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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 6, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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)
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DELAWARE 93-079187
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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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.
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)
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Copies to:
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Alan W. Pettis, Esq.
Latham & Watkins
650 Town Center Drive, Twentieth Floor
Costa Mesa, California 92626
(714) 540-1235
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practical after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of 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 effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BE OFFERING PRICE PER AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock issuable upon
exercise of closing warrants 80,000 shares $10.47(2) $837,600.00 $221.13
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Common Stock issuable upon
conversion of preferred stock
and/or convertible debentures 1,905,488 $6.56(3) $12,500,001.28 $3,300.00
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Common Stock, par value
$.001 per share 968,524 $5.91(4) $5,723,976.84 $1,511.13
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Common Stock issuable upon
exercise of closing warrants 193,706 $10.13(5) $1,962,241.78 $518.03
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Common Stock issuable upon
exercise of adjustable warrants 1,156,940 $0.001(6) $1,156.94 $0.31
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Total 4,304,658 $21,383,330.72 $5,550.60
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</TABLE>
(1) In the event of a stock split, stock dividend, or similar transaction
involving the Company's common stock, in order to prevent dilution, the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act.
(2) The exercise price of the closing warrants, used for the purpose of
calculating the amount of the registration fee in accordance with Rule
457(g) under the Securities Act.
(3) The conversion price of the preferred stock and convertible debentures,
used for the purpose of calculating the amount of the registration fee in
accordance with Rule 457(g) under the Securities Act.
(4) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933 based on the average of the high and low sales prices of the
Registrant's common stock on the Nasdaq National Market on December 5,
2000.
(5) The exercise price of the closing warrants, used for the purpose of
calculating the amount of the registration fee in accordance with Rule
457(g) under the Securities Act.
(6) The exercise price of the adjustable warrants, used for the purpose of
calculating the amount of the registration fee in accordance with Rule
457(g) under the Securities Act.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 6, 2000
PROSPECTUS
UP TO 4,304,658 SHARES OF
NEOTHERAPEUTICS, INC.
COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the
symbol "NEOT." On December 5, 2000, the closing price of our common stock was
$6.00.
This prospectus relates to the sale of up to 4,304,658 shares of our
common stock by Montrose Investments Ltd. and Strong River Investments, Ltd. We
will not receive any of the proceeds from the sale of these shares.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 1
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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 2000
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
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ABOUT NEOTHERAPEUTICS..................................................... 1
RISK FACTORS.............................................................. 1
FORWARD-LOOKING STATEMENTS................................................ 7
ISSUANCE OF COMMON STOCK TO THE SELLING STOCKHOLDERS...................... 7
USE OF PROCEEDS........................................................... 9
SELLING STOCKHOLDERS...................................................... 9
PLAN OF DISTRIBUTION...................................................... 10
VALIDITY OF COMMON STOCK.................................................. 12
EXPERTS................................................................... 12
LIMITATION ON LIABILITY AND DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.......................... 12
WHERE YOU CAN FIND MORE INFORMATION....................................... 12
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ABOUT NEOTHERAPEUTICS
NeoTherapeutics, Inc. is a development stage biopharmaceutical company
engaged in the discovery and development of novel therapeutic drugs intended to
treat neurological and psychiatric diseases and conditions, such as memory
deficits associated with Alzheimer's disease and aging, stroke, spinal cord
injuries, Parkinson's disease, migraine, depression and obesity. Our lead
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 Neotrofin(TM) appears to selectively
increase the production of certain neurotrophic factors, a type of large
protein, in selected areas of the brain and in the spinal cord. These
neurotrophic factors regulate nerve cell growth and function. Our technology 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
differentiation of the central nervous system. We believe that Neotrofin(TM)
could have therapeutic and regenerative effects. NeoGene Technologies, Inc., a
subsidiary of NeoTherapeutics, Inc., is engaged in functional genemics research.
On November 16, 2000, we formed another subsidiary, NeoOncoRx, Inc., for the
purpose of in-licensing anti-cancer compounds which are in the clinical trial
stages of development.
We were incorporated in Colorado in December 1987 and reincorporated in
Delaware in June 1997. Our executive offices are located at 157 Technology
Drive, Irvine, California 92618. Our telephone number is (949) 788-6700. Our web
site address is www.neotherapeutics.com. Information contained in our web site
does not constitute part of this prospectus.
RISK FACTORS
Your investment in our common stock involves a high degree of risk. You
should consider the risks described below and the other information contained in
this prospectus carefully before deciding to invest in our common stock. If any
of the following risks actually occur, our business, financial condition and
operating results would be harmed. As a result, the trading price of our common
stock could decline, and you could lose a part or all of your investment.
OUR LOSSES WILL CONTINUE TO INCREASE AS WE EXPAND OUR DEVELOPMENT EFFORTS, AND
OUR EFFORTS MAY NEVER RESULT IN PROFITABILITY.
Our cumulative losses during the period from our inception in 1987
through September 30, 2000 were approximately $84.7 million, almost all of which
consisted of research and development and general and administrative expenses.
We lost approximately $6.2 million in 1997, $11.6 million in 1998, $26.0 million
in 1999 and approximately $34.9 million for the nine months ended September 30,
2000. We expect our losses to increase in the future as we expand our clinical
trials and increase our research and development activities. We currently do not
sell any products and 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 POTENTIAL DRUG PRODUCTS ARE IN AN EARLY STAGE OF CLINICAL AND PRECLINICAL
DEVELOPMENT AND MAY NOT PROVE SAFE OR EFFECTIVE ENOUGH TO OBTAIN REGULATORY
APPROVAL TO SELL ANY OF THEM.
We currently are testing our first potential drug product in human
clinical trials. Our other proposed products are in preclinical development. We
cannot be certain that any of our potential or proposed products will prove to
be safe or effective in treating disorders of the central nervous system or any
other diseases. All of our potential drugs will require additional research and
development, testing and regulatory clearances before we can sell them. We
cannot be certain that we will receive regulatory approval to sell any of our
potential drugs. We do not expect to have any products commercially available
for at least two years.
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IF WE ARE UNABLE TO OBTAIN SUBSTANTIAL ADDITIONAL FUNDING ON ACCEPTABLE TERMS,
WE MAY HAVE TO DELAY OR ELIMINATE ONE OR MORE OF OUR DEVELOPMENT PROGRAMS.
We currently are spending cash at a rate in excess of $4.0 million per
month, and we expect this rate of spending to continue through December 31,
2000. Starting in January 2001, we expect our rate of spending to be $2.2
million per month, and we expect this rate of spending to continue for at least
the following 11 months. We believe that our existing cash and capital
resources, including the equity and debt financings obtained of approximately $8
million in February 2000, $10 million in April 2000, $7 million in May, 2000 and
$8 million in October, 2000, together with approximately $5 million of equity
financing obtained by our subsidiary NeoGene Technologies, Inc., in September
2000, will satisfy our current funding requirements for at least the next twelve
months.
We expect that we will need substantial additional funds to complete
development and clinical trials of Neotrofin(TM), our lead drug candidate,
before we will be able to submit it to the Food and Drug Administration for
approval for commercial sale. Our capital requirements will depend on many
factors, including:
o continued scientific progress in research and development;
o the progress of preclinical and clinical testing;
o the cost involved in filing, prosecuting and enforcing patent
claims;
o the effect of competing technological developments;
o the cost of manufacturing scale-up;
o the cost of commercialization activities;
o the time and cost involved in obtaining regulatory approvals; and
o our ability to establish collaborative and other arrangements with
third parties, such as licensing and manufacturing agreements.
We expect to seek additional funding through public or private
financings or collaborative or other arrangements with third parties. We may not
obtain additional funds on acceptable terms, if at all. If adequate funds are
not available, we will have to delay or eliminate one or more of our development
programs.
COMPETITION FOR PATIENTS IN CONDUCTING CLINICAL TRIALS AND EXTENSIVE REGULATIONS
GOVERNING THE CONDUCT OF CLINICAL TRIALS MAY PREVENT OR DELAY APPROVAL OF A DRUG
CANDIDATE AND STRAIN OUR LIMITED FINANCIAL RESOURCES.
Many pharmaceutical companies are conducting clinical trials in
patients with 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 may increase costs of our clinical trials and delay the
introduction of our potential products.
ANY FAILURE TO COMPLY WITH EXTENSIVE GOVERNMENTAL REGULATION COULD PREVENT
PRODUCT APPROVAL OR CAUSE GOVERNMENTAL AUTHORITIES TO DISALLOW OUR PRODUCTS
AFTER APPROVAL AND SUBJECT US TO CRIMINAL OR CIVIL LIABILITIES.
The U.S. Food and Drug Administration, or FDA, and comparable agencies
in foreign countries impose many requirements on the introduction of new drugs
through lengthy and detailed clinical testing procedures, 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 available
commercially, if at all.
Our proprietary compounds will require substantial clinical trials and
FDA review as new drugs. Even if we successfully enroll patients in our clinical
trials, patients may not respond to our potential drug products. We think it
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is prudent to expect setbacks. Failure to comply with the regulations applicable
to such testing may delay, suspend or cancel our clinical trials, or the FDA
might not accept the test results. The FDA or other regulatory agency may
suspend clinical trials at any time if it concludes that the trials expose
subjects participating in such trials to unacceptable health risks. Further,
human clinical testing may not show any current or future product candidate to
be safe and effective or the data derived therefrom may be unsuitable for
submission to the FDA or other regulatory agency.
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, the FDA or other regulatory agencies may
not issue their approvals on a timely basis, if at all. If we are delayed or
fail to obtain such approvals, our business may be damaged. If we fail to comply
with regulatory requirements, either prior to approval or in marketing our
products after approval, 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.
THE LOSS OF KEY RESEARCHERS OR MANAGERS COULD HINDER OUR DRUG DEVELOPMENT
PROCESS SIGNIFICANTLY AND MIGHT CAUSE OUR BUSINESS TO FAIL.
Our success depends upon the contributions of our key management and
scientific personnel, especially Dr. Alvin Glasky, our Chief Executive Officer
and Chief Scientific Officer. Our loss of the services of Dr. Glasky or any
other key personnel could delay or preclude us from achieving our business
objectives. Although we currently have key-man life insurance on Dr. Alvin
Glasky in the face amount of $2 million, the loss of Dr. Glasky's services would
damage our research and development efforts substantially.
We also will need substantial additional expertise in finance and
marketing and other areas 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.
IF WE CANNOT PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY, THE
VALUE OF OUR RESEARCH COULD DECLINE AS OUR COMPETITORS APPROPRIATE PORTIONS OF
OUR RESEARCH.
We actively pursue patent protection for our proprietary products and
technologies. We hold four U.S. patents and currently have thirteen 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 may have to file suit to
protect our patents or to defend our use of our patents against infringement
claims brought by others. Because we have limited cash resources, we may not be
able to afford to pursue or defend against litigation in order to protect our
patent rights.
We also rely on trade secret protection for our unpatented proprietary
technology. However, trade secrets are difficult to protect. While we enter into
proprietary information agreements with our employees and consultants, these
agreements may not successfully protect our trade secrets or other proprietary
information.
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WE ARE A SMALL COMPANY RELATIVE TO OUR PRINCIPAL COMPETITORS AND OUR LIMITED
FINANCIAL AND RESEARCH RESOURCES MAY LIMIT OUR ABILITY TO DEVELOP AND MARKET NEW
PRODUCTS.
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. Most of these companies
have substantially greater financial, research and development, manufacturing
and marketing experience and resources than we do. As a result, our competitors
may develop additional drugs that are more effective or less costly than any
drug which we may develop.
OUR MANAGEMENT HAS LIMITED MANUFACTURING AND MARKETING EXPERIENCE AND MAY BE
UNABLE TO MANAGE OUR GROWTH OR MANUFACTURE AND MARKET OUR PRODUCTS 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.
If we receive FDA approval of any of our potential products, we may
decide to establish a commercial-scale manufacturing facility for our products.
The establishment of such a facility will require substantial additional funds
and personnel, and we will need to comply with extensive regulations applicable
to such a facility. These requirements and the associated growth would strain
our existing 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;
o develop additional expertise among existing management personnel;
o attract, hire and retain skilled employees; and
o implement and improve our operational, management information and
financial control systems.
FAILURE TO OBTAIN ADEQUATE REIMBURSEMENT FROM GOVERNMENT HEALTH ADMINISTRATION
AUTHORITIES, PRIVATE HEALTH INSURERS AND OTHER ORGANIZATIONS COULD MATERIALLY
ADVERSELY AFFECT OUR FUTURE BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.
Our ability to market and sell our products will depend in part on the
extent to which reimbursement for the cost of our products and related
treatments will be available from government health administration authorities,
private health insurers and other organizations. Third party payers are
increasingly challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement statements of
newly approved health care products. We cannot be certain that any products
approved for marketing will be considered cost effective or that reimbursement
will be available or that allowed reimbursement will be adequate. In addition,
payers' reimbursement policies could adversely affect our ability to sell our
products on a profitable basis.
HOLDERS OF OUR CONVERTIBLE PREFERRED STOCK AND WARRANTS COULD ENGAGE IN SHORT
SELLING TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OR EXERCISE OF THE SECURITIES AND DECREASE THE EXERCISE PRICE OF THE
WARRANTS. IF THIS OCCURS, THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE.
The holders of shares of preferred stock issued by our subsidiary,
NeoGene Technologies, Inc., have rights to exchange those shares for shares of
our convertible preferred stock or convertible debentures. If those exchange
rights are exercised, the number of shares of common stock issuable upon
conversion of the convertible preferred stock or debentures will vary with the
market price of our common stock. The shares or debentures will be convertible
at a conversion price equal to 101% of the average of the lowest ten closing bid
prices of our common
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stock in the previous 30 trading days. Consequently, the number of shares of
common stock issuable upon conversion of the convertible preferred stock or
debentures will vary with the market price of our stock. A greater number of
shares of common stock are issuable the lower the price of our 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 the securities
to sell short our common stock prior to conversion of the securities, thereby
potentially causing the market price to decline and a greater number of shares
to be issued. The holders of the securities could then convert their securities
and use the shares of common stock received upon conversion to cover their short
positions. The holders of the securities could thereby profit by the decline in
the market price of the common stock caused by their short selling.
Similarly, the exercise price of our Class B Warrants if we deliver a
redemption notice is equal to the lesser of $33.75 per share (subject to
adjustment for stock splits, reverse splits and combinations) and 97% of the
closing bid price of our common stock on the trading day after the redemption
notice is delivered. This fact could give the holders of our Class B Warrants
incentive to sell short our common stock after receipt of a redemption notice,
which could cause the market price to decline. The holders of the Class B
Warrants could then exercise their Class B Warrants and use the shares of common
stock received upon exercise to cover their short positions and thereby profit
by the decline in the market price of the common stock caused by their short
selling. The holders of our Adjustable Warrants could also engage in short
selling because the number of shares of common stock issuable at each vesting
date, if any, will be determined by a formula based on the ten lowest closing
bid prices of our common stock during the 30 consecutive trading days prior to
each vesting date. A greater number of shares of common stock are issuable the
lower the price of our common stock. This may affect the market price of our
stock as well.
Additionally, it is important to note that a significant amount of the
NeoGene preferred stock and warrants are owned by two investors. This fact gives
these investors greater influence over the market price of our stock.
THE TRADING PRICE OF OUR COMMON STOCK AND THE TERMS OF OUR CONVERTIBLE PREFERRED
STOCK, CONVERTIBLE DEBENTURES AND WARRANTS MUST COMPLY WITH THE LISTING
REQUIREMENTS OF THE NASDAQ NATIONAL MARKET OR WE COULD BE DELISTED AND THE
LIQUIDITY OF OUR COMMON STOCK WOULD DECLINE.
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 may apply to our convertible preferred stock,
convertible debentures and Adjustable Warrants because the number of shares of
our common stock issuable upon conversion or exercise of the securities is based
on a future price of our common stock. In addition, the exercise price of our
Class B Warrants is based in part upon a future price of our common stock, and
may be less than the greater of book value or market value. Nasdaq's concerns
regarding these securities include the following:
Stockholders 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 the convertible preferred stock, convertible debentures or the
Adjustable Warrants.
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 Nasdaq may delist our common stock.
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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.
THERE ARE A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK ELIGIBLE FOR FUTURE
SALE IN THE PUBLIC MARKET. THE SALE OF THESE SHARES COULD CAUSE THE MARKET PRICE
OF OUR COMMON STOCK TO FALL.
There were 13,307,227 shares of our common outstanding as of November
29, 2000. In addition, security holders held options and warrants as of November
29, 2000 which, if exercised, would obligate us to issue up to an additional
11,313,412 shares of common stock. A substantial number of those shares, when we
issue them upon exercise, will be available for immediate resale in the public
market. In addition, we have the ability to sell up to approximately $7.5
million of our common stock to a private investor that will be eligible for
immediate resale in the public market. Furthermore, with respect to the
convertible debenture and warrant financing that closed in April 2000,
approximately 3.4 million shares issued upon exercise of Class B Warrants and
over 300,000 Class A Warrants will be eligible for immediate resale in the
public market. The market price of our common stock could fall as a result of
such resales.
ANY FUTURE EQUITY ISSUANCES BY US MAY HAVE DILUTIVE AND OTHER EFFECTS ON OUR
EXISTING 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 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 Equity Line 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.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS, AND MAY NOT HAVE SUFFICIENT
PRODUCT LIABILITY INSURANCE.
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 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.
THE USE OF HAZARDOUS MATERIALS IN OUR RESEARCH AND DEVELOPMENT EFFORTS IMPOSES
CERTAIN COMPLIANCE COSTS ON US AND MAY SUBJECT US TO LIABILITY FOR CLAIMS
ARISING FROM THE USE OR MISUSE OF THESE MATERIALS.
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 was 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.
6
<PAGE> 10
THE MARKET PRICE AND VOLUME OF OUR COMMON STOCK FLUCTUATES SIGNIFICANTLY AND
COULD RESULT IN SUBSTANTIAL LOSSES FOR INDIVIDUAL INVESTORS.
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 fluctuations in our results of operations, timing and
announcements of our technological innovations or new products or those of our
competitors, FDA and foreign regulatory actions, developments with respect to
patents and proprietary rights, public concern as to the safety of products
developed by us or others, changes in health care policy in the United States
and in foreign countries, changes in stock market analyst recommendations
regarding our common stock, the pharmaceutical industry generally and general
market conditions. In addition, the market price of our common stock may drop if
our results of operations fail to meet the expectations of stock market analysts
and investors.
OUR DIRECTORS AND EXECUTIVE OFFICERS OWN A SUBSTANTIAL PERCENTAGE OF OUR COMMON
STOCK. THEIR OWNERSHIP COULD ALLOW THEM TO EXERCISE SIGNIFICANT CONTROL OVER
CORPORATE DECISIONS AND TO IMPLEMENT CORPORATE ACTS THAT ARE NOT IN THE BEST
INTERESTS OF OUR STOCKHOLDERS AS A GROUP.
Our directors and executive officers beneficially own approximately
13.8% of our outstanding common stock as of November 29, 2000. In addition,
Montrose Investments Ltd. and Strong River Investments, Inc. have agreed that
they will vote any and all shares of our common stock that they own as
recommended by our board of directors in any meeting of our stockholders.
Therefore, our directors and executive officers, 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 and voting control may discourage or prevent someone from acquiring
our business.
EFFECT OF CERTAIN CHARTER AND BYLAWS PROVISIONS.
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.
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. The 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.
ISSUANCE OF COMMON STOCK TO THE SELLING STOCKHOLDERS
On September 21, 2000, we entered into a securities purchase agreement
with our subsidiary NeoGene Technologies, Inc. and Montrose Investments Ltd. and
Strong River Investments, Inc., for the issuance and sale of preferred stock and
warrants for aggregate consideration of $5,000,000. Under the securities
purchase agreement, NeoGene issued and sold to the investors a total of 111,110
shares of its Series A Convertible Preferred Stock, no par value per share, at a
purchase price of $45 per share, and issued five-year warrants to purchase a
total of 22,676 shares of NeoGene common stock, no par value per share, at an
exercise price of $45 per share. The Series A Preferred Stock is convertible
into shares of NeoGene common stock on a one-to-one basis, subject to
antidilution adjustments, and automatically converts upon the earlier to occur
of September 21, 2005 or the closing of a public offering of NeoGene common
stock which results in aggregate gross cash proceeds to NeoGene of at least
$25,000,000, based on a valuation of NeoGene of at least $80,000,000.
7
<PAGE> 11
In addition, we issued to the purchasers five-year warrants to purchase
an aggregate of 80,000 shares of our common stock, par value $.001 per share, at
an exercise price of $10.47 per share. We also granted two exchange rights to
the holders of Series A Preferred which will allow such holders to exchange
their shares of Series A Preferred for shares of our preferred stock or
debentures.
The first exchange right grants each purchaser the right, at its
option, at any time after January 21, 2001, to exchange all or a portion of the
shares of Series A Preferred Stock then held by the Purchaser for a number of
shares of our to be designated convertible preferred stock, $.001 par value per
share, equal to the aggregate liquidation preference of the Series A preferred
shares surrendered for exchange plus any accrued but unpaid dividends divided by
the stated value per share of the NeoTherapeutics preferred stock. The
NeoTherapeutics preferred stock will be convertible into shares of our common
stock at a conversion price equal to 101% of the average of the lowest ten
closing bid prices of our common stock, as reported by Nasdaq, during the 30
trading days immediately preceding the conversion.
If at the time the purchaser delivers a written notice of its intent to
exercise the first exchange right, or at any time after the purchaser has
exchanged shares of Series A Preferred Stock for shares of NeoTherapeutics
preferred stock, we do not beneficially own cash, cash equivalents and
marketable securities having an aggregate fair market value of at least
$5,000,000, the purchaser shall have the right to exchange the Series A
preferred shares offered for exchange, or any shares of NeoTherapeutics
preferred stock then owned by the purchaser, for our 5% Subordinated Convertible
Debentures due September 21, 2005, having an aggregate principal amount equal to
the aggregate liquidation preference of the Series A preferred shares, or the
stated value of the shares of NeoTherapeutics preferred stock, surrendered for
exchange, plus any accrued but unpaid dividends. These debentures will be
convertible into shares of our common stock on the same terms as the
corresponding NeoTherapeutics preferred stock.
The second exchange right grants each purchaser the following right: if
at any time the closing price of our common stock as reported by Nasdaq is below
$5.00 for five consecutive trading days, each purchaser shall have the right, at
its option, at any time after that condition is met, to exchange all or a
portion of the Series A preferred shares then held by the purchaser for a number
of shares of our to be designated convertible preferred stock, $.001 par value
per share, equal to the aggregate liquidation preference of the Series A
preferred shares surrendered for exchange plus any accrued but unpaid dividends,
divided by the stated value per share of the NeoTherapeutics preferred stock to
be issued. The NeoTherapeutics preferred stock issued upon exercise of the
second exchange right will be convertible into shares of our common stock at a
conversion price equal to the lesser of 120% of the closing bid price of our
common stock on the first date that any shares of NeoTherapeutics preferred
stock are issued upon exercise of the second exchange right, as reported by
Nasdaq and 101% of the average of the lowest ten closing bid prices of our
common stock, as reported by Nasdaq, during the 30 trading days immediately
preceding the conversion, except that the conversion price of the
NeoTherapeutics preferred stock issued upon exercise of the second exchange
right will be fixed at the initial conversion price for 90 days after the first
issuance of the NeoTherapeutics preferred stock.
If at the time the purchaser delivers a written notice of its intent to
exercise the second exchange right, or at any time after the purchaser has
exercised the second exchange right for shares of NeoTherapeutics preferred
stock, we do not beneficially own cash, cash equivalents and marketable
securities having an aggregate fair market value of at least $5,000,000, the
purchaser shall have the right to exchange the Series A preferred shares offered
for exchange, or shares of NeoTherapeutics preferred stock then owned by the
purchaser, for our 5% Subordinated Convertible Debentures due September 21,
2005, having an aggregate principal amount equal to the aggregate liquidation
preference of the Series A preferred shares, or the stated value of the shares
of NeoTherapeutics preferred stock, surrendered for exchange, plus any accrued
but unpaid dividends. These debentures will be convertible into shares of our
common stock on the same terms as the NeoTherapeutics preferred stock issued
upon exercise of the second exchange right; provided, that the initial
conversion price for any debentures issued in exchange for shares of
NeoTherapeutics preferred stock will be determined as if the debentures had been
issued on the date that the shares of NeoTherapeutics preferred stock were
issued.
8
<PAGE> 12
In a separate transaction, on September 29, 2000, we entered into a
securities purchase agreement with the same purchasers for the issuance and sale
of common stock and warrants for aggregate consideration of $8,000,000. Pursuant
to the securities purchase agreement, we issued and sold to the investors a
total of 968,524 shares of our common stock at a purchase price of $8.26 per
share, and issued five-year warrants to purchase a total of 193,706 shares of
common stock at an exercise price of $10.13 per share. In addition, we issued
Adjustable Warrants to purchase, at an exercise price of $0.001 per share, a
number of shares of common stock to be determined at two vesting dates. The
first vesting date is the 30th trading day following the effective date of the
registration statement of which this prospectus is a part, and the second
vesting date being the 30th trading day following the first vesting date.
The number of shares of common stock issuable at each vesting date
under the Adjustable Warrants, if any, will be determined by a formula based on
the ten lowest closing bid prices of our common stock during the 30 consecutive
trading days prior to each vesting date. A greater number of shares of common
stock are issuable the lower the price of our common stock. However, if the
average of the ten consecutive closing bid prices of our common stock exceeds
$8.92 per share at each vesting date, then no shares are issuable pursuant to
the Adjustable Warrants for that vesting date. In addition, if at any time both
the average of ten consecutive closing bid prices of our common stock exceeds
$12.39 and at least five prices included in the average exceed $12.39, then no
shares will vest pursuant to the Adjustable Warrants for any subsequent vesting
date. The investors agreed not to convert any of our convertible securities
during each adjustment period.
Pursuant to registration rights agreements we entered into with
Montrose Investments Ltd. and Strong River Investments, Inc., 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 purchased pursuant to the securities purchase agreements and
that they acquire upon any exercise of the closing warrants or adjustable
warrants, or upon conversion of our convertible preferred stock or debentures,
assuming that they exercise one or both of the exchange rights. The number of
shares that we have registered is based upon the actual number of shares sold to
the selling stockholders pursuant to the agreements, the maximum number of
shares issuable upon any exercise of the closing warrants, and an estimate of
the number of shares issuable upon conversion or exercise of the preferred
stock, convertible debentures and adjustable warrants.
Montrose Investments Ltd. and Strong River Investments, Inc. have
agreed that they will vote any and all shares of our common stock that they own
as recommended by our board of directors in any meeting of our stockholders.
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.
SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial
ownership of our common stock by the selling stockholders as of November 29,
2000. Each holder of the convertible debentures, convertible preferred stock,
closing warrants and adjustable warrants is prohibited from using them to
acquire shares of our common stock to the extent that such acquisition would
result in the holder, together with any affiliate of the holder to have
beneficial ownership levels of 4.999%, 9.999% or 19.999% of our common stock
following such acquisition. These restrictions may be waived by each holder on
not less than 61 days' notice to us. Montrose Investments, Ltd., waived the
4.999% limit on November 9, 2000.
9
<PAGE> 13
Since the number of shares of our common stock that will be issuable
upon conversion of the convertible debentures or convertible preferred stock, or
that vest under the adjustable warrants, is based upon fluctuations of the
market price of our common stock prior to a conversion of these securities the
actual number of shares of our common stock that will be issuable and
beneficially owned upon conversion or exercise of such securities cannot be
determined at this time. Because of this fluctuating characteristic, we have
agreed to register a number of shares of our common stock that exceeds the
number of our shares of common stock currently beneficially owned by the holders
of the securities. The number of shares of our common stock listed in the table
below as being beneficially owned by each selling stockholder includes the
shares of our common stock that are issuable to it, subject to the three levels
of limitations, upon conversion of the convertible debentures or preferred
stock, assuming that the selling stockholders exercise one or both of their
exchange rights, and exercise of the closing and adjustable warrants owned by
it. However, the three limitations would not prevent a selling stockholder from
acquiring and selling in excess of those limiting percentages of shares of our
common stock through a series of acquisitions and sales under the convertible
debentures, convertible preferred stock, closing warrants or adjustable warrants
while never beneficially owning more than the limiting percentages at one time.
The selling stockholders may sell up to 4,304,658 shares of our common
stock pursuant to this prospectus. HBK Management L.L.C. has voting and
investment power over the securities beneficially owned by Montrose Investments
Ltd. Enright Holding Corp. has voting and investment power over the securities
beneficially owned by Strong River Investments, Inc. The selling stockholders
have not had any material relationship with us or any of our affiliates or
predecessors within the past three years other than as a result of the ownership
of common stock or as a result of the negotiation and the execution of any
equity investment agreements.
<TABLE>
<CAPTION>
Shares of Common Stock
Number of Shares Beneficially Owned
of Common Stock Number of Shares Following the Offering(5)
Beneficially Owned % of of Common Stock -------------------------
Name Before Offering Class Offered Hereby Number % of Class
---- ------------------ ------ ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Montrose Investments Ltd. 1,409,660(1) 9.999% 2,152,329(2) 1,463,461 9.999%
Strong River Investments, Inc. 1,421,358(3) 9.999% 2,152,329(4) 1,475,159 9.999%
</TABLE>
----------
* Less than 1%.
(1) Includes 618,876 shares held by Montrose Investments Ltd. as of November
29, 2000 and 790,784 shares issuable upon exercise or conversion of
warrants and convertible preferred stock exercisable or convertible within
60 days of November 29, 2000.
(2) Includes 484,262 shares held by Montrose Investments Ltd. as of November
29, 2000, 136,853 shares issuable upon exercise of closing warrants,
578,470 shares issuable upon exercise of Adjustable Warrants and 952,744
shares issuable upon conversion of convertible preferred stock or
debentures.
(3) Includes 513,575 shares held by Strong River Investments, Inc. as of
November 29, 2000 and 907,783 shares issuable upon exercise or conversion
of warrants and convertible preferred stock exercisable or convertible
within 60 days of November 29, 2000.
(4) Includes 484,262 shares held by Strong River Investments, Inc. as of
November 29, 2000, 136,853 shares issuable upon exercise of closing
warrants, 578,470 shares issuable upon exercise of Adjustable Warrants and
952,744 shares issuable upon conversion of convertible preferred stock or
debentures.
(5) Assumes the sale by the selling stockholders of all of the shares of common
stock available for resale under this Prospectus.
10
<PAGE> 14
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:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- 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;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- 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 our securities or derivatives of
our 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 us 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.
We have agreed to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholders. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
Upon notification to us 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, we will file a supplement to
this prospectus, if required, pursuant to Rule 424(b) under the Securities Act,
disclosing the following:
- the name of each such selling stockholder and of the participating
broker-dealer(s);
- the number of shares involved;
11
<PAGE> 15
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
- that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus; and
- other facts material to the transaction.
In addition, we will file a supplement to this prospectus when a
selling stockholder notifies us that a donee or pledgee intends to sell more
than 500 shares of our common stock.
We have advised the selling stockholders that the anti-manipulation
provisions of Regulation M promulgated under the Securities Exchange Act of 1934
may apply to their sales of our shares offered by this prospectus.
VALIDITY OF COMMON STOCK
Latham & Watkins, Costa Mesa, California, will pass on the validity of
the issuance of the shares of common stock offered by this prospectus.
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 bylaws 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, bylaws and the Delaware General Corporation Law, 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.
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, 1999;
12
<PAGE> 16
- Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2000;
- Our Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2000;
- Our Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2000;
- Our current reports on Form 8-K filed April 3, 2000, April 21, 2000,
May 25, 2000 and November 13, 2000;
- Our definitive proxy statement filed pursuant to Section 14 of the
Exchange Act in connection with our 2000 Annual Meeting of
Stockholders; 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
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-_____). That registration statement and the exhibits
filed along with the registration statement contain more information about the
shares sold by the selling stockholders. 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.
13
<PAGE> 17
================================================================================
4,304,658 SHARES OF COMMON STOCK
NEOTHERAPEUTICS, INC.
PROSPECTUS
2000
================================================================================
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following sets forth the estimated 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 $ 5,550.60
Accounting Fees and Expenses $ 5,000.00
Legal Fees and Expenses $25,000.00
Miscellaneous $ 5,000.00
----------
Total $40,550.60
==========
Item 15. Indemnification of Directors and Officers.
The bylaws 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, bylaws 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.
Exhibits: Description
-------- -----------
4.1 Securities Purchase Agreement dated as of September 21, 2000,
by and among Registrant, NeoGene Technologies, Inc., Strong
River Investments, Inc. and Montrose Investments Ltd. *
4.2 Certificate of Determination of NeoGene Technologies, Inc. *
4.3 Registration Rights Agreement dated as of September 21, 2000,
by and among NeoGene Technologies, Inc., Strong River
Investments, Inc. and Montrose Investments Ltd. *
4.4 Registration Rights Agreement dated as of September 21, 2000,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd. *
4.5 Warrant issued by NeoGene Technologies, Inc., to Montrose
Investments Ltd., dated as of September 21, 2000. *
4.6 Warrant issued by NeoGene Technologies, Inc., to Strong River
Investments, Inc., dated as of September 21, 2000. *
4.7 Warrant issued by Registrant, to Montrose Investments Ltd.,
dated as of September 21, 2000. *
4.8 Warrant issued by Registrant, to Strong River Investments,
Inc., dated as of September 21, 2000. *
4.9 Form of Registrant Terms of Preferred. *
4.10 Form of Registrant 5% Subordinated Convertible Debenture. *
4.11 Securities Purchase Agreement dated as of September 29, 2000,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd. *
II-1
<PAGE> 19
Exhibits: Description
-------- -----------
4.12 Registration Rights Agreement dated as of September 29, 2000,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd. *
4.13 Closing Warrant issued by Registrant, to Montrose Investments,
Ltd., dated as of September 29, 2000. *
4.14 Closing Warrant issued by Registrant, to Strong River
Investments, Inc., dated as of September 29, 2000. *
4.15 Adjustable Warrant issued by Registrant to Montrose
Investments, Ltd., dated as of September 29, 2000. *
4.16 Adjustable Warrant issued by Registrant to Strong River
Investments, Inc., dated as of September 29, 2000. *
5.1 Opinion of Latham & Watkins.
23.1 Consent of Latham & Watkins (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on this signature page to this
Registration Statement).
------------
* Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's Current Report on Form 8-K filed
with the Commission on November 13, 2000.
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) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be treated 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) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant 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
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE> 20
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on December 5, 2000.
NEOTHERAPEUTICS, INC.
By: /s/ Samuel Gulko
---------------------------
Samuel Gulko
Chief Financial Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of NeoTherapeutics, Inc., do
hereby constitute and appoint Alvin J. Glasky, Ph.D. and Samuel Gulko, or either
of them, our true and lawful attorneys-in-fact and agents, each with full power
to sign for us or any of us in our names and in any and all capacities, any and
all amendments (including post-effective amendments) to this Registration
Statement, or any related registration statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and
to file the same, with all exhibits thereto and other documents required in
connection therewith, and each of them with full power to do any and all acts
and things in our names and in any and all capacities, which such
attorneys-in-fact and agents, or either of them, may deem necessary or advisable
to enable NeoTherapeutics, Inc. to comply with the Securities Act of 1933, as
amended, and any rules, regulations, and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement; and we
hereby do ratify and confirm all that the such attorneys-in-fact and agents, or
either of them, shall do or cause to be done by virtue thereof.
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 Chief Executive Officer, Director December 5, 2000
----------------------------------- (principal executive officer)
Alvin J. Glasky, Ph.D.
/s/ Samuel Gulko Chief Financial Officer, Secretary, December 5, 2000
----------------------------------- Treasurer and Director (principal
Samuel Gulko financial and accounting officer)
/s/ Mark J. Glasky Director December 5, 2000
-----------------------------------
Mark J. Glasky
/s/ Paul H. Silverman Director December 5, 2000
-----------------------------------
Paul H. Silverman, Ph.D., D.Sc.
/s/ Carol O'Cleiracain Director December 5, 2000
-----------------------------------
Carol O'Cleiracain, Ph.D.
/s/ Eric L. Nelson Director December 5, 2000
-----------------------------------
Eric L. Nelson, Ph.D.
/s/ Joseph Rubinfeld Director December 5, 2000
-----------------------------------
Joseph Rubinfeld, Ph.D.
/s/ Armin Kessler Director December 5, 2000
-----------------------------------
Armin Kessler
/s/ Ann Kessler Director December 5, 2000
----------------------------------
Ann Kessler
</TABLE>
S-1
<PAGE> 21
EXHIBIT INDEX
Exhibits: Description
-------- -----------
4.1 Securities Purchase Agreement dated as of September 21, 2000,
by and among Registrant, NeoGene Technologies, Inc., Strong
River Investments, Inc. and Montrose Investments Ltd. *
4.2 Certificate of Determination of NeoGene Technologies, Inc. *
4.3 Registration Rights Agreement dated as of September 21, 2000,
by and among NeoGene Technologies, Inc., Strong River
Investments, Inc. and Montrose Investments Ltd. *
4.4 Registration Rights Agreement dated as of September 21, 2000,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd. *
4.5 Warrant issued by NeoGene Technologies, Inc., to Montrose
Investments Ltd., dated as of September 21, 2000. *
4.6 Warrant issued by NeoGene Technologies, Inc., to Strong River
Investments, Inc., dated as of September 21, 2000. *
4.7 Warrant issued by Registrant, to Montrose Investments Ltd.,
dated as of September 21, 2000. *
4.8 Warrant issued by Registrant, to Strong River Investments,
Inc., dated as of September 21, 2000. *
4.9 Form of Registrant Terms of Preferred. *
4.10 Form of Registrant 5% Subordinated Convertible Debenture. *
4.11 Securities Purchase Agreement dated as of September 29, 2000,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd. *
4.12 Registration Rights Agreement dated as of September 29, 2000,
by and among Registrant, Strong River Investments, Inc. and
Montrose Investments Ltd. *
4.13 Closing Warrant issued by Registrant, to Montrose Investments,
Ltd., dated as of September 29, 2000. *
4.14 Closing Warrant issued by Registrant, to Strong River
Investments, Inc., dated as of September 29, 2000. *
4.15 Adjustable Warrant issued by Registrant to Montrose
Investments, Ltd., dated as of September 29, 2000. *
4.16 Adjustable Warrant issued by Registrant to Strong River
Investments, Inc., dated as of September 29, 2000. *
5.1 Opinion of Latham & Watkins.
23.1 Consent of Latham & Watkins (included in Exhibit 5).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (included on this signature page to this
Registration Statement).
------------
* Previously filed with the Commission as Exhibits to, and incorporated
herein by reference from, the Registrant's Current Report on Form 8-K filed
with the Commission on November 13, 2000.
