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As Filed With the Securities and Exchange Commission on May 28, 1999
Registration No. 333-73009
SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEOTHERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-0979187
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
157 Technology Drive, Irvine, California 92618
(949) 788-6700
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
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Alvin J. Glasky, Ph.D., President and Chief Executive Officer
157 Technology Drive
Irvine, California 92618
(949) 788-6700
(Name, address, including zip code, and telephone number,
including area code of agent for service)
Copies to:
C. Craig Carlson, Esq.
Robert E. Rich, Esq.
Stradling Yocca Carlson & Rauth, a Professional Corporation
660 Newport Center Drive, Suite 1600, Newport Beach, California 92660
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier 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. [ ]
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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UP TO 800,569 SHARES OF
NEOTHERAPEUTICS, INC.
COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the
symbol "NEOT." On May 27, 1999, the closing price of our common stock was
$12.6875.
These shares of common stock are being sold by the holders of certain
of our securities, which holders are listed under the heading "Selling
Stockholders." The selling stockholders previously received the shares from us
or will receive the shares from us by converting previously issued Series A
Preferred Stock or by exercising previously issued common stock purchase
warrants. We will not receive any of the proceeds from the sales of the shares
by the selling stockholders.
Although this prospectus covers up to 800,569 shares, only 283,716
shares of common stock are being offered by the selling stockholders as of the
date of this prospectus. The number of shares being offered for sale includes
208,716 shares that would be issuable upon conversion of 50% of the shares of
Series A Preferred Stock held by the selling stockholders, assuming that such
conversion occurred on or prior to June 29, 1999 at a conversion price equal to
the conversion price that would have been applicable on May 27, 1999 without
giving effect to the fixed initial conversion price of $13.06 per share. The
number of shares being offered for sale also includes 75,000 shares that are
issuable upon exercise of warrants held by the selling stockholders. The selling
stockholders may convert an additional 25% of their shares of Series A Preferred
Stock in cumulative increments during each 30-day period after June 29, 1999.
The Series A Preferred Stock is convertible at a conversion price equal to the
lesser of $13.06 or 101% of the average of the ten lowest closing bid prices of
our common stock occurring in the 30 trading days preceding the particular
conversion. The actual number of shares of common stock which the selling
stockholders will receive upon conversion of the Series A Preferred Stock could
be materially more than 208,716 depending upon the number of shares of Series A
Preferred Stock converted and on the market price of our common stock as of the
date of conversion.
Investing in our common stock involves many risks. See "Risk Factors"
beginning on page 4.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of the prospectus. Any representation to the contrary is a
criminal offense.
-----------
The date of this prospectus is June 1, 1999.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Where You Can Find More Information.............................. 2
About NeoTherapeutics, Inc....................................... 3
Risk Factors..................................................... 4
Forward-Looking Statements....................................... 12
Issuance of Common Stock to Selling Stockholders................. 13
Use of Proceeds.................................................. 13
Selling Stockholders............................................. 14
Plan of Distribution............................................. 15
Legal Matters.................................................... 16
Experts.......................................................... 16
Limitation of Liability and Disclosure of Commission Position on
Indemnification For Securities Act Liabilities................ 16
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, and Chicago.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them which means that we can disclose important information to you by
referring you to those documents instead of having to repeat the information in
this prospectus. The information incorporated by reference is considered to be
part of this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
the selling stockholders sell all the shares.
Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;
Our definitive Proxy Statement filed pursuant to Section 14 of the
Exchange Act in connection with our 1999 Annual Meeting of Stockholders;
Our Current Reports on Form 8-K filed January 28, 1999 and February 9,
1999;
Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1999; and
The description of our common stock contained in the Registration of
Securities of Certain Successor Issuers filed pursuant to Section 12(g) of the
Exchange Act on Form 8-B on June 27, 1997, including any amendment or reports
filed for the purpose of updating such description.
You can request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
NeoTherapeutics, Inc.
Attn: Investor Relations
157 Technology Drive
Irvine, California 92618
(949) 788-6700
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You should rely only on the information contained in this prospectus or
any supplement and in the documents incorporated by reference. We have not
authorized anyone else to provide you with different information. The selling
stockholders will not make an offer of these shares in any state where the offer
is not permitted. You should not assume that the information in this prospectus
or any supplement or in the documents incorporated by reference is accurate on
any date other than the date on the front of those documents.
This prospectus is part of a registration statement we filed with the
SEC (Registration No. 333-73009). More information about the shares sold by the
selling stockholders is contained in that registration statement and the
exhibits filed along with the registration statement. Because information about
contracts referred to in this prospectus is not always complete, you should read
the full contracts which are filed as exhibits to the registration statement.
You may read and copy the full registration statement and its exhibits at the
SEC's public reference rooms or their web site.
ABOUT NEOTHERAPEUTICS
NeoTherapeutics, Inc. is a development stage biopharmaceutical company
engaged in the discovery and development of novel therapeutic drugs intended to
treat neurological diseases and conditions, such as memory deficits associated
with Alzheimer's disease and dementia, spinal cord injuries, stroke, Parkinson's
disease, migraine, depression and obesity. Our initial product candidate,
Neotrofin(TM) (AIT-082, leteprinim potassium) and other compounds under
development are based on our patented technology. This technology uses small
synthetic molecules to create non-toxic compounds, intended to be administered
orally or by injection, that are capable of passing through the blood-brain
barrier to rapidly act upon specific target cells in specific locations in the
central nervous system, including the brain. Animal and laboratory tests have
shown that our AIT-082 compound appears to selectively increase the production
in animals of certain neurotrophic factors, a type of large protein, in the
areas of the brain implicated in memory and in the spinal cord. These
neurotrophic factors regulate nerve cell growth and function. Neotrofin(TM)
(AIT-082) has been developed to capitalize on the beneficial effects of these
proteins, which have been widely acknowledged to be closely involved in the
early formation and maturation of the central nervous system.
NeoTherapeutics, Inc. was incorporated in Colorado in December 1987 and
reincorporated in Delaware in June 1997. All references to "we," "our" or
"NeoTherapeutics" refer to NeoTherapeutics, Inc. and its subsidiaries. Our
executive offices are located at 157 Technology Drive, Irvine, California 92618.
Our telephone number is (949) 788-6700.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and the other information
contained in this prospectus before deciding to invest in our common stock. The
risks described below are not the only ones facing our company. Additional risks
not presently known to us or which we currently consider immaterial may also
adversely affect our company. If any of the following risks actually occur, our
business, financial condition and operating results could be materially
adversely affected. In such case, the trading price of our common stock could
decline, and you could lose a part or all of your investment.
WE ARE A DEVELOPMENT STAGE COMPANY AND HAVE A HISTORY OF OPERATING LOSSES; WE
EXPECT CONTINUED LOSSES
We are considered a development stage company because we have not yet
generated revenues from sales. From our inception in 1987 through March 31,
1999, we have incurred cumulative losses of approximately $28.2 million, almost
all of which consisted of research and development and general and
administrative expenses. We expect our operating losses to increase in the
future as we expand our clinical trials and increase our research and
development activities. It is possible that we may never achieve significant
revenues or become profitable. Even if we eventually generate revenues from
sales, we nevertheless expect to incur significant operating losses over the
next several years. Our ability to become profitable and to achieve long-term
success will depend on:
o the time and expense necessary to develop our proposed products;
o whether we can obtain, or how quickly we can obtain, regulatory
approvals for such products; and
o our success in bringing these products to market.
WE ARE IN THE EARLY STAGE OF PRODUCT DEVELOPMENT AND FACE A RISK OF FAILURE
Our proposed products are in an early stage of development. They will
require additional research and development, clinical testing and regulatory
clearances. We do not currently sell any products and do not expect to have any
products commercially available for at least two years. Our proposed products
are subject to the risks of failure inherent in the development of
pharmaceutical products based on innovative technologies. Some of these risks
are that a proposed product:
o could be found to be ineffective or toxic;
o may fail to receive necessary regulatory clearances;
o will be uneconomical to manufacture or market;
o may not be sold because of patent or other rights of third parties;
or
o becomes unmarketable because a third party introduces an equivalent
or superior product.
As a result, we are unable to predict whether our research and
development activities will result in any commercially viable products or
applications. Disorders of the central nervous system, our primary area of
therapeutic focus, are not thoroughly understood by the scientific and medical
community and are the subject of continuing research. We cannot be certain that
our proposed products will prove to be safe or effective in treating such
disorders or any other diseases. In our industry, the majority of compounds fail
to enter clinical studies, and the majority of products entering clinical
studies after achieving promising preclinical results are not commercialized
successfully.
WE WILL NEED ADDITIONAL FUNDING AND OUR ACCESS TO CAPITAL IS UNCERTAIN
We will require substantial additional capital to further develop our
proposed products and to commercialize any products that are developed. Our
capital requirements will depend on many factors, including:
o the progress of our research and development program;
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o the progress of preclinical and clinical testing;
o the time and cost involved in obtaining regulatory approvals;
o the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights;
o competing technological and market developments; and
o our ability to establish collaborative and other arrangements with
third parties, such as licensing and manufacturing agreements.
On March 27, 1998, we entered into a Private Equity Line of Credit
Agreement with a private investor. Under the private equity line agreement we
may sell shares of our common stock to the investor at a price equal to 88% of
the market price of the common stock at the time of such sales, subject to
certain limitations contained in the private equity line agreement.
We believe that our existing cash and capital resources, including the
proceeds from any future sales of our common stock under the private equity line
agreement, will allow us to satisfy our current and projected funding
requirements for at least the next 12 months. Thereafter, we may require
substantial additional capital. Moreover, we could require additional capital
sooner if we experience unanticipated cash requirements during the next 12
months.
We may seek such additional funding through public or private financing
or collaborative or other arrangements with third parties. We cannot be certain
that additional funds will be available on acceptable terms, if at all. Any
future equity financing will decrease the percentage ownership of existing
stockholders and may, depending on the price at which we are able to sell the
equity securities, result in substantial economic dilution to our existing
stockholders. Alternatively, we may obtain funds by entering into arrangements
with third parties. These arrangements may require us to relinquish rights to
certain of our products or technologies that we would not otherwise relinquish.
If adequate funds are not available, we may have to delay, scale back or
eliminate one or more of our development programs. Any failure to obtain
adequate funding, or any unfavorable arrangement regarding our products or
technology, would limit our ability to develop or commercialize our products and
could have a material adverse effect on our business, financial condition and
results of operations.
WE DEPEND ON THIRD PARTIES FOR CLINICAL TESTING, MANUFACTURING AND MARKETING
Except with respect to our Neotrofin(TM) compound, we currently do not
intend to conduct later-stage human clinical trials ourselves or to manufacture
any of our proposed products for commercial sale nor do we have the resources
necessary to do so. We intend to seek larger pharmaceutical companies as
partners to conduct such activities.
In connection with our efforts to secure corporate partners, we will
seek to retain certain co-marketing rights to certain of our proposed products,
so that we may promote such products to selected medical specialists while our
corporate partner promotes these products to the medical market generally. We
cannot guarantee that we will be able to enter into any such partnering
arrangements on this or any other basis. In addition, we cannot guarantee that
we or our potential corporate partners can successfully introduce our proposed
products or that such proposed products will achieve acceptance by patients,
health care providers and insurance companies. Further, it is possible that we
may not be able to manufacture and market our proposed products at prices that
would permit us to make a profit.
WE FACE RISKS AND UNCERTAINTIES ASSOCIATED WITH CONDUCTING CLINICAL TRIALS
Extensive and costly clinical testing will be necessary to assess the
safety and efficacy of our potential products. The rate of completion of
clinical trials depends on, among other factors, the type, novelty and
complexity of the product and the rate of patient enrollment. Patient enrollment
is a function of many factors, including:
o the nature of the clinical trial protocols;
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o existence of competing protocols;
o size of the patient population;
o proximity of patients to clinical sites; and
o eligibility criteria for the study.
Delays in patient enrollment will increase costs and delay the
introduction of our potential products, thereby harming our business and
financial condition.
Many pharmaceutical companies are conducting research into Alzheimer's
disease. As a result, we must compete with them for clinical sites, physicians
and the limited number of patients with Alzheimer's disease who fulfill the
stringent requirements for participation in clinical trials. This competition
could delay completion of clinical trials and/or result in increased costs.
Even if we successfully enroll patients in our clinical trials, we
cannot guarantee they will respond to our potential products. We think it is
prudent to expect setbacks. If we do not comply with the U.S. Food and Drug
Administration regulations applicable to such testing, our clinical trials could
be delayed, suspended or cancelled, or the FDA might not accept the results of
such testing. The FDA may suspend clinical trials at any time if it concludes
that the subjects participating in such trials are being exposed to unacceptable
health risks. Further, there can be no assurance that human clinical testing
will show any current or future product candidate to be safe and effective or
that data derived therefrom will be suitable for submission to the FDA.
OUR MANAGEMENT HAS LIMITED MANUFACTURING AND MARKETING EXPERIENCE AND MAY HAVE
DIFFICULTY MANAGING OUR GROWTH
We cannot guarantee that we will be able to develop manufacturing or
marketing capabilities successfully, either on our own or through third parties,
or that we will be able to manage the expansion of our operations successfully.
To date, we have engaged exclusively in the development of pharmaceutical
technology and products. Our management has substantial experience in
pharmaceutical company operations, but has limited experience in manufacturing
or procuring products in commercial quantities or in marketing pharmaceutical
products. Our management has only limited experience in negotiating,
establishing and maintaining strategic relationships, conducting clinical trials
and other later-stage phases of the regulatory approval process.
We cannot be certain that we will be able to successfully engage in any
of these activities with respect to any products which we attempt to
commercialize. If we decide to establish a commercial-scale manufacturing
facility for our lead product candidate Neotrofin(TM), we will require
substantial additional funds and personnel and will be required to comply with
extensive regulations applicable to such a facility. This growth may strain our
management and operations. Our ability to manage such growth depends upon the
ability of our officers and key employees to:
o broaden our management team and to attract, hire and retain skilled
employees;
o implement and improve our operational, management information and
financial control systems;
o expand, train and manage our employee base; and
o develop additional expertise among existing management personnel.
WE NEED TO COMPLY WITH EXTENSIVE GOVERNMENTAL REGULATION TO OBTAIN PRODUCT
APPROVALS
Various agencies in the United States and abroad regulate the testing,
manufacturing, labeling, distribution, marketing and advertising of our proposed
products and our ongoing research and development activities. The U.S. Food and
Drug Administration and comparable agencies in foreign countries impose many
requirements on the introduction of new pharmaceutical products through lengthy
and detailed clinical testing procedures, sampling
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activities and other costly and time consuming compliance procedures. These
requirements make it difficult to estimate when Neotrofin(TM) or any other
potential product will be commercially available, if at all.
Our proprietary compounds will require substantial clinical trials and
FDA review as new drugs. We cannot predict with certainty when we might submit
any of our proposed products currently under development for regulatory review.
Once we submit a proposed product for review, we cannot guarantee that FDA or
other regulatory approvals will be granted on a timely basis, if at all.
If we are delayed or fail to obtain such approvals, our business and
results of operations would be damaged. If we fail to comply with regulatory
requirements we could be subject to regulatory or judicial enforcement actions.
These actions could result in:
o product recalls or seizures;
o injunctions;
o civil penalties;
o criminal prosecution;
o refusals to approve new products and withdrawal of existing
approvals; and
o enhanced exposure to product liabilities.
If we sell our products outside the United States, we will be subject to
regulatory requirements governing such sales. These requirements vary widely
from country to country and could delay introduction of our products in those
countries.
UNCERTAINTY REGARDING PRICING OF, AND REIMBURSEMENT FOR, PHARMACEUTICALS
Our commercial success will depend heavily on the extent to which third
party payors, including government authorities (such as Medicare), managed care
providers and private health insurers will reimburse users for the costs of our
products and any related treatments. If those who buy or use our products are
not adequately reimbursed, they may forego or reduce such use.
Governmental authorities and private third-party payors are engaged in
ongoing efforts to contain or reduce the costs of pharmaceutical products. In
the United States, an increasing emphasis on managed care and consolidation of
hospital purchasing has and will continue to place pressure on pharmaceutical
prices, and may reduce the prices we can charge for our potential products. In
many major foreign markets, pricing approval is required before sales can
commence and prices are often set by governmental authorities. These private and
public price controls are subject to change at unpredictable times. Market
acceptance of our potential products will be curtailed severely if adequate
coverage and reimbursement levels are not provided by governmental authorities
and private third-party payors. This includes developments in countries where
any of our potential collaborative partners operate.
WE DEPEND ON KEY PERSONNEL
Our success depends upon the contributions of our key management and
scientific personnel. If we lose the services of any such personnel we could be
delayed in or precluded from achieving our business objectives. Although we
currently have key-man life insurance on Dr. Alvin Glasky, our Chief Executive
Officer and Chief Scientific Officer, in the face amount of $2 million, the loss
of Dr. Glasky's services could substantially damage our business. We will need
substantial additional expertise in such areas as finance and marketing, among
others, in order to achieve our business objectives. Competition for qualified
personnel among pharmaceutical companies is intense, and the loss of key
personnel, or the inability to attract and retain the additional skilled
personnel required for the expansion of our business, could damage our business.
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WE FACE UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS
We actively pursue patent protection for our proprietary products and
technologies. We hold three U.S. patents and currently have five U.S. patent
applications pending. In addition, we have numerous foreign patents issued and
patent applications pending corresponding to our U.S. patents. However, our
patents may not protect us against our competitors. We could be required to file
suit to protect our patents, and we cannot be certain that we will have the
resources necessary to pursue such litigation or otherwise to protect our patent
rights.
We also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. Others could
develop substantially equivalent proprietary information or gain access to our
trade secrets.
We have a policy requiring that our employees and consultants execute
proprietary information agreements upon commencement of employment or consulting
relationships. These agreements provide that all confidential information
developed or made known to the individual during the course of the relationship
shall be kept confidential except in specified circumstances. However, these
agreements may not successfully protect our trade secrets or other proprietary
information.
Others could assert claims against us based on their patents. Such
claims could seek damages as well as an injunction prohibiting clinical testing,
manufacturing and marketing of the product at issue. If any such actions are
successful, in addition to any potential liability for damages, we could be
required to obtain a license in order to continue to manufacture or market the
product at issue. It is possible that any license required under any such patent
would not be made available on acceptable terms, if at all. There has been, and
we believe that there will continue to be, significant litigation in the
pharmaceutical industry regarding patent and other intellectual property rights.
If we become involved in any litigation, a substantial portion of our financial
and personnel resources could be consumed, regardless of the outcome of such
litigation.
WE FACE INTENSE COMPETITION AND RAPID TECHNOLOGICAL CHANGE
Competition in the pharmaceuticals market is intense. Many companies,
both public and private, including well-known pharmaceutical companies, are
developing products to treat Alzheimer's disease and certain of the other
applications we are pursuing. To date, only one product, donepezil (Aricept(R),
Pfizer, Inc.), is being actively marketed for the treatment of Alzheimer's
disease. Most of these companies have substantially greater financial, research
and development, manufacturing and marketing experience and resources than we
do. These competitors may develop pharmaceutical products that are more
effective or less costly than any products which we may develop.
Factors affecting competition in the pharmaceutical industry vary
depending on the extent to which the competitor is able to achieve a competitive
advantage based on proprietary technology. If we are able to establish and
maintain a significant proprietary position with respect to our proposed
products, competition will likely depend primarily on the effectiveness of the
particular product and the number, gravity and severity of its unwanted side
effects as compared to alternative products or treatments.
We compete in an industry which is characterized by extensive research
and development efforts and rapid technological progress. Although we believe
that our proprietary technology may give us a competitive advantage with respect
to our proposed products, new developments are expected to continue and it is
possible that discoveries by others will render our potential products
noncompetitive. Our competitive position also depends on our ability to:
o attract and retain qualified scientific and other personnel;
o develop effective proprietary products;
o implement development and marketing plans;
o obtain patent protection; and
o secure adequate capital resources.
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We may fail to achieve one more of these goals.
THERE ARE RISKS ASSOCIATED WITH THE VARIABLE CONVERSION RATE OF OUR SERIES A
PREFERRED STOCK
As of June 1, 1999, a total of 400 shares of our Series A Preferred
Stock were outstanding. Each share of Series A Preferred Stock has a stated
value of $10,000 and is convertible into shares of our common stock at the
option of the holder of such shares. The Series A Preferred Stock is convertible
at a conversion price equal to the lesser of $13.06 per share of common stock or
101% of the average of the 10 lowest closing bid prices of the common stock
occurring in the 30 trading days preceding the particular conversion. A decrease
in the price of our common stock below the $13.06 maximum conversion price could
result in the Series A Preferred Stock being convertible into more shares of
common stock. Increased sales volume of our common stock could put downward
pressure on the market price of the shares. This fact could encourage holders of
Series A Preferred Stock to sell short our common stock prior to conversion of
the Series A Preferred Stock, thereby potentially causing the market price to
decline. The selling stockholders could then convert their Series A Preferred
Stock and use the shares of common stock received upon conversion to cover their
short position. The selling stockholders could thereby profit by the decline in
the market price of the common stock caused by their short selling.
OUR COMMON STOCK COULD BE DELISTED FROM NASDAQ'S NATIONAL MARKET
Our common stock is listed on the Nasdaq National Market. To remain
listed on this market, we must meet Nasdaq's listing maintenance standards and
abide by Nasdaq's rules governing listed companies. If the price of our common
stock falls below $1.00 per share for an extended period, or if we fail to meet
other Nasdaq standards or violate Nasdaq rules, our common stock could be
delisted from the Nasdaq National Market.
Nasdaq has established certain rules regarding the issuance of "future
priced securities." These rules would apply to our Series A Preferred Stock
because such stock is convertible into common stock at a conversion price based
on a future price of our common stock. Nasdaq's concerns regarding our Series A
Preferred Stock include the following:
Shareholders Must Approve Significant Issuances Of Listed Securities At
A Discount To Market Or Book Value. Nasdaq rules prohibit an issuer of listed
securities from issuing 20% or more of its outstanding capital stock at less
than the greater of book value or then current market value without obtaining
prior stockholder consent. We did not obtain stockholder consent prior to
issuing our Series A Preferred Stock.
Disproportionate Voting Rights Of Securities. The holders of our Series
A Preferred Stock are not entitled to vote such stock except as required by
applicable law. However, without the consent of the holders of the Series A
Preferred Stock then outstanding we may not:
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o alter or adversely change the powers, preferences or rights given to
the Series A Preferred Stock or alter or amend the Certificate of
Designation;
o authorize or create any class of stock ranking senior to or on par
with the Series A Preferred Stock with respect to dividends or
distribution of assets upon a liquidation;
o amend our certificate of incorporation or other charter documents so
as to affect adversely any rights of the holders of the Series A
Preferred Stock;
o increase the authorized number of shares of Series A Preferred
Stock; or
o enter into any agreement with respect to any of these matters.
Public Interest Concerns. Nasdaq may terminate the listing of a security
if necessary to prevent fraudulent and manipulative acts and practices or to
protect investors and the public interest. With respect to future priced
securities, Nasdaq has indicated that it may delist a security if the returns
with respect to the future priced security become excessive compared to the
returns being earned by public investors in the issuer's securities.
Furthermore, certain requirements for continued listing, such as the
$1.00 minimum bid price requirement, are outside of our control. Accordingly,
there is a risk that our common stock might be delisted from the Nasdaq National
Market.
If our common stock is delisted, we likely would seek to list our common
stock on the Nasdaq SmallCap Market or for quotation on the American Stock
Exchange or a regional stock exchange. However, listing or quotation on such
market or exchange could reduce the market liquidity for our common stock.
If our common stock were not listed or quoted on another market or
exchange, trading of our common stock would be conducted in the over-the-counter
market on an electronic bulletin board established for unlisted securities or in
what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations for
the price of, our common stock.
In addition, delisting from the Nasdaq National Market and failure to
obtain listing or quotation on such other market or exchange would subject our
securities to so-called "penny stock" rules. These rules impose additional sales
practice and market-making requirements on broker-dealers who sell and/or make a
market in such securities. Consequently, if our common stock is delisted from
the Nasdaq National Market and we fail to obtain listing or quotation on another
market or exchange, broker-dealers may be less willing or able to sell and/or
make a market in our common stock and purchasers of our common stock may have
more difficulty selling their securities in the secondary market. In either
case, the market liquidity of our common stock would decline.
SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR
COMMON STOCK
As of March 16, 1999, security holders held options and warrants which,
if exercised, would obligate us to issue 4,206,332 shares of common stock.
Substantially all of such shares, when issued upon exercise, will be available
for immediate resale in the public market. In addition, under our existing
Equity Line Agreement we are permitted, as of March 31, 1999, to issue up to an
additional $10.50 million of our common stock during the remainder of its term.
The shares of common stock issuable upon conversion of the Series A Preferred
Stock and those which the Company may sell under our Equity Line Agreement will
be available for immediate resale in the public market. The market price of our
common stock could drop because of such resales.
FUTURE EQUITY ISSUANCES MAY DILUTE OUR CURRENT STOCKHOLDERS
If we issue equity securities, such issuances may have a dilutive impact
on our other stockholders. Additionally, such issuances would cause our net
income (loss) per share to decrease in future periods. As a result, the market
price of our common stock could drop. In addition, if we issue common stock
under our private equity line
10
<PAGE> 12
agreement, it will be issued at a discount to its then-prevailing market price.
These discounted sales could cause the market price of our common stock to drop.
THERE IS A RISK OF PRODUCT LIABILITY CLAIMS
Although we currently carry product liability insurance, it is possible
that the amounts of such coverage will be insufficient to protect us from future
claims. Further, we cannot be certain that we will be able to obtain or maintain
additional insurance on acceptable terms, or at all, for our clinical and
commercial activities or that such additional insurance would be sufficient to
cover any potential product liability claim or recall. Failure to maintain
sufficient insurance coverage could have a material adverse effect on our
business and results of operations.
WE USE HAZARDOUS MATERIALS IN OUR RESEARCH AND DEVELOPMENT EFFORTS
Our research and development efforts involve the use of hazardous
materials. We are subject to federal, state and local laws and regulations
governing the storage, use and disposal of such materials and certain waste
products. We believe that our safety procedures for handling and disposing of
such materials comply with the standards prescribed by federal, state and local
regulations. However, we cannot completely eliminate the risk of accidental
contamination or injury from these materials. If there were an accident, we
could be held liable for any damages that result. Such liability could exceed
our resources. We may incur substantially increased costs to comply with
environmental regulations if we develop our own commercial manufacturing
facility.
OUR STOCK PRICE IS VOLATILE
The stock market from time to time experiences significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. These broad market fluctuations may cause the market price
of our common stock to drop. In addition, the market price of our common stock
is highly volatile. Factors that may cause the market price of our common stock
to drop include:
o fluctuations in our results of operations;
o timing and announcements of the results of our clinical trials, our
technological innovations or new products, or those of our
competitors;
o FDA and foreign regulatory actions;
o developments with respect to patents and proprietary rights;
o public concern as to the safety of products developed by us or
others;
o changes in health care policy in the United States and in foreign
countries;
o changes in stock market analyst recommendations regarding our common
stock;
o failure of our results of operations to meet the expectations of
stock market analysts and investors;
o increases in the number of outstanding shares of our common stock
resulting from sales of new shares, the conversion of shares of our
Series A Preferred Stock, or the exercise of warrants or stock
options;
o changes in investors' perception of the pharmaceutical industry
generally; and
o general stock market conditions.
11
<PAGE> 13
OUR DIRECTORS AND EXECUTIVE OFFICERS OWN A SUBSTANTIAL PERCENTAGE OF OUR COMMON
STOCK
Our directors and executive officers beneficially owned approximately
27.1% of our outstanding common stock as of April 17, 1999. These stockholders,
if they acted together, could exert substantial control over matters requiring
approval by our stockholders. These matters would include the election of
directors and the approval of mergers or other business combination
transactions. This concentration of ownership may discourage or prevent someone
from acquiring our business.
CERTAIN PROVISIONS OF OUR CHARTER AND BYLAWS MAY DISCOURAGE MERGERS AND OTHER
TRANSACTIONS
Certain provisions of our Certificate of Incorporation and Bylaws may
make it more difficult for someone to acquire control of us. These provisions
may make it more difficult for stockholders to take certain corporate actions
and could delay or prevent someone from acquiring our business. These provisions
could limit the price that certain investors might be willing to pay for shares
of our common stock.
WE HAVE NEVER PAID DIVIDENDS
We have never paid cash dividends on our common stock and do not
anticipate paying cash dividends in the foreseeable future.
OUR BUSINESS COULD BE ADVERSELY IMPACTED BY YEAR 2000 ISSUES
The Year 2000 issue in computers arises from the common industry
practice of using two digits to represent a date in computer software code and
databases to enhance both processing time and save storage space. Therefore,
when dates in the year 2000 and beyond are indicated and computer programs read
the date "00", the computer may default to the year "1900" rather than the
correct "2000". This could result in incorrect calculations, faulty data and
computer shutdowns, which would cause disruptions of operations. In addition,
the year 2000 is a leap year and systems need to recognize it as such.
We have completed an inventory and risk assessment of our internal
information technology system applications (including voice and data systems),
our internal non-information technology facilities systems (including embedded
software in environmental controls, security systems, fire protection systems,
elevators and public utility connections for gas, electric and telephone
systems), and embedded and external software contained in laboratory and other
equipment that we believe could be adversely affected by the Year 2000 issue. We
believe that our internal systems are, at the present time, substantially
compliant based upon internal systems tests, currently available information and
reasonable assurance by our equipment and software vendors. The cost to
remediate Year 2000 issues with regard to these systems is not material.
In June of 1998, we began sending questionnaires to and/or contacting
our outside vendors regarding their state of readiness with respect to
identifying and remediating their Year 2000 issues. We have completed our risk
assessment of our outside vendors and are currently reviewing their compliance.
We cannot be certain that our vendors will adequately address their Year 2000
issues. Furthermore, we can not determine that third parties upon which our
vendors depend will accomplish adequate remediation of their Year 2000 issues.
Except for our public utility service vendors, who have indicated that they
expect to be in compliance by mid-1999, we believe that, with respect to the
computer systems of our major outside vendors, should a Year 2000 issue exist
whereby a vendor was unable to address our needs, alternative vendors have been
identified and are readily available that could furnish us with the same or
similar supplies or services that we presently receive from these vendors
without undue cost or expense.
Based on currently available information, we believe that the impact of
the Year 2000 issue, as it relates to our internal operations, information
systems and software applications will not be material. In the event we fail to
successfully resolve our Year 2000 issues with respect to our internal systems
in a timely manner, we believe that, while such events would be disruptive to
our operations in the short term, such circumstances would not have a material
adverse effect on our business, financial condition and results of operations
over the long term. However, failure of the major third parties, in particular
the financial institutions with which we have significant banking and investment
management relationships and our third party manufacturers, to be Year 2000
compliant could have a material adverse effect on our business, financial
condition and results of operations or business prospects.
12
<PAGE> 14
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain forward-looking statements that are based on current
expectations, estimates and projections about our industry, management's
beliefs, and assumptions made by management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," and variations
of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict; therefore, actual results may differ materially from
those expressed or forecasted in any forward-looking statements. Such risks and
uncertainties include those noted in "Risk Factors" above and in the documents
incorporated by reference. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
13
<PAGE> 15
ISSUANCE OF COMMON STOCK TO SELLING STOCKHOLDERS
On January 29, 1999 we entered into a Preferred Stock Purchase Agreement
with Westover Investments L.P., a Delaware limited partnership, and Montrose
Investments Ltd., a Cayman Islands corporation. Under that agreement, we issued
and sold a total of 400 shares of our 5% Series A Preferred Stock with
Conversion Features and warrants to purchase 75,000 shares of common stock for
cash consideration of $4.0 million. Under the agreement, we also have the option
to sell $2.0 million of 5% Series B Preferred Stock with Conversion Features to
Westover Investments L.P. and Montrose Investments Ltd. commencing 180 days
after January 29, 1999, subject to certain conditions contained in the Preferred
Stock Purchase Agreement and the Certificate of Designation governing the Series
A Preferred Stock with Conversion Features.
During the first 120 days after the closing, the Series A Preferred
Stock is convertible into common stock at an initial conversion price of $13.06
per share. Thereafter, the Series A Preferred Stock is convertible at a
conversion price equal to the lesser of $13.06 or 101% of the average of the ten
lowest closing bid prices of the common stock occurring in the 30 trading days
preceding the particular conversion. During the first 90 days after the closing,
the Series A Preferred Stock is convertible, at the option of the selling
stockholders, without limit. The Series A Preferred Stock that has not been
converted as of the end of the first 90 days after closing may be converted
thereafter in 25% cumulative monthly increments. Dividends at the rate of 5% per
annum on the Series A Preferred Stock may be paid quarterly in cash or, at our
option, accrued and paid in common stock at the time of conversion. The
certificate of designation governing the Series A Preferred Stock prohibits any
holder thereof from converting shares of Series A Preferred Stock to the extent
that such conversion would result in such holder beneficially owning in excess
of 4.999% of the outstanding shares of Common Stock following such conversion.
Such restriction may be waived by the holder of the Series A Preferred Stock as
to itself upon not less than 75 days' notice to the Company. In no event can all
400 shares of Series A Preferred Stock be converted into more than 1,450,000
shares of common stock. Additional features of the preferred stock include,
among other things, a redemption feature at the Company's option if the common
stock trades below a floor or above a ceiling price. The Series B Preferred
Stock will contain terms and conditions for conversion substantially identical
to the Series A Preferred Stock, except that the fixed conversion price of the
Series B Preferred Stock will be set at 125% of the average market value of the
common stock for the fifteen trading days preceding the date of the second
closing.
In connection with the purchase of the Series A Preferred Stock, the
investors also received warrants to purchase a total of 75,000 shares of common
stock at an exercise price of $12.98 per share exercisable for a period of 5
years.
Pursuant to a Registration Rights Agreement which we entered into with
Westover Investments L.P. and Montrose Investments Ltd., we have filed a
registration statement, of which this prospectus forms a part, in order to
permit the selling stockholders to resell to the public the shares of common
stock that they acquire upon the conversion of the Series A Preferred Stock or
upon any exercise of the warrants. The sale of shares of common stock delivered
as dividends on the Series A Preferred Stock, if any, is not covered by the
registration statement of which this prospectus forms a part. The number of
shares that we have registered is an estimate based upon the number of shares
that would be issuable upon conversion assuming a conversion price equal to the
conversion price that would have been applicable on April 12, 1999 without
giving effect to the fixed initial conversion price of $13.06 per share,
increased by a factor of 50% to cover potential downward movements in market
price of the common stock.
USE OF PROCEEDS
The proceeds from the sale of the common stock will belong to the
selling stockholders. We will not receive any proceeds from such sales.
14
<PAGE> 16
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock by the selling stockholders as of June 1, 1999.
The number of shares of common stock listed as beneficially owned by each
selling stockholder and potentially offered by this prospectus represents the
number of shares of common stock issuable to such stockholder upon the exercise
of a warrant and upon conversion of the shares of Series A Preferred Stock based
on certain assumptions as to the conversion price which would be in effect at
the time of a conversion. The actual number of shares issuable upon conversion
of the Series A Preferred Stock will fluctuate from time to time based on
changes in the market price of the common stock and provisions in the formula
for determining the conversion price. The certificate of designation governing
the Series A Preferred Stock prohibits any holder thereof from converting shares
of Series A Preferred Stock to the extent that such conversion would result in
such holder beneficially owning in excess of 4.999% of the outstanding shares of
Common Stock following such conversion. Such restriction may be waived by the
holder of the Series A Preferred Stock as to itself upon not less than 75 days'
notice to the Company. The cover page of this prospectus indicates that the
selling stockholders may sell up to 800,569 shares of common stock. Such number
is an estimate based upon the number of shares that would be issuable upon
conversion assuming a conversion price equal to the conversion price that would
have been applicable on April 12, 1999 without giving effect to the fixed
initial conversion price of $13.06 per share, increased by a factor of 50% to
cover potential downward movements in market price of the common stock. The
number of shares stated on the cover page of this prospectus is not intended to
constitute a prediction as to the future market price of the common stock or as
to when selling stockholders will elect to convert their shares of Series A
Preferred Stock. HBK Management L.L.C. ("HBK") has sole voting and investment
power over the securities indicated as held by Montrose Investments Ltd. and by
Westover Investments L.P. By reason of his control over HBK, Harlan B. Korenvaes
is the beneficial owner of such securities within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
of Common Stock Number of Shares of Common Stock
Beneficially Owned of Common Stock Beneficially Owned
Name Before Offering(1) Offered Hereby(2) Following the Offering(3) % of Class
---- ------------------ ----------------- ------------------------- ----------
<S> <C> <C> <C> <C>
Montrose Investments Ltd. 320,081(4) 184,415(4) 0 0%
Westover Investments L.P. 172,351(5) 99,301(5) 0 0%
</TABLE>
- ----------------
(1) Beginning April 29, 1999, Series A Preferred Stock that has not been
previously converted may be converted thereafter in 25% cumulative monthly
increments. The number of shares beneficially owned by each selling
stockholder reflects shares of common stock which would be acquirable,
subject to the 4.999% conversion limitation described above, upon a
conversion by such selling stockholder within 60 days of the date of this
Prospectus. Accordingly, the indicated number reflects as beneficially owned
by the selling stockholders a number of shares issuable upon conversion of
100% of the outstanding shares of Series A Preferred Stock, assuming the
conversion price is then equal to the conversion price that would have been
applicable on May 27, 1999, without giving effect to the fixed initial
conversion price of $13.06 per share.
(2) Until June 29, 1999, the selling stockholders may convert up to a maximum of
50% of their shares of Series A Preferred Stock. Accordingly, the number of
shares indicated as being offered for sale by the selling stockholders
includes a number of shares issuable upon conversion of 50% of the shares of
series a preferred stock held by each selling stockholder, assuming the
conversion price is equal to the conversion price that would have been
applicable on May 27, 1999, without giving effect to the fixed initial
conversion price of $13.06 per share.
(3) Upon the completion of the offering and assuming the sale by the selling
stockholders of all of the shares of common stock available for resale under
this Prospectus, the selling stockholders will not own any of our
outstanding common stock.
(4) Includes 48,750 shares subject to a currently exercisable warrant held by
Montrose Investments Ltd.
(5) Includes 26,250 shares subject to a currently exercisable warrant held by
Westover Investments L.P.
15
<PAGE> 17
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of the shares of
common stock offered hereby on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The selling stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a selling
stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares. The selling stockholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their shares other
than ordinary course brokerage arrangements, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by the
selling stockholders.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholders. The Company has agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
16
<PAGE> 18
Upon the Company being notified by a selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus, and (vi) other facts
material to the transaction. In addition, upon the Company being notified by a
selling stockholder that a donee or pledgee intends to sell more than 500
shares, a supplement to this prospectus will be filed.
The Company has advised the selling stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Securities
Exchange Act of 1934 may apply to their sales of the shares offered hereby.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
hereby will be passed upon for the Company by Stradling Yocca Carlson & Rauth, a
Professional Corporation, Newport Beach, California.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in this registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report. Reference is made to said report which states
that the Company is in the development stage, as described in Note 1 to the
consolidated financial statements.
LIMITATION ON LIABILITY AND DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our by-laws provide for indemnification of our directors and officers to
the fullest extent permitted by law. Insofar as indemnification for liabilities
under the Securities Act may be permitted to directors, officers or controlling
persons of the Company pursuant to the Company's Certificate of Incorporation,
as amended, by-laws and the Delaware General Corporation Law (the "DGCL"), the
Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in such Act and is
therefore unenforceable.
17
<PAGE> 19
================================================================================
800,569 SHARES OF COMMON STOCK
NEOTHERAPEUTICS, INC.
PROSPECTUS
MAY 28, 1999
================================================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the costs and expenses, all of which shall be
borne by the Registrant, in connection with the offering of the securities
pursuant to this Registration Statement:
Registration Fee.......................................... $ 1,893.52
Accounting Fees and Expenses.............................. $ 5,000.00*
Legal Fees and Expenses................................... $20,000.00*
Miscellaneous............................................. $ 3,106.48*
Total.............................................. $30,000.00*
- ---------------
* Estimated
Item 15. Indemnification of Directors and Officers.
The by-laws of the Registrant provide for indemnification of the
Registrant's directors and officers to the fullest extent permitted by law.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Registrant
pursuant to the Registrant's Certificate of Incorporation, by-laws and the
Delaware General Corporation Law (the "DGCL"), the Registrant has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in such Act and is therefore unenforceable.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may include a provision which eliminates or limits the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
relating to prohibited dividends or distributions or the repurchase or
redemption of stock or (iv) for any transaction from which the director derives
an improper personal benefit. The Registrant's Certificate of Incorporation
includes such a provision. As a result of this provision, the Registrant and its
stockholders may be unable to obtain monetary damages from a director for breach
of his or her duty of care.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibits Description
-------- -----------
<S> <C>
4.1 Certificate of Designation of 5% Series A Preferred Stock with
Conversion Features.(1)
4.2 Preferred Stock Purchase Agreement dated as of January 29, 1999, by and
among Registrant, Westover Investments L.P. and Montrose Investments
Ltd.(1)
4.3 Registration Rights Agreement dated as of January 29, 1999, by and among
Registrant, Westover Investments L.P. and Montrose Investments Ltd.(1)
4.4 Form of Warrant issued by Registrant to Westover Investments L.P. and
Montrose Investments Ltd. dated as of January 29, 1999.(1)
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation.(3)
23.1 Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation
(Included in Exhibit 5).(3)
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney.(2)
</TABLE>
II-1
<PAGE> 21
- -------------------
(1) Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference from, the Registrant's Current Report on Form 8-K dated
January 29, 1999.
(2) Previously filed as part of the signature page to this Registration
Statement.
(3) Previously filed.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(iii) Include any additional or changed information on the plan
of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be deemed the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 3 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 27th day of May, 1999.
NEOTHERAPEUTICS, INC.
By: /s/ Samuel Gulko
--------------------------------
Samuel Gulko
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Alvin J. Glasky, Ph.D.* Chief Executive Officer, May 27, 1999
- ------------------------------------ President and Director
Alvin J. Glasky, Ph.D. (principal executive officer)
/s/ Samuel Gulko Chief Financial Officer, May 27, 1999
- ------------------------------------ Secretary, Treasurer and
Samuel Gulko Director (principal financial
and accounting officer)
/s/ Mark J. Glasky* Director May 27, 1999
- ------------------------------------
Mark J. Glasky
/s/ Frank M. Meeks* Director May 27, 1999
- ------------------------------------
Frank M. Meeks
/s/ Paul H. Silverman, Ph.D., D.Sc.* Director May 27, 1999
- ------------------------------------
Paul H. Silverman, Ph.D., D.Sc.
/s/ Carol O'Cleireacain, Ph.D.* Director May 27, 1999
- ------------------------------------
Carol O'Cleireacain, Ph.D.
/s/ Eric L. Nelson, Ph.D.* Director May 27, 1999
- ------------------------------------
Eric L. Nelson, Ph.D.
/s/ Stephen Runnels* Director May 27, 1999
- ------------------------------------
Stephen Runnels
/s/ Joseph Rubinfeld, Ph.D.* Director May 27, 1999
- ------------------------------------
Joseph Rubinfeld, Ph.D.
*By: /s/ Samuel Gulko
-------------------------------
Samuel Gulko, Attorney-In-Fact
</TABLE>
II-3
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits Description
-------- -----------
<S> <C>
4.1 Certificate of Designation of 5% Series A Preferred Stock with
Conversion Features.(1)
4.2 Preferred Stock Purchase Agreement dated as of January 29, 1999, by and
among Registrant, Westover Investments L.P. and Montrose Investments
Ltd.(1)
4.3 Registration Rights Agreement dated as of January 29, 1999, by and among
Registrant, Westover Investments L.P. and Montrose Investments Ltd.(1)
4.4 Form of Warrant issued by Registrant to Westover Investments L.P. and
Montrose Investments Ltd. dated as of January 29, 1999.(1)
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation.(3)
23.1 Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation
(Included in Exhibit 5.1) (3)
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney.(2)
</TABLE>
- -------------------
(1) Previously filed with the Commission as an Exhibit to, and incorporated
herein by reference from, the Registrant's Current Report on Form 8-K dated
January 29, 1999.
(2) Previously filed as part of the signature page to this Registration
Statement.
(3) Previously filed.
II-4
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement (File No. 333-73009) of our report
dated February 26, 1999 included in NeoTherapeutics, Inc.'s Form 10-K for the
year ended December 31, 1998 and to all references to our firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Orange County, California
May 27, 1999
