<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1997.
Registration No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
SPARTA PHARMACEUTICALS, INC.
(Exact name of Registrant as specified in its charter)
------------
Delaware 56-1755527
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
111 Rock Road
Horsham, Pennsylvania 19044
(215) 442-1700
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
------------
JERRY B. HOOK, Ph.D.
President and Chief Executive Officer
Sparta Pharmaceuticals, Inc.
111 Rock Road
Horsham, Pennsylvania 19044
(215) 442-1700
(Name, address, zip code, and telephone number,
including area code, of agent for service)
------------
Copies to:
JAMES J. MARINO, ESQ.
Dechert Price & Rhoads
Princeton Pike Corporate Center
P.O. Box 5218
Princeton, NJ 08543-5218
(609) 520-3200
------------
Approximate date of commencement of proposed sale to the 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, as amended, 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 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 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. [ ]
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 that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to such Section 8(a), may determine.
===============================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
==========================================|=====================|========================|=====================|==================
| | | |
| | | Proposed maximum |
Title of Each Class of | Amount to be | Proposed maximum | aggregate | Amount of
Securities to be Registered | registered | offering price (1) | offering price(1) | registration fee
- ------------------------------------------|---------------------|------------------------|---------------------|------------------
Common Stock, $.001 par value (2).........| 2,035,000 | $.64063 | $1,303,682 | $ 395
- ------------------------------------------|---------------------|------------------------|---------------------|------------------
</TABLE>
(1) Determined solely for purposes of computing the amount of the registration
fee pursuant to Rule 457(c) on the basis of the average of the high and
low prices of the Common Stock as reported on the Nasdaq SmallCap Market
on April 8, 1997.
(2) Includes shares of Common Stock underlying a Warrant to purchase 35,000
shares of Common Stock.
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION -- DATED APRIL 15, 1997
PROSPECTUS
Sparta Pharmaceuticals, Inc.
2,035,000 Shares of Common Stock ($.001 par value)
This Prospectus relates to an offering (the "Offering") by the Stockholders
named herein under the caption "Selling Stockholders" (collectively, the
"Selling Stockholders") for sale to the public of 2,035,000 shares (the
"Shares") of Common Stock, $.001 par value ("Common Stock") of Sparta
Pharmaceuticals, Inc. (the "Company") including 35,000 shares which are issuable
by the Company upon exercise of a warrant to purchase Common Stock (the
"Warrant").
The Selling Stockholders have advised the Company that they may sell, directly
or through brokers, all or a portion of the securities offered hereby in
negotiated transactions or in one or more transactions in the market at the
price prevailing at the time of sale. In connection with such sales, the Selling
Stockholders and any participating broker may be deemed to be "underwriters" of
the Common Stock within the meaning of the Securities Act of 1933, as amended.
It is anticipated that usual and customary brokerage fees will be paid by the
Selling Stockholders in all open market transactions. The Company will pay all
other expenses of this Offering. See "Plan of Distribution." The aggregate
proceeds to the Selling Stockholders from the sale of the Shares so offered will
be the purchase price of the Shares sold less (i) the aggregate commissions,
discounts and other compensation, if any, paid by the Selling Stockholders to
agents or broker-dealers and (ii) certain other expenses of the offering and
sale of the Shares that will be the responsibility of the Selling Stockholders.
The Company will not receive any proceeds from the sale of the Shares by the
Selling Stockholders; however, the Company could receive up to $39,375.00 on the
Warrant.
The Company has informed the Selling Stockholders that the anti-manipulation
provisions of Regulation M under the Securities Exchange Act of 1934, as
amended, may apply to the sales of their shares offered hereby. The Company also
has advised the Selling Stockholders of the requirement for delivery of this
Prospectus in connection with any sale of the shares offered hereby.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April 15, 1997
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION................................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... 3
THE COMPANY........................................................... 4
RISK FACTORS.......................................................... 4
USE OF PROCEEDS....................................................... 15
SELLING STOCKHOLDERS.................................................. 16
PLAN OF DISTRIBUTION.................................................. 18
LEGAL MATTERS......................................................... 18
EXPERTS............................................................... 18
2
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C. a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Shares offered by this Prospectus. Certain portions of the Registration
Statement have not been included in this Prospectus. For further information,
reference is made to the Registration Statement and the Exhibits thereto. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Commission. The
Registration Statement (with exhibits), as well as such reports, proxy
statements and other information, can be inspected and copied at the public
reference facilities maintained by the Commission at its principal offices at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its
regional offices at 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The Commission
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and other information statements regarding registrants that file
electronically with the Commission.
The Common Stock is traded on the Nasdaq SmallCap Market and such reports,
proxy statements and other information concerning the Company are available for
inspection at the offices of the National Association of Securities Dealers,
Inc., 9513 Key West Avenue, Rockville, Maryland 20850.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference into this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, (ii) all other reports filed by the Company pursuant to
Section 13(a) or 15(d) of the Exchange Act since December 31, 1996, and (iii)
the description of the Common Stock, par value $.001 per share, as contained in
the Company's Registration Statement on Form S-1, declared effective on June 21,
1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering covered hereby will be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference in this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference modifies or replaces such
statement.
The Company hereby undertakes to provide without charge to each person to whom
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated by reference in this
Prospectus, other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. In addition, a copy of the Company's most recent annual report to
stockholders will be promptly furnished, without charge, upon written or oral
request. All such requests should be directed to Sparta Pharmaceuticals, Inc.,
111 Rock Road, Horsham, Pennsylvania 19044, Attention: Ronald H. Spair,
telephone number (215) 442-1700.
3
<PAGE>
THE COMPANY
Sparta Pharmaceuticals, Inc. (the "Company" or "Sparta") is a development stage
pharmaceutical company engaged in the business of acquiring rights to, and
developing for commercialization, technologies and drugs for the treatment of a
number of life threatening diseases including cancer, cardiovascular disorders
and acute inflammation. During 1996, the Company focused on securing additional
financing and advancing its product candidates into clinical trials. This
involved finalizing the formulation and coordinating the manufacture of clinical
trial material for RII retinamide, Spartaject(TM) busulfan and L.A.D.D.(TM)
5-FP. Additionally, the Company identified and retained clinical research
organizations to monitor the clinical trials and selected clinical trial sites
for RII retinamide, Spartaject(TM) busulfan and L.A.D.D.(TM) 5-FP. In the
financing area, the Company closed on a total of approximately $16,000,000 in
gross proceeds from two private placements concluded during 1996. The Company
continues to focus on acquiring or licensing compounds that have been previously
tested in humans or animals. The Company has commenced Phase I Clinical Trials
in the United States for two of its product candidates and has an option to
acquire a license to another compound currently in clinical trials in the United
Kingdom.
The Company's lead products under development are:
<TABLE>
<CAPTION>
Product Candidate Indication Stage of Development
- ------------------ ----------- ---------------------
<S> <C> <C>
Spartaject(TM)busulfan Providing injectable delivery of drug Phase I Clinical Trial Commenced
for ablating bone marrow prior to bone
marrow transplant
RII retinamide Treatment of Myelodysplastic Phase I Clinical Trial Commenced
Syndromes (MDS)
L.A.D.D.(TM) 5-FP Providing oral delivery of 5-FU for the IND approved
treatment of colorectal, breast, liver
and other cancers
LEX032 Treatment of reperfusion injury, (e.g., Preclinical
occurring after myocardial infarction
and stroke)
</TABLE>
In addition to the Company's lead products, the Company has also identified, and
in some instances has undertaken some development of, other applications of its
licensed technologies and other product candidates, one of which is in joint
Phase I Clinical Trials in the U.K. with the Cancer Research Campaign ("CRC").
Sparta was incorporated in Delaware in 1990. Sparta's principal executive office
is located at 111 Rock Road, Horsham, Pennsylvania 19044, and its telephone
number is (215) 442-1700.
RISK FACTORS
An investment in the securities offered hereby involves a high degree of risk
and the securities should not be purchased by persons who cannot afford the loss
of their entire investment. In addition to the other information in this
Prospectus, the following factors should be considered carefully in evaluating
an investment in the securities offered hereby.
Early Stage of Development. The Company's product candidates are in the early
stages of research and development and no revenues have been generated to date
from product sales, nor are any product revenues expected for at least the next
several years, if at all. To date, only limited human testing has been conducted
on any of the Company's proposed product candidates. The Company has received
approval of Investigational New Drug ("IND") applications by the United States
Food and Drug Administration ("FDA") relating to proposed Phase I clinical
trials in the United States for three product candidates of which two are
currently in Phase I Clinical Trials. The Company's other product candidates are
in the preclinical stage of development and testing or their development has not
yet commenced. As a result, the
4
<PAGE>
Company must be evaluated in light of the problems, delays, uncertainties and
complications encountered in connection with a development stage
biopharmaceutical business. The risks include, but are not limited to, the
possibilities that any or all of the Company's potential products will be found
to be ineffective or toxic, or fail to receive necessary regulatory clearances.
To achieve profitable operations, the Company must successfully develop, obtain
regulatory approval for, introduce and successfully market at a profit products
that are currently in the research and development phase. The great majority of
the preclinical research and clinical development work and testing for the
Company's product candidates remains to be completed. The Company is currently
not profitable, and no assurance can be given that the Company's research and
development efforts will be successful, that required regulatory approvals will
be obtained, that any of the Company's proposed products will be safe and
effective, that any such products, if developed and introduced, will be
successfully marketed or achieve market acceptance, or that such products can be
marketed at prices that will allow profitability to be achieved. Failure of the
Company to successfully develop, obtain regulatory approval for, introduce and
market its products under development would have a material adverse effect on
the business, financial condition and results of operations of the Company.
Need for Substantial Additional Funds. The Company currently anticipates that
the available cash, cash equivalents, and investments will be sufficient to fund
operations through the first quarter of 1998. However, the Company may be
required to seek additional financing to continue operations during such period
in the event of cost overruns or unanticipated expenses. The Company has
experienced delays in funding its planned research and development activities
and will require substantial additional funds to finance its business activities
on an ongoing basis. The Company's future capital requirements will depend on
numerous factors, including, but not limited to, progress in its research and
development programs, including preclinical and clinical trials, costs of filing
and prosecuting patent applications and, if necessary, enforcing issued patents
or obtaining additional licenses to patents, competing technological and market
developments, the cost and timing of regulatory approvals, the ability of the
Company to establish collaborative relationships, and the cost of establishing
manufacturing, sales and marketing capabilities. The Company has no current
commitment to obtain other additional funds and is unable to state the amount or
potential source of such other additional funds. Moreover, because of the
Company's potential long-term capital requirements, it may undertake additional
equity offerings whenever conditions are favorable, even if it does not have an
immediate need for additional capital at that time. There can be no assurance
that the Company will be able to obtain additional funding when needed, or that
such funding, if available, will be obtainable on reasonable terms. Any such
additional funding may result in significant dilution to existing stockholders.
If adequate funds are not available, the Company may be required to delay,
reduce or eliminate research and development programs, capital expenditures, and
marketing and other operating expenses. The Company may be required to obtain
funds through arrangements with collaborative partners that may require the
Company to relinquish material rights to its products that it would not
otherwise relinquish.
History of Losses; Uncertainty of Future Financial Results. The Company has
experienced significant operating losses since its inception in June 1990. As of
December 31, 1996, the Company's accumulated deficit was $17,365,336. The
majority of the Company's income to date has been derived from interest earned
on invested funds. The Company has not introduced any product commercially. The
Company expects to incur increasing operating losses over the next several years
as its product research programs expand and various preclinical and clinical
trials commence. The amount of net losses may vary significantly from
year-to-year and quarter-to-quarter and depend on, among other factors, the
timing of Company payments in connection with sponsored research, and the
progress of preclinical and clinical development programs. The Company's ability
to attain profitability will depend, among other things, on its successfully
completing development of its product candidates, obtaining regulatory
approvals, establishing manufacturing, sales and marketing capabilities and
obtaining sufficient funds to finance its activities. There can be no assurance
that the Company will be able to achieve profitability or that profitability, if
achieved, can be sustained.
Patents and Proprietary Rights. The Company owns or holds a license to patents
and patent applications in the United States and other countries to protect its
proprietary technology. There can be no assurance that any patents that have
been issued or may be issued in the future will be of substantial protection or
commercial benefit to the Company, will afford the Company adequate protection
from competing products or will not be challenged or declared invalid.
Furthermore, there can be no assurance that additional U.S. or foreign patents
will be issued or licensed to the Company. The extent to which the Company may
be required to license other patents or proprietary rights held by others and
the extent to which the availability of such licenses are presently unknown.
Except as indicated below, the Company is not aware that any of its activities
are in violation of third-party patents; however any such violation could have a
material adverse effect on its
5
<PAGE>
business. In addition, the Company relies heavily on proprietary technologies
for which patent applications have been filed but not yet granted in certain
countries. Insofar as the Company relies on trade secrets, non-disclosure
agreements and unpatented know-how to establish and maintain its competitive
technological position, there can be no assurance that others may not
independently develop the same or similar technologies.
There can be no assurance that any patents will issue from the patent
applications licensed to the Company or acquired in connection with the
acquisition of the assets and business of Lexin Pharmaceutical Corporation
("Lexin" or the "Lexin Purchase"). Further, even if patents issue, there can be
no assurance that they will not be challenged, invalidated or infringed upon or
designed around by others or that the practice of the claims contained in such
patents will not infringe the patent claims of others or that they will provide
the Company with significant protection against competitive products or
otherwise be commercially valuable. There can be no assurance that the Company
will not need to acquire licenses under patents belonging to others for
technology potentially useful or necessary to the Company or, if any such
licenses are required, that they will be available on terms acceptable to the
Company, if at all. To the extent that the Company is unable to obtain patent
protection for its products or technology, the Company's business may be
adversely affected by competitors who develop substantially equivalent products
or technology.
Status of Technologies and Compounds
Spartaject(TM) Technology. A United States patent relating to the Spartaject(TM)
Technology (the "Licensed Patent"), expiring in 2009, is licensed by the Company
from Research Triangle Pharmaceuticals. Corresponding patent applications
relating to the Spartaject(TM) Technology have been filed in various foreign
countries, including certain European countries, Japan and Canada and have been
licensed to the Company. Patents relating to the Spartaject(TM) Technology have
issued in Taiwan and South Africa, which expire in 2008 and 2011, respectively,
and have been licensed to the Company.
Certain patents (the "Third Party Patents") issued in the United States in
September 1992 and March 1995 include numerous claims that, based on presently
available information, may cover certain embodiments of the Spartaject(TM)
Technology including formulations of camptothecin, etoposide and certain
taxanes. The Company believes that these Third Party Patents have been assigned
to Eastman Kodak Company, or a subsidiary thereof. If the Third Party Patents
are not invalid insofar as their claims relate to those embodiments of the
Spartaject(TM) Technology, then (i) the Company may require a license from the
holder of the Third Party Patents to commercialize those embodiments of the
Spartaject(TM) Technology and sell or sublicense others to sell products
utilizing those embodiments of the Spartaject(TM) Technology in the United
States and (ii) the extent to which the Company might require such a license
will depend on the final formulations of its and any sublicensee's products and
whether they utilize those embodiments of the Spartaject(TM) Technology that are
covered by the Third Party Patents. There can be no assurance that a license
will be obtainable on acceptable terms, if at all, and any negotiations to
obtain a license may be protracted. If the Company is required to obtain a
license under the Third Party Patents to practice those embodiments of the
Spartaject(TM) Technology and sell or sublicense others to sell products
utilizing those embodiments of the Spartaject(TM) Technology in the United
States and is unable to do so on commercially reasonable terms, then the
inability to obtain such a license could have a material adverse effect on the
Company's business and its future results of operations.
The application for the Licensed Patent was filed in the United States nearly
nine months prior to the application for the initial Third Party Patent and,
based on presently available information, the work relating to the inventions
claimed in the Licensed Patent, insofar as such claimed inventions cover those
embodiments of the Spartaject(TM) Technology which also appear to be covered by
the initial Third Party Patent, was commenced more than two years prior to the
filing date of the application for the initial Third Party Patent. However,
there can be no assurance that the inventions claimed in the Licensed Patent
covering those embodiments of the Spartaject(TM) Technology were made prior to
the inventions claimed in the Third Party Patents, which appear to cover those
embodiments of the Spartaject(TM) Technology. If such inventions claimed in the
Licensed Patent did have such priority and such priority were established in a
United States court proceeding or otherwise with respect to each such claimed
invention in the Third Party Patents which appears to cover embodiments of the
Spartaject(TM) Technology, then the Third Party Patents would be invalid to the
extent their claims extend to those embodiments of the Spartaject(TM) Technology
and would not prevent the Company from practicing those embodiments of the
Spartaject(TM) Technology in the United States.
6
<PAGE>
Patent applications corresponding to the Third Party Patents have been filed in
various countries outside the United States, including certain European
countries through the European Patent Office ("EPO"), in Japan and in Canada,
also with pending claims that, based on presently available information, may
cover certain embodiments of the Spartaject(TM) Technology. The applications
filed by the holder of the Licensed Patent in various foreign countries,
including certain European countries through the EPO, in Japan and in Canada,
have earlier effective filing dates than the application filed with the EPO, in
Japan and in Canada corresponding to the Third Party Patents. The Company
believes that generally, in most foreign countries, in the case of conflicting
applications claiming the same patentable invention, the application with the
earlier effective filing date (in this case the patent applications filed by the
holder of the Licensed Patent) is entitled to the issuance of the patent.
Accordingly, although there can be no assurance that foreign law will be applied
in this manner, the Company believes that a patent issued in such European
countries, Japan, or Canada corresponding to the Third Party Patents should be
invalid (or susceptible to cancellation) insofar as it pertained to the practice
of the Spartaject(TM) Technology. Therefore, the Company believes it should not
be prevented ultimately from commercializing the Spartaject(TM) Technology in
such European countries, Japan or Canada, respectively, solely by reason of the
issuance of such Third Party Patent. However, there can be no assurance that
relevant claims in the Third Party Patents will not be held to be valid and
infringed.
A patent was issued in the United States (the "Orphan Patent") and a patent
application which designated various countries outside the United States was
published under the Patent Cooperation Treaty (the "Orphan Application") which
the Company understands have been licensed exclusively to Orphan Medical, Inc.
The Orphan Patent includes claims, and the Orphan Application is seeking claims,
covering methods of treating patients with malignant conditions using an
intravascularly administrable busulfan preparation and treating leukemia or
lymphoma patients undergoing a bone marrow transplant using an intravenously
administrable busulfan preparation that, based on presently available
information, may cover methods by which Spartaject(TM) busulfan will be used.
The Company believes, based on advice of patent counsel, that such claims do not
cover the use of Spartaject(TM) busulfan. However, there can be no assurances in
this regard and if such claims do cover the Company's intended use of
Spartaject(TM) busulfan, and the Orphan Patent or any patents issuing on the
Orphan Application are not invalid, then the Company may require a license from
the holder or exclusive licensee of such patent or patents in order to develop
or commercialize Spartaject(TM) busulfan in any country, including possibly the
United States, where such patent or patents are issued. There can be no
assurance that a license will be obtainable on acceptable terms, if at all, and
any negotiations to obtain a license may be protracted. If the Company is unable
to obtain a license on commercially reasonable terms, then the inability to
obtain such a license could have a material adverse effect on the Company's
business and its future results of operations.
A patent application filed by Sandoz Ltd. and Sandoz-Patent-GmbH (the "Sandoz
Application") was published under the Patent Cooperation Treaty ("PCT") in
October 1992 and designated various European countries for filing. The Sandoz
Application includes claims covering certain embodiments of the Spartaject(TM)
Technology applicable to formulations containing certain electrostatic lipids.
Although the patents which have issued in the EPO and the United Kingdom
pursuant to such application do not contain any such claims, if a Spartaject(TM)
formulated product contained such lipids and patents containing such claims
issue on such application in any country and such claims are not invalid, then
the Company may require a license from the holder of such patents in order to
develop or commercialize such product in any such country. There can be no
assurance that a license will be obtainable on acceptable terms, if at all, and
any negotiations to obtain a license may be protracted. If the Company is unable
to do so on commercially reasonable terms, then the inability to obtain such a
license could have a material adverse effect on the Company's business and its
future results of operations.
L.A.D.D. Technology and IPdR. In March 1997 the U.S. Patent and Trademark Office
("PTO") issued an office action indicating an allowance of claims pursuant to
the Company's licensed patent application from Yale University including all of
the claims drawn to the administration of 5-FP (including oral administration)
and IPdR, and other compounds with similar structures, for the treatment of
liver associated diseases. The corresponding U.S. patent is expected to issue in
1997.
The Company is aware that two international patent applications by The Wellcome
Foundation Limited ("Wellcome") were published under the PCT in 1992,
designating the United States, major European countries, Japan, Australia and
New Zealand, among other countries. As published, the applications have broad
claims that the Company believes may cover certain of the prodrugs which may be
used by the Company in practicing the L.A.D.D. Technology licensed by the
Company, or methods of formulating or using such prodrugs, or may cover the
active compound to which the prodrugs
7
<PAGE>
are intended to be converted in vivo. A patent in Australia based on one of such
applications was issued on March 7, 1995, and expires in 2011. Two patent
applications in New Zealand, based on one of such PCT applications, were allowed
and published for opposition in November 1995 and, unless successfully opposed,
will be granted and will expire in 2011 (such Australian patent and potential
New Zealand patents being called collectively the "ANZ Patents"). The claims of
the ANZ Patents do not appear to cover the application of the L.A.D.D.
Technology to 5-FP but may cover its application to IPdR as a radiosensitizer
prodrug. The Company believes that to the extent that it is possible to
interpret such claims as covering such applications to IPdR, they are invalid
and that the issuance of the ANZ Patents to such extent were in error. The
Company had filed timely oppositions to the issuance of the New Zealand
applications based on prior art of which the Company is presently aware. Both
opposition proceedings are currently for post-grant reexamination with respect
to the Australian patent at an appropriate time. The Company is also maintaining
a watch with respect to the publication or allowance of corresponding
applications in other jurisdictions. There can be no assurance, however, that
such issuance in Australia and allowances in New Zealand were in error, or that
another patent or patents based on such published applications will not issue in
the United States or other jurisdictions or that the ANZ Patents and any other
such issued patent or patents would not contain claims which could affect the
practice of the L.A.D.D. Technology. The Company believes that if the ANZ
Patents are valid as issued or any such other patent or patents issue in any
jurisdiction, it may be required to seek a license under such claims in order to
develop, market and sell certain of the applications of its L.A.D.D. Technology
in such jurisdictions. There can be no assurance that such license will be
obtainable on commercially reasonable terms to the Company, if at all. If any
such license were required to practice the L.A.D.D. Technology, the inability to
obtain such license could have a material adverse effect on the Company's
business and its future results of operations.
A patent licensed to the Company and expiring in 2007 has issued in the United
States on IPdR. A U.S. patent licensed to the Company on certain other
nucleoside analogues expires in 2005.
RII retinamide. RII retinamide is not patented in the United States, and the
Company believes it is no longer patentable in the United States. An EPO patent
on RII retinamide licensed to the Company expires in 1998 and pursuant thereto
patent rights have been perfected in various European countries. A patent in
Canada also licensed to the Company expires in 1999.
Patent Rights Acquired from Lexin. The Company has obtained, through the
assignment to the Company of a license agreement with the University of
Pennsylvania ("Penn"), exclusive rights to four issued United States patents
expiring in 2009, 2011 (two), and 2013. An additional five United States patent
applications and three corresponding PCT applications designating various
countries outside the United States are pending (all of which are covered by the
Penn license agreement). The Company has obtained, through the assignment to the
Company of a license agreement with Wichita State University, exclusive rights
to four pending United States patent applications and corresponding foreign
applications, covering a novel family of serine protease inhibitors. One of the
United States applications issued in 1996.
Two patents (the "Antichymotrypsin Patents"), were assigned to Sonoran Desert
Chemicals LLC in 1990 and 1991, respectively, relating to certain uses of
antichymotrypsin. The Antichymotrypsin Patents include claims covering methods
for treating pulmonary and/or bowel inflammations in a mammal using
alpha-1-antichymotrypsin, derivatives and salts thereof, methods for treating
inflammation using alpha-1-antichymotrypsin topically and pharmaceutical
compositions of alpha-1-antichymotrypsin, its salts or derivatives. To the
Company's knowledge, products embodying the Antichymotrypsin Patents have not
yet been developed. Claims of the Antichymotrypsin Patents may cover the
intended use of LEX032, the lead compound which the Company acquired in the
Lexin Purchase. The Company believes, however, based on the advice of patent
counsel, that such claims would not cover the Company's intended use of LEX032.
Nevertheless, there can be no assurance in this regard, and if such claims are
found to cover the Company's intended use of LEX032, and the Antichymotrypsin
Patents are not invalid, then the Company may require a license from the holders
of the Antichymotrypsin Patents in order to develop or commercialize LEX032 in
the United States or any other country where the Antichymotrypsin Patents may
have issued. There can be no assurance that a license will be obtainable on
commercially reasonable terms, if at all, and any negotiations to obtain a
license may be protracted. If the Company is unable to obtain such a license on
commercially reasonable terms, such inability to obtain such a license could
have a material adverse effect on the Company's business and its future results
of operations.
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Asulacrine. An issued United States patent on asulacrine under a license option
to the Company expires in 1999. Patents on asulacrine have also issued in
several European countries and Japan, which patents expire in 2001.
PT-523. A United States patent licensed by the Company and expiring in 2005 has
been issued on the PT-523 compound, its pharmaceutical composition and its use
as a methotrexate resistant cell inhibitor. Corresponding Japanese and Canadian
patents and patents in several European countries have issued, expiring in 2007,
2010 and 2008, respectively.
Other Compounds. The following compounds which the Company may develop are
believed to be in the public domain or not presently subject to patent
protection as compounds in the United States: busulfan, 5-FP, RII retinamide and
aphidicolin. Any patent coverage for any formulations of these compounds with
the Spartaject Technology will be primarily dependent upon the patent coverage
for the Spartaject Technology, to the extent available. The Company has been
granted orphan drug status by the FDA for its intended uses of busulfan and RII
retinamide described. Any patent protection for 5-FP will be dependent upon the
issuance of patents covering the L.A.D.D. Technology and the scope of the
coverage provided by such patents.
Risks of New Product Development; Market Uncertainty. The Company has received
approval by the FDA for IND applications relating to three product candidates,
Spartaject(TM) busulfan, L.A.D.D., 5-FP and RII retinamide, two of which are
currently in Phase I clinical trials. One of the Company's product candidates,
asulacrine, is in a second Phase I clinical trial in England being conducted by
the Cancer Research Campaign ("CRC"). The Company has not filed an IND with the
FDA for asulacrine. Because of the incidence of vein inflammation apparently
caused by the injectable formulation of asulacrine used in the first clinical
trial, CRC developed an oral formulation of the compound which is in a second
Phase I clinical trial in the U.K. Another potential product candidate, IPdR, is
a nucleoside analogue. It is possible that as a result of severe complications
and deaths associated with the use of another nucleoside analogue, which was
under clinical investigation for hepatitis, more extended preclinical toxicity
testing may be required by the FDA for any nucleoside analogues under
investigation for any use, and there can be no assurance that similar toxicities
from the use of IPdR will not result. An additional product candidate, LEX032,
is in the preclinical stage of development.
The Company has not commenced development of some of its other product
candidates and has done only limited development on others. None of the products
the Company proposes to develop or is developing has been approved for marketing
by regulatory authorities and all of the Company's products will require
significant research and development, including lengthy clinical testing, prior
to their commercialization. The results of clinical trial and preclinical
testing discussed in this Prospectus for the Company's compounds and
technologies are subject to varying interpretations. Furthermore, studies
conducted with alternative designs or on alternative populations could produce
results that vary from those discussed in this Prospectus. Therefore, there can
be no assurance that the results discussed in this Prospectus or the Company's
interpretation of them will be accepted by governmental regulators or the
medical community. Even if the development of the Company's products in the
preclinical phase advances to the clinical stage, there can be no assurance that
they will prove to be safe and effective. The products that are successfully
developed, if any, will be subject to requisite regulatory approval prior to
their commercial sale, and the approval, if obtainable, may take several years.
Generally, only a very small percentage of the number of new pharmaceutical
products initially developed is approved for sale. Even if they are approved for
sale, there can be no assurance that they will be commercially successful. The
Company may encounter unanticipated problems relating to development,
manufacturing, distribution and marketing, some of which may be beyond the
Company's financial and technical capacity to solve. The failure to address such
problems adequately could have a material adverse effect on the Company's
business and prospects. No assurance can be given that the Company will succeed
in the development and marketing of any new drug products, or that they will not
be rendered obsolete by products of competitors. There can be no assurance of
the extent to which any of the Company's products, if successfully developed,
will actually be used by patients. Furthermore, there can be no assurance that
the Company's sales of its products for such uses will be profitable even if
patient use occurs.
Uncertainty of Health Care Reform Measures. Federal, state and local officials
and legislators (and certain foreign government officials and legislators) have
proposed or are reportedly considering proposing a variety of reforms to the
health care systems in the United States and abroad. The Company cannot predict
what health care reform legislation, if any, will be enacted in the United
States or elsewhere. Significant changes in the health care system in the United
States or elsewhere are likely to have a substantial impact over time on the
manner in which the Company conducts its business. Such proposals and changes
could have a material adverse effect on the Company's ability to raise capital.
Furthermore,
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the Company's ability to commercialize its potential products may be adversely
affected to the extent that such proposals have a material adverse effect on the
business, financial condition and profitability of other companies that are
prospective corporate partners with respect to certain of the Company's proposed
products.
Uncertain Extent of Price Flexibility and Third-Party Reimbursement. The
Company's ability to commercialize its products successfully will depend in part
on the extent to which appropriate reimbursement levels for the cost of such
products and related treatment are obtained from government authorities, private
health insurers and other organizations, such as health maintenance
organizations ("HMOs"). Third party payors are increasingly challenging the
prices charged for medical products and services. Also the trend towards managed
health care in the United States and the concurrent growth of organizations such
as HMOs, which could control or significantly influence the purchase of health
care services and products, as well as legislative proposals to reduce
government insurance programs, may all result in lower prices for the Company's
products. The cost containment measures that health care providers are
instituting could affect the Company's ability to sell its products and may have
a material adverse effect on the Company.
Government Regulation; Need for FDA and Other Regulatory Approval; Orphan Drug
Status. Prior to marketing, each of the Company's drugs must undergo an
extensive regulatory approval process conducted by the FDA and applicable
agencies in other countries. The process, which focuses on safety and efficacy
and includes a review by the FDA of preclinical testing and clinical trials and
investigating as to whether good laboratory and clinical practices were
maintained during testing, takes many years and requires the expenditure of
substantial resources. The Company is, and will be dependent on the external
laboratories and medical institutions conducting its preclinical testing and
clinical trials to maintain both good laboratory practices established by the
FDA and good clinical practices. Data obtained from preclinical and clinical
testing are subject to varying interpretations which could delay, limit or
prevent regulatory approval. In addition, delays or rejection may be encountered
based upon changes in FDA policy for drug approval during the period of
development and by the requirement for regulatory review of each IND and NDA.
There can be no assurance that even after such time and expenditures regulatory
approval will be obtained for any of the Company's product candidates. Moreover,
such approval may entail significant limitations on the indicated uses for which
a drug may be marketed. Even if such regulatory approval is obtained, a marketed
therapeutic product and its manufacturer are subject to continual regulatory
review, and later discovery of previously unknown problems with a product or
manufacturer may result in restrictions on such product or manufacturing,
including withdrawal of such product from the market. Change in the
manufacturing procedures used by the Company for any of the Company's approved
drugs are subject to FDA review, which could have an adverse effect upon the
Company's ability to continue the commercialization or sale of a drug. The
process of obtaining FDA approval is costly and time consuming, and there can be
no assurance that any product that the Company may develop will be deemed to be
safe and effective by the FDA. The Company will not be permitted to market any
product it may develop in any jurisdiction in which the product does not receive
regulatory approval.
The Company intends to seek orphan drug status for some of its product
candidates pursuant to the Orphan Drug Act of 1983 (the "Orphan Drug Act") and
has been granted orphan drug status for busulfan as preparative therapy for
malignancies treated with bone marrow transplantation and for RII retinamide for
the treatment of myelodysplastic syndromes. There can be no assurance that
orphan drug status will be granted for other product candidates or that for any
grant of orphan drug status, such grant will provide the Company with any
benefits. Although under the Orphan Drug Act as now in effect orphan drug status
may provide an applicant exclusive marketing rights in the United States for a
designated indication for seven years following marketing approval, in order to
obtain such benefits, the applicant must be the sponsor of the first NDA
approved for that drug and indication. If a third party receives prior FDA
approval for an orphan drug indication, the Company may be precluded by the
Orphan Drug Act from obtaining market approval for seven years. Orphan Medical,
Inc., a United States company which is not affiliated with the Company's
distributors of Spartaject(TM) busulfan in Europe and Sweden, has disclosed that
it is in Phase II clinical trials with an intravenous form of busulfan for use
in bone marrow transplants using a formulation with solvents licensed from a
university. It cannot be predicted whether such development by Orphan Medical,
Inc., will be successful and whether it will adversely affect the ability of the
Company to obtain FDA approval of Spartaject(TM) busulfan for the orphan drug
indication of use in bone marrow transplants. In addition, amendments to the
Orphan Drug Act have been introduced in Congress, which if adopted, would limit
the benefits available for sellers of orphan drugs, including limiting the
exclusivity period to four years generally and providing for the loss or sharing
of exclusivity in some circumstances. There can be no assurance
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that such amendments or other amendments will not be adopted, and therefore the
Company is unable to predict the extent to which or whether any benefits
currently provided by the Orphan Drug Act will continue to be available.
Competition; Technological Change. There is substantial competition in the
pharmaceutical field and in the areas of the Company's proposed business in
cancer, cardiovascular disorders and acute inflammation, engaged in by companies
with financial resources, and licensing, research and development staffs and
facilities substantially greater than those of the Company. Competitors include
pharmaceutical companies with recognized, well established development programs
in these areas, and biotechnology firms and pharmaceutical companies with
therapies in the development stage. Many such companies have extensive
experience in undertaking preclinical testing and clinical trials and obtaining
FDA and other regulatory approvals. There can be no assurance that the Company's
competitors will not succeed in developing similar technologies and products
more rapidly than the Company and that these technologies and products will not
be more effective than any of those that are being or will be developed by the
Company, or render the Company's technologies and products obsolete or
noncompetitive. The Company intends to or may apply its Spartaject(TM)
Technology and L.A.D.D. Technology to compounds that are believed to be in the
public domain, or not presently subject to patent protection as compounds, in
the United States, including aphidicolin, busulfan, 5-FU and possibly
paclitaxel. As a result, the Company cannot prevent other companies from
developing products or applying delivery technologies other than the
Spartaject(TM) Technology and the L.A.D.D. Technology to such compounds in a
manner than competes with technologies and product candidates under development
by the Company. Several pharmaceutical companies are developing protease
inhibitors with potential application in pulmonary inflammation, pancreatitis,
coagulative disorders and reperfusion injury. It is widely acknowledged that
proteases are a critical component in the inflammatory cascade and their
inhibition has been pursued by companies engaged in the development of both
traditional pharmaceuticals and biotech compounds.
Dependence Upon Others for Manufacturing and Marketing. The Company currently
has no capability to manufacture any of its products for preclinical testing or
clinical trials, and, if appropriate, for commercial purposes, or to market
them. The Company does not intend to establish in the foreseeable future
manufacturing facilities to produce drug chemicals or product formulations,
except possibly with respect to its Spartaject(TM) Technology, or marketing
capabilities, other than potentially in the United States to specialists in
oncology/hematology practices. Accordingly, the Company will be required to
enter into arrangements with other companies for the manufacture and marketing
of its products. If the Company is unable to obtain or maintain third party
manufacturing and marketing arrangements, it may not be able to commercialize
its product candidates as planned. In addition, manufacturers of the Company's
products will be subject to applicable current good manufacturing practices
("cGMP") prescribed by the FDA or other rules and regulations prescribed by
foreign regulatory authorities. There can be no assurance that the Company will
be able to enter into manufacturing agreements either domestically or abroad
with companies whose facilities and procedures comply with cGMP or applicable
foreign standards. Should such agreements be entered into, the Company will be
dependent on such manufacturers for continued compliance with cGMP and
applicable foreign standards. Failure by a manufacturer of the Company's
products to maintain cGMP or applicable foreign standards could result in
significant time delays or the inability of the Company to commercialize a
product and could have a material adverse effect on the Company. In addition,
the Company's dependence on third parties for the manufacture and marketing of
its products may adversely affect profit margins on its products.
Product Liability. The testing, marketing and sale of human health care products
entail an inherent risk of adverse side effects and/or personal injury and
product liability, and there can be no assurance that product liability claims
will not be asserted against the Company. The Company currently has no product
liability insurance. Under the terms of most of its license agreements, the
Company is required both to indemnify its licensor against product liability
risks and to obtain such coverage prior to the sale of the products covered by
the license, and in certain instances, at coverage levels specified in the
license agreement by the licensor. If the Company fails to do so, its licensor
will be entitled to terminate the license. Although the Company will seek to
carry reasonable levels of product liability insurance, it is not certain that
such coverage will be obtainable on reasonable terms and at levels required by
its licensors, or if obtained, that such amounts ultimately will prove adequate
or will be renewable for any period. If such insurance is not obtained and
maintained at sufficient levels, or if any product liability claim against the
Company were sustained, the Company's business and prospects could be materially
adversely affected and its rights to market certain of its products could be
terminated.
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Dependence on Key Personnel and Scientific Advisors. The Company is highly
dependent on having qualified experienced management, the loss of one or more of
whom could have a material, adverse effect on the Company if an appropriate
successor is not available with reasonable promptness. The Company currently
holds "key person" insurance for coverage against the unanticipated death of
Jerry B. Hook, Ph.D., the Company's President and Chief Executive Officer, in
the amount of $2,000,000. The insurance policy names the Company as beneficiary.
The loss of services of a key person could have a material adverse effect on the
Company. Although the Company has employment agreements with Dr. Hook, William
McCulloch, M.B., Ch.B., F.R.C.P.(Glasg.) D.R.C.O.G., the Company's Senior Vice
President of Research & Development, and Ronald H. Spair, Vice President, Chief
Financial Officer, and Secretary of the Company, each such executive officer may
terminate his employment at any time upon thirty days notice, and there can be
no assurance that such agreements will not be so terminated.
The Company's scientific advisors are employed on a full time basis by unrelated
employers and some have one or more consulting or other advisory arrangements
with other entities which may conflict with their obligations to the Company.
Inventions or processes discovered by such persons, other than those to which
the Company's licenses relate or, those to which the Company is able to acquire
licenses for or those which were invented while performing consulting services
under contract to the Company, will most likely not become the property of the
Company, but will remain the property of such persons or such persons' full-time
employers. Failure to obtain needed patents, licenses or proprietary information
held by others could have a material effect on the Company.
Limited Personnel; Dependence on Corporate and Academic Collaborators for
Research and Development. The Company has nine full-time employees. With these
exceptions, the Company relies, and for the foreseeable future will rely, on
contract development organizations, other academic collaborators and other
consultants for its preclinical and clinical planning, development, monitoring
and regulatory registration services. Contract development organizations and the
Company's advisors and consultants are employed or retained by other entities,
and they have commitments to, or consulting or advisory contracts with, such
entities that may limit their availability to the Company and that may compete
with the Company. There can be no assurance that their services will be
available to the Company on a timely basis when needed, or at all, and as
non-employees, the Company has limited control over their activities. In
addition, the academic collaborators are not actively involved in the Company's
business or in the development of its products from a commercial perspective.
Contract development organizations and the Company's advisors and consultants
generally sign agreements that provide for confidentiality of the Company's
proprietary information and results of studies. However, there can be no
assurance that the Company will be able to maintain the confidentiality of the
Company's technology, the dissemination of which could have a material adverse
effect on the Company's business. Because of the nature of its business, the
Company will require a wide range of skilled personnel to conduct its proposed
operations and will be dependent upon its ability to attract and retain
qualified management, scientific and marketing personnel. There is intense
competition among pharmaceutical companies for such personnel, and there is no
assurance that the Company will be successful in recruiting or retaining them.
Conducting Business Abroad. To the extent the Company conducts business outside
the United States, it intends to do so through licenses, joint ventures or other
contractual arrangements for the development, manufacturing and marketing of its
products. Although the Company has entered into a development and marketing
arrangement for Spartaject(TM) busulfan for Europe and the Scandinavian
countries, no assurance can be given that the Company will be able to establish
other foreign operations successfully through such a plan, that the necessary
foreign regulatory approvals for its product candidates will be obtained, that
foreign patent coverage will be available or that the manufacturing and
marketing of its products through such licenses, joint ventures or other
arrangements will be commercially successful. The Company might also have
greater difficulty obtaining proprietary protection for its products and
technologies outside the United States rather than in it, and enforcing its
rights in foreign courts rather than in United States courts.
Risk of Adjustment to the Conversion Price for Series B' Convertible Preferred
Stock. The outstanding shares of the Company's Series B' Convertible Preferred
Stock ("Series B' Preferred Stock") are convertible at any time at the option of
the holder into shares of the Company's Common Stock at an initial conversion
price of $1.50 per share such that each 10,000 shares of the Company's Series B'
Preferred Stock are initially convertible into 66,667 shares of the Company's
Common Stock. On August 23, 1997 the conversion rate of the then outstanding
shares of Series B' Preferred Stock into shares of Common Stock will be subject
to increase if the average closing bid price of the Common Stock for the 30
consecutive trading days immediately prior to
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August 23, 1997 is not greater than $1.95 per share. Any adjustment to the
conversion rate would have a dilutive effect on the holders of the then
outstanding Common Stock.
Dilution; Shares Eligible for Future Sale; Registration Rights. Of the 9,979,328
shares of Common Stock outstanding as of the date of this Prospectus,
approximately 6,891,989 shares will be eligible for sale in the public market
without restriction on the date of this Prospectus. On April 29, 1997 certain
changes will take effect with respect to regulations promulgated under the
Securities Act of 1933, as amended, which will shorten the required holding
periods before which restricted securities can be sold in the public market. The
revised holding periods are applicable to all securities, whether acquired
before or after April 29. The Company cannot predict the effect, if any, that
these changes in the federal regulations may have on the market prices
prevailing from time to time for the Common Stock. In addition to such
outstanding shares of Common Stock, there are 16,672,137 shares of Common Stock
issuable under currently outstanding warrants and approximately 3,000,000 shares
of Common Stock issuable or reserved for issuance under the Company's 1991 Stock
Plan and under various license, option and research agreements. No prediction
can be made as to the effect, if any, that the sale or the availability for sale
of such securities will have on the market prices prevailing from time to time
for the Common Stock. Nevertheless, the possibility that substantial amounts of
such securities may be sold in the public market may adversely affect prevailing
market prices for the Company's equity securities, and could impair the
Company's ability to raise capital in the future through the sale of equity
securities. Certain stockholders have also been granted demand and piggy-back
rights with respect to future registrations by the Company. Sales of Common
Stock, or the possibility of such sales, in the public market may adversely
affect the market price of the Common Stock underlying the securities being
offered hereby. The Company plans to increase its authorized shares of Common
Stock from 42,000,000 to 72,000,000, subject to the approval of the stockholders
at the annual meeting to be held in June 1997. No prediction can be made as to
the effect, if any, that such an increase will have on the market prices
prevailing from time to time for the Common Stock.
Antitakeover Effects of Certain Charter and By-Law Provisions and Delaware Law.
The Board of Directors has the authority to issue shares of preferred stock with
rights and preferences senior to those of the Common Stock without further vote
or action by the stockholders of the Company. In addition, the Company's
Restated By-Laws and Restated Certificate of Incorporation contain certain
provisions (including a classified Board of Directors) that could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
Such provisions could limit the price that certain investors might be willing to
pay in the future for shares of the Common Stock or other equity securities.
These provisions could also make it more difficult for stockholders to change
the management of the Company or to effect certain transactions.
Absence of Dividends. The Company has never declared or paid any cash dividends
and does not anticipate paying dividends on its Common Stock or other equity
securities for the foreseeable future. Management of the Company anticipates
that all earnings and other resources of the Company, if any, will be retained
by the Company for investment in its business.
Potential Volatility of Price; Low Trading Volume. The market price of the
Common Stock, like that of many other development-stage public pharmaceutical or
biotechnology companies, has been highly volatile and may be in the future.
Factors such as announcements of technological innovations or new commercial
products by the Company or its competitors, disclosure of results of preclinical
and clinical testing, adverse reactions to products, governmental regulation and
approvals, developments in patent or other proprietary rights, public or
regulatory agency concerns as to the safety of products developed by the Company
and general market conditions may have a significant effect on the market price
of the Common Stock and its other equity securities. In addition, in general,
the Common Stock has been thinly traded on the Nasdaq SmallCap Market, which may
affect the ability of the Company's stockholders to sell shares of the Common
Stock in the public market. There can be no assurance that a more active trading
market will develop in the future.
Control by Directors and Others. The Company's directors, executive officers and
principal stockholders beneficially own (excluding exercisable options, warrants
and convertible securities) approximately 36% of the outstanding shares of
Common Stock and will have the ability to exert substantial influence over the
election of the Company's Board of Directors.
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Limited Availability of Net Operating Loss Carry Forwards. At December 31, 1996,
the Company had accumulated approximately $18,573,000 in net operating loss
carry forwards and research and experimental credit carryforwards of $196,700
for income tax purposes that expire in years 2006 through 2011 of which
approximately $4,865,000 of net operating loss carryforwards relate to the
acquisition of Lexin. Based on the number of shares of Common Stock, convertible
notes and shares of convertible preferred stock issued in 1993 and March of
1996, the Company exceeded the limits allowable under the Tax Reform Act of 1986
related to changes in ownership percentage governing future utilization of net
operating loss carry forwards. The effect of these occurrences is to limit the
annual utilization of the net operating loss carry forwards to an amount
determined by multiplying the fair market value of the Company immediately prior
to the change in ownership percentage by the Federal long term tax exempt
interest rate at the time of these changes. There can be no assurance that
further limitations on utilization of net operating loss carry forwards will not
occur resulting from ownership changes that take place subsequent to December
31, 1996 or the potential adjustment to the conversion rate of Series B'
Preferred Stock in August 1997.
Possible Delisting from Nasdaq and Market Illiquidity. Continued inclusion of
the Common Stock for quotation on the Nasdaq SmallCap Market will require that
(i) the Company maintain at least $2,000,000 in total assets (the "Minimum Asset
Requirement") and $1,000,000 in capital and surplus, (ii) the minimum bid price
for the Common Stock be at least $1.00 per share (unless it maintains a public
float of at least $1,000,000 and $2,000,000 in capital and surplus), (iii) the
public float consist of at least 100,000 shares of Common Stock, valued in the
aggregate at more than $200,000, (iv) the Common Stock have at least two active
market makers and (v) the Common Stock be held by at least 300 holders. As of
December 31, 1995, the Company did not meet all of the criteria for continued
listing. Although the Company currently meets the listing criteria and has no
reason to believe that it will not continue to meet such criteria, there can be
no assurance that future events will not result in the Company's failure to meet
all of the criteria for continued listing. In such event, trading, if any, in
the Common Stock would thereafter be conducted in the over-the-counter market in
the so-called "pink sheets" or the NASD's "Electronic Bulletin Board", and it
would be more difficult to dispose of the securities or to obtain as favorable a
price for the securities. Consequently, the liquidity of the securities could be
impaired, not only in the number of securities that could be bought and sold at
a given price, but also through delays in the timing of transactions and
reduction in security analysts' and the media's coverage of the Company, which
could result in lower prices for the securities than might otherwise be attained
and in a larger spread between the bid and asked prices for the securities.
Risks of Low-Priced Stock; Possible Effect of "Penny Stock" Rules on Liquidity
for the Company's Securities. If the Company's securities were delisted from
Nasdaq, they may become subject to Rule 15g-9 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), which imposes additional sales
practice requirements on broker-dealers which sell such securities to persons
other than established customers and "accredited investors." For transactions
covered by this Rule, a broker-dealer must make a special suitability
determination for the purchaser and have received the purchaser's written
consent to the transaction prior to sale. Consequently, such Rule may affect the
ability of broker-dealers to sell the Company's securities and may affect the
ability to sell any of the Company's securities in the secondary market.
The Commission has adopted regulations which define a "penny stock" to be any
equity security that has a market price (as therein defined) of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about sales commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stock.
The foregoing required penny stock restrictions will not apply to the Company's
securities if such securities are listed on Nasdaq and have certain price and
volume information provided on a current and continuing basis, or if the Company
meets certain minimum net tangible assets or average revenue criteria. There can
be no assurance that the Company's securities will qualify for exemption from
the penny stock restrictions. In any event, even if the Company's securities
were exempt from such restrictions, the Company would remain subject to Section
15(b)(6) of the Exchange Act, which gives the Commission the authority to
prohibit any person that engages in unlawful conduct while participating in a
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distribution of penny stock from associating with a broker-dealer or
participating in a distribution of penny stock, if the Commission finds that
such a restriction would be in the public interest.
If the Company's securities were subject to the rules on penny stocks, the
market liquidity for the Company's securities would be materially adversely
affected.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders. The Company is not expected to receive any proceeds from
the exercise of the Warrant issued to Dr. Dian Griesel (see "Selling
Stockholders"), since the Warrant may be exercised pursuant to a cashless
exercise provision. In the event that the Warrant is exercised for cash
($39,375.00), the Company intends to use such net cash proceeds for general
working capital purposes. Whether, how and to what extent the Warrant will be
exercised, and whether the Warrant is exercised for cash or not, cannot be
predicted by the Company.
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SELLING STOCKHOLDERS
The following table sets forth certain information as of April 15, 1997
concerning (i) the name of each Selling Stockholder, (ii) the number of shares
of Common Stock beneficially owned, whether outstanding or issuable, by such
holder before the Offering, (iii) the number of shares of Common Stock which may
be offered by each Selling Stockholder, and (iv) the percentage of Common Stock
owned by each Selling Stockholder before the Offering. The number of shares of
Common Stock set forth below under the caption "Number of Shares of Common Stock
which may be offered" represents the aggregate number of shares of Common Stock
owned by each Selling Stockholder.
<TABLE>
<CAPTION>
Number of Number of
shares of Shares of
Common Common
Name of Selling Stock owned Stock which
- --------------- prior to the may be % of Common
Stockholder Offering offered Stock Owned (1)
- ----------- ------------------- --------------- ---------------
<S> <C> <C> <C>
LINC Capital Management Services, Ltd. 268,734 268,734 2.7
Miroslav Anic 8,311 8,311 *
LINC Healthcare Leasing, N.V. 384,793 384,793 3.9
Philadelphia Ventures - Japan II, L.P. 22,403 22,403 *
Commonwealth Venture Partners II 70,010 70,010 *
Philadelphia Ventures II, L.P. 187,628 187,628 1.9
CIP Capital L.P. 280,041 280,041 2.8
MDS Health Ventures Inc. 224,032 224,032 2.2
State Treasurer of the State of Michigan as Custodian of
the Michigan Public Schools Employees' Retirement
System, State Employees' Retirement System, Michigan
State Police Retirement System, and Michigan Judges
Retirement System 224,032 224,032 2.2
Grotech Partners IV, L.P. 112,016 112,016 1.1
Jerry B. Hook, Ph.D. 99,000 99,000 *
Harvey Rubin, Ph.D. 49,700 49,700 *
Ronald H. Spair 49,500 49,500 *
James T. Fenno 19,800 19,800 *
Dian Griesel, Ph.D. 35,000 35,000 *
--------- --------- -----
Total 2,035,000 2,035,000 20.4%
</TABLE>
- ----------------------
* Less than 1%
(1) The number of shares of Common Stock issued and outstanding as of April 15,
1997 was 9,979,328.
16
<PAGE>
The number of Shares sold by each Selling Stockholder and (if one percent or
more) the percentage of the outstanding shares of Common Stock owned by such
Selling Stockholder after completion of any offering hereunder will be specified
in the Prospectus Supplement relating to such sale.
Each Selling Stockholder will be entitled to receive all of the proceeds from
the future sale of his or its respective shares of Common Stock. Except for the
costs of including such shares of Common Stock within the registration statement
of which this Prospectus forms a part, which costs are borne by the Company, the
Selling Stockholders will bear all expenses of any offering by them of their
Common Stock, including the costs of their counsel and any sales commissions
incurred.
Except as noted below, none of the Selling Stockholders named in the preceding
table have had any position, office or other material relationship with the
Company or any of its predecessors or affiliates. Jerry B. Hook, Ph.D., is the
President and Chief Executive Officer of the Company. Ronald H. Spair is Vice
President, Chief Financial Officer and Secretary of the Company. Harvey Rubin,
Ph.D., is a member of the Scientific Advisory Board of the Company. Richard L.
Sherman, a member of the Company's Board of Directors, is a shareholder of the
General Partner of CIP Capital, L.P. Dian Griesel, Ph.D., is the President of
The Investor Relations Group, a firm retained to provide information on the
Company to the financial community. A component of Dr. Griesel's compensation
includes a Warrant to purchase 35,000 shares of Common Stock at an aggregate
exercise price of $39,375.00. The Warrant has not been exercised as of the date
of the Prospectus and expires on December 4, 2001.
The Shares held by the Selling Stockholders, other than Dr. Griesel, will be
subject to resale restrictions on a certain percentage of such Shares through
October 15, 1997. Such resale restrictions apply to (i) 75% of such shares until
June 15, 1997, (ii) 50% of such shares until August 15, 1997, and (iii) 25% of
such shares until October 15, 1997.
17
<PAGE>
PLAN OF DISTRIBUTION
Sales of shares of Common Stock by Selling Stockholders may be effected from
time to time in transactions (which may include block transactions) in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the shares of Common Stock
directly to purchasers or through broker-dealers that may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the shares of Common Stock for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any broker-dealers that act in connection with the
sale of the shares of Common Stock as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
commission received by them and any profit on the resale of such securities as
principals might be deemed to be underwriting discounts and commissions under
the Securities Act. The Selling Stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of
such securities certain liabilities, including liabilities arising under the
Securities Act. The Company will not receive any proceeds from the sales of the
shares of Common Stock by the Selling Stockholders. Sales of shares of Common
Stock by the Selling Stockholders, or even the potential of such sales, would
likely have an adverse effect on the market price of the Common Stock.
At the time a particular offer of shares of Common Stock is made, except as
herein contemplated, by or on behalf of the Selling Stockholder, to the extent
required, a Prospectus will be distributed which will set forth the number of
shares of Common Stock being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, if any, the purchase
price paid by any underwriter for shares purchased from the Selling Stockholder
and any discounts, commissions or concessions allowed or reallowed or paid to
dealers.
Under the Exchange Act, and the regulations thereunder, any person engaged in a
distribution of the securities of the Company offered by this Prospectus may not
simultaneously engage in market-making activities with respect to such
securities of the Company during the applicable "cooling-off" period (two or
nine days) prior to the commencement of such distribution. In addition, and
without limiting the foregoing, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitations, Regulation M, in connection with
transactions in such securities, which provisions may limit the timing of
purchases and sales of such securities by the Selling Stockholders.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Dechert Price & Rhoads, Princeton, New Jersey.
EXPERTS
The financial statements of the Company at December 31, 1996, and the year then
ended, incorporated by reference in this Prospectus and Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report thereon, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing. The
financial statements of the Company at December 31, 1995, and for each of the
two years in the period ended December 31, 1995, incorporated by reference in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon (which contains
an explanatory paragraph regarding the Company's ability to continue as a going
concern), and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Company in connection with the sale of Common Stock being registered. All
amounts are estimates except the SEC registration fee and the NASD filing fees.
SEC Registration fee.............................. $ 395
NASD fee.......................................... 7,500
Printing and engraving............................ 2,500
Legal fees and expenses of the Company............ 20,000
Accounting fees and expenses...................... 7,500
Blue sky fees and expenses........................ 30,000
Transfer agent fees............................... 1,000
Miscellaneous..................................... 2,000
--------------
Total................................... $ 70,895
==============
The aggregate proceeds to the Selling Stockholders from the sale of the
Shares so offered will be the purchase price of the Shares sold less (i) the
aggregate commissions, discounts and other compensation, if any, paid by the
Selling Stockholders to agents or broker dealers and (ii) certain other expenses
of the offering and sale of the Shares that will be the responsibility of the
Selling Stockholders.
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides generally and in pertinent part that a Delaware corporation may
indemnify its directors, officers, employees and agents against expenses
(including attorneys' fees), judgments, fines and settlements actually and
reasonably incurred by them in connection with any civil, criminal,
administrative or investigative action, suit or proceeding (except actions by or
in the right of the corporation), if, in connection with the matters in issue,
they acted in good faith and in a manner they reasonably believed to be in, or
not opposed to, the best interests of the corporation, and in connection with
any criminal suit or proceeding, they had no reasonable cause to believe their
conduct was unlawful. Section 145 further provides that, in connection with the
defense or settlement of any action by or in the right of the corporation, a
Delaware corporation may indemnify its directors, officers, employees and agents
against expenses actually and reasonably incurred by them if, in connection with
the matters in issue, they acted in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, absent a determination by a court that such indemnity is proper.
Section 145 further permits a Delaware corporation to grant its directors,
officers, employees and agents additional rights of indemnification through
bylaw provisions and otherwise.
Section 102(b)(7) of the DGCL provides that a certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation 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
liability for unauthorized acquisitions or redemptions of, or dividends on,
capital stock) or (iv) for any transaction from which the director derived an
improper personal benefit.
Article VII, Section 6 of the Registrant's By-Laws provides for
mandatory indemnification of its directors and officers and permissible
indemnification of employees and other agents to the maximum extent permitted by
the DGCL. The Registrant's Certificate of Incorporation provides that, pursuant
to Delaware law, its directors shall not be liable for monetary damages for
breach of the directors' fiduciary duty as directors to the Company and its
stockholders. This provision in the Certificate of Incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under
II-1
<PAGE>
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- ------------
<S> <C>
*2.1 -- Copy of the Asset Purchase Agreement, with exhibits thereto, dated February 22, 1996, between the
Registrant and Lexin Pharmaceutical Corporation
**4.2 -- Form of Common Stock Certificate
5.1 -- Legal Opinion of Dechert Price & Rhoads
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of Dechert Price & Rhoads (contained in Exhibit 5.1)
24 -- Power of Attorney (See p. II-5)
</TABLE>
- ---------
* Previously filed with the Company's report on Form 8-K filed on
April 1, 1996, and incorporated by
reference herein.
** Previously filed with the Company's Registration Statement on Form
S-l, Registration Number 33-78086, filed on April 25, 1994, or in
Amendment No. 1 thereto, filed on June 1, 1994.
II-3
<PAGE>
Item 17. Undertakings
The Company hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to include any
additional or changed material 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 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the By-Laws of the Company, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer, or controlling person of the Company 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 hereunder, the Company 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1), or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of such securities at that time as the initial bona fide
offering of those securities.
II-4
<PAGE>
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 Horsham, state of Pennsylvania, on April 15, 1997.
SPARTA PHARMACEUTICALS, INC.
By: /s/ Jerry B. Hook
-------------------------------------
Jerry B. Hook, Ph.D.
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints jointly and severally, Jerry B. Hook, Ph.D., his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any and all amendments to this Registration Statement
(including post effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the 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/ William M. Sullivan Chairman of the Board, April 15, 1997
- ----------------------------------------- Director
William M. Sullivan
/s/ Jerry B. Hook, Ph.D. President, Chief Executive April 15, 1997
- ----------------------------------------- Officer (principal executive officer),
Jerry B. Hook, Ph.D. Director
/s/ Ronald H. Spair Vice President and Chief Financial Officer April 15, 1997
- ----------------------------------------- (principal financial and accounting officer)
Ronald H. Spair
/s/ Lindsay A. Rosenwald, M.D. Director April 15, 1997
- -----------------------------------------
Lindsay A. Rosenwald, M.D.
/s/ Peter Barton Hutt Director April 15, 1997
- ----------------------------------------
Peter Barton Hutt
/s/ Professor Sir John Vane Director April 15, 1997
- ----------------------------------------
Professor Sir John Vane
/s/ Richard L. Sherman Director April 7, 1997
- ----------------------------------------
Richard L. Sherman
/s/ Colin B. Bier Director April 15, 1997
- ----------------------------------------
Colin B. Bier
</TABLE>
II-5
<PAGE>
EXHIBIT 5.1
April 15, 1997
Sparta Pharmaceuticals, Inc
111 Rock Road
Horsham, Pennsylvania 19044
Re: Form S-3 Registration Statement
--------------------------------
Ladies and Gentlemen:
We have acted as counsel to Sparta Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing of a Registration Statement on Form S-3 (the "Registration Statement")
being filed today with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the offer
and sale from time to time pursuant to Rule 415 of the Securities Act of up to
(a) 2,000,000 shares (the "Shares") of the Company's Common Stock, par value
$.001 per share and (b) up to 35,000 shares (the "Warrant Shares") of the
Company's Common Stock, par value $.001 per share, issuable upon exercise of a
warrant to purchase Common Stock (the "Warrant").
In that connection, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary for the
purposes of this opinion, including (a) the Certificate of Incorporation of the
Company, as amended; and (b) the By-Laws of the Company.
In rendering this opinion, we have assumed that (a) the
Registration Statement and any amendments thereto (including post-effective
amendments) will have become effective and comply with all applicable laws; (b)
the Registration Statement will be effective and will comply with all applicable
laws at the time the Shares are offered or issued as contemplated by the
Registration Statement; (c) a Prospectus Supplement will have been prepared and
filed with the Securities and Exchange Commission describing the Shares offered
thereby and will comply with all applicable laws; and (d) all Shares will be
issued and sold in compliance with applicable federal and state securities laws
and in the manner stated in the Registration Statement and the appropriate
Prospectus Supplement thereto.
Based upon and subject to the foregoing, we are of the opinion
that (a) the Shares are legally and validly issued, fully paid and
non-assessable and (b) the Warrant Shares, when issued and delivered to the
holder of the Warrant against payment therefor in accordance with the terms of
the Warrant, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement and to the use of our name in the Prospectus
portion thereof and any Prospectus Supplement thereto, under the caption "Legal
Matters."
Very truly yours,
DECHERT PRICE & RHOADS
II-6
<PAGE>
EXHIBIT 23.1 - CONSENT OF ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this S-3 Registration Statement of our report dated February 28,
1997 included in Sparta Pharmaceuticals, Inc.'s Form 10-K for the year ended
December 31, 1996 and to all references to our Firm included in this
Registration Statement.
Arthur Andersen LLP
Philadelphia, Pa.
April 11, 1997
II-7
<PAGE>
EXHIBIT 23.2 - CONSENT OF ERNST & YOUNG LLP
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-20575) pertaining to the Sparta Pharmaceuticals, Inc. Amended 1991
Stock Plan, the Registration Statement (Form S-3 No. 333-13621) pertaining to
the registration of 25,323,853 share of Common Stock and 11,309,722 Class C
Warrants and the Registration Statement (Form S-3) pertaining to the
registration of 2,035,000 shares of Common Stock of our report dated January 31,
1996, with respect to the financial statements of Sparta Pharmaceuticals, Inc.
included in its Annual Report on Form 10-K for the year ended December 31, 1996,
filed with the Securities and Exchange Commission.
Ernst & Young LLP
Raleigh, North Carolina
April 11, 1997
II-8
