ON SALES OF SALAGEN TABLETS
The Company derives substantially all of its product revenues from the
sale of Salagen(R) Tablets. For the six month period ended June 30, 1996,
U.S. sales of Salagen Tablets were $2,581,000, representing 89% of total
product sales for the period. In 1995, U.S. sales of Salagen Tablets were
$3,693,000, representing 80% of 1995 product sales. Accordingly, any factor
adversely affecting Salagen Tablets sales could have a material adverse
effect on the Company's business, financial condition and results of
operations. Although Salagen Tablets was awarded orphan drug status by the
U.S. Food and Drug Administration (the "FDA") as a treatment of xerostomia
induced by radiation therapy, the seven years of market exclusivity provided
by Orphan designation expires in April 2001. Moreover, the Company
anticipates that sales of its other product, DIDRONEL(R) I.V. Infusion, which
represented 10% and 17% of product sales for the first six months of 1996 and
for 1995, respectively, will continue to decline in the future due to the
introduction of competitive products.
DEPENDENCE ON LICENSE AND ACQUISITION STRATEGY
The Company has adopted a license and acquisition strategy to build its
product pipeline and expects to increase its sales over time through a series
of strategic acquisitions of new pharmaceutical product opportunities which
the Company can develop and market. The Company's strategy for growth is
dependent upon its continued ability to identify and acquire new
pharmaceutical products targeted at niche markets which can be promoted
through the Company's existing marketing and distribution channels. Because
the Company does not engage in proprietary research and development of new
products, it must rely upon the willingness of others to sell or license
pharmaceutical product opportunities to the Company. Other companies,
including those with substantially greater financial, marketing and sales
resources, are competing with the Company to acquire such products. There can
be no assurance that the Company will be able to acquire rights to additional
products on acceptable terms, if at all. The failure of the Company to
acquire additional products or to promote or market
4
<PAGE>
commercially successful products would have a material adverse effect on the
Company's future business, financial condition and results of operations.
Further, the marketing strategy, distribution channels and levels and bases
of competition with respect to newly acquired products may be different than
those of the Company's current products and there can be no assurance that
the Company will be able to compete favorably in those product categories.
UNCERTAINTY OF STRATEGIC ALLIANCES
The Company's strategy for the exploitation of foreign markets for its
products is to enter into strategic alliances with various multinational and
foreign pharmaceutical companies. The Company has entered into alliances
with various companies related to the marketing of Salagen Tablets and the
development of the acylfulvenes. Revenues from strategic alliances consist
of milestone payments and royalty payments. Licensing revenue from strategic
alliances was $7,718,094 for 1995 and $1,021,268 for the six months ended
June 30, 1996, comprising 58% and 23%, respectively, of total revenues.
Future licensing revenues will likely fluctuate from quarter to quarter and
year to year depending on the achievement of milestones by the Company's
partners, the amount of royalty generating activities, and the timing of
initiating additional licensing relationships. Additionally, royalties are
based on sales in local currencies and, therefore, the U.S. Dollar value of
such royalties will fluctuate with currency exchange rates. Absent revenue
from initiation of additional licensing relationships, 1996 licensing revenue
is expected to decline from 1995 amounts, given the high level of initiation
and milestone payments realized in 1995. Although the Company believes that
its partners in these alliances have an economic motivation to perform their
contractual responsibilities, the amount and timing of resources to be
devoted to these activities are not within the control of the Company.
Moreover, the terms of these alliances generally provide that they may be
terminated prior to their expiration under circumstances that may also be
outside the control of the Company. The early termination of one or more of
these strategic alliances could adversely affect the Company's business,
financial condition and results of operations. There can also be no
assurance that the Company will be able to negotiate additional strategic
alliances on acceptable terms or that such alliances will be successful.
UNCERTAINTY OF ACCESS TO CAPITAL
The Company may need to raise additional funds to acquire or license
additional products, to fund operating losses until such time as the Company
achieves sustained profitability, to support the marketing and sales of
additional products and to obtain working capital which may be needed from
time to time. The Company may seek additional funding through public and
private financing, including equity financing. Adequate funds for these
purposes, whether through the financial markets or from other sources, may
not be available when needed or on terms acceptable to the Company.
Insufficient funds may cause the Company to delay, scale back, or abandon
some or all of its product acquisition and licensing programs or marketing.
DEPENDENCE ON SOLE SUPPLIER
The Company relies on E. Merck Fine Chemicals Division as its sole
supplier of pilocarpine hydrochloride, the active ingredient necessary for
the manufacture of Salagen Tablets. The Company believes that E. Merck Fine
Chemicals Division accounts for a substantial majority of the worldwide
supply of Good Manufacturing Practices ("GMP") grade pilocarpine
hydrochloride, and that there is no other producer of pilocarpine
hydrochloride which accounts for a significant portion of the worldwide
supply. The processing facility and raw material requirements for the
production of pilocarpine hydrochloride present significant barriers to entry
of new producers in this market. Although the Company believes that it would
be able to procure adequate supplies of pilocarpine hydrochloride on a timely
basis from an alternate source, the Company has not identified any such
alternate source and
5
<PAGE>
disruptions in supplies would have a material adverse effect on the Company's
business, financial condition and results of operations.
RELIANCE ON THIRD PARTY MANUFACTURERS
The Company does not have any manufacturing facilities and is currently
relying on two third party manufacturers for the production of Salagen
Tablets. The Company intends to continue to rely on others to manufacture
its products, including any products that it may acquire, and has no plans to
establish any manufacturing operations. The manufacture of the Company's
products are subject to GMP regulations prescribed by the FDA or other
standards prescribed by the appropriate regulatory agency in the country of
use. There can be no assurance that the Company's current manufacturers will
comply with all applicable regulatory standards, or that the Company would be
able to identify an alternative third party manufacturer on terms acceptable
to the Company or on any terms.
INTENSE COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE
The manufacture and sale of pharmaceuticals is highly competitive.
Many of the Company's competitors are large well-known pharmaceutical
companies which have considerably greater financial, sales, marketing and
technical resources than those of the Company. Additionally, many of the
Company's present and potential competitors have research and development
capabilities that may allow such competitors to develop new or improved
products that may compete with the Company's products. The pharmaceutical
industry is characterized by rapid product development and technological
change. The Company's pharmaceuticals could be rendered obsolete or
uneconomical by the development of new pharmaceuticals to treat the
conditions addressed by the Company's products, or as the result of
technological advances affecting the cost of production. There can be no
assurance that the Company will be able to compete effectively, that
additional competitors will not enter the market, or that competition will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY
The Company's ability to compete effectively with other companies will
depend, in part, on its ability to maintain the proprietary nature of its
products. The Company was awarded orphan drug status for Salagen Tablets as
a treatment for xerostomia induced by radiation therapy. Orphan designation
provides seven years market exclusivity after product registration. The
Company holds an exclusive license on three U.S. patents and one allowed U.S.
patent application covering MGI 114 and other analogs in the Company's family
of acylfulvenes, a new class of potential anti-cancer compounds.
There can be no assurance that the Company will be able to obtain
patents for any future products or that any current or future issued or
licensed patents or know-how will afford protection against competitors with
similar technologies or processes, or that any patents will not be infringed
upon or designed around by others. In addition, there can be no assurance
that others will not independently develop proprietary technologies and
processes which are the same as or substantially equivalent to those of the
Company. The Company could also incur substantial costs in defending itself
in suits brought against it based on such patents or in bringing suits to
protect such patents or patents licensed by the Company against infringement.
Additionally, the Company protects its proprietary technology and processes
in part by confidentiality agreements with its collaborative partners,
employees and consultants. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
breach, or that the Company's trade secrets will not otherwise become known
or independently discovered by competitors.
6
<PAGE>
FLUCTUATIONS IN OPERATING RESULTS
The Company's results of operations may vary from period to period due
to a variety of factors including continuing demand for the Company's
products, the introduction of new products, the continued stream of licensing
and royalty revenues, expenditures incurred to acquire or license and promote
additional pharmaceuticals, interruptions in or availability of supply by
third-party manufacturers, the introduction of new products by the Company or
its competitors, changes in sales and marketing expenditures and general
economic and industry conditions which affect customer demand. Because the
Company's operating expenses are based on anticipated sales levels variations
in the timing of recognition of revenue could cause significant fluctuations
from period to period and may result in unanticipated earnings shortfalls or
losses. There can be no assurance that the Company will be successful in
maintaining or improving its profitability or avoiding losses in any future
period.
GOVERNMENT REGULATION
Government regulation in the United States and abroad is a significant
factor in the development, production, and marketing of the Company's
products. Prior to marketing, each of the Company's products must undergo an
extensive testing and regulatory approval process conducted by the FDA and by
comparable agencies in other countries. The testing and approval process can
take several years and require the expenditure of substantial resources, and
there can be no assurance that any product that the Company may develop will
be approved by the FDA or any foreign regulatory authority in a timely
manner, if at all. Generally, only a very small percentage of newly
discovered pharmaceutical compounds that enter preclinical development are
approved for sale.
The Company depends on external laboratories and medical institutions to
conduct its preclinical and clinical testing in compliance with clinical and
laboratory practices required by the FDA. The data obtained from preclinical
and clinical testing are subject to varying interpretations that could delay,
limit or prevent regulatory approval. In addition, delays or rejection may
be encountered based upon changes in FDA personnel or policy for drug
approval during the period of development and by changes in the requirements
for regulatory review of each submitted New Drug Application ("NDA").
Moreover, even if the FDA approves the marketing application of a product,
such approval may entail commercially unacceptable limitations on the uses,
or "indications," for which a product may be marketed, and further studies
may be required to provide additional data on product safety or
effectiveness. The FDA also requires post-marketing adverse event
surveillance programs to monitor the product's side effects.
An FDA approved product and its manufacturer are subject to continual
regulatory review and the later discovery of previously unknown problems with
a product or manufacturer may result in restrictions or sanctions on such
product or manufacturer, including the withdrawal of such product from the
market. Most changes in the manufacturing procedures used by the Company for
any of the Company's approved products and any change in manufacturer will
require the approval of the FDA prior to their implementation which could
have an adverse effect upon the Company's ability to continue the
commercialization or sale of a product.
In certain countries, the sales price of a product must also be approved
after marketing approval is granted. No assurance can be given that
satisfactory prices can be obtained in foreign markets even if marketing
approval is granted by foreign regulatory authorities.
7
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UNCERTAINTIES RELATED TO PHARMACEUTICAL PRICING AND REIMBURSEMENT
The profitability of the Company will depend in part on the availability
of adequate reimbursement for the Company's products from third-party payors,
such as government entities, private health insurers and managed care
organizations. Third-party payors are increasingly challenging the pricing
of medical services and products. Although the Company currently has no
problem with third-party reimbursement, there can be no assurance that
reimbursement will be available in the future for the Company's new or
existing products, or that such third-party reimbursement will be adequate.
If adequate reimbursement levels are not provided by government entities and
other third-party payors for the Company's products, the Company's business,
financial condition and results of operations would be materially adversely
affected. Further, a number of legislative and regulatory proposals aimed at
changing the nation's health care system have been proposed in recent years.
While the Company cannot predict whether any such proposals will be adopted,
or the effect that any such proposal may have on its business, such
proposals, if enacted, could have a material adverse effect on the Company's
business, financial condition and results of operations.
POTENTIAL PRODUCT LIABILITY; LIMITED INSURANCE COVERAGE
The Company faces an inherent risk of exposure to product liability
claims in the event that the use of its product is alleged to have resulted
in adverse effects. Such risk exists even with respect to those products that
are manufactured in regulated and licensed facilities or otherwise possess
regulatory approval for commercial sale. While the Company has taken, and
continues to take, what it believes are appropriate precautions, there can be
no assurance that it will avoid significant product liability exposure. The
Company currently has product liability insurance in the amount of $10
million per occurrence and in the aggregate for the year. Although to date
the Company has not been the subject of any product liability claims, there
can be no assurance that such insurance will be sufficient to cover potential
claims. Further, there can be no assurance that adequate insurance coverage
will be available in the future on commercially reasonable terms, if at all,
or that a product liability claim would not materially adversely affect the
Company's business, financial condition and results of operations.
RISK OF PRODUCT RECALL
Product recalls may be issued at the discretion of the Company, the
FDA, the U. S. Federal Trade Commission or other government agencies having
regulatory authority for product sales, and may occur due to disputed
labeling claims, manufacturing issues, quality defects or other reasons.
Although none of the Company's products have been the subject of a recall,
no assurance can be given that product recalls will not occur in the future.
Any product recall could materially adversely affect the Company's business,
financial condition and results of operations.
DEPENDENCE UPON CERTAIN KEY MANAGEMENT
The future success of the Company is largely dependent upon the
leadership of Charles N. Blitzer, the Company's President and Chief Executive
Officer. Should Mr. Blitzer cease to be affiliated with the Company, the
Company's strategic direction and performance could be materially adversely
affected. The Company is also dependent upon a number of other key management
personnel. The loss of the services of one or more key employees, or the
inability of the Company to attract and retain skilled management and
marketing and sales personnel in the future, could have a material adverse
effect on the Company's business, financial condition and results of
operations.
8
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POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock, like that of the
securities of other small pharmaceutical companies, has fluctuated
significantly in recent years and is likely to fluctuate in the future. From
time to time the market for securities has also experienced significant price
and volume fluctuations that are unrelated to the operating performance of
such companies. In addition, announcements by the Company or others
regarding commercial products, patents or proprietary rights, the progress of
clinical trials or government regulation, public concern as to the safety of
drugs, the issuance of securities analysts' reports and general market
conditions may each have a significant effect on the market price of the
Common Stock. Fluctuations in financial performance from period to period
also may have a significant impact on the market price of the Common Stock.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the minimum number of
Shares are estimated to be $3,637,000 ($5,517,000 if the maximum number of
Shares are sold), after deducting commissions to the Placement Agent and
estimated offering expenses.
The Company intends to use the net proceeds to finance the development
and marketing of its current products and for working capital and other
general corporate purposes. The Company also may use a portion of the net
proceeds to acquire or license products and technologies complementing the
Company's current business, although it has no present definitive agreement
or letter of intent with respect to any such acquisition.
Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds of this offering in short-term, interest
bearing, investment-grade securities.
DILUTION
As of June 30, 1996, the net tangible book value of the Company was
$15,172,000, or $1.18 per share of Common Stock. "Net tangible book value"
per share of Common Stock represents the total amount of tangible assets of
the Company, less the total amount of liabilities of the Company, divided by
the number of shares of Common Stock outstanding. Upon completion of this
offering and after deducting the Placement Agent's commissions and estimated
offering expenses, the pro forma net tangible book value of the Company as of
June 30, 1996, would have been $18,809,000, or $1.38 per share of Common
Stock if the minimum number of Shares was sold ($20,689,000 and $1.48 per
share of Common Stock, respectively, if the maximum number of Shares was
sold). This represents an immediate increase in net tangible book value of
approximately $.20 per share to existing shareholders and immediate dilution
of $3.62 per share if the minimum number of Shares are sold to purchasers in
this offering ($.30 and $3.52, respectively, if the maximum number of Shares
are sold). "Dilution" per share represents the difference between the price
to be paid by the new investors and the net tangible book value per share at
June 30, 1996, as adjusted for the offering.
9
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THE COMPANY
MGI PHARMA, INC. (the "Company") is a pharmaceutical company that
acquires, develops and markets innovative and differentiated therapeutic
specialty products for niche markets of unmet medical need. The Company is
primarily focused on products that treat cancer or improve the quality of
life for cancer patients. It is currently marketing its oncology products to
physicians throughout the United States, with sales made to pharmaceutical
wholesalers for distribution to the ultimate consumers of the Company's
products.
Substantially all of the Company's sales revenue is derived from the
sales of Salagen Tablets (pilocarpine hydrochloride). Salagen Tablets, which
the Company began marketing in April 1994 treat radiation-induced dry mouth
in head and neck cancer patients. In 1996, the Company expects to submit a
supplemental NDA to the FDA for Salagen Tablets as a treatment for xerostomia
(dry mouth) resulting from Sjogren's syndrome, a chronic autoimmune system
disease experienced by many patients with rheumatoid arthritis and other
autoimmune diseases.
The Company's business strategy focuses on niche medical markets,
particularly the oncology market, because it believes such markets can be
reached effectively by a relatively small sales force. In the United States,
the number of physicians in a particular subspecialty is usually relatively
small and such physician specialists tend to be located near major
metropolitan areas. Furthermore, the Company believes that current trends in
pharmaceutical detailing will continue to reduce the number of pharmaceutical
sales targets as decisions relating to use of prescription drugs become more
centralized.
The Company attempts to reduce the risk of product failure by acquiring
products that are past the initial discovery stage. Such products have
usually already passed, or have a higher than average chance of passing,
preliminary toxicity testing and have demonstrated some efficacy in animals
or humans. The Company believes that acquiring products that meet such
requirements may allow it to reduce product development time frames, reduce
the research rejection rate due to safety and toxicity concerns, and achieve
a higher probability of product effectiveness. The Company believes there are
a number of compounds that meet these requirements available for licensing
from universities and other research organizations such as biotechnology
companies and other pharmaceutical companies.
The Company's development efforts are currently focused on the
acylfulvenes, a new class of potential anticancer compounds. The acylfulvenes
are chemically modified versions of natural substances produced by the
Omphalotus illudens mushroom. They utilize a mechanism of tumor-killing
action that is distinct from other chemotherapeutic drugs and appear to be
absorbed more quickly by tumor cells than by healthy tissue. In September
1995, the Company filed an Investigative New Drug application with the FDA
for MGI 114, the initial acylfulvene analog to be taken into human clinical
development from the acylfulvene family. In December 1995, Phase I human
clinical studies using MGI 114 began. MGI 114 is an early-stage developmental
drug compound at the very beginning of human testing. There can be no
assurance that MGI 114 or any other acylfulvene analog will ultimately be
determined to be safe and effective for human use.
The Company actively pursues strategic alliances throughout the world
both to market and develop its products. The Company has entered into
agreements with various partners who will market Salagen Tablets in Europe,
Japan, Canada, Israel and Taiwan, following regulatory approval the various
countries. Currently, Salagen Tablets have been approved in the United
Kingdom, France, Ireland, Israel and Greece. In 1995, the Company executed a
development and marketing agreement for the acylfulvenes in Japan with
Dainippon Pharmaceuticals, a major Japanese pharmaceutical company.
10
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The Company was incorporated in Minnesota on November 14, 1979. Its
principal executive offices are located at 9900 Bren Road East, Suite 300E,
Minnetonka, Minnesota 55343, and its phone number is (612) 935-7335.
RECENT DEVELOPMENTS
In January 1996, Chiron Therapeutics BV, a unit of Chiron Corporation,
the Company's European marketing partner for Salagen Tablets, obtained
regulatory approval and was issued a license to sell Salagen Tablets in
France, Ireland and Greece. Marketing of the Salagen Tablet began in Ireland
in 1996 and is expected to begin later this year in France and Greece when
pricing approval is received from these countries.
In April 1996, Charles N. Blitzer was appointed President and Chief
Executive Officer of the Company to replace Dr. Kenneth F. Tempero, who
retired. From 1992 to April of this year, Mr. Blitzer was the President and
Chief Executive Officer of Oncologix, Inc., a pharmaceutical company focused
on cancer related products. From 1977 to 1991, Mr. Blitzer held a variety of
management positions with Marion Merrell Dow, Inc. and Marion Laboratories,
Inc.
In April 1996, the U.S. Patent and Trademark Office notified the Company
that it will grant two patents covering MGI 114 and additional acylfulvene
analogs. In June 1996, one of the patents was issued to the University of
California, from which the Company holds an exclusive license, covering MGI
114 and certain other acylfulvene analogs. These patents complement two
previously issued U.S. patents covering a method of using MGI 114 and other
acylfulvene analogs to inhibit certain tumor cell growth. The Company also
has licensed, pending or granted foreign patents on MGI 114 and its analogs
in over 30 countries worldwide. Patent applications covering an even broader
base of acylfulvene analogs compounds are pending in the United States.
In July 1996, the Company received approval from the Israeli Ministry of
Health to market Salagen Tablets in that nation. This approval covers both
the use of Salagen Tablets for the treatment of the symptoms of xerostomia
(dry mouth) caused by radiation therapy for cancer of the neck and head, and
for the symptoms of Sjogren's Syndrome, an autoimmune disease that causes
disabling dry eyes and dry mouth. Israel is the first nation to approve
Salagen Tablets for treating symptoms associated with Sjogren's Syndrome.
In July 1996, the Decision Network Committee of the National Cancer
Institute ("NCI") voted in favor of funding and conducting human clinical
trials of MGI 114, pending execution of a clinical trials agreement. Assuming
a clinical trials agreement is entered into by NCI and the Company, the
institute will sponsor and oversee clinical research within its network of
more than 50 designated cancer centers located across the United States. The
Company will provide MGI 114 for these studies.
PLAN OF DISTRIBUTION
The Shares are being offered for sale by the Company principally to
selected institutional and accredited investors. T.R. Winston Capital, Inc.
(the "Placement Agent") has been retained to act as the exclusive agent for
the Company in connection with such offers and sales on a best efforts basis.
The closing of the offering is conditional on the sale of the minimum amount
of Shares prior to the Termination Date. The Placement Agent is not obligated
to and does not intend itself to take (or purchase) any of the Shares offered
hereby. It is anticipated that the Placement Agent will obtain indications of
interest from potential investors for the amount of the offering and that
effectiveness of the Registration Statement will not be requested and no
investor funds will be accepted until indications of interest have been
received for at least the minimum number of Shares. Confirmations and
definitive prospectuses will be distributed to all investors at the time of
pricing, informing investors of the closing date, which will be on or
about September 9, 1996. No investor funds will be accepted
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prior to effectiveness of the Registration Statement. Prior to the closing
date, all investor funds will promptly be placed in escrow with First Trust
National Association as escrow agent (the "Escrow Agent"), in an escrow
account established for the benefit of the investors. The Escrow Agent will
invest such funds in accordance with Rule 15c2-4 promulgated under the
Exchange Act. Prior to the closing date, the Escrow Agent will advise the
Company that payment for the purchase of the Shares has been affirmed by the
investors and that the investors have deposited the requisite funds in the
escrow account at the Escrow Agent. Upon receipt of such notice, the Company
will deposit with the Depository Trust Company the Shares to be credited to
the respective accounts of the investors. Investor funds, together with
interest thereon, if any, will be collected by the Company through the
facilities of the Escrow Agent on the scheduled closing date. The offering
will not continue after the closing date. In the event that investor funds
are not received for the minimum number of Shares prior to the Termination
Date, all funds deposited in the escrow account will promptly be returned.
The Company has agreed (i) to pay the Placement Agent a commission equal to
6% of the purchase price of the Shares, (ii) to indemnify the Placement Agent
against certain liabilities, including liabilities under the Securities Act,
and (iii) to reimburse the Placement Agent for certain of its out-of-pocket
expenses incurred in connection with the offering.
Certain officers and the directors of the Company have agreed that they
will not, directly or indirectly, offer, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable for,
or any rights to purchase or acquire, Common Stock for a period of 90 days
after the date of this Prospectus, except in connection with a Company-
sponsored employee stock plan or with the prior written consent of the
Placement Agent.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Dorsey & Whitney LLP, Minneapolis, Minnesota. Certain legal
matters relating to the offering will be passed upon for the Placement Agent
by Reboul, MacMurray, Hewitt, Maynard & Kristol, New York, New York.
EXPERTS
The consolidated financial statements and schedule of MGI PHARMA, INC.,
incorporated by reference herein, have been audited by KPMG Peat Marwick LLP,
independent certified public accountants, as set forth in their reports
thereon incorporated by reference herein. Such consolidated financial
statements and schedule are incorporated by reference herein in reliance upon
such reports given upon the authority of such firm as experts in accounting
and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and CitiCorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a Web site
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that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at the
address "http://www.sec.gov". The Common Stock of the Company is traded on
the Nasdaq National Market. Reports, proxy statements and other information
concerning the Company may be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement (of
which this Prospectus is a part) on Form S-3 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to the Company and the Common Stock
offered hereby, reference is hereby made to the Registration Statement.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE PLACEMENT
AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES, OR AN OFFER
OR SOLICITATION IN ANY JURISDICTION TO A PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE OFFERING BY THE
COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
_____________________
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C>
Incorporation of Certain Documents
by Reference................................... 2
Prospectus Summary.................................. 3
Risk Factors........................................ 4
Use of Proceeds..................................... 9
Dilution............................................ 9
The Company......................................... 10
Recent Developments................................. 11
Plan of Distribution................................ 11
Legal Matters....................................... 12
Experts............................................. 12
Available Information............................... 12
</TABLE>
[LOGO]
800,000 SHARES MINIMUM
1,200,000 SHARES MAXIMUM
COMMON STOCK
________________________
PROSPECTUS
SEPTEMBER 4, 1996
________________________
T.R. WINSTON CAPITAL, INC.
